Document:

<PAGE>   1
                                                                   Exhibit 10.18

                                January 1, 2001

Mr. Robert G. Sachse
2685 East 37th Street
Tulsa, OK 74105

     Re:      Consulting Agreement

Dear Robert:

     This letter will confirm the basis upon which Alliance Resource Management
GP, LLC ("Alliance") has engaged you ("Consultant") to provide certain advisory
and consulting services with respect to strategic planning, marketing, and
potential acquisitions and mergers involving Alliance, acting as the managing
general partner of Alliance Resource Partners, L.P. ("ARLP"). Specifically, the
terms and conditions of our understanding are as follows:

     1.   Advisory and Consulting Services. During the term of this agreement,
Consultant agrees to perform to the best of his abilities such advisory and
consulting work for Alliance and ARLP as the Board of Directors of Alliance, its
President and Chief Executive Officer, or his designees, may from time to time
request. Consultant agrees to perform such of the following advisory and
consulting services as Alliance reasonably requests:

          (a)  To the extent Alliance deems it appropriate and reasonable,
Consultant will familiarize himself with the business, operations, properties,
financial condition and prospects of Alliance and ARLP, each's strategic
development plans, management succession plans, and such other facets of
Alliance as its President and Chief Executive Officer shall direct.

          (b)  Consultant will advise and assist Alliance and ARLP and each's
management in the formulation of potential strategic alliances with power
generators as well as transportation and transmission companies.

          (c)  Consultant will advise and assist Alliance and ARLP and each's
management in (i) identifying potential acquisition targets, (ii) considering
the desirability of effecting a growth transaction and, if Alliance believes
such a transaction to be desirable, in developing a general strategy for
accomplishing such a transaction, (iii) assisting in the preparation and
distribution of materials concerning such merger and/or acquisition candidates,
(iv) making presentations to the Board of Directors of Alliance concerning any
proposed transaction, and (v) the course of the negotiation of a transaction and
participate, if requested, in such negotiations.

<PAGE>   2

Mr. Robert G. Sachse
January 1, 2001
Page 2

          (d)  Secondarily to the advisory and consulting services described
above, Consultant will advise and assist Alliance and ARLP and each's management
in developing similar strategies and analyses in diversification opportunities
(i.e., other than traditional coal acquisitions), that may be available to ARLP.

          (e)  Consultant will render such other advisory and consulting
services as Alliance, acting through its President and Chief Executive Officer,
may reasonably request, giving due consideration to Consultant's experience and
expertise.

     2.   Extent of Advisory and Consulting Services. Consultant shall devote
approximately fifty percent (50%) of his normal business time (i.e., estimated
at approximately 125 days annually), attention and energies as well as his best
talents and abilities to the business of Alliance and ARLP in accordance with
the President and Chief Executive Officer's instructions and directions.
Consultant will, upon request of Alliance's President and Chief Executive
Officer, perform such advisory and consulting work at Alliance's offices in
Tulsa, Oklahoma, or at such other places and at such other times as Alliance and
Consultant shall from time to time agree upon, subject only to reimbursement of
Consultant's reasonable travel and living expenses. During the term of this
Agreement, Consultant will not engage in any other coal business or coal-related
business activity, whether or not such business activity is pursued for gain,
profit or other pecuniary advantage, except to the extent permitted with the
express written authorization of Alliance. The preceding sentence does not
preclude Consultant from owning for investment purposes less than One Percent
(1%) of the outstanding equity interests in any publicly-traded entity engaged
in the coal business or coal-related business activities so long as Consultant
does not directly or indirectly participate in the management of such entity.

     3.   Term. Subject to the provisions for termination set forth in Paragraph
11 below, Consultant is retained for a term of three (3) years and this
Consulting Agreement shall be effective beginning August 14, 2000, and terminate
on August 13, 2003. Consultant and Alliance agree that, on or after March 31,
2003, both parties will initiate discussions in good faith to define the role
and relationship, if any, of Consultant with Alliance subsequent to the
termination date of this Consulting Agreement.

     4.   Consulting Fee. For services performed hereunder, Consultant shall
receive as compensation the sum of One Hundred Fifty Thousand Dollars ($150,000)
per annum, payable monthly in equal amounts of Twelve Thousand Five Hundred
Dollars ($12,500). Within ten (10) days following receipt of Consultant's
invoice for services and reimbursement of reasonable expenses, if any, for the
preceding month, Alliance shall reimburse Consultant for such expenses, subject
to its right to review and retroactively adjust any inappropriate expense
reimbursement in the future. In addition to the foregoing, for services
performed hereunder, Consultant shall receive as compensation (a) the sum of
Seven Thousand Five Hundred Dollars ($7,500) per calendar quarter (or pro rata
portion thereof) paid by Alliance as follows: (a) 250 common units

<PAGE>   3
Mr. Robert G. Sachse
January 1, 2001
Page 3

of ARLP, plus (b) the cash difference between $7,500 less the market value of
such 250 common units payable on the last day of each calendar quarter
calculated by the closing price per common unit averaged over the immediately
preceding two (2) week period as reported in The Wall Street Journal, and (c)
group health coverage (i.e., medical, prescription drug, dental, and vision
coverage) for Consultant and his family (i.e., Mrs. Elizabeth H. Sachse, spouse,
and Robert B. Sachse, son) substantially similar to that offered participants in
the Alliance Coal, LLC and Affiliates health plan.

     5.   Limitation of Reimbursable Expenses. Whenever possible and practical,
Consultant will take advantage of reduced rates for airfare, lodging and car
rental. Consultant shall not be reimbursed for first class airfare.

     6.   Independent Contractor. Consultant is an independent contractor under
this Consulting Agreement with Alliance. Neither Alliance, nor Consultant have
the authority to bind the other to any third person or otherwise to act in any
way as the representative of the other, unless otherwise expressly agreed to in
writing signed by both parties hereto. Consultant shall not be deemed for any
purpose to be the employee, agent, servant or representative of Alliance.
Alliance shall have no direction or control of Consultant except in results to
be obtained. The parties agree that this Consulting Agreement, or its
implementation, does not create a joint employer, single employer, alter ego,
agency relationship or successor relationship between Alliance and ARLP, on one
hand, and Consultant, on the other hand. Furthermore, Consultant acknowledges
that he is solely responsible for, and Consultant shall not be entitled to
secure from Alliance, any health and welfare benefits (including by way of
illustration and not limitation, medical, dental, vision, life, accidental death
and dismemberment, pension, profit sharing, worker's compensation, or other
similar benefits), except as specifically provided in Paragraph 4 above.

     7.   Taxes and Unemployment Compensation. Consultant shall pay and hereby
assumes exclusive liability for payment of any and all Federal, state and other
locally imposed income taxes, contributions, assessments and taxes for
unemployment insurance, old age benefits, annuities or other purposes which are
measured by or based upon the compensation paid to Consultant under this
Consulting Agreement. In addition, Consultant agrees to reimburse Alliance for
any of the aforesaid taxes or contributions which by law Alliance may be
required to pay because of Consultant's failure to pay the same.

     8.   Insurance.

          (a)  Consultant, from the time of commencement of the advisory and
consulting services described hereinabove until the termination of this
Consulting Agreement, shall maintain at his own expense appropriate personal
insurance including homeowners, automobile

<PAGE>   4
Mr. Robert G. Sachse
January 1, 2001
Page 4

liability.

          (b)  Alliance will provide to Consultant coverage under its automobile
liability insurance covering owned, non-owned and hired vehicles used by
Consultant only during the performance of services rendered hereunder with
combined single limits of at least Five Hundred Thousand Dollars ($500,000) per
occurrence, covering liability for bodily injury or sickness, including death
and property damage.

     9.   Indemnity and Contribution. Alliance agrees to indemnify Consultant to
the full extent lawful against any and all claims, losses and expenses incurred
(including all reasonable fees and disbursements of Consultant incurred in
connection with the performance of services hereunder) including, but not
limited to, such expenses as may be incurred with investigation of and
preparation for any pending or threatened claims in any litigation or other
proceedings arising therefrom) arising out of Consultant's engagement hereunder;
provided, however, that Consultant shall notify Alliance of any such claim and,
so long as in the reasonable judgment of Consultant there is no conflict of
interest, Alliance shall have the option to defend Consultant with counsel of
it's own choosing (including counsel retained to also defend Alliance), and
provided, further, there shall be excluded from any such indemnification any
claim, loss or expense that arises primarily out of or is based primarily upon
any action or failure to act by Consultant, other than an action or failure to
act undertaken at the request of or with the written consent of Alliance, that
is found in a final judicial determination (or a settlement tantamount thereto)
to constitute bad faith, willful misconduct, or gross negligence on the part of
Consultant. In the event that the foregoing indemnity is unavailable or
insufficient to hold Consultant harmless, then Alliance shall contribute to
amounts paid or payable by Consultant in respect of any such claims, losses and
expenses in such proportion as approximately reflects the relative benefits
received by, and fault of, Alliance and Consultant in connection with the
matters as to which such claims, losses and expenses relate and other equitable
considerations.

     10.  Termination of Agreement. Notwithstanding the provisions of Paragraphs
3 and 4 hereinabove, the retention of Consultant shall terminate upon the first
to occur of the following events:

          (a)  the demise of Mr. Robert G. Sachse,

          (b)  the mental illness or disability of Mr. Robert G. Sachse, if he
is unable to perform substantially his duties for a period of two continuous
months; provided, however, a decision to so terminate the consulting services
provided by Consultant herewith must be made by the Board of Directors of
Alliance in good faith, and must be based upon medical reports and reasonable
medical advice which shall establish or indicate the Consultant's incapacity may
continue for an indefinite period. When, after such two months of disability or
mental illness, the Board of Directors of Alliance decides to terminate
Consultant's retention hereunder, such
<PAGE>   5
Mr. Robert G. Sachse
January 1, 2001
Page 5

termination shall be effective thirty (30) days after written notice of such
decision has been delivered to Consultant. The compensation provided for under
the terms of this Consulting Agreement shall continue during the period of
Consultant's disability or mental illness until this Consulting Agreement shall
be terminated by Alliance;

          (c)  the termination of the term of this Consulting Agreement on
August 13, 2003, unless otherwise extended by the parties hereto;

          (d)  the breach by either party hereto of any material term of this
Consulting Agreement; provided written notice of the breach setting forth
sufficient detail(s) of the alleged breach is tendered by the non-breaching
party and such material breach or default hereunder is not cured within a
reasonable time period, but in no event shall such cure period exceed thirty
(30) days after notice is received; and

          (e)  Subsequent to the first year of the three-year term hereunder, in
the event that either Consultant or Alliance determine in good faith that an
equitable adjustment in the per annum rate is in order as a result of (a) an
increase or decrease of the time required by Consultant to fulfill the
obligations hereunder, and/or (b) a material change in the Company's growth
strategy, then Alliance and/or Consultant may provide notice of their respective
intent to reopen discussions concerning the annual aggregate consulting fee paid
hereunder. In such event, the parties agree to negotiate in good faith for a
period of not more than thirty (30) days a mutually acceptable adjustment to the
annual consulting rate fee. Should the parties not be able to reach an amicable
agreement, either party may terminate this Consulting Agreement by providing
sixty (60) days advance written notice of such termination.

In the event this Consulting Agreement is terminated in accordance with this
Paragraph 10, the parties acknowledge that the provisions of Paragraphs 5, 11,
12, 13, 14, 17 and 18 shall survive termination, except if the Agreement is
terminated by Alliance pursuant to Paragraph 10(e), the terms of Paragraph 12(b)
will not survive.

     11.  Nondisclosure by Consultant. Consultant acknowledges and agrees that
any information obtained by Consultant while providing the advisory and
consulting services to Alliance is highly confidential, and is important to
Alliance and to the effective operation of its businesses. As a result,
Consultant therefore agrees that while retained by Alliance, and at any time
thereafter, it will make no disclosure of any kind, directly or indirectly,
concerning any confidential matters relating to Alliance of any of its
activities. Moreover, Consultant agrees to execute the Confidentiality Agreement
designated Exhibit "A," and attached hereto and incorporated by reference
herein.

     12.  Noncompetition by Consultant.

<PAGE>   6
Mr. Robert G. Sachse
January 1, 2001
Page 6

          (a)  During the term hereof and, except as otherwise consented to in
writing by Alliance, Consultant agrees not to compete with Alliance and ARLP in
the United States, including Alaska. Except as provided for in Paragraph 2
hereinabove, Consultant agrees that during the term of the Consulting Agreement,
he will not work for, advise, consult with, serve or assist in any way, directly
or indirectly, any party whose business is in any way competitive with the
activities or businesses of Alliance and ARLP, and Consultant agrees further
that he will himself not compete in any way, directly or indirectly, with
Alliance and ARLP, and that he will not purchase or otherwise acquire any
interest of any kind in a business which is in any way competitive with Alliance
and ARLP.

          (b)  Upon termination of this Consulting Agreement, except as
otherwise consented to in writing by Alliance, Consultant agrees not to compete
with Alliance's and/or ARLP's interests in the United States, including Alaska,
for a period of two (2) years following such termination. The interests of
Alliance and ARLP protected from competition by the preceding sentence are
expressly limited to those projects, business agreements, transactions, and
other business transactions (whether successfully closed or not) in which
Consultant has been (i) actively and directly involved on behalf of Alliance
during the term of this Consulting Agreement and (ii) concerns confidential and
propriety information that is subject to the Confidentiality Agreement referred
to in Paragraph 11 above.

          (c)  Within the two preceding paragraphs, the parties hereto
recognizing that irreparable injury will result to Alliance and ARLP, each's
business and property in the event of Consultant's breach of this agreement not
to compete, in that such consulting services are based primarily upon this
Consulting Agreement, agree that in the event of Consultant's breach of its
agreement not to compete, Alliance and ARLP shall be entitled, in addition to
any other remedies and damages available, to an injunction to restrain the
violation thereof by Consultant, his partners, employees and all persons acting
for or with him.

     13.  Notices. All notices made in connection with this Consulting Agreement
shall be in writing, except as otherwise expressly permitted hereunder. Any
notice or other communication in connection herewith shall be deemed duly given
(a) two business days after it is sent by express, registered or certified mail,
return receipt requested, postage prepaid or (b) on the business day after it is
sent by overnight courier, in every case, addressed as follows:

          IF TO CONSULTANT, AT:

          Mr. Robert G. Sachse
          2685 East 37th Street
          Tulsa, OK 74105

<PAGE>   7
Mr. Robert G. Sachse
January 1, 2001
Page 7

          IF TO ALLIANCE, AT

          Alliance Resource Management GP, LLC
          1717 South Boulder Avenue
          P.O. Box 22027
          Tulsa, OK 74121-22027
          Attn: Joseph W. Craft III and Thomas L. Pearson, Esq.

or, in any case, any such other address as may be specified in writing to the
other party hereto. Any party may give notice or other communication in
connection therewith using any other means (including, but not limited to,
personal delivery, messenger service, telecopy, telex, telephone or other oral
communication or ordinary mail), but no such notice or other communication shall
be deemed to have been duly given unless and until it is actually received by
the individual for whom it is intended.

     14.  Mediation.

          (a)  All disputes, controversies and claims (collectively, "Disputes")
arising out of, relating to, or in connection with this Consulting Agreement, or
the breach, termination of validity hereof, that are not otherwise resolved by
negotiation between Alliance and Consultant, may be resolved by mediation. Any
party to a Dispute may request that the matter be submitted to mediation by
written notice to that effect. Within ten (10) days after receipt of said
notice, the other party shall give written notice stating whether or not it
consents to mediation; provided that no parties shall be required to submit to
mediation unless it consents, which consent shall be in its sole discretion; and
provided further that a request for mediation shall not in any way interfere
with, compromise, limit or restrict the parties' right to seek any judicial
remedies whatsoever.

          (b)  If both parties consent, mediation shall be initiated in
accordance with the Center for Public Resources' Model Procedure for Mediation
of Business Disputes, provided that the mediation shall take place in Tulsa,
Oklahoma or such other place as the parties may mutually determine.

          (c)  Any settlement agreement mutually reached in the course of the
mediation shall be recorded in a definitive agreement, which, when duly executed
and delivered by both parties hereto shall be binding and conclusive upon the
parties.

     15.  Assignment. This Consulting Agreement shall not be assignable by any
party without the prior written consent of the other party (which consent shall
not be unreasonably withheld). Notwithstanding the foregoing, the parties hereto
understand that the personal

<PAGE>   8
Mr. Robert G. Sachse
January 1, 2001
Page 8

services of Consultant are essential to receive the benefits of this agreement.
Any purported assignment in violation of this paragraph shall be void.

     16.  Amendment; Waivers, Etc. No amendment, modification or discharge of
this Consulting Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party as to enforcement of
the amendment, modification, discharge or waiver is sought. Any such waiver
shall constitute a waiver only with respect to the specific matter described in
such writing and shall in no way impair the rights of the party granting such
waiver in any other respect or at any other time.

     17.  Governing Law. This Consulting Agreement shall be governed by and
construed in accordance with the internal laws of the State of Oklahoma, without
given effect to the conflict of laws rules thereof.

     18.  Waiver of Jury Trial.

          (a)  THE PARTIES TO THIS CONSULTING AGREEMENT EXPRESSLY WAIVE AND
FOREGO ANY RIGHT TO RECOVER PUNITIVE, EXEMPLARY, OR SIMILAR DAMAGES IN ANY
ARBITRATION, LAWSUIT, LITIGATION OR PROCEEDING ARISING OUT OF OR RESULTING FROM
ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS CONSULTING AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.

          (b)  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS CONSULTING AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS CONSULTING AGREEMENT OR THE
SERVICES CONTEMPLATED HEREBY.

     EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE WAIVERS
SET FORTH IN SUBPARAGRAPH (a) ABOVE, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVERS, (iii) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (iv)
IT HAS BEEN INDUCED TO ENTER INTO THIS CONSULTING AGREEMENT BY, AMONG OTHER
THINGS, WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     19.  Binding Effect. This Consulting Agreement shall be binding upon and
enure to

<PAGE>   9
Mr. Robert G. Sachse
January 1, 2001
Page 9

the benefit of the parties hereto and their respective heirs, successors, and
permitted assigns, if any.

     20.  Entire Agreement. This Consulting Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof.

     21.  Counterparts. This Consulting Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.

     22.  Headings. The headings contained in this Consulting Agreement are for
purposes of convenience only and shall not affect the meaning or interpretation
of this consulting agreement.

                                     * * *

     The foregoing represents the entirety of our agreement, superseding all
prior communications and understandings of the subject, and I invite you to
accept it by countersigning the enclosed copy of this letter, where indicated
below, and returning the copy at your earliest opportunity. I look forward to
the exciting opportunities that lie ahead for Alliance and the role that you
will play in our future.

                                       Very truly yours,

                                       By: /s/ Joseph W. Craft III
                                           -------------------------------------
                                           Joseph W. Craft III
                                           President and Chief Executive Officer

AGREED AND ACCEPTED this
26 day of March, 2001.

By: /s/ Robert G. Sachse
    -------------------------------
    Robert G. Sachse, an individual

<PAGE>   10

                                  Exhibit "A"

                                January 1, 2001

Mr. Robert G. Sachse
2685 East 37th Street
Tulsa, OK 74105

     Re:      Confidentiality Agreement

Dear Robert:

     In regard to the Consulting Agreement executed contemporaneously herewith,
you have been retained to provide certain advisory and consulting services to
Alliance Resource Management GP, LLC and its affiliates (collectively,
"Alliance"). In order for you to accomplish the tasks that you have been
requested to undertake and complete, it will be necessary for you to receive
information concerning Alliance that is regarded as highly confidential. Before
you are provided with such information, Alliance must have assurance that you
recognize the confidential nature of this information and that you are willing
to maintain the information in confidence.

     In consideration and as a condition to your being furnished with, or
granted access to, such information:

     1.   You acknowledge that certain information, whether provided orally or
in writing relating to Alliance including, but not limited to, technical,
financial and marketing information, which Alliance or its representatives agree
to furnish to you or which shall be acquired as a result hereto (collectively,
the "Information") is confidential and proprietary information.

     2.   You agree that all information shall be retained in strict confidence
by you and used for the sole purpose of providing the aforementioned advisory
and consulting services and shall not be used by you in way detrimental to
Alliance, nor used by you or any third party for its competitive benefit, or
disclosed directly or indirectly to any third party without the prior written
permission of Alliance; provided, however, that such restrictions shall not
apply to Information which: (a) at the time of disclosure is in the public
domain; (b) after disclosure becomes a part of the public domain by publication
through no violation of this Confidentiality Agreement; (c) was in your
possession prior to being furnished to you by or on behalf of Alliance; (d) is
hereafter lawfully disclosed to you by a person other than Alliance, or any of
its advisors, agents, employees, directors, officers, or other representatives,
which person to the best of your knowledge, has a legal right to disclose the
same and the Information disclosed was not acquired by such person, either
directly or indirectly, in violation of an obligation of confidence to Alliance;
or (e) is required to be disclosed by you in accordance with applicable law
after written

<PAGE>   11
Mr. Robert G. Sachse
January 1, 2001
Page 2

notice thereof to Alliance.

     3.   Unless otherwise consented to in writing by Alliance, it is understood
that all such Information may not be disclosed to your directors, officers,
employees, and authorized representatives, if any.

     4.   You further agree not to disperse and duplicate any of the
Information. All Information will remain the property of Alliance, and you will
return all Information (original and copies) to Alliance, at the request of
Alliance. All analyses, documents, memoranda, notes or other records maintained
in any form whatsoever, prepared by you, based on, or containing Information
shall be destroyed at the request of Alliance with written confirmation thereof
by you of such destruction.

     5.   In the event that you are requested or required by oral questions,
interrogatories, requests for Information or documents subpoena, civil
investigation demand, or other similar process to disclose any of the
Information acquired by you in the course of your dealing hereunder with
Alliance, or its representatives, it is agreed that you will provide Alliance
with prompt notice of such requests so that Alliance may seek an appropriate
protective order and/or waive compliance with the provisions of this
Confidentiality Agreement.

     It is further agreed that if, in the absence of a protective order or the
receipt of a waiver hereunder, you are, nonetheless, in the written opinion of
counsel, compelled to disclose any of the Information to any tribunal or else
stand liable for contempt or suffer other censor or penalty, you may disclose to
such tribunal only that portion of the Information which is legally required
without liability hereunder and you will exercise your best efforts at
Alliance's expense to obtain a protective order or other reliable assurance that
confidential treatment will be accorded to the Information furnished hereunder;
provided, however, that a copy of the aforementioned written opinion of counsel
shall be furnished to Alliance prior to any such disclosure.

     6.   Without the prior written notice of Alliance, you will not make any
statement, any public announcement, or release to trade publications or to the
press. With respect to customers, competitors, and other third parties with whom
you have dealings during the term of the Consulting Agreement, you may identify
yourself as an independent contractor or consultant to Alliance, but shall
otherwise maintain the confidence of the terms and conditions of this Consulting
Agreement, except as shall be necessary, in the opinion of your counsel, to
comply with the requirements of applicable law and only after written notice
thereof to MAPCO Coal.

     7.   This Confidentiality Agreement shall expire two (2) years from the
date of termination of the aforementioned Consulting Agreement.

     8.   This Confidentiality Agreement shall be governed and construed in
accordance with the laws of the State of Oklahoma.

<PAGE>   12
Mr. Robert G. Sachse
January 1, 2001
Page 3

     Please indicate your agreement by signing this letter, where indicated
below.

                                       Sincerely,

                                       Alliance Resource Management GP, LLC

                                       By: /s/ Thomas L. Pearson
                                           --------------------------------
                                           Thomas L. Pearson
                                           Senior Vice President

ACCEPTED AND ACKNOWLEDGED
THIS 26 day of March 2001.

By: /s/ Robert G. Sachse
    -------------------------------
    Robert G. Sachse, an individual<PAGE>   1

                                                                   EXHIBIT 10.26

                              EMPLOYMENT AGREEMENT

         This Employment Agreement (this "AGREEMENT") by and among COMFORT
SYSTEMS USA (TEXAS), L.P., a Texas limited partnership (the "COMPANY"), and Gary
E. Hess ("EMPLOYEE") is hereby entered into and effective as of the 2nd day of
January, 2001.

                                 R E C I T A L S

A.       The Company is engaged primarily in the heating, ventilation, air
conditioning, plumbing, electrical, fire protection and process piping industry.

B.       Company desires to employ Employee hereunder in a confidential
relationship wherein Employee, in the course of his employment, will become
familiar with and aware of information as to the Company's customers, specific
manner of doing business, processes, techniques and trade secrets and future
plans with respect thereto, all of which have been and will be established and
maintained at great expense to the Company, which information is a trade secret
and constitutes the valuable good will of the Company; and

         NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, it is hereby agreed as follows:

                               A G R E E M E N T S

1.       EMPLOYMENT AND DUTIES.

         (a) Company hereby employs Employee to serve as President and Chief
Operating Officer of the Company. As such, Employee shall have responsibilities,
duties and authority customarily accorded to and expected of an officer holding
such position directly with the Company. Employee hereby accepts this employment
upon the terms and conditions herein contained and agrees to devote his full
time, attention and efforts to promote and further the business of Company.

         (b) Employee shall faithfully adhere to, execute and fulfill all
policies established by Company from time to time.

2.       COMPENSATION. For all services rendered by Employee, Company shall
         compensate Employee as follows:

         (a) BASE SALARY. Effective as of the Effective Date, the base salary
payable to Employee shall be $250,000 per year, payable on a regular basis in
accordance with Company's standard payroll procedures but not less frequently
than monthly. On at least an annual basis, Company will review Employee's
performance and

                                       1
<PAGE>   2

may, in its sole discretion, (i) make increases to such base salary; (ii) pay a
performance bonus; or (iii) recommend Employee for the grant of Company stock
options.

         (b) EMPLOYEE PERQUISITES, BENEFITS AND OTHER COMPENSATION. Employee
shall be entitled to receive additional benefits and compensation from Company
in such form and to such extent as specified below:

         (i) Coverage, subject to contributions required of executives of the
         Company generally, for Employee and his dependent family members under
         health, hospitalization, disability, dental, life and other insurance
         plans that Company may have in effect from time to time. Benefits
         provided to Employee under this clause (i) shall be equal to such
         benefits provided to other Company employees of the same level.

         (ii) Reimbursement for all business travel and other out-of-pocket
         expenses reasonably incurred by Employee in the performance of services
         pursuant to this Agreement. All reimbursable expenses shall be
         appropriately documented in reasonable detail by Employee upon
         submission of any request for reimbursement, and in a format and manner
         consistent with Company's expense reporting policy.

         (iii) Company shall provide Employee with other employee perquisites as
         may be available to or deemed appropriate for Employee by Company and
         participation in all other Company-wide employee benefits as are
         available from time to time.

3.       NONCOMPETITION AGREEMENT.

         (a) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his services in the operation or affairs of the companies
or enterprises in which such investments are made nor violate the terms of this
paragraph 3. Employee will not, during the period of his employment by or with
Company, and for a period of two (2) years immediately following the termination
of his employment under this Agreement, except as provided below, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:

         (i) engage, as an officer, director, shareholder, owner, partner, joint
         venturer, or in a managerial capacity, whether as an employee,
         independent contractor, consultant or advisor, or as a sales
         representative, in any business in direct competition with Company or
         any of its subsidiaries and affiliates within 100 miles of where the
         Company or any of its subsidiaries and affiliates conduct

                                       2

<PAGE>   3

         business, including any territory serviced by the Company or any of
         such subsidiaries (the "TERRITORY");

         (ii) call upon any person who is, at that time, an employee of Company
         or any of its subsidiaries or affiliates sales or managerial capacity
         for the purpose or with the intent of enticing such employee away from
         or out of the employ of Company or any of its subsidiaries or
         affiliates or any its subsidiaries or affiliates;

         (iii) call upon any person or entity which is, at that time, or which
         has been, within one (1) year prior to that time, a customer of the
         Company or any of its subsidiaries or affiliates for the purpose of
         soliciting or selling products or services in direct competition with
         the Company or any of its subsidiaries or affiliates; or

         (iv) call upon any prospective acquisition candidate, on Employee's own
         behalf or on behalf of any competitor, which candidate was, to
         Employee's actual knowledge after due inquiry, either called upon by
         Company or any of its subsidiaries or affiliates or for which Employee
         participated in an acquisition analysis for the purpose of acquiring
         such entity or all or substantially all of such entity's assets.

         Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as a passive investment not more than two
percent (2%) of the capital stock of a competing business the stock of which is
traded on a national securities exchange or on an over-the-counter or similar
market.

         (b) Because of the difficulty of measuring economic losses to Company
or any of its subsidiaries or affiliates as a result of a breach of the
foregoing covenant, and because of the immediate and irreparable damage that
could be caused to Company or any of its subsidiaries or affiliates for which
they would have no other adequate remedy, Employee agrees that the foregoing
covenant may be enforced by Company or any of its subsidiaries or affiliates in
the event of breach or threatened breach by Employee, by injunctions,
restraining orders and other appropriate equitable relief.

         (c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company on the date of the execution of this Agreement and
the current plans of the Company or any of its subsidiaries or affiliates; but
it is also the intent of the Company and Employee that such covenants be
construed and enforced in accordance with the changing activities, business and
locations of the Company or any of its subsidiaries or affiliates throughout the
term of this covenant, whether before or after the date of termination of the
employment of Employee. For example, if, during the term of this Agreement, the
Company or any of its subsidiaries or affiliates engages in new and different
activities, enters a new business or establishes new locations for its current
activities or business in addition to or other than the activities or business
enumerated under the Recitals above or the locations currently established
therefor, then Employee

                                       3

<PAGE>   4

will be precluded from soliciting the customers or Employees of such new
activities or business or from such new location and from directly competing
with such new business within 100 miles of its then-established operating
location(s) through the term of this covenant.

         It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or any of its
subsidiaries or affiliates, or similar activities or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
paragraph 3(a), Employee shall not be chargeable with a violation of this
paragraph 3 if the Company or any of its subsidiaries or affiliates shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.

         (d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth
herein are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and this Agreement shall thereby be reformed.

         (e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against Company or any of
its subsidiaries or affiliates, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Company or any
of its subsidiaries or affiliates of such covenants. It is specifically agreed
that the period of two (2) years following termination of employment stated at
the beginning of this paragraph 3, during which the agreements and covenants of
Employee made in this paragraph 3 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in violation
of any provision of this paragraph 3.

4.       PLACE OF PERFORMANCE; RELOCATION RIGHTS.

         (a) Employee understands that he may be requested by Company or any of
its subsidiaries or affiliates to relocate from his present residence to another
geographic location in order to more efficiently carry out his duties and
responsibilities under this Agreement or as part of a promotion or other
increase in duties and responsibilities. In such event, if Employee agrees to
relocate, Company or any of its subsidiaries or affiliates will pay all
relocation costs to move Employee, his immediate family and their personal
property and effects. Such costs may include, by way of example, but are not
limited to, pre-move visits to search for a new residence, investigate schools
or for other purposes; temporary lodging and living costs prior to moving into a
new permanent residence; duplicate home carrying costs; all closing costs on the
sale of Employee's present residence and on the purchase of a comparable
residence in the new location; and added income taxes that Employee may incur if
any relocation costs are not deductible

                                       4

<PAGE>   5

for tax purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use his best efforts to incur only those costs
which are reasonable and necessary to effect a smooth, efficient and orderly
relocation with minimal disruption to the business affairs of Company or any of
its subsidiaries or affiliates and the personal life of Employee and his family.

         (b) Notwithstanding the above, if Employee is requested by Company to
relocate his primary residence and Employee refuses, such refusal shall not
constitute "CAUSE" for termination of this Agreement under the terms of
paragraph 5(a)(iii).

5.       TERM; TERMINATION; RIGHTS ON TERMINATION.

         (a) TERM. The term of this Agreement shall begin on the date hereof and
continue for three (3) years (the "INITIAL TERM") unless terminated sooner as
herein provided, and shall automatically renew after the Initial Term on a
year-to-year basis on the same terms and conditions contained herein in effect
as of the time of renewal unless the Company notifies Employee at least 60 days
prior to such expiration (the "TERM"). This Agreement and Employee's employment
may be terminated in any one of the following ways:

         (i)      TERMINATION AS A RESULT OF THE EMPLOYEE'S DEATH. The death of
                  Employee shall immediately terminate this Agreement and upon
                  such termination Employee's Estate shall receive from the
                  Company, in a lump-sum payment, the base salary at the rate
                  then in effect for one (1) year, provided, however, that such
                  lump-sum payment shall be reduced by the amount, if any, of
                  benefit payable under any life insurance policies to the
                  extent such policies are procured and paid for by the Company.

         (ii)     TERMINATION ON ACCOUNT OF DISABILITY. If, as a result of
                  incapacity due to physical or mental illness or injury,
                  Employee shall have been absent from his full-time duties
                  hereunder for four (4) consecutive months, then thirty (30)
                  days after receiving written notice (which notice may occur
                  before or after the end of such four (4) month period, but
                  which shall not be effective earlier than the last day of such
                  four (4) month period), Company may terminate Employee's
                  employment hereunder provided Employee is unable to resume his
                  full-time duties with or without reasonable accommodation at
                  the conclusion of such notice period. Also, Employee may
                  terminate his employment hereunder if his health should become
                  impaired to an extent that makes the continued performance of
                  his duties hereunder hazardous to his physical or mental
                  health or his life, provided that Employee shall have
                  furnished Company with a written statement from a qualified
                  doctor to such effect and provided, further, that, at
                  Company's request made within thirty (30) days of the date of
                  such written statement, Employee shall submit to an
                  examination by a doctor selected by Company who is reasonably

                                       5
<PAGE>   6

                  acceptable to Employee or Employee's doctor and such doctor
                  shall have concurred in the conclusion of Employee's doctor.
                  In the event this Agreement is terminated as a result of
                  Employee's disability, Employee shall receive from Company, in
                  a lump-sum payment due within ten (10) days of the effective
                  date of termination, the base salary at the rate then in
                  effect for whatever time period is remaining under the Initial
                  Term of this Agreement or for one (1) year, whichever amount
                  is greater; provided, however, that any such payments shall be
                  reduced by the amount of any disability insurance payments
                  payable to the Employee as a result of such disability.

         (iii)    TERMINATION BY THE COMPANY FOR CAUSE. Company may terminate
                  this Agreement immediately for "CAUSE," which shall be: (1)
                  Employee's willful and material breach of this Agreement
                  (which breach cannot be cured or, if capable of being cured,
                  is not cured within ten (10) days after receipt of written
                  notice to cure); (2) Employee's gross negligence in the
                  performance or intentional nonperformance of any of Employee's
                  material duties and responsibilities hereunder; (3) Employee's
                  willful dishonesty, fraud or misconduct with respect to the
                  business or affairs of Company or any of its subsidiaries or
                  affiliates which materially and adversely affects the
                  operations or reputation of Company or any of its subsidiaries
                  or affiliates; (4) Employee's conviction of a felony crime;
                  (5) Employee's confirmed positive illegal drug test result;
                  (6) confirmed sexual harassment by Employee; or (7) Employee's
                  material and willful violation of the Company's Compliance and
                  Business Ethics Policies. In the event of a termination for
                  Cause, as enumerated above, Employee shall have no right to
                  any severance compensation.

         (iv)     TERMINATION WITHOUT CAUSE. At any time after the commencement
                  of employment, either Employee or Company may, voluntarily or
                  without cause, respectively, terminate this Agreement and
                  Employee's employment, effective thirty (30) days after
                  written notice is provided to the other. Should Employee be
                  terminated by Company without Cause Employee shall receive
                  from Company, in a lump-sum payment due on the effective date
                  of termination, the base salary at the rate then in effect for
                  one (1) year. Further, any termination without Cause by
                  Company shall operate to shorten the period set forth in
                  paragraph 3(a) and during which the terms of paragraph 3 apply
                  to one (1) year from the date of termination of employment.
                  Except as provided in paragraph 12 below, if Employee resigns
                  or otherwise terminates this Agreement, the provisions of
                  paragraph 3 hereof shall apply, except that Employee shall
                  receive no severance compensation. If Employee is terminated
                  by the Company without Cause, or if the Employee terminates
                  his employment for Good Reason pursuant to paragraph 12(c)
                  below, then the Company shall make the insurance premium
                  payments

                                       6
<PAGE>   7

                  contemplated by COBRA for a period of twelve (12) months
                  immediately following such termination.

                  (b) CHANGE IN CONTROL OF THE COMPANY. In the event of a Change
                  in Control of the Company (as defined below) during the Term,
                  paragraph 12 below shall apply.

                  (c) EFFECT OF TERMINATION. Upon termination of this Agreement
                  for any reason provided above, Employee shall be entitled to
                  receive all compensation earned and all benefits and
                  reimbursements due through the effective date of termination.
                  Additional compensation subsequent to termination, if any,
                  will be due and payable to Employee only to the extent and in
                  the manner expressly provided herein. All other rights and
                  obligations of Company and Employee under this Agreement shall
                  cease as of the effective date of termination, except that
                  Company's obligations under paragraph 9 herein and Employee's
                  obligations under paragraphs 3, 6, 7, 8 and 10 herein shall
                  survive such termination in accordance with their terms.

                  (d) BREACH BY COMPANY. If termination of Employee's employment
                  arises out of Company's material failure to pay Employee on a
                  timely basis the amounts to which he is entitled under this
                  Agreement or as a result of any other breach of this Agreement
                  by Company, as determined by a court of competent jurisdiction
                  or pursuant to the provisions of paragraph 16 below, Company
                  shall pay all amounts and damages to which Employee may be
                  entitled as a result of such breach, including interest
                  thereon and all reasonable legal fees and expenses and other
                  costs incurred by Employee to enforce his rights hereunder.
                  Further, none of the provisions of paragraph 3 shall apply in
                  the event this Agreement is terminated as a result of a breach
                  by Company.

6.       RETURN OF COMPANY PROPERTY. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company or its
representatives, vendors or customers which pertain to the business of the
Company shall be and remain the property of the Company and be subject at all
times to its discretion and control. Likewise, all correspondence, reports,
records, charts, advertising materials and other similar data pertaining to the
business, activities or future plans of the Company which is collected by
Employee shall be delivered promptly to the Company without request by it upon
termination of Employee's employment.

7.       INVENTIONS. Employee shall disclose promptly to the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company and which

                                       7
<PAGE>   8

Employee conceives as a result of his employment hereunder. Employee hereby
assigns and agrees to assign all his interests therein to the Company or its
nominee. Whenever requested to do so by the Company, Employee shall execute any
and all applications, assignments or other instruments that the Company shall
deem necessary to apply for and obtain Letters Patent of the United States or
any foreign country or to otherwise protect the Company's interest therein.

8.       TRADE SECRETS. Employee agrees that he will not, during or after the
Term of this Agreement, disclose the specific terms of the Company's
relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company,
whether in existence or proposed, to any person, firm, partnership, corporation
or business for any reason or purpose whatsoever, except and only to the extent
required by law or legal process following notice to the Company.

9.       INDEMNIFICATION. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by Company
against Employee), by reason of the fact that he is or was performing services
under this Agreement, then Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement, as
actually and reasonably incurred by Employee in connection therewith, to the
maximum extent permitted by applicable law. The advancement of expenses shall be
mandatory to the extent permitted by applicable law. In the event that both
Employee and Company are made a party to the same third-party action, complaint,
suit or proceeding, Company agrees to engage counsel, and Employee agrees to use
the same counsel, provided that if counsel selected by Company shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and Company shall pay all reasonable
attorneys' fees of such separate counsel. Company shall not be required to pay
the fees of more than one law firm except as described in the preceding
sentence, and shall not be required to pay the fees of more than two law firms
under any circumstances. Further, while Employee is expected at all times to use
his best efforts to faithfully discharge his duties under this Agreement,
Employee cannot be held liable to Company for errors or omissions made in good
faith where Employee has not exhibited gross, willful and wanton negligence or
misconduct or performed criminal or fraudulent acts.

10.      NO PRIOR AGREEMENTS. Employee hereby represents and warrants to Company
and the Company that the execution of this Agreement by Employee and his
employment by Company and the performance of his duties hereunder will not
violate or be a breach of any agreement with a former Company, client or any
other person or entity. Further, Employee agrees to indemnify Company and the
Company for any claim, including, but not limited to, attorneys' fees and
expenses of investigation, by any such third party that such third party may now
have or may hereafter come to have against Company or any of its subsidiaries or
affiliates based upon or arising out of any noncompetition agreement, invention
or secrecy agreement between Employee and such third party which was in
existence as of the date of this Agreement.

                                       8

<PAGE>   9

11.      ASSIGNMENT; BINDING EFFECT. Employee understands that he has been
selected for employment by Company and/or the Company on the basis of his
personal qualifications, experience and skills. Employee agrees, therefore, he
cannot assign all or any portion of his performance under this Agreement.
Subject to the preceding two (2) sentences and the express provisions of
paragraph 12 below, this Agreement shall be binding upon, inure to the benefit
of and be enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.

12.      CHANGE IN CONTROL.

         (a)      Upon notice by Employee at any time during the 90 days
                  following a Change in Control, the Employee may elect to
                  terminate his employment and shall be entitled to receive in a
                  lump-sum payment due upon the date of such termination the
                  amount equal to two (2) times his annual base salary then in
                  effect, and the noncompetition provisions of paragraph 3 shall
                  apply for a period of one (1) year immediately following the
                  effective date of termination.

         (b)      Upon a Change in Control, any options outstanding to Employee
                  that have not previously vested shall be immediately vested.

         (c)      In any Change in Control situation, if Employee is terminated
                  by Company without Cause at any time during the twelve (12)
                  months immediately following the closing of the transaction
                  giving rise to the Change in Control, or Employee terminates
                  this Agreement for Good Reason (as defined below) at any time
                  during the twelve (12) months immediately following the
                  closing of the transaction giving rise to the Change in
                  Control, Employee shall be entitled to receive in a lump-sum
                  payment, due on the effective date of termination, the amount
                  equal to two (2) times the greater of (i) his annual base
                  salary then in effect or (ii) his annual base salary in effect
                  immediately prior to the closing of the transaction giving
                  rise to the Change in Control, and the noncompetition
                  provisions of paragraph 3 shall apply for a period of one (1)
                  year immediately following the effective date of termination.
                  For purposes of this Agreement, Employee shall have "GOOD
                  REASON" to terminate this Agreement and his employment
                  hereunder if, without Employee's consent, (x) Employee is
                  demoted by means of a reduction in authority,
                  responsibilities, duties or title to a position of materially
                  less stature or importance within the Company than as
                  described in paragraph 1 hereof or (y) the Company breaches
                  this Agreement in any material respect and fails to cure such
                  breach within ten (10) days after Employee delivers written
                  notice and a written description of such breach to the
                  Company, which notice shall specifically refer to this section
                  of this Agreement.

         (d)      For purposes of applying paragraph 5 under the circumstances
                  described in (b) above, the effective date of termination will
                  be the closing date of the transaction giving rise to the
                  Change in Control and all compensation, reimbursements and
                  lump-sum payments due Employee must be paid in full

                                       9

<PAGE>   10

                  by Company at or prior to such closing. Further, Company shall
                  ensure that Employee will be given sufficient time and
                  opportunity to elect whether to exercise all or any of his
                  vested options to purchase the Company's Common Stock,
                  including any options with accelerated vesting under the
                  provisions of the Company's 1998 Long-Term Incentive Plan (or
                  other applicable plan then in effect), such that he may
                  convert the options to shares of the Company's Common Stock at
                  or prior to the closing of the transaction giving rise to the
                  Change in Control, if he so desires.

         (e)      A "CHANGE IN CONTROL" shall be deemed to have occurred if:

                  (i) any person, other than Comfort Systems USA, Inc., a
                  Delaware corporation and the beneficial owner of the Company
                  ("CSUSA"), or an employee benefit plan of CSUSA, or any entity
                  controlled by either, acquires directly or indirectly the
                  Beneficial Ownership (as defined in Section 13(d) of the
                  Securities Exchange Act of 1934, as amended) of any voting
                  security of the CSUSA and immediately after such acquisition
                  such Person is, directly or indirectly, the Beneficial Owner
                  of voting securities representing fifty percent (50%) or more
                  of the total voting power of all of the then-outstanding
                  voting securities of CSUSA;

                  (ii) the following individuals no longer constitute a majority
                  of the members of the Board of Directors of CSUSA: (A) the
                  individuals who, as of the date hereof, constitute the Board
                  of Directors of CSUSA (the "ORIGINAL DIRECTORS"); (B) the
                  individuals who thereafter are elected to the Board of
                  Directors of the CSUSA and whose election, or nomination for
                  election, to the Board of Directors of CSUSA was approved by a
                  vote of at least two-thirds (2/3) of the Original Directors
                  then still in office (such directors becoming "ADDITIONAL
                  ORIGINAL DIRECTORS" immediately following their election); and
                  (C) the individuals who are elected to the Board of Directors
                  of CSUSA and whose election, or nomination for election, to
                  the Board of Directors of CSUSA was approved by a vote of at
                  least two-thirds (2/3) of the Original Directors and
                  Additional Original Directors then still in office (such
                  directors also becoming "ADDITIONAL ORIGINAL DIRECTORS"
                  immediately following their election);

                  (iii) the stockholders of CSUSA shall approve a merger,
                  consolidation, recapitalization, or reorganization of CSUSA, a
                  reverse stock split of outstanding voting securities, or
                  consummation of any such transaction if stockholder approval
                  is not obtained, other than any such transaction which would
                  result in at least seventy-five percent (75%) of the total
                  voting power represented by the voting securities of the
                  surviving entity outstanding immediately after such
                  transaction being Beneficially Owned by at least seventy-five
                  percent (75%) of the holders of outstanding voting securities
                  of CSUSA immediately prior to the transaction, with the voting
                  power of each

                                       10

<PAGE>   11

                  such continuing holder relative to other such continuing
                  holders not substantially altered in the transaction; or

                  (iv) the stockholders of CSUSA shall approve a plan of
                  complete liquidation of CSUSA or an agreement for the sale or
                  disposition of all or a substantial portion of the CSUSA's
                  assets (i.e., fifty percent (50%) or more of the total assets
                  of CSUSA).

                  (v) Employee must be notified in writing by Company or any of
                  its subsidiaries or affiliates at anytime that either Company
                  or any of its subsidiaries or affiliates anticipates that a
                  Change in Control may take place.

         (f)      If it shall be determined that any payment or distribution by
                  Company, the Company or any other person to or for the benefit
                  of the Employee (a "PAYMENT") would be subject to the excise
                  tax imposed by Section 4999 of the Internal Revenue Code of
                  1986, as amended (the "EXCISE TAX"), as a result of the
                  termination of employment of the Employee in the event of a
                  Change in Control, then Company, the Company or the successor
                  to the Company shall pay an additional payment (a "GROSS-UP
                  PAYMENT") in an amount such that after payment by the Employee
                  of all taxes, including, without limitation, any income taxes
                  and Excise Tax imposed on the Gross-Up Payment, the Employee
                  retains an amount of the Gross-Up Payment equal to the Excise
                  Tax imposed on the Payments. Such amount will be due and
                  payable by Company, the Company or the successor to the
                  Company within ten (10) days after the Employee delivers
                  written request for reimbursement accompanied by a copy of the
                  Employee's tax return(s) or other tax filings showing the
                  excise tax actually incurred by the Employee.

13.      COMPLETE AGREEMENT. This Agreement sets forth the entire agreement of
the parties hereto relating to the subject matter hereof and supersedes any
other employment agreements or understandings, written or oral, between or among
Company, the Company and Employee. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with Company or any of its subsidiaries or affiliates or any of its officers,
directors or representatives covering the same subject matter as this Agreement.
This Agreement is the final, complete and exclusive statement and expression of
the agreement between Company and Employee and of all the terms of this
Agreement, and it cannot be varied, contradicted or supplemented by evidence of
any prior or contemporaneous oral or written agreements. This written Agreement
may not be later modified except by a further writing signed by a duly
authorized officer of Company and Employee, and no term of this Agreement may be
waived except in writing signed by the party waiving the benefit of such term.

14.      NOTICE. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:

                                       11

<PAGE>   12

         To Company:      Comfort Systems USA (Texas), L.P.
                          777 Post Oak Blvd, Suite 500
                          Houston, Texas  77056
                          Attention: Law Department

         To Employee:     William F. Murdy
                          5110 San Felipe 363W
                          Houston, TX  77056

         Notice shall be deemed given and effective on the earlier of three (3)
days after the deposit in the U.S. mail of a writing addressed as above and sent
first class mail, certified, return receipt requested, or when actually received
by means of hand delivery, delivery by Federal Express or other courier service,
or by facsimile transmission. Either party may change the address for notice by
notifying the other party of such change in accordance with this paragraph 14.1

15.      SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of this
Agreement or of any part hereof.

16.      ARBITRATION. With the exception of paragraphs 3 and 7, any unresolved
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration, conducted before a panel of three (3)
arbitrators in Houston, Texas, in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association
("AAA") then in effect, provided that Employee shall comply with Company's
grievance procedures in an effort to resolve such dispute or controversy before
resorting to arbitration, and provided further that the parties may agree to use
arbitrators other than those provided by the AAA. The arbitrators shall not have
the authority to add to, detract from, or modify any provision hereof nor to
award punitive damages to any injured party. The arbitrators shall have the
authority to order back-pay, severance compensation, vesting of options (or cash
compensation in lieu of vesting of options), reimbursement of costs, including
those incurred to enforce this Agreement, and interest thereon in the event the
arbitrators determine that Employee was terminated without disability or Cause,
as defined in paragraphs 5(a)(ii) and 5(a)(iii), respectively, or that Company
has breached this Agreement in any material respect. A decision by a majority of
the arbitration panel shall be final and binding. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. The direct expense of any
arbitration proceeding shall be borne by Company.

17.      GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.

                                       12
<PAGE>   13

18.      COUNTERPARTS. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.

19.      THIRD-PARTY BENEFICIARY. The Company is intended to be a third-party
beneficiary under this Agreement, and shall be entitled to enforce the
provisions hereof benefiting the Company.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

                              COMFORT SYSTEMS USA (TEXAS), L.P.

                              By: Comfort Systems USA G.P., Inc.

                              By: /s/ William Murdy
                                 ---------------------------------------
                                  William Murdy
                                  Chief Executive Officer

                              COMFORT SYSTEMS USA, INC.

                              By: /s/ William Murdy
                                 ---------------------------------------
                                  William Murdy
                                  Chief Executive Officer

                              EMPLOYEE:

                              /s/ Gary E. Hess
                              ------------------------------------------
                              Gary E. Hess

                                       13

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00022-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00022-of-00352.parquet"}]]