QUANTA SERVICES INC, POS AM, 1998-10-23

QUANTA SERVICES INC
POS AM, 1998-10-23
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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 23, 1998

REGISTRATION NO. 333-47083

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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POST-EFFECTIVE AMENDMENT NO. 1

FORM S-4
REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

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QUANTA SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 1731 74-2851603
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)

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

BRAD EASTMAN
VICE PRESIDENT AND GENERAL COUNSEL
1360 POST OAK BOULEVARD
SUITE 2100
HOUSTON, TEXAS 77056
(713) 629-7600
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES AND AGENT FOR SERVICE)

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time 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. [X]

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, 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(d)
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. [_]

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

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 THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE +
+SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN +
+OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE +
+SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED OCTOBER 23, 1998

5,000,000 SHARES

[LOGO APPEARS HERE]
COMMON STOCK

We may periodically issue shares of Common Stock in connection with the
acquisition of other businesses. We may structure acquisitions of other
businesses as:

.a merger with Quanta or one of its subsidiaries;

.a purchase of all of the capital stock of the other business; or

.a purchase of the assets of the other business.

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CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 7 IN THIS PROSPECTUS.

-----------

We will negotiate the price and other terms on which we will issue shares of
Common Stock with the owners of the business that we intend to acquire. We
expect that that the price of the shares to be issued in connection with an
acquisition will be reasonably related to the market price of the Common Stock
at either the time we sign a binding agreement for the acquisition or at the
time we close the acquisition. We will not pay any underwriting discounts or
commissions with respect to issuances of Common Stock in connection with an
acquisition. However, we may pay a finder's fee in connection with an
acquisition and any person receiving a finder's fee may be considered an
underwriter under the Securities Act of 1933.

TRADING SYMBOL
New York Stock Exchange -- PWR

QUANTA SERVICES, INC.
1360 POST OAK BOULEVARD, SUITE 2100
HOUSTON, TEXAS 77056
(713) 629-7600

Neither the Securities and Exchange Commission nor any state securites
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus. Any representation to the contrary is
a criminal offense.

The date of this Prospectus is October , 1998.
<PAGE>

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding our company and our financial statements and notes
thereto appearing elsewhere in this Prospectus.

THE COMPANY

Our goal is to become a leading provider of specialty electrical contracting
and maintenance services primarily for electric and telecommunications
infrastructure in North America. We also provide electrical contracting
services to commercial and industrial customers and install transportation
control and lighting systems. Our services include:

. installation, repair and maintenance of electric power transmission and
distribution lines, telecommunications lines and cable television lines;

. construction of electric substations;

. installation of highway lighting and traffic control systems;

. specialized underground construction including underground fueling
systems;

. erection of cellular telephone, PCS(R) and microwave towers;

. design and engineering services; and

. specialty contracting services for electric, video, security, fire, voice
and data systems.

We provide these services to electric utilities, telecommunication and cable
television operators, governmental entities, general contractors and builders,
and owners and managers of commercial and industrial properties.

Our company was formed through the combination of four separate businesses in
February, 1998. These companies, which we refer to as the Founding Companies,
are PAR Electrical Contractors, Inc., Union Power Construction Company, TRANS
TECH Electric, Inc. and Potelco, Inc. Since our initial public offering in
February, 1998, we have acquired 11 other businesses. As a result of these
acquisitions, we have become one of the largest providers of specialty electric
and telecommunications infrastructure contracting services in the markets we
serve. We currently have offices in 19 states, and in 1998 have performed work
in 32 states. Our competitive strengths, we believe, include our large size,
our geographical diversity, our industry relationships, our expertise in
specialty services, our design and engineering capability and the number of
skilled personnel that we employ. Our combined pro forma results were as
follows:

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------
<S> <C> <C>
Revenues $338.0 million $184.2 million
Operating income $ 37.7 million $ 16.2 million
Net income $ 17.8 million $ 7.1 million
</TABLE>

We estimate that the electrical and telecommunications contracting industry
generates annual revenue in excess of $40 billion. Deregulation of utilities,
upgrades and expansion of existing infrastructure and increased outsourcing of
services are changing the way companies conduct business in the electrical and
telecommunications industry. We believe that our strategy of consolidating the
providers of specialty electrical contracting services to the electrical and
telecommunications industry will position us well to capitalize on these
trends.

According to the U.S. Census Bureau, there are more than 50,000 electrical
and telecommunications contracting businesses. These businesses include a small
number of regional or national providers and a large number of relatively
small, owner-operated businesses. These smaller businesses have limited access
to capital

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<PAGE>

and usually can offer only a limited range of services. Therefore, we believe
that we have substantial consolidation and growth opportunities as long as we
maintain a disciplined acquisition program, a decentralized operating structure
and access to financial resources required to complete acquisitions and
capitalize on other opportunities.

GROWTH STRATEGY

Our growth strategy has three components:

. Operating Strategy. We intend to operate on a decentralized basis while
maintaining operating and financial controls. The operators of the
businesses we acquire will remain responsible for the operations,
profitability and growth of their individual business. We will centralize
certain administrative functions such as corporate strategy and
acquisitions, financing, insurance, investor relations and employee
benefit plans. We further intend to realize certain cost savings by
combining overlapping operations of the businesses we acquire. We believe
that we have a competitive advantage when seeking new contracts for
infrastructure projects because of our operating efficiency, financial
strength, technical expertise, presence in key geographic areas and our
reputation for quality and reliability.

. Internal Growth. All of the businesses that we have acquired, on a
combined pro forma basis, have experienced internal revenue growth at a
compound annual rate of 21.5 percent between 1995 and 1997. Our efforts
to continue this trend of internal growth include increasing current
services to our existing customers, selling new services to our existing
customers, seeking new customers and geographically expanding our service
area.

. Acquisitions. We believe that the trend towards outsourcing by electric
utilities and telecommunications providers favors companies that can
provide a broad range of services on a regional or national basis. Small
and mid-size companies that do not have access to capital for growth will
be at a competitive disadvantage. We intend to actively pursue
acquisitions of well-established companies to enter new geographic
markets and expand the range of services we offer, as well as leverage
current operations within existing markets. We expect that there will
continue to be a large number of attractive acquisition candidates due to
the highly fragmented nature of the industry, the desire of the owners of
businesses for liquidity and their need for access to capital for growth.

We believe that our prominence and operating strength combined with the
experience of our executive management will provide us with significant
competitive advantages as we pursue our growth strategy.

3
<PAGE>

THE OFFERING

Common Stock being offered..........

5,000,000 shares which we may issue in
connection with the acquisition of
other businesses

Common Stock to be outstanding
after the offering.................. 25,668,725 shares(1)

Transfer of Shares.................. We may require persons acquiring shares
of Common Stock as part of a business
combination to agree to hold all or
part of such shares for up to two
years.

Listing.............................
The shares of Common Stock are listed
on the NYSE.
- --------

(1) Includes 3,345,333 shares of a special class of Common Stock ("Limited Vote
Common Stock") issued to the initial stockholders and certain management
personnel of the Company. Excludes options to purchase approximately
1,155,150 shares of Common Stock that have been granted pursuant to the
Company's 1997 Stock Option Plan. See "Management--1997 Stock Option Plan",
"Certain Transactions--Organization of the Company" and "Description of
Capital Stock--Common Stock and Limited Vote Common Stock".

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<PAGE>

SUMMARY FINANCIAL DATA

(IN THOUSANDS, EXCEPT PER SHARE DATA)

For periods prior to our initial public offering, our historical financials
reflect the results of PAR, the "accounting acquiror", restated for the results
of NorAm Telecommunications, Inc. ("Noram"), which we acquired in a transaction
accounted for as a pooling-of-interests. Our historical financial statements
for periods subsequent to our initial public offering reflect the results of
the Founding Companies and each of the ten other businesses we acquired from
the date we acquired such businesses.

The unaudited pro forma combined financial information presented below is
intended to give you a better understanding of what the results of operations
and financial position of all of our businesses might have looked like had they
always been combined. We prepared the pro forma income statement and balance
sheet by adding or combining our restated historical financial statements to
the historical results of each acquired company as if they had been acquired on
January 1, 1997. We then adjusted the combined amounts for the effects of
certain other pro forma adjustments to the historical financial statements
discussed in the footnotes below and the consummation of our initial public
offering in February 1998. The companies may have performed differently if they
had been combined as of January 1, 1997. You should not rely on the pro forma
information as being indicative of the historical results that we would have
had or the future results that we will experience.

You should read the summary financial data presented below along with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", the Unaudited Pro Forma Combined Financial Statements and the
Consolidated Financial Statements of our company and the related notes all
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA COMBINED
---------------------------------------------- -----------------------------
YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, JUNE 30, DECEMBER 31, JUNE 30,
1997 1997 1998 1997(7) 1998(7)
------------ ---------------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenues............... $76,204 $34,799 $93,717 $337,965 $184,182
Cost of services
(including
depreciation)......... 58,896 28,861 76,681 269,081 149,807
------- ------- ------- -------- --------
Gross profit........... 17,308 5,938 17,036 68,884 34,375
Selling, general and
administrative
expenses(1)........... 11,589 4,855 8,889 27,112 15,937
Merger expenses--
pooling............... -- -- 231 -- 231
Goodwill
amortization(2)....... 56 28 749 4,089 2,021
------- ------- ------- -------- --------
Income from operations. 5,663 1,055 7,167 37,683 16,186
Other income (expense),
net(3)................ (1,350) (651) (858) (6,125) (3,130)
------- ------- ------- -------- --------
Income before income
tax expense........... 4,313 404 6,309 31,558 13,056
Provision for income
taxes(4).............. 1,786 136 2,900 13,727 5,917
------- ------- ------- -------- --------
Net income............. $ 2,527 $ 268 $ 3,409 $ 17,831 $ 7,139
======= ======= ======= ======== ========
Basic earnings per
share................. $ 0.64 $ 0.07 $ 0.24 $ 0.85 $ 0.34
======= ======= ======= ======== ========
Diluted earnings per
share................. $ 0.64 $ 0.07 $ 0.24 $ 0.85 $ 0.33
======= ======= ======= ======== ========
Shares used in computing
pro forma earnings per
share(5)
Basic.................. 3,952 3,952 14,399 21,041 21,263
======= ======= ======= ======== ========
Diluted................ 3,952 3,952 14,506 21,041 21,370
======= ======= ======= ======== ========
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA COMBINED(6)
JUNE 30, 1998 JUNE 30, 1998
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital ........ $26,724 $42,059
Total assets............ 205,826 319,182
Long-term debt, net of
current maturities..... 33,112 98,410(8)
Total stockholders' eq-
uity................... 128,756 157,535
</TABLE>
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(1) The unaudited pro forma combined statement of operations data reflect an
aggregate of approximately $8.0 million and $2.4 million for the year ended
December 31, 1997 and for the six months ended June 30, 1998, respectively,
in pro forma reductions in salaries, bonuses and benefits of the previous
owners and management of the businesses acquired by us. These amounts are
intended to show you the difference between the historical compensation
costs for the owners and management and the amounts they have agreed with
us on a prospective basis. Additionally, the pro forma information excludes
the $13.0 million non-recurring non-cash charge recognized by Quanta
related to the issuance of stock to an initial stockholder and management,
as a result of the issuance of such shares for nominal consideration. See
Note 2 of Notes to Financial Statements of Quanta Services, Inc.

(2) Reflects amortization of the goodwill to be recorded over a 40-year period
as a result of our acquisition of the Founding Companies and the ten other
businesses acquired using the purchase method of accounting.

(3) Reflects the reduction for interest expense of $1.4 million and $0.2
million for the year ended December 31, 1997 and for the six months ended
June 30, 1998, respectively, attributable to the repayment of $19.0 million
and $18.5 million, respectively, of historical debt of the Founding
Companies with proceeds from the initial public offering, net of increases
in interest expense of $6.0 million and $2.4 million, respectively, on
borrowings under the Company's credit facility for acquisition of the ten
companies acquired using the purchase method of accounting. The reduction
in interest expense is further offset by interest expense of $0.8 and $0.2
for the year ended December 31, 1997 and for the six months ended June 30,
1998, respectively, for borrowings made by the Company to fund S
Corporation Distributions made by two of the Founding Companies.
Additionally, reflects reductions in expenses associated with certain non-
operating assets transferred to the stockholders of the Founding Companies
prior to their acquisition.
(4) Assumes all pretax income before non-deductible goodwill and other
permanent items is subject to an estimated 39.0% combined tax rate.

(5) The shares used in computing earnings per share for the following periods
include:

(a) Year ended December 31, 1997 and six months ended June 30, 1997
(historical)--the 3,000,000 shares issued in connection with PAR and
the 951,945 shares issued in connection with acquisition of the Pooled
Company.

(b) Year ended December 31, 1997 (pro-forma)--(i) the shares described
above in (a), (ii) 5,750,000 shares of Common Stock, net of 579,222
shares representing net cash to Quanta, sold in the IPO to pay the
cash portion of the consideration for the Founding Companies, to repay
expenses incurred in connection with the IPO and to retire debt, (iii)
8,573,392 shares issued to the owners of the other Founding Companies
and to the other ten businesses acquired subsequent to the IPO and
(iv) 3,345,333 shares of Limited Vote Common Stock issued to the
initial stockholders and certain management personnel of the Company.

(c) Six months ended June 30, 1998 (historical)--basic earnings per
share information includes the weighted average portion of (i)
7,527,000 shares of Common Stock issued to the owners of the Founding
Companies, (ii) 3,345,333 shares of Limited Vote Common Stock issued
to the initial stockholders and certain management personnel of the
Company, (iii) 5,750,000 shares of Common Stock sold in the IPO to pay
the cash portion of the consideration for the Founding Companies to
repay expenses incurred in connection with the Offering and to retire
debt, (iv) 951,945 shares issued for the acquisition of the Pooled
Company, and (v) the weighted average portion of the 1,296,740 shares
issued in acquisitions accounted for as purchases.

Shares used in the calculation of the diluted earnings per share for
the six months ended June 30, 1998 include (i) the shares described
above, and (ii) the dilution attributable to outstanding options to
purchase Common Stock, using the treasury stock method; and

(d) Six months ended June 30, 1998 (pro-forma)--basic earnings per share
information includes the shares used in the computation described in
(c) above computed as if those shares had been issued as of January 1,
1998, net of 357,174 shares representing net cash to Quanta, and
2,749,652 shares issued in acquisitions accounted for as purchases
subsequent to June 30, 1998, as if the shares had been issued as of
January 1, 1998.

Shares used in the calculation of the pro forma diluted earnings per
share for the six months ended June 30, 1998 include (i) the shares
described above, and (ii) the dilution attributable to outstanding
options to purchase Common Stock, using the treasury stock method.

(6) Reflects the acquisition of the eight businesses which occurred subsequent
to June 30, 1998 as if they had occurred on June 30, 1998 as described in
the notes to the Unaudited Pro Forma Combined Financial Statements. The
unaudited pro forma combined balance sheet data should be read in
conjunction with the other financial information and historical financial
statements and notes thereto included elsewhere in this Prospectus.

(7) Reflects the elimination of the revenues and related expenses for a
division of one of the Purchased Companies which was not acquired by the
Company.

(8) Includes approximately $61.5 million borrowed under a combination of our
credit facility and notes issued in connection with the eight business
acquisitions which occurred subsequent to June 30, 1998.

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RISK FACTORS

You should carefully consider the following risks before making an
investment decision. The risks described below are not the only ones that we
face. Additional risks about which we do not yet know or that we currently
think are immaterial may also impair our business operations. Our business,
operating results or financial condition could be materially adversely
affected by any of the following risks. The trading price of our Common Stock
could decline due to any of these risks, and you may lose all or part of your
investment. You should also refer to the other information set forth in this
Prospectus, including our financial statements and the related notes.

This Prospectus contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may", "will",
"should", "could", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" and other comparable terminology. These
statements are only predictions. Actual events or results may differ
materially. In evaluating these statements, you should specifically consider
various factors, including the risks outlined below. These factors may cause
our actual results to differ materially from any forward looking statement.

Absence of Combined Operating History. Quanta was founded in August 1997 but
conducted no operations and generated no revenues prior to acquiring the
Founding Companies in February 1998. The businesses we acquire have been
operating and will continue to operate as separate independent entities, and
we cannot be sure that we will be able to integrate the operations of these
businesses successfully. To manage the combined enterprise on a profitable
basis we must institute certain necessary common systems and procedures. To
better integrate the companies we acquire, we intend to integrate their
computer, accounting and financial reporting systems, and certain of their
operational, administrative, banking and insurance procedures. However, we
cannot be certain that we will successfully institute these common systems and
procedures. In addition, we cannot be certain that our recently assembled
management group will be able to successfully manage the businesses we acquire
as a combined entity and effectively implement our operating or growth
strategies. If we are unable to integrate or successfully manage the companies
we have acquired or acquire in the future, our business, financial condition
and results of operations could be materially and adversely affected.

The pro forma combined financial results included in this prospectus cover
periods during which the businesses we have acquired were not under common
control or management. Therefore, these pro forma financial statements may not
be indicative of our future financial or operating results.

Risks Related to Acquisition Strategy. One of our principal growth
strategies is to increase our revenues and the markets we serve through the
acquisition of additional electric and telecommunications infrastructure
contracting companies. We expect to face competition for acquisition
candidates, which may limit the number of acquisition opportunities and may
lead to higher acquisition prices. We cannot be sure that we will be able to
identify, acquire or profitably manage additional businesses. We also cannot
be sure that we can integrate successfully any acquired businesses with our
other operations without substantial costs, delays or other operational or
financial problems. Further, acquisitions involve a number of special risks
which could materially and adversely affect our business, financial condition
and results of operations. These special risks include:

. failure of the acquired business to achieve the results we expect;

. diversion of our management's attention from operational matters;

. our inability to retain key personnel of the acquired business; and

. risks associated with unanticipated events or liabilities.

If one of our acquired businesses suffers customer dissatisfaction or
performance problems, then the reputation of our whole company could be
materially and adversely affected.

Risks Related to Acquisition Financing. We cannot readily predict the
timing, size and success of our acquisition efforts or the capital we will
need for these efforts. We intend to use our Common Stock for all or a

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portion of the consideration for future acquisitions. If our Common Stock does
not maintain a sufficient market value or potential acquisition candidates are
unwilling to accept our Common Stock as part of the consideration for the sale
of their businesses, we may be required to utilize more of our cash resources
to pursue our acquisition program. Using cash for acquisitions limits our
financial flexibility and makes us more likely to seek additional capital
through future debt or equity financings. If we seek more debt, we may have to
agree to financial covenants that limit our operational and financial
flexibility. If we seek more equity, we may dilute the ownership interests of
our then-existing stockholders. When we seek additional debt or equity
financings, we cannot be certain that additional debt or equity will be
available to us on terms acceptable to us. If we cannot secure additional
financing on acceptable terms, we may be unable to pursue our acquisition
strategy.

We have entered into a credit facility with two commercial banks. We will
use the credit facility for acquisitions, working capital and other general
corporate purposes. The credit facility requires us to comply with certain
financial covenants that may limit our operations and financial flexibility.

Risks Related to Operating and Internal Growth Strategies. A key element of
our strategy is to increase the profitability and revenues of the businesses
we acquire. Although we intend to implement this strategy by various means, we
cannot be certain that we will be able to do so successfully. Another key
component of our strategy is to operate the businesses we acquire on a
decentralized basis, with local management retaining responsibility for day-
to-day operations, profitability and the internal growth of the individual
business. If we do not implement proper overall business controls, this
decentralized operating strategy could result in inconsistent operating and
financial practices at the businesses we acquire, and our overall
profitability could be adversely affected. Our ability to generate internal
earnings growth will be affected by, among other factors, our ability to:

. expand the range of services we offer to customers;

. attract new customers;

. increase the number of projects performed for existing customers;

. hire and retain employees;

. open additional facilities; and

. reduce operating and overhead expenses.

Many of these factors are beyond our control, and we cannot be certain that
our strategies will be successful or that we will be able to generate cash
flow sufficient to fund our operations and to support internal growth. Our
inability to achieve internal earnings growth could materially and adversely
affect our business, financial condition and results of operations.

Management of Growth. We expect to grow both internally and through
acquisitions. Our management expects to expend significant time and effort in
evaluating, completing and integrating acquisitions and opening new
facilities. We cannot be certain that our systems, procedures and controls
will be adequate to support our operations as they expand. Any future growth
also will impose significant additional responsibilities on members of our
senior management, including the need to identify, recruit and integrate new
senior level managers and executives. We cannot be certain that we can
identify and retain such additional managers and executives. To the extent
that we are unable to manage our growth efficiently and effectively, or are
unable to attract and retain additional qualified management, our financial
condition and results of operations could be materially and adversely
affected.

Availability of Qualified Employees. Our ability to provide high-quality
services on a timely basis requires that we employ an adequate number of
skilled electricians, journeymen linemen and project managers. Accordingly,
our ability to increase our productivity and profitability will be limited by
our ability to employ, train and retain skilled personnel necessary to meet
our requirements. Many of our competitors are currently experiencing shortages
of qualified personnel. We cannot be certain that we will be able to maintain
an adequate skilled labor force necessary to operate efficiently or that our
labor expenses will not increase as a result of a

8
<PAGE>

shortage in the supply of skilled personnel. If we experience acute labor
shortages, we may have to curtail our planned internal growth.

Unionized Workforce. As of June 30, 1998, approximately forty-five percent
of our employees are covered by collective bargaining agreements. Although the
majority of these agreements prohibit strikes and work stoppages, we cannot be
certain that strikes or work stoppages will not occur in the future. Strikes
or work stoppages would adversely impact our relationship with our customers
and could materially and adversely affect our business, financial condition
and results of operations. In addition, our acquisition strategy could be
adversely affected because of our union status for a variety of reasons. For
instance, our union agreements may be incompatible with the union agreements
of a business we want to acquire and some businesses may not want to become
affiliated with a union based company.

Competition. The electric and telecommunications infrastructure contracting
industry is highly competitive and is served by numerous small, owner-operated
private companies, public companies and several large regional companies. In
addition, relatively few, if any, barriers prevent entry into our market. As a
result, any organization that has adequate financial resources and access to
technical expertise may become one of our competitors. Competition in the
industry depends on a number of factors, including price. Certain of our
competitors may have lower overhead cost structures and may, therefore, be
able to provide their services at lower rates than we can provide such
services. In addition, some of our competitors are larger and have greater
resources than us. We cannot be certain that our competitors will not develop
the expertise, experience and resources to provide services that are equal or
superior in both price and quality to our services. Similarly, we cannot be
certain that we will be able to maintain or enhance our competitive position.

We may also face competition from the in-house service organizations of our
existing or prospective customers. Electric utility and telecommunications
services providers employ personnel who perform some of the same types of
services as those provided by us. We cannot be certain that our existing or
prospective customers will continue to outsource services in the future.

Contract Bidding Risks. We currently generate, and expect to continue to
generate, a significant portion of our revenues under fixed price contracts.
We must estimate the costs of completing a particular project to bid for such
fixed price contracts. The cost of labor and materials, however, may vary from
the costs we originally estimated. These variations along with other risks
inherent in performing fixed price contracts may result in actual revenue and
gross profits for a project differing from those we originally estimated and
could result in losses on projects. Depending upon the size of a particular
project, variations from estimated contract costs can have a significant
impact on our operating results for any fiscal quarter or year.

Certain of our contracts are master service agreements pursuant to which
work is assigned to us by our customer on a project by project basis. Under
master service agreements our customer generally has no obligation to assign
work to us. We cannot be certain that customers with whom we have master
service agreements will continue to assign work to us. A significant decline
in work assigned to us pursuant to these contracts could materially and
adversely affect our results of operations.

Seasonality; Fluctuations of Quarterly Results. The electric and
telecommunications infrastructure contracting business can be subject to
seasonal variations. Generally, during the winter months, demand for new
projects and maintenance services may be lower due to inclement weather, while
demand for electrical service and repairs may be higher due to damage caused
by such weather. Additionally, the industry can be highly cyclical. As a
result, our volume of business may be adversely affected by declines in new
projects in various geographic regions of the U.S. Our quarterly results may
also be materially affected by:

. the timing of acquisitions;

. variations in the margins of projects performed during any particular
quarter;

. the timing and magnitude of acquisition assimilation costs; and

. regional economic conditions.

9
<PAGE>

Accordingly, our operating results in any particular quarter may not be
indicative of the results that you can expect for any other quarter or for the
entire year.

Potential Exposure to Environmental Liabilities. Our operations are subject
to various environmental laws and regulations, including those dealing with
handling and disposal of waste products, PCBs, fuel storage and air quality.
As a result of past and future operations at our facilities, we may be
required to incur environmental remediation costs and other cleanup expenses.
In addition, although we intend to conduct appropriate due diligence with
respect to environmental matters in connection with our future acquisitions,
we cannot be certain that we will be able to identify or be indemnified for
all potential environmental liabilities relating to any acquired business.

Control by Existing Management and Stockholders. The Company's executive
officers and directors, former stockholders of the Founding Companies and
their affiliates beneficially own approximately 8.2 million shares of Common
Stock and Limited Vote Common Stock, representing approximately 38.0 percent
of the aggregate outstanding shares of Common Stock and Limited Vote Common
Stock. The initial stockholders of the Company, certain members of management
and others own 3,345,333 shares of Limited Vote Common Stock. Holders of
shares of Limited Vote Common Stock are entitled to elect one member of our
Board of Directors and are entitled to one-tenth of one vote for each share
held on all other matters on which holders of Common Stock are entitled to
vote. Holders of Limited Vote Common Stock are not entitled to vote on the
election of any other directors. Our executive officers and directors and
former stockholders of the Founding Companies control in the aggregate
approximately 41.6 percent of all shares of Common Stock (which percentage
excludes shares of Limited Vote Common Stock) and, if acting in concert, are
able to exert significant control on our affairs and the outcome of any matter
submitted to a vote of stockholders.

Dependence on Key Personnel. We depend on the continued efforts of our
executive officers and on senior management of the businesses we acquire.
Although we will intend to enter into an employment agreement with each of our
executive officers and other key employees, we cannot be certain that any
individual will continue in such capacity for any particular period of time.
The loss of key personnel, or the inability to hire and retain qualified
employees could adversely effect our business, financial condition and results
of operations. We do not intend to carry key-person life insurance on any of
our employees.

Shares Eligible for Future Sale. Certain of our directors, executive
officers and stockholders who beneficially own in the aggregate 10,872,333
shares of Common Stock and Limited Vote Common Stock have agreed not to sell
or otherwise dispose of their shares until February 18, 2000 without the prior
written consent of BT Alex. Brown Incorporated, the lead underwriter of our
initial public offiering. These shares and an additional 4,998,337 shares of
Common Stock issued in acquisitions are "restricted securities" under the
rules of the Securities and Exchange Commission. Therefore, holders of the
shares may publicly sell them only if the sale is registered under the
Securities Act or sold in accordance with an applicable exemption from
registration. Prior to our initial public offering there had been no 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 prevailing from time to time. Nevertheless, sales of
substantial amounts of the Common Stock in the public market could adversely
affect prevailing market prices and our ability to raise equity capital in the
future.

The 5,000,000 shares of Common Stock registered pursuant to this Prospectus
which are issuable in business combination transactions will generally be
freely tradable by persons who are not otherwise affiliated with us or the
business we acquire. We may require purchasers of Common Stock in this
offering to agree to hold all or a portion of the shares they acquire for a
period of up to two years.

Certain Anti-Takeover Provisions. Certain provisions of our Certificate of
Incorporation and Bylaws, as currently in effect, as well as Delaware law,
could discourage potential acquisition proposals, delay or prevent a change in
control of the Company or limit the price that certain investors may be
willing to pay in the future for

10
<PAGE>

shares of the Common Stock. Our Certificate of Incorporation permits our Board
of Directors to issue "blank check" preferred stock and to adopt amendments to
our Bylaws. Our Bylaws contain restrictions regarding the right of
stockholders to nominate directors and to submit proposals to be considered at
stockholder meetings. Also, our Certificate of Incorporation and Bylaws
restrict the right of stockholders to call a special meeting of stockholders
and to act by written consent. We are also subject to certain provisions of
Delaware law which prohibit us from engaging in any of a broad range of
business transactions with an "interested stockholder" for a period of three
years following the date such stockholder became classified as an interested
stockholder

Absence of Dividends. We have never paid any cash dividends and do not
anticipate paying cash dividends on our Common Stock in the immediate future.

Possible Volatility of Stock Price. Our initial public offering of Common
Stock was completed in February 1998, and we cannot be certain that a viable
public market for the Common Stock will be sustained. The trading price of the
Common Stock could be subject to significant fluctuations in response to
variations in our quarterly operating results, general trends in the company's
industry and other factors

Forward-Looking Statements. There are a number of statements in this
Prospectus that address activities, events or developments which we anticipate
may occur in the future, including such matters as our strategy for internal
growth and improved profitability, the nature and amount of additional capital
expenditures, acquisitions of assets and businesses, industry trends and other
such matters. These statements are based on certain assumptions and analyses
we make in light of our perception of historical trends, current business and
economic conditions and expected future developments as well as other factors
we believe are reasonable or appropriate. However, whether actual results and
developments will conform with our expectations is subject to a number of
risks and uncertainties, including:

. the risk factors discussed in this Prospectus;

. general economic, market or business conditions;

. the business opportunities (or lack thereof) that may be presented to and
pursued by us;

. changes in laws or regulations and other factors.

Most of these are beyond the control of the Company. Consequently, we cannot
be certain that the actual results or developments that we anticipate will be
realized or, even if substantially realized, that they will have the expected
effects on our business or operations.

11
<PAGE>

THE COMPANY

Quanta Services, Inc. (together with its subsidiaries, the "Company" or
"Quanta") was founded in August 1997 to create a leading provider of specialty
electric and telecommunications infrastructure contracting services. In
February 1998, the Company acquired in separate transactions four businesses:
PAR Electrical Contractors, Inc, ("PAR"), Union Power Construction Company
("Union Power"), TRANS TECH Electric, Inc. ("TRANS TECH") and Potelco, Inc.
("Potelco" and together with PAR, Union Power and TRANS TECH, the "Founding
Companies"). For the year ended December 31, 1997, the Founding Companies,
which have been in business an average of 36 years, had pro forma combined
annual revenues of approximately $152.3 million. A brief description of each
of the Founding Companies is set forth below.

PAR. PAR was founded in 1954 and is headquartered in North Kansas City,
Missouri. PAR maintains additional offices in Topeka and Wichita, Kansas;
Clinton, Missouri; Des Moines, Iowa; Aurora, Colorado; and Fontana and
Escondido, California and so far in 1998 provided services to customers in
Missouri, Iowa, Colorado, Kansas, Nebraska, California, Montana, Oklahoma and
Texas. PAR had revenues of approximately $49.1 million for the year ended
December 31, 1997. PAR provides full electric infrastructure contracting
services, including installation of electrical transmission lines, both
underground and above ground, and distribution lines and construction of
electric substations. In addition, PAR provides emergency electrical
restoration services and other routine electrical system maintenance services.

UNION POWER. Union Power was founded in 1946 and is headquartered in
Englewood, Colorado. Union Power maintains additional offices in Las Vegas and
Reno, Nevada, and Vacaville, Susanville and Litchfield California and so far
in 1998 provided services to customers in Colorado, Nevada, California and
Arizona. Union Power had revenues of approximately $42.8 million for the year
ended August 31, 1997. Union Power provides electric infrastructure
contracting services, including installation of electrical transmission lines,
both underground and above ground, and distribution lines and construction of
electric substations. In addition, Union Power provides electrical repair and
maintenance services.

TRANS TECH. TRANS TECH was founded in 1983, is headquartered in South Bend,
Indiana and so far in 1998 provided services to customers in Indiana, Michigan
and Ohio. TRANS TECH had revenues of approximately $32.8 million for the year
ended December 31, 1997. TRANS TECH installs, maintains and repairs traffic
signals, signage, highway control systems components, highway and airport
lighting and fiber optics for states and other governmental entities. The
company also performs traditional electrical contracting services for private
and public entities in the commercial and industrial markets.

POTELCO. Potelco was founded in 1965 and is headquartered near Seattle,
Washington. Potelco maintains additional offices in Spokane, Washington and
Gresham, Oregon, and so far in 1998 provided services to customers in
Washington. Potelco had revenues of approximately $19.2 million for the year
ended December 31, 1997. Potelco provides electric and telecommunication
infrastructure contracting services, including installation of overhead and
underground lines and facilities for the power, telecommunications and cable
television industries. In addition, Potelco provides electrical and
telecommunication installation, maintenance and repair services to the
commercial and industrial markets.

Since the Company's initial public offering (the "IPO") of shares of its
Common Stock, par value $.00001 per share (the "Common Stock") in February
1998, the Company has acquired eleven other businesses which when combined
with the Founding Companies resulted in pro forma combined revenues for the
twelve months ended December 31, 1997 and for the six months ended June 30,
1998 of approximately $338.0 million and $184.2 million, respectively, for a
combined consideration of $85.0 million of cash and notes and 5.0 million
shares of Common Stock. See "Business--Acquisition Program."

Quanta was incorporated in Delaware in August 1997 under the name Fabal
Construction, Inc. and changed its name to Quanta Services, Inc. in November
1997. See "Certain Transactions--Organization of the

12
<PAGE>

Company." Its executive offices are located at 1360 Post Oak Blvd., Suite
2100, Houston, Texas 77056, and its telephone number at that address is (713)
629-7600.

USE OF PROCEEDS

This Prospectus relates to shares of Common Stock that may be offered and
issued by the Company from time to time in connection with the acquisitions of
the securities and assets of other businesses. Other than the securities and
assets acquired, there will be no proceeds to the Company from this offering.

PRICE RANGE OF COMMON STOCK

The Common Stock was initially offered to the public on February 12, 1998 at
a price of $9.00 per share and is listed on the NYSE under the symbol "PWR."
The following table sets forth the high and low sales prices by quarter as
reported by the NYSE.

<TABLE>
<CAPTION>
HIGH LOW
------ -------
<S> <C> <C>
Fiscal Year ended December 31, 1998
1st Quarter (from February 12, 1998).................... $16.75 $11.00
2nd Quarter............................................. $17.75 $12.625
3rd Quarter............................................. $14.81 $12.25
</TABLE>

On October 21, 1998, the last sale price for the Common Stock as reported by
the NYSE was $13.00 per share. On October 21, 1998, there were 100 holders of
record of Common Stock.

DIVIDEND POLICY

The Company currently intends to retain its future earnings, if any, to
finance the growth, development and expansion of its business and,
accordingly, does not currently intend to declare or pay any cash dividends on
the Common Stock in the immediate future. The declaration, payment and amount
of future cash dividends, if any, will be at the discretion of the Company's
Board of Directors after taking into account various factors, including, among
others, the Company's financial condition, results of operations, cash flows
from operations, current and anticipated capital requirements and expansion
plans, the income tax laws then in effect and the requirements of Delaware
law. In addition, the terms of the Company's $125.0 million credit facility
(the "Credit Facility") and $49.4 million Convertible Subordinated Notes
include restrictions on payment of cash dividends by the Company without the
consent of the respective lenders.

13
<PAGE>

SELECTED FINANCIAL DATA

(IN THOUSANDS, EXCEPT PER SHARE DATA)

For financial statement presentation purposes, PAR has been identified as
the "accounting acquiror." Subsequent to the IPO, the Company acquired eleven
additional businesses. Of these eleven acquired businesses, ten were accounted
for using the purchase method of accounting (the "Purchased Companies") and
one was accounted for using the pooling-of-interests method of accounting (the
"Pooled Company"). As such, Quanta's consolidated historical statements as of
December 31, 1996, 1997 and June 30, 1998, and for each of the three years in
the period ended December 31, 1997 and for the six months ended June 30, 1997
and 1998, included elsewhere in this Prospectus, and the related selected
historical financial data derived from them represent the financial position
and results of operations of (i) PAR as restated to include the financial
position and results of operations of the Pooled Company and (ii) the
remaining Founding Companies and the Purchased Companies beginning on their
respective dates of acquisition. The following selected historical financial
data for the Company as of December 31, 1993, 1994 and 1995 and for each of
the two years in the period ended December 31, 1994, have been derived from
the unaudited financial statements of the Company, which have been prepared on
the same basis as the audited financial statements and, in the opinion of the
Company management, reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of such data. The
Founding Companies, the Purchased Companies and the Pooled Company are
collectively referred to as the "Acquired Businesses."

The following selected unaudited pro forma combined financial data present
certain data for the Company, adjusted for (i) the Acquired Businesses, (ii)
the effects of certain other pro forma adjustments to the historical financial
statements and (iii) the consummation of the Company's IPO in February 1998
and the application of the net proceeds therefrom. The unaudited pro forma
combined income statement data assume that the acquisition of the Acquired
Businesses and the IPO and related transactions were closed on January l, 1997
and are not necessarily indicative of the results that the Company would have
obtained had these events actually then occurred or of the Company's future
results. During the periods presented below, the Acquired Businesses were not
under common control or management and, therefore, the data presented may not
be comparable to or indicative of post combination results to be achieved by
the Company. The unaudited pro forma combined financial statements should be
read in conjunction with the other financial information included elsewhere in
this Prospectus. See the Unaudited Pro Forma Combined Financial Statements and
notes thereto and the historical financial statements and the notes thereto of
Quanta, the Founding Companies, and certain other acquired company financial
statements included elsewhere in this Prospectus.

14
<PAGE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENTS OF OPERATIONS DATA:
Quanta Services, Inc. and Subsidiaries
Revenues.............. $35,319 $57,020 $53,224 $71,294 $76,204 $ 34,799 $ 93,717
Costs of services
(including
depreciation)........ 29,000 47,216 44,608 57,164 58,896 28,861 76,681
------- ------- ------- ------- ------- -------- --------
Gross profit.......... 6,319 9,804 8,616 14,130 17,308 5,938 17,036
Selling, general and
administrative
expenses............. 5,055 6,870 6,488 9,931 11,645 4,883 9,869
------- ------- ------- ------- ------- -------- --------
Income from
operations........... 1,264 2,934 2,128 4,199 5,663 1,055 7,167
Other income
(expense), net....... (399) (598) (712) (1,020) (1,350) (651) (858)
------- ------- ------- ------- ------- -------- --------
Income before
provision for income
taxes................ 865 2,336 1,416 3,179 4,313 404 6,309
Provision for income
taxes................ 152 867 353 1,389 1,786 136 2,900
------- ------- ------- ------- ------- -------- --------
Net income............ $ 713 $ 1,469 $ 1,063 $ 1,790 $ 2,527 $ 268 $ 3,409
======= ======= ======= ======= ======= ======== ========
Basic and diluted
earnings per share... $ 0.18 $ 0.37 $ 0.27 $ 0.45 $ 0.64 $ 0.07 $ 0.24
======= ======= ======= ======= ======= ======== ========
Shares used in
computing earnings
per share(5)
Basic............... 3,952 3,952 3,952 3,952 3,952 3,952 14,399
======= ======= ======= ======= ======= ======== ========
Diluted............. 3,952 3,952 3,952 3,952 3,952 3,952 14,506
======= ======= ======= ======= ======= ======== ========
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1997(7) 1998(7)
------------ ----------------
<S> <C> <C>
PRO FORMA COMBINED:
Revenues....................................... $337,965 $184,182
Cost of services (including depreciation)...... 269,081 149,807
-------- --------
Gross profit................................... 68,884 34,375
Selling, general and administrative expenses(1) 27,112 15,937
Merger expenses--pooling....................... -- 231
Goodwill amortization(2)....................... 4,089 2,021
-------- --------
Income from operations......................... 37,683 16,186
Other income (expense), net(3)................. (6,125) (3,130)
-------- --------
Income before income tax expense............... 31,558 13,056
Provision for income taxes(4).................. 13,727 5,917
-------- --------
Net income..................................... $ 17,831 $ 7,139
======== ========
Basic earnings per share....................... $ 0.85 $ 0.34
======== ========
Diluted earnings per share..................... $ 0.85 $ 0.33
======== ========
Shares used in computing pro forma earnings per
share(5)
Basic........................................ 21,041 21,263
======== ========
Diluted...................................... 21,041 21,370
======== ========
</TABLE>

15
<PAGE>

<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------- PRO FORMA
DECEMBER 31, COMBINED(6)
---------------------------------- JUNE 30, JUNE 30,
1993 1994 1995 1996 1997 1998 1998
------ ------ ------ ------ ------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........ $1,151 $1,794 $ 871 $1,792 $2,186 $26,724 $42,059
Total assets........... 15,806 22,713 24,761 29,734 35,747 205,826 319,182
Long-term debt, net of
current maturities.... 2,350 4,512 4,291 6,478 7,542 33,112 98,410(8)
Total stockholders' eq-
uity.................. 6,264 7,921 8,709 8,460 11,210 128,756 157,535
</TABLE>
- --------

(1) The unaudited pro forma combined statement of operations data reflect an
aggregate of approximately $8.0 million and $2.4 million for the year
ended December 31, 1997, and for the six months ended June 30, 1998,
respectively, in pro forma reductions in salaries and bonuses and benefits
of the previous owners and management of the Acquired Businesses to which
they have agreed prospectively. Additionally, it excludes the $13.0
million non-recurring non-cash charge recognized by Quanta related to the
issuance of stock to an initial stockholder and management, as a result of
the issuance of such shares for nominal consideration. See Note 2 of Notes
to Financial Statements of Quanta Services, Inc.

(2) Reflects amortization of the goodwill to be recorded as a result of the
Founding Companies and the Purchased Companies over a 40-year period and
computed on the basis described in the notes to the Unaudited Pro Forma
Combined Financial Statements.

(5) The shares used in computing earnings per share for the following periods
include:

(a) Five years ended December 31, 1997 and six months ended June 30,
1997 (historical)--the 3,000,000 shares issued in connection with
PAR and the 951,945 shares issued in connection with acquisition of
the Pooled Company.

(b) Year ended December 31, 1997 (pro-forma)--(i) the shares described
above in (a), (ii) 5,750,000 shares of Common Stock, net of 579,222
shares representing net cash to Quanta, sold in the IPO to pay the
cash portion of the consideration for the Founding Companies, to
repay expenses incurred in connection with the IPO and to retire
debt, (iii) 8,573,392 shares issued to the owners of the other
Founding Companies and to the other ten businesses acquired
subsequent to the IPO and (iv) 3,345,333 shares of Limited Vote
Common Stock issued to the initial stockholders and certain
management personnel of the Company.

(c) Six months ended June 30, 1998 (historical)--basic earnings per
share information includes the weighted average portion of (i)
7,527,000 shares of Common Stock issued to the owners of the
Founding Companies, (ii) 3,345,333 shares of Limited Vote Common
Stock issued to the initial stockholders and certain management
personnel of the Company, (iii) 5,750,000 shares of Common Stock
sold in the Offering to pay the cash portion of the consideration
for the Founding Companies to repay expenses incurred in connection
with the Offering and to retire debt, (iv) 951,945 shares issued
for the acquisition of the Pooled Company, and (v) the weighted
average portion of the 1,296,740 shares issued in acquisitions
accounted for as purchases.

(d) Six months ended June 30, 1998 (pro-forma)--basic earnings per
share information includes the shares used in the computation
described in (c) above computed as if those shares had been issued
as of January 1, 1998, net of 357,174 shares representing net cash
to Quanta, and 2,749,652 shares issued in acquisitions accounted
for as purchases subsequent to June 30, 1998, as if the shares had
been issued as of January 1, 1998.

(6) Reflects the acquisition of the Purchased Companies which occurred
subsequent to June 30, 1998 and related transactions as if they had
occurred on June 30, 1998 as described in the Notes to the Unaudited Pro
Forma Combined Financial Statements. The unaudited pro forma combined
balance sheet data should be read in conjunction with the other financial
information and historical financial statements and notes thereto included
elsewhere in this Prospectus.

(7) Reflects the elimination of the revenues and related expenses for a
division of one of the Purchased Companies which was not acquired by the
Company.

(8) Includes approximately $61.5 million borrowed under a combination of the
Company's credit facility and notes issued in connection with the
acquisition of the Purchased Companies which occurred subsequent to June
30, 1998.

16
<PAGE>

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

INTRODUCTION

The following discussion should be read in conjunction with the Quanta
Services, Inc. and subsidiaries Consolidated Financial Statements and related
notes thereto included elsewhere in this Prospectus. Except for the historical
financial information contained herein, the matters discussed in this
Prospectus may be considered "forward-looking" statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. Such statements include
declarations regarding the intent, belief or current expectations of the
Company and its management, statements regarding the future results of
acquired companies, the Company's gross margins and the Company's expectations
regarding Year 2000 issues. Prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and
involve a number of risks and uncertainties. Actual results could differ
materially from those indicated by such forward-looking statements. Among the
important factors that could cause actual results to differ materially from
those indicated by such forward-looking statements are the risk factors
identified elsewhere in this Prospectus. See "Risk Factors".

The Company's revenues are derived from providing specialty electrical
contracting and maintenance services related to electric and
telecommunications infrastructure, providing electrical contracting services
to the commercial and industrial markets and installing transportation control
and lighting systems. The Company's services include the installation, repair
and maintenance of electric power transmission and distribution lines,
telecommunication lines and cable television lines, the construction of
electric substations, the erection of cellular telephone, PCS(R) and microwave
towers, the installation of highway lighting and traffic control systems,
specialized underground construction including underground fueling systems,
design and engineering services, as well as the provision of specialty
contracting services for electric, video, security, fire, voice and data
systems. The Company's customers include electric utilities, telecommunication
and cable television system operators, governmental entities, general
contractors and owners and managers of commercial and industrial properties.
The Company had pro forma combined revenues for the year ended December 31,
1997 of $338.0 million, of which 43.2 percent was attributable to electric
utility infrastructure services, 38.6 percent was attributable to
telecommunications infrastructure services, 7.6 percent was attributable to
commercial and industrial services and 10.6 percent was attributable to
transportation control and lighting systems services.

The Company enters into contracts principally on the basis of competitive
bids, the final terms and prices of which are frequently negotiated with the
customer. Although the terms of the contracts undertaken by the Company vary
considerably, the contracts are usually on either a lump sum or unit price
basis in which the Company agrees to do the work for a fixed amount for the
entire project (lump sum) or for units of work performed (unit price). Most
installation projects are completed within one year, while maintenance and
repair work is frequently provided under open-ended, unit price master service
agreements which are renewable annually. Revenues from lump sum contracts are
generally recorded on a percentage-of-completion basis, using the cost-to-cost
method based on the percentage of total costs incurred to date in proportion
to total estimated costs to complete the contract. The Company recognizes
revenue when services are performed except when work is being performed under
a fixed price or cost-plus-fee contract. Such contracts generally provide that
the customer accept completion of progress to date and compensate the Company
for services which have been rendered, measured typically in terms of units
installed, hours expended or some other measure of progress. Certain of the
company's customers require the Company to post performance and payment bonds
upon execution of the contract, depending upon the nature of the work to be
performed. The Company's fixed price contracts often include payment
provisions pursuant to which the customer withholds a 5 percent to 10 percent
retainage from each progress payment and forwards the retainage to the Company
upon completion and approval of the work.

17
<PAGE>

Costs of services consist primarily of salaries and benefits to employees,
depreciation, fuel and other vehicle expenses, equipment rentals,
subcontracted services, materials, parts and supplies. The Company's gross
margin, which is gross profit expressed as a percentage of revenues, is
typically higher on projects where labor, rather than materials, constitutes a
greater portion of the cost of services. Labor costs can be predicted with
relatively less accuracy than materials costs. Therefore, to compensate for
the potential variability of labor costs, the Company seeks to maintain higher
margins on its labor-intensive projects. Certain of the Company's subsidiaries
are subject to a $500,000 deductible for workers compensation insurance.
Fluctuations in insurance accruals related to this deductible could have a
significant impact on gross margins in the period in which such adjustments
are made. Selling, general and administrative expenses consist primarily of
compensation and related benefits to management, administrative salaries and
benefits, marketing, office rent and utilities, communications and
professional fees.

The Acquired Businesses 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 profits and
selling, general and administrative expenses as a percentage of revenues may
not be comparable among the individual Acquired Businesses. In connection with
the Company's acquisitions, certain owners of the Acquired Businesses have
agreed to reductions in their compensation and related benefits totaling $8.0
million lower than 1997 levels. Such reductions have been reflected as a pro
forma adjustment in the Unaudited Pro Forma Combined Statement of Operations
and in the terms of the employment agreements entered into between these
persons and the Company.

The Company believes that it will realize savings from (i) consolidation of
insurance and bonding programs, (ii) reduction in other general and
administrative expenses such as training, marketing, communications and
professional fees, (iii) the Company's ability to borrow at lower interest
rates than most, if not all, of the Acquired Businesses, (iv) consolidation of
operations in certain locations and (v) greater volume discounts from
suppliers of materials, parts and supplies. It is anticipated that costs
related to the Company's new corporate infrastructure, being a public company
and integrating the Acquired Businesses will partially offset these savings.
The Company believes that neither these savings nor the costs associated
therewith can be quantified as there have been limited combined operating
results upon which to base any assumptions. As a result, these savings and
associated costs have not been included in the pro forma financial information
included herein.

In November 1997, the Company sold 1.7 million shares of Limited Vote Common
Stock to management and an initial stockholder. As a result, the Company has
recorded a non-recurring, non-cash compensation charge of $13.0 million,
representing the difference between the amount paid for the shares and the
estimated fair value of the shares on the date of sale (the "Compensation
Charge"). The Compensation Charge has been estimated based on a fair value
that is discounted from the initial public offering price. This non-recurring,
non-cash Compensation Charge is not included in the Unaudited Pro Forma
Combined Financial Statements.

The Founding Companies, excluding PAR, and the Purchased Companies have been
accounted for using the purchase method of accounting. Accordingly, the excess
of the fair value of the consideration paid for the Acquired Businesses,
excluding the Pooled Company, of $134.4 million over the fair value of the net
assets acquired from the Acquired Businesses will be recorded as "goodwill."
In addition, goodwill of $25.6 million has been recorded attributable to the
3,345,333 shares of Limited Vote Common Stock issued to initial stockholders
and management. Together, this goodwill, totaling $160.0 million, will be
amortized over its estimated useful life of 40 years as a non-cash charge to
operating income. The pro forma effect of this amortization expense, the
majority of which is not deductible for tax purposes, is expected to be
approximately $4.1 million per year.

18
<PAGE>

RECENT DEVELOPMENTS

Strategic Investment

In October 1998, the Company entered into a strategic investment agreement
with Enron Capital & Trade Resources Corp. ("ECT"), a subsidiary of Enron
Corp., pursuant to which ECT and an affiliated investment fund made an
investment of $49.4 million in Quanta. The investment is in the form of
Convertible Subordinated Notes bearing interest at 6 7/8 percent and
convertible into Quanta Common Stock at a price of $13.75 per share.
Additionally, Quanta and ECT entered into a strategic alliance pursuant to
which ECT and Quanta will exchange information regarding the design,
construction and maintenance of electric power transmission and distribution
systems and fiber optic communications systems. Further, the Company paid a
commitment fee of approximately $2.0 million to an affiliate of ECT at the
closing date. This will be included in other assets on the Company's balance
sheet and amortized over the original life of the notes. The Convertible
Subordinated Notes require quarterly interest payments and equal semi-annual
principal payments beginning in 2006 until the notes are paid in full in 2010.
The Company has the option to redeem the notes at a premium beginning in 2002.

REGULATORY MATTERS

The Company's operations are subject to the authority of various state and
municipal regulatory bodies concerned with the licensing of contractors. The
Company has experienced no material difficulty in complying with the
requirements imposed on it by such regulatory bodies. See "Business--
Regulation."

SEASONALITY; FLUCTUATIONS OF QUARTERLY RESULTS

The Company's results of operations can be subject to seasonal variations.
Generally, during the winter months, demand for new projects and maintenance
services may be lower due to reduced construction activity during such
weather, while demand for electrical service and repairs may be higher due to
damage caused by inclement weather. Additionally, the industry can be highly
cyclical. As a result, the Company's volume of business may be adversely
affected by declines in new projects in various geographic regions in the U.S.
Typically, the Company experiences lower gross margins and operating margins
during the winter months. Quarterly results may also be materially affected by
the timing of acquisitions, variations in the margins of projects performed
during any particular quarter, the timing and magnitude of acquisition
assimilation costs and regional economic conditions. Accordingly, the
Company's operating result in any particular quarter may not be indicative of
the results that can be expected for any other quarter or for the entire year.

LIQUIDITY AND CAPITAL RESOURCES

In February 1998, Quanta completed the IPO, which involved the issuance of
5,000,000 shares of Common Stock at a price of $9.00 per share (before
deducting underwriter discounts and commissions). In March 1998, Quanta sold
an additional 750,000 shares of Common Stock at a price of $9.00 per share
(before deducting underwriter discounts and commissions) pursuant to the
underwriter's overallotment option. The proceeds from these transactions, net
of the discounts and after deducting the expenses of the IPO, were
approximately $45.1 million. Of this amount, $21.0 million was used to fund
the cash portion of the purchase price relating to the acquisition of the
Founding Companies.

As of June 30, 1998, the Company had pro forma cash and cash equivalents of
$5.2 million, pro forma working capital of $42.1 million and long-term debt of
$98.4 million net of current maturities, after giving consideration to the
consummation of the transactions with the Acquired Businesses and the
application of the net proceeds of the IPO.

19
<PAGE>

capital, to finance acquisitions and for other general corporate purposes.
Amounts borrowed under the Credit Facility bear interest at a rate equal to
either (a) the London Interbank Offered Rate ("LIBOR") plus 0.75 percent to
1.75 percent, as determined by the ratio of the Company's total funded debt to
EBITDA (as defined in the Credit Facility) or (b) the bank's prime rate plus
up to 0.25 percent, as determined by the ratio of the Company's total funded
debt to EBITDA. Commitment fees of 0.175 percent to 0.30 percent (based on
certain financial ratios) are due on any unused borrowing capacity under the
Credit Facility. The Company's existing and future subsidiaries will guarantee
the repayment of all amounts due under the facility and the facility restricts
pledges on all material assets. The Credit Facility contains usual and
customary covenants for a credit facility of this nature including the
prohibition of the payment of dividends, certain financial ratio covenants and
the consent of the lenders for acquisitions exceeding a certain level of cash
consideration. Additionally, the Company has issued $49.4 million of
Convertible Subordinated Notes bearing interest at 6 7/8 percent, the proceeds
of which were used to reduce outstanding borrowings under the Credit Facility
and include restrictive covenants which mirror the Credit Facility. As of
October 16, 1998, outstanding borrowings under the Credit Facility totaled
approximately $69.3 million.

Through October 16, 1998 the Company has acquired eleven companies in
addition to the Founding Companies for an aggregate consideration of 5.0
million shares of Common Stock and $85.0 million in cash and notes. The cash
portion of such consideration was provided by borrowings under the Company's
credit facility. The timing, size or success of any acquisition effort and the
associated potential capital commitments cannot be predicted. See "Risk
Factors--Risks Related to Acquisition Strategy" and "Risks Related to
Acquisition Financing".

The Company expects to continue its aggressive acquisition program. The
Company intends to continue to use a combination of cash and Common Stock to
finance the principal part of the consideration payable in acquisitions. If
the Common Stock does not maintain a sufficient value, or potential
acquisition candidates are unwilling to accept Common Stock as part of the
consideration for the sale of their businesses, the Company could be required
to utilize more cash to complete acquisitions. If sufficient funds were not
available from operating cash flow or through borrowings under the Company's
Credit Facility, the Company may seek additional financing through the public
or private sale of equity or debt securities. There can be no assurance that
the Company could secure such financing if and when it is needed or on terms
the Company deems acceptable. If the Company is unable to secure acceptable
financing, its acquisition program could be negatively affected. The Company
anticipates that its cash flow from operations and Credit Facility will
provide sufficient cash to enable the Company to meet its working capital
needs, debt service requirements and planned capital expenditures for property
and equipment for at least the next 12 months.

INFLATION

Due to relatively low levels of inflation experienced during the years ended
December 31, 1995, 1996 and 1997, inflation did not have a significant effect
on the results of the combined Founding Companies in those periods.

YEAR 2000

Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and software used by many companies may need to be upgraded to comply
with such "Year 2000" requirements. Significant uncertainty exists concerning
the potential effects associated with such compliance, but systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail.

The Company has made a preliminary review of both its information technology
and its non-information technology systems to determine whether they are Year
2000 compliant. Additionally, the Company reviews the systems of all of its
potential acquisitions for Year 2000 compliance. The Company has not
identified any material systems which are not Year 2000 compliant. The Company
is currently preparing a formal questionnaire

20
<PAGE>

for all significant suppliers, customers and service providers to determine
the extent to which the Company is vulnerable to those third parties' failure
to remediate the Year 2000 problem. The Company has received oral assurances
of Year 2000 compliance from many of the third parties with whom it has
relationships. Unless public suppliers of water, electricity, natural gas and
telecommunications are disrupted for a substantial period of time (in which
case the Company's business may be materially and adversely affected), the
Company believes that its operations will not be significantly disrupted even
if third parties with whom the Company has relationships are not Year 2000
compliant. Further, the Company believes that it will not be required to make
any material expenditures to address the Year 2000 problem as it relates to
its existing systems. While it is not possible at present to quantify the cost
of corrective actions, management does not expect that these actions will
materially exceed the cost of normal software upgrades and replacements
expected to occur through the Year 2000. However, uncertainty exists
concerning the potential costs and effects associated with any Year 2000
compliance, and the Company intends to continue to make efforts to ensure that
third parties with whom it has relationships are Year 2000 compliant.
Therefore, there can be no assurance that unexpected Year 2000 compliance
problems of either the Company or its vendors, customers and service providers
would not materially and adversely affect the Company's business, financial
condition or operating results. The Company will continue to consider the
likelihood of a material business interruption due to the Year 2000 issue,
and, if necessary, implement appropriate contingency plans.

INDIVIDUAL FOUNDING COMPANIES

The selected historical financial information presented in the tables below
is derived from the respective audited financial statements of the Founding
Companies included elsewhere herein. The following discussion should be read
in conjunction with the Financial Statements of the Founding Companies and the
notes thereto appearing elsewhere in this Prospectus.

For financial statement presentation purposes, as required by the rules and
regulations of the Securities Act, PAR has been identified as the accounting
acquiror. As such, the financial statements of Quanta for periods prior to
February 18, 1998 are the financial statements of PAR as restated for the
acquisition of the Pooled Company.

QUANTA SERVICES, INC. AND SUBSIDIARIES RESULTS OF OPERATIONS

The unaudited historical combined statements of operations for the six
months ended June 30, 1998 reflect the historical operations of PAR and the
Pooled Company. The operations of the Founding Companies have been included in
the Company's historical Financial Statements beginning February 19, 1998 and
the operations of the Purchased Companies have been included from their
respective acquisition dates.

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 DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------- ----------------------------
1995 1996 1997 1997 1998
------------- ------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $53,224 100.0% $71,294 100.0% $76,204 100.0% $34,799 100.0% $93,717 100.0%
Cost of services........ 44,608 83.8 57,164 80.2 58,896 77.3 28,861 82.9 76,681 81.8
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Gross profit.......... 8,616 16.2 14,130 19.8 17,308 22.7 5,938 17.1 17,036 18.2
Selling, general and
administrative
expenses............... 6,488 12.2 9,931 13.9 11,645 15.3 4,883 14.0 9,869 10.5
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Income from operations.. $ 2,128 4.0% $ 4,199 5.9% $ 5,663 7.4% $ 1,055 3.1% $ 7,167 7.7%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>

Quanta results for the six months ended June 30, 1998 compared to the six
months ended June 30, 1997

Revenues. Historical revenues increased $58.9 million, or 169.3 percent, to
$93.7 million for the six months ended June 30, 1998, due to the acquisition
of the Founding Companies on February 18, 1998 and subsequent acquisitions of
the Purchased Companies.

21
<PAGE>

Gross profit. Gross profit increased $11.1 million, or 186.9 percent, to
$17.0 million for the six months ended June 30, 1998. Gross margins increased
from 17.1 percent for the six months ended June 30, 1997 to 18.2 percent for
the six months ended June 30, 1998. This increase in gross margin was
primarily the result of the acquisition of the Founding Companies on February
18, 1998, which had higher gross margins than PAR as restated for the Pooled
Company, improved asset utilization and a higher proportion of relatively
higher margin telecommunication revenues to total revenues.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $5.0 million, or 102.0 percent, to $9.9
million for the six months ended June 30, 1998, due to the acquisition of the
Founding Companies on February 18, 1998, the acquisition of the Purchased
Companies and increases in selling and administrative salaries required to
support the higher level of revenues generated from an increased volume of
projects, as well as the establishment of a corporate office and
administrative infrastructure during 1998.

Quanta results for the year ended December 31, 1997 compared to the year
ended December 31, 1996

Revenues. Revenues increased $4.9 million, or 6.9 percent, from $71.3
million for the year ended December 31, 1996 to $76.2 million for the year
ended December 31, 1997, primarily as a result of an increased demand for the
company's services in Missouri, California and Colorado, partially offset by a
decrease in activity in Oregon.

Gross profit. Gross profit increased $3.2 million, or 22.7 percent , from
$14.1 million for the year ended December 31, 1996 to $17.3 million for the
year ended December 31, 1997. As a percentage of revenues, gross profit
increased from 19.8 percent to 22.7 percent. The increase in gross profit and
gross margin is primarily due to increased labor productivity, renegotiated
unit pricing on certain long-term contracts and lower equipment rental expense
as PAR replaced rental equipment on certain projects with company-owned
equipment, partially offset by lower gross profit from operations in Oregon
due to the completion of a significant telecommunications contract.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $1.7 million, or 17.2 percent, from $9.9
million for the year ended December 31, 1996 to $11.6 million for the year
ended December 31, 1997, primarily due to increased administrative support
required by the higher level of revenues and increases in owner compensation,
partially offset by decreased commissions paid to salesmen. As a percentage of
revenues, selling, general and administrative expenses increased from 13.9
percent to 15.3 percent.

Results for the year ended December 31, 1996 compared to the year ended
December 31, 1995

Revenues. Revenues increased $18.1 million, or 34.0 percent, from $53.2
million for the year ended December 31, 1995 to $71.3 million for the year
ended December 31, 1996, primarily as a result the acquisition of a company by
the Pooled Company and increased demand for the company's services in
Colorado, Oregon and, to a lesser extent, in California, but were partially
offset by decreased activity in Missouri.

Gross profit. Gross profit increased $5.5 million, or 64.0 percent, from
$8.6 million for the year ended December 31, 1995 to $14.1 million for the
year ended December 31, 1996. As a percentage of revenues, gross profit
increased from 16.2 percent to 19.8 percent. This increase in gross profit was
a result of the acquisition of a company by the Pooled Company, the awarding
of a significant telecommunications contract, improved labor productivity and
asset utilization but was partially offset by increases in insurance costs and
higher costs than anticipated on certain contracts.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $3.4 million, or 52.3 percent, from $6.5
million for the year ended December 31, 1995 to $9.9 million for the year
ended December 31, 1996, primarily due to the acquisition of a company by the
Pooled Company, increased commissions paid to salesmen responsible for the
awarding of the telecommunications contract and increases in

22
<PAGE>

administrative salaries required to support the higher level of revenues
generated from an increased volume of projects and increases in owner
compensation. As a percentage of revenues, selling, general, and
administrative expenses increased from 12.2 percent to 13.9 percent.

UNION POWER RESULTS OF OPERATIONS

Union Power was founded in 1946, and is headquartered in Englewood,
Colorado. It operates primarily west of the Mississippi River and in 1997
provided services to customers in Colorado, Nevada, California and Oregon.
Union Power is primarily involved in providing electric infrastructure
contracting services, including installation of electrical transmission lines,
both underground and above ground, and distribution lines and construction of
electric substations. In addition, Union Power provides electrical repair and
maintenance services.

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

<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31, THREE MONTHS ENDED NOVEMBER 30,
------------------------------------------- -----------------------------------
1995 1996 1997 1996 1997
------------- ------------- ------------- ---------------- -----------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $12,614 100.0% $25,636 100.0% $42,792 100.0% $ 7,211 100.0% $ 15,357 100.0%
Cost of services........ 10,240 81.2 22,319 87.1 37,766 88.3 6,037 83.7 13,474 87.7
------- ----- ------- ----- ------- ----- -------- ------- --------- -------
Gross profit............ 2,374 18.8 3,317 12.9 5,026 11.7 1,174 16.3 1,883 12.3
Selling, general and
administrative
expenses............... 1,896 15.0 1,563 6.1 1,966 4.6 491 6.8 677 4.4
------- ----- ------- ----- ------- ----- -------- ------- --------- -------
Income from operations.. $ 478 3.8% $ 1,754 6.8% $ 3,060 7.1% $ 683 9.5% $ 1,206 7.9%
======= ===== ======= ===== ======= ===== ======== ======= ========= =======
</TABLE>

Union Power results for the three months ended November 30, 1997 compared to
the three months ended November 30, 1996

Revenues. Revenues increased $8.2 million, or 113.0 percent, from $7.2
million for the three months ended November 30, 1996 to $15.4 million for the
three months ended November 30, 1997, primarily due to increased demand for
Union Power's services in Nevada, a higher volume of work in California and
increased outsourcing of required services by utility customers, which
resulted in a higher component of subcontracted work.

Gross profit. Gross profit increased $0.7 million, or 60.4 percent, from
$1.2 million for the three months ended November 30, 1996 to $1.9 million for
the three months ended November 30, 1997, primarily as a result of the
increase in sales. As a percentage of revenues, gross profit decreased to 12.3
percent from 16.3 percent primarily as a result of a higher proportion of
subcontract work and low margin material costs.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.2 million, or 37.9 percent, from $0.5
million for the three months ended November 30, 1996 to $0.7 million for the
three months ended November 30, 1997, due primarily to growth in the Company's
office staff needed to support the increased sales. As a percentage of
revenues, selling, general and administrative expenses decreased from 6.8
percent to 4.4 percent primarily due to economies of scale.

Union Power results for the year ended August 31, 1997 compared to the year
ended August 31, 1996

Revenues. Revenues increased $17.2 million, or 67.2 percent, from $25.6
million for the year ended August 31, 1996 to $42.8 million for the year ended
August 31,1997, primarily due to increased demand for the Company's services
in Nevada, a higher volume of work in California and increased outsourcing of
required services by utility customers, which resulted in a higher component
of subcontracted work.

Gross profit. Gross profit increased $1.7 million, or 51.5 percent, from
$3.3 million for the year ended August 31, 1996 to $5.0 million for the year
ended August 31, 1997. As a percentage of revenues, gross profit

23
<PAGE>

decreased to 11.7 percent from 12.9 percent primarily as a result of a higher
percentage of work being subcontracted at lower margins and higher costs than
anticipated on certain projects.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.4 million, or 25.0 percent, from $1.6
million for the year ended August 31, 1996 to $2.0 million for the year ended
August 31, 1997 due to the continued expansion into the California and Nevada
markets. As a percentage of revenues, selling, general and administrative
expenses decreased from 6.1 percent to 4.6 percent primarily due to economies
of scale.

Union Power results for the year ended August 31, 1996 compared to the year
ended August 31, 1995

Revenues. Revenues increased $13.0 million, or 103.2 percent, from $12.6
million for the year ended August 31, 1995 to $25.6 million for the year ended
August 31, 1996, primarily as a result of an increase in the overall demand
for the company's services in Nevada and California.

Gross profit. Gross profit increased $0.9 million, or 37.5 percent, from
$2.4 million for the year ended August 31, 1995 to $3.3 million for the year
ended August 31, 1996. As a percentage of revenues, gross profit decreased to
12.9 percent from 18.8 percent primarily as a result of higher costs than
anticipated on a specific contract in 1996.

Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $0.3 million, or 15.8 percent, from $1.9
million for the year ended August 31, 1995 to $1.6 million for the year ended
December 31, 1996 due to lower owner compensation and employee bonuses in
1996. As a percentage of revenues, selling, general and administrative
expenses decreased from 15.0 percent to 6.1 percent.

Union Power liquidity and capital resources

Union Power generated $.2 million of net cash from operating activities for
the three months ended November 30, 1997. Net cash used in investing
activities was approximately $1.3 million, primarily for the purchase of
operating equipment. Net cash provided by financing activities of $1.7 million
resulted from advances under the Company's line of credit and additional
borrowings.

At November 30, 1997, Union Power had $3.0 million of working capital and
$1.5 million of total long-term debt outstanding.

Union Power generated $1.0 million of net cash from operating activities for
the year ended August 31, 1997. Net cash used in investing activities was
approximately $1.5 million, primarily for the purchase of operating equipment.
Net cash provided by financing activities of $0.2 million resulted from
advances on the company's line of credit.

At August 31, 1997, Union Power had working capital of $2.8 million and $1.0
million of total long-term debt outstanding.

TRANS TECH RESULTS OF OPERATIONS

TRANS TECH was founded in 1983, is headquartered in South Bend, Indiana and
in 1997 provided services to customers in Indiana, Kentucky, Michigan and
Ohio. TRANS TECH installs, maintains and repairs traffic signals, signage,
highway control systems components, highway and airport lighting and fiber
optics for states and other governmental entities, and also performs
traditional electrical contracting services for private and public entities in
the commercial and industrial markets.

24
<PAGE>

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

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1996 1997
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues.......................... $21,397 100.0% $24,414 100.0% $32,817 100.0%
Cost of services.................. 18,934 88.5 20,426 83.7 26,519 80.8
------- ----- ------- ----- ------- -----
Gross profit.................... 2,463 11.5 3,988 16.3 6,298 19.2
Selling, general and
administrative expenses.......... 1,639 7.7 1,848 7.6 2,015 6.1
------- ----- ------- ----- ------- -----
Income from operations............ $ 824 3.8% $ 2,140 8.7% $ 4,283 13.1%
======= ===== ======= ===== ======= =====
</TABLE>

TRANS TECH results for the year ended December 31, 1997 compared to the year
ended December 31, 1996.

Revenues. Revenues increased $8.4 million, or 34.4 percent, from $24.4
million for the year ended December 31, 1996 to $32.8 million for the year
ended December 31, 1997, primarily as a result of an increase in demand for
services provided by commercial and industrial customers and, to a lesser
extent, by transportation control and lighting systems customers.

Gross profit. Gross profit increased $2.3 million, or 57.5 percent, from
$4.0 million for the year ended December 31, 1996 to $6.3 million for the year
ended December 31, 1997. As a percentage of total revenue, gross margin
increased from 16.3 percent for the year ended December 31, 1996 to 19.2
percent for the year ended December 31, 1997 primarily as a result of improved
labor productivity and asset utilization.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.2 million, or 11.1 percent, from $1.8
million for the year ended December 31, 1996 to $2.0 million for the year
ended December 31, 1997, primarily due to increased administrative salaries
required by the higher level of revenues and increases in owner compensation.
As a percentage of revenues, selling, general and administrative expenses
decreased from 7.6 percent to 6.1 percent due to economies of scale.

TRANS TECH results for the year ended December 31, 1996 compared to the year
ended December 31, 1995

Revenues. Revenues increased $3.0 million, or 14.0 percent, from $21.4
million for the year ended December 31, 1995 to $24.4 million for the year
ended December 31, 1996, primarily as a result of increased volume of work for
commercial and industrial customers offset partially by a decrease in activity
in the transportation control and lighting systems market.

Gross profit. Gross profit increased $1.5 million, or 60.0 percent, from
$2.5 million for the year ended December 31, 1995 to $4.0 million for the year
ended December 31, 1996. As a percentage of total revenue, gross margin
increased from 11.5 percent for the year ended December 31, 1995 to 16.3
percent for the year ended December 31, 1996 as a result of increased labor
productivity and a decrease in materials cost as a percentage of revenues.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.2 million, or 12.5 percent, from $1.6
million for the year ended December 31, 1995 to $1.8 million for the year
ended December 31, 1996, primarily due to the addition of administrative
positions and increased marketing expenses. As a percentage of revenues,
selling, general and administrative expenses remained relatively constant.

25
<PAGE>

TRANS TECH LIQUIDITY AND CAPITAL RESOURCES

TRANS TECH generated $1.1 million of net cash from operating activities for
the year ended December 31, 1997. Net cash used in investing activities was
approximately $0.9 million, primarily for the purchase of operating equipment.
Net cash used in financing activities of $0.4 million resulted primarily from
distributions to shareholders of $6.7 million, which were mostly offset by
borrowings to fund the distributions.

At December 31, 1997, TRANS TECH had working capital of $4.8 million and
$5.6 million of total long-term debt outstanding.

TRANS TECH generated $2.9 million in net cash from operating activities for
the year ended December 31, 1996. Net cash used in investing activities was
approximately $0.9 million, principally for purchases of operating equipment.
Net cash used in financing activities of $2.1 million resulted from repayments
of debt and distributions to shareholders.

At December 31, 1996, TRANS TECH had working capital of $2.8 million and
$0.6 million of total long-term debt outstanding.

POTELCO RESULTS OF OPERATIONS

Potelco, founded in 1965, is headquartered near Seattle, Washington and
operates primarily in Washington, Oregon and Idaho. Potelco provides electric
and telecommunications infrastructure contracting services, including
installation of overhead and underground lines and facilities for the power,
telecommunications and cable television industries. In addition, Potelco
provides electrical and telecommunications installation, maintenance and
repair services to the commercial and industrial markets.

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 DECEMBER 31,
----------------------------
1996 1997
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues.......................................... $14,549 100.0% $19,220 100.0%
Cost of services.................................. 12,946 89.0 15,563 81.0
------- ----- ------- -----
Gross profit.................................... 1,603 11.0 3,657 19.0
Selling, general and administrative expenses...... 971 6.7 1,478 7.7
------- ----- ------- -----
Income from operations............................ $ 632 4.3% $ 2,179 11.3%
======= ===== ======= =====
</TABLE>

Potelco results for the year ended December 31, 1997 compared to the year
ended December 31, 1996

Revenues. Revenues increased $4.7 million, or 32.4 percent, from $14.5
million for the year ended December 31, 1996 to $19.2 million for the year
ended December 31, 1997, primarily as a result of an increase in the demand
for services by telecommunications infrastructure and commercial and
industrial customers to either upgrade their telecommunication systems from
cable to fiber optic or to install new systems.

Gross profit. Gross profit increased $2.1 million, or 131.3 percent, from
$1.6 million for the year ended December 31, 1996 to $3.7 million for the year
ended December 31, 1997. As a percentage of revenues, Potelco's gross margins
improved from 11.0 percent to 19.0 percent due to the projects performed
during 1997 having a relatively higher labor component and therefore resulting
in higher gross margins, as compared to the projects performed during 1996
which had a relatively higher proportion of low margin materials costs.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.5 million, or 50.0 percent, from $1.0
million for the year ended December 31, 1996 to $1.5 million for the year

26
<PAGE>

ended December 31, 1997, primarily due to increases in office salaries and
profit sharing contributions. As a percentage of revenues, these selling,
general and administrative expenses increased from 6.7 percent to 7.7 percent.

POTELCO LIQUIDITY AND CAPITAL RESOURCES

Potelco generated $0.8 million of net cash from operating activities for the
year ended December 31, 1997. Net cash used in investing activities was
approximately $1.6 million, primarily for the purchase of property and
equipment. Net cash provided by financing activities of $0.9 million resulted
primarily from additional proceeds received from a note payable to a bank and
borrowing of other long-term debt.

At December 31, 1997, Potelco had working capital of $1.2 million and $0.9
million of total long-term debt outstanding.

27
<PAGE>

BUSINESS

GENERAL

Quanta was founded in August 1997 to create a leading provider of specialty
electrical contracting and maintenance services primarily related to electric
and telecommunications infrastructure in North America. In addition, the
company provides electrical contracting services to the commercial and
industrial markets and installs transportation control and lighting systems.
The Company's services include the installation, repair and maintenance of
electric power transmission and distribution lines and telecommunication and
cable television lines, the construction of electric substations, the erection
of cellular telephone, PCS(R) and microwave towers, the installation of
highway lighting and traffic control systems, specialized underground
construction including underground fueling systems, design and engineering
services and the provision of specialty contracting services for electric,
video, security, fire, voice and data systems. The Company's customers include
electric utilities, telecommunication and cable television system operators,
governmental entities, general contractors and owners and managers of
commercial and industrial properties.

The Company is one of the largest providers of electric and
telecommunications infrastructure contracting services in its markets. The
Company maintains offices in 19 states and during 1998, the Acquired
Businesses performed work in 32 states. The Company believes that its size,
geographical diversity of operations, industry relationships, design and
engineering capability, expertise in specialty services and number of skilled
personnel provide the Company significant competitive advantages. During 1997,
the Company generated pro forma combined revenues, operating income and net
income of $338.0 million, $37.7 million and $17.8 million, respectively. For
the six months ended June 30, 1998, the Company generated pro forma combined
revenues, operating income and net income of $184.2 million, $16.2 million and
$7.1 million, respectively.

INDUSTRY OVERVIEW

The Company estimates that the electrical and telecommunications contracting
industry generates annual revenues in excess of $40 billion. The Company
believes that growth in this industry is being positively affected by the
following trends:

Deregulation. The wholesale electricity market, including sales of
electricity between utilities and other generators, is regulated by the
Federal Energy Regulatory Commission ("FERC"). In 1996, FERC accelerated the
deregulation of the electric power industry by issuing Order nos. 888 and 889,
which require shareholder-owned utilities (of which there were approximately
223 in 1997) to provide non-utility electricity suppliers with access to
transmission services. Management expects the deregulation of the electric
power industry to increase competition among suppliers of electricity, which
will lead utilities to lower their costs by outsourcing non-core functions
such as the installation, construction, maintenance and repair of electric
transmission and distribution systems and electric substations, services that
have traditionally been performed by the utilities themselves.

The Telecommunications Act of 1996 preempted state and local government
control over access to the telecommunications market, eliminating barriers to
entry and opening the markets to new entrants. Management expects the
elimination of such barriers to lead to increased construction of competing
telecommunications networks as competitive telecommunications providers,
existing as well as new, expand into new markets and offer services that once
were reserved for incumbents.

Upgrading and Expanding Existing Infrastructure. As access to electric
transmission services increases, the Company believes that financial penalties
will be imposed upon electric utilities in the event of transmission and
distribution system downtime attributable to the utilities. As a result, the
company expects that utilities will modernize existing transmission systems,
which will increase the amount of upgrading and repair work available to
outside contractors. The Company also expects commercial and industrial
companies to continue to upgrade and expand their existing electrical
infrastructure as a result of (i) increasing levels of modernization activity,
(ii) the effects of more stringent electric codes, which establish minimum
power and safety requirements, (iii) revised

28
<PAGE>

national energy standards, (iv) increases in use of electric power and (v)
increased installation of electrical capacity in excess of minimum code
requirements in order to facilitate marketing of properties.

The amount of traditional voice and data traffic has increased steadily, and
growth in the use of personal computers and modems has created significant
data traffic from a wide variety of sources. Because of the physical
limitations of the existing communications network facilities, the Company
believes there is an immediate need to upgrade and expand facilities with new
and innovative technology, expanding, and in many cases, replacing existing
telecommunications and cable television infrastructure to allow for increases
in the volume of traffic. The need to upgrade and expand telecommunications
infrastructure as a result of deregulation and the growth in consumer demand
for enhanced telecommunications services is expected to continue to prompt
telecommunications providers to increase the current level of outsourcing to
independent contractors who serve the industry.

Increased Outsourcing. The outsourcing trend has largely been driven by the
efforts of electric utilities and telecommunications providers to reduce costs
and focus on their core competencies. The Company believes that electric
utilities and telecommunications providers will increasingly seek
comprehensive solutions to their infrastructure needs by utilizing fewer
qualified contractors that can provide the full range of new construction,
installation, repair, maintenance and emergency services.

The Company believes that its industry is highly fragmented. According to
the U.S. Census Bureau, there are more than 50,000 electrical and
telecommunications contracting businesses, consisting of a small number of
regional or national providers and a large number of relatively small, owner-
operated businesses that have limited access to capital and that offer a
limited range of services. The Company believes that the fragmented nature of
the industry presents substantial consolidation and growth opportunities for
companies with a disciplined acquisition program, a decentralized operating
strategy and access to financial resources. The Company also believes that the
prominence and operating strength of the Acquired Businesses and the
experience of its executive management will provide the Company with
significant competitive advantages to capitalize on these opportunities.

STRATEGY

The Company plans to achieve its goal of becoming a leading provider of
electric and telecommunications infrastructure contracting services by
implementing its operating strategy, emphasizing continued internal growth and
expanding through acquisitions.

OPERATING STRATEGY. The key elements of the Company's operating strategy
are:

Operate on a Decentralized Basis. The Company intends to manage its
operations on a decentralized basis while maintaining operating and
financial controls. Local management will retain responsibility for the
operations, profitability and growth of its individual business. The
Company believes that, while maintaining operating and financial controls,
a decentralized operating structure will retain the entrepreneurial spirit
of each of the Acquired Businesses and will permit the Company to
capitalize on the Acquired Businesses' local and regional market knowledge,
specialized skills and customer relationships. In addition, the Company
believes that its operating efficiency, financial strength, technical
expertise, presence in key geographic areas and reputation for quality and
reliability provide competitive advantages in bidding for, winning and
executing new contracts for infrastructure projects. While local management
will retain control of the operations of its individual business, the
Company's executive management will have responsibility for corporate
strategy and acquisitions, financing, insurance, investor relations and
employee benefit plans.

Achieve Operating Efficiencies. Certain administrative functions are
being centralized. In addition, by combining overlapping operations of
certain of the Acquired Businesses, the Company expects to achieve more
efficient asset utilization and realize savings in overhead and other
expenses. The Company intends to use its increased purchasing power to gain
volume discounts in areas such as vehicles and equipment,

29
<PAGE>

electrical materials, marketing, bonding, employee benefits and insurance.
The Company will seek to realize cost savings and other benefits by the
sharing of purchasing, pricing, bidding and other business practices and
the sharing of licenses. The Company intends to further develop and expand
the use of management information systems to facilitate financial control,
project costing and asset utilization. At some locations, the larger
combined workforce will provide additional staffing flexibility.

INTERNAL GROWTH. The Company is focused on continuing its strong internal
growth by (i) increasing the volume of services provided to existing
customers, (ii) expanding the scope of services provided to existing
customers, (iii) broadening its customer base and (iv) geographically
expanding its service area. The Company believes it will be able to expand the
services it offers in its markets by leveraging the specialized strengths of
individual Acquired Businesses. Such services include design and engineering,
where the contractor applies in-house engineering expertise to design the most
cost-effective system, and the application of new technologies, such as a
robotic arm that can be used to facilitate the repair of high voltage power
transmission lines without taking them out of service. The Company further
believes that strategic agreements with large electric and telecommunications
infrastructure owners will provide opportunities for future internal growth.
For instance, the Company consummated a strategic investment by ECT and an
associated investment fund pursuant to which ECT and Quanta agreed to exchange
information regarding the design, installation and maintenance of electric
power transmission and distribution systems and fiber optic communications
systems.

ACQUISITIONS. The Company believes that the increasing trend toward the
outsourcing of services to the electric and telecommunications infrastructure
contracting industry will result in a competitive disadvantage for small and
mid-sized companies that do not have access to capital and cannot provide a
broad range of specialty contracting services on a national basis. In
addition, the Company expects that there will continue to be a large number of
attractive acquisition candidates due to the highly fragmented nature of the
industry, the inability of many companies to expand and modernize due to
capital constraints and the desire of owners for liquidity. The Company
believes that its financial strength and experienced management will be
attractive to acquisition candidates. The key elements of the Company's
acquisition strategy are:

Enter New Geographic Markets. The Company intends to expand into
geographic markets not currently served by the Company by selectively
acquiring well-established specialty electrical and telecommunications
contractors that, like the Founding Companies, are leaders in their
regional markets, are financially stable, have a strong customer base, have
senior management committed to participating in the future growth of the
Company and can serve as "platforms" for the future growth of the Company.

Expand Within Existing Markets. The Company intends to explore
acquisition opportunities in the geographic markets it already serves as
well as geographic markets served by businesses the Company acquires in the
future. Once the Company has entered a specific geographic market, it will
seek to acquire other well-established companies in that particular market
to deepen its market penetration and expand the range of services offered
to its customers. The Company will also pursue "tuck-in" acquisitions of
smaller companies whose operations can be integrated into and leveraged
with an existing operation.

30
<PAGE>

ACQUISITION PROGRAM

Since the Company's IPO, the Company has acquired 11 other businesses which
when combined with the Founding Companies and the Pooled Company resulted in
pro forma combined revenues for the year ended December 31, 1997 and the six
months ended June 30, 1998, of approximately $338.0 million and $184.2
million, respectively, for a combined consideration of $85.0 million in cash
and notes and 5.0 million shares of Common Stock. The following table
describes the businesses we have acquired since the IPO:

<TABLE>
<CAPTION>
CLOSING
BUSINESS ACQUIRED DATE BUSINESS DESCRIPTION HEADQUARTERS
----------------- -------- -------------------- ----------------
<S> <C> <C> <C>
Golden State Utility
Company................ 04/15/98 Underground, aerial and underwater Turlock, CA
installation, maintenance and
splicing of telecommunications
cable, including fiber optic
cable, and construction and
maintenance of cellular sites
Spalj Construction
Company................ 05/05/98 Installation of underground fiber- Deerwood, MN
optic networks
NorAm
Telecommunications,
Inc. .................. 06/23/98 Outside and inside fiber-optic Portland, OR
networks and technical services
support for the telecommunications
industry
Environmental
Professional
Associates, Ltd........ 07/02/98 Electric utility line clearance Marysville, CA
services
Underground Construction
Co., Inc............... 08/04/98 Construction and maintenance of Benicia, CA
utility and industrial conduits,
pipelines, airport fueling systems
and other specialized heavy
engineering projects
North Pacific
Construction Co. ...... 08/11/98 Underground construction to the Woodland, CA
telecommunications industry
Sumter Builders, Inc. .. 08/14/98 Construction and maintenance of Sumter, SC
distribution systems, transmission
systems, and substations for
electric utilities
Telecom Network
Services, Inc.......... 08/20/98 Engineering and design/build Kirkland, WA
services for telecommunications
providers
Harker & Harker, Inc. .. 09/15/98 Construction and maintenance of Reno, NV
distribution systems, transmission
systems, and substations for
electric utilities
Smith Contracting....... 09/21/98 Fiber optic technical services for Fergus Falls, MN
the telecommunications industry
Manuel Bros., Inc. ..... 10/15/98 Installation, removal and Grass Valley, CA
maintenance of underground conduit
for the telecommunications
industry
</TABLE>

The Company believes it will be regarded by acquisition candidates as an
attractive acquiror because of (i) the Company's strategy for creating a
national, comprehensive and professionally managed specialty electric and
telecommunications infrastructure contracting business, (ii) the Company's
decentralized operating strategy and opportunities to participate in a larger
organization, (iii) the Company's access to financial resources as a public
company, (iv) the potential for increased profitability due to centralizing
certain administrative functions,

31
<PAGE>

enhanced systems capabilities and economies of scale and (v) the potential for
owners of the businesses being acquired to participate in the Company's
planned growth while realizing liquidity. The Company believes that the
management of the Acquired Businesses will be instrumental in identifying and
assisting in the completion of future acquisitions.

The Company has developed a set of financial, geographic and management
criteria designed to assist management in the evaluation of acquisition
candidates. These criteria evaluate a variety of factors, including, but not
limited to (i) historical and projected financial performance, (ii) internal
rate of return, return on assets and return on revenue, (iii) experience and
reputation of the candidate's management and operations, (iv) composition and
size of the candidate's customer base, (v) whether the geographic location of
the candidate will enhance or expand the Company's market area or ability to
attract other acquisition candidates, (vi) whether the acquisition will
augment or increase the Company's market share or services offered or help
protect the Company's existing customer base, (vii) potential synergies gained
by combining the acquisition candidate with the Company's existing operations
and (viii) liabilities, contingent or otherwise, of the candidate. The Company
anticipates that acquisition candidates in the target markets and industries
will have annual revenues ranging from $10 million to $100 million.

As consideration for future acquisitions, the Company expects to utilize a
combination of cash, Common Stock and debt. The purchase price for each future
acquisition will vary. The major factors in establishing the purchase price
will be historical earnings, strength of management, future prospects of the
acquiree and the ability of the acquiree to complement or leverage the
services already offered by the Company.

SERVICES

The Company provides a broad range of services, including the installation,
repair and maintenance of electric power transmission and distribution lines
and telecommunications and cable television lines, the construction of
electric substations, the erection of cellular telephone, PCS(R) and microwave
towers, the installation of highway lighting and traffic control systems,
specialized underground construction including underground fueling systems,
design and engineering services and the provision of specialty contracting
services for electric, video, security, fire, voice and data systems. The
Company currently provides four broad business services: electric utility
infrastructure services; telecommunications infrastructure services;
commercial and industrial services; and transportation control and lighting
systems services. The Company had pro forma combined revenues for the year
ended December 31, 1997 of $338.0 million, of which 43.2 percent was
attributable to electric utility infrastructure services, 38.6 percent was
attributable to telecommunications infrastructure services, 7.6 percent was
attributable to commercial and industrial services and 10.6 percent was
attributable to transportation control and lighting systems services.

Electric Utility Infrastructure Services. The Company performs specialty
electrical contracting services for electric utilities. These services include
installing, repairing and maintaining electric transmission and distribution
lines, principally above ground, maintaining street lights and other system
components, constructing electric substations and erecting transmission
towers. The work performed often involves the splicing of high voltage lines
and, on occasion, the installation of underground high voltage distribution
systems. The Company also repairs and replaces lines which have been damaged
or destroyed as a result of adverse weather conditions.

Telecommunications Infrastructure Services. The Company provides a variety
of services in connection with telecommunications, cable television and other
data transmission. The Company installs fiber optic, coaxial and copper cable
both above and below ground on behalf of telecommunications and cable service
providers. The services provided by the Company include design/build
consulting, the placing and splicing of cable, excavation of trenches in which
to place the cable, placement of related structures such as poles, anchors,
conduits, manholes, cabinets and closures, placement of drop lines from the
main distribution lines to an individual residence or business and maintenance
and removal of these fiber optic, coaxial and copper lines and

32
<PAGE>

related structures. The Company has the ability to directionally bore and
place cables, a highly specialized method of positioning buried cable which is
often required in congested urban and suburban markets where trenching may be
impractical. In addition, the Company is involved in the engineering, design
and erection of communications towers, including cellular telephone, PCS(R)
and microwave towers.

Commercial and Industrial Services. The Company designs, installs, maintains
and repairs electrical wiring, telephone and data copper wiring, fiber optic
cabling and building control and automation systems for commercial and
industrial customers.

Transportation Control and Lighting Systems Services. The Company installs,
maintains and repairs traffic and highway control systems, such as signals,
signage, lighting and freeway management systems components. In addition, the
Company installs overhead cable and control systems for light rail lines,
"smart" highway control systems and airport lighting and designs, and
constructs and maintains airport fueling systems.

CUSTOMERS

The Company's customers include electric utilities, telecommunications and
cable television system operators, governmental entities, general contractors
and builders, owners and managers of commercial and industrial properties. The
Company's customer base is highly concentrated. Electric utilities, in the
aggregate, represent the largest customer base of the Company. General
contractors, as a group, account for a significant portion of customers for
the Company's commercial and industrial work. The Company believes that a
substantial portion of its total revenues and operating income will continue
to be derived from a concentrated group of customers. The loss of any of these
customers could have a material adverse effect on the Company's business,
financial condition and results of operations.

Management at each of the Acquired Businesses has been responsible for
developing and maintaining successful long-term relationships with key
customers. The Company relies heavily on repeat customers and uses both the
written and verbal referrals of its satisfied customers to help generate new
business. Many of the Company's customers or prospective customers have a
qualification procedure for becoming an approved bidder or vendor based upon
the satisfaction of particular performance and safety standards set by the
customer. Such customers often maintain a list of vendors meeting such
standards and award contracts for individual jobs only to such vendors. The
Company strives to maintain its status as a preferred or qualified vendor to
such customers.

EMPLOYEES

As of June 30, 1998, the Company had approximately 340 salaried employees,
including executive officers, project managers or engineers, job
superintendents, staff and clerical personnel and approximately 2,525 hourly
employees, the number of which fluctuates depending upon the number and size
of the projects undertaken by the Company at any particular time. The Company
does not anticipate any overall reductions in staff as a result of the
consolidation of the Acquired Businesses, although there may be some job
realignments and new assignments in an effort to eliminate overlapping and
redundant positions.

Three of the Founding Companies are signatories to master collective
bargaining agreements with the International Brotherhood of Electrical Workers
(the "IBEW"). The other Founding Company is a signatory to various local IBEW
agreements as well as local agreements with the Laborers International Union
("LIU") and the Operating Engineers Union ("OEU"). One of the Purchased
Companies is a signatory to various local IBEW agreements as well as local
agreements with the LIU, OEU, the Operative Plasters and Cement Masons
International Association and the United Brotherhood of Carpenters and Joiners
of America. Another of the Purchased Companies has voluntarily entered
negotiations with a local affiliate of the IBEW in order to qualify for
additional work. Under these agreements, the Founding Companies agree to pay
specified wages to its union employees, observe certain workplace rules and
make employee benefit payments to multi-employer pension plans and employee
benefit trusts rather than administering the funds on behalf of their
employees. IBEW covered employees are represented by numerous local unions
under various agreements with varying terms and

33
<PAGE>

expiration dates. Such local agreements are entered into by and between the
IBEW local and the National Electrical Contractors Association ("NECA"), of
which the Company is a member. The majority of the collective bargaining
agreements contain provisions that prohibit work stoppages or strikes, even
during specified negotiation periods relating to agreement renewal, and
provide for binding arbitration dispute resolution in the event of prolonged
disagreement; however, there can be no assurance that work stoppages or
strikes will not occur at any given time.

Each of the Acquired Businesses provides a variety of health, welfare and
benefit plans for their employees who are not covered by collective bargaining
agreements. It is anticipated that these various employee benefit plans will
be replaced by a single plan covering all of the Company's non-bargaining
employees.

The electric and telecommunications infrastructure contracting industry is
experiencing a shortage of skilled craftsmen. In response to the shortage, the
Company seeks to take advantage of various IBEW and NECA referral programs and
hire graduates of the joint IBEW/NECA apprenticeship program for training
qualified electricians. As a union employer, the Company believes that its
access to qualified personnel through these and other union sources will
afford it a distinct advantage over non-union employers in attracting much
needed skilled craftsmen in an ever-tightening labor market. None of the
Acquired Businesses has experienced any strikes or work stoppages in the past
20 years. The Company believes its relationships with its employees and union
representatives is satisfactory.

TRAINING, QUALITY ASSURANCE AND SAFETY

Performance of the Company's services requires the use of equipment and
exposure to conditions that can be dangerous. Although the Company is
committed to a policy of operating safely and prudently, the Company has been
and is subject to claims by employees, customers and third parties for
property damage and personal injuries resulting from performance of the
Company's services. The Company performs on-site services using employees who
have completed applicable Company safety and training programs. The Company's
policies require that employees complete a prescribed training and service
program with the Company in addition to those required by NECA and the IBEW
prior to performing more sophisticated and technical jobs. For example, all
journeymen linemen are required by the IBEW and NECA to complete a minimum of
8,000 hours of on-the-job training, approximately 200 hours of classroom
education and extensive testing and certification. The Company requires
additional training, depending upon the sophistication and technical
requirements of each particular job. The Company intends to establish Company-
wide training and educational programs, as well as comprehensive safety
policies and regulations, by sharing "best practices" throughout its
operations.

EQUIPMENT AND FACILITIES

The Company operates a fleet of owned and leased trucks and trailers,
support vehicles and specialty construction equipment, such as backhoes,
excavators, trenchers, generators, boring machines, cranes and wire pullers
and tensioners. The total size of the rolling-stock fleet approximates 4,700
units. Most of this fleet is serviced by the Company's own mechanics who work
at various maintenance sites and facilities. The Company believes that these
vehicles generally are well-maintained and adequate for its present
operations. Management believes that in the future it will be able to lease or
purchase this equipment at lower prices due to its larger size and the volume
of its leasing and purchasing activity.

The Company leases its corporate headquarters in Houston, Texas. The Company
maintains offices in North Kansas City and Clinton, Missouri; Austin, Texas;
South Bend, Indiana; Las Vegas and Reno, Nevada; Topeka and Wichita, Kansas;
Salt Lake City, Utah; Honolulu, Hawaii; Des Moines, Iowa; Rathrum, Idaho;
Kingman and Chino Valley, Arizona; Aurora and Englewood, Colorado; Clackamas
and Portland, Oregon; Anchorage, Alaska; Chico, Escondido, Fontana, Benicia,
San Francisco, El Cajon, Grass Valley, Marysville, Redwood City, Sacramento,
Selma, Turlock, Woodland, and Vacaville, California; Deerwood, Minnesota;
Sumter and Florence, South Carolina; and Sumner, Seattle, Kirkland, Everett
and Spokane, Washington. This space is used for offices, equipment yards,
warehousing, storage and vehicle shops. The Company owns some of the
facilities it occupies and leases others. The Company believes that its
facilities are sufficient for its current needs. See "Certain Transactions."

34
<PAGE>

REGULATION

The Company's operations are subject to various federal, state and local
laws and regulations including (i) licensing requirements applicable to
electricians and engineers, (ii) building and electrical codes, (iii)
permitting and inspection requirements applicable to construction projects,
(iv) regulations relating to worker safety and environmental protection and
(v) special bidding and procurement requirements on government projects.

The Company believes that it has all the 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 and/or revocation of the Company's operating
licenses. Many state and local regulations governing electrical construction
require permits and licenses to be held by individuals who typically have
passed an examination or met other requirements. 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 are held by at least
two Company employees.

COMPETITION

The markets in which the Company operates are highly competitive, requiring
substantial resources and skilled and experienced personnel. The Company
competes with other independent contractors in most of the markets in which it
operates, several of which are large domestic companies that have greater
financial, technical and marketing resources than the Company. In addition,
there are relatively few, if any, barriers to entry into the markets in which
the Company operates and, as a result, any organization that has adequate
financial resources and access to technical expertise may become a competitor
to the Company. A significant portion of the Company's revenues are currently
derived from fixed price agreements and price is often an important factor in
the award of such agreements. Accordingly, the Company could be outbid by its
competitors in an effort to procure such business. There can be no assurance
that the Company's competitors will not develop the expertise, experience and
resources to provide services that are equal or superior in both price and
quality to the Company's services, or that the Company will be able to
maintain or enhance its competitive position. The Company may also face
competition from the in-house service organizations of its existing or
prospective customers, including electric utility and telecommunications
providers, which employ personnel who perform some of the same types of
services as those provided by the Company. Although a significant portion of
these services is currently outsourced, there can be no assurance that
existing or prospective customers of the Company will continue to outsource
services in the future.

RISK MANAGEMENT, INSURANCE AND PERFORMANCE BONDS

The primary risks in the Company's operations are bodily injury, property
damage and injured workers' compensation. The Company maintains automobile and
general liability insurance for third party bodily injury and property damage
and workers' compensation coverage which it considers sufficient to insure
against these risks, subject to self-insured amounts. Accruals for outstanding
claims are estimated based on known facts and the Company's prior experience.
Actual experience and claims could differ from the Company's estimates. The
Company consolidated the purchase of insurance, which resulted in savings from
the amounts paid by the Acquired Businesses.

Contracts in the electrical contracting industry may require performance
bonds or other means of financial assurance to secure contractual performance.
If the Company were unable to obtain surety bonds or letters of credit in
sufficient amounts or at acceptable rates, it may be precluded from entering
into additional contracts with certain of its customers.

LEGAL PROCEEDINGS

The Company is, from time to time, a party to litigation or administrative
proceedings that arise in the normal course of its business. The Company does
not have pending any litigation that, separately or in the aggregate, that in
the opinion of management, would have a material adverse effect on the
Company's results of operations or financial condition.

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<PAGE>

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth certain information concerning the Company's
directors, executive officers and key employees:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John R. Colson....................... 51 Chief Executive Officer, Director
James H. Haddox...................... 50 Chief Financial Officer, Secretary
Gary A. Tucci........................ 42 Vice President Western Region,
President of Potelco, Director
Brad Eastman......................... 31 Vice President and General Counsel
Derrick A. Jensen.................... 27 Vice President and Controller
John R. Wilson....................... 48 President of PAR, Director
Vice President of Union Power,
Timothy A. Soule..................... 51 Director
John A. Martell...................... 43 Vice President of TRANS TECH, Director
James R. Ball........................ 55 Director
Vincent D. Foster.................... 42 Chairman of the Board of Directors
Rodney R. Proto...................... 50 Director
Michael T. Willis.................... 54 Director
Ronald W. Soule...................... 54 President of Union Power
Robert J. Urbanski................... 47 President of TRANS TECH
</TABLE>

John R. Colson was elected Chief Executive Officer of the Company in
December 1997 and became a director of the Company effective upon the
consummation of the IPO in February 1998. He joined PAR in 1971 and became
President in 1991. He is currently a member of the Council of Industrial
Relations, governor of the Missouri Valley chapter of NECA and a director of
the Missouri Valley Line Apprenticeship Program.

James H. Haddox has been Chief Financial Officer of the Company since
November 1997 and Secretary since December 1997. From March 1996 until joining
the Company, Mr. Haddox was Senior Vice President--Finance of Corporate
Express Delivery Systems, Inc., a national provider of same day delivery
services. From January 1994 to March 1996, Mr. Haddox held various positions,
including Chief Accounting Officer and Vice President--Finance, with U.S.
Delivery Systems, Inc., a NYSE listed company which was the largest provider
of same day delivery services in the U.S. prior to its merger with Corporate
Express, Inc. in March 1996. From 1991 to 1994 Mr. Haddox was an independent
business consultant providing management services. From 1987 to 1991, Mr.
Haddox held various financial positions, including Chief Financial Officer and
Chief Accounting Officer, at Allwaste, Inc., a NYSE listed national
environmental services company. Mr. Haddox is a Certified Public Accountant.

Gary A. Tucci has been Vice President Western Region of the Company since
August 1998. Mr. Tucci joined Potelco in 1975 and became President in 1988. He
is a member of the Joint NECA/IBEW Apprenticeship and Training Committee as
well as the labor relations board. Mr. Tucci became a director of the Company
effective upon the consummation of the IPO.

Brad Eastman has been Vice President and General Counsel of the Company
since July 1998. From March 1996 until joining the Company, Mr. Eastman was an
associate in the law firm of Brobeck, Phleger & Harrison LLP focusing on
clients in high growth industries. From October 1994 until March 1996 Mr.
Eastman was an associate in the law frim of Sullivan & Cromwell focusing on
clients in the financial services industry. Mr. Eastman holds a J.D. degree.

Derrick A. Jensen has been Vice President and Controller of the Company
since December 1997. Prior to joining the Company, he was employed by Arthur
Andersen LLP ("Arthur Andersen"), serving most recently as audit manager
focusing on clients in consolidating industries. Mr. Jensen is a Certified
Public Accountant.

36
<PAGE>

John R. Wilson was elected President of PAR in 1997. He joined PAR in 1977
and became an Executive Vice President in 1991. Mr. Wilson became a director
of the Company effective upon the consummation of the IPO.

Timothy A. Soule joined Union Power in 1972 and became Vice President in
1975. He is also a member of the Board of Trustees for the joint NECA/IBEW
Line Construction Benefit Fund, Union Power's representative to the Rocky
Mountain Electrical League and a member of the Board of Directors of Power and
Communication Contractors Association. Mr. Soule became a director of the
Company effective upon the consummation of the IPO.

John A. Martell founded TRANS TECH in 1983 and serves as Vice President. He
is currently a member of the National Fire Protection Association and the
Illuminating Engineering Society. Mr. Martell is a Registered Professional
Engineer. Mr. Martell became a director of the Company effective upon the
consummation of the IPO.

James R. Ball is a private investor, a consultant to Koch Industries, Inc.
and a member of the board of directors of Carbide/Graphite Group, Inc., a
producer of graphite electrode specialties products. From 1969 to 1994, he
held several positions with Vista Chemical Company ("Vista") and its
predecessor, Conoco, Inc. Vista was sold in 1991 to RWE-DEA, a unit of RWE AG,
a German energy and chemicals concern, and Mr. Ball served on the board of
directors of Vista and was its President and Chief Executive Officer from 1992
through 1994. Mr. Ball became a director of the Company effective upon the
consummation of the IPO.

Vincent D. Foster has been a director of the Company since November 1997 and
became non-executive Chairman of the Board upon consummation of the IPO. Mr.
Foster is a Managing Director of Main Street Merchant Partners II, L.P., a
merchant banking firm. From September 1988 through October 1997, Mr. Foster
was a partner of Andersen Worldwide and Arthur Andersen. Mr. Foster was the
Director of the Corporate Finance and Mergers and Acquisitions practices of
Arthur Andersen for the southwestern U.S., specializing in structuring and
executing "roll-up" transactions and in providing merger and acquisition and
corporate finance advisory services to clients in consolidating industries.
Mr. Foster holds a J.D. degree and is a Certified Public Accountant.

Rodney R. Proto has been President, Chief Operating Officer and a director
of Waste Management, Inc., (formerly known as USA Waste Services, Inc. "WMI"),
a solid waste services company, since August 1996. Prior thereto, he was
President, Chief Operating Officer and a director of Sanifill, Inc.
("Sanifill"), a solid waste management company acquired by WMI in August 1996.
Mr. Proto joined Sanifill in February 1992. Before joining Sanifill, he was
employed by Browning-Ferris Industries, Inc. for 12 years where he served,
among other positions, as Chairman of BFI Overseas from 1985 to 1987 and
President of Browning-Ferris Industries Europe, Inc. from 1987 through 1991.
Mr. Proto became a director of the Company effective upon the consummation of
the IPO.

Michael T. Willis is Chairman of the Board, Chief Executive Officer and
President of Metamor Worldwide, formerly CoreStaff, Inc. ("Metamor"), one of
the largest information technology and staffing companies in the U.S. Prior to
founding Metamor in 1993, Mr. Willis served as Chief Executive Officer and
President of The Talent Tree Corporation ("Talent Tree"), which he founded in
1976 and built into one of the largest temporary services companies in the
U.S. Mr. Willis sold Talent Tree to Hestair plc in 1987 and then continued as
President and Chief Executive Officer until April 1993. Mr. Willis is also a
director of the Southwest Bank of Texas, a publicly-traded financial
institution. Mr. Willis became a director of the Company effective upon the
consummation of the IPO.

Ronald W. Soule joined Union Power in 1963 and became President in 1987. He
is a member of the Board of Directors of the Colorado NECA/IBEW Negotiation
Committee, the Western Line Constructors Chapter of NECA and the Mountain
States Joint Apprenticeship and Training Committee. He is also Union Power's
representative to NECA and the past President of Western Line Constructors
Chapter of NECA.

37
<PAGE>

Robert J. Urbanski founded TRANS TECH in 1983 and serves as President. He is
a member of the Institute of Transportation Engineers and the International
Municipal Sign Association.

The Amended and Restated Bylaws of the Company permit the Board of Directors
to increase the size of the Board. Each director serves a one-year term. At
each annual meeting of stockholders, all except one of the directors will be
elected by the holders of the Common Stock and one director will be elected by
the holders of the Limited Vote Common Stock. Mr. Foster has been designated
as the director elected by holders of Limited Vote Common Stock.

The Board of Directors has established an Audit Committee, an Acquisitions
Committee and a Compensation Committee.

DIRECTORS' COMPENSATION

Directors who also are employees of the Company or any of its subsidiaries
will not receive additional compensation for serving as directors. Each
director who is not an employee of the Company or any of its subsidiaries will
receive a fee of $1,000 for attendance at each meeting of the Board of
Directors or any committee thereof (unless held on the same day as a Board of
Directors meeting). Directors of the Company will be reimbursed for reasonable
out-of-pocket expenses incurred in attending meetings of the Board of
Directors or the committees thereof, and for other expenses reasonably
incurred in their capacity as directors of the Company. Each non-employee
director will receive an option to purchase 10,000 shares of Common Stock upon
such person's initial election to the Board of Directors and an annual grant
of an option to purchase 5,000 shares of Common Stock at each annual meeting
of the Company's stockholders thereafter at which such director is re-elected
or remains a director. See "--1997 Stock Option Plan." In addition, each of
Messrs. Ball, Proto and Willis purchased 20,000 shares of Limited Vote Common
Stock from the Company for nominal consideration.

EXECUTIVE COMPENSATION

The Company anticipates that during 1998 the annualized base salaries of its
most highly compensated executive officers will be $150,000. As part of Mr.
Haddox's employment arrangement with the Company, he purchased 100,000 shares
of Limited Vote Common Stock for nominal consideration and received an option
under the 1997 Stock Option Plan to purchase 125,000 shares of Common Stock at
the IPO price. As part of Mr. Jensen's employment arrangement with the
Company, he purchased 37,500 shares of Limited Vote Common Stock for nominal
consideration and received an option under the 1997 Stock Option Plan to
purchase 62,500 shares of Common Stock at the IPO price. Mr. Eastman received
an option under the 1997 Stock Option Plan to purchase 50,000 shares of Common
Stock at $13.0625 per share.

EMPLOYMENT AGREEMENTS

The Company has entered into an employment agreement with Messrs. Colson and
Haddox and certain other key employees of the Company that prohibits such
individual from disclosing the Company's confidential information and trade
secrets and generally restricts these individuals from competing with the
Company for a period of five years after the date of the individual's
employment agreement. Each of these agreements has an initial term of two to
three years, provides for an automatic annual extension at the end of its
initial term and is terminable by the Company for "good cause" upon ten days'
written notice and without "good cause" by either party upon thirty days'
written notice. All employment agreements provide that if the officer's
employment is terminated by the Company without "good cause," such officer
will be entitled to receive a lump-sum severance payment at the effective time
of termination equal to the officer's base salary at the rate then in effect
for the greater of (i) the time period remaining under the initial term of the
agreement or (ii) one year. In addition, all employment agreements provide
that in the event of termination without "good cause," the non-competition
provision will not apply for any time period in which the employee is not
receiving or has not received severance compensation.

Some of the employment agreements contain certain provisions concerning a
change-in-control of the Company, including the following: (i) in the event
five days' advance notice of the transaction giving rise to the

38
<PAGE>

change-in-control is not received by the Company and such officer, the change-
in-control will be deemed a termination of the employment agreement by the
Company without "good cause," and the provisions of the employment agreement
governing the same will apply, except that the severance amount otherwise
payable (discussed in the preceding paragraph) shall be tripled and the
provisions which restrict competition with the Company shall not apply and
(ii) the officer must be given sufficient time and opportunity to elect
whether to exercise all or any of his or her options to purchase Common Stock,
including any options with accelerated vesting under the provisions of the
1997 Stock Option Plan, such that the officer may acquire the Common Stock at
or prior to the closing of the transaction giving rise to the change-in-
control, if he or she so desires.

1997 STOCK OPTION PLAN

In December 1997, the Board of Directors adopted, and the stockholders of
the Company approved, the 1997 Stock Option Plan. The purpose of the 1997
Stock Option Plan is to provide directors, key employees, officers and certain
advisors with additional incentives by increasing their proprietary interest
in the Company. The aggregate amount of Common Stock of the Company with
respect to which options may be granted may not exceed the greater of
2,380,850 shares or 15% of the outstanding shares of Common Stock. On February
27, 1998, the Company filed a Registration Statement on Form S-8 with respect
to 2,380,850 shares of Common Stock issuable in connection with the 1997 Stock
Option Plan.

The 1997 Stock Option Plan provides for the grant of incentive stock options
("ISOs") as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and nonqualified stock options (collectively, the
"Awards"). The amount of ISOs that may be granted under the 1997 Stock Option
Plan is limited to 2,380,850 shares. The 1997 Stock Option Plan is
administered by the Compensation Committee of the Board of Directors. The
Compensation Committee has, subject to the terms of the 1997 Stock Option
Plan, the sole authority to grant Awards under the 1997 Stock Option Plan, to
construe and interpret the 1997 Stock Option Plan and to make all other
determinations and take any and all actions necessary or advisable for the
administration of the 1997 Stock Option Plan.

All of the Company's employees, non-employee directors, officers and
advisors are eligible to receive Awards under the 1997 Stock Option Plan, but
only employees of the Company are eligible to receive ISOs. Options will be
exercisable during the period specified in each option agreement and will
generally become exercisable in installments pursuant to a vesting schedule
designated by the Compensation Committee. In the discretion of the
Compensation Committee, option agreements may provide that options will become
immediately exercisable in the event of a "change in control" (as defined in
the 1997 Stock Option Plan) of the Company. No ISO will remain exercisable
later than ten years after the date of grant (or five years in the case of
ISOs granted to employees owning more than 10% of the voting capital stock).

The Company has outstanding options to purchase approximately 1,555,150
shares of Common Stock issued pursuant to the 1997 Stock Option Plan.

The 1997 Stock Option Plan also provides for automatic option grants to
directors who are not otherwise employed by the Company or its subsidiaries.
Upon commencement of service, a non-employee director will receive a non-
qualified option to purchase 10,000 shares of Common Stock, and each
continuing or re-elected non-employee director annually will receive an option
to purchase 5,000 shares of Common Stock. Options granted to non-employee
directors are fully exercisable following the expiration of six months from
the date of grant.

The exercise price for ISOs granted under the 1997 Stock Option Plan may be
no less than the fair market value of a share of the Common Stock on the date
of grant (or 110% in the case of ISOs granted to employees owning more than
10% of the voting capital stock).

39
<PAGE>

CERTAIN TRANSACTIONS

ORGANIZATION OF THE COMPANY

Quanta was initially capitalized in August 1997 by several independent
investors, including Midwest Acquisition Support, LLC (an entity controlled by
Bernard J. Gram), Kevin D. Miller, Steven P. Colmar and William G. Parkhouse,
who acted as co-founders of Quanta and paid nominal cash consideration for
1,620,625 shares of Limited Vote Common Stock. In September 1997, Fabal
Funding Corp., a corporation affiliated with this group, agreed to advance up
to $125,000 to the Company in consideration for receiving, at the closing of
the IPO, 41,665 shares of Limited Vote Common Stock. These shares were
distributed to five individuals who each individually advanced $25,000 to
Fabal Funding Corp. In addition, in November 1997 Main Street purchased
1,484,543 shares of Limited Vote Common Stock for nominal cash consideration
(both Main Street and the group of investors described above, the "Initial
Stockholders"). Main Street advanced funds to Quanta to enable Quanta to pay
various expenses incurred in connection with its efforts to complete the
acquisitions of the Founding Companies, and consummate the IPO, which advances
were repaid from the net proceeds of the IPO.

Quanta acquired all of the issued and outstanding capital stock and other
equity interests of the Founding Companies for consideration of (i)
approximately $21.0 million in cash and (ii) 7,527,000 shares of Common Stock.

The following table sets forth for each Founding Company the consideration
paid by Quanta to the stockholders of the Founding Companies (i) in cash and
(ii) in shares of Common Stock.

<TABLE>
<CAPTION>
SHARES OF
CASH COMMON STOCK
----------- ------------
<S> <C> <C>
PAR............................................. $ 8,370,000 3,000,000
Union Power..................................... 5,348,430 1,917,000
TRANS TECH...................................... 4,362,862 1,563,750
Potelco......................................... 2,919,038 1,046,250
----------- ---------
Total......................................... $21,000,330 7,527,000
=========== =========
</TABLE>

TRANSACTIONS INVOLVING CERTAIN OFFICERS, DIRECTORS AND STOCKHOLDERS

Certain stockholders of certain of the Founding Companies who are directors,
executive officers or key employees of the Company had guaranteed
indebtedness, performance bonds and other obligations of each of their
respective Founding Companies. These guarantees were terminated following the
completion of the IPO.

Prior to consummation of the IPO, the stockholders of Union Power purchased
certain non-operating assets from that company at a price equal to the book
value of such assets, estimated to be $126,000 in the aggregate.

Prior to consummation of the IPO, the stockholders of PAR purchased certain
non-operating assets from that company at a price equal to the book value of
such assets, estimated to be $731,000 in the aggregate.

Union Power leases its main office facilities located in Englewood, Colorado
from Soule Trusts Partnership, which is controlled by affiliates of Ronald W.
and Timothy A. Soule, and a branch facility located in North Las Vegas, Nevada
from RTS Partnership, which is owned by Ronald W. and Timothy A. Soule. Ronald
W. and Timothy A. Soule are President and Vice President of Union Power,
respectively, and Timothy Soule is a director of the Company. The Englewood
office lease provides for a five-year term that will terminate in the year
2002 with an option to renew the lease for an additional five-year term, and
covers approximately 3,500 square feet of office space on 4.8 acres, at a
monthly rental rate of $3,500. The North Las Vegas office lease will terminate
on May 31, 2006 with provision for automatic one-year renewal periods. Such
lease covers 2.69 acres and the leasehold improvements located on such land
for a monthly rental rate of $4,700. In addition, Union Power will lease two
directional drilling rigs from Mountain Drilling Equipment Co., which is owned
by Ronald W. and Timothy A. Soule. The equipment lease with Mountain Drilling
Equipment Co. provided for a one-year term

40
<PAGE>

which ended on August 1, 1998, and a monthly rental rate of $8,000. Title to
these rigs was transferred to Union Power at the end of the lease term for no
additional consideration. The Company believes that the economic terms of
these leases do not exceed fair market value.

Potelco has entered into leases for its main office with the father of Gary
A. Tucci and for another office in Washington with Gary A. Tucci, who is
President of Potelco and Vice President Western Region and a director of the
Company. Currently, both leases are oral and on a month to month basis. The
main office lease is for a 15,000 square foot building on five acres, at a
rent of $2,000 per month. The other lease is for a 2,200 square foot office
with a 6,000 square foot maintenance facility on 1.5 acres, at a rent of
$2,800 per month. The Company believes that the economic terms of these leases
do not exceed fair market value.

TRANS TECH leases its main office from TRANS TECH Properties, which is
partially owned by Robert J. Urbanski and John A. Martell, who are President
and Vice President of TRANS TECH, respectively. Additionally, Mr. Martell is a
director of the Company. The main office of TRANS TECH is located in South
Bend, Indiana, and the facilities consist of approximately 7.5 acres of real
property, a 4,350 square foot office attached to a 10,560 square foot heated
warehouse, a 3,480 square foot detached unheated warehouse and a 3,000 square
foot detached vehicle maintenance facility. The initial lease term is for five
years at a rent of $5,900 per month, plus the payment of all taxes, insurance
and maintenance on the property. TRANS TECH has the option to renew the lease
for an additional five year term at a rental rate equal to the then current
market rate. The Company believes that the economic terms of this lease do not
exceed fair market value.

Union Power had notes outstanding to various affiliates in the aggregate
amount of approximately $460,000, which the Company used a portion of the
proceeds of the IPO to repay these notes.

Potelco owed approximately $1.1 million to its sole stockholder and his
father pursuant to a promissory note and other arrangements. The Company used
a portion of the proceeds of the IPO to repay this indebtedness.

ECT and an associated investment fund invested $49,350,000 in convertible
subordinated notes of the Company. These notes are convertible at the holders
option into an aggregate of 3,589,091 shares of Common Stock. As part of the
investment, ECT and the Company agreed to exchange information regarding the
design, installation and maintenance of electric power transmission and
distribution systems and fiber optic communications systems. The Company has
agreed, at the option of the holders of the convertible subordinated notes, to
appoint a director selected by such holders to the Company's board of
directors.

COMPANY POLICY

In the future, any transactions with directors, officers, employees or
affiliates of the Company are anticipated to be minimal and will, in any case,
be approved by a majority of the Board of Directors, including a majority of
disinterested members of the Board of Directors.

41
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's voting capital stock by (i) each person
known by the Company to be a beneficial owner of more than 5% of any class of
the Company's voting capital stock, (ii) each director and executive officer
of the Company and (iii) all directors and executive officers of the Company
as a group. Except as otherwise indicated below, the persons named in the
table have advised the Company that they have sole voting and investment power
with respect to the shares of capital stock shown as beneficially owned by
them. Unless otherwise indicated, each person or group has sole voting and
investment power with respect to all such shares. Unless otherwise indicated,
the number of shares and percentage of ownership of Common Stock for each of
the named stockholders, directors and executive officers assumes that shares
of Common Stock that the stockholders directors and executive officers may
acquire within 60 days are outstanding.
<TABLE>
<CAPTION>
PERCENTAGE
SHARES OF SHARES
BENEFICIALLY BENEFICIALLY
NAME OWNED OWNED
---- ------------ ------------
<S> <C> <C>
Enron Capital Trade & Resources Corp.(1)............ 3,589,090 14.2%
Joint Energy Development Investments II
Partnership(1)..................................... 2,691,818 11.1
John R. Colson(2)................................... 2,100,000 9.7
Gary A. Tucci(3).................................... 1,046,250 4.8
John R. Wilson(4)................................... 900,000 4.2
John A. Martell(5).................................. 781,875 3.6
Timothy A. Soule(6)................................. 337,392 1.6
Vincent D. Foster(7)(a)............................. 271,499 1.3
James H. Haddox(2).................................. 100,000(b) *
Brad Eastman(2)..................................... * *
Derrick A. Jensen(2)................................ 37,500(b) *
James R. Ball(2)(8)................................. 45,000 *
Rodney R. Proto(2)(8)............................... 45,000 *
Michael T. Willis(2)(9)............................. 123,573 *
Kevin D. Miller(a)(10).............................. 334,022(b) 1.5
Midwest Acquisition Support, LLC(a)(11)............. 334,022(b) 1.5
Stephen P. Colmar(a)(12)............................ 208,764(b) 1.0
William G. Parkhouse(b)(13)......................... 179,382(b) *
Sam W. Humphreys(a)(14)............................. 261,398(b) 1.2
All directors and executive officers as a group (12
persons)(15)....................................... 5,788,089 26.7
</TABLE>
- -------
* Less than 1%.
(a) Owns more than 5% of the outstanding shares of Limited Vote Common Stock.
(b) Consists entirely of Limited Vote Common Stock. See "Description of
Capital Stock" for a description of the Limited Vote Common Stock.

(1) The address for Enron Capital & Trade Resources Corp. ("ECT") and Joint
Energy Development Investments II Limited Partnership ("JEDI-II") is 1400
Smith Street, Houston, Texas 77002. ECT holds directly 897,272 shares of
Common Stock issuable upon conversion of the Convertible Promissory Note
dated September 29, 1998, made by Quanta in favor of ECT. A subsidiary of
ECT is the general partner of Enron Capital Management II Limited
Partnership which is the general partner of JEDI-II which may result in
ECT being deemed to be the beneficial owner of the shares owned by JEDI-
II; but ECT disclaims such beneficial ownership interest of the shares
issuable to JEDI-II. ECT is a wholly-owned subsidiary of Enron Corp.
which may be deemed to be the beneficial owner of all shares owned by
ECT; Enron Corp. disclaims any beneficial ownership of any shares
issuable to either ECT or JEDI-II.

(2) The address for Messrs. Ball, Colson, Eastman, Haddox, Jensen, Proto and
Willis is 1360 Post Oak Boulevard, Suite 2100, Houston, Texas 77056.
(3) The address for Mr. Tucci is 14103 Eight Street East, Sumner, Washington
98390.
(4) The address for Mr. Wilson is 1440 Iron Street, P.O. Box 12520, North
Kansas City, Missouri 64116.
(5) The address for Mr. Martell is 4601 Cleveland Road, P.O. Box 3915, South
Bend, Indiana 46619. Includes 174,310 shares owned by trusts for the
benefit of minor children of Mr. Martell, of which he disclaims
beneficial ownership.
(6) The address for Mr. Soule is 2045 W. Union Avenue, Englewood, Colorado
80110.

(7) The address for Mr. Foster is 1360 Post Oak Boulevard, Suite 800,
Houston, Texas 77056. Includes 100 shares of Common Stock, options to
purchase 10,000 shares of Common Stock and 261,399 shares of Limited Vote
Common Stock.
(8) Consists of 20,000 shares of Limited Vote Common Stock, 15,000 shares of
Common Stock and options to purchase 10,000 shares of Common Stock.
(9) Includes 98,573 shares of Limited Vote Common Stock, 15,000 shares of
Common Stock and options to purchase 10,000 shares of Common Stock.
(10) The address for Mr. Miller is 109 E. 5th Street, Suite E, Auburn, Indiana
46706.
(11) The address for Midwest Acquisition Support, LLC is 4040 San Felipe,
Suite 155, Houston, Texas 77027. Midwest Acquisition Support, LLC is a
limited liability company controlled by Bernard J. Gram.
(12) The address for Mr. Colmar is 603 W. 13th, Suite 1A-247, Austin, Texas
78701. Does not include 117,526 shares of Limited Vote Common Stock owned
by members of Mr. Colmar's family, for which he disclaims beneficial
ownership.
(13) The address for Mr. Parkhouse is 5901 Fox Chapel Road, Austin, Texas
78746. Does not include 154,640 shares of Limited Vote Common Stock held
in trust for members of Mr. Parkhouse's family, for which he disclaims
beneficial ownership.

(14) The address for Mr. Humphreys is 1360 Post Oak Boulevard, Suite 800,
Houston, Texas 77056.

(15) Includes 537,472 shares of Limited Vote Common Stock and options to
purchase 40,000 shares of Common Stock.

42
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 40,000,000 shares of
Common Stock, par value $.00001 per share, including 3,345,333 shares of
Limited Vote Common Stock. The Company has also authorized the issuance of
10,000,000 shares of Preferred Stock, par value $.00001 per share ("Preferred
Stock").

COMMON STOCK AND LIMITED VOTE COMMON STOCK

The holders of Common Stock are entitled to one vote for each share on all
matters voted upon by stockholders, including the election of directors. Such
holders are not entitled to vote cumulatively for the election of directors.
Holders of a majority of the shares of Common Stock entitled to vote in any
election of directors may elect all of the directors standing for election.

Holders of Limited Vote Common Stock, voting together as a single class, are
entitled to elect one director. Holders of Limited Vote Common Stock are not
entitled to vote on the election of any other directors. Only the holders of
the Limited Vote Common Stock may remove the director such holders are
entitled to elect. Holders of Limited Vote Common Stock are entitled to 0.10
of one vote for each share held on all other matters on which they are
entitled to vote.

Subject to the rights of any then outstanding shares of Preferred Stock,
holders of Common Stock and Limited Vote 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 Limited Vote 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
Limited Vote 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 Limited Vote Common Stock are not subject to any redemption
provisions and are convertible into Common Stock as described below.

Each share of Limited Vote Common Stock will automatically convert to Common
Stock on a share-for-share basis in the event of a permitted disposition of
such share of Limited Vote 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 holder or to another holder of Limited Vote Common
Stock or a related party thereto (whether a party is a "related party" shall
be determined in accordance with Sections 267, 707, 318 and/or 4946 of the
Code)). The holders of Limited Vote Common Stock have no rights to convert
Limited Vote Common Stock into Common Stock and the only conversion feature of
the Limited Vote Common Stock is the automatic conversion upon a permitted
disposition.

The Common Stock is listed on the NYSE.

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 Amended and
Restated 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, exchange 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 class or series of the Preferred Stock, in each case without
any further action or vote by the holders of Common Stock.

43
<PAGE>

Although the Company has no present intention to issue shares of Preferred
Stock, the issuance of shares of Preferred Stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For example, the issuance of a series of Preferred Stock might
impede a business combination by including class voting rights that would
enable the holders to block such a transaction; or such issuance might
facilitate a business combination by including voting rights that would
provide a required percentage vote of the stockholders. In addition, under
certain circumstances, the issuance of Preferred Stock could adversely affect
the voting power of the holders of the Common Stock. Although the Board of
Directors is required to make any determination to issue such stock based on
its judgment as to the best interests of the stockholders of the Company, the
Board of Directors could act in a manner that would discourage an acquisition
attempt or other transaction that some or a majority of the stockholders might
believe to be in their best interests or in which stockholders might receive a
premium for their stock over the then-market price of such stock. The Board of
Directors does not at present intend to seek stockholder approval prior to any
issuance of currently authorized stock, unless otherwise required by law or
the rules of any market on which the Company's securities are traded.

STATUTORY BUSINESS COMBINATION PROVISION

The Company is a Delaware corporation and is subject to Section 203 of the
DGCL. In general, Section 203 prevents a Delaware corporation from engaging in
a "business combination" (as defined) with an "interested stockholder"
(defined generally as a person owning 15% or more of a corporation's
outstanding voting stock or affiliate or associate) for three years following
the time such stockholder became an interested stockholder unless (i) before
such person became an interested stockholder, the board of directors of the
corporation approved the business combination or the transaction in which the
interested stockholder became an interested stockholder, (ii) upon
consummation of the transaction which resulted in the interested stockholder's
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 stock held by directors who are also officers
of the corporation and by employee stock plans that do not provide employees
with the rights to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer) or (iii) at or subsequent
to the time such person became an interested stockholder, the business
combination was approved by the board of directors of the corporation and
authorized at a meeting of stockholders by the affirmative vote of the holders
of 66 2/3% of the outstanding voting stock of the corporation not owned by the
interested stockholder. Under Section 203, the restrictions described above
also do not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of one of certain
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became
an interested stockholder with the approval of a majority of the corporation's
directors, if such extraordinary transaction is approved or not opposed by a
majority of the directors who were directors prior to any person becoming an
interested stockholder during the previous three years or were recommended for
election or elected to succeed such directors by a majority of such directors.

LIMITATION ON DIRECTORS' LIABILITY

Delaware law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of a director's fiduciary duty of care. The duty of care
requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all material information
reasonably available to them. Absent the limitations authorized by Delaware
law, directors are accountable to corporations and their stockholders for
monetary damages for conduct constituting gross negligence in the exercise of
their duty of care. Delaware law enables corporations to limit available
relief to equitable remedies such as injunction or rescission. The Amended and
Restated Certificate of Incorporation limits the liability of directors of the
Company to the Company or its stockholders to the fullest extent permitted by
Delaware law. Specifically, directors of the Company will not be personally
liable to the Company or its stockholders for monetary damages for breach of a
director's fiduciary duty as a director, except for liability for breach of
the duty of loyalty, for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, for unlawful payments of
dividends or unlawful stock repurchases or

44
<PAGE>

redemptions as provided in Section 174 of the DGCL or for any transaction in
which a director has derived an improper personal benefit.

The Amended and Restated Certificate of Incorporation provides that each
officer and director of the Company will be indemnified and held harmless, to
the fullest extent permitted by Delaware law (as amended from time to time),
against all expenses, liabilities and losses reasonably suffered in connection
with any action, suit or proceeding by reason of the fact that he or she is or
was a director or officer of the Company or, while being at the time a
director or officer of the Company, is or was serving at the request of the
Company as a director, trustee, officer, employee or agent of another entity.
The Company is not, however, permitted to indemnify any person in connection
with a proceeding initiated by that person unless such proceeding was
authorized by the Board of Directors. The Amended and Restated Bylaws also
provide for mandatory advancement of expenses of officers and directors
incurred in defending any covered proceeding in advance of its final
disposition. The Company also carries directors' and officers' liability
insurance.

The inclusion of these provisions in the Amended and Restated Certificate of
Incorporation may have the effect of reducing the likelihood of derivative
litigation against directors and may discourage or deter stockholders or
management from bringing a lawsuit against directors for breach of their duty
of care, even though such an action, if successful, might otherwise have
benefitted the Company and its stockholders. The Company's Amended and
Restated Bylaws provide indemnification to the Company's officers and
directors and certain other persons with respect to certain matters.

OTHER MATTERS

The Amended and Restated Certificate of Incorporation provides that the
number of directors shall be as determined by the Board of Directors from time
to time, but shall be at least one and not more than nineteen. It also
provides that directors may be removed only for cause, and then only by the
affirmative vote of the holders of at least a majority of all outstanding
voting stock entitled to vote. This provision, in conjunction with the
provision of the Amended and Restated Bylaws authorizing the Board of
Directors to fill vacant directorships, will prevent stockholders from
removing incumbent directors without cause and filling the resulting vacancies
with their own nominees.

The Amended and Restated Certificate of Incorporation provides that
stockholders may act only at an annual or special meeting of stockholders and
may not act by written consent. The Amended and Restated Certificate of
Incorporation provides that special meetings of the stockholders can be called
only by the Chairman of the Board pursuant to a resolution approved by a
majority of the whole Board of Directors.

STOCKHOLDER PROPOSALS

The Company's Amended and Restated Bylaws contain provisions (i) requiring
that advance notice be delivered to the Company of any business to be brought
by a stockholder before an annual meeting of stockholders and (ii)
establishing certain procedures to be followed by stockholders in nominating
persons for election to the Board of Directors. Generally, such advance notice
provisions provide that written notice must be given to the Secretary of the
Company by a stockholder (a) in the event of business to be brought by a
stockholder before, (i) an annual meeting, not less than 90 nor more than 180
days prior to the earlier of the date of the meeting or the anniversary date
of the immediately preceding annual meeting of stockholders and (ii) a special
meeting, not less than 40 nor more than 60 days prior to the date of such
meeting of stockholders (with certain exceptions if less than 50 days notice
or prior public disclosure of the date of the special meeting is given to
stockholders) and (b) in the event of nominations of persons for election to
the Board of Directors by any stockholder, (i) with respect to an election to
be held at the annual meeting of stockholders, not less than 90 days prior to
the anniversary date of the immediately preceding annual meeting of
stockholders and (ii) with respect to an election to be held at a special
meeting of stockholders for the election of directors, not later than the
close of business on the 10th day following the day on which notice of the
date of the special meeting was mailed to stockholders or public disclosure of
the date of the special meeting was made, whichever first occurs.

45
<PAGE>

Such notice must set forth specific information regarding such stockholder and
such business or director nominee, as described in the Company's Amended and
Restated Bylaws. The foregoing summary is qualified in its entirety by
reference to the Company's Amended and Restated Bylaws.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is American Stock
Transfer and Trust Company.

SHARES ELIGIBLE FOR FUTURE SALE

The Company has outstanding 21,620,670 shares of Common Stock, of which
6,701,945 shares are freely tradable without restriction or further
registration under the Securities Act, except for those held by "affiliates"
(as defined in the Securities Act) of the Company, which shares will be
subject to the resale limitations of Rule 144 under the Securities Act. The
remaining 14,918,725 shares of Common Stock are deemed "restricted securities"
under Rule 144 in that they were originally issued and sold by the Company in
private transactions in reliance upon exemptions under the Securities Act, and
may be publicly sold only if registered under the Securities Act or sold in
accordance with an applicable exemption from registration, such as those
provided by Rule 144 promulgated under the Securities Act as described below.

In general, under Rule 144 as currently in effect, if a minimum of one year
has elapsed since the later of the date of acquisition of restricted
securities from the issuer or from any affiliate of the issuer, the acquiror
or subsequent holder would be entitled to sell within any three-month period a
number of those shares that does not exceed the greater of one percent of the
number of shares of such class of stock then outstanding or the average weekly
trading volume of the shares of such class of stock during the four calendar
weeks preceding the filing of a Form 144 with respect to such sale. Sales
under Rule 144 are also subject to certain manner of sale provisions and
notice requirements and to the availability of current public information
about the issuer. In addition, if a period of at least two years has elapsed
since the later of the date of acquisition of restricted securities from the
issuer or from any affiliate of the issuer, and the acquiror or subsequent
holder thereof is deemed not to have been an affiliate of the issuer of such
restricted securities at any time during the 90 days preceding a sale, such
person would be entitled to sell such restricted securities under Rule 144(k)
without regard to the requirements described above. Rule 144 does not require
the same person to have held the securities for the applicable periods. The
foregoing summary of Rule 144 is not intended to be a complete description
thereof. The Securities and Exchange Commission (the "Commission") has
proposed certain amendments to Rule 144 that would, among other things,
eliminate the manner of sale requirements and revise the notice provisions of
that rule. The Commission has also solicited comments on other possible
changes to Rule 144, including possible revisions to the one- and two-year
holding periods and the volume limitations referred to above.

Options to purchase approximately 1,555,150 shares of Common Stock have been
issued under the 1997 Stock Option Plan. In general, pursuant to Rule 701
under the Securities Act, any employee, officer or director of, or consultant
to, the Company who purchased his or her shares pursuant to a written
compensatory plan or contract is entitled to rely on the resale provisions of
Rule 701, which permit non-affiliates to sell such shares without compliance
with the public information, holding period, volume limitation or notice
provisions of Rule 144, and permit affiliates to sell such shares without
compliance with the holding period provisions of Rule 144. In addition, the
Company has filed a Registration Statement on Form S-8 covering the shares
issuable upon exercise of stock options that may be granted in the future
under the 1997 Stock Option Plan, in which case such shares of Common Stock
generally will be freely tradable by non-affiliates in the public market
without restriction under the Securities Act.

The Company, its executive officers, directors, stockholders at the time of
the IPO and persons acquiring shares of Common Stock in connection with the
acquisitions of the Founding Companies have agreed not to offer, sell,
contract to sell, grant any option or other right for the sale of, or
otherwise dispose of any shares of Common Stock or any securities,
indebtedness or other rights exercisable for or convertible or exchangeable
into

46
<PAGE>

Common Stock owned or acquired in the future in any manner until February 18,
2000 (the "Lockup Period") without the prior written consent of BT Alex. Brown
Incorporated, except that the Company may, subject to certain conditions,
issue Common Stock in connection with acquisitions, upon conversion of Limited
Vote Common Stock into Common Stock and may grant awards (or Common Stock upon
exercise of awards) under the 1997 Stock Option Plan. These restrictions will
be applicable to any shares acquired by any of those persons during the Lockup
Period. The Company has granted registration rights to stockholders of the
Founding Companies in connection with registrations of sales of Common Stock
by the Company following the Lockup Period (other than registrations in
connection with acquisitions and pursuant to employee benefit plans). The
Company has also granted registration rights to the former stockholders of
Spalj Construction Company and the holders of its convertible subordinated
promissory notes issued to ECT and an associated investment fund.
Additionally, the Company has agreed that the holders of such convertible
subordinated promissory notes or the shares of Common Stock issuable upon
conversion thereof may purchase their pro rata portion of certain future
issuances of the Company's Common Stock or securities exercisable for or
convertible into Common Stock.

Prior to the IPO, there was no established public market for the Common
Stock. No prediction can be made of the effect, if any, that sales of shares
under Rule 144, or otherwise, or the availability of shares for sale will have
on the market price of the Common Stock prevailing from time to time. The
Company is unable to estimate the number of shares that may be sold in the
public market under Rule 144, or otherwise, because such amount will depend on
the trading volume in, and market price for, the Common Stock and other
factors. Nevertheless, sales of substantial amounts of the Common Stock in the
public market, or the perception that such sales could occur, could adversely
affect the market price of the Common Stock of the Company and the Company's
future ability to raise equity capital and complete any additional
acquisitions for Common Stock.

PLAN OF DISTRIBUTION

This Prospectus covers the offer and sale of up to 5,000,000 shares of
Common Stock which Quanta may issue from time to time in connection with the
future direct and indirect acquisitions of other businesses, properties or
securities in business combination transactions in accordance with Rule
415(a)(1)(viii) of Regulation C under the Securities Act.

Quanta expects that the terms upon which it may issue the shares will be
determined through negotiations with the security holders or principal owners
of the businesses whose securities or assets are acquired. It is expected that
the shares that are issued will be valued at prices reasonably related to
market prices for the Common Stock prevailing either at the time an
acquisition agreement is executed or at the time an acquisition is
consummated.

All expenses of this offering will be paid by the Company. No underwriting
discounts or commissions will be paid in connection with the issuance of
shares by Quanta in business combination transactions, although finder's fees
may be paid with respect to specific acquisitions. Any person receiving a
finder's fee may be deemed to be an underwriter within the meaning of the
Securities Act.

The shares of Common Stock offered hereunder will be listed on the NYSE, but
may be subject to certain contractual holding period requirements. See "Shares
Eligible for Future Sale."

This Prospectus, as appropriately amended or supplemented, may also be used
by persons who receive from the Company shares of Common Stock in connection
with direct and indirect acquisitions by the Company of securities and assets
of businesses held by such persons, or their transferees, and who wish to
offer and sell such shares (such persons being referred to herein as "Selling
Stockholders") in transactions in which they and any broker-dealer through
whom such shares are sold may be deemed to be underwriters within the meaning
of the Securities Act; provided, however, that no Selling Stockholder will be
authorized to use this Prospectus for any offer of such shares of Common Stock
without first obtaining the written consent of the Company. The Company

47
<PAGE>

may consent to the use of this Prospectus by Selling Stockholders for a
limited period of time and subject to conditions and limitations that may vary
as to any given Selling Stockholder. The Company will receive none of the
proceeds from any such sale of shares of Common Stock by Selling Stockholders.

Agreements with Selling Stockholders permitting the use of this Prospectus
may provide that any such offering be effected in an orderly manner through
securities dealers, acting as brokers or dealers, selected by the Company;
that Selling Stockholders enter into custody agreements with certain persons
with respect to such shares; and that sales be made only by one or more of the
methods described under this caption, as appropriately supplemented or amended
as required.

Selling Stockholders may from time to time sell all or a portion of the
shares of Common Stock in transactions on the NYSE, in negotiated
transactions, or a combination of such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The shares of Common Stock may be sold
directly or through broker-dealers. If shares of Common Stock are sold through
broker-dealers, the Selling Stockholders may pay brokerage commissions and
charges. The methods by which Selling Stockholders' shares of Common Stock may
be sold include (a) block trades (which may involve crosses) in which the
broker or dealer so engaged will attempt to sell the securities as agent but
may position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its own account pursuant to this Prospectus; (c)
exchange distributions and/or secondary distributions in accordance with the
rules of the NYSE; (d) ordinary brokerage transactions and transactions in
which the broker solicits purchasers; and (e) privately negotiated
transactions.

Selling Stockholders and any broker-dealer participating in the distribution
of the shares of Common Stock may be deemed to be "underwriters" within the
meaning of the Securities Act, and any profit and any commissions paid or any
discounts or concessions allowed to any such broker-dealer may be deemed to be
underwriting discounts and commissions under the Securities Act. The Selling
Stockholders may indemnify any broker-dealer that participates in transactions
involving the sale of shares of Common Stock against certain liabilities,
including liabilities under the Securities Act.

There can be no assurances that Selling Stockholders will sell any or all of
the shares of Common Stock offered hereunder.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Jackson Walker L.L.P., Dallas, Texas.

48
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all exhibits, schedules and amendments relating thereto,
the "Registration Statement") under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus, filed as part of the
Registration Statement, does not contain all the information contained in the
Registration Statement, certain portions of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement. Statements contained in this
Prospectus as to the contents of any contract or other document filed as an
exhibit to the Registration Statement are qualified in their entirety by
reference to such exhibits for complete statements of their provisions. All of
these documents may be inspected without charge at the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and at the following regional offices of the
Commission: Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and 7 World Trade Center, 13th Floor, New York, New York
10048. Copies can also be obtained from the Public Reference Section of the
Commission at prescribed rates. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission.

The Company is subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith files periodic reports, proxy statements and other
information with the Commission. Such periodic reports, proxy statements and
other information will be available for inspection and copying at the public
reference facilities and other regional offices referred to above. In
addition, the shares of Common Stock are traded on the NYSE, and such reports,
proxy statements and other information may be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York, 10005.

49
<PAGE>

INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Quanta Services, Inc. Unaudited Pro Forma Combined Financial Statements
Introduction to Unaudited Pro Forma Combined Financial Statements...... F-2
Unaudited Pro Forma Combined Balance Sheet............................. F-3
Unaudited Pro Forma Combined Statements of Operations.................. F-4
Notes to Unaudited Pro Forma Combined Financial Statements............. F-6
Quanta Services, Inc. and Subsidiaries
Report of Independent Public Accountants............................... F-10
Consolidated Balance Sheets............................................ F-11
Consolidated Statements of Operations.................................. F-12
Consolidated Statements of Cash Flows.................................. F-13
Consolidated Statements of Stockholders' Equity........................ F-14
Notes to Consolidated Financial Statements............................. F-15
Quanta Services, Inc.
Report of Independent Public Accountants............................... F-29
Balance Sheet.......................................................... F-30
Statement of Operations................................................ F-31
Statement of Stockholders' Equity...................................... F-32
Notes to Financial Statements.......................................... F-33

FOUNDING COMPANIES

Union Power Construction Company
Report of Independent Public Accountants............................... F-38
Balance Sheets......................................................... F-39
Statements of Operations............................................... F-40
Statements of Cash Flows............................................... F-41
Statements of Stockholders' Equity..................................... F-42
Notes to Financial Statements.......................................... F-43
Trans Tech Electric, Inc.
Report of Independent Public Accountants............................... F-51
Balance Sheets......................................................... F-52
Statements of Operations............................................... F-53
Statements of Cash Flows............................................... F-54
Statements of Shareholders' Equity..................................... F-55
Notes to Financial Statements.......................................... F-56
Potelco, Inc.
Report of Independent Public Accountants............................... F-62
Balance Sheets......................................................... F-63
Statements of Operations............................................... F-64
Statements of Cash Flows............................................... F-65
Statements of Stockholder's Equity..................................... F-66
Notes to Financial Statements.......................................... F-67

SUBSEQUENT ACQUISITIONS

Spalj Construction Company
Report of Independent Public Accountants............................... F-74
Balance Sheet.......................................................... F-75
Statement of Operations................................................ F-76
Statement of Cash Flows................................................ F-77
Statement of Shareholders' Equity...................................... F-78
Notes to Financial Statements.......................................... F-79
Underground Construction Co., Inc.
Report of Independent Public Accountants............................... F-84
Balance Sheets......................................................... F-85
Statements of Operations............................................... F-86
Statements of Cash Flows............................................... F-87
Statements of Shareholders' Equity..................................... F-88
Notes to Financial Statements.......................................... F-89
Sumter Builders, Inc.
Report of Independent Public Accountants............................... F-96
Balance Sheets......................................................... F-97
Statements of Operations............................................... F-98
Statements of Cash Flows............................................... F-99
Statements of Stockholders' Equity..................................... F-100
Notes to Financial Statements.......................................... F-101
Manuel Brothers
Report of Independent Public Accountants............................... F-106
Balance Sheets......................................................... F-107
Statements of Operations............................................... F-108
Statements of Stockholders' Equity..................................... F-109
Statements of Cash Flows............................................... F-110
Notes to Financial Statements.......................................... F-111
</TABLE>

F-1
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

BASIS OF PRESENTATION

The following unaudited pro forma combined financial statements give effect
to (i) the acquisitions by Quanta Services, Inc. ("Quanta"), of the
outstanding capital stock of PAR, TRANS TECH, Union Power and Potelco
(together, the "Founding Companies"), and related transactions, (ii) Quanta's
initial public offering ("IPO") and (iii) the subsequent acquisitions of
eleven additional businesses from February 19, 1998 through October 16, 1998.
Of these eleven acquired businesses, ten were accounted for using the purchase
method of accounting (the "Purchased Companies") and one was accounted for
using the pooling-of-interests method of accounting (the "Pooled Company").
The acquisitions of the Founding Companies occurred simultaneously with the
closing of Quanta's initial public offering and were accounted for using the
purchase method of accounting. The Founding Companies, the Purchased Companies
and the Pooled Company are collectively referred to as the "Acquired
Businesses". PAR has been identified as the accounting acquiror for financial
statement presentation purposes. As such, Quanta's consolidated historical
financial statements represent the financial position and results of
operations of (i) PAR as restated to include the financial position and
results of operations of the Pooled Company, and (ii) the remaining Founding
Companies and the Purchased Companies beginning on their respective dates of
acquisition.

The unaudited pro forma combined balance sheet gives effect to eight of the
Purchased Companies (included as "Other Individually Insignificant
Acquisitions" in the Unaudited Pro Forma Combined Balance Sheet) which were
acquired subsequent to June 30, 1998 and related transactions as if they had
occurred on June 30, 1998. The unaudited pro forma combined statements of
operations give effect to these transactions as if they had occurred on
January 1, 1997. The unaudited pro forma combined statements of operations
also give effect to the pre-acquisition results of the Other Founding
Companies (which includes Quanta Services, Inc., TRANS TECH, Union and Potelco
from January 1, 1997 through February 18, 1998) and the results of the two
Purchased Companies acquired prior to June 30, 1998.

Quanta has preliminarily analyzed the savings that it expects to realize
from reductions in salaries, bonuses and certain benefits to the owners. To
the extent the owners of the Companies have contractually agreed to
prospective reductions in salaries, bonuses, benefits and lease payments,
these reductions have been reflected in the unaudited pro forma combined
statements of operations. With respect to other potential cost savings, Quanta
has not and cannot quantify these savings until a period subsequent to the
acquisitions. It is anticipated that these savings will be partially offset by
costs related to Quanta's new corporate infrastructure 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 Quanta.

The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions that Company management deems appropriate
and may be revised as additional information becomes available. The pro forma
financial data do not purport to represent what Quanta's 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 Quanta's
financial position or results of operations for any future period. Since the
Acquired Businesses were not under common control or management during the
entire period covered by the pro-formas, 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 also "Risk Factors" included elsewhere herein.

F-2
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

JUNE 30, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
QUANTA OTHER
SERVICES, INC. INDIVIDUALLY
AND INSIGNIFICANT PRO FORMA PRO FORMA
SUBSIDIARIES ACQUISITIONS ADJUSTMENTS TOTAL
-------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents. $ 1,778 $ 3,418 $ -- $ 5,196
Accounts receivable, net.. 43,856 21,596 320 65,772
Cost and estimated
earnings in excess of
billings on uncompleted
contracts................ 18,221 6,415 -- 24,636
Inventories............... 1,750 74 -- 1,824
Prepaid expenses and other
current assets .......... 1,198 685 -- 1,883
-------- ------- ------- --------
Total current assets.... 66,803 32,188 320 99,311
PROPERTY AND EQUIPMENT, net. 44,088 13,992 (796) 57,284
OTHER ASSETS................ 1,170 2,138 -- 3,308
GOODWILL, net............... 93,765 33 65,481 159,279
-------- ------- ------- --------
Total assets............ $205,826 $48,351 $65,005 $319,182
======== ======= ======= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of
long-term debt........... $ 3,946 $ 3,889 $ -- $ 7,835
Accounts payable and
accrued expenses......... 33,301 11,495 -- 44,796
Billings in excess of
costs and estimated
earnings on uncompleted
contracts................ 2,832 1,789 -- 4,621
-------- ------- ------- --------
Total current
liabilities............ 40,079 17,173 -- 57,252
LONG-TERM DEBT, net of
current maturities......... 33,112 4,285 61,013 98,410
DEFERRED INCOME TAXES....... 3,879 -- 1,275 5,154
OTHER NON-CURRENT
LIABILITIES................ -- 831 -- 831
COMMITMENTS AND
CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock........... -- -- -- --
Common Stock.............. -- 561 (561) --
Limited Vote Common Stock. -- -- -- --
Unearned ESOP shares...... (1,831) -- -- (1,831)
Additional paid-in
capital.................. 115,375 3,770 25,009 144,154
Retained earnings......... 15,212 21,731 (21,731) 15,212
-------- ------- ------- --------
Total stockholders'
equity................. 128,756 26,062 2,717 157,535
-------- ------- ------- --------
Total liabilities and
stockholders' equity... $205,826 $48,351 $65,005 $319,182
======== ======= ======= ========
</TABLE>

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

F-3
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)

<TABLE>
<CAPTION>
QUANTA OTHER
SERVICES, INC. OTHER INDIVIDUALLY
AND FOUNDING INSIGNIFICANT PRO FORMA PRO FORMA
SUBSIDIARIES COMPANIES(3) ACQUISITIONS ADJUSTMENTS TOTAL
-------------- ------------ ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES................ $93,717 $14,849 $77,017 $(1,401) $184,182
COST OF SERVICES
(including
depreciation).......... 76,681 12,486 61,830 (1,190) 149,807
------- ------- ------- ------- --------
Gross Profit.......... 17,036 2,363 15,187 (211) 34,375
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 8,889 956 8,642 (2,550) 15,937
MERGER EXPENSES-Pooling. 231 -- -- -- 231
GOODWILL AMORTIZATION... 749 -- 2 1,270 2,021
------- ------- ------- ------- --------
Income from
Operations........... 7,167 1,407 6,543 1,069 16,186
OTHER INCOME (EXPENSE)
Interest Expense...... (1,049) (192) (286) (2,438) (3,965)
Other, net............ 191 68 597 (21) 835
------- ------- ------- ------- --------
INCOME (LOSS) BEFORE
INCOME TAX EXPENSE..... 6,309 1,283 6,854 (1,390) 13,056
PROVISION FOR INCOME
TAXES.................. 2,900 65 261 2,691 5,917
------- ------- ------- ------- --------
NET INCOME (LOSS)....... $ 3,409 $ 1,218 $ 6,593 $(4,081) $ 7,139
======= ======= ======= ======= ========
BASIC EARNINGS PER
SHARE.................. $ 0.34
========
DILUTED EARNINGS PER
SHARE.................. $ 0.33
========
DILUTED EARNINGS PER
SHARE BEFORE MERGER
EXPENSES-Pooling....... $ 0.34
========
SHARES USED IN COMPUTING
PRO FORMA COMBINED
EARNINGS PER SHARE--
BASIC (1)............. 21,263
========
DILUTED (2)........... 21,370
========
</TABLE>
- --------

(1) Includes (i) 7,527,000 shares of Common Stock issued to the owners of the
Founding Companies, (ii) the issuance of 4,998,337 shares related to the
Purchased Companies and the Pooled Company, (iii) 3,345,333 shares of
Limited Vote Common Stock issued to the initial stockholders and certain
management personnel of the Company, and (iv) 5,750,000 shares of Common
Stock, net of 357,174 shares representing net cash to Quanta, sold in the
IPO to pay the cash portion of the consideration for the Founding
Companies, to repay expenses incurred in connection with the IPO and to
retire debt.

(2) Includes (i) the 21,263,496 shares described above, and (ii) the dilution
attributable to outstanding options to purchase Common Stock, using the
treasury stock method.

(3) Represents pre-acquisition results of Quanta Services, Inc., TRANS TECH,
Union and Potelco.

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

F-4
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)

<TABLE>
<CAPTION>
QUANTA OTHER
SERVICES, INC. OTHER INDIVIDUALLY
AND FOUNDING INSIGNIFICANT PRO FORMA PRO FORMA
SUBSIDIARIES COMPANIES ACQUISITIONS ADJUSTMENTS TOTAL
-------------- --------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES................ $76,204 $106,288 $160,892 $ (5,419) $337,965
COST OF SERVICES
(including
depreciation).......... 58,896 88,696 126,523 (5,034) 269,081
------- -------- -------- -------- --------
Gross Profit.......... 17,308 17,592 34,369 (385) 68,884
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 11,589 18,997 18,041 (21,515) 27,112
GOODWILL AMORTIZATION... 56 -- -- 4,033 4,089
------- -------- -------- -------- --------
Income (loss) from
Operations........... 5,663 (1,405) 16,328 17,097 37,683
OTHER INCOME (EXPENSE)
Interest Expense...... (1,219) (702) (312) (5,390) (7,623)
Other, net............ (131) 270 1,229 130 1,498
------- -------- -------- -------- --------
INCOME (LOSS) BEFORE
INCOME TAX EXPENSE..... 4,313 (1,837) 17,245 11,837 31,558
PROVISION FOR INCOME
TAXES.................. 1,786 1,461 1,864 8,616 13,727
------- -------- -------- -------- --------
NET INCOME (LOSS)....... $ 2,527 $ (3,298) $ 15,381 $ 3,221 $ 17,831
======= ======== ======== ======== ========
BASIC AND DILUTED
EARNINGS PER SHARE..... $ 0.85
========
SHARES USED IN COMPUTING
PRO FORMA COMBINED
BASIC AND DILUTED
EARNINGS PER SHARE(1).. 21,041
========
</TABLE>
- --------

(1) Includes (i) 7,527,000 shares of Common Stock issued to the owners of the
Founding Companies, (ii) the issuance of 4,998,337 shares related to the
Purchased Companies and the Pooled Company, (iii) 3,345,333 shares of
Limited Vote Common Stock issued to the initial stockholders and certain
management personnel of the Company, and (iv) 5,750,000 shares of Common
Stock, net of 579,222 shares representing net cash to Quanta, sold in the
IPO to pay the cash portion of the consideration for the Founding
Companies, to repay expenses incurred in connection with the IPO and to
retire debt.

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

F-5
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

1. GENERAL:

Quanta was founded to create a leading provider of specialty electrical
contracting and maintenance services primarily related to electric and
telecommunications infrastructure in North America. Quanta conducted no
operations prior to its initial public offering ("IPO") and acquired the
Founding Companies concurrently with and as a condition of the closing of the
IPO.

The historical financial statements of the Other Founding Companies
(excluding PAR) included in the accompanying pro forma financial statements
reflect the results of operations of those Other Founding Companies for
periods prior to February 18, 1998, and were derived from the respective
Founding Companies' financial statements. The periods included in these
financial statements for the individual Founding Companies are for the year
ended December 31, 1997, and the period from January 1, 1998 to February 18,
1998. The audited historical financial statements for the Founding Companies
included elsewhere herein have been included in accordance with Securities and
Exchange Commission (SEC) Staff Accounting Bulletin No. 80.

The historical financial information of the Other Individually Insignificant
Acquisitions reflect the financial position of the eight Companies which were
acquired subsequent to June 30, 1998, and the results of their operations
accounted for using the purchase method of accounting for the year ended
December 31, 1997 and for the six months ended June 30, 1998 and the pre-
acquisition results of the two companies acquired in purchase acquisitions
prior to June 30, 1998 as though these acquisitions had occurred on January 1,
1997.

2. ACQUISITION OF COMPANIES:

In February 1998, Quanta completed its IPO which involved the issuance of
5,000,000 shares of common stock, providing approximately $38.8 million in net
proceeds to the Company, after deducting underwriter discounts and commissions
and expenses related to the IPO. Concurrent with the closing of its initial
public offering, Quanta acquired in separate transactions, for consideration
including $21.0 million of cash and 7,527,000 shares of Common Stock, the
following four entities (the "Founding Companies"): PAR Electrical
Contractors, Inc., Potelco Inc., TRANS TECH Electric, Inc. and Union Power
Construction Company. Also, in March 1998, the Company's underwriters
exercised their over-allotment option to acquire an additional 750,000 shares
of the Company's Common Stock at the initial public offering price of $9 per
share, providing the Company with approximately $6.3 million (net of
underwriting discounts and commissions) of additional proceeds from the IPO.

Subsequent to its IPO, and through June 30, 1998, the Company has acquired
three additional businesses for approximately $23.5 million of cash and 2.2
million shares of Common Stock. Of these three, two were accounted for using
the purchase method of accounting and one was accounted for using the pooling-
of-interests method of accounting. Accordingly, the Company's historical
financial statements have been restated to include the historical financial
statements of the Pooled Company.

Subsequent to June 30, 1998, and through October 16, 1998, the Company has
acquired eight businesses for approximately $61.5 million of cash (funded
through borrowings under the Company's credit facility or issued as notes
payable) and 2.7 million shares of Common Stock. All of those acquisitions
were accounted for using the purchase method of accounting.

In connection with the acquisitions of the Founding Companies and the
Purchased Companies, the Company has recorded approximately $160.0 million of
excess total consideration paid over the net tangible assets acquired as
goodwill in the accompanying consolidated financial statements. The
accompanying balance sheets include allocations of the respective purchase
prices initially assigned to the assets acquired and liabilities assumed based
on preliminary estimates of fair value and may be revised as additional
information concerning the valuation of such assets and liabilities becomes
available.

F-6
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)

3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:

(a) Records the effect of the purchase of eight Purchased Companies closed
subsequent to June 30, 1998 by Quanta consisting of cash consideration of
$61.5 million (funded through borrowings under the Company's bank Credit
Facility or issued as notes payable and recorded as long-term debt) and
approximately 2.7 million shares of Common Stock for a total estimated
purchase price of $90.3 million resulting in excess purchase price of $65.5
million over the net assets acquired.

(b) Records the elimination of the assets and related liabilities for a
division of one of the Purchased Companies which was not acquired by the
Company.

The following table summarizes unaudited pro forma combined balance sheet
adjustments (in thousands):

<TABLE>
<CAPTION>
ADJUSTMENT
-------------- PRO FORMA
(A) (B) ADJUSTMENTS
ASSETS ------- ----- -----------
<S> <C> <C> <C>
Current Assets--
Cash and cash equivalents........................ $ -- $ -- $ --
Accounts receivable.............................. -- 320 320
Prepaid expenses and other....................... -- -- --
------- ----- -------
Total current assets........................... -- 320 320
Property and equipment, net........................ -- (796) (796)
Goodwill........................................... 65,481 -- 65,481
------- ----- -------
Total Assets....................................... $65,481 $(476) $65,005
======= ===== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities--
Current maturities of long-term debt............. $ -- $ -- $ --
Accounts payable and accrued expenses............ -- -- --
Billing in excess of costs and profits
recognized...................................... -- -- --
------- ----- -------
Total current liabilities...................... -- -- --
Long-term debt, net of current maturities.......... 61,489 (476) 61,013
Deferred income taxes.............................. 1,275 -- 1,275
------- ----- -------
Total liabilities.............................. 62,764 (476) 62,288
Stockholders' equity--
Common Stock..................................... (561) -- (561)
Unearned ESOP shares............................. -- -- --
Limited Vote Common Stock........................ -- -- --
Additional paid-in capital....................... 25,009 -- 25,009
Retained earnings................................ (21,731) -- (21,731)
------- ----- -------
Total stockholders' equity..................... 2,717 -- 2,717
------- ----- -------
Total liabilities and stockholders' equity..... $65,481 $(476) $65,005
======= ===== =======
</TABLE>

F-7
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)

4. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS:

Six Months Ended June 30, 1998

(a) Reflects the $2.4 million reduction in salaries, bonuses and benefits to
the owners of the Acquired Businesses. These reductions in salaries, bonuses
and benefits have been agreed to prospectively in accordance with the terms of
employment agreements. Such employment agreements are primarily for three
years, contain restrictions related to competition and provide severance for
termination of employment in certain circumstances. Additionally, reflects
reductions in expenses associated with certain non-operating assets that have
been or will be transferred from the Acquired Businesses prior to their
acquisition.

(b) Reflects the amortization of goodwill to be recorded as a result of the
acquisition of the Founding Companies and the Purchased Companies over a 40-
year estimated life.

(c) Reflects interest expense of $2.6 million on borrowings and notes
payable issued of $85.0 million to fund the cash portion of consideration paid
for the Purchased Companies, net of interest savings of $0.2 million on $18.5
million of historical debt repaid using proceeds from the IPO or distributed
prior to the acquisition of the Founding Companies. The additional $2.6
million of interest expense was calculated utilizing an annual effective
interest rate of approximately 7.0 percent.

(d) Reflects the elimination of revenues between certain of the Acquired
Businesses.

(e) Reflects the incremental provision for federal and state income taxes at
an approximate 39.0 percent overall tax rate before non-deductible goodwill
and other permanent items, relating to the above adjustments to the statements
of operations and for income taxes on S corporation income not provided for in
the historical financial statements.

(f) Reflects the elimination of the revenues and related expenses for a
division of one of the Purchased Companies which was not acquired by the
Company.

The following table summarizes unaudited pro forma combined statements of
operations adjustments (in thousands):

<TABLE>
<CAPTION>
ADJUSTMENTS
------------------------------------------------ PRO FORMA
(A) (B) (C) (D) (E) (F) ADJUSTMENTS
------- ------- ------- ----- ------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ -- $ -- $ -- $(914) $ -- $(487) $(1,401)
Cost of services........ -- -- -- (914) -- (276) (1,190)
------- ------- ------- ----- ------- ----- -------
Gross profit.......... -- -- -- -- -- (211) (211)
Selling, general and
administrative
expenses............... (2,352) -- -- -- -- (198) (2,550)
Goodwill amortization... -- 1,270 -- -- -- -- 1,270
------- ------- ------- ----- ------- ----- -------
Income (loss) from
operations........... 2,352 (1,270) -- -- -- (13) 1,069
Other income (expense)--
Interest expense...... -- -- (2,438) -- -- -- (2,438)
Other, net............ -- -- (21) -- -- -- (21)
------- ------- ------- ----- ------- ----- -------
Income (loss) before
income taxes......... 2,352 (1,270) (2,459) -- -- (13) (1,390)
Provision for income
taxes.................. -- -- -- -- 2,691 -- 2,691
------- ------- ------- ----- ------- ----- -------
Net income (loss)..... $ 2,352 $(1,270) $(2,459) $ -- $(2,691) $ (13) $(4,081)
======= ======= ======= ===== ======= ===== =======
</TABLE>

F-8
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Year Ended December 31, 1997

(a) Reflects the $8.0 million reduction in salaries, bonuses and benefits to
the owners of the Acquired Businesses. These reductions in salaries, bonuses
and benefits have been agreed to prospectively in accordance with the terms of
employment agreements. Such employment agreements are primarily for three
years, contain restrictions related to competition and provide severance for
termination of employment in certain circumstances. Additionally, reflects
reductions in expenses associated with certain non-operating assets that have
been or will be transferred from the Acquired Businesses prior to their
acquisition.

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

(c) Reflects interest expense of $.8 million on borrowings of $8.7 million
necessary to fund the S Corporation Distributions and $6.0 million on
borrowings and notes payable issued of $85.0 million to fund the cash portion
of consideration paid for the Purchased Companies, net of interest savings of
$1.4 million on $19.0 million of historical debt repaid using proceeds from
the IPO or distributed prior to the acquisition of the Founding Companies. The
additional $6.8 million of interest expense was calculated utilizing an annual
weighted average effective interest rate of approximately 7.14 percent.

(d) Reflects the elimination of revenues between certain of the Acquired
Businesses.

(e) Reflects the elimination of the non-recurring non-cash charge of $13.0
million, which was based on the fair value of shares issued to an initial
stockholder and management in December 1997.

(f) Reflects the incremental provision for federal and state income taxes at
an approximate 39.0 percent overall tax rate before non-deductible goodwill
and other permanent items, relating to the above adjustments to the statements
of operations and for income taxes on S corporation income not provided for in
the historical financial statements.

(g) Reflects the elimination of the revenues and related expenses for a
division of one of the Purchased Companies which was not acquired by the
Company.

The following table summarizes unaudited pro forma combined statements of
operations adjustments (in thousands):

<TABLE>
<CAPTION>
ADJUSTMENTS
------------------------------------------------------------ PRO FORMA
(A) (B) (C) (D) (E) (F) (G) ADJUSTMENTS
------- ------- ------- ------- -------- ------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ -- $ -- $ -- $(4,480) $ -- $ -- $(939) $(5,419)
Cost of services........ -- -- -- (4,480) -- -- (554) (5,034)
------- ------- ------- ------- -------- ------- ----- -------
Gross profit............ -- -- -- -- -- -- (385) (385)
Selling, general and
administrative ex-
penses................. (8,004) -- -- -- (13,003) -- (508) (21,515)
Goodwill amortization... -- 4,033 -- -- -- -- -- 4,033
------- ------- ------- ------- -------- ------- ----- -------
Income (loss) from
operations............. 8,004 (4,033) -- -- 13,003 -- 123 17,097
Other income (expense)--
Interest expense...... -- -- (5,390) -- -- -- -- (5,390)
Other, net............ 130 -- -- -- -- -- -- 130
------- ------- ------- ------- -------- ------- ----- -------
Income (loss) before
income taxes......... 8,134 (4,033) (5,390) -- 13,003 -- 123 11,837
Provision for income
taxes.................. -- -- -- -- -- 8,616 -- 8,616
------- ------- ------- ------- -------- ------- ----- -------
Net income (loss)....... $ 8,134 $(4,033) $(5,390) $ -- $ 13,003 $(8,616) $ 123 $ 3,221
======= ======= ======= ======= ======== ======= ===== =======
</TABLE>

F-9
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Quanta Services, Inc.:

We have audited the accompanying consolidated balance sheets of Quanta
Services, Inc. (a Delaware corporation), and subsidiaries as of December 31,
1996 and 1997, and the related consolidated statements of operations, cash
flows and stockholders' equity for the three years ended December 31, 1997.
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 Quanta Services, Inc. and
subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for the three years ended December 31, 1997,
in conformity with generally accepted accounting principles.

As discussed in Note 1, the accompanying consolidated financial statements
reflect the Company on a historical basis including PAR Electrical
Contractors, Inc., as the accounting acquiror restated for the effect of a
pooling-of-interests transaction.

ARTHUR ANDERSEN LLP

Houston, Texas
October 16, 1998

F-10
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................... $ 512 $ 489 $ 1,778
Accounts receivable, net of allowance of $174,
$193 and $972 (unaudited)..................... 11,794 12,878 43,856
Costs and estimated earnings in excess of
billings on uncompleted contracts............. 799 1,746 18,221
Inventories.................................... 579 865 1,750
Prepaid expenses and other current assets...... 623 724 1,198
------- ------- --------
Total current assets......................... 14,307 16,702 66,803
PROPERTY AND EQUIPMENT, net...................... 14,752 18,286 44,088
OTHER ASSETS..................................... 507 645 1,170
GOODWILL, net.................................... 168 114 93,765
------- ------- --------
Total assets................................. $29,734 $35,747 $205,826
======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt........... $ 6,427 $ 7,200 $ 3,946
Accounts payable and accrued expenses.......... 4,872 6,578 33,301
Billings in excess of costs and estimated
earnings on uncompleted contracts............. 1,216 738 2,832
------- ------- --------
Total current liabilities.................... 12,515 14,516 40,079
LONG TERM DEBT, net of current maturities........ 6,478 7,542 33,112
DEFERRED INCOME TAXES............................ 2,281 2,479 3,879
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.00001 par value, 10,000,000
shares authorized, none issued and
outstanding................................... -- -- --
Common Stock, $.00001 par value, 40,000,000
shares authorized, 3,951,945, 3,951,945 and
15,525,685 (unaudited) shares issued and
outstanding................................... -- -- --
Limited Vote Common Stock, $.00001 par value,
3,345,333 shares authorized, 3,345,333 shares
issued and outstanding at June 30, 1998....... -- -- --
Unearned ESOP shares........................... (2,085) (1,831) (1,831)
Additional paid-in capital..................... 1,269 1,238 115,375
Retained earnings.............................. 9,276 11,803 15,212
------- ------- --------
Total stockholders' equity................... 8,460 11,210 128,756
------- ------- --------
Total liabilities and stockholders' equity... $29,734 $35,747 $205,826
======= ======= ========
</TABLE>

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

F-11
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES.......................... $53,224 $71,294 $76,204 $34,799 $93,717
COST OF SERVICES (including
depreciation).................... 44,608 57,164 58,896 28,861 76,681
------- ------- ------- ------- -------
Gross profit.................... 8,616 14,130 17,308 5,938 17,036
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES.......... 6,438 9,876 11,589 4,855 8,889
MERGER EXPENSES--Pooling.......... -- -- -- -- 231
GOODWILL AMORTIZATION............. 50 55 56 28 749
------- ------- ------- ------- -------
Income from operations.......... 2,128 4,199 5,663 1,055 7,167
OTHER INCOME (EXPENSE):
Interest expense................ (787) (989) (1,219) (557) (1,049)
Other, net...................... 75 (31) (131) (94) 191
------- ------- ------- ------- -------
Other income (expense), net... (712) (1,020) (1,350) (651) (858)
------- ------- ------- ------- -------
INCOME BEFORE INCOME TAX EXPENSE.. 1,416 3,179 4,313 404 6,309
PROVISION FOR INCOME TAXES........ 353 1,389 1,786 136 2,900
------- ------- ------- ------- -------
NET INCOME........................ $ 1,063 $ 1,790 $ 2,527 $ 268 $ 3,409
======= ======= ======= ======= =======
BASIC EARNINGS PER SHARE.......... $ .27 $ .45 $ .64 $ .07 $ .24
======= ======= ======= ======= =======
DILUTED EARNINGS PER SHARE........ $ .27 $ .45 $ .64 $ .07 $ .24
======= ======= ======= ======= =======
DILUTED EARNINGS PER SHARE BEFORE
MERGER EXPENSES.................. $ .27 $ .45 $ .64 $ .07 $ .25
======= ======= ======= ======= =======
SHARES USED IN COMPUTING EARNINGS
PER SHARE:
Basic........................... 3,952 3,952 3,952 3,952 14,399
======= ======= ======= ======= =======
Diluted......................... 3,952 3,952 3,952 3,952 14,506
======= ======= ======= ======= =======
</TABLE>

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

F-12
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- -----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income...................... $ 1,063 $ 1,790 $ 2,527 $ 268 $ 3,409
Adjustments to reconcile net
income to net cash provided by
operating activities--
Depreciation and amortization.. 2,592 2,814 3,323 1,606 3,364
Loss (gain) on sale of
property and equipment........ 10 (96) 49 2 (57)
Non-cash compensation charge
for issuance of Common Stock
(ESOP)........................ -- 720 254 -- --
Deferred income taxes.......... 166 364 5 15 192
Changes in operating assets
and liabilities--
(Increase) decrease in--
Accounts receivable......... (767) (2,532) (1,084) (406) (3,163)
Inventories................. -- (579) (286) 47 (128)
Costs and profits recognized
in excess of billings...... 36 (233) (947) (857) (5,643)
Prepaid expenses and other
current assets............. 153 (63) 42 128 41
Increase (decrease) in--
Accounts payable and accrued
expenses.................... 210 1,150 1,706 1,641 5,768
Billings in excess of costs
and profits recognized...... (490) 1,026 (478) (1,090) 184
Other, net................... (23) (100) (88) (33) (442)
------- ------- ------- ------- --------
Net cash provided by
operating activities........ 2,950 4,261 5,023 1,321 3,525
------- ------- ------- ------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of property
and equipment.................. 100 172 268 95 969
Additions of property and
equipment...................... (4,184) (3,981) (6,429) (3,939) (7,266)
Cash paid for acquisitions, net
of cash acquired............... (128) -- -- -- (34,773)
------- ------- ------- ------- --------
Net cash used in investing
activities.................. (4,212) (3,809) (6,161) (3,844) (41,070)
------- ------- ------- ------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from long-term debt.... 3,491 7,152 4,714 1,692 564
Payments of long-term debt...... (2,419) (5,400) (4,063) (1,645) (24,838)
Redemptions of Common Stock..... (97) (2,805) (31) -- --
Issuances of Common Stock, net
of offering costs.............. -- -- -- -- 45,109
Net borrowings under bank lines
of credit...................... 163 843 495 1,964 26,369
Distributions to stockholders... (80) (375) -- -- (8,370)
Other........................... 43 280 -- -- --
------- ------- ------- ------- --------
Net cash provided by (used
in) financing activities.... 1,101 (305) 1,115 2,011 38,834
------- ------- ------- ------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............ (161) 147 (23) (512) 1,289
CASH AND CASH EQUIVALENTS,
beginning of period............. 526 365 512 512 489
------- ------- ------- ------- --------
CASH AND CASH EQUIVALENTS, end of
period.......................... $ 365 $ 512 $ 489 $ -- $ 1,778
======= ======= ======= ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for--
Interest........................ $ 801 $ 637 $ 679 $ 540 $ 935
Income taxes, net of refunds.... 553 870 1,518 33 799
</TABLE>

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

F-13
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
LIMITED VOTE
COMMON STOCK COMMON STOCK ADDITIONAL TOTAL
----------------- ---------------- UNEARNED PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT ESOP SHARES CAPITAL EARNINGS EQUITY
---------- ------ --------- ------ ----------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994................... 3,951,945 $ -- -- $ -- $ -- $ 904 $ 7,017 $ 7,921
Distribution to
stockholders.......... -- -- -- -- -- -- (219) (219)
Other.................. -- -- -- -- -- (56) -- (56)
Net income............. -- -- -- -- -- -- 1,063 1,063
---------- ----- --------- ----- ------- -------- ------- --------
Balance, December 31,
1995................... 3,951,945 -- -- -- -- 848 7,861 8,709
Distribution to
stockholders.......... -- -- -- -- -- -- (375) (375)
Purchase of stock from
stockholders.......... -- -- -- -- (2,805) -- -- (2,805)
Distribution of stock
via ESOP.............. -- -- -- -- 720 -- -- 720
Other.................. -- -- -- -- -- 421 -- 421
Net income............. -- -- -- -- -- -- 1,790 1,790
---------- ----- --------- ----- ------- -------- ------- --------
Balance, December 31,
1996................... 3,951,945 -- -- -- (2,085) 1,269 9,276 8,460
Distribution of stock
via ESOP.............. -- -- -- -- 254 -- -- 254
Other.................. -- -- -- -- -- (31) -- (31)
Net income............. -- -- -- -- -- -- 2,527 2,527
---------- ----- --------- ----- ------- -------- ------- --------
Balance, December 31,
1997................... 3,951,945 -- -- -- (1,831) 1,238 11,803 11,210
Issuances of stock
(unaudited)........... -- -- 3,345,333 -- -- -- -- --
Initial public
offering, net of
offering costs
(unaudited)........... 5,750,000 -- -- -- -- 45,109 -- 45,109
Acquisition of Founding
Companies (unaudited). 4,527,000 -- -- -- -- 53,890 -- 53,890
Acquisition of
purchased companies
(unaudited)........... 1,296,740 -- -- -- -- 15,138 -- 15,138
Net income (unaudited). -- -- -- -- -- -- 3,409 3,409
---------- ----- --------- ----- ------- -------- ------- --------
Balance, June 30, 1998
(unaudited)............ 15,525,685 $ -- 3,345,333 $ -- $(1,831) $115,375 $15,212 $128,756
========== ===== ========= ===== ======= ======== ======= ========
</TABLE>

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

F-14
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

In February 1998, Quanta completed its initial public offering (the
"Offering" or "IPO"), concurrent with which Quanta acquired, in separate
transactions, four entities (the "Founding Companies"). Subsequent to the date
of the Offering, and through June 30, 1998, the Company has acquired three
additional businesses for approximately $23.5 million in cash and 2.2 million
shares of Common Stock. Of these additional acquired businesses, one was
accounted for as a pooling-of-interests and is referred to herein as the
"Pooled Company." The remaining acquired businesses were accounted for as
purchases and are referred to herein as the "Purchased Companies." Quanta
intends to continue to acquire through merger or purchase similar companies to
expand its national and regional operations.

The financial statements of Quanta for periods prior to February 18, 1998
(the effective closing date of the acquisitions of the Founding Companies),
are the financial statements of PAR Electrical Contractors, Inc. ("PAR" or the
"Accounting Acquiror") as restated for the acquisition of the Pooled Company
in June 1998. The operations of the other Founding Companies and Quanta,
acquired by the Accounting Acquiror, have been included in the Company's
historical financial statements beginning February 19, 1998, and the Purchased
Companies beginning on their respective dates of acquisition.

In the course of its operations, the Company is subject to certain risk
factors, including but not limited to: absence of combined operating history,
risks related to acquisition strategy, risks related to acquisition financing,
risks related to operating and internal growth strategies, management of
growth, availability of qualified employees, unionized workforce, competition,
contract bidding risks, seasonality, exposure to environmental liabilities and
dependence on key personnel.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The accompanying consolidated financial statements after February 18, 1998,
include the accounts of Quanta and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

Interim Consolidated Financial Information

The unaudited interim consolidated financial statements have been prepared
pursuant to the rules of the Securities and Exchange Commission ("SEC").
Certain information and footnote disclosures, normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information presented not misleading. 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 consolidated 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.

Supplemental Cash Flow Information

The Company had non-cash investing and financing activities related to
capital leases of approximately $112,000, $111,000 and $692,000 during the
years ended December 31, 1995, 1996 and 1997, respectively.

F-15
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Accounts Receivable and Provision for Doubtful Accounts

The Company provides an allowance for doubtful accounts when collection is
considered doubtful.

Inventories

Inventories consist of parts and supplies held for use in the ordinary
course of business and are valued by the Company 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. Depreciation and
amortization expense, excluding amortization of goodwill, was approximately
$2,542,000, $2,759,000 and $3,269,000 for the years ended December 31, 1995,
1996 and 1997, respectively.

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 statements of operations.

Debt Issue Costs

Debt issue costs related to the Company's credit facility are included in
other assets and are amortized to interest expense over the scheduled maturity
of the debt.

Goodwill

Goodwill represents the excess of the aggregate purchase price paid by the
Company in the acquisition of businesses accounted for as purchases over the
fair market value of the net assets acquired. Goodwill is amortized on a
straight-line basis over 40 years.

The Company applies 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". Management continually evaluates whether events or
circumstances have occurred that indicate that the remaining estimated useful
lives of property and equipment, other identifiable intangible assets and
goodwill may warrant revision or that the remaining balances may not be
recoverable.

Revenue Recognition

The Company recognizes revenue when services are performed except when work
is being performed under a fixed price or cost-plus-fee contract. Such
contracts generally provide that the customer accept completion of progress to
date and compensate the Company for services rendered, measured typically in
terms of units installed, hours expended or some other measure of progress.
Revenues from fixed price or cost-plus-fee contracts are recognized on the
percentage-of-completion method measured by the percentage of costs incurred
to date to total estimated costs for each contract. Contract costs include all
direct material, labor and subcontract costs and those indirect costs related
to contract performance, such as indirect labor, supplies, tools, repairs and
depreciation costs. 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-16
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The balances billed but not paid by customers pursuant to retainage
provisions in fixed price or cost-plus-fee contacts 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 at each balance sheet date will be collected within the subsequent
fiscal year.

The current asset "Cost and estimated earnings in excess of billings on
uncompleted contracts" represents revenues recognized in excess of amounts
billed. The current liability "Billings in excess of costs and estimated
earnings on uncompleted contracts" represents billings in excess of revenues
recognized.

Warranty Costs

For certain contracts, the Company generally warrants labor for the
installation of new electrical systems and servicing of existing electrical
systems. An accrual for warranty costs is recorded based upon the historical
level of warranty claims and management's estimate of future costs.

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 method of accounting for employee stock options or similar equity
instruments and the current method of accounting prescribed by Accounting
Principles Board ("APB") Opinion No. 25, under which compensation expense is
recorded to the extent that the fair market value of the related stock is in
excess of the options' exercise price at date of grant. 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 prescribed in SFAS No. 123 had been applied. The Company will
measure compensation expense attributable to stock options based on the method
prescribed in APB Opinion No. 25 and will provide the required pro forma
disclosure of net income and earnings per share, as applicable, in the notes
to future consolidated annual financial statements.

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 assets and
liabilities are recorded for future tax consequences of temporary 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.

Prior to January 1, 1996, the Pooled Company had elected to be treated as an
S Corporation under provisions of the Internal Revenue Code. As such, federal
and state income tax regulations provided that the income or losses of the
Pooled Company were attributable to its stockholders in their individual tax
returns. Effective January 1, 1996, the Pooled Company terminated its S
Corporation status and simultaneously adopted SFAS No. 109.

Certain of the acquisitions were S corporations for income tax purposes and,
accordingly, any income tax liabilities for the periods prior to the
acquisitions are the responsibility of the respective stockholders. Effective
with the acquisitions, the S corporations converted to C corporations.
Accordingly, an estimated deferred tax liability has been recorded to provide
for the estimated future income tax liability as a result of the difference
between the book and tax bases of the net assets of these former S
corporations. For purposes of these consolidated financial statements, federal
and state income taxes have been provided for the post-acquisition periods.

F-17
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Earnings per Share

The Company has adopted SFAS No. 128, "Earnings Per Share", which requires
restatement of all comparative per share amounts. Under the provisions of SFAS
No. 128, the presentation of primary earnings per share has been replaced with
earnings per share for potentially dilutive securities such as outstanding
options. All prior period earnings per share data have been restated.

For financial statement purposes, as required by the rules and regulations
of the Securities Act, PAR has been identified as the accounting acquiror in
the transaction with Quanta and its initial public offering. As such the
shares of Quanta Common Stock beneficially owned by the stockholders of PAR
and the shares issued in connection with the acquisition of the Pooled Company
have been issued in the calculation of basic and diluted earnings per share of
the Company, for all periods prior to the IPO.

Collective Bargaining Agreements

Certain of the subsidiaries are party to various collective bargaining
agreements with certain of its employees. The agreements require the Company
to pay specified wages and provide certain benefits to its union employees.
These agreements expire at various times.

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,
disclosures of contingent 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. Reference is made to the
"Revenue Recognition" section of this footnote and Note 12 for discussion of
certain estimates reflected in the Company's financial statements.

New Accounting Pronouncements

In the first quarter of 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income", which requires the display of comprehensive income and
its components in the financial statements. Comprehensive income represents
all changes in equity of an entity during the reporting period, including net
income and charges directly to equity, which are excluded from net income. For
the six months ended June 30, 1998 and 1997, there are no material differences
between the Company's "traditional" and "comprehensive" net income.

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related
Information", which establishes standards for the way public enterprises are
to report information about operating segments in annual financial statements
and requires the reporting of selected information about operating segments in
interim financial reports issued to stockholders. SFAS No. 131 also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. SFAS No. 131 is effective for the
Company for its year ended December 31, 1998, at which time the Company will
adopt the provision. The Company is currently evaluating the impact on the
Company's financial disclosures.

In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits", which becomes effective for
financial statements for the year ended December 31, 1998. SFAS No. 132
requires revised disclosures about pension and other postretirement benefit
plans. The Company does not believe the adoption of this standard will have a
material effect on its annual financial statements.

F-18
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which becomes effective for financial
statements beginning January 1, 2000. SFAS No. 133 requires a company to
recognize all derivative instruments (including certain derivative instruments
embedded in other contracts) as assets or liabilities in its balance sheet and
measure them at fair value. The statement requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999. The Company is evaluating SFAS No. 133 and the
impact on existing accounting policies and financial reporting disclosures.
However, the Company has not to date engaged in activities or entered into
arrangements normally associated with derivative instruments.

In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position (SOP) 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use". The SOP provides
guidance with respect to accounting for the various types of costs incurred
for computer software developed or obtained for the Company's use. The Company
is required to, and will adopt SOP 98-1 by the first quarter of fiscal 1999
and believes that adoption will not have a material effect on its consolidated
financial statements.

In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-
Up Activities", which requires costs of start-up activities to be expensed as
incurred, and upon adoption, previously deferred costs should be charged as a
cumulative effect of a change in accounting principle. The statement is
effective for financial statements beginning after December 15, 1998, and the
Company expects to adopt the new standard in January 1999. The adoption of
this standard is not expected to have a material effect on the Company's
financial position or result of operations.

3. PER SHARE INFORMATION:

The computation of basic and diluted earnings per share for the three years
ended December 31, 1997 and the six months ended June 30, 1997 (unaudited) is
based upon the 3,000,000 shares of Common Stock issued in connection with PAR
and 951,945 shares issued in connection with the acquisition of the Pooled
Company during the quarter ended June 30, 1998.

The computation of basic earnings per share for the six months ended June
30, 1998 (unaudited) is based upon 14,398,526 shares of Common Stock
outstanding which includes the weighted average portion of (i) 7,527,000
shares of Common Stock issued to the owners of the Founding Companies, (ii)
3,345,333 shares of Limited Vote Common Stock issued to the initial
stockholders and certain management personnel of the Company, (iii) 5,750,000
shares of Common Stock sold in the Offering to pay the cash portion of the
consideration for the Founding Companies to repay expenses incurred in
connection with the Offering and to retire debt, (iv) 951,945 shares issued
for the acquisition of the Pooled Company, and (v) the 1,296,740 shares issued
in acquisitions accounted for as purchases.

Shares used in the calculation of the diluted earnings per share for the six
months ended June 30, 1998 (unaudited) include (i) the shares described above,
and (ii) the dilution attributable to outstanding options to purchase Common
Stock, using the treasury stock method.

4. BUSINESS COMBINATIONS:

In February 1998, Quanta completed its initial public offering (the
"Offering"), concurrent with which, Quanta acquired, in separate transactions,
four entities (the "Founding Companies"). Subsequent to the date of the
Offering, and through June 30, 1998, the Company has acquired three additional
businesses for approximately $23.5 million of cash and 2.2 million shares of
Common Stock. Of these additional businesses acquired, one

F-19
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

was accounted for as a pooling-of-interests and is referred to herein as the
"Pooled Company". The remaining businesses acquired were accounted for as
purchases and are referred to herein as the "Purchased Companies". Quanta
intends to continue to acquire through merger or purchase similar companies to
expand its national and regional operations.

Pooling

During the second quarter of 1998, Quanta completed the acquisition of all
the common stock of NorAm Telecommunications, Inc. ("NorAm" or the "Pooled
Company"), in a business combination accounted for as a "pooling-of-interests"
transaction in accordance with the requirements of APB No. 16. NorAm,
headquartered in Oregon, provides outside and inside fiberoptic networks and
technical support for the telecommunications industry. Quanta issued 951,945
shares of Common Stock in exchange for all the common stock of NorAm. There
were no transactions between Quanta and NorAm during the periods prior to the
business combination.

The following table summarizes the unaudited restated revenues, net income
and per share data of the Company after giving effect to the Pooled Company
(in thousands, except per share data).

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1995 1996 1997
--------------- --------------- ---------------
NET NET NET
REVENUES INCOME REVENUES INCOME REVENUES INCOME
-------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues and net income--
As previously reported.. $38,915 $ 515 $42,684 $ 750 $49,132 $2,294
Pooled Company.......... 14,309 548 28,610 1,040 27,073 233
------- ------ ------- ------ ------- ------
As restated........... $53,224 $1,063 $71,294 $1,790 $76,205 $2,527
======= ====== ======= ====== ======= ======
Earnings per share basic
and diluted--
As previously reported.. $ 0.17 $ 0.25 $ 0.76
Pooled Company.......... 0.10 0.20 (0.12)
------ ------ ------
As restated........... $ 0.27 $ 0.45 $ 0.64
====== ====== ======
</TABLE>

Purchases

During the second quarter of 1998, the Company completed two acquisitions
accounted for as purchases. The aggregate consideration paid in these
transactions consisted of $23.5 million in cash and 1.3 million shares of
Common Stock. The accompanying balance sheet as of June 30, 1998 includes
preliminary allocations of the respective purchase prices and is subject to
final adjustment. Set forth below are unaudited pro forma combined revenue and
income data reflecting the pro forma effect of these acquisitions on the
Company's results of operations for the year ended December 31, 1997 and the
six months ended June 30, 1998. The unaudited data presented below consists of
the income statement data as presented in these consolidated financial
statements plus (i) the income statement data of the Founding Companies for
the periods prior to February 19, 1998 and (ii) the effects of the Pooled
Company and (iii) all Purchased Companies as if the acquisitions were
effective on the first day of the year being reported. The revenue and net
income data are in thousands.

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------------
<S> <C> <C>
Revenues....................................... $223,110 $132,555
Net income..................................... $ 13,279 $ 5,542
Earnings per share basic and diluted........... $ 0.73 $ 0.29
</TABLE>

F-20
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Pro forma adjustments included in the amounts above primarily relate to: (a)
reductions in former owners, and certain key employees, salaries and benefits;
(b) adjustment to depreciation and amortization expense due to the purchase
price allocations; (c) elimination of historical interest expense related to
certain obligations which were repaid or not assumed by the Company, and to
record interest expense on cash expended in the acquisitions of the Purchased
Companies; (d) elimination of non-recurring acquisition costs associated with
the Pooled Company; and (e) adjustment to the federal and state income tax
provisions based on the combined operations. The pro forma financial data does
not purport to represent what the Company's combined financial position or
results of operations would actually have been if such transactions had in
fact occurred on those dates and are not necessarily representative of the
Company's financial position or results of operations for any future period.

5. PROPERTY AND EQUIPMENT:

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES ------------------
IN YEARS 1996 1997
------------ -------- --------
<S> <C> <C> <C>
Land....................................... -- $ 1,652 $ 1,861
Buildings and leasehold improvements....... 5-31 1,780 1,927
Operating equipment and vehicles........... 5-10 27,618 32,768
Office equipment, furniture and fixtures... 5 828 955
-------- --------
31,878 37,511
Less--Accumulated depreciation and
amortization.............................. (17,126) (19,225)
-------- --------
Property and equipment, net.............. $ 14,752 $ 18,286
======== ========
</TABLE>

6. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

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

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1997
------ ------
<S> <C> <C>
Accounts payable, trade....................................... $2,478 $3,196
Accrued compensation and other expenses....................... 2,394 3,382
------ ------
$4,872 $6,578
====== ======
</TABLE>

Contracts in progress are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Costs incurred on contracts in progress................. $ 12,395 $ 11,578
Estimated earnings, net of losses....................... 3,067 3,017
-------- --------
15,462 14,595
Less--Billings to date.................................. (15,879) (13,587)
-------- --------
$ (417) $ 1,008
======== ========
Costs and profits recognized in excess of billings...... $ 799 $ 1,746
Less--Billings in excess of costs and profits
recognized............................................. (1,216) (738)
-------- --------
$ (417) $ 1,008
======== ========
</TABLE>

F-21
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. DEBT:

The Company's long-term debt obligations consisted of the following (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revolving credit facility..................... $ -- $ -- $28,400
Bank lines of credit, with total borrowing
capacity of $2,000,000, interest at bank's
prime rate plus 1%, secured by accounts
receivable and guaranteed by NorAm's
stockholders................................. 605 968 1,447
Bank lines of credit, with total borrowing
capacity of $8,000,000, interest at bank's
prime rate, secured by equipment, receivables
and other assets............................. 2,378 2,510 --
Notes payable to bank, interest ranging from
9.08% to 10%, payments due monthly from
$9,313 to $36,613 including interest, secured
by equipment................................. 1,729 1,578 1,466
Note payable to bank, prime interest rate, due
$250,000 annually including interest, secured
by stock..................................... 2,105 1,831 1,831
Notes payable to various banks, interest
ranging from 7.0% to 15.35%, secured by
certain equipment, receivables and other
assets....................................... 1,434 1,658 1,949
Notes payable to various banks, interest
ranging from 6.50% to 9.75%, secured by
certain equipment, receivables and other
assets....................................... 4,555 5,642 --
Capital lease obligations..................... 99 555 1,965
------- ------- -------
12,905 14,742 37,058
Less--Current maturities...................... (6,427) (7,200) (3,946)
------- ------- -------
Total long-term debt........................ $ 6,478 $ 7,542 $33,112
======= ======= =======
</TABLE>

Credit Facility

In April 1998, the Company obtained a $50.0 million revolving credit
facility (the "Credit Facility") from two commercial banks. In August 1998,
the Company amended its Credit Facility to increase the facility to $125.0
million. The Credit Facility is secured by a pledge of all of the capital
stock of the Company's material operating subsidiaries and by certain assets
of the Company and is to provide funds to be used for working capital, to
finance acquisitions and for other general corporate purposes. Amounts
borrowed under the Credit Facility bear interest at a rate equal to either (a)
the London Interbank Offered Rate ("LIBOR") plus 0.75% to 1.75%, as determined
by the ratio of the Company's total funded debt to EBITDA (as defined in the
Credit Facility) or (b) the bank's prime rate plus up to 0.25%, as determined
by the ratio of the Company's total funded debt to EBITDA. Commitment fees of
0.175% to 0.30% (based on certain financial ratios) are due on any unused
borrowing capacity under the Credit Facility. The Company's existing and
future subsidiaries will guarantee the repayment of all amounts due under the
facility and the facility restricts pledges on all material assets. The Credit
Facility contains usual and customary covenants for a credit facility of this
nature including the prohibition of the payment of dividends, certain
financial ratio covenants and the consent of the lenders for acquisitions
exceeding a certain level of cash consideration. As of October 16, 1998, $69.3
million was borrowed under the credit facility.

F-22
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The maturities of long-term debt (excluding capital leases) as of December
31, 1997, are as follows (in thousands):

<TABLE>
<S> <C>
Year ending December 31--
1998............................................................ $ 7,001
1999............................................................ 4,002
2000............................................................ 1,983
2001............................................................ 1,171
2002............................................................ 30
-------
$14,187
=======
</TABLE>

The Company leases certain buildings and equipment under non-cancellable
lease agreements. The following schedule shows the future minimum lease
payments under these leases as of December 31, 1997 (in thousands):

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Year ending December 31--
1998..................................................... $ 233 $ 553
1999..................................................... 233 258
2000..................................................... 134 134
2001..................................................... 12 117
2002..................................................... -- 89
----- ------
Total minimum lease payments........................... 612 $1,151
======
Less--Amounts representing interest........................ (57)
-----
Present value of minimum lease payments................. 555
Less--Current portion...................................... (199)
-----
Long-term obligation.................................... $ 356
=====
</TABLE>

Rent expense related to operating leases was approximately $21,000, $205,000
and $462,000 for the years ended December 31, 1995, 1996 and 1997,
respectively. Assets under capital leases are included as part of property and
equipment.

8. INCOME TAXES:

Federal and state income taxes are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996 1997
--------------- --------
<S> <C> <C> <C>
Federal--
Current.......................................... $ 154 $ 840 $ 1,475
Deferred......................................... 138 299 10
State--
Current.......................................... 33 185 306
Deferred......................................... 28 65 (5)
------ -------- --------
$ 353 $ 1,389 $ 1,786
====== ======== ========
</TABLE>

F-23
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

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 to income (loss) before
provision for income taxes as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1996 1997
--------------- --------
<S> <C> <C> <C>
Provision at the statutory rate.................... $ 304 $ 1,093 $ 1,504
Increase resulting from--
State income tax, net of related tax effect...... 40 166 187
Nondeductible expenses........................... 9 -- 29
Permanent differences............................ -- 57 42
FAS 109 adoption................................. -- 93 --
Other............................................ -- (20) 24
------ -------- --------
$ 353 $ 1,389 $ 1,786
====== ======== ========
</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 (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
Deferred income tax liabilities--
Property and equipment.................................. $(2,281) $(2,500)
State taxes............................................. 9 10
Other................................................... (156) (172)
------- -------
Total deferred income tax liabilities................. (2,428) (2,662)
------- -------
Deferred income tax assets--
Bad debt reserves....................................... 42 42
Accounts receivable..................................... 28 35
Goodwill................................................ 27 41
Inventory............................................... -- 29
State taxes............................................. (18) (29)
Other accruals not currently deductible................. 283 473
------- -------
Total deferred income tax assets...................... 362 591
------- -------
Total net deferred income tax liabilities............. $(2,066) $(2,071)
======= =======
</TABLE>

F-24
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The net deferred tax assets and liabilities are comprised of the following
(in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
Deferred tax assets--
Current................................................. $ 362 $ 591
Long-term............................................... -- --
------- -------
Total................................................. 362 591
------- -------
Deferred tax liabilities--
Current................................................. (147) (183)
Long-term............................................... (2,281) (2,479)
------- -------
Total................................................. (2,428) (2,662)
------- -------
Net deferred income tax liabilities................... $(2,066) $(2,071)
======= =======
</TABLE>

9. STOCKHOLDERS' EQUITY:

Limited Vote Common Stock

The shares of Limited Vote Common Stock have rights similar to shares of
Common Stock, except that such shares are entitled to elect one member of the
board of directors and are entitled to one-tenth of one vote for each share
held on all other matters. Each share of Limited Vote Common Stock will
convert into Common Stock upon disposition by the holder of such shares in
accordance with the transfer restrictions applicable to such shares.

Stock Plan

F-25
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

immediately exercisable in the event of a "change in control" (as defined in
the 1997 Stock Option Plan) of the Company. No ISO will remain exercisable
later than ten years after the date of grant (or five years in the case of
ISOs granted to employees owning more than 10% of the voting capital stock).

As of October 16, 1998, the Company has outstanding options to purchase
approximately 1,555,150 shares of Common Stock issued pursuant to the 1997
Stock Option Plan.

Initial Public Offering

In February, 1998, Quanta completed its initial public offering, which
involved the issuance of 5.0 million shares of its Common Stock at a price of
$9.00 per share, resulting in net proceeds to the Company of $38.8 million
after deducting underwriting discounts and commissions and expenses related to
the IPO. In March 1998, the Company sold 750,000 shares of Common Stock
pursuant to the over-allotment granted to the underwriters. The Company
realized net proceeds from the sale of $6.3 million.

Employee Stock Ownership Plan.

The Company issued shares of Common Stock to an Employee Stock Ownership
Plan (the "ESOP") in connection with the acquisition of the Pooled Company.
The ESOP was terminated on July 31, 1998, and pending a favorable
determination letter from the Internal Revenue Service, a portion of the
shares of the Company's Common Stock held by the ESOP will be sold to repay
debt owed by the ESOP to the Company and the remaining portion of the
unallocated shares will be distributed to its participants. The cost of the
unallocated ESOP shares is reflected as a reduction in the Company's
stockholders' equity. Upon distribution from the ESOP, the Company will owe an
excise tax equal to 10% of the value of the Company's Common Stock
distributed. In addition, the Company will eliminate the remaining balance
reflected as Unearned ESOP Shares on the Company's balance sheet and will have
to recognize a non-cash non-recurring compensation charge equal to the value
of the unallocated shares held by the ESOP at the time it allocates and
distributes such shares. Although the Company currently cannot determine the
amount of the excise tax that will be owed or the non-cash non-recurring
compensation charge that will be recognized, the amount of such obligations
would not be material to the Company's financial condition based on the market
price for the Company's Common Stock on October 16, 1998.

10. EMPLOYEE BENEFIT PLAN:

In connection with its collective bargaining agreements with various
electrical unions, the Company participates with other companies in the
unions' multi-employer pension plans. These plans cover all of the Company's
employees who are members of such unions. The Employee Retirement Income
Security Act of 1974, as amended by the Multi-Employer Pension Plan Amendments
Act of 1980, imposes certain liabilities upon employers who are contributors
to a multi-employer plan in the event of the employer's withdrawal from, or
upon termination of such plan. The Company has no plans to withdraw from these
plans. The plans do not

F-26
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

maintain information on net assets and actuarial present value of the
accumulated share of the plans' unfunded vested benefits allocable to the
Company, and amounts, if any, for which the Company may be contingently liable
is not ascertainable at this time.

Certain subsidiaries of the Company provide various defined contribution
plans to their employees. The plans cover substantially all full time
employees of the Company. Contributions to the plans by the Company vary from
plan to plan. Contributions to the plan were approximately $230,000, $214,000
and $217,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.

In addition to certain defined contribution plans noted above, the financial
statements include discretionary bonuses to employees of $564,000, $1,087,000
and $2,300,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.

11. FINANCIAL INSTRUMENTS:

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

12. COMMITMENTS AND CONTINGENCIES:

Litigation

Subsidiaries of the Company are involved in disputes or 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, business property liability, workers' compensation, general
liability and an umbrella policy. Effective January 1, 1996, the Company began
self-insuring for certain workers' compensation risks up to $1,000,000 per
occurrence. In October 1997, the Company reduced the deductible to $500,000
per occurrence. The Company has accrued for the estimated probable claims
costs in satisfying the deductible provisions of the insurance policies for
claims occurring through December 31, 1997. The accrual is based on known
facts and historical trends, and management believes such accrual to be
adequate.

In August 1998, the Company consolidated the casualty insurance program for
all subsidiaries of Quanta. This program has no self-insurance provisions.
Self-insured claims under previous policies are monitored to ensure that such
remaining accruals are adequate.

Product Rights

In May 1997, the Company entered into an agreement with a third party which
gives the Company exclusive rights for 30 months to the use of a patented
product used in the construction, maintenance, repair and improvement of
energized transmission and distribution lines in all states west of the
Mississippi River.

The product is a telescoping robotic arm for temporarily supporting
energized power lines to enable repair or replacement of transmission poles,
cross-arms, insulators and the like while maintaining an energized connection.
In exchange for the exclusive rights, the Company agreed to pay the third
party a fixed fee and a percentage of gross profits generated from the use of
the product. As of December 31, 1997, the Company had made payments totaling
$225,000 related to fees for the use of such product.

F-27
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Performance Bonds

In certain circumstances, the Company is required to provide performance
bonds in connection with its contract commitments.

13. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company grants credit, generally without collateral, to its customers,
which include utility companies, municipalities and commercial companies
located primarily in the United States. Consequently, the Company is subject
to potential credit risk related to changes in business and economic factors
throughout the United States. However, the Company generally is entitled to
payment for work performed and has certain lien rights in that work. Further,
management believes that its contract acceptance, billing and collection
policies are adequate to minimize the potential credit risk.

14. SUBSEQUENT EVENTS:

Business Combinations

Subsequent to June 30, 1998, the Company has acquired eight additional
companies for an aggregate consideration of $61.5 million in cash and notes
and 2.7 million shares of Common Stock. The cash portion of such consideration
was provided by borrowings under the Company's credit facility.

Strategic Investment

In October 1998, the Company entered a strategic investment agreement with
Enron Capital & Trade Resources Corp. ("ECT"), a subsidiary of Enron Corp.,
pursuant to which ECT or its affiliated companies made an investment of $49.4
million in Quanta. The investment is in the form of Convertible Subordinated
Notes bearing interest at 6 7/8 percent and convertible into Quanta Common
Stock at a price of $13.75 per share. Additionally, Quanta and ECT entered
into a strategic alliance pursuant to which ECT and Quanta will exchange
information regarding the design, construction and maintenance of electric
power transmission and distribution systems and fiber optic communications
systems. Further, the Company paid a commitment fee of approximately $2.0
million to ECT at the closing date. This will be included in other assets on
the Company's balance sheet and amortized over the original life of the notes.
The Convertible Subordinated Notes require quarterly interest payments and
must make equal semi-annual principal payments beginning in 2006 until the
notes are paid in full in 2010. The Company has the option to redeem the notes
at a premium beginning in 2002.

F-28
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Quanta Services, Inc.:

We have audited the accompanying balance sheet of Quanta Services, Inc. (a
Delaware corporation), as of December 31, 1997, and the related statement of
operations, and stockholders' equity for the period from inception (August 19,
1997) through December 31, 1997. 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 Quanta Services, Inc., as of
December 31, 1997, and the results of its operations for the period from
inception (August 19, 1997) through December 31, 1997, in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 18, 1998

F-29
<PAGE>

QUANTA SERVICES, INC.

BALANCE SHEET--DECEMBER 31, 1997

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
ASSETS
<S> <C>
CASH AND CASH EQUIVALENTS............................................ $ --
DEFERRED OFFERING COSTS.............................................. 1,306
--------
Total assets..................................................... $ 1,306
========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
ACCRUED LIABILITIES AND AMOUNTS DUE TO STOCKHOLDER................... $ 1,306
STOCKHOLDERS' EQUITY:
Preferred stock, $.00001 par value, 10,000,000 authorized, none
issued and outstanding............................................ --
Common stock, $.00001 par value, 40,000,000 shares authorized, none
issued and outstanding............................................ --
Limited Vote Common Stock, $.00001 par value, 3,345,333 shares
authorized, issued and outstanding................................ --
Additional paid-in capital......................................... 13,003
Retained deficit................................................... (13,003)
--------
Total stockholders' equity....................................... --
--------
Total liabilities and stockholders' equity....................... $ 1,306
========
</TABLE>

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

F-30
<PAGE>

QUANTA SERVICES, INC.

STATEMENT OF OPERATIONS

FOR THE PERIOD FROM INCEPTION (AUGUST 19, 1997)

THROUGH DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)

<TABLE>
<S> <C>
REVENUES............................................................. $ --
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES......................... 13,003
--------
LOSS BEFORE INCOME TAXES............................................. (13,003)
PROVISION FOR INCOME TAXES........................................... --
--------
NET LOSS............................................................. $(13,003)
========
BASIC AND DILUTED EARNINGS PER SHARE................................. $ (18.92)
========
WEIGHTED AVERAGE SHARES USED IN THE COMPUTATION OF BASIC AND DILUTED
EARNINGS PER SHARE.................................................. 687,336
========
</TABLE>

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

F-31
<PAGE>

QUANTA SERVICES, INC.

STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE PERIOD FROM INCEPTION (AUGUST 19, 1997)

THROUGH DECEMBER 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,
August 19, 1997........... 1,693,779 $ -- $ -- $ -- $ --
ISSUANCE OF SHARES TO AN
INITIAL STOCKHOLDER AND
MANAGEMENT................ 1,651,554 -- 13,003 -- 13,003
NET LOSS................... -- -- -- (13,003) (13,003)
--------- ----- ------- -------- --------
BALANCE, December 31, 1997. 3,345,333 $ -- $13,003 $(13,003) $ --
========= ===== ======= ======== ========
</TABLE>

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

F-32
<PAGE>

QUANTA SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Quanta Services, Inc., a Delaware corporation ("Quanta" or the "Company"),
was founded in August 1997 to create a leading provider of specialty
electrical contracting and maintenance services primarily related to electric
and telecommunications infrastructure in North America. In February 1998,
Quanta completed its initial public offering (the "IPO") which involved the
issuance of 5,000,000 shares of common stock, providing approximately $38.9
million in net proceeds to the Company, after deducting underwriter discounts
and commissions and expenses related to the IPO. Concurrent with the closing
of its initial public offering, Quanta acquired, in separate transactions (the
"Acquisitions"), for consideration including $21.0 million of cash and
7,527,000 shares of Common Stock, the following four entities (the "Founding
Companies"): PAR Electrical Contractors, Inc., Potelco, Inc., TRANS TECH
Electric, Inc. and Union Power Construction Company. Also, in March 1998, the
Company's underwriters exercised their over-allotment option to acquire an
additional 750,000 shares of the Company's Common Stock at the initial public
offering price of $9 per share, providing the Company with approximately $6.3
million (net of underwriting discounts and commissions) of additional proceeds
from the IPO. Quanta intends to continue to acquire through merger or purchase
similar companies to expand its national and regional operations.

Quanta has not conducted any operations, and all activities through December
31, 1997 were related to the IPO and the Acquisitions. All expenditures of the
Company through December 31, 1997 were funded by the primary stockholders, on
behalf of the Company. The primary stockholders have also committed to fund
future organization expenses and offering costs. As of March 18, 1998, costs
of approximately $2.9 million have been incurred in connection with the IPO,
and such costs will be treated as a reduction of the proceeds from the IPO.
Quanta has treated costs incurred through December 31, 1997, as deferred
offering costs in the accompanying balance sheet.

2. STOCKHOLDERS' EQUITY:

Common Stock and Preferred Stock

In connection with the organization and initial capitalization of Quanta,
the Company issued 1,693,779 shares (as restated for the 1,613.6016 for-one
stock split discussed below) of Common Stock at $.00001 par value ("Common
Stock") for $10.48. In November, 1997 Quanta issued approximately 1.5 million
shares and 0.2 million shares, respectively (as restated for the 1,613.6016
for-one stock split discussed below) of Common Stock at $.00001 par value to
an initial stockholder and management of Quanta. As a result of the issuance
of shares to Main Street Merchant Partners II, L.P. ("Main Street") and
management for nominal consideration, the Company recorded in November 1997,
for financial statement presentation purposes, a non-recurring, non-cash
charge of $13.0 million, which has been based on a fair value of such shares
which has been determined to be $7.65 per share (a discount of 15% from the
initial public offering price). The shares issued to Main Street and members
of management were issued to engage such parties in providing services related
primarily to the Company's public offering activities, including financial
advisory and other consulting services. The fair value of such shares was
based on specific factors related to the Company and the transactions
including restrictions on transferability and sale of the shares issued and
the limited vote provisions of such shares.

F-33
<PAGE>

QUANTA SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Quanta effected a 1,613.6016 for-one stock split in December 1997 for each
share of Common Stock of the Company then outstanding. In addition, the
Company increased the number of authorized shares of Common Stock to 40.0
million and increased the number of authorized shares of $.00001 par value
preferred stock to 10.0 million.

In December 1997, the 3.3 million shares of Common Stock held by certain
primary stockholders of Quanta were converted into 3.3 million shares of
Limited Vote Common Stock. The shares of Limited Vote Common Stock have rights
similar to shares of Common Stock, except that such shares are entitled to
elect one member of the board of directors and are entitled to one-tenth of
one vote for each share held on all other matters. Each share of Limited Vote
Common Stock will convert into Common Stock upon disposition by the holder of
such shares in accordance with the transfer restrictions applicable to such
shares.

Shares used in the Calculation of Basic and Diluted Earnings Per Share

Shares used in the calculation of basic and diluted earnings per share
include the weighted average portion of the 3,345,333 shares issued from the
period from inception through December 31, 1997.

Stock Plan

In December 1997, the Company's board of directors and stockholders approved
the Company's 1997 Stock Option Plan (the "Plan"), which provides for the
granting or awarding of incentive or nonqualified stock options to directors,
officers, key employees and consultants of the Company. The aggregate amount
of Common Stock of the Company with respect to which options may be granted
may not exceed the greater of 2.38 million shares or 15 percent of the
aggregate number of shares of Common Stock outstanding. The Plan will be
administered by the compensation committee (the "Committee") of the Company's
board of directors. The Company has filed a registration statement on Form S-8
under the Securities Act of 1933 registering the issuance of shares upon
exercise of options granted under this Plan. In February 1998, concurrent with
the IPO, the Company granted approximately 627,500 options to management and
various key employees of the Founding Companies. Options will be exercisable
during the period specified in each option agreement and will generally become
exercisable in installments over four years beginning on the first year
anniversary of the grant date. No options will remain exercisable later than
ten years after the date of grant. The exercise price of options may be no
less than the fair market value of the Common Stock on the date of grant (or
110 percent in the case of options granted to employees owning more than 10
percent of the voting capital stock).

The Plan also provides for automatic option grants to directors who are not
otherwise employed by the Company or its subsidiaries. Upon commencement of
service, a nonemployee director will receive a nonqualified option to purchase
10,000 shares of Common Stock and continuing or re-elected nonemployee
directors annually will receive options to purchase 5,000 shares of Common
Stock. Options granted to nonemployee directors are fully exercisable
following the expiration of six months from the date of grant.

S-4 Registration Statement

In February 1998, the Company filed a Form S-4 Registration Statement in
order to register an additional 5.0 million shares of Common Stock which the
Company may issue from time to time in connection with future acquisitions of
other businesses, properties or securities in business combination
transactions. The Company expects that the terms upon which it may issue the
shares will be determined through negotiations with the shareholders or
principal owners of the businesses whose securities or assets are to be
acquired.

F-34
<PAGE>

QUANTA SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. 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
method of accounting for employee stock options or similar equity instruments
and the current method of accounting prescribed by Accounting Principles Board
(APB) Opinion No. 25, under which compensation expense is recorded to the
extent that the fair market value of the related stock is in excess of the
options' exercise price at date of grant. 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 prescribed in
SFAS No. 123 had been applied. The Company will measure compensation expense
attributable to stock options based on the method prescribed in APB Opinion
No. 25 and will provide the required pro forma disclosure of net income and
earnings per share, as applicable, in the notes to future consolidated annual
financial statements.

4. NEW ACCOUNTING PRONOUNCEMENTS:

SFAS No. 128 requires the presentation of basic earnings per share and
diluted earnings per share in financial statements of public enterprises
rather than primary and fully diluted earnings per share as previously
required. Under the provisions of this statement, basic earnings per share are
computed based on weighted average shares outstanding and excludes dilutive
securities such as options and warrants. Diluted earnings per share are
computed including the impact of all potentially dilutive securities.
Supplementally, basic and diluted earnings per share are presented in Note 5
below for 1997 on a pro forma basis.

5. BUSINESS COMBINATIONS:

As discussed in Note 1, Quanta acquired the Founding Companies in February
1998. Pursuant to the Securities and Exchange Commission's Staff Accounting
Bulletin No. 97 (SAB 97), the financial statements of Quanta for periods prior
to February 18, 1998 (the effective closing date of the Acquisitions), are the
financial statements of PAR Electrical Contractors, Inc. (PAR) (the
"Accounting Acquiror"). The operations of the other Founding Companies and
Quanta, acquired by the Accounting Acquiror, will be included in the Company's
historical financial statements beginning February 19, 1998.

The following summary unaudited pro forma combined balance sheet information
presented below, gives effect to the Acquisitions, the IPO and related
transactions, including the repayment of historical debt of the Founding
Companies, as if they had occurred on December 31, 1997 (in thousands).

<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
COMBINED
DECEMBER 31,
1997
------------
<S> <C>
Current Assets............................................... $ 47,021
Property and Equipment, Net.................................. 26,965
Goodwill..................................................... 65,747
Other Assets................................................. 244
--------
Total Assets............................................... $139,977
========
Current Liabilities.......................................... $ 19,846
Long-term debt, net of current maturities.................... 6,723
Deferred income taxes........................................ 4,301
Stockholders' Equity......................................... 109,107
--------
Total Liabilities and Stockholders' Equity................. $139,977
========
</TABLE>

F-35
<PAGE>

QUANTA SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The unaudited pro forma combined statement of operations for the year ended
December 31, 1997 presented below assumes that the Acquisitions, the IPO and
related transactions were closed on January 1, 1997 and present certain data
for the Company as adjusted for: i) the acquisition of the Founding Companies,
ii) the IPO completed on February 18, 1998 (including the exercise of the
underwriter's over-allotment option), iii) certain reductions in salaries,
bonuses and benefits to former owners of the Founding Companies, iv)
amortization of goodwill resulting from the acquisitions, v) reduction in
interest expense, net of interest expense on borrowings to fund S corporation
distributions by certain of the Founding Companies and vi) adjustments to the
federal and state income tax provision based on pro forma operating results.

The pro forma adjustments are based on estimates, available information and
certain assumptions which may be revised as additional information becomes
available. The pro forma financial data do not purport to represent what the
Company's combined financial position or results of operations would actually
have been if such transactions had in fact occurred on those dates and are not
necessarily representative of the Company's financial position or results of
operations for any future period. Since Quanta and the Founding Companies were
not under common control or management, historical combined results may not be
comparable to, or indicative of, future performance.

<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
COMBINED
-----------------
YEAR ENDED
DECEMBER 31, 1997
-----------------
(IN THOUSANDS)
<S> <C>
Revenues.................................................... $152,303
Cost of services (including depreciation)................... 123,270
--------
Gross profit................................................ 29,033
Selling, general and administrative expenses................ 10,166
Goodwill amortization....................................... 1,640
--------
Income from operations...................................... 17,227
--------
Other income (expense):
Interest expense.......................................... (767)
Other, net................................................ 311
--------
Other income (expense), net............................... (456)
--------
Income before income tax expense............................ 16,771
Provision for income taxes.................................. 7,181
--------
Net income.................................................. $ 9,590
========
Basic earnings per share.................................... $ 0.60
========
Diluted earnings per share.................................. $ 0.60
========
Shares used in the pro forma computation of earnings per
share--
Basic..................................................... 16,043
========
Diluted................................................... 16,043
========
</TABLE>

F-36
<PAGE>

QUANTA SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Shares Used in Calculation of Pro Forma Combined Earnings Per Share

Shares used in the calculation of the unaudited pro forma combined basic and
diluted earnings per share include (i) 7,527,000 shares of Common Stock issued
to the owners of the Founding Companies, (ii) 3,345,333 shares of Limited Vote
Common Stock issued to the initial stockholders and certain management
personnel of the Company, (iii) 5,000,000 shares of Common Stock sold in the
IPO to pay the cash portion of the Acquisition consideration, to repay
expenses incurred in connection with the Offering and to retire debt, and (iv)
170,778 of the 750,000 shares of Common Stock issued as part of the exercise
of the underwriter's over-allotment option, as discussed in Note 1. The
579,222 shares excluded reflect net cash to Quanta.

The Company has entered into employment agreements with certain key
executives of the Founding Companies and the executive officers of Quanta.
These employment agreements generally prohibit such individuals from
disclosing confidential information and trade secrets, and restrict such
individuals from competing with the Company for a period of five years from
the date of the employment agreement. The initial term of these employment
agreements is three years with provisions for annual extensions at the end of
the initial term.

F-37
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Union Power Construction Company:

We have audited the accompanying balance sheets of Union Power Construction
Company, a Colorado corporation, as of August 31, 1996 and 1997, and the
related statements of operations, cash flows and stockholders' equity for the
three years ended August 31, 1997. 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 Union Power Construction
Company as of August 31, 1996 and 1997, and the results of its operations and
its cash flows for the three years ended August 31, 1997, in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
December 5, 1997

F-38
<PAGE>

UNION POWER CONSTRUCTION COMPANY

BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
AUGUST 31,
------------------- NOVEMBER 30,
1996 1997 1997
ASSETS ------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................... $ 612 $ 404 $ 951
Marketable securities....................... 101 110 123
Accounts receivable--
Trade, net of allowance for doubtful
accounts of $84,000...................... 3,902 8,822 12,259
Retainage................................. 204 498 601
Related-party receivables................... 65 32 --
Costs and estimated earnings in excess of
billings on uncompleted contracts.......... -- 77 113
Deferred income taxes....................... 30 115 --
Prepaid expenses and other current assets... 44 95 46
------ ------- -------
Total current assets.......................... 4,958 10,153 14,093
PROPERTY AND EQUIPMENT, net................... 4,810 5,868 6,836
------ ------- -------
Total assets.................................. $9,768 $16,021 $20,929
====== ======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt........ $ 249 $ 663 $ 1,916
Current maturities of related-party debt.... 238 128 200
Accounts payable and accrued expenses....... 2,878 6,209 8,239
Related-party payable....................... 22 -- --
Billings in excess of costs and estimated
earnings on uncompleted contracts.......... -- 322 700
------ ------- -------
Total current liabilities..................... 3,387 7,322 11,055
LONG-TERM DEBT, net of current maturities..... 1,065 748 1,234
RELATED-PARTY DEBT, net of current maturities. 38 328 237
DEFERRED INCOME TAXES......................... 843 1,257 1,311
OTHER LONG-TERM LIABILITIES................... 20 22 --
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value, 25,000 shares
authorized, 25,000 shares issued and
outstanding................................ 25 25 25
Unrealized loss on securities............... (62) (56) (44)
Retained earnings........................... 4,452 6,375 7,111
------ ------- -------
Total stockholders' equity.................... 4,415 6,344 7,092
------ ------- -------
Total liabilities and stockholders' equity.... $9,768 $16,021 $20,929
====== ======= =======
</TABLE>

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

F-39
<PAGE>

UNION POWER CONSTRUCTION COMPANY

STATEMENTS OF OPERATIONS

(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED AUGUST 31, NOVEMBER 30,
------------------------- ---------------
1995 1996 1997 1996 1997
------- ------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES........................... $12,614 $25,636 $42,792 $7,211 $15,357
COST OF SERVICES (including
depreciation)..................... 10,240 22,319 37,766 6,037 13,474
------- ------- ------- ------ -------
Gross profit..................... 2,374 3,317 5,026 1,174 1,883
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.......................... 1,896 1,563 1,966 491 677
------- ------- ------- ------ -------
Income from operations........... 478 1,754 3,060 683 1,206
------- ------- ------- ------ -------
OTHER INCOME (EXPENSE):
Interest expense................. (7) (84) (110) (36) (39)
Related-party interest expense... (10) (6) (22) (2) (7)
Other, net....................... 142 166 229 7 45
------- ------- ------- ------ -------
Other income, net.............. 125 76 97 (31) (1)
------- ------- ------- ------ -------
INCOME BEFORE PROVISION FOR INCOME
TAXES............................. 603 1,830 3,157 652 1,205
PROVISION FOR INCOME TAXES......... 239 718 1,234 254 469
------- ------- ------- ------ -------
NET INCOME......................... $ 364 $ 1,112 $ 1,923 $ 398 $ 736
======= ======= ======= ====== =======
</TABLE>

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

F-40
<PAGE>

UNION POWER CONSTRUCTION COMPANY

STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
YEAR ENDED AUGUST NOVEMBER
31, 30,
--------------------- ------------
1995 1996 1997 1996 1997
----- ------ ------ ---- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................... $ 364 $1,112 $1,923 $398 $ 736
Adjustments to reconcile net income to
net cash provided by operating
activities--
Depreciation and amortization........... 217 486 577 156 362
Deferred taxes.......................... 137 296 329 132 172
Changes in operating assets and
liabilities--
(Increase) decrease in--
Accounts receivable.................... 249 (2,523) (5,180) (381) (3,540)
Costs and estimated earnings in excess
of billings on uncompleted contracts.. (226) 237 (77) -- (36)
Prepaid expenses and other current
assets................................ 12 15 (51) 22 47
Increase (decrease) in--
Accounts payable and accrued expenses.. 280 1,578 3,331 222 2,030
Billings in excess of costs and
estimated earnings on uncompleted
contracts............................. (28) -- 322 65 378
Other, net............................. 80 84 (132) 7 8
----- ------ ------ ---- ------
Net cash provided by operating
activities........................... 1,085 1,285 1,042 621 157
----- ------ ------ ---- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment............................... 41 27 105 -- --
Additions of property and equipment...... (605) (2,771) (1,634) (283) (1,330)
----- ------ ------ ---- ------
Net cash used in investing activities.... (564) (2,744) (1,529) (283) (1,330)
----- ------ ------ ---- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt............. 300 1,432 786 -- 2,450
Payments of long-term debt............... (272) (239) (507) (101) (730)
----- ------ ------ ---- ------
Net cash provided by financing
activities.............................. 28 1,193 279 (101) 1,720
----- ------ ------ ---- ------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.............................. 549 (266) (208) 237 547
CASH AND CASH EQUIVALENTS, beginning of
year..................................... 329 878 612 612 404
----- ------ ------ ---- ------
CASH AND CASH EQUIVALENTS, end of year.... $ 878 $ 612 $ 404 $849 $ 951
===== ====== ====== ==== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for--
Interest................................ $ 17 $ 90 $ 161 $ 27 $ 50
Income taxes............................ 55 340 831 290 532
</TABLE>

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

F-41
<PAGE>

UNION POWER CONSTRUCTION COMPANY

STATEMENTS OF STOCKHOLDERS' EQUITY

(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK UNREALIZED TOTAL
------------- RETAINED HOLDING STOCKHOLDERS'
SHARES AMOUNT EARNINGS GAIN (LOSS) EQUITY
------ ------ -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, August 31, 1994...... 25 $25 $2,976 $ -- $3,001
Change in market value of
securities................. -- -- -- (70) (70)
Net income.................. -- -- 364 -- 364
--- --- ------ ---- ------
BALANCE, August 31, 1995...... 25 25 3,340 (70) 3,295
Change in market value of
securities................. -- -- -- 8 8
Net income.................. -- -- 1,112 -- 1,112
--- --- ------ ---- ------
BALANCE, August 31, 1996...... 25 25 4,452 (62) 4,415
Change in market value of
securities................. -- -- -- 6 6
Net income.................. -- -- 1,923 -- 1,923
--- --- ------ ---- ------
BALANCE, August 31, 1997...... 25 25 6,375 (56) 6,344
--- --- ------ ---- ------
Change in market value of
securities (unaudited)..... -- -- -- 12 12
Net income (unaudited)...... -- -- 736 -- 736
--- --- ------ ---- ------
BALANCE, November 30, 1997
(unaudited).................. 25 $25 $7,111 $(44) $7,092
=== === ====== ==== ======
</TABLE>

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

F-42
<PAGE>

UNION POWER CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Union Power Construction Company, a Colorado corporation (the Company or
Union), provides electrical power line installation, repair and maintenance
services for utilities throughout the western United States. The Company
performs the majority of its contract work under time and equipment contracts,
fixed price contracts and unit cost contracts with contract terms generally
ranging from one month to two years. The Company performs the majority of its
work in Colorado, Nevada and California.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Interim Financial Information

The interim financial statements for the three months ended November 30,
1996 and 1997 are unaudited and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnote disclosures required by
generally accepted accounting principles for complete financial statements. In
the opinion of the Company's management, the unaudited interim financial
statements contain all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation. 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.

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. Depreciation
expense was $217,000, $486,000 and $577,000 for the years ended August 31,
1995, 1996 and 1997, respectively.

Revenue Recognition

The Company recognizes revenue when services are performed except when work
is being performed under a fixed price or cost-plus-fee contract. Such
contracts generally provide that the customer accept completion of progress to
date and compensate the Company for services which have been rendered,
measured typically in terms of units installed, hours expended or some other
measure of progress. Revenues from fixed price or cost-plus-fee contracts are
recognized on the percentage-of-completion method measured by the percentage
of costs incurred to date to total estimated costs for each contract. Contract
costs include all direct material, subcontractor and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs and depreciation costs. 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-43
<PAGE>

UNION POWER CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The balances billed but not paid by customers pursuant to retainage
provisions in fixed price or cost-plus-fee 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 at each balance sheet date will be collected within the subsequent
fiscal year.

The current asset "Costs and estimated earnings in excess of billings on
uncompleted contracts" represents revenues recognized in excess of amounts
billed. The current liability "Billings in excess of costs and estimated
earnings on uncompleted contracts" represents billings in excess of revenues
recognized.

Warranty Costs

For certain contracts, the Company generally warrants labor for one to two
years after project completion. An accrual for warranty costs is recorded
based upon the historical level of warranty claims and management's estimate
of future costs.

Accounts Receivable and Provision for Doubtful Accounts

The Company provides an allowance for doubtful accounts based upon the
specific identification of accounts receivable where collection is deemed no
longer probable and an allowance based upon the level of accounts receivable
balances.

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 assets and
liabilities are recorded for future tax consequences of temporary 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.

Collective Bargaining Agreement

The Company is a party to various collective bargaining agreements with
certain of its employees. The agreements require the Company to pay specified
wages and provide certain benefits to its union employees. These agreements
will expire at various times through 2005.

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,
disclosures of contingent 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. Reference is made to the
"Revenue Recognition" section of this footnote for discussion of significant
estimates reflected in the Company's financial statements.

New Accounting Pronouncements

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 or other assets may be impaired, an evaluation of
recoverability would be performed. If an evaluation is required, the estimated
future undiscounted cash flows

F-44
<PAGE>

UNION POWER CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

associated with the asset are compared to the asset's carrying amount to
determine if an impairment of such property is necessary. Adoption of this
standard did not have a material effect on the financial position or results
of operations of the Company.

SFAS No. 130, "Reporting Comprehensive Income", requires the presentation of
comprehensive income in an entity's financial statements. Comprehensive income
represents all changes in equity of an entity during the reporting period,
including net income and charges directly to equity which are excluded from
net income. This statement will be adopted by the Company during fiscal year
1998.

3. PROPERTY AND EQUIPMENT:

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
AUGUST 31,
ESTIMATED USEFUL --------------
LIVES IN YEARS 1996 1997
---------------- ------ -------
<S> <C> <C> <C>
Land..................................... -- $ 126 $ 126
Operating equipment and vehicles......... 5-10 9,440 10,497
Leasehold improvements................... 10 88 113
Office furniture and equipment........... 5 110 145
------ -------
9,764 10,881
Less--Accumulated depreciation and
amortization............................ 4,954 5,013
------ -------
Property and equipment, net.............. $4,810 $ 5,868
====== =======
</TABLE>

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

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

<TABLE>
<CAPTION>
AUGUST 31,
-------------
1996 1997
------ ------
<S> <C> <C>
Accounts payable, trade..................................... $1,750 $3,840
Accrued compensation and benefits........................... 456 1,300
Other accrued expenses...................................... 672 1,069
------ ------
$2,878 $6,209
====== ======
</TABLE>

Contracts in progress are as follows (in thousands):

<TABLE>
<CAPTION>
AUGUST 31,
---------------
1996 1997
------- -------
<S> <C> <C>
Costs incurred on contracts in progress.................. $15,529 $45,025
Estimated earnings, net of losses........................ 603 4,183
------- -------
16,132 49,208
Less--Billings to date................................... 16,132 49,453
------- -------
$ -- $ (245)
======= =======
Costs and estimated earnings in excess of billings on
uncompleted contracts................................... $ -- $ 77
Less--Billings in excess of costs and estimated earnings
on uncompleted contracts................................ -- (322)
------- -------
$ -- $ (245)
======= =======
</TABLE>

F-45
<PAGE>

UNION POWER CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. LONG-TERM DEBT:

In August 1995, the Company entered into a $300,000 secured installment loan
with a bank. The loan is due August 1999 and bears interest at 8.27 percent
with monthly payments of $7,400. Amounts outstanding under this loan were
$221,000 and $149,000 at August 31, 1996 and 1997, respectively. In November
1995, the Company entered into a $200,000 secured installment loan with a bank
for the purchase of construction equipment. This loan is due November 1999 and
bears interest at 8.22 percent with monthly payments of $5,000. At August 31,
1996 and 1997, $163,000 and $116,000, respectively, were outstanding under
this agreement.

The Company entered into a $1 million secured installment loan with a bank
in August 1996. The loan matures in April 2000 and bears interest at a rate of
8 percent with monthly payments due of $24,000. Amounts outstanding under this
agreement were $929,000 and $682,000 at August 31, 1996 and 1997,
respectively. In April 1997, the Company entered into a $360,000 installment
loan with a bank. This loan matures February 2001 with monthly payments of
$8,800 and an interest rate of 8.25 percent. There was $314,000 outstanding
under this arrangement at August 31, 1997.

The Company has established a $2 million secured revolving line of credit
with a bank effective August 1997. Borrowings under this facility bear
interest at a rate of prime, as defined, minus 1 percent for the first $1
million in borrowings and at prime for any balance over $1 million and are due
February 1998. Outstanding indebtedness under this facility was $150,000 and
$1,500,000 at August 31, 1997 and November 30, 1997, respectively.

The Company also has loans outstanding from certain stockholders or other
related parties totaling $277,000 and $456,000 at August 31, 1996 and 1997,
respectively. These loans bear interest at rates ranging from 7 percent to 9
percent and are due at various times from November 1997 to June 2001.

The loan agreement covering the bank line of credit contains various
covenants, including a minimum tangible net worth requirement, a minimum
working capital requirement and various financial ratios.

All of the Company's debt is secured by property and equipment. Two of the
Company's stockholders have personally guaranteed substantially all debt with
banks.

The maturities of long-term debt as of August 31, 1997, are as follows (in
thousands):

<TABLE>
<S> <C>
Year ending August 31--
1998............................................................. $ 791
1999............................................................. 588
2000............................................................. 406
2001............................................................. 82
------
$1,867
======
</TABLE>

6. LEASES:

Union leases its Denver office and facility from a company which is owned by
the Company's stockholders. The lease is renewable on a monthly basis at
Union's election. Rent paid under this related-party lease was approximately
$42,000 for each of the years ended August 31, 1995, 1996 and 1997.

The Company also leases its Las Vegas, Nevada, office and yard from two of
the Company's stockholders. The lease terminates in June 2006 and rent paid
was $19,000 and $56,000 for each of the years ended August 31, 1996 and 1997,
respectively.

F-46
<PAGE>

UNION POWER CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The Company also enters into various vehicle and construction equipment
operating leases. Vehicle lease terms are typically five years or less, and
construction equipment leases typically are short-term (one year or less).
Payments made for vehicle leases were $11,000, $19,000 and $149,000 for the
years ended August 31, 1995, 1996 and 1997, respectively.

Union rents various construction equipment under a one-year operating lease
from a company owned by two of Union's stockholders. Total related-party
equipment rental expense was $96,000 for the year ended August 31, 1997.

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

<TABLE>
<S> <C>
Year ending August 31--
1998............................................................. $ 343
1999............................................................. 248
2000............................................................. 240
2001............................................................. 188
2002............................................................. 56
Thereafter....................................................... 215
------
$1,290
======
</TABLE>

7. INCOME TAXES:

Federal and state income taxes are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 31,
----------------
1995 1996 1997
---- ---- ------
<S> <C> <C> <C>
Federal--
Current................................................ $ 87 $358 $ 745
Deferred............................................... 116 251 303
State--
Current................................................ 15 64 160
Deferred............................................... 21 45 26
---- ---- ------
$239 $718 $1,234
==== ==== ======
</TABLE>

Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate rate of 35 percent to income
(loss) before provision for income taxes as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 31,
----------------
1995 1996 1997
---- ---- ------
<S> <C> <C> <C>
Provision at the statutory rate......................... $211 $641 $1,106
Increase resulting from--
Permanent differences, mainly meals and entertainment. 5 7 7
State income tax, net of benefit for federal
deduction............................................ 23 70 121
---- ---- ------
$239 $718 $1,234
==== ==== ======
</TABLE>

F-47
<PAGE>

UNION POWER CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
AUGUST 31,
---------------
1996 1997
------ -------
<S> <C> <C>
Deferred income tax liabilities--
Property and equipment $ (843) $(1,257)
Other................................................. (347) (14)
------ -------
Total deferred income tax liabilities............... (1,190) (1,271)
Deferred income tax assets--
Property and equipment................................ 5 5
Other accruals not currently deductible............... 377 129
------ -------
Total deferred income tax assets.................... 382 134
Valuation allowance..................................... (5) (5)
------ -------
Total deferred income tax liabilities............... $ (813) $(1,142)
====== =======
</TABLE>

The net deferred tax assets and liabilities are comprised of the following
(in thousands):

<TABLE>
<CAPTION>
AUGUST 31,
---------------
1996 1997
------ -------
<S> <C> <C>
Deferred tax assets--
Current............................................... $ 377 $ 129
Long-term............................................. -- --
------ -------
Total............................................... 377 129
------ -------
Deferred tax liabilities--
Current............................................... (347) (14)
Long-term............................................. (843) (1,257)
------ -------
Total............................................... (1,190) (1,271)
------ -------
Net deferred income tax liabilities................. $ (813) $(1,142)
====== =======
</TABLE>

8. RELATED-PARTY TRANSACTIONS:

Note Receivable

The Company has loaned funds to various entities owned by the Company's
stockholders. Interest income under this arrangement was $15,000, $13,000 and
$3,000 for the years ended August 31, 1995, 1996 and 1997, respectively.

Rental Income

Union has from time to time leased or rented construction equipment on a
short-term basis to various related parties. Total rental revenue under these
arrangements was $4,000 for the year ended August 31, 1996.

F-48
<PAGE>

UNION POWER CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Management Fee Income

The Company also receives management fee income from a related-party owned
by two of Union's stockholders for financial and management services rendered.
Total payments received were $7,000, $13,000 and $9,000 for the years ended
August 31, 1995, 1996 and 1997.

9. EMPLOYEE BENEFIT PLAN:

In connection with its collective bargaining agreements with various
electrical, labor and operating engineer unions, the Company participates with
other companies in the various multiemployer pension plans. These plans cover
all of the Company's employees who are members of such unions. The Employee
Retirement Income Security Act of 1974, as amended by the Multi-Employer
Pension Plan Amendments Act of 1980, imposes certain liabilities upon
employers who are contributors to a multiemployer plan in the event of the
employer's withdrawal from, or upon termination of, such plan. The Company has
no plan to withdraw from these plans. The plans do not maintain information on
net assets and actuarial present value of the accumulated share of the plans'
unfunded vested benefits allocable to the Company, and amounts, if any, for
which the Company may be contingently liable are not ascertainable at this
time. Total contributions to these plans were approximately $1.2 million, $2.3
million and $2.9 million at August 31, 1995, 1996 and 1997, respectively.

The Company has a defined contribution profit-sharing plan for employees not
covered by a union bargaining agreement. The plan provides for the Company to
make discretionary contributions of up to 15 percent of an employee's salary.
Total contributions by the Company under the plan were approximately $127,000,
$130,000 and $155,000 for the years ended August 31, 1995, 1996 and 1997,
respectively.

10. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, available for sale securities, a line of credit, accounts
payable, notes payable and debt. The Company believes that the carrying value
of these instruments on the accompanying balance sheets approximates their
fair value.

11. COMMITMENTS AND CONTINGENCIES:

Litigation

The Company is involved in disputes or 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.

Performance Bonds

In certain circumstances, the Company is required to provide performance
bonds in connection with its contract commitments which are personally
guaranteed by certain stockholders of the Company.

12. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company had sales greater than 10 percent of total sales to three major
customers (comprising approximately 27 percent, 17 percent and 16 percent of
total sales), three major customers (comprising approximately 39 percent, 27
percent and 11 percent of total sales) and two major customers (comprising
approximately 40 percent and 34 percent of total sales) during the years ended
August 31, 1995, 1996 and 1997, respectively.

F-49
<PAGE>

UNION POWER CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The Company grants credit, generally without collateral, to its customers,
which are major public utilities, located primarily in the western United
States. Consequently, the Company is subject to potential credit risk related
to changes in business and economic factors within the region it operates.
However, management believes that its contract acceptance, billing and
collection policies are adequate to minimize the potential credit risk.

13. CONTRACT CLAIM:

In 1995, the Company received a $970,000 settlement from the Western Area
Power Administrator (WAPA). During the course of the project, the job was shut
down by WAPA for a protracted length of time due to an accident by an
unrelated contractor working on the same project. As a result, the Company
incurred significant idle crew time. The Company presented WAPA with a claim
for costs incurred by the Company for WAPA's actions and received the
settlement, which is included in 1995 revenues.

14. SUBSEQUENT EVENTS:

Construction Contract

In October 1997, the Company was awarded a major contract for construction
of 164 miles of electrical transmission lines and two substation facilities.
The contract requires substantial completion by December 1, 1998, and carries
significant penalties for work not being completed by the substantial
completion date. Work began in December 1997.

Debt

In November 1997, the Company entered into a $500,000 term loan agreement
due November 2001 with a bank for the purchase of construction equipment. The
loan bears interest at a rate of 8.5 percent and monthly principal and
interest payments of $12,300. The loan is secured by the equipment purchased.

15. SUBSEQUENT EVENTS TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):

In December 1997, the Company amended its $2 million secured revolving line
of credit to increase total available borrowings under the facility to $3
million. The terms of the facility, including interest and maturity date,
remain unchanged. See discussion of the facility in Note 5.

In December 1997, the Company and its stockholders entered into a definitive
agreement with Quanta Services, Inc. ("Quanta"), providing for all outstanding
shares of the Company's common stock to be exchanged for cash and shares of
Quanta common stock concurrent with an initial public offering of additional
common stock by Quanta which closed in February 1998. In addition, the key
executives of the Company entered into employment agreements with the Company
and Quanta which have an initial term of three years and generally restricts
the disclosure of confidential information as well as competition with the
Company and Quanta for a period of five years following from the date of the
employment agreement. Reference is made to Note 1 of Quanta Services, Inc.
financial statements included elsewhere herein.

In connection with the acquisition, two of Company's stockholders purchased
certain nonoperating assets not used in the business at a price equal to the
net book value of such assets (approximately $183,000 at August 31, 1997).

F-50
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To TRANS TECH Electric, Inc.:

We have audited the accompanying balance sheets of TRANS TECH Electric, Inc.,
an Indiana Subchapter S corporation, as of December 31, 1996 and 1997, and the
related statements of operations, cash flows and shareholders' equity for each
of the three years in the period ended December 31, 1997. 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 TRANS TECH Electric, Inc., as
of December 31, 1996 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 18, 1998

F-51
<PAGE>

TRANS TECH ELECTRIC, INC.

BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997(1)
ASSETS ------------ ------------ ------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............. $ 389 $ 155 $ 155
Accounts receivable--
Trade, net of allowance of $130 and
$199, respectively................. 4,484 5,744 5,744
Retainage........................... 1,822 1,554 1,554
Inventories........................... 610 808 808
Costs and estimated earnings in excess
of billings on uncompleted contracts. 1,853 3,619 3,619
Prepaid expenses and other current
assets............................... 66 63 63
------- ------- -------
Total current assets................ 9,224 11,943 11,943
PROPERTY AND EQUIPMENT, net............. 2,642 2,905 2,905
OTHER ASSETS............................ 3 3 3
------- ------- -------
Total assets........................ $11,869 $14,851 $14,851
======= ======= =======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES:
Note payable.......................... $ 797 $ 1,976 $ 1,976
Current maturities of long-term debt.. 107 80 80
Current portion of capital lease
obligations.......................... 285 415 415
Accounts payable and accrued expenses. 4,465 4,567 4,567
Billings in excess of costs and
estimated earnings on uncompleted
contracts............................ 728 96 96
------- ------- -------
Total current liabilities........... 6,382 7,134 7,134
LONG-TERM DEBT, net of current
maturities............................. 607 5,575 7,180
LONG-TERM CAPITAL LEASE OBLIGATIONS, net
of current obligations................. 467 474 474
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par value, 1,000
shares authorized, 926 shares issued
and outstanding...................... 125 125 125
Retained earnings..................... 4,350 1,605 --
Treasury stock, 150 shares, at cost... (62) (62) (62)
------- ------- -------
Total shareholders' equity.......... 4,413 1,668 63
------- ------- -------
Total liabilities and shareholders'
equity............................. $11,869 $14,851 $14,851
======= ======= =======
</TABLE>
- --------
(1) The pro forma balance sheet column presented reflects the impact of Sub S
distributions. See Note 11 for further discussion.

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

F-52
<PAGE>

TRANS TECH ELECTRIC, INC.

STATEMENTS OF OPERATIONS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
REVENUES............................................. $21,397 $24,414 $32,817
COST OF SERVICES (including depreciation)............ 18,934 20,426 26,519
------- ------- -------
Gross profit....................................... 2,463 3,988 6,298
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES......... 1,639 1,848 2,015
------- ------- -------
Income from operations............................. 824 2,140 4,283
------- ------- -------
OTHER INCOME (EXPENSE):
Interest expense................................... (297) (313) (405)
Other, net......................................... 34 45 51
------- ------- -------
Other income (expense), net...................... (263) (268) (354)
------- ------- -------
NET INCOME........................................... $ 561 $ 1,872 $ 3,929
======= ======= =======
</TABLE>

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

F-53
<PAGE>

TRANS TECH ELECTRIC, INC.

STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1996 1997
-------- ------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $ 561 $ 1,872 $ 3,929
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization................... 442 574 674
Gain on sale of property and equipment.......... (19) (31) (19)
Bad debt expense................................ 83 34 79
Changes in operating assets and liabilities-
(Increase) decrease in--
Accounts receivable............................ 827 (2,134) (1,071)
Inventories.................................... (254) 256 (198)
Costs and estimated earnings in excess of
billings on uncompleted contracts............. (241) 377 (1,766)
Prepaid expenses and other current assets...... (33) (7) 3
Increase (decrease) in--
Accounts payable and accrued expenses.......... (878) 1,359 103
Billings in excess of costs and estimated
earnings on uncompleted contracts............. (141) 583 (632)
-------- ------- --------
Net cash provided by operating activities..... 347 2,883 1,102
-------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment.... 46 69 105
Additions of property and equipment............. (1,180) (923) (1,023)
-------- ------- --------
Net cash used in investing activities......... (1,134) (854) (918)
-------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on line of credit... 1,139 (2,283) 1,178
Proceeds from long-term debt.................... 537 1,185 5,507
Payments of long-term debt...................... (148) (477) (429)
Distributions to shareholders................... (457) (542) (6,674)
-------- ------- --------
Net cash provided by (used in) financing
activities................................... 1,071 (2,117) (418)
-------- ------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS...................................... 284 (88) (234)
CASH AND CASH EQUIVALENTS, beginning of period.... 193 477 389
-------- ------- --------
CASH AND CASH EQUIVALENTS, end of period.......... $ 477 $ 389 $ 155
======== ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.......................... $ 310 $ 297 $ 405
</TABLE>

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

F-54
<PAGE>

TRANS TECH ELECTRIC, INC.

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, December 31, 1994........ 926 $125 $ 2,916 $(62) $ 2,979
Distributions to shareholders... -- -- (457) -- (457)
Net income...................... -- -- 561 -- 561
--- ---- ------- ---- -------
BALANCE, December 31, 1995........ 926 125 3,020 (62) 3,083
Distributions to shareholders... -- -- (542) -- (542)
Net income...................... -- -- 1,872 -- 1,872
--- ---- ------- ---- -------
BALANCE, December 31, 1996........ 926 125 4,350 (62) 4,413
Distributions to shareholders... -- -- (6,674) -- (6,674)
Net income...................... -- -- 3,929 -- 3,929
--- ---- ------- ---- -------
BALANCE, December 31, 1997........ 926 $125 $ 1,605 $(62) $ 1,668
=== ==== ======= ==== =======
</TABLE>

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

F-55
<PAGE>

TRANS TECH ELECTRIC, INC.

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

TRANS TECH Electric, Inc., an Indiana Subchapter S corporation (the
Company), focuses on providing traffic signals, street and sign lighting
installation and general commercial and industrial electrical construction
primarily for commercial, state and regulatory entities. The Company performs
the majority of its contract work under fixed price contracts, unit-price and
fixed price contracts modified by penalty provisions, with contract terms
generally ranging from six to 18 months. The Company performs the majority of
its work in Indiana and Michigan.

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.

Supplemental Cash Flow Information

The Company had noncash investing and financing activities related to
capital leases and equipment acquired by seller financing of approximately
$621,000, $485,000 and $457,000 for the years ended December 31, 1995, 1996
and 1997, respectively.

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
last-in, first-out (LIFO) method. The excess of current costs over the
carrying value of LIFO inventories was $105,000 and $146,000 at December 31,
1996 and 1997, respectively.

Accounts Receivable and Provision for Doubtful Accounts

The Company provides an allowance for doubtful accounts based upon the
specific identification of accounts receivable where collection is no longer
deemed probable and an allowance based upon the level of total accounts
receivable balances.

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. Depreciation
expense was $442,000, $574,000 and $674,000 for the years ended December 31,
1995, 1996 and 1997, respectively.

Revenue Recognition

The Company recognizes revenue when services are performed except when work
is being performed under a fixed price contract. Such contracts generally
provide that the customer accept completion of progress to date and compensate
the Company for services which have been rendered, measured typically in terms
of units

F-56
<PAGE>

TRANS TECH ELECTRIC, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

installed, hours expended or some other measure of progress. Revenues from
fixed price contracts are recognized on the percentage-of-completion method
measured by the percentage of costs incurred to date to total estimated costs
for each contract. Contract costs include all direct material, labor and
subcontract costs and those indirect costs related to contract performance,
such as indirect labor, supplies, tools, repairs and depreciation costs.
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.

The balances billed but not paid by customers pursuant to retainage
provisions in fixed price 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 at each balance
sheet date will be collected within the subsequent fiscal year.

Warranty Costs

For certain contracts, the Company warrants labor for the first year after
installation of new electrical systems. An accrual for warranty costs is
recorded based upon the historical level of warranty claims and management's
estimate of future 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 shareholders report their shares 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 the IPO (see Note 11).

Collective Bargaining Agreements

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,
disclosures of contingent 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. Reference is made to the
"Revenue Recognition" section of this footnote and Note 9 for discussion of
certain estimates reflected in the Company's financial statements.

New Accounting Pronouncement

F-57
<PAGE>

TRANS TECH ELECTRIC, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

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 an impairment of such property 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 consists of the following (in thousands):

<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES --------------
IN YEARS 1996 1997
------------ ------ ------
<S> <C> <C> <C>
Operating equipment and vehicles............ 5-7 $3,957 $4,653
Leasehold improvements...................... 10-31 384 384
Office furniture and equipment.............. 5 317 285
------ ------
4,658 5,322
Less-Accumulated depreciation and
amortization............................... (2,016) (2,417)
------ ------
Property and equipment, net............... $2,642 $2,905
====== ======
</TABLE>

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

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

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1997
------ ------
<S> <C> <C>
Accounts payable, trade.................................... $3,702 $3,765
Accrued compensation and benefits.......................... 340 341
Other accrued expenses..................................... 423 461
------ ------
$4,465 $4,567
====== ======
</TABLE>

Contracts in progress are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1997
------ ------
<S> <C> <C>
Costs incurred on contracts in progress.................... $9,178 $9,696
Estimated earnings, net of losses.......................... 1,630 2,138
------ ------
10,808 11,834
Less-Billings to date...................................... 9,683 8,311
------ ------
$1,125 $3,523
====== ======
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... $1,853 $3,619
Less-Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... 728 96
------ ------
$1,125 $3,523
====== ======
</TABLE>

F-58
<PAGE>

TRANS TECH ELECTRIC, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. DEBT:

The Company has a $5 million line of credit agreement with a bank bearing
interest at the national prime rate. The line of credit is collateralized by
the Company's receivables, inventory, property and equipment. The Company's
weighted average interest rate for the facility was 8.4 percent and 8.5
percent as of December 31, 1996 and 1997, respectively. At December 31, 1996
and 1997, the outstanding balance on this facility was $797,000 and
$1,976,000, respectively, and is payable upon demand.

The Company's debt obligations consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER
31,
-----------
1996 1997
---- ------
<S> <C> <C>
Note payable to bank, due in November 2000 with interest only
payments until that date, interest due at 8.0%.................... $ -- $5,050
Note payable to bank, 8.2% and 8.6% weighted average interest rate,
respectively, due $10,000 monthly with final maturity on May 1,
2001.............................................................. 663 597
Note payable to commercial finance company, 8.1% interest rate,
$3,871 due monthly with final maturity on March 1, 1998........... 51 8
---- ------
714 5,655
Less-Current maturities............................................ 107 80
---- ------
Total long-term debt............................................... $607 $5,575
==== ======
</TABLE>

The long-term debt is secured by the Company's receivables, inventory,
property and equipment and is guaranteed by the Company's principal
shareholders. The line of credit and notes payable to the bank are subject to
certain financial reporting and financial ratio requirements. At December 31,
1997, the Company was in violation of its minimum debt to net worth ratio due
to the distribution of the Company's retained earnings (see Note 11). The
Company has received a waiver, effective through January 1, 1999, from the
bank for this violation.

The maturities of long-term debt as of December 31, 1997, are as follows (in
thousands):

<TABLE>
<S> <C>
Year ending December 31--
1998............................................................. $ 80
1999............................................................. 79
2000............................................................. 5,135
2001............................................................. 361
</TABLE>

6. LEASES:

The Company leases its office and warehouse space from an entity owned
principally by the Company's shareholders. The lease expires in June 2000 and
requires the Company to pay all taxes, insurance and maintenance on the
property. In November 1997, the Company amended the lease agreement. The
amended lease will begin on February 1, 1998 for a term of five years. The
Company has the option to renew the lease for an additional five years at a
current market value rent. The rent paid on this related-party lease was
approximately $49,000, $59,000 and $59,000 for the years ended December 31,
1995, 1996 and 1997, respectively.

F-59
<PAGE>

TRANS TECH ELECTRIC, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The Company leases various equipment under noncancelable sale-leaseback
capital leases and the leased assets are included as part of "Property and
equipment." Details of the capital leased assets are as follows (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
------ ------
<S> <C> <C>
Operating equipment and vehicles.......................... $1,022 $1,442
Less--Accumulated depreciation............................ (194) (357)
------ ------
Net capitalized leased assets............................. $ 828 $1,085
====== ======
</TABLE>

At December 31, 1997, the future minimum lease payments under operating and
capital leases are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
OPERATING CAPITAL
LEASES LEASES
--------- -------
<S> <C> <C>
1998.................................................... $ 70 $ 486
1999.................................................... 71 322
2000.................................................... 71 197
2001.................................................... 71 --
2002.................................................... 71 --
Thereafter.............................................. 6 --
---- -----
Total................................................. $360 1,005
Less-Amount representing interest....................... (116)
-----
Present value of minimum lease payments................. 889
Less-Current maturities................................. (415)
-----
Long-term obligations................................... $ 474
=====
</TABLE>

7. EMPLOYEE BENEFIT PLAN:

In connection with its collective bargaining agreements with various
electrical, labor and operating engineer unions, the Company participates with
other companies in the unions' multiemployer pension plans. These plans cover
all of the Company's employees who are members of such unions. The Employee
Retirement Income Security Act of 1974, as amended by the Multi-Employer
Pension Plan Amendments Act of 1980, imposes certain liabilities upon
employers who are contributors to a multiemployer plan in the event of the
employer's withdrawal from, or upon termination of, such plan. The Company has
no plan to withdraw from these plans. The plans do not maintain information on
net assets and actuarial present value of the accumulated share of the plan's
unfunded vested benefits allocable to the Company, and amounts, if any, for
which the Company may be contingently liable are not ascertainable at this
time. Total contributions to the plans were approximately $403,000, $474,000
and $606,000 for the years ended December 31, 1995, 1996, 1997, respectively.

The Company has a defined contribution profit-sharing plan. The plan
provides for the Company to match one-half of employee contributions to the
plan up to a maximum of $3,500 per year per employee. Total contributions by
the Company under the plan were approximately $31,000, $30,000 and $23,000 for
the years ended December 31, 1995, 1996 and 1997, respectively. The Company
may also make discretionary contributions. The Company made discretionary
contributions of $44,000, $70,000 and none for the years ended December 31,
1995, 1996 and 1997, respectively.

F-60
<PAGE>

TRANS TECH ELECTRIC, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

8. FINANCIAL INSTRUMENTS:

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

9. COMMITMENTS AND CONTINGENCIES:

Litigation

Insurance

The Company carries a broad range of insurance coverage, including workers'
compensation, business auto liability, general liability and an umbrella
policy. The Company is self-insured for medical claims up to $5,000 per year
per covered individual. The Company has recorded accruals for its estimated
portion of self-insured claims based on estimated claims incurred through
December 31, 1995, 1996 and 1997.

Performance Bonds

In certain circumstances, the Company is required to provide performance
bonds in connection with its contract commitments which are personally
guaranteed by certain shareholders of the Company.

10. MAJOR CUSTOMERS AND RISK CONCENTRATION:

During 1995 and 1996, one customer accounted for 17 percent and 21 percent
of the Company's revenue, respectively. During 1997, two customers accounted
for 23 percent and 11 percent of the Company's revenues, respectively.

The Company grants credit, generally without collateral, to its customers,
which include real estate operators, general contractors and state and
regulatory agencies, located primarily in Indiana and Michigan. Consequently,
the Company is subject to potential credit risk related to changes in business
and economic factors within Indiana and Michigan. However, management believes
that its contract acceptance, billing and collection policies are adequate to
minimize the potential credit risk.

11. SUBSEQUENT EVENTS:

In December 1997, the Company and its shareholders entered into a definitive
agreement with Quanta Services, Inc. ("Quanta"), providing for all outstanding
shares of the Company's common stock to be exchanged for cash and shares of
Quanta common stock, concurrent with an initial public offering of additional
common stock by Quanta which closed in February 1998. In addition, two
executives of the Company entered into employment agreements with the Company
and Quanta which have an initial term of three years and generally restricts
the disclosure of confidential information as well as restricts competition
with the Company and Quanta for a period of five years from the date of the
employment agreement. Reference is made to Note 1 of Quanta Services, Inc.
financial statements included elsewhere herein.

Prior to the closing of the transaction discussed above, the Company made a
distribution of approximately $1,605,000. The Company funded the distribution
through bank borrowings.

F-61
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Potelco, Inc.:

We have audited the accompanying balance sheets of Potelco, Inc., a Washington
Subchapter S corporation, as of December 31, 1996 and 1997, and the related
statements of operations, cash flows and stockholder's equity 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 Potelco, Inc., as of December
31, 1996 and 1997, and the results of its operations and its cash flows for
the years then ended, in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 18, 1998

F-62
<PAGE>

POTELCO, INC.

BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997(1)
ASSETS ------------ ------------ ------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............. $ 36 $ 107 $ 107
Accounts receivable--
Trade, net of allowance of $15 and
$103 respectively.................... 2,987 5,002 5,002
Retainage............................. 902 546 546
Costs and estimated earnings in excess
of billings on uncompleted contracts. 117 532 532
Prepaid expenses and other current
assets............................... 25 -- --
------ ------ ------
Total current assets................ 4,067 6,187 6,187
PROPERTY AND EQUIPMENT, net............. 2,679 3,778 3,778
------ ------ ------
Total assets........................ $6,746 $9,965 $9,965
====== ====== ======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES:
Note payable to bank.................. $ 550 $1,095 $3,095
Note payable to stockholder........... 109 10 10
Current maturities of long-term debt.. 445 589 589
Current portion of note payable to
related party........................ 216 1,033 1,033
Accounts payable and accrued expenses. 1,839 2,224 2,224
Billings in excess of costs and
estimated earnings on uncompleted
contracts............................ 139 72 72
------ ------ ------
Total current liabilities........... 3,298 5,023 7,023
LONG-TERM DEBT, net of current
maturities--
Note payable to related party......... 863 -- --
Other long-term debt.................. 537 928 928
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, $5 par value, 10,000
shares authorized, 22 shares issued
and 2 shares outstanding............. -- -- --
Additional paid-in capital............ 160 160 160
Retained earnings..................... 1,888 3,854 1,854
------ ------ ------
Total stockholder's equity.......... 2,048 4,014 2,014
------ ------ ------
Total liabilities and stockholder's
equity............................. $6,746 $9,965 $9,965
====== ====== ======
</TABLE>
- --------
(1) The pro forma balance sheet column presented reflects the impact of Sub S
distributions. See Note 13 for further discussion.

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

F-63
<PAGE>

POTELCO, INC.

STATEMENTS OF OPERATIONS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
REVENUES...................................................... $14,549 $19,220
COST OF SERVICES (including depreciation)..................... 12,946 15,563
------- -------
Gross profit................................................ 1,603 3,657
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.................. 971 1,478
------- -------
Income from operations...................................... 632 2,179
------- -------
OTHER INCOME (EXPENSE):
Interest expense............................................ (321) (202)
Other, net.................................................. (123) (11)
------- -------
Other income (expense), net............................... (444) (213)
------- -------
NET INCOME.................................................... $ 188 $ 1,966
======= =======
</TABLE>

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

F-64
<PAGE>

POTELCO, INC.

STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------
1996 1997
----- ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................... $ 188 $1,966
Adjustments to reconcile net income to net cash provided by
operating activities--
Depreciation.................................................. 473 506
Loss on sale of property and equipment........................ 129 14
Changes in operating assets and liabilities--
(Increase) decrease in--
Accounts receivable........................................ 208 (1,659)
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... 79 (415)
Prepaid expenses and other current assets.................. (16) 25
Increase (decrease) in--
Accounts payable and accrued expenses...................... (611) 385
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... (371) (67)
----- ------
Net cash provided by operating activities................. 79 755
----- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment.................. 60 52
Additions to property and equipment........................... (322) (1,671)
----- ------
Net cash used in investing activities..................... (262) (1,619)
----- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in note payable to bank.......................... 250 545
Net decrease in note payable to stockholder................... (8) (99)
Payments of note payable to related party..................... (45) (46)
Payments of other long-term debt.............................. (437) (567)
Proceeds from other long-term debt............................ 50 1,102
Distributions to stockholder.................................. (101) --
----- ------
Net cash provided by (used in) financing activities....... (291) 935
----- ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (474) 71
CASH AND CASH EQUIVALENTS, beginning of period.................. 510 36
----- ------
CASH AND CASH EQUIVALENTS, end of period........................ $ 36 $ 107
===== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest........................................ $ 328 $ 215
</TABLE>

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

F-65
<PAGE>

POTELCO, INC.

STATEMENTS OF STOCKHOLDER'S EQUITY

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------- PAID-IN RETAINED STOCKHOLDER'S
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31,
1995..................... 2 $ -- $160 $1,801 $1,961
Distributions to
stockholder............ -- -- -- (101) (101)
Net income.............. -- -- -- 188 188
--- ---- ---- ------ ------
BALANCE, December 31,
1996..................... 2 -- 160 1,888 2,048
Net income.............. -- -- -- 1,966 1,966
--- ---- ---- ------ ------
BALANCE, December 31,
1997..................... 2 $ -- $160 $3,854 $4,014
=== ==== ==== ====== ======
</TABLE>

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

F-66
<PAGE>

POTELCO, INC.

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Potelco, Inc., a Washington Subchapter S corporation (the Company), focuses
on providing underground and overhead power and telephone cable installation
primarily under commercial, industrial and governmental contracts. The Company
performs the majority of its contract work in Washington under lump-sum, cost-
plus and unit-priced contracts, with contract terms generally ranging from 30
days to 18 months.

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.

Supplemental Cash Flow Information

The Company had noncash investing and financing activities related to
capital leases of approximately $374,000 and $378,000 during the years ended
December 31, 1996 and 1997, respectively.

Accounts Receivable and Provision for Doubtful Accounts

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. Depreciation
expense was approximately $473,000 and $506,000 for the years ended December
31, 1996 and 1997, respectively.

Revenue Recognition

The Company recognizes revenue when services are performed except when work
is being performed under fixed price or cost-plus-fee contracts. Such
contracts generally provide that the customer accept completion of progress to
date and compensate the Company for services which have been rendered,
measured typically in terms of units installed, hours expended or some other
measure of progress. Revenues from fixed price contracts are recognized on the
percentage-of-completion method measured by the percentage of costs incurred
to date to total estimated costs for each contract. Revenues from cost-plus-
fee contracts are recognized on the basis of costs incurred during the year,
plus the fee earned, and are measured by the cost-to-cost method. Contract
costs include all direct material and labor costs and those indirect costs
related to contract performance, such as indirect labor, supplies, tools,
repairs and depreciation costs.

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

F-67
<PAGE>

POTELCO, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

settlements may result in revisions to costs and income, and their effects are
recognized in the period in which the revisions are determined.

The balances billed but not paid by customers pursuant to retainage
provisions in fixed price or cost plus fee 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 at each balance sheet date will be collected within the subsequent
fiscal year.

The current asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The current liability, "Billings in excess of costs and estimated
earnings on uncompleted contracts," represents billings in excess of revenues
recognized.

Warranty Costs

For certain contracts, the Company generally warrants labor for the first
year after completion of the installation. An accrual for warranty costs is
recorded based upon the historical level of warranty claims and management's
estimate of future costs.

Income Taxes

Collective Bargaining Agreements

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,
disclosures of contingent 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. Reference is made to the
"Revenue Recognition" section of this footnote for discussion of significant
estimates reflected in the Company's financial statements.

New Accounting Pronouncement

Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards 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 an impairment of such property is necessary. Adoption of this
standard did not have a material effect on the financial position or results
of operations of the Company.

F-68
<PAGE>

POTELCO, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. PROPERTY AND EQUIPMENT:

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES --------------
IN YEARS 1996 1997
------------ ------ ------
<S> <C> <C> <C>
Operating equipment and vehicles............. 5-10 $5,279 $6,607
Office equipment, furniture and fixtures..... 5 99 116
Leasehold improvements....................... 5 184 210
------ ------
Total cost................................. 5,562 6,933
Less-Accumulated depreciation................ (2,883) (3,155)
------ ------
Property and equipment, net................ $2,679 $3,778
====== ======
</TABLE>

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

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

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1997
------ ------
<S> <C> <C>
Accounts payable, trade.................................... $1,117 $ 881
Accrued compensation and benefits.......................... 149 479
Other accrued expenses..................................... 573 864
------ ------
$1,839 $2,224
====== ======
</TABLE>

Contracts in progress are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
------ ------
<S> <C> <C>
Costs incurred on contracts in progress.................. $1,147 $3,386
Estimated earnings, net of losses........................ 782 1,125
------ ------
1,929 4,511
Less-Billings to date.................................... (1,951) (4,051)
------ ------
$ (22) $ 460
====== ======
Costs and estimated earnings in excess of billings on
uncompleted contracts................................... $ 117 $ 532
Billings in excess of costs and estimated earnings on
uncompleted contracts................................... (139) (72)
------ ------
$ (22) $ 460
====== ======
</TABLE>

5. NOTE PAYABLE TO BANK:

The note payable to bank as of December 31, 1996, represents borrowings
under a revolving credit agreement maturing April 30, 1997. Borrowings are
based on percentages of contract billings and are secured by substantially all
of the Company's assets. This agreement provides for a total credit limit of
$800,000, of which $550,000, had been drawn at December 31, 1996, and requires
monthly interest payments of prime plus .75 percent.

F-69
<PAGE>

POTELCO, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

On May 2, 1997, the Company entered into revolving credit agreements with a
bank maturing May 1, 1998. The agreements provide for total credit limits of
$1,000,000 and $400,000, and require monthly interest payments of prime (8.5
percent at December 31, 1997) plus .75 percent beginning June 1, 1997. On
October 1, 1997, the $1,000,000 revolving credit agreement was amended to
increase the credit limit to $1,500,000, of which approximately $1,095,000 had
been drawn at December 31, 1997.

The notes payable outstanding as of December 31, 1996 and 1997, related to
the revolving credit agreements contain several ratio and covenant
requirements, including a minimum working capital ratio and a debt to net
worth restriction. Furthermore, these notes are guaranteed by the stockholder.
The Company was in compliance with these requirements for the years ended
December 31, 1996 and 1997.

6. LONG-TERM DEBT AND CAPITAL LEASES:

Long-term debt and capital leases consist of the following:

<TABLE>
<CAPTION>
DECEMBER
31,
------------
1996 1997
----- -----
<S> <C> <C>
Notes payable to a third party due in monthly installments
aggregating approximately $10,000 including interest ranging
from 7.9% to 11%, collateralized by equipment.................. $ 263 $ 434
Note payable to a bank due in monthly installments of
approximately $6,000 including interest at prime plus .75,
collateralized by equipment.................................... -- 289
Notes payable to a third party due in monthly installments
aggregating approximately $12,000 plus interest at 10%,
collateralized by equipment.................................... 128 116
Notes payable to a third party due in monthly installments of
approximately $800 plus interest at 10.27%, collateralized by
equipment...................................................... 21 13
Obligations under capital leases................................ 570 665
----- -----
982 1,517
Less-Current maturities of long-term debt....................... (445) (589)
----- -----
Other long-term debt............................................ $ 537 $ 928
===== =====
</TABLE>

Future required principal payments on long-term debt (excluding capital
leases) as of December 31, 1997, over the next five years and are as follows
(in thousands):

<TABLE>
<S> <C>
Year ending December 31, 1997--
1998.............................................................. $303
1999.............................................................. 200
2000.............................................................. 134
2001.............................................................. 146
2002.............................................................. 69
</TABLE>

The $400,000 revolving credit agreement was terminated during the fourth
quarter of 1997 and the balance ($289,000 at December 31, 1997) was converted
to a long-term note payable to the bank.

F-70
<PAGE>

POTELCO, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The Company has entered into noncancelable lease agreements with third-party
leasing companies for the acquisition of trucks and equipment. The required
lease payments, including interest at varying rates implicit in the leases, as
of December 31, 1997, over the next four years are as follows (in thousands):

<TABLE>
<S> <C>
Twelve months ending December 31--
1998.............................................................. $313
1999.............................................................. 244
2000.............................................................. 152
2001.............................................................. 34
----
Net minimum lease payments........................................ 743
Less amount representing interest................................. (78)
----
Present value of net minimum lease payments....................... $665
Less-Current maturities........................................... (286)
----
Long-term obligations............................................. $379
====
</TABLE>

7. RELATED-PARTY NOTES PAYABLE:

The Company entered into a debt agreement with the father of the Company's
sole stockholder for approximately $1,163,000, as amended. The agreement
stipulates that the note will accrue interest at 8 percent, with required
monthly payments including interest and principal of at least $10,000. The
note is scheduled to mature on December 1, 2014. The balance outstanding was
approximately $1,079,000 and $1,033,000 as of December 31, 1996 and 1997,
respectively.

The Company's sole stockholder advanced funds to the Company totaling
$200,000 to provide short-term liquidity during 1994. The interest rate on the
advance is based on a blended annual rate, which is approximately 6.35 percent
as of December 31, 1996 and 1997, respectively. Amounts due totaled
approximately $109,000 and $10,000 as of December 31, 1996 and 1997,
respectively.

All related party debt is classified as current as of December 31, 1997,
based upon the Company's intent to repay such amounts during 1998.

8. RELATED-PARTY LEASES:

The Company leases a facility from the father of the Company's sole
stockholder for a monthly rental of $2,000 plus annual property taxes. The
lease is month-to-month, with no termination date.

The Company also leases a facility from its sole stockholder at a monthly
rental of $2,800 plus annual property taxes. The lease is month-to-month, with
no termination date.

Lease payments on the above facilities aggregated approximately $58,000 for
each of the years ended December 31, 1996 and 1997, respectively.

9. EMPLOYEE BENEFIT PLANS:

F-71
<PAGE>

POTELCO, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

withdrawal from, or upon termination of, such plan. The Company has no plans
to withdraw from these plans. The plans do not maintain information on net
assets and actuarial present value of the accumulated share of the plan's
unfunded vested benefits allocable to the Company, and amounts, if any, for
which the Company may be contingently liable are not ascertainable at this
time. Total contributions to the plans were approximately $246,000 and
$352,000 for the years ended December 31, 1996 and 1997, respectively.

The Company has two retirement plans covering all employees not included in
a collective bargaining unit. These noncontributory plans consist of a money
purchase pension plan and a profit-sharing plan. The money purchase pension
plan requires Company contributions equal to 10 percent of the covered
salaries. Contributions to this plan totaled approximately $27,000 and $35,000
for the years ended December 31, 1996 and 1997, respectively. The Company made
discretionary contributions to the profit-sharing plan of approximately
$14,000 and $49,000 for the years ended December 31, 1996 and 1997,
respectively. In addition, during the year December 31, 1997, the Company
accrued $228,000 related to employee bonuses that are anticipated to be paid
subsequent to December 31, 1997.

10. FINANCIAL INSTRUMENTS:

11. COMMITMENTS AND CONTINGENCIES:

Litigation

Insurance

The Company carries a broad range of insurance coverage, including business
auto liability, general liability, workers' compensation and an umbrella
policy.

Performance Bonds

In certain circumstances, the Company is required to provide performance
bonds in connection with its contract commitments which are personally
guaranteed by certain stockholders of the Company.

12. MAJOR CUSTOMERS AND RISK CONCENTRATION:

During the year ended December 31, 1996, three customers accounted for 36
percent, 20 percent and 12 percent of the Company's revenues, respectively.
During the year ended December 31, 1997, three customers accounted for 34
percent, 16 percent and 7 percent of the Company's revenues, respectively.

The Company grants credit, generally without collateral, to its customers,
which are located primarily in the northwestern United States. Consequently,
the Company is subject to potential credit risk related to changes in business
and economic factors within this region. However, management believes that its
contract acceptance, billing and collection policies are adequate to minimize
the potential credit risk.

F-72
<PAGE>

POTELCO, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

13. SUBSEQUENT EVENTS:

In December 1997, the Company and its stockholder entered into a definitive
agreement with Quanta Services, Inc. ("Quanta"), subject to certain conditions
pursuant to which all outstanding shares of the Company's common stock would
be exchanged for cash and shares of Quanta common stock, concurrent with an
initial public offering of additional common stock by Quanta which closed in
February 1998. In addition, the key executives of the Company entered into
employment agreements with the Company and Quanta which have an initial term
of three years, and generally restricts the disclosure of confidential
information as well as restricts competition with the Company and Quanta for a
period of five years following termination of employment. Reference is made to
Note 1 of Quanta Services, Inc. financial statements included elsewhere
herein.

Prior to the closing of the transaction noted above, the Company made a Sub
S distribution of approximately $2.0 million representing substantially all of
the previously-taxed undistributed earnings through December 31, 1997. The
Company funded the distribution through borrowings.

F-73
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Spalj Construction Company:

We have audited the accompanying balance sheet of Spalj Construction Company
(a Minnesota Subchapter S Corporation) as of December 31, 1997, and the
related statements of operations, cash flows and shareholders' equity 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Spalj Construction Company as
of December 31, 1997, 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
May 1, 1998

F-74
<PAGE>

SPALJ CONSTRUCTION COMPANY

BALANCE SHEET

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, DECEMBER 31,
1997 1997(1)
ASSETS ------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................... $ 3,251 $ 3,251
Accounts receivable--
Trade, net of allowance of $100.................. 2,788 2,788
Retainage........................................ 1,429 1,429
Note receivable due from affiliate................. 125 125
Costs and estimated earnings in excess of billings
on uncompleted contracts.......................... 556 556
Prepaid expenses and other current assets.......... 262 262
------- -------
Total current assets............................. 8,411 8,411
PROPERTY AND EQUIPMENT, net.......................... 2,349 2,349
------- -------
Total assets..................................... $10,760 $10,760
======= =======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses.............. $ 1,947 $ 5,526
Billings in excess of costs and estimated earnings
on uncompleted contracts.......................... 142 142
------- -------
Total current liabilities........................ 2,089 5,668
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par value, 400 shares authorized,
62 shares issued and outstanding.................. 21 21
Additional paid-in capital......................... 226 226
Retained earnings.................................. 8,424 4,845
------- -------
Total shareholders' equity....................... 8,671 5,092
------- -------
Total liabilities and shareholders' equity....... $10,760 $10,760
======= =======
</TABLE>
- --------
(1) The pro forma balance sheet column presented reflects the impact of
Subchapter S Corporation distributions. See Note 12 for further
discussion.

The accompanying notes are an integral part of this financial statement.

F-75
<PAGE>

SPALJ CONSTRUCTION COMPANY

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1997

(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUES............................................................... $21,492
COST OF SERVICES, including depreciation............................... 15,099
-------
Gross profit......................................................... 6,393
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........................... 1,145
-------
Income from operations............................................... 5,248
OTHER INCOME (EXPENSE), net............................................ 115
-------
INCOME BEFORE PROVISION FOR INCOME TAXES............................... 5,363
PROVISION FOR INCOME TAXES............................................. 14
-------
NET INCOME............................................................. $ 5,349
=======
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-76
<PAGE>

SPALJ CONSTRUCTION COMPANY

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 1997

(IN THOUSANDS)

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................... $ 5,349
Adjustments to reconcile net income to net cash provided by operating
activities--
Depreciation and amortization....................................... 537
Loss on sale of property and equipment.............................. 13
Changes in operating assets and liabilities-
Decrease (increase) in--
Accounts receivable................................................ (2,205)
Note receivable due from affiliate................................. 125
Costs and estimated earnings in excess of billings on uncompleted
contracts......................................................... (446)
Prepaid expenses and other current assets.......................... (183)
Increase (decrease) in--
Accounts payable and accrued expenses.............................. 1,295
Billings in excess of costs and estimated earnings on uncompleted
contracts......................................................... (333)
-------
Net cash provided by operating activities......................... 4,152
-------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment........................ 16
Additions of property and equipment................................. (981)
Other............................................................... 19
-------
Net cash used in investing activities............................. (946)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholders....................................... (3,852)
-------
Net cash used in financing activities............................. (3,852)
-------
NET DECREASE IN CASH AND CASH EQUIVALENTS............................. (646)
CASH AND CASH EQUIVALENTS, beginning of year.......................... 3,897
-------
CASH AND CASH EQUIVALENTS, end of year................................ $ 3,251
=======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid................................................... $ 3
=======
Interest paid....................................................... $ --
=======
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-77
<PAGE>

SPALJ CONSTRUCTION COMPANY

STATEMENT OF SHAREHOLDERS' EQUITY

FOR THE YEAR ENDED DECEMBER 31, 1997

(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, 1996..... 62 $21 $226 $ 6,927 $ 7,174
Net income................... -- -- -- 5,349 5,349
Distributions to
shareholders................ -- -- -- (3,852) (3,852)
--- --- ---- ------- -------
BALANCE, December 31, 1997..... 62 $21 $226 $ 8,424 $ 8,671
=== === ==== ======= =======
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-78
<PAGE>

SPALJ CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Spalj Construction Company (the Company), a Minnesota Subchapter S
Corporation located in Deerwood, Minnesota, is primarily engaged in the
installation of telephone fiber optic lines and buried cables in the
continental United States.

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.

Accounts Receivable and Provision for Doubtful Accounts

The Company provides an allowance for doubtful accounts when collection is
considered doubtful.

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. Depreciation and
amortization expense was approximately $537,000 for the year ended December
31, 1997.

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 over its
estimated life. 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 generally recognizes revenue as services are performed. The
Company's contracts generally provide that the customer accept completion of
progress to date and compensate the Company for services rendered. Measurement
is typically in terms of units installed or some other measure of progress.
Revenues are recognized using the percentage-of-completion method measured by
the percentage of costs incurred to date to the total estimated costs for each
contract. Contract costs include all direct material, direct labor,
subcontract costs and indirect costs related to contract performance, such as
indirect labor, supplies, tools, repairs and depreciation costs. 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 contract costs and income. The resulting effects are
recognized in the period in which the revisions are determined.

Accounts receivable billed but not paid by customers pursuant to contract
retainage provisions is due upon completion of the contract and acceptance by
the customer. Based on the Company's experience with similar contracts in
recent years, the retainage balance as of the balance sheet date will be
collected within the subsequent fiscal year.

F-79
<PAGE>

SPALJ CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Warranty Costs

As provided in its contracts, the Company generally warrants labor for the
first year after completion and acceptance of the work by the customer. An
accrual for warranty costs is recorded based upon the historical level of
warranty claims and management's estimate of future 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 shareholders report their shares of
the Company's taxable earnings or losses in their personal tax returns.

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 liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates. Reference is
made to the "Revenue Recognition" section of this footnote and Note 8 for
discussion of certain estimates reflected in the Company's financial
statements.

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 an impairment of such property 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 as of December 31, 1997 (in
thousands):

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
IN YEARS
------------
<S> <C> <C>
Buildings and leasehold improvements................. 7-31.5 $ 115
Operating equipment and vehicles..................... 3-7 5,375
Office equipment, furniture and fixtures............. 7 154
------
5,644
Less--Accumulated depreciation and amortization...... (3,295)
------
Property and equipment, net........................ $2,349
======
</TABLE>

F-80
<PAGE>

SPALJ CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accounts payable and accrued expenses consist of the following as of
December 31, 1997 (in thousands):

<TABLE>
<S> <C>
Accounts payable, trade........................................... $1,711
Accrued compensation and other expenses........................... 236
------
$1,947
======
</TABLE>

Contracts in progress are as follows as of December 31, 1997 (in thousands):

<TABLE>
<S> <C>
Costs incurred on contracts in progress.......................... $6,761
Estimated earnings, net of losses................................ 1,733
------
8,494
Less--Billings to date........................................... 8,080
------
$ 414
======
Costs and estimated earnings in excess of billings on uncompleted
contracts....................................................... $ 556
Less--Billings in excess of costs and estimated earnings on
uncompleted contracts........................................... (142)
------
$ 414
======
</TABLE>

5. LEASES:

Operating Leases

The Company rents various pieces of equipment and warehouse space near its
job sites under several operating lease agreements on a month-to-month basis.
The rent paid under these lease agreements was approximately $198,000 for the
year ended December 31, 1997.

The Company also leases certain management vehicles on a longer-term basis.
The total future minimum lease payments under these noncancelable operating
leases are $12,000 for 1998.

6. INCOME TAXES:

According to the Internal Revenue Service, certain S Corporations are
responsible for a tax on the "built-in gain" realized on the sale of an asset
that existed at the time a company changes its status from a C Corporation.
The Company had previously elected S Corporation status effective April 1,
1994. Of the Company's provision for income taxes for the year ended December
31, 1997, $9,000 is a result of these taxes, and the remaining $5,000 relates
to tax imposed by certain states in which the Company does business.

F-81
<PAGE>

SPALJ CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

7. RELATED-PARTY TRANSACTIONS:

During 1997, the Company leased building and yard space located in Deerwood,
Minnesota, from certain Company shareholders for $60,000. During 1998, the
Company extended this lease agreement to December 31, 1998 for an additional
annual rate of $60,000.

At December 31, 1997, an affiliate was indebted to the Company for a note
receivable of approximately $125,000. The note receivable is due on demand
with interest calculated at the prime rate. Interest income from this note
totaled approximately $9,000 during the year ended December 31, 1997.

At December 31, 1997, the Company's cash and cash equivalents were deposited
in a financial institution controlled by certain shareholders.

During 1997, the Company charged approximately $93,000 to an affiliated
company controlled by certain Company shareholders for various office,
administrative and other costs. At December 31, 1997, approximately $53,000
was due to the Company related to such charges and was included in prepaid
expenses and other current assets in the accompanying balance sheet.

8. EMPLOYEE BENEFIT PLAN:

The Company has a self-funded medical plan covering substantially all
employees. The Company is responsible for all family claims paid in the plan
year up to a specific stop-loss amount of $10,000 per family. Aggregate excess
coverage is purchased to protect the Company for claims above the self-funded
limit. The financial statements reflect an estimated accrued liability for
outstanding claims.

The Company has a 401(k) plan and profit-sharing plan covering substantially
all employees. Participant contributions to the 401(k) plan are limited to 17
percent of total compensation paid to participants during the plan year. The
Company may also make discretionary contributions up to a maximum of $2,000
for each participant. Contributions to the plan were approximately $73,000 for
the year ended December 31, 1997.

9. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents,
accounts receivable and accounts payable. The Company believes that the
carrying value of these instruments on the accompanying balance sheet
approximates their fair values.

10. COMMITMENTS AND CONTINGENCIES:

Litigation

F-82
<PAGE>

SPALJ CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Insurance

The Company carries a broad range of insurance coverage, including business
auto liability, business property liability, workers' compensation, general
liability and an umbrella policy.

11. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company had sales greater than 10 percent of total sales to four major
customers (comprising approximately 19 percent, 16 percent, 13 percent and 12
percent, respectively) during the year ended December 31, 1997.

The Company grants credit, generally without collateral, to its customers
which include telecommunication companies, utilities and municipalities
located primarily in the Midwestern, Central and Southern regions of the
United States. Consequently, the Company is subject to potential credit risk
related to changes in business and economic factors within the Midwestern,
Central and Southern regions of the United States. However, management
believes that its contract acceptance, billing and collection policies are
adequate to minimize the potential credit risk.

12. SUBSEQUENT EVENT:

In January 1998, the Company made cash distributions to shareholders of
approximately $3,579,000 funded through its operations. Had this transaction
been recorded at December 31, 1997, the effect on the accompanying balance
sheet would be an increase in liabilities of $3,579,000 and a decrease in
shareholders' equity of $3,579,000.

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

On May 5, 1998, the Company was acquired by Quanta Services, Inc.

F-83
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Underground Construction Co., Inc.:

We have audited the accompanying balance sheet of Underground Construction
Co., Inc. (a California Subchapter S Corporation) as of December 31, 1997, and
the related statements of operations, cash flows and shareholders' equity 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Underground Construction Co.,
Inc., as of December 31, 1997, and the results of its operations and cash
flows for the year then ended in conformity with generally accepted accounting
principles.

S. J. Gallina & Co., LLP

Walnut Creek, California
February 23, 1998

F-84
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................... $ 278 $ 859
Marketable securities............................... 216 249
Accounts receivable--
Trade, net of allowance of $135................... 11,627 8,759
Retainage......................................... 1,764 1,994
Other receivables................................. 112 150
Costs and estimated earnings in excess of billings
on uncompleted contracts........................... 1,645 854
Prepaid expenses and other current assets........... 105 116
------- -------
Total current assets............................ 15,747 12,981
PROPERTY AND EQUIPMENT, net........................... 5,604 5,486
CASH SURRENDER VALUE OF LIFE INSURANCE................ 748 773
------- -------
Total assets.................................... $22,099 $19,240
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt................ $ 202 $ 114
Current maturities of capital lease obligations..... 422 214
Bank line of credit................................. 700 --
Accounts payable and accrued expenses............... 7,827 4,967
Billings in excess of costs and estimated earnings
on uncompleted contracts........................... 1,688 1,558
------- -------
Total current liabilities....................... 10,839 6,853
LONG-TERM DEBT, net of current maturities............. 217 468
LONG-TERM CAPITAL LEASE OBLIGATIONS, net of current
maturities........................................... 768 823
COMMITMENTS AND CONTINGENCIES......................... -- --
------- -------
Total liabilities............................... 11,824 8,144
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, 100,000 shares
authorized, 42,983 shares issued and outstanding at
December 31, 1997 and 40,923 shares issued and
outstanding at June 30, 1998....................... 43 41
Paid-in capital..................................... 2,943 2,802
Accumulated other comprehensive income.............. 135 154
Notes receivable from shareholders for purchase of
common stock....................................... (577) (377)
Retained earnings................................... 7,731 8,476
------- -------
Total shareholders' equity...................... 10,275 11,096
------- -------
Total liabilities and shareholders' equity...... $22,099 $19,240
======= =======
</TABLE>

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

F-85
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED JUNE 30
DECEMBER 31, ----------------
1997 1997 1998
------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES......................................... $48,478 $16,920 $25,345
COST OF SERVICES, including depreciation......... 40,858 15,113 21,582
------- ------- -------
Gross profit................................. 7,620 1,807 3,763
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES..... 4,152 1,781 1,680
------- ------- -------
Income from operations....................... 3,468 26 2,083
OTHER INCOME (EXPENSE), net:
Interest expense............................... (225) (96) (98)
Other, net..................................... 365 92 312
------- ------- -------
Other income (expense), net.................. 140 (4) 214
------- ------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES......... 3,608 22 2,297
PROVISION FOR INCOME TAXES....................... 103 1 156
------- ------- -------
NET INCOME....................................... $ 3,505 $ 21 $ 2,141
======= ======= =======
</TABLE>

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

F-86
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ----------------
1997 1997 1998
------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................... $ 3,505 $ 21 $ 2,141
Adjustments to reconcile net income to net
cash provided by operating activities--
Depreciation and amortization............... 1,073 506 550
Gain on sale of property and equipment...... (19) (16) (210)
Changes in operating assets and
liabilities--
Decrease (increase) in--
Accounts receivable....................... (7,603) (68) 2,696
Costs and estimated earnings in excess of
billings on uncompleted contracts........ (53) (408) 791
Prepaid expenses and other current assets. 88 146 (11)
Cash surrender value of life insurance.... (119) -- (25)
Increase (decrease) in--
Accounts payable and accrued expenses..... 3,871 328 (1,844)
Billings in excess of costs and estimated
earnings on uncompleted contracts........ 999 39 (129)
------- ------- -------
Net cash provided by operating
activities............................. 1,742 548 3,959
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment.. 66 30 216
Additions of property and equipment........... (462) (205) (77)
Purchase of marketable securities............. (4) (3) (14)
Proceeds from shareholder notes............... 142 87 200
Other, net.................................... 5 (22) (102)
------- ------- -------
Net cash provided by (used in) investing
activities............................. (253) (113) 223
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments made to acquire common stock......... (2,048) (2,048) (559)
Payments of long-term debt and capital lease
obligations.................................. (722) (330) (345)
Net borrowings (repayments) under bank line of
credit....................................... 700 1,000 (700)
Distributions to shareholders................. (1,166) (680) (1,997)
------- ------- -------
Net cash used in financing activities... (3,236) (2,058) (3,601)
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................... (1,747) (1,623) 581
CASH AND CASH EQUIVALENTS, beginning of period.. 2,025 2,025 278
------- ------- -------
CASH AND CASH EQUIVALENTS, end of period........ $ 278 $ 402 $ 859
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Income taxes paid........................... $ 11 $ 3 $ 121
Interest paid............................... $ 218 $ 96 $ 102
</TABLE>

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

F-87
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
ACCUMULATED NOTES
COMMON STOCK OTHER RECEIVABLE TOTAL
-------------- PAID-IN RETAINED COMPREHENSIVE FROM STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS INCOME SHAREHOLDERS EQUITY
------ ------ ------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1996................... 49,783 $50 $3,109 $ 7,507 $107 $(280) $10,493
Net income............. -- -- -- 3,505 -- -- 3,505
Distributions to
shareholders.......... -- -- -- (1,845) -- -- (1,845)
Redemption of stock.... (8,800) (9) (603) (1,436) -- -- (2,048)
Issuance of stock...... 2,000 2 437 -- -- (439) --
Change in market value
of securities......... -- -- -- -- 28 -- 28
Payments received on
notes receivable...... -- -- -- -- -- 142 142
------ --- ------ ------- ---- ----- -------
BALANCE, December 31,
1997................... 42,983 43 2,943 7,731 135 (577) 10,275
Net income (unaudited). -- -- -- 2,141 -- -- 2,141
Distributions to
shareholders
(unaudited)........... -- -- -- (980) -- -- (980)
Redemption of stock
(unaudited)........... (2,060) (2) (141) (416) -- -- (559)
Change in market value
of securities
(unaudited)........... -- -- -- -- 19 -- 19
Payments received on
notes receivable
(unaudited)........... -- -- -- -- -- 200 200
------ --- ------ ------- ---- ----- -------
BALANCE, June 30, 1998
(unaudited)............ 40,923 $41 $2,802 $ 8,476 $154 $(377) $11,096
====== === ====== ======= ==== ===== =======
</TABLE>

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

F-88
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Underground Construction Co., Inc. (the Company), a California Subchapter S
Corporation located in Benicia, California, is primarily engaged in various
types of construction projects. The Company performs its contract work under
fixed-fee, unit price and cost-plus contracts with contract terms generally
ranging from one month to one year. The Company performs the majority of its
work in California, Texas and Oregon.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Interim Financial Information

The interim financial statements for the six months ended June 30, 1997 and
1998, are unaudited and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnote disclosures required by
generally accepted accounting principles for complete financial statements. In
the opinion of the Company's management, the unaudited interim financial
statements contain all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation. 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.

Supplemental Cash Flow Information

The Company had noncash investing activities of approximately $1,132,000,
$654,000 and $361,000 related to property and equipment during the year ended
December 31, 1997, and the six months ended June 30, 1997 and June 30, 1998,
respectively. The Company also had noncash investing and financing activities
of approximately $439,000 related to issuance of common stock during the year
ended December 31, 1997.

Marketable Securities

The Company's marketable securities are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses reported in shareholders' equity. Aggregate cost, gross
unrealized holding gains and gross unrealized holding losses were
approximately $81,000, $140,000 and $5,000, respectively, at December 31,
1997. Unrealized gains of approximately $28,000, $13,000 and $19,000 were
recorded during the year ended December 31, 1997, and the six months ended
June 30, 1997 and June 30, 1998, respectively. Realized gains and losses and
declines in value judged to be other-than-temporary on available-for-sale
securities are included in other income. The costs of securities sold are
based on the specific identification method. Interest and dividends from these
securities are included in other income.

Accounts Receivable and Provision for Doubtful Accounts

The Company provides an allowance for doubtful accounts based upon the level
of total accounts receivable balances.

Property and Equipment

F-89
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

useful life of the building. Depreciation expense was approximately
$1,073,000, $506,000 and $550,000 for the year ended December 31, 1997, and
the six months ended June 30, 1997 and June 30, 1998, respectively.

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 over its
estimated life. 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 generally recognizes revenue as services are performed. The
Company's contracts generally provide that the customer accept completion of
progress to date and compensate the Company for services rendered. Revenues
are recognized using the percentage-of-completion method measured by the
percentage of costs incurred to date to the total estimated costs for each
contract. Contract costs include all direct material, direct labor,
subcontract costs and indirect costs related to contract performance, such as
indirect labor, supplies, tools, repairs and depreciation. 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 contract costs and income. The resulting effects are recognized in the
period in which the revisions are determined.

Accounts receivable billed but not paid by customers pursuant to contract
retainage provisions are due upon completion of the contract and acceptance by
the customer. Based on the Company's experience with similar contracts in
recent years, the retainage balance as of the balance sheet date will be
collected within the subsequent fiscal year.

Warranty Costs

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 may differ from those estimates.
Reference is made to the "Revenue Recognition" and "Warranty Costs" sections
of this footnote for discussion of certain estimates reflected in the
Company's financial statements.

F-90
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

New Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures About Segments of
an Enterprise and Related Information", which requires that a public business
enterprise report financial and descriptive information about its reportable
operating segments. SFAS No. 131 is effective for financial statements for
periods beginning after December 15, 1997. The Company will adopt SFAS No. 131
in 1998.

3. PROPERTY AND EQUIPMENT:

Property and equipment as of December 31, 1997, consist of the following (in
thousands):

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
IN YEARS
------------
<S> <C> <C>
Land.................................................. -- $ 767
Buildings and building improvements................... 10-25 2,824
Operating equipment and vehicles...................... 5-10 13,026
Office equipment, furniture and fixtures.............. 3-7 683
-------
17,300
Less--Accumulated depreciation........................ (11,696)
-------
Property and equipment, net........................... $ 5,604
=======

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accounts payable and accrued expenses as of December 31, 1997, consist of
the following (in thousands):

Accounts payable, trade............................... $ 4,518
Accrued compensation and other expenses............... 3,309
-------
$ 7,827
=======

Contracts in progress as of December 31, 1997, are as follows (in
thousands):

Costs incurred on contracts in progress............... $38,367
Estimated earnings, net of losses..................... 4,865
-------
43,232
Less--Billings to date................................ (43,275)
-------
$ (43)
=======
Costs and estimated earnings in excess of billings on
uncompleted contracts................................ $ 1,645
Less--Billings in excess of costs and estimated
earnings on uncompleted contracts.................... (1,688)
-------
$ (43)
=======
</TABLE>

F-91
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. DEBT:

The Company has a $3,000,000 line of credit with a bank, bearing interest at
the bank's prime rate (8.5 percent at December 31, 1997), of which $700,000
and $0 was outstanding as of December 31, 1997, and June 30, 1998,
respectively. The line of credit expires June 1, 1999, and is secured by
personal guarantees of certain officers and directors of the Company.
Commitment fees of approximately $8,000 and $7,500 were charged on this line
of credit during the year ended December 31, 1997, and the six months ended
June 30, 1998, respectively. The Company also has a $500,000 standby letter of
credit with a bank supported by an unsecured promissory note. As of December
31, 1997, and June 30, 1998, there was no outstanding balance under this
letter of credit.

The loan agreement covering the line of credit contains various covenants
which, among other things, limit the Company's ability to incur additional
indebtedness and require the Company to maintain a minimum tangible net worth
of not less than $6.5 million as of December 31, 1997. The Company is also to
maintain a ratio of current assets to current liabilities of not less than
1.25 to 1.00 and other various coverage ratios.

The Company's long-term debt obligations as of December 31, 1997, consist of
the following (in thousands):

<TABLE>
<S> <C>
Notes payable to third parties due in monthly installments through
2001; interest ranging from 7.01% to 8.75%; collateralized by
equipment............................................................ $419
Less--Current maturities.............................................. (202)
----
Total long-term debt.............................................. $217
====
</TABLE>

The maturities of long-term debt as of December 31, 1997, are as follows (in
thousands):

6. LEASES:

The Company leases certain vehicles under capital leases, and the leased
assets are included as part of property and equipment, net. Details of the
capital leased assets as of December 31, 1997, are as follows (in thousands):

<TABLE>
<S> <C>
Vehicles............................................................. $1,800
Less--Accumulated depreciation....................................... (481)
------
Net capital leased assets........................................ $1,319
======
</TABLE>

F-92
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Future minimum lease payments under the capital leases as of December 31,
1997, are as follows (in thousands):

<TABLE>
<S> <C>
1998................................................................. $ 507
1999................................................................. 384
2000................................................................. 318
2001................................................................. 145
2002................................................................. 5
------
Total minimum lease payments..................................... 1,359
Less--Amounts representing interest.................................. (169)
------
Present value of minimum lease payments............................ 1,190
Less--Current portion................................................ (422)
------
Long-term obligation............................................... $ 768
======
</TABLE>

7. INCOME TAXES:

Federal and state income taxes as of December 31, 1997, are as follows (in
thousands):

<TABLE>
<S> <C>
Current--
Federal............................................................... $ 1
State................................................................. 102
----
$103
====
</TABLE>

As a result of the Company's S Corporation status, the only corporate-level
taxes for the year ended December 31, 1997, are built-in gains taxes on
property dispositions, the 1.5 percent California surtax on California-
apportioned income and other non-California state taxes. Of the Company's
provision for income taxes for the year ended December 31, 1997, approximately
$47,000 relates to taxes imposed on California-apportioned income, $55,000
relates to taxes imposed by certain states in which the Company does business
and the remaining $1,000 relates to the built-in gains tax.

8. RELATED-PARTY TRANSACTIONS:

The Company and its shareholders have an agreement which describes
procedures for transfer of the Company's common stock due to termination of
active employment, retirement, death or other occasion. The Company and its
employee benefit trusts have first priority for the purchase of shares
tendered by a shareholder in such instances. If the Company and its employees
benefit trusts do not accept such offer, the remaining shareholders may
purchase all or part of the offered shares. The methodology for determining
the purchase price is set forth in the agreement.

The Company holds unsecured notes receivable due from shareholders for
purchase of common stock. These notes receivable bear interest at 5.0 percent
to 7.0 percent and are due in installments through January 2006.

During the year ended December 31, 1997, bonuses to shareholders totaled
approximately $899,000, of which approximately $599,000 is included in accrued
expenses at December 31, 1997.

Accrued shareholder distributions of approximately $1,017,000 are included
in accrued expenses at December 31, 1997.

Personal guarantees of certain officers and directors of the Company secure
the line of credit discussed in Note 5.

F-93
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

9. EMPLOYEE BENEFIT PLAN:

The Company has a defined contribution plan covering full-time employees
with two or more years of service which is funded entirely by the Company.
Contributions to the plan for the year ended December 31, 1997, were
approximately $791,000. All contributions are fully vested. As of December 31,
1997, there is no unfunded vested liability. The Company owes the plan
approximately $62,000 at December 31, 1997.

10. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents,
marketable securities, accounts receivable, notes receivable, a line of
credit, accounts payable and debt. The Company believes that the carrying
values of these instruments on the accompanying balance sheets approximates
their fair values.

11. COMMITMENTS AND CONTINGENCIES:

Litigation

Insurance

The Company carries a broad range of insurance coverage, including business
auto liability, business property liability, workers' compensation, general
liability and an umbrella policy.

12. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company had sales greater than 10 percent of total sales to two major
customers (comprising approximately 33 percent and 16 percent of total sales)
during the year ended December 31, 1997 and to two major customers (comprising
approximately 25 percent and 23 percent of total sales) during the six months
ended June 30, 1998.

The Company grants credit, generally without collateral, to its customers,
which include national industrial or commercial enterprises or regional
utilities located primarily in the Western United States. Consequently, the
Company is subject to potential credit risk related to changes in business and
economic factors within these regions. However, management believes that its
contract acceptance, billing and collection policies are adequate to minimize
the potential credit risk.

13. COMPREHENSIVE INCOME:

Comprehensive income for the six months ended June 30, 1998 consists of the
following (in thousands):

<TABLE>
<S> <C>
Net income........................................................... $2,141
Unrealized gains on marketable securities............................ 19
------
$2,160
======
</TABLE>

14. SUBSEQUENT EVENTS:

On January 1,1998, the Company redeemed 2,060 shares of common stock for
$559,000.

F-94
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

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

The Company paid shareholder distributions of approximately $342,000 and
$638,000 on April 15, 1998 and June 9, 1998, respectively.

On August 4, 1998, the Company was acquired by Quanta Services, Inc.

F-95
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of Sumter Builders, Inc.:

We have audited the accompanying balance sheet of Sumter Builders, Inc. (a
South Carolina corporation) as of December 31, 1997 and the related statements
of operations, stockholders' 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sumter Builders, Inc. as of
December 31, 1997 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

Columbia, South Carolina
March 23, 1998

F-96
<PAGE>

SUMTER BUILDERS, INC.

BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................... $ 1,053 $ 904
Contract receivables................................ 2,360 3,196
Costs and estimated earnings in excess of billings
on contracts in progress........................... 2,476 1,641
Prepaid expenses.................................... 3 11
------- -------
Total current assets.............................. 5,892 5,752
------- -------
PROPERTY AND EQUIPMENT:
Cost................................................ 14,104 14,455
Less--Accumulated depreciation...................... (10,539) (11,198)
------- -------
Net property and equipment........................ 3,565 3,257
------- -------
OTHER ASSETS:
Due from officers and employees..................... 93 98
Cash surrender value of life insurance.............. 62 62
Investments......................................... 1,534 1,094
------- -------
Total other assets................................ 1,689 1,254
------- -------
Total assets...................................... $11,146 $10,263
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses.................................... $ 956 $ 738
Accounts payable.................................... 734 594
Billings in excess of costs and estimated earnings
on contracts in progress........................... 295 8
Current maturities of long-term debt and capital
lease obligations.................................. 527 756
------- -------
Total current liabilities......................... 2,512 2,096
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS.......... 801 662
DEFERRED COMPENSATION................................. 83 64
POSTRETIREMENT BENEFITS............................... 678 666
------- -------
Total liabilities................................. 4,074 3,488
------- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 60,000 shares
authorized, 1,632 shares issued and outstanding in
1997 and 1998, respectively........................ 2 2
Additional paid-in capital.......................... 557 557
Retained earnings................................... 6,358 5,947
Unrealized holding gain, net........................ 155 269
------- -------
Total stockholders' equity........................ 7,072 6,775
------- -------
Total liabilities and stockholders' equity........ $11,146 $10,263
======= =======
</TABLE>

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

F-97
<PAGE>

SUMTER BUILDERS, INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -----------------
1997 1997 1998
------------ -------- --------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES........................................ $22,445 $ 9,749 $ 13,556
COST OF SERVICES (including depreciation)....... 19,131 8,184 11,745
------- ------- --------
Gross profit................................ 3,314 1,565 1,811
------- ------- --------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.... 2,150 783 953
------- ------- --------
Income from operations...................... 1,164 782 858
------- ------- --------
OTHER INCOME (EXPENSE):
Interest expense.............................. (86) (36) (62)
Interest and dividends........................ 112 62 33
Gain on sale of investments................... 144 44 --
Gain on sale of property and equipment........ 171 159 16
Miscellaneous................................. 109 101 8
------- ------- --------
Total other income (expense)................ 450 330 (5)
------- ------- --------
NET INCOME...................................... $ 1,614 $ 1,112 $ 853
======= ======= ========
</TABLE>

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

F-98
<PAGE>

SUMTER BUILDERS, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ------------------
1997 1997 1998
------------ -------- --------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................. $ 1,614 $ 1,112 $ 853
Adjustments to reconcile net income to net
cash provided by operating activities--
Depreciation.............................. 1,485 615 759
Gain on sale of property and equipment.... (171) (159) (16)
Gain on sale of investments............... (144) (44) --
Change in assets and liabilities:
Contract receivables.................... 85 321 (836)
Costs and estimated earnings in excess
of billings on contracts in progress... (1,821) (519) 835
Prepaid expenses........................ (1) -- (8)
Due from officers and employees......... (71) (19) (5)
Cash surrender value of life insurance.. 9 -- --
Accrued expenses........................ 241 (377) (218)
Accounts payable........................ 232 53 (140)
Billings in excess of costs and
estimated earnings on contracts in
progress............................... 127 (110) (287)
Deferred compensation................... (77) -- (19)
Postretirement benefits................. (11) -- (12)
------- -------- --------
Net cash provided by operating
activities........................... 1,497 873 906
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment......... (1,320) (660) (451)
Proceeds from sale of property and
equipment.................................. 222 159 16
Proceeds from sale of investments........... 1,394 528 754
Additions to investments.................... (928) (452) (200)
------- -------- --------
Net cash used in investing activities. (632) (425) 119
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.... -- -- 397
Principal payments on long-term debt and
capital lease obligations.................. (328) (136) (307)
Cash dividends paid......................... (1,017) (931) (1,264)
------- -------- --------
Net cash used in financing activities. (1,345) (1,067) (1,174)
------- -------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS..... (480) (619) (149)
------- -------- --------
Cash and cash equivalents, beginning of
period....................................... 1,533 1,533 1,053
------- -------- --------
Cash and cash equivalents, end of period...... $ 1,053 $ 914 $ 904
======= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION--
Cash paid during the year for interest...... $ 93 $ 36 $ 62
Purchase of property and equipment through
the issuance of capital lease obligations.. 747 -- 213
</TABLE>

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

F-99
<PAGE>

SUMTER BUILDERS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNREALIZED
---------------- PAID-IN RETAINED HOLDING
SHARES PAR VALUE CAPITAL EARNINGS GAIN, NET TOTAL
------ --------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1996................... 1,632 $ 2 $557 $ 5,761 $ 55 $ 6,375
Dividends paid........ -- -- -- (1,017) -- (1,017)
Net income............ -- -- -- 1,614 -- 1,614
Change in unrealized
holding gain, net.... -- -- -- 0 100 100
----- ---- ---- ------- ---- -------
BALANCE, December 31,
1997................... 1,632 2 557 6,358 155 7,072
===== ==== ==== ======= ==== =======
Dividends paid
(unaudited).......... -- -- -- (1,264) -- (1,264)
Net Income
(unaudited).......... -- -- -- 853 -- 853
Change in unrealized
holding gain, net
(unaudited).......... -- -- -- -- 114 114
----- ---- ---- ------- ---- -------
BALANCE, June 30, 1998
(unaudited)............ 1,632 $ 2 $557 $ 5,947 $269 $ 6,775
===== ==== ==== ======= ==== =======
</TABLE>

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

F-100
<PAGE>

SUMTER BUILDERS, INC.

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Organization and Operation

Sumter Builders, Inc. (the Company), incorporated in 1935, constructs
electrical substations, installs transmission and distribution lines and
provides maintenance services for existing power distribution lines. The
Company provides its services primarily to utility companies located in the
Southeastern United States.

Revenue and Cost Recognition

Revenues from long-term fixed price construction contracts are recognized by
the percentage of completion method. The percentages of completion are
determined by relating actual cost of work performed to date to the estimated
total cost of the respective contracts.

Generally, profits from short-term cost plus and unit price contracts are
recognized upon substantial completion of each contract. The substantial
completion requirement is deemed to have been met when such contracts have
been accepted by the owner(s).

At the time a loss on a contract becomes known, the full amount of the
estimated loss is accrued.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash in banks and all highly
liquid debt instruments with an original maturity of three months or less.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided
primarily using accelerated methods based on the estimated useful lives of the
assets, which generally range from 5 to 31 1/2 years.

Investments

Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" requires debt and equity
securities to be classified according to the Company's investment strategy.
The classifications are held-to-maturity, available-for-sale and trading.

The Company's investments are held for an indefinite period and are
classified as available-for-sale as defined by SFAS No. 115. These investments
are stated at market value with the difference between cost and market
classified as unrealized holding gain or loss as part of stockholders' equity.
During 1997, an increase in the value of the investments resulted in
unrealized gains of $100,246. The net increase in unrealized gains resulted in
the unrealized holding gain, net reported in stockholders' equity of $155,528
at December 31, 1997. The Company's investments had an aggregate fair value
and cost basis of $1,533,667 and $1,378,139 at December 31, 1997,
respectively.

As of December 31, 1997, the Company's investments are primarily in equity
securities. These investments are classified as long-term investments in the
accompanying balance sheet.

Income Taxes

The Company elected to include its taxable income with that of its
stockholders (an S Corporation election) effective January 1, 1983.
Accordingly, the accompanying financial statements do not include a provision
for income taxes.

F-101
<PAGE>

SUMTER BUILDERS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Postretirement Benefits Other Than Pensions

In 1995, the Company adopted the provisions of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". The statement
requires employers to accrue the cost of postretirement benefits during the
employees' careers with the Company based on actuarially determined costs from
the date of hire to the full eligibility date of employees who are expected to
qualify for benefits. In applying the provisions of this statement, the
Company recognized the accumulated postretirement benefit obligation as of the
beginning of 1995 of $637,367 as a change in accounting principle.

Postretirement benefits other than pensions consist of certain health care
and life insurance benefits provided to a group of retired employees.

For purposes of measuring the expected postretirement obligation, a 6
percent annual rate of increase in the per capita claims cost was assumed for
1997. This rate is assumed to remain at 6 percent. The discount rate used in
determining the accumulated postretirement benefit obligation was 8 percent.

If the health care cost trend rate were increased by 1 percent, the
accumulated postretirement benefit obligation as of the end of 1997 would have
been increased by $65,972. The service cost and interest cost for 1997 would
have been unchanged.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of 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.

2. PROPERTY AND EQUIPMENT:

At December 31, 1997, property and equipment consist of the following (in
thousands):

<TABLE>
<CAPTION>
1997
--------
<S> <C>
Autos and trucks................................................... $ 9,405
Heavy equipment.................................................... 3,124
Computer equipment................................................. 129
Leasehold improvements............................................. 157
Office and other buildings......................................... 298
Land............................................................... 123
Office equipment................................................... 92
Warehouse and shops................................................ 29
Equipment under capital leases..................................... 747
--------
14,104
Less--Accumulated depreciation..................................... (10,539)
--------
$ 3,565
========
</TABLE>

F-102
<PAGE>

SUMTER BUILDERS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS:

Information related to contracts in progress at December 31, 1997, is
presented below (in thousands):

<TABLE>
<CAPTION>
1997
-------
<S> <C>
Costs incurred on contracts in progress................................ $35,319
Estimated profit earned to date........................................ 1,397
-------
36,716
Less--Billings to date on contracts in progress........................ (34,535)
-------
$ 2,181
=======
</TABLE>

These amounts (in thousands) are included in the accompanying balance sheets
under the following captions:

<TABLE>
<CAPTION>
1997
------
<S> <C>
Costs and estimated earnings in excess of billings on contracts in
progress.............................................................. $2,476
Billings in excess of costs and estimated earnings on contracts in
progress.............................................................. (295)
------
$2,181
======
</TABLE>

Contract receivables at December 31, 1997, are as follows (in thousands):

<TABLE>
<CAPTION>
1997
------
<S> <C>
Due currently............................................................ $2,220
Retainage................................................................ 140
------
$2,360
======
</TABLE>

4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS:

Long-term debt consists of the following at December 31, 1997 (in
thousands):

<TABLE>
<CAPTION>
1997
----
<S> <C>
Note payable to bank, monthly payments of $12 with a maturity of January
2000, interest rate is prime rate (8.5% at December 31, 1997), secured
by equipment of the Company............................................. $264
Note payable to bank, monthly payments of $10 with a maturity of October
2000, interest rate is fixed at 8.5%, secured by equipment of the
Company................................................................. 297
Note payable to bank, monthly payments of $6, with a maturity of December
1998, interest rate is prime rate (8.5% at December 31, 1997), secured
by equipment of the Company............................................. 72
----
633
Less--Current portion.................................................... (292)
----
Long-term debt........................................................... $341
====
</TABLE>

As of December 31, 1997, the annual maturities of long-term debt are: 1998,
$292; 1999, $238 and 2000, $103.

Capital Leases

The Company is party to various equipment leases expiring through 2000 which
transfer ownership at the end of the lease terms. These leases have been
capitalized using interest rates from 6.89 percent through

F-103
<PAGE>

SUMTER BUILDERS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

7.61 percent. Amortization on the capital leases is included in depreciation
expense. Future minimum lease payments under these leases are as follows (in
thousands):

<TABLE>
<CAPTION>
PRESENT VALUE OF
MINIMUM LEASE
TOTAL PAYMENT INTEREST PAYMENTS
------------- -------- ----------------
<S> <C> <C> <C>
1998.................................... $278 $43 $235
1999.................................... 278 25 253
2000.................................... 213 6 207
---- --- ----
$769 $74 $695
==== === ====
</TABLE>

Interest expense incurred related to the leases totaled $18,077 for the year
ended December 31, 1997. The lease obligations are reflected in the
accompanying balance sheet under the following captions (in thousands):

<TABLE>
<S> <C>
Current maturities of long-term debt and capital lease obligations........ $235
Long-term debt and capital lease obligations.............................. 460
----
$695
====
</TABLE>

5. COMMITMENTS AND CONTINGENCIES:

The Company leases vehicles and office equipment under various operating
leases. Rentals for the year ended 1997 were $786,968. Minimum rental payments
required under the operating leases are as follows (in thousands):

<TABLE>
<S> <C>
1998................. $1,228
1999................. 1,252
2000................. 1,119
2001................. 1,076
2002................. 504
------
Total.............. $5,179
======
</TABLE>

The Company maintains a self-insurance program, administrated by an
insurance carrier, for that portion of workers' compensation costs that are
not covered by insurance. As of December 31, 1997, the Company was liable for
workers' compensation claims in the aggregate amount of $300,000 per incident
and in the aggregate amount of $1,000,000 annually.

As part of the Company's workers compensation insurance agreement, the
Company has obtained letters of credit from a bank in the aggregate amount of
$700,000. These letters of credit expire on various dates through May 1998. At
December 31, 1997, the Company owed no amounts under these letters of credit.

The Company is involved in various legal proceedings arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the Company's
financial condition or results of operations.

6. BENEFIT PLAN:

The Company has a 401(k) benefit plan for which employees meeting certain
requirements are eligible. The Company made matching contributions of
approximately $107,000 in 1997.

F-104
<PAGE>

SUMTER BUILDERS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

7. SHAREHOLDER AGREEMENT:

Effective February 17, 1993, the shareholders of the Company entered into an
agreement that establishes the compensation level for the shareholders and
outlines commitments of the minority shareholder to sell his ownership in the
Company and of the majority shareholder to purchase this ownership. In
accordance with the shareholder agreement, the Company has accrued
approximately $160,650 as of December 31, 1997, of which $83,750 is classified
as long term, to provide for the present value of the future obligation for
deferred compensation to the minority shareholder (a former employee of the
Company).

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

On August 14, 1998, the Company was acquired by Quanta Services, Inc.

F-105
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Manuel Bros., Inc.:

We have audited the accompanying balance sheet of Manuel Bros., Inc. (a
California Stock Corporation) as of September 30, 1997, and the related
statements of operations, stockholders' 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Manuel Bros., Inc., as of
September 30, 1997, and the results of its operations and cash flows for the
year then ended in conformity with generally accepted accounting principles.

S. J. Gallina & Co., LLP

Sacramento, California

October 21, 1998

F-106
<PAGE>

MANUEL BROS., INC.

BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1998
------------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................... $1,246 $ 995
Marketable securities.............................. 292 322
Accounts receivable:
Trade, net of allowance of $0.................... 2,486 1,339
Retainage........................................ 304 253
Other receivables................................ 111 119
Costs and estimated earnings in excess of billings
on uncompleted contracts.......................... 115 678
Prepaid expenses and other current assets.......... 12 66
Deferred Income Taxes.............................. -- 112
------ ------
Total current assets........................... 4,566 3,884
PROPERTY AND EQUIPMENT, net.......................... 3,452 3,328
NOTES RECEIVABLE, noncurrent......................... 79 149
------ ------
Total assets................................... $8,097 $7,361
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt............... $ 228 $ 281
Bank line of credit................................ 540 --
Accounts payable and accrued expenses.............. 1,514 2,088
Billings in excess of costs and estimated earnings
on uncompleted contracts.......................... 495 --
Deferred income taxes.............................. 16 --
------ ------
Total current liabilities...................... 2,793 2,369
LONG-TERM DEBT, net of current maturities............ 1,468 1,395
DEFERRED INCOME TAXES................................ 64 100
------ ------
Total liabilities.............................. 4,325 3,864
STOCKHOLDERS' EQUITY:
Common stock, $0 par value, 10,000 shares
authorized, 3,852 shares issued and outstanding at
September 30, 1997 and 3,852 shares issued and
outstanding at June 30, 1998...................... 58 58
Accumulated other comprehensive income............. 41 41
Retained earnings.................................. 3,673 3,398
------ ------
Total stockholders' equity..................... 3,772 3,497
------ ------
Total liabilities and stockholders' equity..... $8,097 $7,361
====== ======
</TABLE>

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

F-107
<PAGE>

MANUEL BROS., INC.

STATEMENTS OF OPERATIONS

(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30,
SEPTEMBER 30, ------------------
1997 1997 1998
------------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES..................................... $16,571 $ 12,789 $ 11,761
COST OF SERVICES, including interest and
depreciation................................ 13,169 9,511 10,132
------- -------- --------
Gross profit............................. 3,402 3,278 1,629
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. 1,683 1,075 1,990
------- -------- --------
Income (loss) from operations............ 1,719 2,203 (361)
OTHER INCOME (EXPENSE), net:
Interest expense........................... (87) (64) (77)
Other, net................................. 186 120 71
------- -------- --------
Other income (expense), net.............. 99 56 (6)
------- -------- --------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES....................................... 1,818 2,259 (367)
PROVISION FOR INCOME TAXES................... 699 524 (92)
------- -------- --------
Net income (loss)........................ $ 1,119 $ 1,735 $ (275)
======= ======== ========
</TABLE>

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

F-108
<PAGE>

MANUEL BROS., INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK OTHER TOTAL
-------------- RETAINED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT EARNINGS INCOME EQUITY
------ ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, September 30, 1996. 4,221 $63 $2,807 $22 $2,892
Net income................ -- -- 1,119 -- 1,119
Redemption of stock....... (369) (5) (253) -- (258)
Change in market value of
securities............... -- -- -- 19 19
----- --- ------ --- ------
BALANCE, September 30, 1997. 3,852 58 3,673 41 3,772
Net income (loss)
(unaudited).............. -- -- (275) -- (275)
Change in market value of
securities (unaudited)... -- -- -- -- --
----- --- ------ --- ------
BALANCE, June 30, 1998
(unaudited)................ 3,852 $58 $3,398 $41 $3,497
===== === ====== === ======
</TABLE>

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

F-109
<PAGE>

MANUEL BROS., INC.

STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30,
SEPTEMBER 30, -------------------
1997 1997 1998
------------- --------- --------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).......................... $ 1,119 $ 1,735 $ (275)
Adjustments to reconcile net income (loss)
to net cash provided by (used for)
operating activities:
Depreciation.............................. 776 588 587
(Gain) loss on sale of property and
equipment................................ (3) 1 (1)
Gain on sale of marketable securities..... (5) -- --
Change in deferred income taxes........... 39 1 (92)
Changes in operating assets and
liabilities:
Decrease (increase) in:
Accounts receivable...................... (756) 1,143 959
Costs and estimated earnings in excess of
billings on uncompleted contracts....... 417 403 (562)
Prepaid expenses and other current
assets.................................. (1) (9) 4
Increase (decrease) in:
Accounts payable and accrued expenses.... (20) (957) 573
Billings in excess of costs and estimated
earnings on uncompleted contracts....... (1,475) (1,735) (495)
Income taxes payable..................... (576) (552) --
------- --------- --------
Net cash provided by (used for) operating
activities.............................. (485) 618 698
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment................................. 60 15 30
Additions of property and equipment........ (1,035) (932) (285)
Reinvestment of dividends and purchase of
marketable securities, net of sales....... (136) (126) (30)
Collections (loans) on notes receivable,
net....................................... (43) (48) 103
------- --------- --------
Net cash provided by (used for) investing
activities.............................. (1,154) (1,091) (182)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt................. (325) (251) (227)
Net borrowings (repayments) under bank line
of credit................................. 540 -- (540)
------- --------- --------
Net cash provided by (used for) financing
activities.............................. 215 (251) (767)
------- --------- --------
Net increase (decrease) in cash.......... (1,424) (724) (251)
CASH, beginning of period................... 2,670 2,670 1,246
------- --------- --------
CASH, end of period......................... $ 1,246 $ 1,946 $ 995
======= ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Income taxes paid.......................... $ 1,251 $ 1,076 $ 22
Interest paid.............................. $ 132 $ 97 $ 126
</TABLE>

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

F-110
<PAGE>

MANUEL BROS., INC.

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Manuel Bros., Inc. (the Company), a California Corporation located in Grass
Valley, California, is primarily engaged in heavy engineering construction
which includes installation of underground telephone cable and paving. The
Company performs its contract work under unit-price contracts with various
contracts being modified by incentive and penalty provisions. The Company is
also engaged in the limited production of concrete and concrete materials. The
Company sells these products to a variety of users on a retail basis.
Approximately ninety-six percent of the Company's revenues are derived from
its heavy engineering construction operations.

The accompanying financial statements include all amounts relating to the
Company's concrete production and sales activities. The accompanying financial
statements also include all amounts relating to the rental of non-residential
real estate owned by the Company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Interim Financial Information

The interim financial statements for the nine months ended June 30, 1997 and
1998, are unaudited and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnote disclosures required by
generally accepted accounting principles for complete financial statements. In
the opinion of the Company's management, the unaudited interim financial
statements contain all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation. The results of
operations for the interim periods are not necessarily indicative of the
results for the entire fiscal year.

Supplemental Cash Flow Information

The Company had noncash investing activities of approximately $963,672,
$783,726 and $207,478 related to property and equipment during the year ended
September 30, 1997, and the nine months ended June 30, 1997 and June 30, 1998,
respectively. The Company also had noncash investing and financing activities
of $258,286 related to redemption of common stock during the year ended
September 30, 1997 and approximately $160,000 related to the conversion of
accounts receivable to a note for the nine months ended June 30, 1998. See
Note 16.

Marketable Securities

The Company's marketable securities are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses reported in stockholders' equity. Aggregate cost, gross
unrealized holding gains and gross unrealized holding losses were
approximately $224,388, $69,011 and $1,375, respectively, at September 30,
1997. Unrealized gains, net of deferred income taxes of $27,148, of
approximately $40,488 were recorded during the year ended September 30, 1997.
No unrealized gains were recorded for the nine months ended June 30, 1997 and
June 30, 1998, respectively. Realized gains and losses and declines in value
judged to be other-than-temporary on available-for-sale securities are
included in other income. The costs of securities sold are based on the
specific identification method. Interest and dividends from these securities
are included in other income.

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.
Building improvements are capitalized and depreciated over the estimated
useful life of the building. Depreciation expense was $775,954, $587,859 and
$587,181 for the year ended September 30, 1997, and the nine months ended June
30, 1997 and June 30, 1998, respectively.

F-111
<PAGE>

MANUEL BROS., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

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 over its
estimated life. 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 generally recognizes revenue as services are performed. The
Company's contracts generally provide that the customer accept completion of
progress to date and compensate the Company for services rendered. Revenues
are recognized using the percentage-of-completion method measured by the
percentage of costs incurred to date to the total estimated costs for each
contract. Contract costs include all direct material, direct labor,
subcontract costs and indirect costs related to contract performance, such as
indirect labor, supplies, tools, repairs, interest and depreciation.
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 contract costs and income. The resulting effects are
recognized in the period in which the revisions are determined.

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 may differ from those estimates.
Reference is made to the "Revenue Recognition" section of this footnote for
discussion of certain estimates reflected in the Company's financial
statements.

New Accounting Pronouncements

The Company adopted SFAS No. 130, "Reporting Comprehensive Income", which
requires the display of comprehensive income and its components in the
financial statements. Comprehensive income represents all changes in equity of
an entity during the reporting period, including net income and charges
directly to equity, which are excluded from net income. See Note 15 for other
comprehensive income.

F-112
<PAGE>

MANUEL BROS., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. NOTES RECEIVABLE:

Notes receivable consist of various promissory notes amounting to $149,372
bearing interest from 8.00% to 10.00%.

4. PROPERTY AND EQUIPMENT:

Property and equipment as of September 30, 1997, consist of the following
(in thousands):

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
IN YEARS
------------
<S> <C> <C>
Land................................................... -- $ 308
Buildings and building improvements.................... 10-31.5 1,038
Operating equipment and vehicles....................... 5-7 5,522
Office equipment, furniture and fixtures............... 5-7 174
------
7,042
Less--Accumulated depreciation......................... 3,590
------
Property and equipment, net............................ $3,452
======

5. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accounts payable and accrued expenses as of September 30, 1997, consist of
the following (in thousands):

Accounts payable, trade................................ $1,171
Accrued compensation and other expenses................ 343
------
$1,514
======

Contracts in progress as of September 30, 1997, are as follows (in
thousands):

Costs incurred on contracts in progress................ $7,778
Estimated earnings, net of losses...................... 1,019
------
8,797
Less--Billings to date................................. 9,177
------
$ (380)
======
Costs and estimated earnings in excess of billings on
uncompleted contracts................................. $ 115
Less--Billings in excess of costs and estimated
earnings on uncompleted contracts..................... (495)
------
$ (380)
======
</TABLE>

6. DEBT:

The Company has available a $1,250,000 revolving line of credit through
February 1, 1998 with Bank of America. Interest accrues on outstanding
advances at the bank's prime rate plus 0.50% and is payable monthly. The
Company has signed a security agreement pledging accounts receivable,
inventory, and equipment as security for this line of credit. The line of
credit is personally guaranteed by the principal stockholder of the Company.
As of September 30, 1997, there was an outstanding balance of $540,000 on the
line of credit.

F-113
<PAGE>

MANUEL BROS., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The Company also has a $150,000 non-revolving line of credit through
February 1, 1998 with Bank of America. Interest accrues at the bank's prime
rate plus 0.50%. This line of credit is for the purchase of equipment used for
operations. Payments on the line of credit are made over one to four years,
depending on the type of equipment purchased. The line of credit is personally
guaranteed by the principal stockholder of the Company. The unpaid balance on
the equipment line of credit amounted to $5,878 and $39,068 classified as
current and noncurrent liabilities, respectively, as of September 30, 1997.

Both lines of credit were renewed on February 1, 1998. See Note 16.

The Company's long-term debt obligations as of September 30, 1997, consist
of the following (in thousands):

<TABLE>
<S> <C>
Notes payable to third parties due in monthly installments through
2026; interest ranging from 7.0% to 9.75%; collateralized by equipment
and deed of trust ($177 unsecured).................................... $1,365
Notes payable to related parties due in monthly installments through
2007, interest ranging from 8% to 10%, collateralized by deed of trust
and common stock...................................................... 331
------
Total debt......................................................... 1,696
Less--Current maturities............................................... (228)
------
Total long-term debt............................................... $1,468
======
</TABLE>

The maturities of long-term debt as of September 30, 1997, are as follows
(in thousands):

<TABLE>
<S> <C>
1998..................................................................... $228
1999..................................................................... 231
2000..................................................................... 245
2001..................................................................... 175
Thereafter............................................................... 817
</TABLE>

7. OPERATING LEASES:

Operating Leases--Lessee:

The Company enters into various construction equipment operating leases.
Construction equipment lease terms are typically five years or less. Payments
made for operating leases were $216,908 for the year ended September 30, 1997.

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

<TABLE>
<S> <C>
Year ending September 30--
1998.................................................................... $118
1999.................................................................... 68
2000.................................................................... 4
----
190
====
</TABLE>

F-114
<PAGE>

MANUEL BROS., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Operating Leases--Lessor:

The Company currently leases office space to various businesses under
operating lease agreements. The cost and accumulated depreciation related to
the building and land, included in property and equipment, for the year ended
September 30, 1997 are as follows (in thousands):

<TABLE>
<S> <C>
Cost.................................................................... $555
Accumulated depreciation................................................ (28)
----
Book value............................................................ $527
====
</TABLE>

Rents received during the year ended September 30, 1997 amounted to $75,541.
Rental income for the year ended September 30, 1997 amounted to $45,101, net of
$30,440 of expenses.

The aggregate rental revenues over the next four years are as follows (in
thousands):

<TABLE>
<S> <C>
Year Ending September 30:
1998..................................................................... $ 50
1999..................................................................... 42
2000..................................................................... 30
2001..................................................................... 25
----
$147
====
</TABLE>

8. INCOME TAXES:

Federal and state income taxes are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1997
-------------
<S> <C>
Federal--
Current...................................................... $564
Deferred..................................................... 28
State--
Current...................................................... 96
Deferred..................................................... 11
----
$699
====
</TABLE>

Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate rate of 34 percent to income
before provision for income taxes as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1997
-------------
<S> <C>
Provision at the statutory rate................................ $618
Increase resulting from--
State income tax, net of related tax effect.................. 62
Nondeductible expenses....................................... 14
Permanent differences........................................ 5
----
$699
====
</TABLE>

F-115
<PAGE>

MANUEL BROS., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
Deferred income tax liabilities--
Property and equipment....................................... $ 82
Marketable Securities........................................ 27
Other........................................................ 2
----
Total deferred income tax liabilities...................... 111
----
Deferred income tax assets--
State taxes.................................................. 30
Other accruals not currently deductible...................... 1
----
Total deferred income tax assets........................... 31
----
Total net deferred income tax liabilities.................. $ 80
====
</TABLE>

The net deferred tax assets and liabilities are comprised of the following
(in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
Deferred tax assets--
Current...................................................... $ 31
Long-term.................................................... --
----
Total...................................................... 31
----
Deferred tax liabilities--
Current...................................................... 47
Long-term.................................................... 64
----
Total...................................................... 111
----
Net deferred income tax liabilities........................ $ 80
====
</TABLE>

9. RELATED-PARTY TRANSACTIONS:

Operating lease:

The Company rents, on a month-to-month basis, yard space in California and
Montana from a stockholder and a former stockholder, respectively. Rent
expense relating to these leases amounted to $38,927 for the year ended
September 30, 1997.

Stock Redemption:

On January 1, 1997, the Company redeemed 369 shares of stock, held by Joan
Manuel, by issuing a note in the amount of $258,286. The note is secured by
the redeemed shares of stock, is payable in monthly principal and interest
payments of $3,134 and bears interest at 8.00%. See Note 6.

F-116
<PAGE>

MANUEL BROS., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

10. EMPLOYEE PROFIT SHARING PLAN AND BENEFIT PLAN:

The Company maintains a defined contribution profit sharing plan for
substantially all of its employees. The amount of the contribution to the
profit sharing plan is determined annually by the board of directors and may
not exceed fifteen percent of the participant's compensation. The board of
directors elected not to make a contribution to the profit sharing plan for
the year ended September 30, 1997.

In addition, the Company maintains an employee 401(k) plan. The Company
contributes to the plan at the discretion of management. Matching
contributions made by the Company amounted to $30,000 for the year ended
September 30, 1997.

11. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash, marketable securities,
accounts receivable, notes receivable, a line of credit, accounts payable and
debt. The Company believes that the carrying values of these instruments on
the accompanying balance sheets approximate their fair values.

12. CONTRACT BACKLOG:

The following schedule is a reconciliation of contract backlog representing
signed contracts as of September 30, 1997 (in thousands):

<TABLE>
<S> <C>
Balance, September 30, 1996.......................................... $11,280
Contract adjustments and new contracts awarded....................... 9,000
-------
Subtotal........................................................... 20,280
Less contract revenue earned......................................... 15,906
-------
Balance, September 30, 1997.......................................... $ 4,374
=======
</TABLE>

13. COMMITMENTS AND CONTINGENCIES:

Litigation

Insurance

The Company carries a broad range of insurance coverage, including business
auto liability, business property liability, workers' compensation, general
liability and an umbrella policy.

Internal Revenue Service Audit

In 1996, the Internal Revenue Service (the "Service") completed an
examination of the Company's federal income tax returns for 1993, 1994, and
1995. The examining agent proposed adjustments relating to per diem

F-117
<PAGE>

MANUEL BROS., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

and other issues that, if sustained, would result in additional federal income
taxes and penalties for those years of approximately $123,866 plus interest.
In addition, if similar adjustments were applied to 1996 and 1997, the Company
estimates that the additional federal income taxes and penalties as well as
the state taxes and penalties for those years would approximate $182,000 plus
interest. The Company does not agree with the adjustments proposed by the
Service and is contesting the proposed tax deficiencies in the federal tax
court. The Company is confident that upon final resolution of the issue, the
proposed tax deficiencies will be substantially reduced.

No provision has been made in the accompanying financial statement for the
proposed additional taxes, penalties, and interest since the ultimate
liability cannot be reasonably estimated.

14. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company had sales greater than 10 percent of total sales to two major
customers (comprising approximately 46 percent and 28 percent of total sales)
during the year ended September 30, 1997. Approximately 31% and 39% of trade
and retainage receivables are due from these two customers.

The Company grants credit, generally without collateral, to its customers,
which include publicly traded utility companies, governmental agencies and
general contractors. Consequently, the Company is subject to potential credit
risk related to changes in business and economic factors. However, management
believes that its contract acceptance, billing and collection policies are
adequate to minimize the potential credit risk.

15. COMPREHENSIVE INCOME:

Comprehensive income for the year ended September 30, 1997 consists of the
following (in thousands):

<TABLE>
<S> <C>
Net income........................................................... $1,119
Unrealized gains on marketable securities............................ 19
------
$1,138
======
</TABLE>

16. SUBSEQUENT EVENTS:

In September 1998, the Company wrote off approximately $160,000 of
uncollectible contract billings which are included in accounts receivable at
September 30, 1997 and notes receivable at June 30, 1998.

Subsequent to September 30, 1997, the Company made revisions to the
estimated contract revenues and costs which would have resulted in a decrease
in gross profit of $128,000. These revisions are reflected in the June 30,
1998 financial statements.

On October 15, 1998, the Company was acquired by Quanta Services, Inc. In
conjunction with this acquisition, the following events occurred: (i) the
related party notes payable of $330,816 and third party notes payable of
$652,657 were paid off; (ii) the Company's concrete production and sales
activities and the rental activities were sold; and (iii) the availability on
both lines of credit terminated at the time of acquisition.

F-118
<PAGE>

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE AND THE SELLING STOCKHOLDERS ARE OFFERING TO
SELL SHARES OF COMMON STOCK AND SEEKING OFFERS TO BUY SHARES OF COMMON STOCK
ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION
CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY
SALE OF THE COMMON STOCK.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 2
Risk Factors.............................................................. 7
The Company............................................................... 12
Use of Proceeds........................................................... 13
Price Range of Common Stock............................................... 13
Dividend Policy........................................................... 13
Selected Financial Data................................................... 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 17
Business.................................................................. 28
Management................................................................ 36
Certain Transactions...................................................... 40
Principal Stockholders.................................................... 42
Description of Capital Stock.............................................. 43
Shares Eligible for Future Sale........................................... 46
Plan of Distribution...................................................... 47
Legal Matters............................................................. 48
Additional Information.................................................... 49
Index to Financial Statements............................................. F-1
</TABLE>

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

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

5,000,000 SHARES

[LOGO OF QUANTA SERVICES, INC. APPEARS HERE]

COMMON STOCK

-----------
PROSPECTUS
-----------

October , 1998

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Delaware General Corporation Law

Section 145(a) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding if he or she acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
the person reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding,
had reasonable cause to believe that such conduct was unlawful.

Section 145(b) of the DGCL states that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred in connection with the
defense or settlement of such action or suit if he or she acted in good faith
and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.

Section 145(c) of the DGCL provides that to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred in connection therewith.

Section 145(d) of the DGCL states that any indemnification under subsections
(a) and (b) of Section 145 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of conduct
set forth in subsections (a) and (b). Such determination shall be made (1) by
the board of directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(3) by the stockholders.

Section 145(e) of the DGCL provides that expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an

II-1
<PAGE>

undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in Section 145. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.

Section 145(f) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, the other subsections of
Section 145 shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in
another capacity while holding such office.

Section 145(g) of the DGCL provides that a corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted and incurred in any such capacity, or arising
out of such person's status as such, whether or not the corporation would have
the power to indemnify against such liability under the provisions of Section
145.

Section 145(j) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who
has ceased to be a director, officer, employee or agent, and shall inure to
the benefit of the heirs, executors and administrators of such a person.

Amended and Restated Certificate of Incorporation

The Amended and Restated Certificate of Incorporation provides that a
director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability for unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided for in Section 174 of the DGCL. If the
DGCL is amended to authorize the further elimination or limitation of the
liability of directors, then the liability of a director of the Company, in
addition to the limitation on personal liability described above, shall be
limited to the fullest extent permitted by the amended DGCL. Further, any
repeal or modification of such provision of the Amended and Restated
Certificate of Incorporation by the stockholders of the Company shall be
prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the Company existing at the time of such
repeal or modification.

Bylaws

The Bylaws of the Company provide that the Company will indemnify and hold
harmless any director or officer of the Company to the fullest extent
permitted by applicable law, as in effect as of the date of the adoption of
the Bylaws or to such greater extent as applicable law may thereafter permit,
from and against all losses, liabilities, claims, damages, judgments,
penalties, fines, amounts paid in settlement and expenses (including
attorneys' fees) whatsoever arising out of any event or occurrence related to
the fact that such person is or was a director or officer of the Company and
further provide that the Company may, but is not required to, indemnify and
hold harmless any employee or agent of the Company or a director, officer,
employee or agent of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise who is or was serving in such
capacity at the written request of the Company; provided, however, that the
Company is only required to indemnify persons serving as directors, officers,
employees or agents of the Company for the expenses incurred in a proceeding
if such person has met the standards of conduct that make it permissible under
the laws of the State of Delaware for the Company to indemnify the claimant
for the amount claimed, but the burden of proving such defense will be on the
Company. The Bylaws further provide that, in the event of any threatened, or
pending action, suit or proceeding in which any of the persons referred to
above is a party or is involved and that may give rise to a right of
indemnification under the Bylaws, following written request by such person,
the Company will promptly pay to such person amounts to cover expenses
reasonably incurred by such person in such

II-2
<PAGE>

proceeding in advance of its final disposition upon the receipt by the Company
of (i) a written undertaking executed by or on behalf of such person providing
that such person will repay the advance if it is ultimately determined that
such person is not entitled to be indemnified by the Company as provided in
the Bylaws and (ii) satisfactory evidence as to the amount of such expenses.

Insurance

The Company maintains liability insurance for the benefit of its directors
and officers.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 --Amended and Restated Agreement and Plan of Organization dated as of
December 11, 1997 by and among Quanta Services, Inc. and PAR
Electrical Contractors, Inc. and its stockholders**
2.2 --Amended and Restated Agreement and Plan of Organization dated as of
December 11, 1997 by and among Quanta Services, Inc. and Union Power
Construction Company and its stockholders**
2.3 --Amended and Restated Agreement and Plan of Organization dated as of
December 11, 1997 by and among Quanta Services, Inc. and TRANS TECH
Electric, Inc. and its stockholders**
2.4 --Amended and Restated Agreement and Plan of Organization dated as of
December 11, 1997 by and among Quanta Services, Inc. and Potelco,
Inc. and its stockholders**
3.1 --Amended and Restated Certificate of Incorporation**
3.2 --Amended and Restated Bylaws**
4.1 --Form of Common Stock Certificate**
5.1 --Opinion of Jackson Walker L.L.P.***
10.1 --Form of Employment Agreement**
10.2 --1997 Stock Option Plan**
10.3 --Acquisition Agreement and Plan of Reorganization dated as of May 5,
1998, by and among Quanta Services, Inc., Spalj Acquisition, Inc. and
Spalj Construction Company and its stockholders***
10.4 --Acquisition Agreement and Plan of Reorganization dated as of August
4, 1998, by and among Quanta Services, Inc., Underground Construction
Co., Inc., Five Points Construction Company and their Stockholders+
10.5 --Amended and Restated Credit Agreement (the "Credit Agreement") dated
as of August 3, 1998 among Quanta Services, Inc. as Borrower and Bank
One Texas, National Association, National City Bank and the other
financial institutions parties thereto, as Lenders+
10.6 --First Amendment to the Credit Agreement dated as of September 29,
1998
10.7 --Securities Purchase Agreement among Quanta Services, Inc. and Enron
Capital & Trade Resources Corp. ("ECT") and Joint Energy Development
Investments II Limited Partnership ("JEDI") dated as of September 29,
1998
10.8 --Registration Rights Agreement dated as of September 29, 1998 by and
among Quanta Services, Inc., JEDI and ECT
10.9 --Form of Convertible Promissory Note issued to ECT and JEDI
21.1 --Subsidiaries**
23.1 --Consent of Arthur Andersen LLP
23.2 --Consent of Jackson Walker L.L.P. (contained in Exhibit 5.1)
23.3 --Consent of Arthur Andersen LLP
23.4 --Consent of S.S. Gallina & Co., LLP
23.5 --Consent of S.S. Gallina & Co., LLP
24.1 --Power of Attorney***
27 --Financial Data Schedule
</TABLE>

II-3
<PAGE>

- --------
** Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (No. 333-42957) and incorporated herein by reference.

*** Previously filed.

+ Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1998 and incorporated herein by
reference.

(b) Financial Statement Schedules.

All schedules are omitted because they are not applicable or because the
required information is contained in the Financial Statements or Notes
thereto.

ITEM 22. UNDERTAKINGS.

The undersigned registrant hereby undertakes as follows:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment 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.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant 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
registrant 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 Act and will be governed by the final
adjudication of such issue.

II-4
<PAGE>

(5) That, for the purpose of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement 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.

(6) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.

(7) That every prospectus (i) that is filed pursuant to paragraph (6)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment 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.

(8) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.

(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.

II-5
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act, Quanta Services, Inc.
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on October 23, 1998.

Quanta Services, Inc.

/s/ John R. Colson
By___________________________________
John R. Colson
Chief Executive Officer

Pursuant to the requirements of the Securities Act, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated and on October 23, 1998.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
/s/ John R. Colson Chief Executive Officer,
- ------------------------------------ Director (Principal
John R. Colson Executive Officer)

James H. Haddox* Chief Financial Officer
- ------------------------------------ (Principal Financial and
James H. Haddox Accounting Officer)

Vincent D. Foster* Director
- ------------------------------------
Vincent D. Foster

John R. Wilson* Director
- ------------------------------------
John R. Wilson

Timothy A. Soule* Director
- ------------------------------------
Timothy A. Soule

John A. Martell* Director
- ------------------------------------
John A. Martell

Gary A. Tucci* Director
- ------------------------------------
Gary A. Tucci

James R. Ball* Director
- ------------------------------------
James R. Ball

Rodney R. Proto* Director
- ------------------------------------
Rodney R. Proto

Michael T. Willis* Director
- ------------------------------------
Michael T. Willis
</TABLE>

/s/ John R. Colson
*By____________________________
John R. Colson
ATTORNEY IN FACT

II-6

<PAGE>
EXHIBIT 10.6

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment") dated as of September 29, 1998, is by and between Quanta Services,
Inc., a Delaware corporation (the "Borrower"), Bank One, Texas, National
Association ("Bank One"), National City Bank and the other lenders from time to
time parties hereto (each a "Lender" and collectively, the "Lenders"), Bank One
as administrative agent for the Lenders (in such capacity, the "Agent") and
National City Bank as co-agent for the Lenders (in such capacity, the "Co-
Agent").

WITNESSETH:

WHEREAS, the Borrower, the Lenders, the Agent and the Co-Agent have entered
into that certain Amended and Restated Credit Agreement dated as of August 3,
1998, pursuant to which the Lenders have agreed to make Loans to the Borrower
and to issue Letters of Credit for the account of the Borrower pursuant to the
terms thereof (the "Credit Agreement"); and

WHEREAS, the Borrower, the Lenders, the Agent and the Co-Agent desire to
amend the Credit Agreement as hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Borrower, the Lenders, the Agent and the Co-Agent hereby
agree as follows:

1. AMENDMENTS TO CREDIT AGREEMENT.

(a) Section 1.1 of the Credit Agreement is hereby amended as follows:

(i) The following definitions of "Beneficial Ownership", "Change
of Control", "Enron Subordinated Debt Documents" and "Exchange Act" are hereby
added in the correct alphabetical order:

"Beneficial Ownership," and "Beneficial Owner" shall have the meanings
assigned to them in Rule 13d-3 under the Exchange Act in effect on
September 29, 1998.

"Change in Control" shall be deemed to have occurred if (i) any Person
acquires, directly or indirectly, the Beneficial Ownership of any
voting security of the Borrower 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
the then outstanding voting securities of the Borrower entitled to
vote generally in the election of directors; or (ii) individuals who
on September 29, 1998, constitute the Borrower's Board of Directors,
or their successors approved in accordance with the terms below, cease
for any reason to constitute at least a majority thereof, unless the
election or nomination for the election by the Borrower's stockholders
of each new director was approved by vote of at least 2/3rds of the
directors then still in office who were directors on September 29,
1998, or their successors approved in accordance with the terms
hereof.
<PAGE>

"Enron Subordinated Debt Documents" means that certain Securities
Purchase Agreement by and among the Borrower, Enron Capital & Trade
Resources Corp. and Joint Energy Development Investments II Limited
Partnership dated as of September 29, 1998, the Convertible
Subordinated Notes of the Borrower issued pursuant thereto and any
other Basic Document as defined therein, as amended from time to time
as permitted hereby.

"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations of the SEC
promulgated thereunder.

(b) Section 6.11(a)(iii) of the Credit Agreement is hereby amended and
restated in its entirety as follows:

"(iii) the maximum cash purchase price paid and Indebtedness incurred
to a seller by the Borrower or any of its Subsidiaries in connection
with (x) any single Acquisition shall not exceed $12,000,000, and (y)
all Acquisitions made during any rolling four (4) fiscal quarters
(excluding any Acquisitions exceeding $12,000,000 for which the
Borrower has obtained approval of the Majority Lenders hereunder and
all Acquisitions made from and after April 9, 1998, through September
29, 1998) shall not exceed twenty-five percent (25%) of the Borrower's
Consolidated Net Worth as of the end of the immediately preceding
fiscal quarter;"

"Section 6.25 Subordinated Debt Investment. The Borrower shall
provide written notice to the Agent (by confirmed fax to each of the
Agent and its legal counsel, Gardere Wynne Sewell & Riggs, L.L.P.,
attention: Ms. Lisa J. Mellencamp (fax no.: 713-308-5555)) of (i)
any Change of Control within two (2) Business Days following any such
Change of Control, and (ii) any notice received by the Borrower from
any holder of a Subordinated Debt Investment exercising any right to
require the Borrower to redeem all or any part of a Subordinated Debt
Investment within two (2) Business Days of the Borrower's receipt
thereof. The Borrower shall not redeem all or any part of the
Indebtedness evidenced by the Enron Subordinated Debt Documents as a
result of a Change of Control before ten (10) days following the date
of a Redemption Notice (as defined in the Enron Subordinated Debt
Documents) or if prohibited by the subordination provisions contained
therein. The Borrower shall not redeem, pursuant to any optional
redemption right it may have, all or any part of a Subordinated Debt
Investment before the Maturity Date. The Borrower shall not amend,
modify or change in any way any of the Enron Subordinated Debt
Documents so as to change the stated maturity date of the principal of
such Indebtedness, or any installment of interest thereon, to an
earlier date, increase the rate of interest thereon or any premium
payable on the redemption thereof, change any of the redemption or
subordination provisions thereof (or the definitions of any defined
terms contained therein) or otherwise change in any respect materially

2
<PAGE>

adverse to the interests of the Lenders any of the terms thereof, in
each case, without the consent of the Majority Lenders."

(d) Section 7.1 of the Credit Agreement is hereby amended as follows:

(i) Section 7.1(k) of the Credit Agreement is hereby amended and
restated in its entirety as follows:

"(k) a Change of Control shall occur or the common stock of the
Borrower shall be delisted from the New York Stock Exchange; or"

(ii) A new Section 7.1(l) of the Credit Agreement is added as follows:

"(l) an Event of Default shall occur and be continuing under the Enron
Subordinated Debt Documents or any other documents evidencing a
Subordinated Debt Investment."

2. CONSENT TO ENRON SUBORDINATED DEBT DOCUMENTS. The Lenders hereby
consent to the terms of the Enron Subordinated Debt Documents as in effect on
September 29, 1998 and agree that the subordinated Indebtedness evidenced
thereby shall be a Subordinated Debt Investment for purposes of the Credit
Agreement, provided that the Borrower secures, and it hereby agrees to so
secure, the repayment of the Obligations with the assets of the Borrower and its
Subsidiaries pursuant to documentation standard and customary for secured credit
facilities of this type on or before November 29, 1998.

3. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. To induce the
Lenders, the Agent and the Co-Agent to enter into this Amendment, the Borrower
hereby reaffirms, as of the date hereof, its representations and warranties in
their entirety contained in the Credit Agreement and in all other documents
executed pursuant thereto (except to the extent such representations and
warranties relate solely to an earlier date) and additionally represents and
warrants as follows:

(a) The execution and delivery of this Amendment and the performance
by the Borrower of its obligations under this Amendment and the Credit Agreement
as amended hereby are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action, have received all necessary
governmental and other approvals (if any shall be required), and do not and will
not contravene or conflict with the governance documents of the Borrower or any
provision of law, any presently existing requirement or restriction imposed by
any judicial, arbitral, regulatory or governmental instrumentality or constitute
a default under, or result in the creation or imposition of any Lien other than
a Permitted Lien upon any property or assets of the Borrower or any Guarantor
under, any agreement, instrument or indenture by which the Borrower or any
Guarantor is bound;

(b) This Amendment has been duly executed and delivered on behalf of
the Borrower and this Amendment and the Credit Agreement as amended hereby are
the legal, valid and binding obligations of the Borrower, enforceable in
accordance with its terms subject as to enforcement only to bankruptcy,
insolvency, reorganization, moratorium or other similar laws and equitable
principles affecting the enforcement of creditors' rights generally; and

3
<PAGE>

4. REAFFIRMATION OF CREDIT AGREEMENT. This Amendment shall be deemed to
be an amendment to the Credit Agreement, and the Credit Agreement, as amended
hereby, is hereby ratified, approved and confirmed in each and every respect.
All references to the Credit Agreement herein and in any other document,
instrument, agreement or writing shall hereafter be deemed to refer to the
Credit Agreement as amended hereby.

5. DEFINED TERMS. Except as amended hereby, terms used herein when
defined in the Credit Agreement shall have the same meanings herein unless the
context otherwise requires.

6. GOVERNING LAW; ARBITRATION; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL.

(a) The Credit Agreement, as amended hereby, and the other Credit
Documents, and the rights and duties of the parties thereto, shall be construed
in accordance with and governed by the internal laws of the State of Texas.

(b) THE AGENT, THE CO-AGENT, EACH LENDER AND THE BORROWER HEREBY
WAIVES ITS RIGHT TO RESOLVE DISPUTES, CLAIMS, AND CONTROVERSIES ARISING FROM THE
CREDIT AGREEMENT, AS AMENDED HEREBY, ANY OTHER CREDIT DOCUMENT OR ANY MATTER IN
CONNECTION THEREWITH, INCLUDING, WITHOUT LIMITATION, CONTRACT DISPUTES AND TORT
CLAIMS, THROUGH ANY COURT PROCEEDING OR LITIGATION AND ACKNOWLEDGES THAT ALL
SUCH DISPUTES, CLAIMS AND CONTROVERSIES SHALL BE RESOLVED PURSUANT TO THIS
SECTION, EXCEPT THAT EQUITABLE RELIEF AND CERTAIN OTHER RIGHTS AND REMEDIES SET
FORTH BELOW MAY BE SOUGHT FROM ANY COURT OF COMPETENT JURISDICTION. EACH PARTY
REPRESENTS TO THE OTHER PARTIES THAT THIS WAIVER IS MADE KNOWINGLY AND
VOLUNTARILY AFTER CONSULTATION WITH AND UPON ADVICE OF ITS COUNSEL AND IS A
MATERIAL PART OF THIS AGREEMENT. ALL SUCH DISPUTES, CLAIMS AND CONTROVERSIES
SHALL BE RESOLVED BY BINDING ARBITRATION PURSUANT TO THE COMMERCIAL RULES OF THE
AMERICAN ARBITRATION ASSOCIATION ("AAA"). Any arbitration proceeding held
pursuant to this arbitration provision shall be conducted in Houston, Texas or
at any other place selected by mutual agreement of the parties. No act to take
or dispose of any collateral shall constitute a waiver of this arbitration
agreement or be prohibited by this arbitration agreement. This arbitration
provision shall not limit the right of any party during any dispute, claim or
controversy to seek, use, and employ ancillary, or preliminary rights and/or
remedies, judicial or otherwise, for the purposes of realizing upon, preserving,
protecting, foreclosing upon or proceeding under forcible entry and detainer for
possession of, any real or personal property, and any such action shall not be
deemed an election of remedies. Such remedies include, without limitation,
obtaining injunctive relief or a temporary restraining order, invoking a power
of sale under any deed of trust or mortgage, obtaining a writ of attachment or
imposition of a receivership, or exercising any rights relating to personal
property, including exercising the right of set-off, or taking or disposing of
such property with or without judicial process pursuant to the Uniform
Commercial Code. Any disputes, claims or controversies concerning the
lawfulness or reasonableness of an act, or exercise of any right or remedy
concerning any collateral, including any claim to rescind, reform, or otherwise
modify any agreement relating to the collateral, shall also be arbitrated;
provided, however that no arbitrator shall have the right or the power to enjoin
or restrain any act of either party. Judgment upon any award rendered by any
arbitrator may be entered in any court having jurisdiction. The statute of
limitations, estoppel, waiver, laches and similar doctrines which would
otherwise be applicable in an action brought by a party shall be

4
<PAGE>

applicable in any arbitration proceeding, and the commencement of an arbitration
proceeding shall be deemed the commencement of any action for these purposes.
The federal arbitration act (Title 9 of the United States Code) shall apply to
the construction, interpretation, and enforcement of this arbitration provision.

(c) To the fullest extent permitted by applicable law, each party
hereto agrees that any court proceeding or litigation permitted by Section 6(b)
may be brought and maintained in the courts of the State of Texas sitting in
Harris County or the United States District Court for the Southern District of
Texas. To the fullest extent permitted by applicable law, the Borrower hereby
expressly and irrevocably submits to the jurisdiction of the courts of the State
of Texas and the United States District Court for the Southern District of Texas
for the purpose of any such litigation as set forth above and irrevocably agrees
to be bound by any judgment rendered thereby in connection with such litigation.
To the fullest extent permitted by applicable law, the Borrower further
irrevocably consents to the service of process, by registered mail, postage
prepaid, or by personal service within or without the state of Texas. To the
fullest extent permitted by applicable law, the Borrower hereby expressly and
irrevocably waives any objection which it may have or hereafter may have to the
laying of venue of any such litigation brought in any such court referred to
above and any claim that any such litigation has been brought in an inconvenient
forum. To the extent that the Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution or otherwise) with respect to itself or its property, the Borrower
hereby irrevocably waives to the fullest extent permitted by applicable law,
such immunity in respect of its obligations under the Credit Agreement, as
amended hereby, and the other Credit Documents.

(d) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY
HERETO VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY (BY ITS
ACCEPTANCE HEREOF) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING PERMITTED BY SECTION 7(B) AND WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF THE CREDIT AGREEMENT, AS AMENDED HEREBY, ANY OTHER
CREDIT DOCUMENT, ANY OTHER RELATED DOCUMENT OR ANY RELATIONSHIP BETWEEN THE
AGENT, THE CO-AGENT, ANY LENDER, THE BORROWER AND/OR ANY GUARANTOR, AND AGREES
THAT ANY SUCH ACTION, PROCEEDING OR DISPUTE SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE LENDERS TO
PROVIDE THE LOANS AND THE LETTERS OF CREDIT.

7. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and by the different parties on different counterpart signature
pages, each of which when executed shall be deemed an original but all such
counterparts taken together shall constitute one and the same Amendment.

8. SEVERABILITY. Any provision of this Amendment that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

9. HEADINGS. Section headings used in this Amendment are for reference
only and shall not affect the construction of this Amendment.

5
<PAGE>

10. NOTICE OF ENTIRE AGREEMENT. This Amendment, together with the other
Credit Documents, constitute the entire understanding among the Borrower, the
Agent, the Co-Agent and the Lenders and supersedes all earlier or
contemporaneous agreements, whether written or oral, concerning the subject
matter of the Amendment and the other Credit Documents. THIS WRITTEN AMENDMENT
TOGETHER WITH THE OTHER CREDIT DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their duly authorized officers as of the day and
year first written above.

BORROWER:
--------

QUANTA SERVICES, INC.

By: /s/ Brad Eastman
----------------------------------------
Name: Brad Eastman
----------------------------------------
Title: Vice President and General Counsel
----------------------------------------

6
<PAGE>

LENDERS:
-------

BANK ONE, TEXAS, NATIONAL ASSOCIATION, as
Administrative Agent and as a Lender

By: /s/ John E. Elam, Jr.
----------------------------------------
Name: John E. Elam, Jr.
Title: Vice President

7
<PAGE>

NATIONAL CITY BANK, as Co-Agent and as a Lender

By: /s/ Michael J. Durbin
--------------------------
Name: Michael J. Durbin
Title: Vice President

8
<PAGE>

CONSENT AND ACKNOWLEDGMENT

Each of the undersigned Guarantors, by its signature hereto, acknowledges
and agrees to the terms and conditions of that certain First Amendment to
Amended and Restated Credit Agreement (the "Amendment") dated as of September
29, 1998, by and between Quanta Services, Inc., a Delaware corporation (the
"Borrower"), Bank One, Texas, National Association ("Bank One"), National City
Bank and the other lenders from time to time parties hereto (collectively, the
"Lenders"), Bank One as administrative agent for the Lenders (in such capacity,
the "Agent") and National City Bank as co-agent for the Lenders (in such
capacity, the "Co-Agent"). Each of the undersigned (i) acknowledges and
reaffirms its obligations under its Guaranty (collectively, the "Guaranties"),
and agrees that the Guaranties shall remain in full force and effect, and (ii)
agrees to fulfill the terms of Section 2 of the Amendment to the extent
applicable to its assets.

Dated as of September 29, 1998.

ADVANCED COMMUNICATIONS TECHNOLOGIES, INC.
COAST TO COAST LLC
ENVIRONMENTAL PROFESSIONAL ASSOCIATES LTD.
FIVE POINTS CONSTRUCTION COMPANY
GOLDEN STATE UTILITY CO.
HAMLIN ACQUISITION, INC.
NORAM TELECOMMUNICATIONS INC.
NORTH PACIFIC CONSTRUCTION COMPANY, INC.
PAR ELECTRICAL CONTRACTORS, INC.
POTELCO, INC.
QSI, INC.
QUANTA DELAWARE, INC.
QUANTA SERVICES MANAGEMENT PARTNERSHIP, L.P.
RT TELECOMMUNICATIONS, INC.
SMITH ACQUISITION DE, INC.
SPALJ CONSTRUCTION CO.
SPAN-CON OF DEERWOOD, INC.
SUMTER BUILDERS, INC.
TELECOM NETWORK SERVICES, INC.
TRANS TECH ELECTRIC, INC.
UNDERGROUND CONSTRUCTION COMPANY
UNION POWER CONSTRUCTION CO.
W.H.O.M. CORPORATION

By: /s/ Brad Eastman
-----------------------------------------
Name: Brad Eastman
-----------------------------------------
Title: Vice President and Assistant Secretary
-----------------------------------------

<PAGE>

EXHIBIT 10.7

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

SECURITIES PURCHASE AGREEMENT

AMONG

QUANTA SERVICES, INC.

AND

ENRON CAPITAL & TRADE RESOURCES CORP.
AND
JOINT ENERGY DEVELOPMENT INVESTMENTS II
LIMITED PARTNERSHIP

DATED AS OF SEPTEMBER 29, 1998

$49,350,000 CONVERTIBLE SUBORDINATED NOTES DUE 2010

===============================================================================
<PAGE>

TABLE OF CONTENTS

ARTICLE I
DEFINITIONS.............................................................. 1
Section 1.01 Definitions.............................................. 1
Section 1.02 Accounting Procedures and Interpretation................ 12

ARTICLE II
ISSUANCE OF SECURITIES; RIGHTS OF PURCHASERS............................ 12
Section 2.01 Issuance of Securities.................................. 12
Section 2.02 The Closing............................................. 12
Section 2.03 Delivery................................................ 12
Section 2.04 Payment................................................. 12
Section 2.05 Conversion.............................................. 13
Section 2.06 Right to Participate in Certain Issuances by Borrower... 13

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BORROWER.......................... 14
Section 3.01 Corporate Existence..................................... 14
Section 3.02 Borrower SEC Documents.................................. 15
Section 3.03 No Material Adverse Change.............................. 15
Section 3.04 Litigation.............................................. 16
Section 3.05 No Breach............................................... 16
Section 3.06 Authority............................................... 16
Section 3.07 Approvals............................................... 17
Section 3.08 Use of Loans............................................ 17
Section 3.09 Employee Benefit Matters................................ 17
Section 3.10 Taxes................................................... 17
Section 3.11 Assets.................................................. 18
Section 3.12 No Material Misstatements............................... 18
Section 3.13 Investment Company Act.................................. 18
Section 3.14 Public Utility Holding Company Act...................... 18
Section 3.15 No Violation............................................ 18
Section 3.16 Environmental Matters................................... 18
Section 3.17 Insurance............................................... 19
Section 3.18 Capitalization.......................................... 19
Section 3.19 Conversion Shares....................................... 20
Section 3.20 Certain Fees............................................ 20
Section 3.21 Licenses................................................ 20
Section 3.22 Undisclosed Liabilities................................. 20
Section 3.23 Labor Relations......................................... 20

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS........................ 21

-i-
<PAGE>

Section 4.01 Investment.............................................. 21
Section 4.02 Nature of Purchasers.................................... 21
Section 4.03 Receipt of Information; Authorization................... 21
Section 4.04 Anti-Hedging............................................ 22
Section 4.05 Restricted Securities................................... 22
Section 4.06 Certain Fees............................................ 22
Section 4.07 No Implied Representations.............................. 22
ARTICLE V
CLOSING ACTIONS......................................................... 22
Section 5.01 Closing................................................. 22

ARTICLE VI
AFFIRMATIVE COVENANTS................................................... 24
Section 6.01 Financial Statements and Reports........................ 24
Section 6.02 Maintenance, Etc........................................ 25
Section 6.03 Further Assurances...................................... 25
Section 6.04 Performance of Obligations.............................. 26
Section 6.05 Shares.................................................. 26
Section 6.06 Hart-Scott-Rodino Compliance............................ 26
Section 6.07 Board Representation.................................... 26
Section 6.08 Insurance............................................... 27

ARTICLE VII
NEGATIVE COVENANTS...................................................... 27
Section 7.01 Debt.................................................... 27
Section 7.02 Dividends, Distributions and Redemptions................ 27
Section 7.03 Nature of Business...................................... 27
Section 7.04 Proceeds of Notes....................................... 28
Section 7.05 ERISA Compliance........................................ 28
Section 7.06 Transactions with Affiliates............................ 28
Section 7.07 Negative Pledge Agreements.............................. 28

ARTICLE VIII
PAYMENT OF THE NOTES.................................................... 28
Section 8.01 Repayment............................................... 28
Section 8.02 Interest................................................ 28
Section 8.03 Payments and Computations............................... 30
Section 8.04 Mandatory Redemption.................................... 31
Section 8.05 Optional Redemption..................................... 31
Section 8.06 Subordination........................................... 32

ARTICLE IX
DEFAULT AND REMEDIES.................................................... 35
Section 9.01 Events of Default....................................... 35

-ii-
<PAGE>

Section 9.02 Remedies................................................ 36
Section 9.03 Set-Off................................................. 37

ARTICLE X
RELATIONSHIP OF THE PARTIES............................................. 37
Section 10.01 Objectives and Purpose.................................. 37
Section 10.02 Mutual Access and Cooperation........................... 38
Section 10.03 Term of This Article.................................... 39
Section 10.04 Protection of Employees................................. 39
Section 10.05 Confidentiality......................................... 39
Section 10.06 Relationships of the Parties............................ 40
Section 10.07 No Authority to Bind; No Fiduciary Relationship......... 41
Section 10.08 Publicity............................................... 41
Section 10.09 Business Opportunities.................................. 41
Section 10.10 Borrower's Business Opportunities....................... 42

ARTICLE XI
MISCELLANEOUS........................................................... 42
Section 11.01 Interpretation and Survival of Provisions............... 42
Section 11.02 Costs, Expenses and Taxes............................... 43
Section 11.03 No Waiver; Modifications in Writing..................... 45
Section 11.04 Binding Effect; Assignment.............................. 46
Section 11.05 Replacement Securities.................................. 47
Section 11.06 Communications.......................................... 47
Section 11.07 Governing Law........................................... 48
Section 11.08 Arbitration............................................. 48
Section 11.09 Execution in Counterparts............................... 48

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Exhibits:

Exhibit A - Form of Opinion of Counsel
Exhibit B - Form of Convertible Subordinated Notes

Schedules:

Schedule 3.01 - Subsidiaries
Schedule 3.03 - Material Adverse Change
Schedule 3.04 - Litigation
Schedule 3.07 - Approvals
Schedule 3.10 - Taxes
Schedule 3.16 - Environmental
Schedule 3.17 - Insurance
Schedule 3.18 - Capitalization
Schedule 3.21 - Licenses
Schedule 3.22 - Undisclosed Liabilities
Schedule 3.23 - Labor Relations

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SECURITIES PURCHASE AGREEMENT

SECURITIES PURCHASE AGREEMENT, dated as of September 29, 1998 (this
"Agreement"), among QUANTA SERVICES, INC., a Delaware corporation ("Borrower"),
ENRON CAPITAL & TRADE RESOURCES CORP., a Delaware corporation ("ECT") and JOINT
ENERGY DEVELOPMENT INVESTMENTS II LIMITED PARTNERSHIP, a Delaware limited
partnership ("JEDI-II").

In consideration of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:

ARTICLE I
DEFINITIONS

Section 1.01 Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:

"1/9 Principal" shall have the meaning specified in Section 8.04(a).

"AAA" shall have the meaning specified in Section 11.08.

"Acceptance Notice" shall have the meaning specified in Section 2.06(b).

"Acquisition" shall mean the acquisition by the Borrower of a "business" as
defined in Rule 11-01(d) of Regulation S-X adopted by the Commission.

"Action" against a Person means any lawsuit, action, proceeding,
investigation or complaint before any Governmental Authority, mediator or
arbitrator.

"Affiliate" of any Person shall mean (i) any Person directly or indirectly
controlled by, controlling or under common control with such first Person, (ii)
any director or officer of such first Person or of any Person referred to in
clause (i) above and (iii) if any Person in clause (i) above is an individual,
any member of the immediate family (including parents, spouse and children) of
such individual and any trust whose principal beneficiary is such individual or
one or more members of such immediate family and any Person who is controlled by
any such member or trust. For purposes of this definition, any Person which
owns directly or indirectly 20% or more of the securities having ordinary voting
power for the election of directors or other governing body of a corporation or
20% or more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person) will be deemed to
"control" (including, with its correlative meanings, "controlled by" and "under
common control with") such corporation or other Person.

"Arbitrators" shall have the meaning specified in Section 11.08.

"Base Rate" shall have the meaning specified in Section 8.02(a).

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"Basic Documents" means, collectively, this Agreement, the Notes, the
Structuring Fee Agreement, the Registration Rights Agreement, and any and all
other agreements or instruments executed and delivered to the holders of the
Notes by the Borrower or any Subsidiary or Affiliate of the Borrower on even
date herewith, or any amendments, supplements, continuations or modifications
thereto.

"Beneficial Ownership," "Beneficial Owner" and "Beneficially Own" shall
have the meanings ascribed to them in Rule 13d-3 under the Exchange Act in
effect on the date hereof.

"Blockage Period" means that period starting on the day the written notice
of a default is delivered pursuant to Section 8.06(c) by holders of Senior
Indebtedness or their applicable representative, and ending on the 180th day
after such written notice is delivered.

"Board of Directors" means the Board of Directors of the Borrower.

"Borrower SEC Documents" shall have the meaning specified in Section 3.02.

"Business Day" means any day other than a Saturday, Sunday, or a legal
holiday for commercial banks in Houston, Texas, or New York, New York.

"Capitalized Lease Obligations" means, for any Person, the amount of such
Person's liabilities under all leases of real or personal property (or any
interest therein) which is required to be capitalized on the balance sheet of
such Person as determined in accordance with GAAP.

"Capital Stock" of any Person means any and all shares, interests,
participations, or other equivalents (however designated) of, or rights,
warrants, or options to purchase, corporate stock or any other equity interest
(however designated) of or in such Person.

"Change in Control" shall be deemed to have occurred if (i) any Person
acquires, directly or indirectly, the Beneficial Ownership of any voting
security of the Borrower 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 the then outstanding voting
securities of Borrower entitled to vote generally in the election of directors;
or (ii) individuals who on the Closing Date constitute the Borrower's Board of
Directors, or their successors approved in accordance with the terms below,
cease for any reason to constitute at least a majority thereof, unless the
election or nomination for the election by the Borrower's stockholders of each
new director was approved by vote of at least 2/3rds of the directors then still
in office who were directors on the Closing Date or their successors approved in
accordance with the terms hereof.

"Closing" has the meaning provided therefor in Section 2.02.

"Closing Date" means the date upon which the Closing occurs as provided in
Section 2.02.

"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.

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"Commission" means the United States Securities and Exchange Commission.

"Common Stock" means the common stock, par value $0.00001 per share, of the
Borrower or such other class of securities as shall, after the date of this
Agreement, constitute the common equity of the Borrower.

"Confidential Information " shall have the meaning specified in Section
10.05(b)
.
"Consolidated Interest Expense" means, for any period, total interest
expense of the Borrower and its Subsidiaries on a consolidated basis for such
period in connection with Indebtedness, determined in accordance with GAAP.

"Consolidated Net Income" means, for any period, the net income (or loss),
after provision for taxes, of the Borrower and its Subsidiaries on a
consolidated basis for such period, determined in accordance with GAAP.

"Consolidated Subsidiaries" shall mean each Subsidiary of the Borrower
(whether now existing or hereafter created or acquired) the financial statements
of which shall be (or should have been) consolidated with the financial
statements of the Borrower.

"Conversion Date" shall mean the date that all the principal under the
Notes is converted into Conversion Shares as more fully provided for in Section
2.05.

"Conversion Shares" shall mean those shares of Capital Stock as such term
is defined in Section 3.19.

"Default" shall mean an Event of Default or an event which with notice or
lapse of time, or both, would become, an Event of Default.

"Delist" or "Delisted" shall mean the delisting of the shares of stock of a
corporation from the exchange such shares are traded on.

"Designee" shall have the meaning set forth in Section 6.07.

"Dispute" shall have the meaning specified in Section 11.08.

"DOJ" shall have the meaning specified in Section 6.06

"EBITDA" means, for any period, on a trailing four fiscal quarter basis,
(using the historical financial results of the Founding Companies, to the extent
necessary, for any period prior to the acquisition of the Founding Companies by
the Borrower on a pro forma basis, consistent with Commission regulations) the
sum of (i) Consolidated Net Income plus each of the following to the extent
actually deducted in determining Consolidated Net Income (a) Consolidated
Interest Expense, and (b) provisions for taxes based on income or revenues, plus
(ii) the amount of all depreciation, amortization expense and other non-cash
charges deducted in determining Consolidated Net Income,

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all calculated on a consolidated basis for the Borrower and its Subsidiaries and
as determined in accordance with GAAP. Upon the consummation of any Acquisition,
EBITDA shall be adjusted to include the historical financial results of the
acquired business (on a trailing four fiscal quarter pro forma basis consistent
with Commission regulations).

"Effective Date" means the date this Agreement is executed by all the
parties hereto.

"Employee Plan" means any employee benefit plan, program or policy
including thrift plans, stock purchase plans, stock bonus plans, stock options
plans, employee stock ownership plans or other incentive or profit sharing
arrangements for the benefit of employees, officers or directors of the Borrower
or its Affiliates, with respect to which the Borrower or any ERISA Affiliate may
have any liability or any obligation to contribute, including a Plan or a
Multiemployer Plan.

"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of non-
compliance or violations, formal investigations or proceedings relating to any
Environmental Law ("Claims") or any permit issued under any Environmental Law,
including, without limitation, (i) any and all claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and (ii)
any and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
a release or threatened release of Hazardous Materials.

"Environmental Laws" means any and all Government Requirements pertaining
to the environment in effect in any and all jurisdictions in which the Borrower
or any Subsidiary is conducting or at any time has conducted business, or where
any Property of the Borrower or any Subsidiary is located, including, without
limitation, the Oil Pollution Act of 1990 ("OPA"), as amended, the Clean Air
Act, as amended, the Comprehensive Environmental, Response, Compensation, and
Liability Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection laws. As used in the provisions hereof
relating to Environmental Laws, the term "oil" has the meaning specified in OPA;
the terms "hazardous substance" and "release" (or "threatened release") have the
meanings specified in CERCLA, and the terms "solid waste" and "disposal" (or
"disposed") have the meanings specified in RCRA; provided, however, that (i) in
the event either OPA, CERCLA or RCRA is amended so as to broaden the meaning of
any term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment, and (ii) to the extent the laws of the state
in which any Property of the Borrower or any Subsidiary is located establish a
meaning for "oil," "hazardous substance," "release," "solid waste" or "disposal"
which is broader than that specified in either OPA, CERCLA or RCRA, such broader
meaning shall apply.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.

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<PAGE>

"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Borrower or any Subsidiary of the Borrower
would be deemed to be a "single employer" within the meaning of Section
4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section 414 of the
Code.

"Event of Default" shall have the meaning assigned such term in Section
9.01.

"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and the rules and regulations of the Commission promulgated
thereunder.

"Exchangeable Securities" shall mean a security of any type, including but
not limited to debt, warrants or other rights, issued by the Borrower and
representing the right to acquire shares of Common Stock from the Borrower upon
exchange, conversion or exercise thereof.

"FTC" shall have the meaning specified in Section 6.06.

"Financial Statements" means the financial statement or statements
described or referred to in Section 3.02.

"Fixed Charge Coverage Ratio" means, for any period, on a trailing four
fiscal quarter basis (using the historical financial results of the Founding
Companies, to the extent necessary, for any period prior to the acquisition of
the Founding Companies by the Borrower on a pro forma basis, consistent with
Commission regulations), the ratio of (i) the sum of, without duplication, (a)
EBITDA, minus (b) cash taxes, minus (c) all cash dividends, distributions or
payments made in respect of the Capital Stock of the Borrower to the extent
permitted hereunder; to (ii) the sum of, without duplication, (a) the portion of
Funded Debt due and payable within one (1) year of the date of determination,
plus (b) Consolidated Interest Expense for the four fiscal quarters then ended,
all calculated on a consolidated basis for the Borrower and its Subsidiaries and
as determined in accordance with GAAP. Upon the consummation of any
Acquisition, the Fixed Charge Coverage Ratio shall be determined including the
historical financial results of the acquired business (on a trailing four fiscal
quarter pro forma basis, consistent with Commission regulations).

"Founding Companies" means PAR Electrical Contractors, Inc., a Missouri
corporation, Union Power Construction Company, a Colorado corporation, TRANS
TECH Electric, Inc., an Indiana corporation and Potelco, Inc., a Washington
corporation.

"Funded Debt" means, as of any date of determination, the sum, without
duplication, of the following for the Borrower and its Subsidiaries: (i)
Indebtedness for borrowed money, all obligations evidenced by bonds, debentures,
notes or similar instruments, and purchase money obligations which in accordance
with GAAP would be shown on the consolidated balance sheet of the Borrower as a
liability, (ii) all reimbursement obligations relative to the face amount of all
drawn letters of credit issued for the account of the Borrower or any of its
Subsidiaries, and (iii) all Capitalized Lease Obligations.

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"GAAP" means generally accepted accounting principles in the United States
of America in effect from time to time.

"Governmental Authority" shall include the country, the state, county, city
and political subdivisions in which any Person or such Person's Property is
located or which exercises valid jurisdiction over any such Person or such
Person's Property, and any court, agency, department, commission, board, bureau
or instrumentality of any of them including monetary authorities which exercises
valid jurisdiction over any such Person or such Person's Property. Unless
otherwise specified, all references to Governmental Authority herein shall mean
a Governmental Authority having jurisdiction over, where applicable, the
Borrower, the Subsidiaries or any of their Property or any Purchaser.

"Government Requirement" means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement
(in the case of banking regulatory authorities whether or not having the force
of law), including without limitation, Environmental Laws, energy regulations
and occupational, safety and health standards or controls of any Governmental
Authority.

"Guaranty" by any Person means all contractual obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business) of such Person guarantying any Indebtedness, dividend or other
obligation (including, without limitation, obligations in connection with sales
of any property) of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, all obligations
incurred through an agreement, contingent or otherwise, by such Person: (i) to
purchase such Indebtedness or obligation, or to purchase any property or assets
constituting security therefor, primarily for the purpose of assuring the owner
of such Indebtedness or obligations of the ability of the primary obligor to
make payment of the Indebtedness or obligation; or (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, or (y)
to maintain working capital or other balance sheet condition, or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, in each case primarily for the purpose of assuring the owner of
such Indebtedness or obligation of the ability of the primary obligor to make
payment of the Indebtedness or obligation; or (iii) to lease property or to
purchase securities or other property or services of the primary obligor
primarily for the purpose of assuring the owner of such Indebtedness or
obligation of the ability of the primary obligor to make payment of the
Indebtedness or obligation; or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purpose of all computations made under this Agreement, the
amount of a Guaranty in respect of any obligation shall be deemed to be equal to
the amount that would apply if such obligation were the direct obligation of
such Person rather than the primary obligor or, if less, the maximum aggregate
potential liability of such Person under the terms of the Guaranty.

"Hazardous Material" shall have the meaning assigned to the term Hazardous
Substance in the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Acts of
1986, and shall include any substance

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defined as "hazardous" or "toxic" or words used in place thereof under any
Environmental Law applicable to the Borrower or any of its Subsidiaries.

"HSR Act" shall have the meaning specified in Section 6.06.

"HSR Fees" shall have the meaning specified in Section 11.02(e).

"Indebtedness" means, for any Person, the following obligations of such
Person, without duplication: (i) obligations of such Person for borrowed money;
(ii) obligations of such Person representing the deferred purchase price of
property or services other than accounts payable arising in the ordinary course
of business and other than amounts which are being contested in good faith and
for which reserves in conformity with GAAP have been provided; (iii) obligations
of such Person evidenced by bonds, notes, bankers acceptances, debentures or
other similar instruments of such Person or reimbursement obligations or other
obligations with respect to letters of credit issued for such Person's account
or letters of credit issued pursuant to such Person's application therefor;
(iv) obligations of other Persons, whether or not assumed, secured by Liens upon
property or payable out of the proceeds or production from property now or
hereafter owned or acquired by such Person, but only to the extent of such
property's fair market value; (v) Capitalized Lease Obligations of such Person;
(vi) obligations under Interest Rate Protection Agreements and under hedge,
swap, exchange, forward, future, collar or cap arrangements, fixed price
agreements and all other agreements or arrangements designed to protect against
fluctuations in commodity prices and currency exchange rates; and (vii)
obligations of such person pursuant to a Guaranty of any of the foregoing of
another Person. For purposes of this Agreement, the Indebtedness of any Person
shall include the Indebtedness of any partnership or joint venture to which such
Person is a party, to the extent the holder of such Indebtedness has recourse to
such Person.

"Indemnified Party" shall have the meaning specified in Section 11.02(d).

"Indemnity Matters" shall have the meaning specified in Section 11.02(a).

"Interest Expense" means interest on the Notes, and for purposes of this
definition, shall be calculated at the cash interest rate, whether paid in cash
or in kind.

"Interest Rate Protection Agreement" means any hedge, swap, exchange,
forward, future collar or cap arrangements, fixed price agreements or other
agreements or arrangements designed to protect against fluctuations in interest
rates.

"Legal Fees" shall have the meaning specified in Section 11.02(e).

"Licenses" shall have the meaning specified in Section 3.21.

"Lien" means any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement,

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conditional sale or trust receipt or a lease, consignment or bailment for
security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting Property. For the
purpose of this Agreement, a Person shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale agreement,
or leases under a financing lease or other arrangement pursuant to which title
to the Property has been retained by or vested in some other Person in a
transaction intended to create a financing.

"Lost Interest" shall have the meaning specified in Section 8.02(d).

"Majority Holders" means, at any time, the Purchasers or holders of more
than 66 2/3% of the principal owing under the Notes.

"Mandatory Redemption" shall mean the obligation of Borrower to redeem the
Notes as more fully set forth in Section 8.04(a).

"Mandatory Redemption Dates" shall mean the effective dates of any
Mandatory Redemption.

"Material Adverse Effect" means any material and adverse effect on (i) the
assets, liabilities, financial condition, business, operations or affairs of the
Borrower and its Subsidiaries taken as a whole, from those reflected in the
Financial Statements or from the facts represented or warranted in any Basic
Document, (ii) the ability of the Borrower and its Subsidiaries taken as a whole
to carry out their business as of the Closing Date or as proposed as of the
Closing Date to be conducted to meet their obligations under the Basic Documents
on a timely basis or (iii) the ability of the Borrower to consummate the
transactions under this Agreement and the other Basic Documents.

"Maturity Date" means June 30, 2010.

"Maximum Rate" means at any particular time in question, the maximum
nonusurious rate of interest, if any, which under applicable law may then be
charged on the Notes. If such maximum rate changes after the date hereof, the
Maximum Rate shall be automatically increased or decreased, as the case may be,
without notice to the Borrower from time to time as the effective date of each
change in such maximum rate.

"Multiemployer Plan" means a Plan defined as such in Section 3(37) or
4001(a)(3) of ERISA.

"Note Payments" shall have the meaning specified in Section 8.06(b).

"Notes" means the Convertible Subordinated Notes of the Borrower issued
pursuant to Section 2.01 of this Agreement, in the aggregate principal amount of
$49,350,000, made by the Borrower and payable to the order of the Purchasers as
follows: (i) a $12,337,500.00 promissory note payable to ECT and (ii) a
$37,012,500.00 promissory note payable to JEDI-II.

"Notice Giver" shall have the meaning specified in Section 6.06.

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"NYSE" shall have the meaning set forth in Section 9.01(j).

"Obligations" means any and all amounts, liabilities and obligations owing
from time to time by Borrower to the Purchasers, pursuant to any of the Basic
Documents and all renewals, extensions and/or rearrangements thereof, whether
such amounts, liabilities or obligations be liquidated or unliquidated, now
existing or hereafter arising, absolute or contingent.

"Offer Notice" shall have the meaning specified in Section 2.06(b).

"Optional Redemption" shall mean the rights of Borrower to redeem the Notes
as more fully set forth in Section 8.05.

"Optional Redemption Notice" shall have the meaning specified in Section
8.05.

"Optional Redemption Right" shall have the meaning specified in Section
8.05.

"Participation" means, for each Purchaser, such Purchaser's proportionate
share pertaining to the Obligations. As of the Effective Date, ECT's
Participation shall be 25% and JEDI-II's Participation shall be 75%.

"Person" means any individual, corporation, company, voluntary association,
partnership, joint venture, trust, limited liability company, unincorporated
organization or government or any agency, instrumentality or political
subdivision thereof, or any other form of entity.

"Plan" means any employee pension benefit plan, as defined in Section 3(2)
of ERISA, which (i) is currently or hereafter sponsored, maintained or
contributed to by the Borrower, any Subsidiary or an ERISA Affiliate or (ii) was
at any time during the preceding six calendar years sponsored, maintained or
contributed to, by the Borrower, any Subsidiary or an ERISA Affiliate.

"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

"Public Offering" shall mean a firm commitment underwritten public offering
registered under the Securities Act pursuant to a registration statement which
has been declared effective by the Commission under the Securities Act.

"Purchasers" means ECT and JEDI-II and/or, to the extent then applicable,
each assignee of ECT or JEDI-II or their respective successors or assigns
pursuant to Section 11.04.

"Purchaser's Account" means for any Purchaser, the account specified by
such Purchaser as its Purchaser's Account by notice in writing to the Borrower.

"Qualified Foreign Subsidiaries" means any Subsidiaries which have the
following characteristics:

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(i) incorporated under the laws of any country or state other than
the United States of America or any state thereof;

(ii) the sum of the Acquisition price and any investment or loans by
the Borrower or any other Subsidiary of the Borrower is less
than or equal to $15,000,000; and

(iii) any Indebtedness of the Subsidiary is not supported by (i) any
Guaranties of the Borrower or any other of its Subsidiaries or
(ii) any other collateral support (other than Borrower pledging
the stock of the Subsidiary or a loan from Borrower to a
Subsidiary) of the Borrower or any other of its Subsidiaries.

"Redemption Price" shall mean, with respect to any Note or a portion
thereof, the Principal amount thereof to be redeemed in whole or in part, plus
the applicable premium, if any, payable upon redemption thereof pursuant to the
terms hereof.

"Redemption Notice" shall have the meaning specified in Section 8.04(b).

"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the date hereof, made by the Borrower in favor of the Purchasers
relating to the Conversion Shares.

"Related Parties" shall have the meaning specified in Section 11.02(a).

"Response Period" shall have the meaning specified in Section 8.05.

"Responsible Officer" means, as to any Person, the Chief Executive Officer,
the President or any Vice President of such Person and the Chief Financial
Officer of such Person. Unless otherwise specified, all references to a
Responsible Officer herein shall mean a Responsible Officer of the Borrower.

"Representatives" shall have the meaning specified in Section 10.05(a).

"Securities" means the Notes and, when issued, the Conversion Shares.

"Securities Act" means the Securities Act of 1933, as amended from time to
time, and the rules and regulations of the Commission promulgated thereunder.

"Securities Holders" shall have the meaning specified in Section 2.06(a).

"Senior Credit Agreement" means the Credit Agreement dated as of August 3,
1998, among the Borrower, the Senior Loan Agents, and the Senior Lenders, as it
may from time to time be amended, modified, supplemented or increased from time
to time, and any Credit Agreement or similar agreement executed in connection
with any refinancing of the Senior Loan permitted hereunder.

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"Senior Indebtedness" shall mean all obligations, including the obligation
to pay principal and accrued interest, arising under the Senior Loan Documents.

"Senior Loan Agents" means Bank One, Texas, National Association and
National City Bank, and any substitute agent, as agents under the Senior Credit
Agreement, and any agent, if any, under any refinancing arrangement of the
Senior Loan permitted hereunder.

"Senior Lenders" means each of the lenders from time to time under the
Senior Credit Agreement.

"Senior Loan" shall mean, collectively, any advance or advances of
principal made by the Senior Lenders to the Borrower under the Senior Credit
Agreement and the other Senior Loan Documents and all accrued but unpaid
interest thereon.

"Senior Loan Documents" means the Senior Credit Agreement and all
promissory notes, collateral documents and other agreements, documents and
instruments executed or delivered in connection therewith, as such agreements
may be amended, modified or supplemented from time to time.

"Share Issuance Obligations" shall have the meaning specified in Section
3.18.

"Special Entity" means any joint venture, limited liability company or
partnership, general or limited partnership or any other type of partnership or
company other than a corporation, in which a Person or one or more of its other
Subsidiaries is a member, owner, partner or joint venturer and owns, directly or
indirectly, at least a majority of the equity of such entity or controls such
entity, but excluding any tax partnerships that are not classified as
partnerships under state law. For purposes of this definition, any Person which
owns directly or indirectly an equity investment in another Person which allows
the first Person to manage or elect managers who manage the normal activities of
such second Person will be deemed to "control" such second Person (e.g.,a sole
general partner controls a limited partnership).

"Structuring Fee Agreement" means the agreement between the Borrower and
ECT Securities Limited Partnership dated as of the date hereof.

"Subsidiary" means (i) any corporation of which at least a majority of the
outstanding shares of stock having by the terms thereof ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether or not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by a
Person or one or more of its Subsidiaries or by a Person and one or more of its
Subsidiaries and (ii) any Special Entity. Unless otherwise indicated herein,
each reference to the term "Subsidiary" shall mean a Subsidiary of the Borrower.

Section 1.02 Accounting Procedures and Interpretation. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting

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matters hereunder shall be made, and all financial statements and certificates
and reports as to financial matters required to be furnished to the Purchasers
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q
promulgated by the Commission) and in compliance as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto.

ARTICLE II
ISSUANCE OF SECURITIES; RIGHTS OF PURCHASERS

Section 2.01 Issuance of Securities. Subject to the terms and conditions
herein set forth, the Borrower agrees that it will issue the Notes to the
Purchasers and the Purchasers agree that they shall each purchase the Notes from
the Borrower in their respective Participations, for an aggregate cash
consideration of $49,350,000.

Section 2.02 The Closing. The execution of the Basic Documents, delivery
of the Notes by the Borrower to the Purchasers, payment by the Purchasers to the
Borrower of the consideration therefor as set forth in Section 2.01 and all
other instruments required pursuant to Section 5.01, will take place at a
closing (the "Closing") to be held at the offices of Bracewell & Patterson,
L.L.P. The date and time at which the Closing occurs is the "Closing Date".

Section 2.03 Delivery. Delivery of the Notes pursuant to this Agreement
shall be made on the Closing Date by the Borrower delivering to the Purchasers,
against payment of the purchase price therefor, one Note executed by the
Borrower in the principal amount of $12,337,500.00, payable to the order of ECT
and one Note executed by the Borrower in the principal amount of $37,012,500.00,
payable to the order of JEDI-II.

Section 2.04 Payment. Payment of the consideration for the Notes shall
be made by wire transfer of immediately available funds to such account of the
Borrower as shall have been designated to the Purchasers on the Closing Date.

Section 2.05 Conversion. Each holder of a Note shall have the right, at
such holder's option, to convert such Note into shares of Common Stock upon the
terms and conditions including antidilution adjustments as more fully specified
in the Notes and after making all required antidilution adjustments.

Section 2.06 Right to Participate in Certain Issuances by Borrower.

(a) For so long as (i) ECT or JEDI-II is the Beneficial Owner of
Notes or Conversion Shares or (ii) any party is the Beneficial Owner of twenty
(20%) percent of the aggregate of all Conversion Shares issued or issuable upon
conversion of the Notes and such party acquired Notes and/or Conversion Shares
in a private transaction excluding resales under rule 144 of the Securities Act
(collectively, the "Securities Holders"), the Borrower shall not issue any
shares of Common Stock or any Exchangeable Securities, for any consideration or
in any type of transaction,

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unless the Borrower shall have first complied with, in the case of an issuance
other than pursuant to a Public Offering, the provisions of Section 2.06(b) or,
in the case of a Public Offering, the provisions of Section 2.06(c).

(b) If the Borrower determines to issue any shares of Common Stock or
any Exchangeable Securities, other than in a Public Offering, then the Borrower
shall provide written notice ("Offer Notice") of such determination to the
Securities Holders, which notice shall include all the terms of such issuance
and shall offer to the Securities Holders the right to purchase, at the same
price and on the same terms as the Borrower proposes to issue such shares of
Common Stock or Exchangeable Securities to others (or, if the Borrower proposes
to issue such shares of Common Stock or any Exchangeable Securities other than
for cash, at a price equal to the fair market value of the assets acquired by
the Borrower (as determined in good faith by agreement between the Borrower and
the Securities Holders, or if the parties are unable to agree, by an investment
banking firm or other asset valuation firm of national reputation selected by
the Borrower and the Securities Holders, the cost of which shall be borne by the
Borrower) divided by either the number of shares of Common Stock or Exchangeable
Securities issued in exchange for such assets), a number or amount of the shares
of Common Stock or Exchangeable Securities that represents the right to acquire
upon exercise, exchange or conversion of such Exchangeable Securities, a number
of shares of Common Stock so that, upon closing of the transaction, the
Securities Holders will Beneficially Own the same percentage of the then to be
outstanding Common Stock as was Beneficially Owned prior to the transaction
closing. If the Securities Holders determine to accept the offer contained in
the Offer Notice, the Securities Holders shall deliver a written notice to the
Borrower indicating its acceptance within 30 days after its receipt of the Offer
Notice or such longer period as is available to others, which notice shall
indicate whether the Securities Holders have accepted such offer in whole or in
part, and, if accepted in part, the number or amount of shares of Common Stock
or Exchangeable Securities as to which such offer has been accepted (an
"Acceptance Notice"). Any acceptance of the offer contained in an Offer Notice
by delivery of an Acceptance Notice shall be irrevocable and shall constitute a
commitment by the Securities Holders to purchase from the Borrower, and by the
Borrower to sell to the Securities Holders the number or amount of shares of
Common Stock or Exchangeable Securities covered by such Acceptance Notice upon
the terms contained in the Offer Notice.

(c) If at any time and from time to time, the Borrower determines to
issue any shares of Common Stock or any Exchangeable Security in a Public
Offering, then (y) the Borrower shall provide written notice of such offering to
the Securities Holders, which notice shall include the proposed size and other
terms of such issuance, to the extent then known, the name or names of any
managing underwriter or placement agent(s) and the date when it is proposed that
any such issuance will be made, and (z) the Borrower shall either sell directly
or cause the underwriters or placement agent(s) to offer to the Securities
Holders the right to purchase from the Borrower directly or from the
underwriters or placement agent(s), at the applicable offering price, a number
or amount of the shares of Common Stock, Exchangeable Securities or other
securities proposed to be issued such that, if purchased by to the Securities
Holders, it would permit such holders to Beneficially Own the same percentage of
the then to be outstanding Common Stock as was Beneficially Owned prior to the
Public Offering.

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(d) Notwithstanding the foregoing, the rights set forth in this
Section 2.06 shall not be exercisable on the issuance of shares of the Common
Stock or Exchangeable Securities as follows:

(i) in connection with an issuance pursuant to an Acquisition;
or

(ii) in connection with an issuance pursuant to an Employee Plan.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BORROWER

The Borrower represents and warrants to the Purchasers, for the benefit of
each of the holders of the Notes, which representations and warranties shall
survive the execution of any Basic Document for a period of two years, that as
of the date of this Agreement:

Section 3.01 Corporate Existence. The Borrower: (i) is a corporation
duly organized, legally existing and in good standing under the laws of the
State of Delaware; (ii) has all requisite power, and has all material
governmental licenses, authorizations, consents and approvals necessary to own
its assets and carry on its business as now being or as proposed to be
conducted; and (iii) is qualified to do business in all jurisdictions in which
the nature of the business conducted by it makes such qualifications necessary
and where failure so to qualify would have a Material Adverse Effect. Neither
the Borrower nor any of its Subsidiaries is in default in the performance,
observance or fulfillment of any provision of, in the case of the Borrower, its
Certificate of Incorporation, as amended and restated, or Bylaws, or, in the
case of any Subsidiary, its Certificate of Incorporation, Bylaws or other
organizational documents. Schedule 3.01 identifies each Subsidiary of the
Borrower and the ownership of all outstanding Capital Stock of each such
Subsidiary. Each of the Borrower's Subsidiaries that is a corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State or other jurisdiction of its incorporation and has all requisite
power, and has all material governmental licenses, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being or
as proposed to be conducted. Each of the Borrower and each of its Subsidiaries
that is a corporation is duly qualified or licensed and in good standing as a
foreign corporation, and is authorized to do business, in each jurisdiction in
which the ownership or leasing of its respective properties or the character of
its respective operations makes such qualification necessary, except where the
failure to obtain such qualification, license, authorization or good standing
would not have a Material Adverse Effect. Each Subsidiary of the Borrower that
is not a corporation has been duly formed and is duly qualified or licensed and
authorized to do business in each jurisdiction in which the ownership or leasing
of its respective properties or the character of its respective operations makes
such qualification necessary, except where the failure to obtain such
qualification, license or authorization would not have a Material Adverse
Effect.

Section 3.02 Borrower SEC Documents. Borrower has timely filed with the
Commission all forms, registrations and proxy statements, reports, schedules and
statements required to be filed by it since December 31, 1997 under the Exchange
Act or the Securities Act (all documents filed

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since such date, collectively "Defined Terms Borrower SEC Documents"). The
Borrower SEC Documents, including, without limitation, any financial statements
or schedules included therein, at the time filed (in the case of registration
statements and proxy statements, solely on the dates of effectiveness and the
dates of mailing, respectively) (except to the extent corrected by a
subsequently filed Borrower SEC Document which such filing is made prior to the
Closing Date) (i) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (ii) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be. The financial statements of Borrower included in the Borrower SEC
Documents at the time filed (and, in the case of registration statements and
proxy statements, solely on the date of effectiveness and the date of mailing,
respectively) complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited statements, as permitted by Form
10-Q of the Commission), and fairly present (subject in the case of unaudited
statements to normal, recurring and year-end audit adjustments) in all material
respects the consolidated financial position of Borrower as at the dates thereof
and the consolidated results of its operations and cash flows for the periods
then ended.

Section 3.03 No Material Adverse Change. Except as set forth in or
contemplated by the Borrower SEC Documents filed with the Commission as of the
date hereof or in Schedule 3.03, since June 30, 1998, each of Borrower and its
Subsidiaries has conducted its business in the ordinary course, consistent with
past practice, and there has been no (i) material adverse change in the business
or financial condition of Borrower and its subsidiaries taken as a whole, other
than those occurring as a result of general economic or financial conditions or
other developments which are not unique to Borrower and its subsidiaries but
also affect other Persons who participate or are engaged in the lines of
business of which Borrower and its subsidiaries participate or are engaged, (ii)
material adverse effect on the ability of Borrower to consummate the
transactions contemplated hereby, (iii) declaration, setting aside or payment of
any dividend or other distribution with respect to the Borrower's capital stock,
(iv) acquisition or disposition of any material asset by the Borrower or any of
its Subsidiaries or any contract or arrangement therefore, otherwise than for
fair value in the ordinary course of business or as disclosed in the Borrower
SEC Documents, or (v) material change in the Borrower's accounting principles,
practices or methods.

Section 3.04 Litigation. Except as set forth in the Borrower SEC
Documents or as disclosed to the Purchasers in Schedule 3.04, there is no Action
pending or, to the knowledge of the Borrower, contemplated or threatened against
or affecting the Borrower, any of its Subsidiaries or any of their respective
officers, directors, properties or assets, which relates to or challenges the
legality, validity or enforceability of this Agreement, any of the Basic
Documents or any other documents or agreements executed or to be executed by the
Borrower pursuant hereto or thereto or in connection herewith or therewith, or
which (individually or in the aggregate) reasonably could be expected to have a
Material Adverse Effect.

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Section 3.05 No Breach. The execution, delivery and performance by the
Borrower of this Agreement, the Basic Documents and all other agreements and
instruments to be executed and delivered by the Borrower pursuant hereto or
thereto or in connection herewith or therewith, compliance by the Borrower with
the terms and provisions hereof and thereof, the issuance of the Notes by the
Borrower and the application of the proceeds thereof in compliance herewith do
not and will not (a) violate any provision of any law, statute, rule or
regulation, order, writ, judgment, injunction, decree, governmental permit,
determination or award having applicability to the Borrower or any of its
Subsidiaries or any of their respective properties or assets, (b) conflict with
or result in a violation of any provision of the charter or bylaws of the
Borrower or its Subsidiaries, (c) require any consent (other than consents set
forth on Schedule 3.07), approval or notice under or result in a violation or
breach of or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under (i) any note, bond, mortgage, license, or loan or credit agreement to
which the Borrower or any of its Subsidiaries is a party or by which the
Borrower or any of its Subsidiaries or any of their respective properties may be
bound or (ii) any other such agreement, instrument or obligation, or (d) result
in or require the creation or imposition of any Lien upon or with respect to any
of the properties now owned or hereafter acquired by the Borrower or any of its
Subsidiaries; with the exception of the conflicts stated in clause (b) of this
Section 3.05, except where such conflict, violation, default, breach,
termination, cancellation, failure to receive consent or approval, or
acceleration with respect to the foregoing provisions of this Section 3.05 would
not, individually or in the aggregate, reasonably be likely to have a Material
Adverse Effect.

Section 3.06 Authority. The Borrower has all necessary power and
authority to execute, deliver and perform its obligations under the Basic
Documents to which it is a party; and the execution, delivery and performance by
the Borrower of the Basic Documents to which it is a party, have been duly
authorized by all necessary action on its part; and the Basic Documents
constitute the legal, valid and binding obligations of the Borrower, enforceable
in accordance with their terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer and similar laws affecting
creditors' rights generally or by general principles of equity. No approval
from the stockholders of the Borrower is required as a result of the listing of
the Conversion Shares with the NYSE.

Section 3.07 Approvals. Except as set forth on Schedule 3.07, no
authorization, consent, approval, waiver, license, qualification or written
exemption from, nor any filing, declaration, qualification or registration with,
any Governmental Authority (including any filing with the Federal Trade
Commission or the Department of Justice pursuant to the HSR Act) or any other
Person is required in connection with the execution, delivery or performance by
the Borrower of this Agreement or any of the Basic Documents or the issuance by
the Borrower of the Notes or the Conversion Shares, except where the failure to
receive such authorization, consent, approval, waiver, license, qualification or
written exemption from, or to make such filing, declaration, qualification or
registration would not, individually or in the aggregate, reasonably be likely
to have a Material Adverse Effect.

Section 3.08 Use of Loans. The purchase price of the Notes shall be used
solely (i) to pay principal and interest outstanding on the Senior Loan, (ii)
for Borrower's acquisition and capital

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expenditure program and (iii) for general corporate purposes. The Borrower is
not engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or ultimate,
or buying or carrying margin stock (within the meaning of Regulation G, U or X
of the Board of Governors of the Federal Reserve System) and no part of the
purchase price of the Notes will be used to buy or carry any margin stock.

Section 3.09 Employee Benefit Matters. The Borrower and its Subsidiaries
and each ERISA Affiliate are in compliance in all material respects with all
applicable provisions of ERISA or the Code and published interpretations
thereunder with respect to all Employee Plans which are subject to ERISA or the
Code, except where the failure to be in compliance would not reasonably be
likely to have a Material Adverse Effect. No breach or violation of or default
by the Borrower or any ERISA Affiliate under any Employee Plan has occurred
which is reasonably likely to have a Material Adverse Effect.

Section 3.10 Taxes. Except as set out in Schedule 3.10, the Borrower
and each of its Subsidiaries have timely and properly prepared and filed all
necessary federal, state, local and foreign tax returns with respect to the
Borrower and its Subsidiaries which are required to be filed (taking into
consideration any extension periods) and have paid when due all taxes shown to
be due thereon and have paid, or made adequate provision (in accordance with
GAAP) for the payment of, all other taxes and assessments with respect to the
Borrower and its Subsidiaries to the extent that the same shall have become due
(taking into consideration any extension periods), except where the failure to
file such returns or to pay, or make provision for the payment of, such taxes
and assessments would not have a Material Adverse Effect on the Borrower and its
Subsidiaries, taken as a whole. Except as set forth in Schedule 3.10, the
Borrower has no knowledge of any tax deficiency which has been asserted against
the Borrower or any Subsidiary which the Borrower reasonably expects to have a
Material Adverse Effect.

Section 3.11 Assets. Neither the Borrower nor any of its Affiliates is a
party to any contract, agreement, arrangement or understanding (other than this
Agreement and the agreements entered into hereunder) that by its terms purports
to obligate, restrict or otherwise bind the Purchasers (as Affiliates of the
Borrower or otherwise) including any area of mutual interest, exclusivity, non-
competition or other similar agreement.

Section 3.12 No Material Misstatements. None of the representations or
warranties made by Borrower herein or in any Schedule hereto, or certificate
furnished by Borrower pursuant to this Agreement, when all such documents are
read together in their entirety, contains any untrue statement of a material
fact, or omits to state any material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which made, not misleading.

Section 3.13 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.

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Section 3.14 Public Utility Holding Company Act. Neither the Borrower
nor any Subsidiary is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," or a "public utility" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.

Section 3.15 No Violation. Neither the Borrower nor any of its
Subsidiaries is (a) in violation of its charter or bylaws, (b) in default (nor
has an event occurred which with notice or passage of time or both would
constitute such a default) under or in violation of any provision of any loan or
credit agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties may be bound or (c) a party to any order
of any Governmental Authority arising out of any Action, which such violation,
default or action in clauses (b) and (c) could reasonably be expected to have a
Material Adverse Effect. Neither the Borrower nor any of its Subsidiaries is in
violation of any statute, rule or regulation of any Governmental Authority or
any governmental permit, which violation could reasonably be expected to
(individually or in the aggregate) (A) affect the legality, validity or
enforceability by the Purchasers of this Agreement or any of the Basic
Documents, or (B) have a Material Adverse Effect.

Section 3.16 Environmental Matters.

(a) Borrower and its Subsidiaries have complied with, and will be in
compliance with, all applicable Environmental Laws and the requirements of any
permits issued under such Environmental Laws except where failure to so comply
could not reasonably be expected to have a Material Adverse Effect. Except as
set forth in Schedule 3.16, to the knowledge of the Borrower, there are no
pending, past or threatened Environmental Claims against the Borrower or any of
its Subsidiaries or any property owned or operated by the Borrower or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect. To the knowledge of the Borrower, there are no conditions or
occurrences on or emanating from any property owned or operated by the Borrower
or any of its Subsidiaries or on any property adjoining or in the vicinity of
any such property that could reasonably be expected (i) to form the basis of an
Environmental Claim against the Borrower or any of its Subsidiaries or any
property owned or operated by the Borrower or any of its Subsidiaries, or (ii)
to cause any property owned or operated by the Borrower or any of its
Subsidiaries to be subject to any material restrictions on the ownership,
occupancy, the current or intended use or transferability of such property by
the Borrower or any of its Subsidiaries under any applicable Environmental Law
except for any such condition or occurrence described in clauses (i) or (ii)
which could not reasonably be expected to have a Material Adverse Effect.

(b) To the knowledge of the Borrower (i) Hazardous Materials have not
at any time been generated, used, treated or stored on, or transported to or
from, any property owned or operated by the Borrower or any of its Subsidiaries
in a manner that has violated or could reasonably be expected to violate any
Environmental Law, except for such violation which could not reasonably be
expected to have a Material Adverse Effect, and (ii) Hazardous Materials have
not at any time been released on or from any property owned or operated by the
Borrower or any of its Subsidiaries in a manner that has violated or could
reasonably be expected to violate any Environmental Law, except for such
violation which could not reasonably be expected to have a Material Adverse
Effect.

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<PAGE>

Section 3.17 Insurance. Except as set forth on Schedule 3.17, Borrower
and its Subsidiaries (for such time period after an entity became a Subsidiary
of the Borrower) have policies of property and casualty insurance and bonds of
the type and in amounts customarily carried by persons conducting business or
owning assets similar to those of the Borrower and its Subsidiaries. There is
no material claim pending under any of such policies or bonds as to which
coverage has been, nor any basis for Borrower to reasonably believe that a
material claim will be, questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums due and payable under all such policies
and bonds have been paid and Borrower and its Subsidiaries are otherwise in
compliance with the terms of such policies and bonds. Borrower has no knowledge
of any threatened termination of, or material premium increase with respect to,
any of such policies. Schedule 3.17 identifies all risks, if any, of the
Borrower or any of its Subsidiaries which are self insured which might have a
Material Adverse Effect.

Section 3.18 Capitalization. The authorized Capital Stock of the Borrower
consists of (a) 36,654,667 shares of Common Stock, par value $0.00001 per share,
of which 17,615,233 shares are issued and outstanding; (b) 3,345,333 shares of
Limited Vote Common Stock, par value $0.00001 per share, of which 3,345,333
shares are issued and outstanding; and (c) 10,000,000 shares of Preferred Stock,
$0.00001 per share, of which no shares are issued and outstanding. All
outstanding shares of Common Stock are validly issued, fully paid and
nonassessable and were issued free of preemptive rights. Except as set forth on
Schedule 3.18 or pursuant to the Borrower's 1997 Stock Option Plan, the Borrower
is not a party to any voting trust or other agreement with respect to the voting
of its Capital Stock. Except as set forth in Schedule 3.18 or under the
Borrower's 1997 Stock Option Plan for which there are 1,471,485 shares issuable
under currently outstanding options, there are no (i) outstanding securities
convertible into or exchangeable for Capital Stock of the Borrower or (ii)
contracts, commitments, agreements, understandings or arrangements of any kind
to which the Borrower is a party obligating the Borrower under any circumstance
to issue any Capital Stock, or any securities convertible into or exchangeable
for or rights to purchase or subscribe for Capital Stock of the Borrower, other
than this Agreement (the "Share Issuance Obligations"). Schedule 3.18
reasonably sets forth information regarding the Share Issuance Obligations.
Except as set forth on Schedule 3.18 neither the Borrower nor any of its
Subsidiaries is a party to or bound by any agreement with respect to any of its
securities which grants registration rights to any Person.

Section 3.19 Conversion Shares. The shares of Common Stock issuable upon
conversion of the Notes (the "Conversion Shares"), when issued and delivered in
accordance with the terms of the Notes, will be duly and validly issued, fully
paid, nonassessable, free of preemptive rights of other stockholders and free
from all Liens (except any Liens created or suffered to be created by the
Purchasers) and will not be subject to any restriction on the voting or transfer
thereof created by the Borrower, other than the restrictions set forth in
Section 4.01 and Section 4.04 of this Agreement. The Borrower has duly and
validly reserved the Conversion Shares for issuance upon conversion of the
Notes.

Section 3.20 Certain Fees. Except for the fees payable to ECT Securities
Limited Partnership pursuant to the Structuring Fee Agreement and except as
contemplated by this Agreement, no fees or commissions will be payable by the
Borrower to brokers, finders, investment bankers, or Purchasers with respect to
the issuance and sale of any of the Securities or the

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consummation of the transaction contemplated by this Agreement. The Borrower
agrees that it will indemnify and hold harmless the Purchasers from and against
any and all claims, demands, or liabilities for broker's, finders, placement, or
other similar fees or commissions incurred by the Borrower or alleged to have
been incurred by the Borrower in connection with the issuance or sale of the
Securities or the consummation of the transaction contemplated by this
Agreement.

Section 3.21 Licenses. Except as set forth in Schedule 3.21, each of the
Borrower and its Subsidiaries holds all licenses, franchises, permits, consents,
registrations, certificates and other approvals (including, without limitation,
those relating to environmental matters and worker health and safety)
(individually, a "License" and, collectively, "Licenses") required for the
conduct of its business as now being conducted, except where the failure to hold
any such License would not have a Material Adverse Effect.

Section 3.22 Undisclosed Liabilities. Except: (i) as and to the extent
disclosed or reserved against on the consolidated balance sheet of Borrower as
of June 30, 1998 or the notes thereto included in the Borrower SEC Documents or
otherwise disclosed in the Borrower SEC Documents filed with the Commission as
of the date hereof; (ii) those incurred in connection with the execution of the
Basic Documents; or (iii) as set forth in Schedule 3.22, neither Borrower nor
any of its subsidiaries have any liabilities or obligations of any nature,
whether known or unknown, absolute, accrued, contingent or otherwise and whether
due or to become due, and that would be required by GAAP to be disclosed and
that, individually or in the aggregate, have or would reasonably be expected to
have a Borrower Material Adverse Effect.

Section 3.23 Labor Relations. Except as disclosed on Schedule 3.23,
there is no unfair labor practice litigation involving the Borrower or any of
its subsidiaries either pending before the NLRB or a court or, to the knowledge
of Borrower, threatened against Borrower or any of its subsidiaries. Except as
disclosed on Schedule 3.23, there is no labor strike, dispute, slowdown or
stoppage, either pending or, to the knowledge of Borrower, threatened against
Borrower or any of its subsidiaries, nor has the Borrower experienced any such
labor interruptions over the past two years. The Borrower considers its
relationship with its employees to be good.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

Each of the Purchasers, severally and not jointly, represent and warrant to
the Borrower, which representations and warranties shall survive the execution
of any Basic Document, that as of the date of this Agreement:

Section 4.01 Investment. Each Purchaser represents and warrants to, and
covenants and agrees with, the Borrower that the Securities are being acquired
for its own account, not as a nominee or agent, and with no intention of
distributing or reselling the Notes or the Conversion Shares or any part thereof
and that such Purchaser has no present intention of selling or granting any
participation in or otherwise distributing the same in any transaction which
would be in violation of the securities laws of the United States of America or
any State, without prejudice, however, to Purchasers' right at all times to sell
or otherwise dispose of all or any part of the Notes or the Conversion Shares
under

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a registration statement under the Securities Act and applicable state
securities laws or under an exemption from such registration available
thereunder (including, without limitation, if available, Rule 144 promulgated
thereunder). If either Purchaser should in the future decide to dispose of any
of the Notes or the Conversion Shares, the Purchasers understand and agree (i)
that it may do so only (A) in compliance with the Securities Act and applicable
state securities law, as then in effect, and (B) in the manner contemplated by
any registration statement pursuant to which such securities are being offered,
and (ii) that stop-transfer instructions to that effect will be in effect with
respect to such securities. The Purchasers agree to the imprinting, so long as
appropriate, of a legend on each Note and on each certificate representing the
Conversion Shares, to the effect as set forth above.

Section 4.02 Nature of Purchasers. Each Purchaser represents and
warrants to, and covenants and agrees with, the Borrower that, (i) it is an
"accredited investor" within the meaning of paragraphs (a)(3) or (8) of Rule 501
under the Securities Act and (ii) by reason of its business and financial
experience it has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Securities, is able to bear the economic risk of
such investment and, at the present time, would be able to afford a complete
loss of such investment.

Section 4.03 Receipt of Information; Authorization. Each Purchaser
acknowledges that it has had access to information regarding the business,
assets, operations, financial condition and results of operations of the
Borrower and has been provided a reasonable opportunity to ask questions of and
receive answers from representatives of the Borrower regarding such matters.
Each Purchaser further acknowledges that it is experienced in investing in
corporations and businesses. Each Purchaser represents and warrants that the
purchase of the Securities by it has been duly and properly authorized and this
Agreement and each Basic Document to which the Purchasers are a signatory has
been duly executed and delivered by it or on its behalf.

Section 4.04 Anti-Hedging. Each Purchaser represents and warrants to,
and covenants and agrees with, the Borrower that each of the Purchasers will not
at any time, prior to the Mandatory Redemption Date engage in any put, call,
short-sale, hedge, straddle or similar transactions in Borrower's Capital Stock
intended to reduce the Purchaser's risk of owning Borrower's Capital Stock
excluding index options or similar basket hedges.

Section 4.05 Restricted Securities. Each Purchaser understands that the
Securities it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the
Borrower in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Securities Act, only in certain limited circumstances.
In this connection, such Purchaser represents that it is familiar with Rule 144
of the Commission promulgated under the Securities Act.

Section 4.06 Certain Fees. No fees or commissions will be payable by the
Purchasers to brokers, finders, or investment bankers with respect to the
purchase of any of the Securities or the consummation of the transaction
contemplated by this Agreement. Each Purchaser agrees that it will, jointly and
severally, indemnify and hold harmless the Borrower from and against any and all
claims, demands, or liabilities for broker's, finders, placement, or other
similar fees or commissions

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incurred by the Purchasers or alleged to have been incurred by the Purchasers in
connection with the purchase of the Securities or the consummation of the
transaction contemplated by this Agreement.

Section 4.07 No Implied Representations. Notwithstanding anything to the
contrary contained in this Agreement, it is the express understanding of the
Purchasers that the Borrower is not making any representation or warranty
whatsoever, express or implied, other than those representations and warranties
of Borrower expressly set forth in this Agreement.

ARTICLE V
CLOSING ACTIONS

Section 5.01 Closing. At Closing, the following shall occur:

(a) The Purchasers shall receive the following, each in form and
substance satisfactory to the Purchasers and in sufficient counterparts:

(i) Duly executed counterparts of this Agreement signed by all
the parties hereto.

(ii) The duly executed Structuring Fee Agreement and the
Registration Rights Agreement, dated as of the Closing Date in form and
substance satisfactory to Purchasers.

(iii) Certificates of good standing as to the Borrower issued by
the Secretary of State of its state of incorporation.

(iv) The duly executed certificate of the Secretary of the
Borrower setting forth (1) resolutions of its directors in form and
substance reasonably satisfactory to the Purchasers with respect to the
authorization of this Agreement and the other Basic Documents to which it
is a party and the transactions contemplated hereby and thereby; (2) the
names and true signatures of the officers authorized to sign such
instruments; and (3) copies of the articles or certificate of incorporation
and the bylaws of the Borrower.

(v) Any other document which the Purchasers may reasonably
request, including opinions addressed to Purchasers, dated as of the
Closing Date, of Akin, Gump, Strauss, Hauer & Feld, L.L.P. and Brad
Eastman, each counsel for the Borrower, substantially in the forms of
Exhibit A-1 and A-2 hereto, respectively.

(b) The Borrower shall execute and deliver the Notes, in the form as
attached hereto as Exhibit B.

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(d) All other consents, including without limitation any required
shareholder approval, and waivers necessary to complete the transactions
under this Agreement and the other Basic Documents shall have been obtained
by the Borrower and the Purchasers.

(e) The Borrower shall pay to ECT Securities Limited Partnership all
payments required under the terms of the Structuring Fee Agreement.

(f) If requested in writing by either of the Purchasers, a Designee
of the Purchasers shall be nominated for election to the Board of Directors of
the Borrower pursuant to Section 6.07.

(g) The Borrower shall duly and validly reserve the Conversion Shares
for issuance upon conversion of the Notes.

(h) Each of the Basic Documents shall be executed and delivered by
all the respective parties thereto and shall be in full force and effect.

(i) The Borrower shall pay the Legal Fees.

(j) The Purchasers shall accept delivery of and make payment for the
Securities.

ARTICLE VI
AFFIRMATIVE COVENANTS

Unless the Majority Holders' prior written consent to the contrary is
obtained, the Borrower will, for the benefit of each of the Purchasers, at all
times comply with the covenants contained in this Article VI (or cause each
Subsidiary's compliance with the applicable covenants), from the date hereof
and, with the exception of the covenant in Section 6.07 which shall survive for
as long as either ECT or JEDI-II or their respective Affiliates are Beneficial
Owners of Conversion Shares in excess of 727,273 shares of Common Stock, subject
to equitable adjustment, for so long as any part of the principal under the
Notes is outstanding.

Section 6.01 Financial Statements and Reports. The Borrower shall
deliver, or shall cause to be delivered, to the Purchasers with sufficient
copies for each of the Purchasers:

(a) Annual Financial Statements. As soon as available and in any
event within 90 days after the end of each fiscal year of the Borrower, the
audited consolidated statements of income, stockholder's equity, changes in
financial position and cash flow of the Borrower and its Consolidated
Subsidiaries for such fiscal year, and the related consolidated balance sheets
of the Borrower and its Consolidated Subsidiaries as at the end of such fiscal
year, and setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, and accompanied by the related opinion of
independent public accountants of recognized national standing acceptable to the
Senior Agent (or in the absence of a Senior Loan, the Purchasers) which opinion
shall state that said financial statements fairly present the consolidated
financial condition and results of

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operations of the Borrower and its Consolidated Subsidiaries as at the end of,
and for, such fiscal year and that such financial statements have been prepared
in accordance with GAAP except for such changes in such principles with which
the independent public accountants shall have concurred and such opinion shall
not contain a "going concern" or like qualification or exception. The provisions
of this Section 6.01(a) shall be deemed satisfied as long as the Borrower timely
files financial statements in accordance with, and meeting the requirements of,
the Exchange Act, without extension.

(b) Quarterly Financial Statements. As soon as available and in any
event within 45 days after the end of each of the first three fiscal quarterly
periods of each fiscal year of the Borrower, consolidated statements of income,
stockholder's equity, changes in financial position and cash flow of the
Borrower and its Consolidated Subsidiaries for such period and for the period
from the beginning of the respective fiscal year to the end of such period, and
the related consolidated balance sheets as of the end of the prior fiscal year
and at the end of such period, accompanied by the certificate of a Responsible
Officer, which certificate shall state that said financial statements fairly
present the consolidated financial condition and results of operations of the
Borrower and its Consolidated Subsidiaries in accordance with GAAP, as at the
end of, and for, such period (subject to normal year-end audit adjustments).
The provisions of this Section 6.01(b) shall be deemed satisfied as long as the
Borrower timely files financial statements in accordance with, and meeting the
requirements of, the Exchange Act, without extension.

(c) Notice of Default. Promptly after the Borrower knows that any
Default or any Material Adverse Effect has occurred, a notice of such Default or
Material Adverse Effect, describing the same in reasonable detail and the action
the Borrower proposes to take with respect thereto.

(d) SEC Filings, Etc. Promptly upon its becoming available, each
financial statement, report, notice or proxy statement sent by the Borrower to
stockholders generally and each regular or periodic report and any registration
statement or prospectus in respect thereof filed by the Borrower with any
securities exchange or the Commission or any successor agency. The requirements
of this Section 6.01(d) shall deemed to be satisfied as to those documents which
are filed with the Commission, available generally to the public and not
distributed to the stockholders upon the timely filing of such documents with
the Commission.

(e) Other Matters. Subject to any applicable restrictions on
disclosure, from time to time such other information regarding the business,
affairs or financial condition of the Borrower (including, without limitation,
any Plan or Multiemployer Plan and any reports or other information required to
be filed under ERISA) as any Purchaser or the Purchasers may reasonably request;
provided, however, that the Borrower shall not be obligated pursuant to this
Section 6.01 to provide access to any information which it reasonably considers
to be a trade secret or similar confidential information.

Section 6.02 Maintenance, Etc. The Borrower shall and shall cause each
Subsidiary to: upon reasonable notice, permit representatives of the Purchasers,
during normal business hours, to examine, copy and make extracts from its
financial books and records, to inspect its Properties, and

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to discuss its business and affairs with its officers, all to the extent
reasonably required by the Purchasers; provided, however, that the Borrower
shall not be obligated pursuant to this Section 6.02 to provide access to any
information which it reasonably considers to be a trade secret or similar
confidential information; preserve and maintain its corporate existence and all
of its material attendant rights, privileges and franchises, keep appropriate
books of record and account in relation to its business and activities; comply
with all Governmental Requirements, including, without limitation, any
Environmental Laws, except where the failure to comply would not reasonably be
expected to have a Material Adverse Effect; pay and discharge all taxes,
assessments and governmental charges or levies imposed on it or on its income or
profits or on any of its Property, except for any such tax, assessment, charge
or levy the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained.

Section 6.03 Further Assurances. The Borrower will cure promptly any
defects in the creation and issuance of the Notes and the execution and delivery
of the Basic Documents. The Borrower at its expense will promptly execute and
deliver to the Purchasers, upon request, all such other documents, agreements
and instruments to correct any omissions in the Basic Documents or to make any
recordings, to file any notices or obtain any consents, all as may reasonably be
necessary or appropriate in connection therewith.

Section 6.04 Performance of Obligations. The Borrower will pay the Notes
according to the reading, tenor and effect thereof; and the Borrower will do and
perform every act and discharge all of the obligations to be performed and
discharged by them under the Basic Documents, at the time and times and in the
manner specified.

Section 6.05 Shares. Borrower shall at all times during the term of the
Notes maintain a sufficient number of shares of Common Stock of the Borrower to
be issued as Conversion Shares upon the exercise of all or part of the Notes.
The Borrower shall take such action as may be reasonably required to promptly
cause the Conversion Shares to be approved for listing on the NYSE, but in any
event, no later than ninety (90) days after the Closing Date.

Section 6.06 Hart-Scott-Rodino Compliance. As soon as practicable after
the receipt from either or both of the Purchasers (the "Notice Giver") of
notice of the conversion of the Notes as provided in Section 2.05, which
conversion would require a filing under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and the rules, regulations and formal interpretations
thereunder, as amended from time to time (the "HSR Act"), but in any event no
later than the 15th Business Day after receipt of such notice, the Borrower will
(i) prepare and file with the Antitrust Division of the Department of Justice
(the "DOJ") and the Federal Trade Commission (the "FTC") the Notification and
Report Form (accompanied by all documentary attachments contemplated thereby)
required by the HSR Act, (ii) upon the request of the Purchasers (the "Notice
Giver"), request early termination of the waiting period imposed by the HSR
Act, (iii) coordinate and cooperate with the Notice Giver in responding to
formal and informal requests for additional information and documentary material
from the DOJ and the FTC in connection with such filing, and (iv) use its best
efforts to take, or cause to be taken, all reasonable action and to do, or cause
to be done, all things reasonably necessary and appropriate to permit the
issuance to the Notice Giver of the shares of common stock issuable upon the
conversion of the Notes with respect to which any filing is required under the
HSR

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<PAGE>

Act, and (v) reimburse Purchasers for the entire amount of any filing fee and
any reasonable other costs and expenses incurred by Purchasers in connection
therewith (including legal fees), or as required to be paid under the HSR Act
and (vi) make payment of any HSR Fees payable by the Borrower or either of the
Purchasers.

Section 6.07 Board Representation. ECT and JEDI-II shall have the right
(a) to designate one member of the Board of Directors of the Borrower or (b) (i)
to designate one person to receive (and Borrower covenants and agrees to deliver
to such individual) prior notice of any proposed board action and to receive
(and Borrower covenants and agrees to deliver to such individual) reasonable
notice of and to attend any meeting of the Borrower's Board of Directors, (ii)
to receive (and Borrower covenants and agrees to deliver to such individual),
promptly after they are produced, subject to any confidentiality obligations,
all management reports and accounts relating to the Borrower that is provided to
the Board of Directors (or any committee thereof), (iii) upon reasonable notice,
to have reasonable access to the books and records, facilities and management of
the Borrower, including statutory books, minute books and customer lists and
(iv) receive copies of each written consent of directors and all related
information circulated to directors of the Borrower, in each case concurrently
with their delivery to the directors (the person so designated shall be the
"Designee"). In the event ECT and JEDI-II elect to designate a person to serve
as member of the Board of Directors of the Borrower, the Borrower shall (x)
expand as required the number of directors constituting the entire board, (y)
fill the vacancy created by such expansion with such Designee and (z) submit the
name of such Designee to the stockholders of the Borrower (together with a
recommendation of his or her election) at each meeting of stockholders at which
directors are elected, until requested otherwise by ECT and JEDI-II. To the
extent such Designee is not an employee, officer or director of ECT or any of
its Affiliates, the Borrower shall have the right to approve such Designee, such
approval not to be unreasonably withheld.

Section 6.08 Insurance. Borrower shall maintain such insurance as to
comply with all requirements of law and agreements to which the Borrower or any
subsidiary is a party and otherwise sufficient to adequately insure against such
risks as are usually insured against in the same general area by companies
engaged in the same or similar business for the assets and operations of the
Borrower and each Subsidiary.

ARTICLE VII
NEGATIVE COVENANTS

Unless the Majority Holders' prior written consent to the contrary is
obtained, for the benefit of the Note Holders, the Borrower will at all times
comply with the covenants contained in this Article VII (or cause each
Affiliate's compliance with the applicable covenants), from the date hereof and
for so long as any part of the principal under the Notes is outstanding:

Section 7.01 Debt. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume, guarantee or in any other manner become
directly or indirectly liable (as to new Indebtedness) for the payment of (a)
any Prohibited Subordinated Indebtedness, as hereafter defined, or (b) any other
Indebtedness unless the Borrower's Fixed Charge Coverage Ratio is greater than
or equal to the level permitted by the Senior Credit Agreement, but in no event
shall such ratio be less

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than 1.15 to 1.0. As used herein, "Prohibited Subordinated Indebtedness" shall
mean any Indebtedness that is either (i) both subordinated in payment to the
Senior Indebtedness in any manner and secured by a lien on all or any portion of
the Properties of the Borrower or any of its Subsidiaries or (ii) is a general
unsecured obligation of the Borrower and is subordinated to the Senior
Indebtedness pursuant to terms and covenants less restrictive than Section 8.06
of this Agreement.

Section 7.02 Dividends, Distributions and Redemptions. Neither the
Borrower or any Subsidiary will declare or pay any dividend, purchase, redeem or
otherwise acquire for value any of its stock now or hereafter outstanding,
return any capital to its stockholders or make any distribution of its assets to
its partners, except to Borrower or any Subsidiary, other than dividends,
purchases, redemptions or acquisitions payable solely in Borrower's Capital
Stock.

Section 7.03 Nature of Business. Neither the Borrower nor any Subsidiary
will engage in any line of business other than the specialty electric and
telecommunications infrastructure contracting service business, electrical and
telecommunications contracting services, installation of transportation,
control, lighting and airport fueling equipment and services or business
reasonably related thereto.

Section 7.04 Proceeds of Notes. The Borrower will not permit proceeds of
the Notes to be used for any purpose other than those permitted by Section 3.08.
Neither the Borrower nor any Person acting on behalf of the Borrower has taken
or will take any action which might cause any of the Basic Documents to violate
Regulation G, U or X or any other regulation of the Board of Governors of the
Federal Reserve System or to violate Section 7 of the Exchange Act or any rule
or regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect.

Section 7.05 ERISA Compliance. The Borrower will not at any time incur,
or permit any ERISA Affiliate to incur, a liability to or on account of a Plan
which, in the aggregate for all such liabilities, could have a Material Adverse
Effect.

Section 7.06 Transactions with Affiliates. Neither the Borrower nor any
Subsidiary will enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of Property or the rendering of any service,
with any Affiliate (other than the Purchasers if they are Affiliates of the
Borrower) unless such transactions are otherwise not in violation of this
Agreement, are in the ordinary course of its business and are upon fair and
reasonable terms no less favorable to it than it would obtain in a comparable
arm's length transaction with a Person not an Affiliate or unless such
transaction is approved by a majority of the disinterested members of the Board
of Directors.

Section 7.07 Negative Pledge Agreements. With the exception of Qualified
Foreign Subsidiaries, the Borrower will not and will not permit any Subsidiary
to create, incur, assume or suffer to exist any contract, agreement or
understanding (other than the Basic Documents) which in any way prohibits or
restricts any Subsidiary from paying dividends or making any other distribution
to the Borrower or which requires the consent of a notice to other Persons in
connection with any of the foregoing, other than the Senior Loan Documents, so
long as the Senior Loan Documents

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permit the payment of dividends and making of other distributions by the
Subsidiaries to the Borrower for the purpose of paying the Obligations.

ARTICLE VIII
PAYMENT OF THE NOTES

Section 8.01 Repayment. The Borrower shall pay to the Purchasers on the
Maturity Date, an amount equal to the outstanding principal amount of the Notes
plus the accrued and unpaid interest on the outstanding principal amount of the
Notes. Upon conversion of all or any part of a Note pursuant to Section 2.05,
the portion of the principal of the Note converted shall no longer be
outstanding following such conversion.

Section 8.02 Interest.

(a) Subject to the provisions of Section 8.02(b), the outstanding
principal amount of the Notes shall bear interest at the rate of 6 7/8% per
annum (the "Base Rate"). Accrued interest on the Notes shall be due and payable
in cash quarterly on each March 31, June 30, September 30, and December 31,
during the term of the Notes, commencing on December 31, 1998, and on the
Maturity Date or, in the event the maturity of the Notes is accelerated pursuant
to the term hereof, such earlier date as the Notes become due and payable, or
the date the Notes are paid in full, whichever first occurs.

(b) Upon the occurrence of an Event of Default as set forth in
Section 9.01(a) or 9.01(j) hereof, the rate that the Notes shall accrue interest
shall increase by 2% per annum over the Base Rate from the first date of such
Event of Default until such time as the Event of Default is cured. At such time
as the Event of Default is cured, the rate that the Notes accrue interest shall
revert to the Base Rate. If the Event of Default is a failure to pay interest
timely as more fully described in Section 9.01(a), the interest due (calculated
at the rates set forth in this Section 8.02(b)) that is unpaid shall be deemed
an advance of principal under the Notes and, as of the interest payment date,
shall be added to the outstanding principal balance of the Notes
(notwithstanding that the outstanding principal balance may exceed, in the
aggregate, the face amount of the Notes).

(c) Interest shall be computed based on a year of 365/366 days for
the actual number of days elapsed commencing on the day immediately following
any advance of principal (or interest paid in kind) through and including the
date of payment of any principal amount.

(d) Notwithstanding anything herein or in the other Basic Documents
to the contrary, it is the intention of the parties hereto to conform strictly
to usury laws applicable to this transaction. Accordingly, if the transactions
contemplated hereby would be usurious under applicable law, then, in that event,
notwithstanding anything to the contrary in the Notes, this Agreement or in any
other Basic Document, it is agreed as follows: (a) the aggregate of all
consideration which constitutes interest under law applicable to the holders of
the Notes that is contracted for, taken, reserved, charged or received under the
Notes, this Agreement or under any of the other Basic Documents or agreements or
otherwise in connection with this transaction shall

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under no circumstances exceed the maximum amount allowed by such applicable law,
and any excess shall be canceled automatically and, if already paid, shall be
credited by the Purchasers on the principal amount of the Obligations (or, to
the extent that the principal amount of the Obligations shall have been or would
thereby be paid in full, refunded to the Borrower); and (b) in the event that
the maturity of the Notes is accelerated by reason of an election of the
Purchasers resulting from any Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to this transaction
may never include more than the maximum amount allowed by such applicable law,
and (c) excess interest, if any, provided for in this Agreement or otherwise in
connection with the Notes shall be canceled automatically and, if already paid,
shall be credited by the Purchasers on the principal amount of the Obligations
(or, to the extent that the principal amount of the Obligations shall have been
or would thereby be paid in full, refunded by the Purchasers to the Borrower).
The right to accelerate the maturity of the Notes does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and no Purchaser intends to collect any unearned interest in the
event of acceleration. All sums paid or agreed to be paid to the Purchasers for
the use, forbearance or detention of sums included in the Obligations shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of the Notes until payment in full so that the
rate or amount of interest on account of the Obligations does not exceed the
applicable usury ceiling, if any. As used in this Section 8.02(d), the term
"applicable law" shall mean the laws which govern this Agreement as described in
Section 11.07 (or the law of any other jurisdiction whose laws may be
mandatorily applicable notwithstanding other provisions of this Agreement), or
law of the United States of America applicable to the Purchasers and the Notes
which would permit the Purchasers to contract for, charge, take, reserve or
receive a greater amount of interest than under any other applicable law. If the
stated rate of interest under this Agreement ever exceeds the Maximum Rate, then
the outstanding principal amount of the Notes made hereunder shall bear interest
at the Maximum Rate until the difference between the interest which would have
been due at the stated rates of interest and the amount due at the Maximum Rate
(the "Lost Interest") has been recaptured by the Purchasers. If the Notes are
repaid in full and the Lost Interest has not been fully recaptured by the
Purchasers pursuant to the preceding sentence, then the Notes shall be deemed to
have accrued interest at the Maximum Rate since the date the initial advance
under the Notes was made to the extent necessary to recapture the Lost Interest
not recaptured pursuant to the preceding sentence and, to the extent allowed by
law, the Borrower shall pay to the Purchasers the amount of the Lost Interest
remaining to be recaptured by the holders of the Notes.

Section 8.03 Payments and Computations.

(a) All payments and obligations by Borrower under the Notes or any
other Basic Document shall be made to the Purchasers, without any presentment
and without any notation of such payment being made on the Notes (i) by wire
transfer in immediately available funds to such accounts as the Purchasers may
designate from time to time by written notice to the Borrower (as to each
Purchaser, the "Purchaser's Account") or (ii) in such other manner as may be
designated in writing to the Borrower by the Purchaser.

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<PAGE>

(b) The Borrower shall make each payment under this Agreement and
under the Notes not later than 2:00 p.m. (Houston, Texas time) on the day when
due in U.S. Dollars to the Purchasers at the location specified in paragraph (a)
above in immediately available funds. All payments by the Borrower hereunder
shall be made without any offset, abatement, withholding, or reduction.

(c) Whenever any payment shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of payment of interest. If the time for payment for an amount
payable is not specified in the Basic Documents, or in any other document, the
payment shall be due and payable ten days after the date on which the Purchasers
demand payment therefor.

(d) All payments and prepayments received shall be applied first to
accrued interest and second to the reduction of principal.

Section 8.04 Mandatory Redemption.

(a) To the extent that the Notes have not been converted as provided
for herein, beginning on June 30, 2006 and on each December 31 and June 30
thereafter (the "Mandatory Redemption Dates"), the Borrower shall redeem, at a
Redemption Price of one hundred percent (100%) of one-ninth (1/9th) of the
original principal amount (the "1/9 Principal") of each of the Notes, on each of
the Mandatory Redemption Dates until the Maturity Date. In addition to this 1/9
Principal, the Borrower shall at the time of redemption pay all accrued and
unpaid interest to the date of redemption. If, on the Mandatory Redemption
Dates, monies for the redemption of the principal and the accrued interest of
the Notes required by this Section 8.04(a) shall have been paid to the
Purchasers, then interest on the portion of the Notes redeemed shall cease to
accrue and become payable. The principal amount under the Notes still
outstanding on the Maturity Date shall be redeemed as of such date by the
Borrower at face value plus all accrued and unpaid interest thereon.

(b) Upon the occurrence of a Change of Control, each Purchaser shall
have the right to require that the Borrower redeem all, or at the election of
each Purchaser, that portion of the principal amount outstanding under the
respective Notes. The Borrower shall redeem the Notes at the Redemption Prices
(expressed in dollars to be paid per $100 of unpaid principal amounts of the
Notes to be redeemed) set forth below, plus accrued interest to the date of
redemption:

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year 1: $107.00 per $100 of Principal
year 2: $106.13 per $100 of Principal
year 3: $105.25 per $100 of Principal
year 4: $104.38 per $100 of Principal
year 5: $103.50 per $100 of Principal
year 6: $102.63 per $100 of Principal
year 7: $101.75 per $100 of Principal
year 8: $100.88 per $100 of Principal
year 9 and thereafter: $100.00 per $100 of Principal.

The years stated above reflect the time periods beginning on the Closing Date
and ending on each anniversary of the Closing Date. Within three Business Days
following any Change of Control, the Borrower shall send a notice of the
occurrence of such Change of Control by first-class mail, postage prepaid to
each Purchaser. Purchasers may exercise the right to require the Borrower to
redeem their Notes by written notice to the Borrower addressed to its principal
office (a "Redemption Notice") given within 90 days following the date of notice
to such Purchasers of the occurrence of a Change of Control. The Borrower shall
make payment of the Redemption Price specified herein plus accrued interest in
cash no later than 10 days following the date of the Redemption Notice.

Section 8.05 Optional Redemption. At the option of the Borrower, the
Notes shall be redeemable beginning on the fourth anniversary of the Closing
Date (the "Optional Redemption Right"). Following such fourth anniversary, the
Borrower shall have the right, at its option, upon not less than sixty (60) days
written notice to each Purchaser (the "Optional Redemption Notice") to redeem
all or, at the election of the Borrower, that portion of the principal amount
outstanding under the respective Notes that Borrower so elects. The Borrower
shall redeem the Notes at the Redemption Prices (expressed in dollars to be paid
per $100 of unpaid principal amounts of the Notes to be redeemed) set forth
below, plus accrued interest to the date of redemption:

year 5: $103.50 per $100 of Principal
year 6: $102.63 per $100 of Principal
year 7: $101.75 per $100 of Principal
year 8: $100.88 per $100 of Principal
year 9 and thereafter: $100.00 per $100 of Principal.

The years stated above reflect time periods beginning on the fourth anniversary
of the Closing Date and ending on each anniversary of the Closing Date
thereafter. After the timely receipt of the Optional Redemption Notice by the
Purchasers, within thirty (30) days (the "Response Period") after receipt of the
Optional Redemption Notice, each Purchaser shall make an election as to a
conversion of the Notes, as such conversion right is more fully set forth in the
Notes. Should any of the Purchasers elect to convert or fail to make an
election prior to the end of the Response Period, the Notes shall not be
redeemed but shall be converted as provided for in the Notes. Should any of the
Purchasers elect to not convert, such Purchasers electing not to convert shall
be redeemed according to the schedule above. The Borrower shall make payment of
the Redemption Price specified herein plus accrued interest in cash no later
than 10 days following the end of the Response Period. The

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Borrower shall have no right of redemption at any time or pursuant to any
procedure except for the Optional Redemption Right as set forth in this Section
8.05.

Section 8.06 Subordination.

(a) The payment of principal of and interest on the Notes and any
payment on account of the acquisition or redemption of the Notes, including,
without limitation, pursuant to Section 8.04 or 8.05, shall be subordinated and
junior to the prior payment in full of all Senior Indebtedness to the extent and
in the manner provided in this Section 8.06, and each Purchaser agrees to be
bound by the subordination provisions contained herein and that these
subordination provisions are for the benefit of the holders of Senior
Indebtedness. This Section 8.06 shall constitute a continuing offer to all
Persons who become holders of, or continue to hold, Senior Indebtedness, and
such provisions are made for the benefit of the holders of Senior Indebtedness,
and such holders are made obligees hereunder and any one or more of them may
enforce such provisions.

(b) The Borrower shall not pay principal of, premium, if any, or
interest on the Notes or defease or acquire any of the Notes (including, without
limitation, repurchases of the Notes pursuant to Section 8.04 or 8.05) for cash
or property, or on account of the redemption provisions of the Notes or on
account of any fees, indemnities, expenses, or any other obligation owing under
or in respect of this Agreement or the Notes (collectively, the "Note
Payments"), during the period (the "Indefinite Blockage Period") beginning on
the date that the Borrower and the Purchasers receive written notice (a "Payment
Notice") from the holders of such Senior Indebtedness of (i) any default in
payment (a "Payment Default") of any principal of, premium, if any, or interest
on any Senior Indebtedness or any fees, indemnities, expenses or any other
obligation owing under or in respect of Senior Indebtedness, or (ii) the
acceleration of the Senior Indebtedness in accordance with its terms, and ending
on the earliest of (A) the date that all Senior Indebtedness is paid in full,
(B) the date on which the Senior Indebtedness to which such Payment Default
relates is paid in full or such Payment Default is cured or waived in writing in
accordance with the applicable Senior Loan Documents, and (C) the date on which
the Purchasers receive from the holders of the Senior Indebtedness or their
successors that commenced the Indefinite Blockage Period written notice that the
Indefinite Blockage Period has been terminated.

(c) If an event of default (as defined in the applicable Senior Loan
Documents) other than a Payment Default with respect to any Senior Indebtedness
(an "Other Default"), has occurred, is continuing and permits the holders (or
any requisite percentage thereof) to declare such Senior Indebtedness due and
payable prior to the date on which it would otherwise have become due and
payable, then during the period (the "Payment Blockage Period") commencing on
the date that the Borrower and the Purchasers receive written notice of such
Other Default (a "Default Notice") and ending on the earliest of (i) 180 days
after such date, (ii) the date on which the Senior Indebtedness to which such
Other Default relates is paid in full or such Other Default is cured or waived
in writing in accordance with the applicable Senior Loan Documents, and (iii)
the date on which the Purchasers receive from the holders of the Senior
Indebtedness or their successors that commenced the Payment Blockage Period
written notice that the Payment Blockage Period has been terminated, no Note
Payments shall be made by or on behalf of the Borrower. Notwithstanding any

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other provision of this Agreement, the duration of any such Payment Blockage
Periods shall not, in the aggregate, exceed more than 180 days during any
consecutive 360-day period. Notwithstanding the provisions described in the
immediately proceeding sentence, unless the provisions of paragraph (b) above
prevent the making of Note Payments, the Borrower may resume making Note
Payments at the expiration of the Payment Blockage Period.

(d) The Purchasers each hereby agree to promptly deliver to the
holders of the Senior Indebtedness a copy of any notice of Default or Event of
Default sent to the Borrower. The Purchasers also each hereby agree that, prior
to enforcing any of their default remedies with respect thereto (including any
right to sue the Borrower or to file or participate in the filing of any
involuntary bankruptcy petition against the Borrower) (a "Collection Action"),
such Purchasers will provide prior written notice to the holders of the Senior
Indebtedness of such Purchasers' intention to exercise such Collection Action.

(e) In the event of any bankruptcy, insolvency, receivership,
assignment for the benefit of creditors, reorganization, or arrangement with
creditors of the Borrower, whether or not pursuant to bankruptcy laws, or any
dissolution, liquidation (full or material), or other marshaling of the assets
and liabilities of the Borrower, then all Senior Indebtedness shall be paid in
full in cash before the Purchasers shall be entitled to receive any Note
Payments. To this end, any Note Payments to which the Purchasers would have been
entitled but for the provision of this Section 8.06 shall be paid or delivered
by the Person making such payment directly to the holders of Senior Indebtedness
or their representative ratably according to the respective amounts of the
Senior Indebtedness held or represented by each, to the extent necessary to make
payment in full of all Senior Indebtedness remaining unpaid, after giving effect
to all concurrent payments and distributions to or for the holders of such
Senior Indebtedness.

(f) In the event that, notwithstanding the foregoing provisions of
this Section 8.06, any Note Payments shall be made by or on behalf of the
Borrower and received by any Purchaser at a time when such payment or
distribution was prohibited by the provisions of this Section 8.06, then, unless
such payment or distribution is no longer prohibited by this Section 8.06, such
payment or distribution shall be received and held in trust by such Purchaser
for the benefit of the holders of Senior Indebtedness, and shall be promptly
paid or delivered by such Purchaser to the holders of Senior Indebtedness or
their representative ratably according to the respective amounts of the Senior
Indebtedness held or represented by each, to the extent necessary to enable
payment in full of all Senior Indebtedness remaining unpaid, after giving effect
to all concurrent payments and distributions to or for the holders of such
Senior Indebtedness.

(g) Subject to and after the payment in full of all Senior
Indebtedness, the Purchasers shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments and distributions of cash, property, and
securities applicable to the Senior Indebtedness until the principal, interest,
premium, and other amounts payable on Notes shall be paid in full. No payment
or distribution of any character, whether in cash, securities, or other property
to which the Purchasers would have been entitled except for the provisions of
this Section 8.06 and which has been made to the holders of the Senior
Indebtedness shall, as between the Borrower, its creditors

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other than the holders of Senior Indebtedness, and the Purchasers, be deemed to
be a payment or distribution by the Borrower to the holders of the Senior
Indebtedness.

(h) The provisions of this Section 8.06 are solely for the purposes
of defining the relative rights of the holders of the Senior Indebtedness, on
the one hand, and the Purchasers, on the other hand. Nothing herein shall
impair, as between the Borrower and the Purchasers, the obligation of the
Borrower to pay to the Purchasers the principal, interest, premium, and any
other amounts due under the Notes when the same shall become due in accordance
with their terms, nor shall anything in this Agreement prevent the Purchasers
from exercising all remedies otherwise permitted by applicable law upon default
under this Agreement, subject, however, to the provisions of this Section 8.06
and the rights of the holders of the Senior Indebtedness hereunder.

(i) No right of any present or future holders of any Senior
Indebtedness to enforce the subordination provisions contained in this Section
8.06 shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Borrower or any such holder, or by any
noncompliance by the Borrower with the terms of this Agreement, regardless of
any knowledge thereof which any such holder may have or be otherwise charged
with. The holders of Senior Indebtedness may extend, renew, modify, increase or
amend the terms of the Senior Indebtedness or any security therefor and release,
sell or exchange any such security and otherwise deal freely with the Borrower,
all without affecting the liabilities and obligations of the parties to this
Agreement or the Purchaser under this Section 8.06.

(j) Nothing in this Section 8.06 shall modify or prohibit the
Purchasers from the exercise of its conversion rights or the discharge of the
obligations of the Borrower with respect to conversion of the Notes.

ARTICLE IX
DEFAULT AND REMEDIES

Section 9.01 Events of Default. The occurrence of any of the following
shall be an "Event of Default" for the purposes of this Agreement and the Notes:

(a) the Borrower shall default in the payment or prepayment when due
of any accrued interest; or

(b) the Borrower shall default in the payment of the principal or the
Redemption Price of any of the Notes when the same shall become due and payable
as more fully set forth in Article VIII; or

(c) (i) in the event that the Senior Loan is no longer in existence,
the Borrower shall, as to any related Indebtedness (other than the Obligations
and the Senior Loan) aggregating $2,000,000 in principal or more, default in the
payment when due of any principal of or interest, or any event specified in any
note, agreement, indenture or other document evidencing or relating to any such
Debt shall occur if the effect of such event is to cause, or (with the giving of
any notice or the lapse of time or both) to permit the holder or holders of such
Debt (or a trustee or agent on behalf

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of such holder or holders) to cause, such Debt to become due prior to its stated
maturity, or (ii) as to the Senior Loan, there shall have occurred a default
thereunder and the holders of the Senior Loan shall have elected to accelerate
the payment of the Senior Loan (or it shall become accelerated automatically or
otherwise be due and payable in full prior to its stated maturity); or

(d) any representation, warranty or certification made herein or in
any other Basic Document by the Borrower, or any certificate furnished by the
Borrower to any of the Purchasers pursuant to the provisions hereof or any Basic
Document, shall prove to have been false or misleading as of the time made or
furnished in any material and adverse respect and such default shall continue
unremedied for a period of thirty (30) days after notice thereof to the Borrower
by the Purchasers; or

(e) the Borrower shall default in the performance of any of its
obligations under Articles VI and VII or any other Article of this Agreement or
under any other Basic Document to which it is a party (other than the payment of
amounts due which shall be governed by Section 9.01(a) and (b)) and such default
shall continue unremedied for a period of thirty (30) days after notice thereof
to the Borrower by the Purchasers; or

(f) the Borrower shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or

(g) the Borrower shall (i) apply for a consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary case
under the Federal Bankruptcy Code (as now or hereafter in effect), (iv) file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up, liquidation or composition or
readjustment of debts, (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in a
involuntary case under the Federal Bankruptcy Code, or (vi) take any corporate
action for the purpose of effecting any of the foregoing, or

(h) a proceeding or case shall be commenced, without the application
or consent of the Borrower, in any court of competent jurisdiction, seeking (i)
its liquidation reorganization, dissolution or winding-up, or the composition or
readjustment of its debt; (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Borrower of all or any substantial part
of its assets, or (iii) similar relief in respect of the Borrower under any law
relating to bankruptcy, insolvency, reorganization, winding-up, or composition
or adjustment of debts, and such proceeding or case shall continue undismissed,
or an order, judgement or decree approving or ordering any of the foregoing
shall be entered and continue unstayed and in effect, for a period of 60 days;
or an order for relief against the Borrower shall be entered in an involuntary
case under the Federal Bankruptcy Code; or

(i) any of the Basic Documents after delivery thereof shall for any
reason, except to the extent permitted by the terms thereof, cease to be in full
force and effect and valid, binding and enforceable in all material respects in
accordance with their terms, or such Default shall continue

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unremedied for a period of forty-five (45) days after notice thereof to the
Borrower by the Purchasers; or

(j) the Common Stock of the Borrower shall be Delisted (other than
due solely to a Change of Control where Borrower is not the surviving entity)
from the New York Stock Exchange ("NYSE"); or

(k) in the event that the Senior Loan is no longer in existence, a
judgment or judgments for the payment of money in excess of $2,000,000 in the
aggregate shall be rendered by a court against the Borrower and the same shall
not be discharged (or provision shall not be made for such discharge), or a stay
of execution thereof shall not be procured, within forty-five (45) days from the
date of entry thereof and the Borrower shall not, within said period of 45 days,
or such longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal.

Section 9.02 Remedies.

(a) Upon the happening of any Event of Default specified in Section
9.01 (other than clauses (g) or (h) of Section 9.01, the Majority Holders may by
written notice to the Borrower declare the entire principal amount of its
respective Notes then outstanding, including interest accrued thereon, to be
immediately due and payable without presentment, demand, protest, notice of
protest or dishonor or other notice of default of any kind, all of which are
hereby expressly waived by the Borrower.

(b) Upon the happening of any Event of Default specified in clauses
(g) or (h) of Section 9.01, the entire principal amount of all Obligations then
outstanding, including interest accrued thereon, shall, without notice or action
by the Purchasers be immediately due and payable without presentment, demand,
protest, notice of protest or dishonor or other notice of default of any kind,
all of which are hereby expressly waived by the Borrower.

(c) In addition to the foregoing, upon the happening of any of the
events described in subsections (a) and (b) above, the Purchasers may exercise
any of the rights or remedies provided in the other Basic Documents or avail
itself of any rights or remedies provided by applicable law.

(d) All proceeds received after maturity of the Notes or following a
Mandatory Redemption Date, whether by acceleration or otherwise, shall be
applied first to reimbursement of expenses and indemnities provided for in the
Basic Documents; second to accrued interest on the Notes; third pro rata to
principal outstanding on the Notes and other Obligations; and any excess shall
be paid to the Borrower or as otherwise required by any Governmental
Requirement.

Section 9.03 Set-Off. Upon the occurrence of any Event of Default, any
Purchaser shall have the right to set-off any funds of the Borrower in the
possession of the Purchaser against any Debt then due by the Borrower to the
Purchaser. The Borrower agrees that any Purchaser or a participation in the
Notes may exercise any and all rights of counter-claim, set-off, banker's lien
and

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other liens with respect to any and all monies owing by the Borrower to such
holder as fully as if such holder of a participation were a holder of a Note in
the amount of such participation.

ARTICLE X
RELATIONSHIP OF THE PARTIES

Section 10.01 Objectives and Purpose. Borrower has the objective of
providing labor and equipment services for construction and maintenance of
transmission and distribution facilities and fiber optic communications systems
for ECT and its Affiliates including Portland General Electric Corp. In
furtherance of this objective, Borrower believes it to be instrumental to
receive the following:

(a) Current and updated forecasts for construction and maintenance
requirements of ECT and its Affiliates;

(b) Detailed drawings, specifications and instructions for
construction and maintenance requirements of ECT and its Affiliates;

(c) Subject to legal requirements and existing contractual
obligations, special consideration in contract negotiations for the maintenance
of ECT and its Affiliates' transmission systems, distribution systems, and fiber
optic networks;

(d) Timely answers to any of its questions;

(e) Evaluation of "value engineering" proposals;

(f) Areas and projects for improvement and cost reduction between
ECT, its Affiliates and Borrower; and

(g) Evaluations by ECT and its Affiliates of "Value Added" proposals
submitted by Borrower.

ECT acknowledges the foregoing objectives and goals.

ECT and Borrower acknowledge that the purpose of this Article X is to facilitate
communications between ECT and Borrower in furtherance of the design,
construction, maintenance, and timely and cost-effective completion of projects
aimed at ensuring the high quality of the transmission and distribution systems,
and fiber optic communication systems of ECT and its Affiliates.

In addition, ECT and Borrower acknowledge the need to meet from time-to-time to
evaluate each other's performance provided for in this Article X.

Section 10.02 Mutual Access and Cooperation. Borrower desires, and ECT
agrees to use reasonable efforts to provide to Borrower, reasonable access from
time-to-time to representatives of ECT and its Affiliates (i) to discuss
Borrower's service capabilities and goals as outlined above;

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(ii) to present for consideration by ECT and its Affiliates proposals and
opportunities from Borrower for the provision of services to ECT and its
Affiliates, (iii) for consultation with Borrower regarding acquisition and
investment opportunities identified by Borrower, (iv) to discuss matters in
which ECT has, or may have, general expertise (which areas of expertise may
include, without limitation, commodity trading, origination, engineering and the
financial analysis, modeling and structuring of proposed transactions) and (v)
otherwise to explore and evaluate ways in which Borrower and ECT might work
together to enhance their respective businesses.

In connection with the foregoing, ECT shall, as appropriate, use reasonable
efforts (i) to arrange meetings from time-to-time between representatives of
Borrower and representatives of ECT or its Affiliates to discuss such matters,
(ii) to provide to Borrower from time-to-time reasonable access to relevant
information of ECT and (iii) to otherwise enhance cooperation and communication
between ECT and its Affiliates on the one hand and Borrower on the other hand to
facilitate access to information and personnel, subject, however, to limitations
imposed by applicable law and existing confidentiality obligations as well as
internal policies regarding the maintenance of the confidentiality of
proprietary data and other commercially sensitive information.

Borrower agrees to use reasonable efforts to provide to representatives of ECT
and its Affiliates reasonable access from time to time to representatives of
Borrower and its Affiliates that it controls (i) to pursue the matters
referenced above and (ii) to discuss generally the industry in which Borrower
and such Affiliates are engaged and the objectives of companies in such
industry.

It is the intent of the parties to work cooperatively in connection with the
foregoing towards the goal of mutually beneficial discussions, relations and
transactions.

Section 10.03 Term of This Article. This Article shall run for a term of
two years. Each party hereto may during the existence of the arrangements
between Borrower and ECT engage in or have business relations with competitors
of the other parties and/or their Affiliates which relations are more fully
discussed in Sections 10.09 and 10.10.

Section 10.04 Protection of Employees. From and after the date hereof
until the date one year after which this Article X has been terminated, each
party hereto shall not, and shall cause its respective wholly owned subsidiaries
not to, solicit to employ any of the employees of the other party or its
Affiliates with whom the soliciting party or its Affiliates had contact in
connection with the transactions contemplated hereby; provided, however, that
any such solicitation shall not be a breach of this Section if (i) the personnel
who performed such solicitation have no knowledge of this Article or the
transactions contemplated hereby and (ii) none of the soliciting party's (or any
of its Affiliates') personnel who have knowledge of this Article or the
transactions contemplated hereby have actual knowledge of any such solicitation.
The term "solicit to employ" shall not be deemed to include general
solicitations of employment not specifically directed towards employees of a
party hereto or its Affiliates.

Section 10.05 Confidentiality. In connection with the matters described in
this Agreement, each party may provide to the other certain information that is
confidential, proprietary or otherwise

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not generally available to the public (including information provided to the
Designee). As a condition to furnishing such information the parties agree as
follows:

(a) Nondisclosure of Confidential Information. From and after the
date hereof, until the date two years after the disclosure of the particular
Confidential Information (as defined below), such Confidential Information shall
be used solely in connection with the matters contemplated by this Agreement
hereof and the recipient of the Confidential Information shall not disclose the
Confidential Information to any person other than those of its directors,
officers, employees, lenders, counsel, representatives and Affiliates, if any
(those such persons who actually receive any confidential information hereunder
being collectively, the "Representatives") who need to know the Confidential
Information. It is understood that (i) the Representatives shall be informed of
the confidential nature of the Confidential Information and the requirement that
it not be used other than for the purposes described herein and (ii) in any
event, the party receiving Confidential Information shall be responsible for any
breach of this Article by any of its Representatives. Each party may also
disclose the Confidential Information in order to comply with any applicable
law, order, regulation or ruling. The term "person" as used in this Article
shall be broadly interpreted to include, without limitation, any corporation,
company, partnership, individual or other entity.

(b) Definition of "Confidential Information". As used herein,
"Confidential Information" means all information that is furnished under this
Article by a party hereto, and which is confidential, proprietary or otherwise
not generally available to the public. Notwithstanding the foregoing, the
following will not constitute Confidential Information for purposes of this
Article: (i) information that is or becomes generally available to the public
other than as a result of a breach of this Article by the party receiving such
information or its Representatives; (ii) information that, prior to being
furnished pursuant hereto, was already in the files of the party receiving such
information or its Representatives from another source not known to be subject
to any prohibition against transmitting the information; or (iii) information
that becomes available to the party receiving such information or its
Representatives from another source not known to be subject to any prohibition
against transmitting the information.

(c) Return of Information. The written Confidential Information,
except for that portion of the Confidential Information that may be found in
analyses, compilations, studies or other documents prepared by or for the party
receiving the Confidential Information, will be returned promptly upon any
request made during the two year period referred to in Paragraph 10.03 above,
and no copies shall be retained by the party receiving the Confidential
Information or its Representatives. That portion of the Confidential
Information that may be found in analyses, compilations, studies or other
documents prepared by or for the party receiving the Confidential Information,
oral Confidential Information and written Confidential Information not so
requested or returned will be held by the party receiving the Confidential
Information and kept subject to the terms of this Article, or destroyed.

Section 10.06 Relationships of the Parties. The purpose of Article X is
to establish the intent of the parties to establish and promote open
communications with the objective of identifying mutually-beneficial business
opportunities. The parties' overall expectation is that a broader working
relationship will develop; however, it is not the intent of this Article or any
future action

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(not specifically set forth in a definitive agreement) by either party to
require that either party suffer any unreasonable burden or commitment
(including, without limitation, financial, time and human resource burdens and
commitments), or any constraint on its business. Nor is it the intent to create
a right in favor of either party to any specific business opportunity or
opportunities. The parties hereto acknowledge and agree that the terms of this
Article are subject in all respects to the terms and intent of Sections 10.09
and 10.10 hereof.

All activities contemplated hereby shall be performed in a mutually agreeable
manner designed to minimize the disruption of the business and operations of
each party and that of its Affiliates. Except as specifically contemplated in
this Article, the parties shall be unrestricted in the conduct of their
business; any actual commitments shall be set forth in a specific definitive
agreement governing the proposed transaction or commitment.

The Borrower agrees that no term or provision in this Article X shall modify the
rights or remedies of the Purchasers contained in the other sections of this
Agreement including, without limitation, the right to repayment of principal and
interest under the Notes, the right of Mandatory Redemption, the remedies of the
Purchasers in an Event of Default, and the conversion rights set forth in
Section 2.05 hereof. No default under the terms of this Article X or claim by
either of ECT or the Borrower for any non-performance shall affect such rights
and remedies.

Section 10.07 No Authority to Bind; No Fiduciary Relationship. Neither
party hereto shall have the authority to bind or to purport to bind the other
party hereto. The parties agree that no employment, agency, joint venture,
partnership, advisory or fiduciary relationship shall be deemed to exist or
arise between them with respect to the transactions contemplated by this
Article; any such relationship shall exist only as expressly stated in any
future definitive agreements.

Section 10.08 Publicity. Any press release or other public announcement
regarding or relating to the existence of this Article and its contents shall be
mutually agreed upon by the parties.

Section 10.09 Business Opportunities. Notwithstanding anything to the
contrary of the foregoing, the Borrower recognizes that the Purchasers and their
respective Affiliates, and Designees, (a) have participated and will continue to
participate in venture capital and other direct investments in other Persons and
other similar transactions, (b) may have interests in, participate with, and
maintain seats on the boards of directors of such Persons and (c) may develop
business opportunities for such Persons. The Borrower also recognizes that such
other Persons and Affiliates of the Purchasers may be engaged in the business of
specialty electric and telecommunications infrastructure contracting services in
competition with the Borrower. The Borrower (i) acknowledges and agrees that
neither the Purchasers and their Affiliates nor the Designees shall be
restricted or proscribed by the terms of this Agreement or the relationship
between the Purchasers and the Borrower, or otherwise, from engaging in any of
the foregoing activities, regardless of whether such business activity is in
direct or indirect competition with the business or activities of the Borrower
and its Affiliates, and that neither the Purchasers and their respective
Affiliates nor any Designee has any obligation to offer the Borrower any
business opportunity presented to any of them, unless knowledge of such
opportunity was disclosed to such Purchaser or its Affiliate or to such Designee
solely by the Borrower or its Affiliates and (ii) waives any claim that any
business

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opportunity pursued by the Purchasers or any of their respective Affiliates or
any of such other Persons constitutes a corporate opportunity of the Borrower
that is or was misappropriated (provided that such waiver shall not apply to any
opportunity, the knowledge of which was disclosed to the Purchaser or its
Affiliate or to such Designee solely by the Borrower or its Affiliates, or to
any breach of the obligation of confidentiality or limitation on the use of
information set forth in this Agreement). Except as provided in this Section
10.09, nothing herein shall alter the duties of any Designee to the Borrower
while such Designee serves as a director of the Borrower. This Section 10.09
shall in no way allow a director to usurp a corporate opportunity solely for his
or her personal benefit without presenting and allowing time to the Borrower to
develop such opportunity. Neither the Borrower nor any of its Affiliates shall
enter into any contract, agreement, arrangement or understanding that by its
terms purports to obligate, restrict or otherwise bind the Purchasers (as
Affiliates of the Borrower or otherwise), including any area of mutual interest,
exclusivity, non-competition or other similar agreement. The Borrower recognizes
that the provisions of this Section 10.09 constitute an inducement of the
Purchasers to enter into this Agreement and to purchase the Notes and that in
absence of the provisions contained in this Section 10.9, the Purchasers would
not be willing to make such investment in the Borrower.

Section 10.10 Borrower's Business Opportunities. Notwithstanding anything
to the contrary to the foregoing, the Purchasers recognize that the Borrower and
its Affiliates (a) have performed and will continue to perform services for
Persons that compete with the Purchasers and their respective Affiliates and (b)
may develop business opportunities with such Persons that directly or indirectly
compete with the services offered by Purchasers and their Affiliates. The
Purchasers (i) acknowledge and agree that neither the Borrower nor its
Affiliates shall be restricted or proscribed by the terms of this Agreement or
the relationship between the Purchasers and the Borrower, or otherwise, from
engaging in any of the foregoing activities, regardless of whether such business
activity is in direct or indirect competition with the business or activities of
the Purchasers and their respective Affiliates, and neither the Borrower nor its
Affiliates has any obligation to offer the Purchasers or their Affiliates any
business opportunity presented to any of them, unless knowledge of such
opportunity was disclosed to Borrower or its Affiliates solely by a Purchaser
and (ii) waive any claim that any business opportunity constitutes a corporate
opportunity of such Purchaser that is or was misappropriated (provided that such
waiver shall not apply to any opportunity, the knowledge of which was disclosed
to the Borrower or its Affiliates solely by the Purchasers or their Affiliates,
or to any breach of the obligations of confidentiality or limitation on the use
of information set forth in this Agreement). Nothing in this Section 10.10 shall
modify the obligations of Borrower set forth in the second to last sentence of
Section 10.09.

ARTICLE XI
MISCELLANEOUS

Section 11.01 Interpretation and Survival of Provisions. Article,
Section, Schedule, and Exhibit references are to this Agreement, unless
otherwise specified. All references to instruments, documents, contracts, and
agreements are references to such instruments, documents, contracts, and
agreements as the same may be amended, supplemented, and otherwise modified from
time to time, unless otherwise specified. The word "including" shall mean
"including but not limited to." Whenever the Borrower has an obligation under
the Basic Documents, the expense of complying

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<PAGE>

with that obligation shall be an expense of the Borrower unless otherwise
specified. Whenever any determination, consent, or approval is to be made or
given by the Purchasers or the Majority Holders, such action shall be in the
respective Purchasers' or the Majority Holders' sole discretion unless otherwise
specified in this Agreement. If any provision in the Basic Documents is held to
be illegal, invalid, not binding, or unenforceable, such provision shall be
fully severable and the Basic Documents shall be construed and enforced as if
such illegal, invalid, not binding, or unenforceable provision had never
comprised a part of the Basic Documents, and the remaining provisions shall
remain in full force and effect. The Basic Documents have been reviewed and
negotiated by sophisticated parties with access to legal counsel and shall not
be construed against the drafter. The representation and warranties for a period
of two years, and the covenants made in this Agreement, the Notes or any other
Basic Document shall survive the closing of the transactions described herein
and remain operative and in full force and effect regardless of (a) any
investigation made by or on behalf of the Borrower or the Purchasers or (b)
acceptance of any of the Securities and payment therefor and repayment or
repurchase thereof. All indemnification obligations of the Borrower and the
provisions of Section 11.02 shall remain operative and in full force and effect
unless such obligations are expressly terminated in a writing referencing those
individual Sections, regardless of any purported general termination of this
Agreement.

Section 11.02 Costs, Expenses and Taxes.

(a) The Borrower agrees to indemnify the Purchasers, and their
respective officers, directors, employees, representatives, agents, attorneys,
and Affiliates (collectively, "Related Parties") from, hold each of them
harmless against and promptly upon demand pay or reimburse each of them for, any
and all actions, suits, proceedings (including any investigations, litigation,
or inquiries), claims, demands, and causes of action, and, in connection
therewith, all reasonable costs, losses, liabilities, damages, or expenses of
any kind or nature whatsoever, net of any insurance paid to Purchasers under
Borrower's insurance arrangements, (collectively the "Indemnity Matters") which
may be incurred by them or asserted against or involve any of them as a result
of a claim by a Person that is not an Affiliate of the Purchasers or any Related
Parties under (i), (ii), (iii) and (v) (whether or not any of them is designated
a party thereto) as a result of, arising out of, or in any way related to (i)
any actual or proposed use by the Borrower of the proceeds of any sale of the
Securities, (ii) the operations of the business of the Borrower or any of its
Affiliates, (iii) the failure of the Borrower or any of its Affiliates to
comply with any Governmental Requirement, (iv) the breach of the
representations, warranties and covenants of the Borrower contained herein,
provided such claim for indemnification relating to a breach of the
representations and warranties is made prior to the expiration of such
representations and warranties, or (v) any other aspect of this Agreement and
the other Basic Documents, including, without limitation, the reasonable fees
and disbursements of counsel and all other reasonable expenses incurred in
connection with investigating, defending or preparing to defend any such action,
suit, proceeding (including any investigations, litigation, or inquiries), or
claim and INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE NEGLIGENCE OF
ANY INDEMNITEE (but not Indemnity Matters related solely to the gross negligence
or wilful misconduct of any Indemnitee).

(b) The Borrower agrees to pay and hold the Purchasers harmless from
and against any and all present and future stamp and other similar taxes with
respect to this Agreement

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<PAGE>

and Basic Documents and save the Purchasers harmless from and against any and
all liabilities with respect to or resulting from any delay or omission to pay
such taxes, and will indemnify the Purchasers for the full amount of taxes paid
by the Purchasers (not to include income or gross receipt tax liability) in
respect of payments made or to be made under this Agreement, any Note, or any
other Basic Document and any liability (including penalties, interest, and
expenses) arising therefrom or with respect thereto, whether or not such taxes
were correctly or legally asserted.

(c) The Borrower agrees to indemnify and hold harmless from time to
time the Purchasers, and their respective Related Parties from and against any
and all losses, claims, cost recovery actions, administrative orders or
proceedings, damages, and liabilities to which the Purchasers and their
respective Related Parties may incur, have asserted against them or involve any
of them pursuant to a claim by a Person that is not an Affiliate of the
Purchasers or any Related Parties (i) under any Environmental Law applicable to
the Borrower, any Subsidiary, or any of their respective Properties, (ii) as a
result of the breach or non-compliance by the Borrower or any Subsidiary with
any Environmental Law applicable to the Borrower or any Subsidiary, or any of
their respective Properties, (iii) due to the ownership by the Borrower or any
Subsidiary of their respective Properties or any activity on any of their
respective Properties, or any past activity on any of their respective
Properties which, though lawful and fully permissible at the time, could result
in present liability under any Environmental Law, (iv) the presence, use,
release, storage, treatment, or disposal of hazardous substances on or at any of
the properties owned or operated by the Borrower or any Subsidiary, or (v) any
other environmental, health, or safety condition in connection with this
Agreement or any other Basic Document, provided, however, no indemnity shall be
afforded under this Section 11.02(c) in respect of any Property for any
occurrence arising solely and directly from the acts or omissions of the
Purchasers during the period after which such Person, its successors or assigns
shall have acquired such Property through foreclosure or deed in lieu of
foreclosure.

(d) Promptly after the Purchaser or other Person indemnified
hereunder (hereinafter, the "Indemnified Party") has received notice or has
knowledge of any claim for indemnification hereunder, or the commencement of any
action or proceeding by a third person, which the Indemnified Party believes in
good faith is an indemnifiable claim under this Agreement, the Indemnified Party
shall give Borrower written notice of such claim or the commencement of such
action or proceeding. Such notice shall state the nature and the basis of such
claim. The Borrower shall have the right to defend and settle, at its own
expense and by its own counsel, any such matter as long as the Borrower pursues
the same diligently and in good faith. If the Borrower undertakes to defend or
settle, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate with the Borrower and its counsel
in all commercially reasonable respects in the defense thereof and the
settlement thereof. Such cooperation shall include, but shall not be limited to,
furnishing the Borrower with any books, records and other information reasonably
requested by the Borrower and in the Indemnified Party's possession or control.
Such cooperation of the Indemnified Party shall be at the cost of the Borrower.
After the Borrower has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Borrower diligently pursues such defense, the Borrower shall not be liable
for any

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<PAGE>

additional legal expenses incurred by the Indemnified Party in connection with
any defense or settlement of such asserted liability; provided, however, that
the Indemnified Party shall be entitled (i) at its expense, to participate in
the defense of such asserted liability and the negotiations of the settlement
thereof or (ii) if (a) the Borrower has failed to assume the defense and employ
counsel or (b) if the defendants in any such action include both the Indemnified
Party and the Borrower and counsel to the Indemnified Party shall have concluded
that there may be reasonable defenses available to the Indemnified Party that
are different from or additional to those available to the Borrower or if the
interests of the Indemnified Party reasonably may be deemed to conflict with the
interests of the Borrower, then the Indemnified Party shall have the right to
select a separate counsel and to assume such legal defense and otherwise to
participate in the defense of such action, with the expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the Borrower as incurred, and the Borrower shall not settle any
such claim without the consent of the Indemnified Party unless the settlement
thereof imposes no liability or obligation on, and includes a complete release
from liability of, the Indemnified Party. If the Indemnified Party undertakes
such a defense through counsel of its choice, the Indemnified Party may settle
such matter, and the Borrower shall reimburse the Indemnified Party for the
amount paid in such settlement and any other liabilities or expenses incurred by
the Indemnified Party in connection therewith.

(e) At Closing, Borrower shall pay the Purchasers' reasonable,
invoiced legal fees, professional fees and other transaction costs incurred in
the evaluation and negotiation of the proposed transaction, but in no event
shall Borrower be required to pay any amounts in excess of $50,000 (the "Legal
Fees"). The Borrower shall also pay all filing fees associated with all filings
required under the HSR Act, if applicable, and any other notification or request
for consent, approval or permission that may be required by statute, regulation
or judicial decrees in connection with the proposed transaction (the "HSR
Fees").

(f) The Borrower's obligations under this Section 11.02 shall survive
any termination of this Agreement and the payment of the Obligations.

(g) THE INDEMNIFICATION AND RELEASE PROVISIONS PROVIDED FOR IN THIS
AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LOSSES, COSTS, EXPENSES AND
DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM (i) THE ACTIVE, PASSIVE OR
CONCURRENT NEGLIGENCE, OR OTHER FAULT OF ANY INDEMNIFIED PARTY OR (ii) ANY
ACTION THAT SUBJECTS THE INDEMNIFIED PARTY TO CLAIMS PREMISED IN WHOLE OR IN
PART IN STRICT LIABILITY. BORROWER AND THE PURCHASERS ACKNOWLEDGE THAT THIS
STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.

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<PAGE>

Section 11.03 No Waiver; Modifications in Writing.

(a) No failure or delay on the part of the Borrower, the Purchasers
in exercising any right, power, or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power, or
remedy preclude any other or further exercise thereof or the exercise of any
right, power, or remedy. The remedies provided for herein are cumulative and are
not exclusive of any remedies that may be available to the Borrower, the
Purchasers at law or in equity or otherwise.

(b) Except as otherwise provided herein, no amendment, waiver,
consent, modification, or termination of any provision of this Agreement, the
Notes or any other Basic Document, shall be effective unless signed by the
Borrower and the Purchasers. Any amendment, supplement or modification of or to
any provision of this Agreement or the Notes or any other Basic Document, any
waiver of any provision of this Agreement, the Notes or any other Basic
Document, and any consent to any departure by the Borrower from the terms of any
provision of this Agreement, the Notes or any other Basic Document, shall be
effective only in the specific instance and for the specific purpose for which
made or given. Except where notice is specifically required by this Agreement,
no notice to or demand on the Borrower in any case shall entitle the Borrower to
any other or further notice or demand in similar or other circumstances.

Section 11.04 Binding Effect; Assignment. This Agreement shall be binding
upon the Borrower, the Purchasers, and their respective successors and permitted
assigns. Except as expressly provided in this Agreement, this Agreement shall
not be construed so as to confer any right or benefit upon any Person other than
the parties to this Agreement, and their respective successors and permitted
assigns. All or any portion of the rights and obligations of the Purchasers
under this Agreement with respect to the Basic Documents may be sold, assigned
or pledged by any Purchaser. Upon any assignment of the Basic Documents, the
assignee shall succeed to all of the assignor's rights and obligations under the
Basic Documents to the extent assigned and the Purchaser shall be automatically
released from any such obligations hereunder with respect to the Basic Documents
to the extent assigned, other than the obligations arising under Article X
hereof. The Converted Shares may be sold, assigned or pledged and upon any
assignment complying with the terms of the Registration Rights Agreement and
upon any such assignment the holders of the Converted Shares shall succeed to
the Purchaser's rights and obligations under the Registration Rights Agreement.
Upon request of any Purchaser in connection with any transfer of the Notes, the
Borrower shall execute and deliver any amendment to this Agreement, the Notes,
and the other Basic Documents reasonably requested by the Purchaser to reflect
the transfer and delineate the rights of the transferor and the transferee
provided that the Borrower shall not be liable for the expenses incurred in
documenting such amendment. In the event that a Purchaser grants participations
in its Note to other Persons, each of such other Persons shall have the rights
of setoff against any amounts due by the Borrower hereunder and similar rights
or Liens to the same extent as made available to the Purchasers. The Borrower
acknowledges that the Purchasers may "syndicate" the loan evidenced by the
Notes, and the other Basic Documents and agree to execute any amendments,
restatements

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<PAGE>

and other modifications to the Basic Documents in connection with such
syndication, provided that the Borrower shall not be liable for the expenses
incurred by Purchasers in documenting such syndication. The Borrower may deem
and treat the original Purchasers as the owner of the Notes for the purpose of
receiving payment of principal of and premium (if any) and interest on the Notes
and for all other purposes whatsoever until the Borrower is notified otherwise
in writing pursuant to Section 11.06 of this Agreement.

Section 11.05 Replacement Securities. Upon receipt of evidence
satisfactory to the Borrower of the loss, theft, destruction, or mutilation of
the Notes, or Converted Shares and, in the case of any such loss, theft, or
destruction, upon delivery of any indemnity or other obligation reasonably
requested by the Borrower or its transfer agent to the Borrower or, in the case
of any such mutilation, upon surrender or cancellation thereof, the Borrower
will issue a new Note, or Conversion Shares, as applicable.

Section 11.06 Communications. All notices and demands provided for
hereunder shall be in writing and shall be given by registered or certified
mail, return receipt requested, telecopy, air courier guaranteeing overnight
delivery or personal delivery to the following addresses:

If to the Purchasers:

Joint Energy Development Investments II Limited Partnership
c/o Enron Corp.
1400 Smith Street
Houston, Texas 77002
Attention: Donna Lowry
Telecopier: (713)646-4039

Enron Capital & Trade Resources Corp.
c/o Enron Corp.
1400 Smith Street
Houston, Texas 77002
Attention: Donna Lowry
Telecopier: (713)646-4039

and

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<PAGE>

If to the Borrower:

Quanta Services, Inc.
1360 Post Oak Boulevard, Suite 2100
Houston, Texas 77056
Attention: President and General Counsel
Telecopier: (713) 629-7676

or to such other address as the Borrower or any Purchaser may designate in
writing. All other communications may be by regular mail. All notices and
communications shall be deemed to have been duly given: at the time delivered
by hand, if personally delivered; upon actual receipt if sent by certified mail,
return receipt requested, if mailed; when receipt acknowledged, if telecopied;
and upon actual receipt when delivered to an air courier guaranteeing overnight
delivery.

Section 11.07 Governing Law. This Agreement will be construed in
accordance with and governed by the laws of the State of Texas without regard to
principles of conflicts of laws.

Section 11.08 Arbitration. Any action, dispute, claim or controversy of
any kind between the Borrower and a Purchaser arising out of, or pertaining to
this Agreement or the transactions contemplated hereby (a "Dispute") shall be
resolved by binding arbitration in accordance with the terms hereof. Any party
may, by summary proceedings, bring an action in court to compel arbitration of
any Dispute. Any arbitration shall be administered by the American Arbitration
Association (the "AAA") in accordance with the terms of this Section, the
Commercial Arbitration Rules of the AAA, and, to the maximum extent applicable,
the Federal Arbitration Act. Judgment on any award rendered by an arbitrator
may be entered in any court having jurisdiction. Any arbitration shall be
conducted before a three person panel of arbitrators. Such panel shall consist
of one person designated by the Borrower, one designated by the Purchasers and
one designated by the nominees of the Borrower and the Purchasers (collectively,
the "Arbitrators"). Such arbitrators designated by each of the Borrower and the
Purchasers do not have to be neutral. If either of the Borrower or the
Purchasers fails to designate an arbitrator within ten (10) days after the
filing of the Dispute with the AAA, or either of the Borrowers or the Purchasers
arbitrators fail to designate a third arbitrator within thirty (30) days after
their appointments, the third arbitrator shall be appointed by the AAA. An
arbitration proceeding hereunder shall be conducted in Houston, Texas and shall
be concluded within 180 days of the filing of the Dispute with the AAA. The
Arbitrators shall be empowered to award sanctions and to take such other actions
as they deem necessary, to the same extent a judge could impose sanctions or
take such other actions pursuant to the Federal Rules of Civil Procedure and
applicable law. No award by the Arbitrators shall assess consequential,
punitive or exemplary damages or damages for lost profits but may assess costs
and expenses in a manner deemed equitable. The arbitrator shall make specific
written findings of fact and conclusions of law. The decision of the arbitrator
shall be final and binding on each party. All fees of the Arbitrators and any
engineer, accountant or other consultant engaged by the Arbitrators, shall be
paid by the Borrower and the Purchasers as awarded by the Arbitrators.

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<PAGE>

Section 11.09 Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Agreement.

IN WITNESS WHEREOF, the parties hereto execute this Agreement,
effective as of the date first above written.

QUANTA SERVICES, INC.,
a Delaware corporation

By: /s/ Brad Eastman
---------------------------------------
Name: Brad Eastman
---------------------------------------
Title: Vice President and General Counsel
---------------------------------------

JOINT ENERGY DEVELOPMENT
INVESTMENTS II LIMITED PARTNERSHIP,
a Delaware limited partnership, as Purchaser

By: Enron Capital Management II Limited
Partnership, its General Partner

By: Enron Capital II Corp., its
General Partner

By: /s/ Robert Greer
-----------------------------
Name: Robert Greer
-----------------------------
Title: Agent and Attorney-in-Fact
-----------------------------

ENRON CAPITAL & TRADE RESOURCES
CORP., a Delaware corporation

By: /s/ Robert Greer
---------------------------------------
Name: Robert Greer
---------------------------------------

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<PAGE>

Title: Vice President
---------------------------------------

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<PAGE>

EXHIBIT 10.8

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this "Agreement") is made and entered
into as of September 29, 1998 by and among Quanta Services, Inc., a Delaware
corporation (the "Company"), Joint Energy Development Investments II Limited
Partnership, a Delaware limited partnership ("JEDI"), and Enron Capital & Trade
Resources Corp., a Delaware corporation ("ECT").

This Agreement is made pursuant to the Securities Purchase Agreement (the
"Securities Purchase Agreement") dated as of even date herewith, by and among
the Company, ECT and JEDI. In order to induce ECT and JEDI to enter into the
Securities Purchase Agreement, the Company has agreed to provide the
registration and other rights set forth in this Agreement. Pursuant to the
Securities Purchase Agreement, ECT and JEDI will acquire the Convertible
Promissory Notes (the "Notes") which will entitle ECT and JEDI to convert the
Notes into shares of Common Stock, par value $.00001 per share, of the Company.
The execution and delivery of this Agreement shall occur contemporaneously with
the Closing (as defined in the Securities Purchase Agreement).

The parties agree as follows:

ARTICLE I

Section 1.01. Definitions. Capitalized terms used herein without
definition shall have the meanings given to them in the Securities Purchase
Agreement. The terms set forth below are used herein as so defined:

"Commission" has the meaning specified therefor in Section 1.02 of
this Agreement.

"Common Stock" means the common stock, par value $.00001 per share of
the Company.

"Conversion Shares" means the shares of Common Stock issuable on
conversion of the Notes.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.

"Holder" means the record holder of any Registrable Securities.

"Inspector" has the meaning specified therefor in Section 2.03 of this
Agreement.

"Losses" has the meaning specified therefor in Section 2.08 of this
Agreement.
<PAGE>

"Person" means any individual, corporation, company, voluntary
association, partnership, joint venture, trust, limited liability company,
unincorporated organization or government or any agency, instrumentality or
political subdivision thereof, or any other form of entity.

"Records" has the meaning specified therefor in Section 2.03 this
Agreement.

"Registrable Securities" means the Conversion Shares and any other
shares of Common Stock acquired by ECT and JEDI pursuant to Section 2.06 of the
Securities Purchase Agreement until such time as such securities cease to be
Registrable Securities pursuant to Section 1.02 hereof.

"Requesting Holder(s)" has the meaning specified therefor in Section
2.01 this Agreement.

"Request Notice" has the meaning specified therefor in Section 2.01
this Agreement.

"Registration Statement" has the meaning specified therefor in Section
2.01 of this Agreement.

"Securities Act" has the meaning specified therefor in Section 1.02
this Agreement.

"Selling Holder" means a Holder who is selling Registrable Securities
pursuant to a Registration Statement (as defined herein).

"Voting Securities" has the meaning specified therefor in Section 2.01
this Agreement.

Section 1.02. Registrable Securities. Any Registrable Security will cease
to be a Registrable Security when (i) a Registration Statement (as defined in
Section 2.01(b)) covering such Registrable Security has been declared effective
by the Securities and Exchange Commission (the "Commission") and such
Registrable Security has been sold or disposed of pursuant to such effective
Registration Statement; (ii) such Registrable Security is disposed of pursuant
to Rule 144 (or any similar provision then in force) under the Securities Act of
1933, as amended (the "Securities Act"); (iii) such Registrable Security is
eligible to be, and at the time of determination can be, disposed of pursuant to
paragraph (k) of Rule 144 (or any similar provision then in force) under the
Securities Act; or (iv) such Registrable Security is held by the Company or one
of its subsidiaries.

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<PAGE>

ARTICLE II

Section 2.01. Demand Registration. (a) After the expiration of 180 days
after the Closing Date, any Holder or Holders who collectively Beneficially Own
at least 20% of the Registrable Securities may request (a "Request Notice") the
Company to register under the Securities Act all or any portion of the
Registrable Securities that are held by such Holder or Holders (collectively,
the "Requesting Holder") for sale in the manner specified in the Request Notice.

(b) Promptly following receipt of a Request Notice, the Company shall
notify each Holder (except the Requesting Holder) of the receipt of a Request
Notice and shall use its commercially reasonable efforts to file a registration
statement under the Securities Act (each such registration statement is
hereinafter referred to as a "Registration Statement") effecting the
registration under the Securities Act, for public sale in accordance with the
method of disposition specified in such Request Notice, of the Registrable
Securities specified in the Request Notice (and in any notices that the Company
receives from other Holders no later than the 15th day after receipt of the
notice sent by the Company) (such other Holders and the Requesting Holder are
hereinafter referred to as the "Requesting Holders"). If such method of
disposition shall be an underwritten public offering, the Company may designate
the managing underwriter of such offering, subject to the approval of the
Requesting Holders holding a majority of the Registrable Securities to be
registered, which approval shall not be withheld unreasonably. The Company
shall be obligated to register Registrable Securities pursuant to this Section
2.01 on two occasions only.

(c) If the Company has received a Request Notice, whether or not a
Registration Statement with respect thereto has been filed or has become
effective, and furnishes to the Requesting Holders a copy of a resolution of the
Board of Directors of the Company certified by the Secretary of the Company
stating that in the good faith judgment of the Board of Directors it would not
be in the best interest of the Company's stockholders for such Registration
Statement (A) to be filed on or before the date such filing would otherwise be
required hereunder, or (B) to become effective because such action (x) would
materially interfere with a significant acquisition, corporate reorganization or
other similar transaction involving the Company, (y) would require premature
disclosure of material information that the Company has a bona fide business
purpose for preserving as confidential, or (z) the Company is unable to comply
with requirements of the Commission, the Company shall have the right, but not
more than once in any calendar year with respect to any Request Notice, to defer
such filing or effectiveness for such period as may be reasonably necessary
(which period shall not, in any event, exceed ninety days from the date the
response period for Holders pursuant to Section 2.01(b) expires).

(d) The Company shall be entitled to include in any Registration
Statement filed pursuant to this Section 2.01, for sale in accordance with the
method of disposition specified by the Requesting Holder, securities of the
Company entitled to vote generally in the election of directors

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<PAGE>

(or any securities convertible into or exchangeable for or exercisable for the
purchase of securities so entitled generally to vote in the election of
directors) (collectively, "Voting Securities") to be sold by the Company for its
own account, except as and to the extent that, in the opinion of the managing
underwriter (if such method of disposition shall be an underwritten public
offering), such inclusion would materially jeopardize the successful marketing
of the Registrable Securities to be sold. Any Person other than a Holder (the
"Other Holders") entitled to piggy-back registration rights with respect to a
Registration Statement filed pursuant to this Section 2.01 may include Voting
Securities of the Company with respect to which such rights apply in such
Registration Statement for sale in accordance with the method of disposition
specified by the Requesting Holder, except and to the extent that, in the
opinion of the managing underwriter (if such method of disposition shall be an
underwritten public offering) such inclusion would materially jeopardize the
successful marketing of the Registrable Securities to be sold. Except as
provided in this subsection (d) and in Section 2.05, the Company will not effect
any other registration of its Voting Securities (except with respect to
Registration Statements on Form S-4 or S-8 or any forms succeeding thereto for
purposes permissible under such forms as of the date hereof or filed in
connection with an exchange offer or an offering of securities solely to the
Company's existing stockholders or such other registration statements (i) for
the resale of shares issued pursuant to an employee stock ownership trust or
other benefit plan of a business acquired in an Acquisition or (ii) in
connection with non-underwritten resales of securities issued to owners of a
business acquired in an Acquisition), whether for its own account or that of any
Other Holder, from the date of receipt of a Request Notice requesting the
registration of an underwritten public offering until the completion or
abandonment of the distribution by the underwriters of all securities
thereunder.

From and after the date of this Agreement and until no Registrable
Securities remain outstanding, the Company shall not grant any demand
registration rights to any Person unless such rights are expressly made subject
to the right of Holders to include an equal number of shares of the Registrable
Securities along with the other Person's shares in any registration relating to
an underwritten public offering with respect to which, in the opinion of the
managing underwriter, the inclusion of all shares requested to be registered by
all Persons holding registration rights, would materially jeopardize the
successful marketing of the securities (including the Registrable Securities) to
be sold.

Section 2.02. Piggy-Back Registration. If the Company proposes to
register any Voting Securities under the Securities Act for sale to the public
for cash, whether for its own account or for the account of Other Holders or
both (except with respect to Registration Statements on Forms S-4 or S-8 or any
forms succeeding thereto for purposes permissible under such forms as of the
date hereof or filed in connection with an exchange offer or an offering of
securities solely to the Company's existing stockholders), each such time it
will give written notice to all Holders of its intention to do so no less than
20 days prior to the anticipated filing date. Upon the written request of any
Holder received by the Company no later than the 15th day after receipt by such
Holder of

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<PAGE>

the notice sent by the Company, to register, on the same terms and conditions as
the securities otherwise being sold pursuant to such registration, any of its
Registrable Securities (which request shall state the intended method of
disposition thereof), the Company will use its commercially reasonable efforts
to cause the Registrable Securities as to which registration shall have been so
requested to be included in the securities to be covered by the Registration
Statement proposed to be filed by the Company, on the same terms and conditions
as any similar securities included therein, all to the extent requisite to
permit the sale or other disposition by each Holder (in accordance with its
written request) of such Registrable Securities so registered; provided,
however, that the Company may at any time, in its sole discretion and without
the consent of any Holder, abandon the proposed offering in which any Holder had
requested to participate. The number of Registrable Securities to be included in
such a registration may be reduced or eliminated if and to the extent, in the
case of an underwritten offering, the managing underwriter shall render to the
Company its opinion that such inclusion would materially jeopardize the
successful marketing of the securities (including the Registrable Securities)
proposed to be sold therein; provided, however, that (a) in the case of a
Registration Statement filed pursuant to the exercise of demand registration
rights of any Other Holders, priority shall be given first to the Other Holders
demanding such registration, then to the Holders, then to the Company and then
to Other Holders (other than the Other Holders demanding such registration) and
(b) in the case of a Registration Statement the filing of which is initiated by
the Company, priority shall be given (A) first to the Company, then (B) such
priority shall be given equally to (x) the Other Holders (exercising their piggy
back registration rights) and (y) the Holders.

From and after the date of this Agreement and until no Registrable
Securities remain outstanding, the Company shall not grant any piggy-back
registration rights to any Person unless such rights are expressly made subject
to the prior right of Holders to include their Registrable Securities on a pro-
rata basis in any registration relating to an underwritten public offering with
respect to which, in the opinion of the managing underwriter, the inclusion in
the offering of all shares requested to be registered by all Persons holding
registration rights would materially jeopardize the successful marketing of the
securities (including the Registrable Securities) to be sold. In the event that
the number of Registrable Securities to be included in a registration is to be
reduced as provided above, within 10 days after receipt by each Holder proposing
to sell Registrable Securities pursuant to the registered offering of the
opinion of such managing underwriter, all such Selling Holders may allocate
among themselves the number of shares of such Registrable Securities which such
opinion states may be distributed without adversely affecting the distribution
of the securities covered by the Registration Statement, and if such Holders are
unable to agree among themselves with respect to such allocation, such
allocation shall be made in proportion to the respective numbers of shares
specified in their respective written requests.

Section 2.03. Registration Procedures. If and whenever the Company is
required pursuant to this Agreement to effect the registration of any of the
Registrable Securities under the Securities Act, the Company will, as
expeditiously as possible:

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<PAGE>

(a) prepare and file as promptly as reasonably possible with the
Commission a Registration Statement, on a form available to the Company, with
respect to such securities (which filing shall be made within 30 days after the
receipt by the Company of a Request Notice) and use its commercially reasonable
efforts to cause such Registration Statement to become and remain effective for
the period of the distribution contemplated thereby (determined pursuant to
subparagraph (g) below);

(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective for
the distribution period (determined pursuant to subparagraph (g) below) and as
may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement;

(c) furnish to each Selling Holder and to each underwriter such number
of copies of the Registration Statement and the prospectus included therein
(including each preliminary prospectus and each document incorporated by
reference therein to the extent then required by the rules and regulations of
the Commission) as such Persons may reasonably request in order to facilitate
the public sale or other disposition of the Registrable Securities covered by
such Registration Statement;

(d) if applicable, use its commercially reasonable efforts to register
or qualify the Registrable Securities covered by such Registration Statement
under the securities or blue sky laws of such jurisdictions as the Selling
Holders or, in the case of an underwritten public offering, the managing
underwriter, shall reasonably request, provided that the Company will not be
required to qualify generally to transact business in any jurisdiction where it
is not then required to so qualify or to take any action which would subject it
to general service of process in any such jurisdiction where it is not then so
subject;

(e) immediately notify each Selling Holder and each underwriter, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus contained in such Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing and as promptly as
practicable amend or supplement the prospectus or take other appropriate action
so that the prospectus does not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing;

(f) in the case of an underwritten public offering, furnish upon
request, (i) on the date that Registrable Securities are delivered to the
underwriters for sale pursuant to such

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<PAGE>

Registration Statement, an opinion of counsel for the Company dated as of such
date and addressed to the underwriters and to the Selling Holders, stating that
such Registration Statement has become effective under the Securities Act and
that (A) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Securities Act, (B) the
Registration Statement, the related prospectus, and each amendment or supplement
thereof, comply as to form in all material respects with the requirements of the
Securities Act and the applicable rules and regulations thereunder of the
Commission (except that such counsel need express no opinion as to the financial
statements, or any expertized schedule, report or information contained or
incorporated therein) and (C) to such other effects as may reasonably be
requested by counsel for the underwriters, and (ii) on the effective date of the
Registration Statement and on the date that Registrable Securities are delivered
to the underwriters for sale pursuant to such Registration Statement, a letter
dated such dates from the independent accountants retained by the Company,
addressed to the underwriters and, if available, to the Selling Holders, stating
that they are independent public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the financial
statements of the Company and the schedules thereto that are included or
incorporated by reference in the Registration Statement or the prospectus, or
any amendment or supplement thereof, comply as to form in all material respects
with the applicable requirements of the Securities Act and the published rules
and regulations thereunder, and such letter shall additionally address such
other financial matters (including information as to the period ending no more
than five business days prior to the date of such letter) included in the
Registration Statement in respect of which such letter is being given as the
underwriters may reasonably request;

(g) make available for inspection by one representative of the Selling
Holders, designated by a majority thereof, any underwriter participating in any
distribution pursuant to such Registration Statement, and any attorney,
accountant or other agent retained by such representative of the Selling Holders
or underwriter (the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company (collectively, the "Records"),
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Inspector in connection with such
Registration Statement, provided, however, that with respect to any Records that
are confidential, the Inspectors shall take such action as the Company may
reasonably request in order to maintain the confidentiality of the Records. For
purposes of subsections (a) and (b) above with respect to demand registration
only, the period of distribution of Registrable Securities in a firm commitment
underwritten public offering shall be deemed to extend until the earlier of (a)
the date each underwriter has completed the distribution of all securities
purchased by it or (b) the date ninety (90) days subsequent to the effective
date of such registration statement, and the period of distribution of
Registrable Securities in any other registration shall be deemed to extend until
the earlier of the sale of all Registrable Securities covered thereby or one
year;

-7-
<PAGE>

(h) use its commercially reasonable efforts to keep effective and
maintain for the period specified in subparagraph (g) a registration,
qualification, approval or listing obtained to cover the Registrable Securities
as may be necessary for the Selling Holders to dispose thereof and shall from
time to time amend or supplement any prospectus used in connection therewith to
the extent necessary in order to comply with applicable law;

(i) use its commercially reasonable efforts to cause the Registrable
Securities to be registered with or approved by such other governmental agencies
or authorities as may be necessary by virtue of the business and operations of
the Company to enable the Selling Holders to consummate the disposition of such
Registrable Securities; and

(j) enter into customary agreements and take such other actions as are
reasonably requested by the Selling Holders or the underwriters, if any, in
order to expedite or facilitate the disposition of such Registrable Securities.

Each Selling Holder, upon receipt of notice from the Company of the
happening of any event of the kind described in subsection (e) of this Section
2.03, shall forthwith discontinue disposition of the Registrable Securities
until such Selling Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by subsection (e) of this Section 2.03 or until it is
advised in writing by the Company that the use of the prospectus may be resumed,
and has received copies of any additional or supplemental filings which are
incorporated by reference in the prospectus, and, if so directed by the Company,
such Selling Holder will, or will request the managing underwriter or
underwriters, if any, to, deliver to the Company (at the Company's expense) all
copies in their possession or control, other than permanent file copies then in
such Selling Holder's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice. If the Company shall
give any such notice, the time periods mentioned in subsection (g) of this
Section 2.03 shall be extended by the number of days during the period from and
including the date of the giving of such notice to and including the date when
each Selling Holder shall have received the copies of the supplemented or
amended prospectus contemplated by subsection (e) of this Section 2.03 hereof or
the notice that they may resume use of the prospectus.

In connection with each registration hereunder with respect to an
underwritten public offering, the Company and each Selling Holder agrees to
enter into a written agreement with the managing underwriter or underwriters
selected in the manner herein provided in such form and containing such
provisions as are customary in the securities business for such an arrangement
between underwriters and companies of the Company's size and investment stature.

Section 2.04 Cooperation by Selling Holders. The Company shall have no
obligation to include in such registration statement shares of a Selling Holder
who has failed to timely furnish

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<PAGE>

such information which, in the written opinion of counsel to the Company, is
reasonably required in order for the registration statement to comply with the
Securities Act.

Section 2.05 Restrictions on Public Sale by Selling Holders of
Registrable Securities. To the extent not inconsistent with applicable law,
including insurance codes, each Selling Holder of Registrable Securities that is
included in a registration statement which registers Registrable Securities
pursuant to this Agreement agrees not to effect any public sale or distribution
of the issue being registered (or any securities of the Company convertible into
or exchangeable or exercisable for securities of the same type as the issue
being registered) during the 14 days before, and during the 90-day period
beginning on, the effective date of a registration statement filed by the
Company (except as part of such registration), but only if and to the extent
requested in writing (with reasonable prior notice) by the managing underwriter
or underwriters in the case of an underwritten public offering by the Company of
securities of the same type as the Registrable Securities, provided that the
duration of the foregoing restrictions shall be no longer than the duration of
the shortest restriction imposed by the underwriters on the officers or
directors or any other stockholder of the Company; and, provided further that to
the extent the Selling Holders do not participate in the underwritten public
offering, the period of time for which the Company is required to keep any other
registration statement which includes Registrable Securities that is effective
concurrently with the holdback period described above continuously effective
shall be increased by a period equal to such requested holdback period.

Section 2.06. Restrictions on Public Sale by the Company. To the extent
required by an underwriter in an underwritten public offering, the Company
agrees not to effect on its own behalf any public sale or distribution of any
securities similar to those being registered, or any securities convertible into
or exchangeable or exercisable for such securities, during the 14 days before,
and during the 90-day period beginning on, the effective date of any
registration statement in which the Selling Holders of Registrable Securities
are participating except pursuant to such registration statement or a
registration statement on Form S-8 or Form S-4 or such other registration
statements for (i) the resale of shares issued pursuant to an employee stock
ownership trust or other benefit plan of a business acquired in an Acquisition
or (ii) in connection with non-underwritten commitments to register the resale
of securities issued to owners of a business acquired in an Acquisition. This
section applies to demand registration rights only.

Section 2.07. Expenses.

(a) "Registration Expenses" means all expenses incident to the
Company's performance under or compliance with this Agreement, including without
limitation, all registration and filing fees, blue sky fees and expenses,
printing expenses, listing fees, fees and disbursements of counsel and
independent public accountants for the Company, fees of the National Association
of Securities Dealers, Inc., transfer taxes, fees of transfer agents and
registrars, costs of insurance and

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<PAGE>

reasonable out-of-pocket expenses, including, without limitation all
reasonable expenses incurred directly by the Selling Holders for one legal
counsel, but excluding any Selling Expenses. "Selling Expenses" means all
underwriting fees, discounts and selling commissions allocable to the sale of
the Registrable Securities.

(b) The Company will pay all Registration Expenses in connection with
each Registration Statement filed pursuant to this Agreement, whether or not the
Registration Statement becomes effective, and the Selling Holders shall pay all
Selling Expenses in connection with any Registrable Securities registered
pursuant to this Agreement.

Section 2.08. Indemnification. (a) In the event of a registration of any
Registrable Securities under the Securities Act pursuant to this Agreement, the
Company will indemnify and hold harmless each Selling Holder thereunder and each
underwriter, pursuant to the applicable underwriting agreement with such
underwriter, of Registrable Securities thereunder and each Person, if any, who
controls such Selling Holder or underwriter within the meaning of the Securities
Act and the Exchange Act, against any losses, claims, damages or liabilities
(including reasonable attorneys' fees) ("Losses"), joint or several, to which
such Selling Holder or underwriter or controlling Person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such Losses,
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement under which such Registrable Securities were registered
under the Securities Act pursuant to this Agreement, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon 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 such Selling Holder,
each such underwriter and each such controlling Person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Loss or actions; provided, however, that the Company will
not be liable in any such case if and 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 so made in conformity
with information furnished by such Selling Holder, such underwriter or such
controlling Person in writing specifically for use in such Registration
Statement or prospectus.

(b) Each Selling Holder agrees to indemnify and hold harmless the
Company, its directors, officers, employees and agents and each Person, if any,
who controls the Company within the meaning of the Securities Act or of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Selling Holder, but only with respect to information regarding such Selling
Holder furnished in writing by or on behalf of such Selling Holder expressly for
inclusion in any Registration Statement or prospectus relating to the
Registrable Securities, or any amendment or supplement thereto; provided,
however, that the liability of such Selling Holder shall not be greater in
amount than the dollar amount of the proceeds (net of any Selling Expenses)

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<PAGE>

received by such Selling Holder from the sale of the Registrable Securities
giving rise to such indemnification.

(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party other than under this Section 2.08. In case any such
action 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 in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 2.08 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that, (i) if the indemnifying party has failed to assume the defense
and employ counsel or (ii) if the defendants in any such action include both the
indemnified party and the indemnifying party and counsel to the indemnified
party shall have concluded that there may be reasonable defenses available to
the indemnified party that are different from or additional to those available
to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, then the indemnified party shall have the right to select a separate
counsel and to assume such legal defense and otherwise to participate in the
defense of such action, with the reasonable expenses and fees of such separate
counsel and other reasonable expenses related to such participation to be
reimbursed by the indemnifying party as incurred.

(d) If the indemnification provided for in this Section 2.08 is
unavailable to the Company or the Selling Holders or is insufficient to hold
them harmless in respect of any Losses, then each such indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such Losses as between the
Company on the one hand and each Selling Holder on the other, in such proportion
as is appropriate to reflect the relative fault of the Company on the one hand
and of each Selling Holder on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company on the one hand and each Selling Holder on the other shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statements of a material fact or the omission or alleged omission to state a
material fact has been made by, or relates to, information supplied by such
party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.

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<PAGE>

No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who is not guilty of such fraudulent misrepresentation.

ARTICLE III

Section 3.01. Dispute Resolution. Any action, dispute, claim or
controversy of any kind now existing or hereafter arising between the Company
and a Holder arising out of, pertaining to this Agreement or the transactions
contemplated hereby (a "Dispute") shall be resolved by binding arbitration in
accordance with the terms hereof. Any party may, by summary proceedings, bring
an action in court to compel arbitration of any Dispute. Any arbitration shall
be administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Section, the Commercial Arbitration Rules of
the AAA, and, to the maximum extent applicable, the Federal Arbitration Act.
Judgment on any award rendered by an arbitrator may be entered in any court
having jurisdiction. Any arbitration shall be conducted before a panel of three
arbitrators. Such panel shall consist of one person designated by the Company,
one designated by the Holder(s) and one designated by their designees. The
arbitrators designated by the parties are not required to be neutral. If a
party fails to designate an arbitrator within 10 days after the filing of the
Dispute with the AAA, or the parties, arbitrators fail to designate a third
arbitrator within 30 days after the later of their appointments, such arbitrator
shall be appointed by the AAA. An arbitration proceeding hereunder shall be
concluded within 180 days of the filing of the Dispute with the AAA.
Arbitration proceedings shall be conducted in Houston, Texas. Arbitrators shall
be empowered to award sanctions and to take such other actions as they deem
necessary, to the same extent a judge could impose sanctions or take such other
actions pursuant to the Federal Rules of Civil Procedure and applicable law. No
award by the arbitrators shall assess consequential, punitive or exemplary
damages but may assess costs and expenses in a manner deemed equitable. The
arbitrators shall make specific written findings of fact and conclusions of law.
The decision of the arbitrators shall be final and binding on each party.

Section 3.02. Communications. All notices and other communications
provided for or permitted hereunder shall be made in writing by telecopy,
courier service or personal delivery:

(a) if to a Holder of Registrable Securities, at the most current
address given by such Holder to the Company in accordance with the provisions of
this Section 3.02, which address initially is, with respect to JEDI or ECT, the
address set forth in the Securities Purchase Agreement, and

(b) if to the Company, initially at its address set forth in the
Securities Purchase Agreement and thereafter at such other address, notice of
which is given in accordance with the provisions of this Section 3.02.

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<PAGE>

All such notices and communications shall be deemed to have been
received at the time delivered by hand, if personally delivered; when receipt
acknowledged, if telecopied; and when actually received if delivered to an air
courier guaranteeing overnight delivery.

Section 3.03. Successor and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including subsequent holders of Registrable Securities as set forth in
Section 3.12.

Section 3.04. Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but one
and the same Agreement.

Section 3.05. Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

Section 3.06. Governing Law. The laws of the State of Texas shall govern
this Agreement without regard to principles of conflict of laws.

Section 3.07. Severability of Provisions. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting or impairing the validity or enforceability of such provision in any
other jurisdiction.

Section 3.08. Entire Agreement. This Agreement, together with the
Securities Purchase Agreement and the other Basic Documents (as defined in the
Securities Purchase Agreement) are intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the securities sold pursuant to the Securities Purchase Agreement. This
Agreement, the Securities Purchase Agreement and the other Basic Documents,
supersede all prior agreements and understandings between the parties with
respect to such subject matter.

Section 3.09. Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, the successful party shall be entitled
to recover reasonable attorneys' fees in addition to its costs and expenses and
any other available remedy.

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<PAGE>

Section 3.10. Amendment. This Agreement may be amended only by means of a
written amendment signed by the Company and by the Holders of a majority of the
Registrable Securities.

Section 3.11. Registrable Securities Held by the Company or Its
Affiliates. In determining whether the Holders of the required amount of
Registrable Securities have concurred in any direction, amendment, supplement,
waiver or consent, Registrable Securities owned by the Company or one of its
Affiliates shall be disregarded.

Section 3.12. Assignment of Rights. The rights of any Holder under this
Agreement may be assigned to any Person who acquires at least 10,000 shares of
Registrable Securities, which such number of shares shall be subject to
equitable adjustment for stock splits, stock dividends paid in shares of Common
Stock, or combinations of outstanding shares of Common Stock into a smaller
number of shares. Any assignment of registration rights pursuant to this
Section 3.12 shall be effective only upon receipt by the Company of written
notice from such assigning Holder stating the name and address of any assignee.
The rights of an assignee under this Section 3.12 shall be the same rights
granted to the assigning Holder under this Agreement. In connection with any
such assignment, the term "Holder" as used herein shall, where appropriate to
assign the rights and obligations of the assigning Holder hereunder to such
assignee, be deemed to refer to the assignee.

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<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

QUANTA SERVICES, INC.

By: /s/ Brad Eastman
-------------------------------------
Name: Brad Eastman
-------------------------------------
Title: Vice President and General Counsel
-------------------------------------

JOINT ENERGY DEVELOPMENT
INVESTMENTS II LIMITED PARTNERSHIP

By Enron Capital Management II Limited
Partnership, its General Partner

By Enron Capital II Corp., its General Partner

By: /s/ Robert Greer
----------------------------------
Name: Robert Greer
----------------------------------
Title: Agent and Attorney-in-Fact
----------------------------------

ENRON CAPITAL & TRADE RESOURCES CORP.

By: /s/ Robert Greer
--------------------------------------
Name: Robert Greer
--------------------------------------
Title: Vice President
--------------------------------------

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<PAGE>

EXHIBIT 10.9

CONVERTIBLE PROMISSORY NOTE

THIS CONVERTIBLE PROMISSORY NOTE AND THE SHARES OF CAPITAL STOCK ISSUABLE UPON
CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND MAY NOT BE
SOLD, PLEDGED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR IN RELIANCE ON AN AVAILABLE EXEMPTION
FROM THE REGISTRATION PROVISIONS OF THE ACT AND ANY APPLICABLE STATE SECURITIES
OR BLUE SKY LAWS.

THIS NOTE IS SUBJECT TO CERTAIN SUBORDINATION AGREEMENTS AND PROVISIONS SET
FORTH IN THE PURCHASE AGREEMENT (AS DEFINED BELOW). NOTWITHSTANDING ANY
STATEMENT TO THE CONTRARY CONTAINED IN THIS INSTRUMENT, NO PAYMENT ON ACCOUNT OF
THE OBLIGATIONS HEREUNDER, WHETHER OF PRINCIPAL, INTEREST OR OTHERWISE, SHALL BE
MADE, PAID, RECEIVED OR ACCEPTED EXCEPT IN ACCORDANCE WITH THE EXPRESS TERMS OF
SUCH SUBORDINATION AGREEMENTS AND PROVISIONS.

U.S.$_____________ Houston, Texas _____________, 1998

QUANTA SERVICES, INC., a Delaware corporation (the "Borrower"), for value
received, hereby promises to pay to the order of ___________________________ .,
a Delaware corporation (the "Purchaser"), the principal sum
of______________________________________________________________________ (U.S.
$________________), interest on the unpaid balance of such principal amount and
premium on such principal amount in accordance with the Securities Purchase
Agreement referenced below (this "Note").

1. Securities Purchase Agreement.

This Note is the Borrower's Convertible Promissory Note to be issued
pursuant to the Securities Purchase Agreement dated as of September 29, 1998
among Borrower, Purchaser and Joint Energy Development Investments II Limited
Partnership (the "Purchase Agreement"). Capitalized Terms used herein but not
defined herein shall have the meanings given such terms in the Purchase
Agreement.

<PAGE>

2. Principal, Interest and Payments Generally.

Principal shall be advanced on even date herewith. Unless the outstanding
principal amount of this Note has been redeemed as provided in Section 3 below
or converted pursuant to Section 5 below, the Borrower shall pay to the
Purchaser the outstanding principal amount of this Note and all accrued but
unpaid interest on the Maturity Date. Except as set forth in Section 8.05 of
the Purchase Agreement, the Borrower shall not prepay the principal.

Interest shall accrue thereon as set forth in the Purchase Agreement.
Interest shall be payable quarterly as more fully set forth in the Purchase
Agreement.

3. Redemption.

The principal due to the Purchaser hereunder shall be subject to Mandatory
Redemption and Optional Redemption as more fully set forth in, respectively,
Sections 8.04 and 8.05 of the Purchase Agreement.

4. Default and Remedies.

It shall be an "Event of Default" under this Note to the extent the
Purchase Agreement so provides. During the continuation of an Event of Default,
the Purchaser may exercise, subject to the limitations set forth in the Purchase
Agreement, all of its rights under the Purchase Agreement and all other rights
at law or in equity. During the continuation of an Event of Default, the
Purchaser may exercise the conversion feature of this Note as set forth below.

During the continuation of an Event of Default, all payments received in
respect of obligations under this Note shall be applied in the order set forth
in the Purchase Agreement. No right, power, or remedy conferred to the
Purchaser in this Note or in any documents supporting this Note or now or
hereafter existing at law, in equity, by statute, or otherwise shall be
exclusive, and each such right, power, or remedy shall to the full extent
permitted by law be cumulative and in addition to every other such right, power
or remedy. No course of dealing and no delay in exercising any right, power, or
remedy conferred to the Purchaser shall operate as a waiver of or otherwise
prejudice any such right, power, or remedy. No notice to or demand upon the
Borrower shall entitle the Borrower to similar notices or demands in the future.
Without limiting the generality of this paragraph, no description of the right
to accelerate this Note, charge default interest under this Note, or otherwise
exercise remedies under this Note shall limit the right of the Purchaser to take
such actions with respect to this Note under the Purchase Agreement.

-2-
<PAGE>

5. Conversion.

5.1 Certain Definitions. As used in this Section 5, the following terms
shall have the following meanings:

"Closing Price" means on any particular date (a) the last sale price per
share of the Common Stock on such date on the principal stock exchange on which
the Common Stock has been listed or, if there is no such price on such date,
then the last sale price on such exchange on the date nearest preceding such
date, or (b) if the Common Stock is not listed on any stock exchange, the final
bid price for a share of Common Stock in the over-the-counter market, as
reported by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") at the close of business on such date, or the last sales price
if such price is reported and final bid prices are not available, or (c) if the
Common Stock is not quoted on the NASDAQ, the bid price for a share of Common
Stock in the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding to its
functions of reporting prices), or (d) if the Common Stock is no longer publicly
traded, as determined by an investment banking firm selected in good faith by
the Board of Directors of the Borrower, provided, that none of the transactions
related to the foregoing shall include purchases by any "affiliate" (as such
term is defined in the General Rules and Regulations under the Securities Act of
1933) of the Borrower.

"Common Stock" means the Borrower's Common Stock, $.00001 par value
("Common Stock").

"Conversion Price" means U.S. $13.75, subject to adjustment as provided in
this Section 5.

5.2 Conversion Right and Conversion Price. At any time the Purchaser may
convert all, or at the election of Purchaser, any part, of the outstanding
principal amount of this Note into that number of fully paid and non-assessable
shares of Common Stock obtained by dividing the outstanding principal amount of
this Note to be so converted by the Conversion Price. The Conversion Price is
subject to adjustment in certain instances, as hereinafter provided. This Note
may be converted by surrender of this Note to the Borrower at its principal
office, accompanied by a duly executed notice of conversion and a written
instrument or instruments of transfer duly executed by the Purchaser or the
Purchaser's attorney-in-fact duly authorized in writing. Upon conversion of
this Note, the Purchaser shall be entitled to receive, in addition to the number
of shares of Common Stock issuable upon such conversion, all interest accrued to
the date of conversion of this Note. All such interest shall be payable in
cash.

-3-
<PAGE>

5.3 Issuance of Common Stock on Conversion. As promptly as practicable
after the surrender of this Note for conversion, the Borrower shall deliver or
cause to be delivered to the Purchaser certificates representing the number of
fully paid and nonassessable shares of Common Stock into which this Note may be
converted in accordance with the provisions of this Section 5. Such conversion
shall be deemed to have been made at the close of business on the date that this
Note shall have been surrendered for conversion so that the rights of the
Purchaser shall cease at such time and, subject to the following provisions of
this Section 5.3, the Purchaser shall be treated for all purposes as having
become the record holder of such Common Stock at such time and such conversion
shall be at the Conversion Price in effect at such time; provided, however, that
no such surrender on any date when the stock transfer books of the Borrower
shall be closed shall be effective to constitute the Purchaser as the record
holder of such Common Stock on such date, but such surrender shall be effective
to constitute the Purchaser as the record holder for all purposes at the close
of business on the next succeeding day on which such stock transfer books are
open; and, in that event such conversion shall be at the Conversion Price in
effect on the date that this Note shall have been surrendered for conversion, as
if the stock transfer books of the Borrower had not been closed. If the last
day for the exercise of the conversion right shall not be a Business Day, then
such conversion right may be exercised on the next succeeding Business Day. In
case this Note is called for Optional Redemption as provided for in Section 8.05
of the Purchase Agreement, the right to convert this Note shall cease and
terminate at the close of business at the expiration of the Response Period, as
such term is defined in Section 8.05.

No fractional shares of Common Stock shall be issued upon conversion of
this Note. Instead of any fractional shares of Common Stock which would
otherwise be issuable upon conversion of this Note, the Borrower shall pay a
cash adjustment in respect of such fraction in an amount equal to such fraction
of a share multiplied by current market price.

5.4 Antidilution Adjustments. The number and kind of securities issuable
upon the conversion of the Note shall be subject to adjustment, without
duplication, from time to time upon the happening of certain events occurring on
or after the date of original issue of the Note as follows:

(i) In case the Borrower shall (A) subdivide its outstanding Common
Stock into a greater number of shares, (B) combine its outstanding Common
Stock into a smaller number of shares, (C) pay a dividend or make a
distribution on its outstanding Common Stock in shares of its capital stock
or (D) issue by reclassification of its outstanding Common Stock (whether
pursuant to a merger or consolidation or otherwise) any other shares of
capital stock of the Borrower, the holder of this Note surrendered for
conversion after the record date fixed by the

-4-
<PAGE>

Board of Directors for such subdivision, combination, dividend,
distribution or reclassification shall be entitled to receive the aggregate
number and kind of shares of capital stock of the Borrower which, if this
Note had been converted immediately prior to such record date at the
Conversion Price then in effect, such holder would have been entitled to
receive by virtue of such subdivision, combination, dividend, distribution
or reclassification; and the Conversion Price shall be deemed to have been
adjusted after such record date to apply to such aggregate number and kind
of shares. Such adjustment shall be made successively whenever any of the
events listed above shall occur.

(ii) In case the Borrower shall pay a dividend or make a distribution
on any class of capital stock of the Borrower in shares of Common Stock,
the Conversion Price in effect immediately prior to the record date for the
determination of stockholders entitled to receive such dividend or
distribution shall be reduced by multiplying such Conversion Price by a
fraction of which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the day immediately prior to
such record date and of which the denominator shall be the sum of such
number of shares and the total number of shares issued in such dividend or
other distribution.

(iii) In case the Borrower shall issue to all holders of Common Stock
rights or warrants entitling them to subscribe for or purchase Common Stock
at a price per share less than the current market price per share (as
determined pursuant to clause (viii) below), the Conversion Price in effect
from and after the record date therefor shall be reduced so that it shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to such record date by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding on such record
date plus the number of shares of Common Stock which the aggregate offering
price of the total number of shares of Common Stock so offered for
subscription or purchase would purchase at such current market price and of
which the denominator shall be the number of shares of Common Stock
outstanding on such record date plus the number of additional shares of
Common Stock so offered for subscription or purchase. For the purpose of
this clause (iii), the issuance of rights or warrants to subscribe for or
purchase securities convertible into Common Stock shall be deemed to be the
issuance of rights or warrants to purchase the Common Stock into which such
securities are convertible (without regard to any antidilution provision
contained therein for a subsequent adjustment of such number) at an
aggregate offering price equal to the aggregate offering price of such
securities plus the minimum aggregate amount (if any) payable upon
conversion of such securities into Common Stock. Such adjustment shall be
made successively whenever such a

-5-
<PAGE>

record date is fixed. In case such rights or warrants are not issued after
such a record date has been fixed, the Conversion Price shall be readjusted
to the Conversion Price which would have been in effect if such record date
had not been fixed.

(iv) In case the Borrower shall distribute to all holders of Common
Stock (whether pursuant to a merger or consolidation or otherwise)
evidences of its indebtedness or assets (excluding shares of capital stock
of the Borrower and cash dividends out of retained earnings), or rights to
subscribe for Common Stock at a price less than the then current market
price per share (excluding those referred to in clause (iii) above), then
in each such case the Conversion Price in effect from and after the record
date therefor shall be adjusted so that it shall equal the price determined
by multiplying the Conversion Price in effect immediately prior to such
record date by a fraction, of which the numerator shall be the current
market price per share (determined as provided in clause (viii) below) of
the Common Stock on such record date less the fair market value (as
determined by the Board of Directors, whose determination in good faith
shall be conclusive) of the portion of the evidences of indebtedness or
assets so distributed or of such rights to subscribe applicable to one
share of Common Stock and of which the denominator shall be such current
market price per share of Common Stock. Such adjustment shall be made
successively whenever any such a record date is fixed. In case such
distribution is not made after such a record date has been fixed, the
Conversion Price shall be readjusted to the Conversion Price which would
have been in effect if such record date had not been fixed.

(v) If the Borrower shall issue any additional shares of Common Stock
(otherwise as provided in (i) through (iv) above) at a price per share less
than the current market price per share of Common Stock but above the
Conversion Price, then the Conversion Price shall be adjusted to the price
determined by multiplying the Conversion Price by a fraction (A) the
numerator of which shall be (1) the sum of (x) the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock multiplied by the current market price
and (y) the consideration, if any, received and deemed received by the
Borrower upon the issuance of such additional shares of Common Stock (2)
divided by the total number of shares of Common Stock outstanding
immediately after the issuance of such additional shares of Common Stock,
and (B) the denominator of which shall be the current market price.

(vi) If the Borrower shall issue any additional shares of Common Stock
prior to the second anniversary of the issuance of the Notes (otherwise as
provided in (i) through (v) above) at a price per share less than the
Conversion Price per share

-6-
<PAGE>

of Common Stock, then the Conversion Price shall be adjusted to the price
determined by multiplying the Conversion Price by a fraction (A) the
numerator of which shall be (1) the sum of (x) the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock multiplied by the Conversion Price and
(y) the consideration, if any, received and deemed received by the Borrower
upon the issuance of such additional shares of Common Stock (2) divided by
the total number of shares of Common Stock outstanding immediately after
the issuance of such additional shares of Common Stock, and (B) the
denominator of which shall be the Conversion Price.

(vii) In case the Borrower shall issue any security or evidence of
indebtedness which is convertible into or exchangeable for Common Stock
("Convertible Security"), or any warrant, option or other rights to
subscribe for or purchase Common Stock or any Convertible Security
(together with Convertible Securities, "Common Stock Equivalent"), or if,
after any such issuance, the price per share for which such additional
shares of Common Stock may be issuable thereunder is amended, then the
Conversion Price upon each such issuance or amendment shall be adjusted as
provided in the preceding paragraph hereof on the basis that (A) the
maximum number of additional shares of Common Stock issuable pursuant to
all such Common Stock Equivalents (without regard to any antidilution
provision contained therein for a subsequent adjustment of such number)
shall be deemed to have been issued as of the earlier of (x) the date on
which the Borrower shall enter into a firm contract for the issuance of
such Common Stock Equivalent or (y) the date of actual issuance of such
Common Stock Equivalent; and (B) the aggregate consideration for such
maximum number of additional shares of Common Stock shall be deemed to be
the minimum consideration received and receivable by the Borrower for the
issuance of such additional shares of Common Stock pursuant to such Common
Stock Equivalent. No adjustment of the Conversion Price shall be made
under this paragraph upon the issuance of any Convertible Security which is
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor, if any adjustments shall previously have been
made in the Conversion Price then in effect upon the issuance of such
warrants or other rights pursuant to subparagraphs (v) and (vi).

The following provisions shall be applicable to making of adjustments
in the Conversion Price hereinbefore provided in subparagraphs (iii), (iv),
(v) and (vi):

(A) The consideration received by the Borrower shall be deemed to
be the following: to the extent that any additional shares of Common
Stock or any Common Stock Equivalents shall be issued for cash
consideration, the

-7-
<PAGE>

consideration received by the Borrower therefor, or, if such
additional shares of Common Stock or Common Stock Equivalents are
offered by the Borrower for subscription, the subscription price, or,
if such additional shares of Common Stock or Common Stock Equivalents
are sold to underwriters or dealers for public offering without a
subscription offering, the initial public offering price, in any such
case excluding any amounts paid or receivable for accrued interest or
accrued dividends and without deduction of any compensation,
discounts, commissions or expenses paid or incurred by the Borrower
for and in the underwriting of, or otherwise in connection with, the
issue thereof; to the extent that such issuance shall be for a
consideration other than cash, then, except as herein otherwise
expressly provided, the fair market value of such consideration at the
time of such issuance as determined in good faith by the Borrower's
Board of Directors. The consideration for any additional shares of
Common Stock issuable pursuant to any Common Stock Equivalents shall
be the consideration received by the Borrower for issuing such Common
Stock Equivalents, plus the additional consideration payable to the
Borrower upon the exercise conversion or exchange of such Common Stock
Equivalents. In case of the issuance at any time of any additional
shares of Common Stock or Common Stock Equivalents in payment or
satisfaction of any dividend upon any class of stock other than Common
Stock, the Borrower shall be deemed to have received for such
additional shares of Common Stock or Common Stock Equivalents a
consideration equal to the amount of such dividend so paid or
satisfied. In any case in which the consideration to be received or
paid shall be other than cash, the Board of Directors of the Borrower
shall notify promptly each holder of this Note of its determination of
the fair market value of such consideration.

(B) Upon the expiration of the right to convert, exchange or
exercise any Common Stock Equivalent the issuance of which effected an
adjustment in the Conversion Price, if any such Common Stock
Equivalent shall not have been converted, exercised or exchanged, the
number of shares of Common Stock deemed to be issued and outstanding
by reason of the fact that they were issuable upon conversion,
exchange or exercise of any such Common Stock Equivalent shall no
longer be computed as set forth above, and the Conversion Price shall
forthwith be readjusted and thereafter be the price which it would
have been (but reflecting any other adjustments in the Conversion
Price made pursuant to the provisions of subparagraphs (d)(v) and
(d)(vi) after the issuance of such Common Stock Equivalent) had the
adjustment of the Conversion Price made upon the issuance or sale of
such Common Stock Equivalent been made on the basis of the issuance
only of the

-8-
<PAGE>

number of additional shares of Common Stock actually issued upon
exercise, conversion or exchange of such Common Stock Equivalent and
thereupon only the number of additional shares of Common Stock
actually so issued shall be deemed to have been issued and only the
consideration actually received by the Borrower (computed as in
paragraph (A) above) shall be deemed to have been received by the
Borrower.

(C) The number of shares of Common Stock at any time outstanding
shall not include any shares thereof then directly or indirectly owned
or held by or for the account of the Borrower or its subsidiaries.

No adjustments of the Conversion Price shall be made pursuant to
subparagraphs (v) and (vi) upon the issuance of shares of Common Stock that
are issued pursuant to (x) Employee Plans, or (y) Acquisitions.

(viii) For the purpose of any computation under clauses (iii), (iv)
and (v) above, the current market price shall be deemed to be the
following:

(A) With respect to a bonafide underwritten public offering, the
offering price agreed to by the underwriter;

(B) With respect to binding agreements made by the Borrower to
issue shares of Common Stock for a price that is (y) determined as of
the date of the agreement with reference to a market price
contemporaneous with the date of the binding agreement and (z) without
full adjustment to the Closing Price on the day of issuance, the price
as determined by such binding agreement; or

(C) With respect to all other situations, the average of the
daily Closing Prices for 30 consecutive trading days commencing 45
trading days before the date in question.

(ix) In any case in which this subsection (d) shall require that an
adjustment as a result of any event becomes effective from and after a
record date, the Borrower may elect to defer until after the occurrence of
such event (A) issuing to the holder of this Note converted after such
record date and before the occurrence of such event the additional shares
of Common Stock issuable upon such conversion over and above the shares
issuable on the basis of the Conversion Price in effect

-9-
<PAGE>

immediately prior to adjustment and (B) paying to such holder any amount in
cash in lieu of a fractional share of Common Stock pursuant to Section 5.3
above. In lieu of the shares the issuance of which is deferred pursuant to
subclause (A) above, the Borrower shall issue or cause a transfer agent to
issue due bills or other appropriate evidence of the right to receive such
shares.

(x) Any adjustment in the Conversion Price otherwise required by this
Section 5.4 to be made may be postponed until the date of the next
adjustment otherwise required to be made if such adjustment (together with
any other adjustments postponed pursuant to this clause (x) and not
theretofore made) would not require an increase or decrease of more than 1%
in such price. All calculations under this Section 5.4 shall be made to
the nearest cent or to the nearest 1/100th of a share, as the case may be.

(xi) In case at any time, as a result of an adjustment made pursuant
to subclause (C) or (D) of clause (i) above, the holder of this Note
thereafter surrendered for conversion shall become entitled to receive any
shares of capital stock of the Borrower other than Common Stock, the number
and kind of such other shares so receivable upon conversion of this Note
shall thereafter be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect
to the Common Stock contained in clauses (i) to (vii), inclusive, above,
and the other provisions of this Section 5.4 with respect to the Common
Stock shall apply on like terms to any such other shares.

(xii) The Board of Directors may make such reductions in the
Conversion Price, in addition to those required by this Section 5.4, as
shall be determined by the Board of Directors to be advisable in order to
avoid taxation so far as practicable of any dividend of stock or stock
rights or any event treated as such for federal income tax purposes to the
recipients. The Board of Directors shall have the power to resolve any
ambiguity or correct any error in this Section 5.4, and its action in so
doing shall be final and conclusive.

(xiii) With respect to any stockholder rights plan (the "Rights
Plan") pursuant to which "Rights" would be issued or issuable to
stockholders of the Borrower, no adjustment shall be made to the Conversion
Price as a result of such Rights Plan in the event that an appropriate
amount of "Rights" are reserved for issuance in connection with issuance of
Conversion Shares to the Purchaser. If and when the Rights become
exercisable, an appropriate adjustment to the Conversion Price in
accordance with the terms of the Rights Plan shall be made pursuant to this
Section 5.4.

-10-
<PAGE>

5.5 Certain Notices and Calculations. Whenever the Conversion Price is
adjusted as provided in Section 5.4, the Borrower shall promptly deliver to the
holder hereof a certificate signed by two officers of the Borrower setting forth
the Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment and the computation thereof.

5.6 Reservation of Shares. The Borrower covenants that it will at all
times reserve and keep available, free from preemptive rights, out of its
authorized but unissued shares of Common Stock, solely for the purpose of issue
upon conversion of this Note as herein provided, such number of shares of Common
Stock as shall then be issuable upon the conversion of this Note. The Borrower
covenants that all shares of Common Stock which shall be so issuable shall, upon
issuance, be duly and validly issued and fully paid and non-assessable. The
Borrower shall from time to time, in accordance with applicable law, use all
commercially reasonable efforts to seek necessary stockholder approval to
increase the authorized amount of its Common Stock if at any time the authorized
amount of shares of Common Stock remaining unissued shall not be sufficient to
permit the conversion of all Notes at the time outstanding. The Borrower shall
take such action as may be reasonably required to cause the Conversion Shares to
be approved for listing on the NYSE.

5.7 Certain Covenants. Before taking any action which would cause an
adjustment reducing the Conversion Price below the then stated or par value of
the Common Stock issuable upon conversion of this Note, the Borrower will take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Borrower may validly and legally issue fully paid and non-
assessable shares of such Common Stock at such adjusted Conversion Price.

5.8 Certain Notices. In case:

(i) the Borrower shall authorize the distribution to all holders of
Common Stock of evidences of its indebtedness or assets (other than cash
dividends or other cash distributions paid out of surplus); or

(ii) the Borrower shall authorize the granting to the holders of
Common Stock of rights or warrants to subscribe for or purchase any shares
of capital stock or any class or of any other rights; or

(iii) of any reclassification of the capital stock of the Borrower
(other than a subdivision or combination of its outstanding shares of
Common Stock), or of any consolidation or merger to which the Borrower is a
party and for which approval of

-11-
<PAGE>

any stockholders of the Borrower is required, or of the sale, lease, or
transfer of all or substantially all of the property of the Borrower; or

(iv) of the voluntary or involuntary dissolution, liquidation, or
winding up of the Borrower;

then, in each case, the Borrower shall provide to the Purchaser at least 20
days, but not more than 45 days, prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution, rights, or warrants,
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution, rights, or
warrants are to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, lease, transfer, dissolution, liquidation, or
winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, lease, transfer,
dissolution, liquidation, or winding up.

5.9 Merger or Consolidation. In case of any consolidation or merger of
the Borrower with or into another corporation or entity (other than a merger
with another corporation in which the Borrower is the surviving corporation and
which does not result in any reclassification or change in the Common Stock
issuable upon conversion of this Note), or in the case of a statutory share
exchange in which all shares of Common Stock are exchanged for shares of another
corporation or entity, the holder of this Note shall have, and the Borrower or
such successor entity or purchaser shall covenant in the constituent documents
effecting any of the foregoing transactions that the holder of this Note shall
have, the right to obtain upon conversion of this Note, in lieu of each share of
Common Stock theretofore issuable upon exercise of the conversion rights set
forth herein, the kind and amount of shares of stock, other securities, money
and property receivable upon such consolidation or merger or share exchange by a
holder of one share of Common Stock issuable upon exercise of the conversion
rights set forth herein as if they had been exercised immediately prior to such
consolidation or merger or share exchange. The constituent documents effecting
any such consolidation or merger or share exchange shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided in this paragraph. The provisions of this paragraph shall apply
similarly to successive consolidations or mergers or shares exchanges.

-12-
<PAGE>

6. Miscellaneous.

This Note shall be governed by the laws of the State of Texas without
regard to conflicts of law principles which would select another law.

EXECUTED as of the date first above written.

QUANTA SERVICES, INC.

By: /s/ Brad Eastman
-------------------------------------
Name: Brad Eastman
-------------------------------------
Title: Vice President and General Counsel
-------------------------------------

-13-

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports dated March 18, 1998 on the financial statements of the following
businesses included in or made a part of this registration statement: Quanta
Services, Inc.; TRANS TECH Electric, Inc.; and Potelco, Inc.; and to the use
of our report dated December 5, 1997 on the financial statements of Union
Power Construction Company; and to the use of our report dated May 1, 1998 on
the financial statements of Spalj Construction Company and to all references
to our Firm included in this registration statement; and to the use of our
report dated October 16, 1998 on the financial statements of Quanta Services,
Inc. and subsidiaries.

ARTHUR ANDERSEN LLP

Houston, Texas
October 22, 1998

<PAGE>

EXHIBIT 23.3

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
report dated March 23, 1998 on the financial statements of Sumter Builders,
Inc. made a part of this registration statement and to all references to our
Firm included in this registration statement.

ARTHUR ANDERSEN LLP

Columbia, South Carolina
October 22, 1998

<PAGE>

EXHIBIT 23.4

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
report, dated February 23, 1998, on the financial statements of Underground
Construction Co., Inc. for the year ended December 31, 1997 included in or
made a part of this registration statement and to all references to our firm
in this registration statement.

/s/ S. J. Gallina & Co., LLP
-------------------------------------

S. J. Gallina & Co., LLP

Walnut Creek, California

October 22, 1998

<PAGE>

EXHIBIT 23.5

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
report, dated February 23, 1998, on the financial statements of Manuel Bros.,
Inc. for the year ended December 31, 1997 included in or made a part of this
registration statement and to all references to our firm in this registration
statement.

/s/ S. J. Gallina & Co., LLP
-------------------------------------

S. J. Gallina & Co., LLP

Walnut Creek, California

October 21, 1998

<PAGE>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
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<SECURITIES> 0
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</TABLE>