History

• Frees, Inc. was established in 1947.
• Proven success in the design, construction, installation and balancing of Energy Efficient Industrial Air Quality Management Systems.
• Pioneered Directed Air Flow Ventilation Techniques
• Developed proprietary software and use of computer modeling to minimize capital and operating costs to meet OSHA Air Quality Standards.
• Can assist or do EPA permitting modeling and MACT analysis.
• Styrene Monomer Control
• Air Permitting and Modeling for VOC Emissions
• Grinding Dust Control and Woodshops
• Process Control Systems
• Technical Services
• Turnkey Capabilities
• The Only Written Performance Guarantee for PEL Compliance
• Committed to staying on the leading edge of air quality technology.

GENERAL PROFILE OF COMPANY

Frees, Inc. ("Frees") was founded in 1947 in Shreveport, Louisiana. Under the guidance of the late W. G. Free, Sr. and his son, Ronald P. Free, President and majority owner for the past 15 years, the Comapny has grown from a small, local provider of heating and air conditioning services to a nationally recognized specialist in industrial plant and environmental ventilation. Frees has broad experience in large scale ventilation projects for numerous industries, including multi-million dollar projects to ventilate power generation plants for Southwestern Electric Power Company. Frees has developed its greatest expertise in the ventilation of facilities fabricating fiberglass reinforced products such as boats, tubs & showers, and tanks. These fabricators have a number of environmental problems and these problems cannot be solved effectively using conventional ventilation methods or systems. Frees has responded with innovative solutions including the:

• MTM;
• Frees Directed Air Flow System and
• Frees Turnkey-Single Source Solution

These solutions are discussed in detail later in this report

Recent Events

This past year of 1996 was a year of tremendous change and reorganization. At the beginning of 1996, Frees was composed of two primary divisions-Environmental Ventilation Contracting and Heating & Air Conditioning Sales and Service (HVAC). Over the past few years, the Environmental Ventilation Contracting division had grown significantly and was larger in revenues and net income than the HVAC division. Frees made the strategic decision to sell the HVAC division. and to concentrate its efforts and build its future on Environmental Contractin.

Frees sold its HVAC division to Service Experts, Inc. (NASDAQ:SERX) during the fourth quarter of 1996 and has been in the process of breaking out those assets, operations and personnel. Accordingly, a significant amount of management time was spent during 1996 and the first quarter of 1997 in negotiations and closing of this transaction.

Frees also made the decision to hire additional marketing and sales personnel to promote Environmental Ventilation Contracting. Two marketing and sales persons were hired by Frees at the end of 1996 and one additional sales person has been hired in the first quarter of 1997. Senior management has spent a substantial amount of time preparing these persons to properly represent Frees and to provide them with the marketing presentations and other tools necessary. Although the activities above consumed a significant amount of time and resulted in reduced revenues for 1996.