ENCOMPASS SERVICES CORP
JOSEPH M. IVEY, JR. EMPLOYMENT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>JOSEPH M. IVEY, JR. EMPLOYMENT AGREEMENT
<TEXT>

<PAGE>

                                                                    EXHIBIT 10.7

                              EMPLOYMENT AGREEMENT

This Employment Agreement (this "Agreement") is effective as of March 28, 2000,
among Encompass Management Co., a Delaware corporation (the "Company"),
Encompass Services Corporation, a Texas corporation ("Encompass"), and Joseph
M. Ivey, a resident of Attala County, Mississippi ("Employee"). In
consideration of the premises and the mutual covenants contained herein, the
parties hereby agree as follows:

     1. Employment. The Company hereby agrees to employ Employee and Employee
hereby agrees to work for the Company as its President and Chief Executive
Officer. Employee's principal office shall be in Houston, Texas. Employee will
initially have direct supervisory responsibility and authority for the matters
set forth on Exhibit A. So long as Employee is employed by the Company, Employee
shall devote Employee's skill, energy and substantially all of his business-
related efforts to the faithful discharge of Employee's duties as an employee of
the Company. In providing services hereunder, Employee shall comply with and
follow all directives, policies, standards and regulations from time to time
established by the Board of Directors of the Company.

     2. Term of Employment. Employee's employment by the Company pursuant to
this Agreement shall continue in effect for a term of three years from the date
of this Agreement (the "Initial Period"), which shall be automatically extended
for additional, successive one year periods (the "Additional Periods")
commencing on the first anniversary date of this Agreement and on each
anniversary date thereafter, unless either party gives notice of non-renewal as
provided in Section 9(e) or otherwise terminates this Agreement in accordance
with the other provisions of Section 9.

     3. Representations and Warranties. Employee represents and warrants that
Employee is under no contractual or other restrictions or obligations that will
significantly limit Employee's activities on behalf of the Company or will
prohibit or limit the disclosure or use by Employee of any information which
directly or indirectly relates to the nature of the Company or the services to
be rendered by Employee under this Agreement.

     4.  Compensation. Subject to the provisions of Section 9, Employee will be
entitled to the compensation and benefits set forth in this Section 4.

         (a) During the Initial Period, the Company shall pay Employee an Annual
Base Salary, payable semi-monthly, in equal semi-monthly installments at a rate
equal to $425,000 per year for the first calendar year or portion thereof. In
each subsequent calendar year during the term of this Agreement, the Company
shall pay to Employee an Annual Base Salary determined by the Board of Directors
following its annual salary and performance review. Employee's Annual Base
Salary will be reviewed at least annually in the third quarter of each fiscal
year of Employee's employment hereunder, commencing in the third quarter of
fiscal year 2000.

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         (b) Employee shall be eligible to receive an annual bonus pursuant to
the incentive compensation program in effect from time to time for executive
employees of the Company. The target bonus of Employee under such program shall
not be less than 120% of Employee's annual salary, but the actual bonus paid for
any given period shall be in accordance with the bonus plan then in place and
may be more or less than the target bonus. The bonus will be earned for
Employee's performance during each calendar year but will be finally determined
and paid following the closing of the books and records of the Company for the
calendar year and review of same by the Compensation Committee of the Company
and the Company's independent auditors.

         (c) All payments of salary and other compensation to Employee shall be
made after deduction of any taxes required to be withheld with respect thereto
under applicable federal and state laws.

     5. Fringe Benefits; Expenses. (a) During the term of employment of Employee
hereunder, Employee shall participate in all employee benefit plans sponsored by
the Company for its executive employees, including but not limited to stock
bonus, stock purchase, stock performance incentive and stock option plans, sick
leave and disability leave, health insurance, dental insurance and pension
and/or profit sharing plans; provided, however, that except as provided below,
the nature, amount and limitations of such plans shall be determined from time
to time by the Board of Directors of the Company.

         (b) The Company will reimburse Employee for all reasonable business
expenses incurred by Employee in the scope of Employee's employment, including
reasonable cost of commuting from Employee's residence; provided, however, that
Employee must file expense reports with respect to such expenses in accordance
with the Company's policies as are in effect from time to time.

         (c) During the term of employment of Employee hereunder, Employee shall
be entitled to a minimum of five weeks paid vacation during each calendar year
and to paid holidays and other paid leave set forth in the Company's policies in
effect from time to time. Any vacation not used during a calendar year may not
be used during any subsequent period.

         (d) During the term of employment of Employee hereunder, the Company
will pay all license fees, occupation taxes and reasonable educational costs and
expenses necessary to maintain Employee's good standing under any professional
licenses related to the business of the Company.

         (e) During the term of employment of Employee hereunder, the Company
shall use reasonable efforts to provide (i) life insurance payable to Employee's
designated beneficiary in an amount at least three times Employee's Annual Base
Salary and (ii) disability insurance on behalf of Employee which, as a goal,
shall provide for salary continuation in the event of permanent disability in an
amount equal to the lesser of (i) 60% of Employee's Annual Base Salary, or (ii)
$20,000 per month.


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    6. Indemnification and Insurance. The Company shall indemnify Employee
with respect to matters relating to Employee's services as an officer and/or
director of the Company or any of its Affiliates (as defined in Exhibit B
attached hereto) to the extent set forth in the Company's By-laws and in
accordance with the terms of any other indemnification which is generally
applicable to executive officers of the Company or any of its Affiliates that
may be provided by the Company or any such Affiliate from time to time. The
foregoing indemnity is contractual and will survive any adverse amendment to or
repeal of the By-laws. The Company will also cover Employee under a policy of
officers' and directors' liability insurance providing coverage that is
comparable to that provided now or hereafter to any other executive officer or
director of the Company. The provisions of this Section 6 will survive the
termination of Employee's employment for any reason and the term of this
Agreement.

    7. Gross-Up of Parachute Payments.

       (a) To provide Employee with adequate protection in connection with
Employee's ongoing employment with the Company, this Agreement or other
incentive plans of the company provide Employee with various benefits in the
event of termination of Employee's employment with the Company. If Employee's
employment is terminated within the meaning of Section 2806 of the Internal
Revenue Code of 1986, as amended (the "Code"), a portion of those benefits could
be characterized as "excess parachute payments" within the meaning of Section
2806 of the Code. The parties hereto acknowledge that the protections set forth
in this Section 7 are important, and it is agreed that Employee should not have
to bear the burden of any excise tax that might be levied under Section 4999 of
the Code or any similar provision of state or federal law, in the event that
any portion of the benefits payable to Employee pursuant to this Agreement or
other incentive plans of the Company are treated as an excess parachute payment.
The parties, therefore, have agreed as set forth in this Section 7. Employee and
Company agree to use their best efforts to structure any payments to Employee so
that they minimize or eliminate "excess parachute payments" as defined in
Section 2806 of the Code.

          (b) Anything in this Agreement to the contrary notwithstanding, if it
shall be determined that any payment or distribution (including income
recognized by Employee upon the early vesting of restricted property or upon the
exercise of options whose exercise date has been accelerated) by the Company or
any other person to or for the benefit of Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 7) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any similar provision of state or federal law or
any interest or penalties are incurred by Employee with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Company
shall pay an additional payment (a "Gross-Up Payment") in an amount such that
after payment by Employee of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed on the Gross-Up Payment, Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed on the Payments.

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         (c) Subject to the provisions of Section 7(d) below, all
determinations required to be made under this Section 7, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by the Company's primary independent public accounting firm (the "Accounting
Firm") that shall provide detailed supporting calculations both to the Company
and to Employee within 15 business days after the receipt of notice from
Employee that there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Finn is serving as accountant or
auditor for the individual, entity or group effecting the change in control of
the Company, the Company may appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. The Company shall
indemnify and hold harmless Employee, on an after-tax basis, for any Excise Tax
or income tax (including interest and penalties with respect thereto) imposed on
Employee as a result of such payment of fees and expenses. Any Gross-Up Payment,
as determined pursuant to this Section 7, shall be paid by the Company to
Employee within five days of the receipt of the Accounting Firm's determination.
If the Accounting Firm determines that no Excise Tax is payable by Employee, it
shall furnish Employee with a written statement that failure to report the
Excise Tax on Employee's applicable federal income tax return would not result
in the imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding on the Company and Employee. As a result of
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments may not have been made by the Company that should have been
made ("Underpayment"), or vice versa ("Overpayment"), consistent with the
calculations required to be made hereunder. If the Company exhausts its remedies
pursuant to Section 7(d) below and Employee thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of Employee. If an Overpayment has
occurred, the Employee will promptly reimburse the Company for such amount.

         (d) Employee shall notify the Company in writing of any claim
(including any threatened tax lien related to or based on any such claims) by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after Employee is informed in
writing of such claim (or threatened lien) and shall apprize the Company of the
nature of such claim and the date on which such claim is requested to be paid.
Employee shall not pay such claim prior to the expiration of the 30-day period
following the date on which Employee gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due or such tax lien would be imposed). If the Company notifies
Employee in writing prior to the expiration of such period that it desires to
contest such claim (or threatened lien), Employee shall:

             (i) give the Company any information reasonably requested by the
     Company relating to such claims (or threatened lien);

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              (ii) take such action in connection with contesting such claim (or
    threatened lien) as the Company shall reasonably request in writing from
    time to time, including, without limitation, accepting legal representation
    with respect to such claim by an attorney reasonably selected by the
    Company;

              (iii)  cooperate with the Company in good faith in order
     effectively to contest such claim (or threatened lien); and

              (iv) permit the Company to participate in any proceedings relating
    to such claims (or threatened lien); provided, however, that the Company
    shall bear and pay directly all costs and expenses (including legal fees and
    expenses, additional interest and penalties) incurred in connection with
    such contest and shall indemnify and hold Employee harmless, on an after-tax
    basis, for any Excise Tax or income tax (including interest and penalties
    with respect thereto) imposed as a result of such representation and payment
    of costs and expenses. Without limitation on the foregoing provisions of
    this Section 7(d), the Company shall control all proceedings taken in
    connection with such contest and, at its sole option, may pursue or forego
    any and all administrative appeals, proceedings, hearings and conferences
    with the taxing authority in respect of such claim and may, at its sole
    option, either direct Employee to pay the tax claimed and sue for a refund
    or contest the claim in any permissible manner, and Employee shall prosecute
    such contest to a determination before any administrative tribunal, in a
    court of initial jurisdiction and in one or more appellate courts, as
    Employee shall determine (but in no event shall the Company permit or direct
    Employee to allow a tax lien to be imposed on Employee's property);
    provided, further, that if the Company directs Employee to pay such claim
    and sue for a refund, the Company shall advance the amount of such payment
    to Employee, on an interest-free basis, and shall indemnify and hold
    Employee harmless on an after-tax basis, from any Excise Tax or income tax
    (including interest or penalties with respect thereto) imposed with respect
    to such advance or with respect to any imputed income with respect to such
    advance; and provided, further, that any extension of the statute of
    limitations relating to payment of taxes for the taxable year of Employee
    with respect to which such contested amount is claimed to be due is limited
    solely to such contested amount. In addition, the Company's control of the
    contest shall be limited to issues with respect to which a Gross-Up Payment
    would be payable hereunder, and Employee shall be entitled to settle or
    contest, as the case may be, any other issue raised by the Internal Revenue
    Service or any other taxing authority.

         (e) If, after the receipt by Employee of an amount advanced by the
Company pursuant to Section 7(d), Employee becomes entitled to receive any
refund with respect to such claim, Employee shall (subject to the Company's
complying with the requirements of Section 7(d) above) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If after the receipt by Employee of an
amount advanced by the Company pursuant to Section 7(d) above, a determination
is made that Employee shall not be entitled to any refund with respect to such
claim and the Company does not notify Employee in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required

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to be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

    8. Options and Other Stock-Related Plans. Except to the extent otherwise
provided in this Section 8, the terms and conditions of any option, stock bonus,
restricted stock, stock award or other stock-related plan or program with
respect to capital stock of the Company which may be granted to Employee or in
which Employee may participate shall be governed by the applicable Company plan,
if any, and/or separate agreement(s) between the Company and Employee with
respect thereto.

        (a) All stock options theretofore granted to the Employee will vest upon
a termination of this Agreement under Section 9(c); or in the event of a Change
of Control, six months after such Change of Control (assuming Employee has not
by the end of the sixth month waived such rights, been terminated for Cause, or
resigned without Good Reason); except that vesting under this paragraph will not
take place if termination of this Agreement occurs as defined in Section 9(b).

        (b) Upon the occurrence of any of the events described in Section 8(a)
above, the exercise period of each stock option then held by the Employee shall
be the greater of (i) the balance of the then remaining term of this Agreement,
or (ii) ninety (90) days from the date of termination, but in neither event
beyond the unexpired term of such option as set forth in the respective plan or
option agreement under which such option was initially granted.

        (c) The period for exercising any Founder Options (as defined in Exhibit
B) held by the Employee shall be the remainder of the ten-year term of such
Founder Options, as provided in the option agreement under which such Founder
Options were initially granted.

        (d) Except as otherwise provided in Section 8(b) or 8(c) above, the
exercise period for stock options held by the Employee at the time of any
termination of the Agreement shall be the greater of (i) ninety (90) days from
the effective date of termination of employment, or (ii) the exercise period
established in or under the terms of the stock option plan or stock option
agreement to which such stock options are subject, or (iii) the exercise period
established in or under the terms of any other written agreement between the
Employee and the Company with respect to such stock options.

     9. Termination or Non-Renewal of Employment.

        (a) Termination by Either Party; General Provisions. Either the Company
or

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Employee may terminate Employee's employment hereunder at any time during the
term of this Agreement by delivery of sixty (60) days prior written notice by
the terminating party to the other party. Promptly after such termination of
employment, in addition to any other payments or benefits provided in this
Section 9, the Company shall pay to Employee an amount equal to the sum of (i)
Employee's earned but unpaid Annual Base Salary through the date of termination
of employment at the rate in effect at the time of such termination, (ii)
vacation pay earned but not taken to the date of such termination, and (iii) all
other amounts previously deferred by Employee or earned but not paid as of such
date under all Company incentive or deferred compensation plans or programs.

         (b)  Termination for Cause; Resignation without Good Reason. If the
Company terminates Employee's employment for Cause, or if the Employee
terminates employment without Good Reason, the payments due to Employee shall be
limited to the amounts described in Section 9(a).

         (c)  Termination Without Cause: Termination for Good Reason. If the
Company terminates Employee's employment without Cause (except as provided in
Section 9(d) below), or if the Employee terminates Employee's employment for
Good Reason, then the Company shall promptly pay or otherwise provide to
Employee the following amounts in addition to those set forth in Section 9(a):

              (i) An amount equal to three times the sum of (A) Employee's
    Annual Base Salary then in effect and (B) Employee's actual bonus for the
    fiscal year prior to the one in which such termination occurs (such bonus
    for 1999 is considered to be $450,000), payable in a single lump sum by
    certified or bank cashier's check within 30 days of such termination; and

              (ii) An amount equal to the product of (A) the maximum monthly
    premium payment that may be charged to continue coverage for Employee and
    Employee's dependents under the Company's health insurance plan under COBRA,
    and under all life, dental and disability insurance policies provided by
    Employer for Employee multiplied by (B) 36 months (payable over such
    period). The Company will use its best efforts to keep the policies of
    insurance referred to in this clause in effect for the benefit of the
    Employee through the 36 month period. After the expiration of the 36 month
    period, if the Employee is unable to secure reasonable alternative coverage
    as a result of lack of insurability, at the written request of the Employee
    the Company will use reasonable commercial efforts to continue such
    coverage, provided that the Company will have no obligation to incur any
    incremental cost or risk (other than minor administration inconvenience) and
    Employee shall agree in writing to bear all such cost and risk and hold the
    Company harmless against same. Any unpaid amounts under this clause (ii)
    will cease if Employee secures substantially similar coverage under new
    employment.

     (d) Termination on Disability. If at any time during the term of Employee's
employment hereunder, Employee is unable due to physical or mental disability to
perform effectively Employee's duties hereunder, the Company shall continue
payment of (1)

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compensation as provided in Section 4(a) and (2) health, dental, disability and
life insurance benefits as provided in Section 5 of this Agreement during the
first 12 month period of such disability to the extent not covered by the
Company's disability insurance policies (the Company may offset against its
obligations in this sentence the amounts actually received by the Employee under
such policies). Upon the expiration of such 12 month period, the Company, at its
sole option, may continue payment of Employee's salary for such additional
periods as the Company elects, or may terminate Employee's employment hereunder
without any further compensation obligations to Employee hereunder. If Employee
should die during the term of Employee's employment hereunder, Employee's
employment and the Company's obligations hereunder for compensation payments
shall terminate as of the end of the month in which Employee's death occurs.

         (e) Non-Renewal of Employment; General Provisions. Either the Company
or Employee may elect not to renew Employee's employment hereunder at the end of
the Initial Period, or at the end of any Additional Period thereafter, by
delivery of sixty (60) days prior written notice by the electing party to the
other party. At the expiration of the employment term (in addition to any other
amounts provided in Section 10(c) above in the case of a non-renewal by the
Company), the Company shall pay to Employee an amount equal to the sum of (i)
Employee's earned but unpaid Annual Base Salary through the date of termination
of employment at the rate then in effect, (ii) vacation pay earned but not taken
to the date of such termination, and (iii) all other amounts previously deferred
by Employee or earned but not paid as of such date under all Company incentive
or deferred compensation plans or programs.

         (f) Waiver of Claims. In the event this Agreement expires as a result
of nonrenewal by the Company, or is terminated by the Company without Cause or
as a result of a disability of Employee in accordance with Section 9(d), or is
terminated by Employee with Good Reason, Employee agrees to accept, in full
settlement of any and all claims, losses, damages and other demands that
Employee may have arising out of such termination or non-renewal, as liquidated
damages and not as a penalty, the payments, benefits and vesting of rights set
forth in this Agreement. Employee hereby waives any and all rights Employee may
have to bring any cause of action or proceeding contesting any such termination
or non-renewal; provided, however, that such waiver shall not be deemed to
affect Employee's rights to enforce any other obligations of the Company not
relating to employment.

         (g) Lock-ups, etc. During the period of one (1) year after an event as
defined in Section 10(c) above, Employee shall sign any lock-up letters,
standstill agreements, or other similar documentation specifically required by
an underwriter from Employee in connection with a public offering of securities
by the Company or take other actions reasonably related thereto as requested by
the Board of Directors of the Company; provided, however, that the period of any
such lock-up or standstill agreements shall not exceed the shorter of (i) 180
days or (ii) the balance of the one (1) year period. In the event Employee fails
to sign any such letters, agreements or similar documentation or take any such
action, the Company may seek and obtain specific performance of such covenant,
including any injunction requiring execution thereof or the taking of any such
actions, and Employee hereby appoints the then president of the Company in
office from time to time to sign any such documents on Employee's behalf so long
as such

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documents are prepared on the same basis as other shareholders generally or as
all Company management shareholders.

    10. No Mitigation Obligation. The Company acknowledges that it will be
difficult and may be impossible (i) for Employee to find reasonably comparable
employment following termination of Employee's employment and (ii) to measure
the amount of damages which Employee may suffer as a result of the termination
of Employee's employment. Accordingly, all amounts paid to Employee under this
Agreement following Employee's termination of employment are acknowledged by the
Company to be reasonable and to be liquidated damages, and Employee will not be
required to mitigate the amount of such payments by seeking other employment or
otherwise, nor will any profits, income, earnings or other benefits from any
source whatsoever (including from other employment) create any mitigation,
offset, reduction or any other obligation on the part of Employee under this
Agreement, except as described in Sections 9(c)(ii) and 9(d).

    11. Covenant Not to Compete.

        (a) During Employee's employment with the Company or any of its
Affiliates and thereafter during the Restricted Period (as defined in Exhibit B
attached hereto), Employee will not engage in or carry on, directly or
indirectly, either for himself or as a member of a partnership or as a
shareholder, investor, owner, officer or director of a company or other entity,
or as an employee, agent, associate or consultant of any person, partnership,
corporation or other entity, any business in any State of the United States or
in any other part of the world that directly competes with any services or
products produced, sold, conducted, developed, or in the process of development
by the Company or its Affiliates on the date of termination of Employee's
employment.

        (b) Notwithstanding the foregoing, Employee shall not be deemed to be in
violation of Section 11 (a) based solely on the ownership of less than one
percent of any class of securities of a publicly-held company whose gross assets
exceed $100,000,000.

        (c) Employee acknowledges that the limitations set forth herein on
Employee's rights to compete with the Company and its Affiliates are reasonable
and necessary for the protection of the Company and its Affiliates. In this
regard, Employee specifically agrees that the limitations as to period of time
and geographic area, as well as all other restrictions on Employee's activities
specified herein, are reasonable and necessary for the protection of the Company
and its Affiliates. In particular, Employee acknowledges that the parties
anticipate that Employee will be actively seeking markets for the products and
services of the Company and its Affiliates throughout the United States during
Employee's employment with the Company.

        (d) In the event that there shall be any violation of the covenant not
to compete set forth in this Section 11, then the time limitation thereof shall
be extended for a period of time equal to the period of time during which such
violation continues; and in the event the Company is required to seek relief
from such violation in any court, board of arbitration or

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other tribunal, then the covenant shall be extended for a period of time equal
to the pendency of such proceedings, including all appeals.

         (e) Employee agrees that the remedy at law for any breach by Employee
of this Section 11 will be inadequate and that the Company shall also be
entitled to injunctive relief.

     12. Confidential Information. During the term of Employee's employment
hereunder, and for five years after Employee's termination of employment,
Employee shall not use or disclose, without the prior written consent of the
Company, Confidential Information (as defined in Exhibit B attached hereto)
relating to the Company or any of its Affiliates, and upon termination of
Employee's employment will return to the Company all written materials in
Employee's possession embodying such Confidential Information. Employee will
promptly disclose to the Company all Confidential Information, as well as any
business opportunity related to the Company which comes to Employee's attention
during the term of Employee's employment with the Company. Employee will not
take advantage of or divert any such business opportunity for the benefit of
Employee or any other Person (as defined in Exhibit B attached hereto) without
the prior written consent of the Company. Employee agrees that the remedy at law
for any breach by Employee of this Section 12 will be inadequate and that the
Company shall also be entitled to injunctive relief.

     13. Intellectual Property.

         (a) To the extent they relate to, or result from, directly or
indirectly, the actual or anticipated operations of the Company or any of its
Affiliates, Employee hereby agrees that all patents, trademarks, copyrights,
trade secrets, and other intellectual property rights, all inventions, whether
or not patentable, and any product, drawing, design, recording, writing,
literary work or other author's work, in any other tangible form developed in
whole or in part by Employee during the term of this Agreement, or otherwise
developed, purchased or acquired by the Company or any of its Affiliates, shall
be the exclusive property of the Company or such Affiliate, as the case may be
("Intellectual Property").

         (b) Employee will hold all Intellectual Property in trust for the
Company and will deliver all Intellectual Property in Employee's possession or
control to the Company upon request and, in any event, at the end of Employee's
employment with the Company.

         (c) Employee shall assign and does hereby assign to the Company all
property rights that Employee may now or hereafter have in the Intellectual
Property. Employee shall take such action, including, but not limited to, the
execution, acknowledgment, delivery and assistance in preparation of documents,
and the giving of testimony, as may be requested by the Company to evidence,
transfer, vest or confirm the Company's right, title and interest in the
Intellectual Property.

         (d) Employee will not contest the validity of any invention, any
copyright, any trademark or any mask work registration owned by or vesting in
the Company or any of its Affiliates under this Agreement.

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    14.  Definitions. As used in this Agreement, the terms defined in
Exhibit B have the means assigned to such terms in such exhibit.

    15. Notices. All notices, requests, demands and other communications
required by or permitted under this Agreement shall be in writing and shall be
sufficiently delivered if delivered by hand, by courier service, or sent by
registered or certified mail, postage prepaid, to the parties at their
respective addresses listed below:

        (a)    If to Employee:

               Joseph M. Ivey
               Post Office Box 658
               Kosciusko, Mississippi 39090

        (b)    If to the Company:

               Encompass Management Co.
               Three Greenway Plaza, Suite 2000
               Houston, Texas 77046
               Attention:   Corporate Secretary
               Facsimile:   713-626-4766

Any party may change such party's address by written notice to the other party.

    16. Set-off Rights. The Company's obligations to make the payments and
provide the benefits required by this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set off, counterclaim,
recoupment, defense or other claim, right or action that the Company may have
against Employee or others, unless such amount is a determinable liability of
the Employee to the Company as of the date payment is due to Employee.

     17. Assignment. This Agreement is personal to Employee, and Employee shall
not assign any of Employee's rights or delegate any of Employee's duties
hereunder without the prior written consent of the Company. Neither Employee nor
Employee's spouse will have the right to commute, encumber, or otherwise dispose
of any payments under this Agreement. The Company shall have the right to assign
this Agreement to a successor in interest in connection with a merger, sale of
substantially all assets, or the like; provided however, that an assignment of
this Agreement to an entity with operations, products or services outside of the
industries in which the Company is then active shall not be deemed to expand the
scope of Employee's covenant not to compete with such operations, products or
services without Employee's written consent. The Company shall require any
Person who is the successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization, or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform,
by a written agreement in form and substance reasonably satisfactory to
Employee, all of the obligations of

                                      11
<PAGE>

the Company under this Agreement. As used in this Agreement, the term "Company"
means the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, written agreement, or otherwise.

    18. Survival. The provisions of this Agreement shall survive the termination
of Employee's employment hereunder in accordance with their terms.

    19. Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of Texas without regard to the
choice-of-law principles thereof.

    20. Binding Upon Successors. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns.

    21. Entire Agreement. This Agreement constitutes the entire agreement
between the Company and Employee with respect to the terms of employment of
Employee by the Company and supersedes all prior agreements and understandings,
whether written or oral, between them concerning such terms of employment.

    22. Amendments and Waivers. This Agreement may be amended, modified or
supplemented, and any obligation hereunder may be waived, only by a written
instrument executed by the parties hereto. The waiver by either party of a
breach of any provision of this Agreement shall not operate as a waiver of any
subsequent breach. No failure on the part of any party to exercise, and no delay
in exercising, any right or remedy hereunder shall operate as a waiver hereof,
nor shall any single or partial exercise of any such right or remedy by such
party preclude any other or further exercise thereof or the exercise of any
other right or remedy.

    23. Cumulative Rights And Remedies. All rights and remedies hereunder are
cumulative and are in addition to all other rights and remedies provided by law,
agreement or otherwise. Employee's obligations to the Company and the Company's
rights and remedies hereunder are in addition to all other obligations of
Employee and rights and remedies of the Company created pursuant to any other
agreement.

    24. Construction. Each party to this Agreement has had the opportunity to
review this Agreement with legal counsel. This Agreement shall not be construed
or interpreted against any party on the basis that such party drafted or
authored a particular provision, parts of or the entirety of this Agreement.

    25. Severability. In the event that any provision or provisions of this
Agreement is held to be invalid, illegal or unenforceable by any court of law or
otherwise, the remaining provisions of this Agreement shall nevertheless
continue to be valid, legal and enforceable as though the invalid or
unenforceable parts had not been included therein. In addition, in such event
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the

                                      12
<PAGE>

original intent of the parties as closely as possible with respect to those
provisions which were held to be invalid, illegal or unenforceable.

    26. Attorneys' Fees and Costs. If any action at law or in equity is brought
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which it may be entitled.

    27. Encompass Performance Agreement. Encompass shall cause the Company to
perform each and every obligation to be performed by the Company hereunder.

    IN WITNESS WHEREOF, the Company and Employee have executed this Agreement on
the date first above written.

                                        COMPANY:

                                        Encompass Management Co.

                                        By: /S/ J. PATRICK MILLINOR, JR.
                                            ----------------------------
                                        Name: J. PATRICK MILLINOR, JR.
                                              ------------------------
                                        Title: Chairman
                                               --------

                                        ENCOMPASS:

                                        ENCOMPASS SERVICES CORPORATION

                                        By: /S/ J. PATRICK MILLINOR JR,
                                            ---------------------------
                                        Name: J. PATRICK MILLINOR,  JR.
                                              -------------------------
                                        Title: Chairman
                                               --------

                                        EMPLOYEE:

                                        /S/ JOSEPH M. IVEY
                                        ------------------
                                        Joseph M.Ivey

                                      13
<PAGE>

                                                                       EXHIBIT A

              DUTIES OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER

The President and Chief Executive Officer shall have duties as directed by the
Board of Directors. These will include, but not be limited to,

 .  Direct executive responsibility for operations, sales and marketing, human
   resources, acquisitions, corporate development and planning, and purchasing.

 .  Interface and co-operative involvement with the Chairman of the Board.

                                      14
<PAGE>

                                                                       EXHIBIT B

                                  DEFINITIONS

    "Annual Base Salary" means the salary of Employee in effect at the relevant
time determined in accordance with Section 4(a) hereof.

    "Affiliate" means, with respect to any Person, each other Person who
controls, is controlled by, or is under common control with the Person
specified.

    "Cause" when used in connection with the termination of employment with the
Company, means the termination of Employee's employment by the Company by reason
of (i) the conviction of Employee of a crime involving moral turpitude by a
court of competent jurisdiction; (ii) the proven commission by Employee of an
act of fraud upon the Company; (iii) the willful and proven misappropriation of
any funds or property of the Company by Employee; (iv) the willful, continued
and unreasonable failure by Employee to perform material duties assigned to
Employee, after reasonable written notice and opportunity to cure such
performance has been given by the Company; (v) the knowing engagement by
Employee in any direct, material conflict of interest with the Company without
compliance with the Company's conflict of interest policy, if any, then in
effect; (vi) the knowing engagement by Employee, without the written approval of
the Board of Directors of the Company, in any activity which competes with the
business of the Company or any of its Affiliates or which would result in a
material injury to the Company or any of its Affiliates; or (vii) the knowing
engagement in any activity which would constitute a material violation of the
provisions of the Company's Insider Trading Policy or Business Ethics Policy, if
any, then in effect.

    "Change of Control" means

        (i) the acquisition by any individual, entity or group (within the
    meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Designated
    Person") of beneficial ownership (within the meaning of Rule 13d-3
    promulgated under the Securities Exchange Act of 1934, as amended, (the
    "Exchange Act")) of 30% or more of either (1) the then outstanding shares of
    Common Stock of the Company (the "Outstanding Company Common Stock") or (2)
    the combined voting power of the then outstanding voting securities of the
    Company entitled to vote generally in the election of directors (the
    "Outstanding Company Voting Securities"); provided, however, that the
    following acquisitions shall not constitute a Change of Control: (a) any
    acquisition of Common Stock of the Company or voting securities of the
    Company directly from the Company (excluding an acquisition by virtue of the
    exercise of a conversion privilege), (b) any acquisition of Common Stock of
    the Company or voting securities of the Company by the Company (c) any
    acquisition of Common Stock of the Company or voting securities of the
    Company by any employee benefit plan(s) (or related trust(s)) sponsored or
    maintained by the Company or any corporation controlled by the Company and
    approved by the Incumbent Board, (d) any acquisition by any corporation
    pursuant to a reorganization, merger or consolidation, if, immediately
    following such reorganization,
<PAGE>

    merger or consolidation, the conditions described in clauses (1), (2) and
    (3) of paragraph (iii) below of this definition are satisfied, or (e) an
    acquisition by Apollo Management L.P. and/or one or more of its affiliates
    resulting in an ownership of no more than 40% of the Common Stock of the
    Company (for this purpose, any securities convertible into Common Stock held
    by Apollo Management L.P. and its affiliates will be treated as if they have
    been converted for purposes of determining the percentage of ownership held
    on an "as-converted" basis); or

        (ii) individuals who, as of the date hereof, constitute the entire Board
    of Directors of the Company (the "Incumbent Board") cease for any reason to
    constitute at least a majority of the Board of Directors of the Company (the
    "Board"); provided, however, that any individual becoming a director
    subsequent to the date hereof whose election, or nomination for election by
    the Company's shareholders, was approved by a vote of at least a majority of
    the directors then comprising the Incumbent Board shall be considered as
    though such individual were a member of the Incumbent Board, but excluding,
    for this purpose, any such individual whose initial assumption of office
    occurs as a result of either (1) an actual or threatened election contest
    (as such terms are used in Rule 14a-11 of the Regulation 14A promulgated
    under the Exchange Act), or an actual or threatened solicitation of proxies
    or consents by or on behalf of a Person other than the Board or (2) a plan
    or agreement to replace a majority of the members of the Board then
    comprising the Incumbent Board; or

        (iii) approval by the shareholders of the Company of a reorganization,
    merger or consolidation, in each case unless, immediately following such
    reorganization, merger or consolidation, (1) more than 50% (or such greater
    percentage as may be approved by the Incumbent Board) of the then
    outstanding shares of common stock of the corporation resulting from such
    reorganization, merger or consolidation (including, without limitation, a
    corporation which as a result of such transaction owns the Company through
    one or more subsidiaries) and the combined voting power of the then
    outstanding voting securities of such corporation entitled to vote generally
    in the election of directors is then beneficially owned, directly or
    indirectly, by all or substantially all of the individuals and entities who
    were the beneficial owners, respectively, of the Outstanding Company Common
    Stock and Outstanding Company Voting Securities immediately prior to such
    reorganization, merger or consolidation in substantially the same
    proportions as their ownership immediately prior to such reorganization,
    merger or consolidation, of the Outstanding Company Common Stock or
    Outstanding Company Voting Securities, as the case may be, (2) no Designated
    Person (excluding the Company or any employee benefit plan(s) (or related
    trust(s)) of the Company and/or its subsidiaries or any Person beneficially
    owning, immediately prior to such reorganization, merger or consolidation,
    directly or indirectly, 30% (or such lesser percentage as may be approved by
    the Incumbent Board) or more of the Outstanding Company Common Stock or
    Outstanding Company Voting Securities, as the case may be) beneficially
    owns, directly or indirectly, 30% (or such lesser percentage as may be
    approved by the Incumbent Board) or more of, respectively, the then
    outstanding shares of common stock of the corporation resulting from such
    reorganization, merger or consolidation or the combined voting power of the
    then outstanding voting securities of such corporation entitled to vote
    generally in the

                                      16
<PAGE>

    election of directors, and (3) at least a majority of the members of the
    board of directors of the corporation resulting from such reorganization,
    merger or consolidation were members of the Incumbent Board at the time of
    the execution of the initial agreement providing for such reorganization,
    merger or consolidation; or

          (iv) approval by the shareholders of the Company of (1) a complete
    liquidation or dissolution of the Company or (2) the sale or other
    disposition of all or substantially all of the assets of the Company, other
    than to a corporation, with respect to which immediately following such sale
    or other disposition, (A) more than 50% (or such greater percentage as may
    be approved by the Incumbent Board) of the then outstanding shares of common
    stock of such corporation and the combined voting power of the then
    outstanding voting securities of such corporation entitled to vote generally
    in the election of directors is then beneficially owned, directly or
    indirectly, by all or substantially all of the individuals and entities who
    were beneficial owners, respectively, of the Outstanding Company Common
    Stock and Outstanding Company Voting Securities immediately prior to such
    sale or other disposition in substantially the same proportion as their
    ownership, immediately prior to such sale or other disposition, of the
    Outstanding Company Common Stock and Outstanding Company Voting Securities,
    as the case may be, (B) no Designated Person (excluding the Company and any
    employee benefit plan (or related trust) of the Company and/or its
    subsidiaries or such corporation and any Person beneficially owning,
    immediately prior to such sale or other disposition, directly or indirectly,
    30% (or such lesser percentage as may be approved by the Incumbent Board) or
    more of the Outstanding Company Common Stock or Outstanding Company Voting
    Securities, as the case may be) beneficially owns, directly or indirectly,
    30% (or such lesser percentage as may be approved by the Incumbent Board) or
    more of, respectively, the then outstanding shares of common stock of such
    corporation or the combined voting power of the then outstanding voting
    securities of such corporation entitled to vote generally in the election of
    directors, and (C) at least a majority of the members of the board of
    directors of such corporation were members of the Incumbent Board at the
    time of the execution of the initial agreement or action of the Board
    providing for such sale or other disposition of assets of the Company.

     "Confidential Information" includes information conveyed or assigned to the
Company or any of its Affiliates by Employee or conceived, compiled, created,
developed, discovered or obtained by Employee from and during Employee's
employment relationship with the Company, whether solely by Employee or jointly
with others, which concerns the affairs of the Company or its Affiliates and
which the Company could reasonably be expected to desire be held in confidence,
or the disclosure of which would likely be embarrassing, detrimental or
disadvantageous to the Company or its Affiliates and without limiting the
generality of the foregoing includes information relating to inventions, and the
trade secrets, technologies, algorithms, products, services, finances, business
plans, marketing plans, legal affairs, supplier lists, client lists, potential
clients, business prospects, business opportunities, personnel assignments,
contracts and assets of the Company or any of its Affiliates and information
made available to the Company or any of its Affiliates by other parties under a
confidential relationship. Confidential Information, however, shall not include
information (a) which is, at the time in question, in the public domain through
no wrongful act of Employee, (b) which is later disclosed to Employee by one not
under obligations of confidentiality to the Company or any of

                                      17
<PAGE>

its Affiliates or Employee, (c) which is required by court or governmental
order, law or regulation to be disclosed, or (d) which the Company has expressly
given Employee the right to disclose pursuant to written agreement.

     "Founder Options" mean the options to acquire common stock of the Company
for an exercise price of $3.07 per share (as presently constituted) granted to
the Employee prior to the Company's initial public offering.

     "Good Reason" means the occurrence of any of the following events:

     (a) Employee is assigned duties, taken as a whole, that are materially
inconsistent with, or materially diminished from, Employee's positions, duties,
responsibilities and status with the Company immediately prior to such action,
or Employee's status, reporting responsibilities, titles or offices are
materially diminished from those in effect immediately prior to such action, or
Employee's duties and responsibilities are materially increased without a
corresponding reasonable increase in the Employee's compensation, except in each
case in connection with the termination of Employee's employment by the Company
for Cause or on account of disability, or as a result of the Employee's death,
or by the Employee for other than Good Reason; provided, however, that Good
Reason shall not be triggered under this subsection (a) by an immaterial action
not taken in bad faith or by an action that is remedied by the Company promptly
after receipt of written notice from Employee; or

     (b) Employee's Annual Base Salary is reduced from that which was in effect
prior to such action unless such reduction is part of a general reduction in
compensation within the officer ranks due to economic or company-wide
considerations; or

     (c) The Company takes any action to materially reduce or eliminate
Employee's participation in the Company's benefit or compensation plans unless
such reduction is part of a general reduction in benefits within the officer
ranks due to economic or company-wide considerations; or

     (d) The Employee's principal office is relocated more than 20 miles from
where such office was located immediately prior to such event; or

     (e) The Company requires Employee at any time to relocate more than 20
miles from where Employee's primary residence was located immediately prior to
such event; or

     (f) The amendment, modification or repeal of any provision of the
Certificate of Incorporation or Bylaws of the Company that was in effect
immediately prior to the commencement of a Protected Period, if such amendment,
modification or repeal would materially adversely affect Employee's rights to
indemnification by the Company; or

     (g) The Company shall violate or breach any obligation of the Company
(regardless whether such obligation be set forth in the Bylaws of the Company
and/or in this Agreement or any other separate agreement entered into between
the Company and Employee) to indemnify Employee against any claim, loss, expense
or liability sustained or incurred by Employee by

                                      18
<PAGE>

reason, in whole or in part, of the fact that Employee is or was an officer or
director of the Company; or

    (h) The Company shall violate or breach any other material obligation of the
Company owing to Employee relating to Employee's employment with the Company,
provided that in the event of a violation or breach that is reasonably subject
to being cured by the Company, Good Reason shall only occur if the Company shall
fail or refuse to commence a cure within 15 days after written notice thereof is
given by Employee to the Company or shall thereafter fail to diligently
prosecute such cure to completion; or

    (i) The Company shall fail to keep in force, for the benefit of Employee,
directors' and officers' insurance with coverage amounts and scope at least
equal to the coverage amounts in effect on the date hereof; or

    (j) The Company shall fail to obtain from a successor (including a successor
to a material portion of the business or assets of the Company) a satisfactory
assumption in writing of the Company's obligations under this Agreement; or

    (k) The Company shall fail to provide Employee with office space, related
facilities and support personnel (including, but not limited to, administrative
and secretarial assistance) that are both commensurate with the Employee's
position and Employee's responsibilities to and position with the Company and
not materially dissimilar to the office space, related facilities and support
personnel provided to other executive officers of the Company; or

    (1) The Company notifies Employee of the Company's intention not to observe
or perform one or more of the material obligations of the Company under this
Agreement; or

    (m) The Board (or any nominating committee of the Board) fails to recommend
and support Employee's re-election as a director of the Company if the Employee
is a director of the Company; or

    (n)  The Company elects not to renew this Agreement; or

    (o) If by the end of the sixth month after the Company undergoes a Change of
Control, as defined in Exhibit B to this Agreement, Employee has not given the
Company a written waiver of this right.

    "Person" means any individual, corporation, trust, partnership, limited
partnership, foundation, association, limited liability company, joint stock
association or other legal entity.

    "Restricted Period" means the period beginning on the date of the
termination of Employee's employment with the Company and its Affiliates and
ending as follows, as applicable:

          (i) one year after the termination of Employee's employment if
Employee is not entitled to benefits under Section 9(c); or

                                      19
<PAGE>

         (ii) three years after the termination of Employee's employment, if
Employee receives all benefits under Section 9(c), subject to permitted set-offs
under Section 16.

                                      20
</TEXT>
</DOCUMENT>
