Exhibit 10.1

 

ASSET PURCHASE AGREEMENT

 

This ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
December 13, 2005 by and among INTEGRATED ELECTRICAL SERVICES, INC., a Delaware
corporation (the “Parent”), H. R. ALLEN, INC., a South Carolina corporation (the
“Company”), ALLEN SERVICES, INC., a South Carolina corporation (the “Buyer”),
and HERBERT R. ALLEN, JR., an individual and resident of the State of South
Carolina (“Guarantor”).

 

WITNESSETH:

 

WHEREAS, the Parent owns, either directly or indirectly, all of the issued and
outstanding capital stock of the Company, which is engaged in the electrical
construction and services business (the “Business”);

 

WHEREAS, the Parent and the Company desire to sell to the Buyer substantially
all of the Company’s assets, which are more fully described in Section 1.1
hereof, and the Buyer desires to acquire such assets in consideration of the
payment by the Buyer of the purchase price and the assumption by the Buyer of
the liabilities provided for herein, all upon the terms and subject to the
conditions hereinafter set forth;

 

WHEREAS, Guarantor is the President and owner of the Buyer and has agreed to
personally guarantee to the Parent and the Company the Buyer’s performance of
all representations, warranties, covenants, agreements and conditions set forth
herein;

 

NOW, THEREFORE, for and in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions of the parties
contained herein, it is hereby agreed as follows:

 

1. PURCHASE AND SALE OF ASSETS.

 

1.1 Transfer of Assets. On the terms and subject to the conditions set forth in
this Agreement, on the Closing Date (as defined in Section 2.1 hereof), the
Company shall sell, convey, assign, transfer and deliver to the Buyer, and the
Buyer shall purchase and acquire from the Company (except as provided in
Section 1.2 hereof) all of the assets, rights and properties of the Parent or
the Company set forth on Schedule 1.1. The assets described in this Section 1.1
as being sold, conveyed, assigned, transferred and delivered to the Buyer
hereunder are sometimes hereinafter referred to collectively as the “Assets”.

 

1.2 Excluded Assets. It is expressly understood and agreed that the Assets shall
not include the following (such assets are hereinafter referred to collectively
as the “Excluded Assets”):

 

(a) Cash and cash equivalents or similar type investments, such as certificates
of deposit, Treasury bills and other marketable securities;

 

(b) Claims for refunds of taxes and other governmental charges to the extent
such refunds relate to periods ending on or prior to the Closing Date;

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(c) Subject to Section 4.6, any asset, tangible or intangible, which is not
freely transferable without the consent of a third party (other than the
consents of any of the Parent’s lenders or other parties holding security
interests in connection with the Parent’s credit facilities, including without
limitation those set forth in Schedule 1.5), upon the failure to obtain such
consent;

 

(d) The original corporate minute books, stock books, financial records, tax
returns, personnel and payroll records and corporate policies and procedures
manuals of the Company and other records required by applicable laws to be
retained;

 

(e) Any contract or agreement, whether written or oral, between the Company and
IES Contractors, Inc.;

 

(f) The accounts receivable associated with bonded jobs identified on Schedule
1.2 in the total net amount of $1,254,943 (the “Excluded Accounts”);

 

(g) Any amounts owed to the Company by Parent, Integrated Electrical Finance,
Inc., IES Management LP, IES Management ROO LP, IES Properties, Inc., IES
Contractors, Inc. or IES Reinsurance, Ltd. other than amounts owed to the
Company by IES Contractors, Inc. under the MCAS Beaufort contract dated July 1,
2005; and

 

(h) Any asset not set forth on Schedule 1.1.

 

1.3 Instruments of Conveyance and Transfer.

 

(a) At the Closing, the Buyer, the Company and the Parent shall enter into a
Bill of Sale, Assignment and Assumption Agreement in the form attached hereto as
Exhibit A, transferring to the Buyer good and indefeasible title to all of the
tangible personal property included in the Assets, subject only to Permitted
Encumbrances.

 

(b) At the Closing, the Buyer, Company and the Parent shall deliver such other
instruments of transfer and assignment in respect of the Assets as the Buyer or
Parent shall reasonably require and as shall be consistent with the terms and
provisions of this Agreement, including without limitation one or more special
warranty deeds conveying the Real Property.

 

(c) At the Closing, the Guarantor shall, and to the extent of his authority
shall cause the Transferred Employees (as hereinafter defined) to, resign as
officers and directors of the Company and any other affiliates of the Parent.

 

1.4 Further Assurances. From time to time after the Closing, the Parent and the
Company will execute and deliver, or cause to be executed and delivered, without
further consideration, such other instruments of conveyance, assignment,
transfer and delivery and will take such other actions as the Buyer may
reasonably request in order to more effectively transfer, convey, assign and
deliver to the Buyer, and to place the Buyer in possession and control of any of
the Assets or to enable the Buyer to exercise and enjoy all rights and benefits
of the Company with respect thereto.

 

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1.5 Liabilities. On the Closing Date, the Buyer will assume and agree to pay and
discharge all liabilities of the Company, known or unknown, absolute or
contingent, including without limitation any liabilities incurred under any
Seller’s affidavit executed in favor of third parties in connection with the
closing of the transactions contemplated hereby (the “Assumed Liabilities”)
other than the liabilities set forth on Schedule 1.5 (the “Retained
Liabilities”), which shall be retained by the Parent or the Company,
respectively.

 

1.6 Expenses: Consents and Taxes. The Buyer shall pay, or cause to be paid
(i) all costs and expenses of obtaining all consents of third parties for the
assignment of any of the Assets (other than costs and expense associated with
obtaining any consents required in connection with the Parent’s lenders as
listed in Schedule 1.5, paragraphs 1-4 inclusive, which shall be the
responsibility of the Parent) and (ii) all transfer, stamp, sales, use or other
similar taxes or duties payable in connection with the sale and transfer of the
Assets to the Buyer.

 

2. CLOSING; PURCHASE PRICE.

 

2.1 Closing Date. The consummation of the transactions contemplated in this
Agreement (the “Closing”) shall take place at the offices of Cochran & Baker
LLP, 520 Post Oak Blvd., Suite 820, Houston, Texas at 10:00 a.m., Central time,
December 12, 2005 (the “Closing Date”) contemporaneously with the execution of
this Agreement or at such other place and time as the parties hereto may
mutually agree.

 

2.2 Purchase Price. The aggregate purchase price for the Assets shall be
$5,805,057 (the “Purchase Price”), subject to adjustment pursuant to Section 2.3
below, plus the Buyer’s assumption of the Assumed Liabilities pursuant to
Section 1.5 above. The Purchase Price shall be payable by the Buyer to the
Company in immediately available funds by confirmed wire transfer to a bank
account to be designated by the Company.

 

2.3 Cash Reconciliation.

 

(a) Within 60 days following the Closing Date, the Company shall prepare and
deliver to the Buyer a schedule setting forth the Company’s calculation, for the
period commencing on November 1, 2005, and ending as of the Closing, (a) the
cash disbursements funded by the Company, the Parent or any of their affiliates
for the benefit of the Company, to include those made in the ordinary course to
trade vendors and those made in the ordinary course for Company employee benefit
plans (the “Disbursements”), and (b) the cash deposits made by the Company (the
“Deposits”).

 

(b) The Buyer shall immediately review such schedule for accuracy and within
three business days following the Buyer’s receipt of such schedule (i) the Buyer
shall remit to the Company in immediately available funds, the amount by which
the Disbursements exceed the Deposits, if any; or (ii) the Company shall remit
to the Buyer, in like manner and within such period, the amount by which
Deposits exceed the Disbursements, if any. If Buyer does not agree with the
Company’s schedule, Buyer shall immediately bring all disputed amounts to
Company’s attention and attempt to reach agreement as to the disputed amounts,
but shall nonetheless be obligated to make payment as to the undisputed amounts

 

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within the time limits set forth above. Buyer and the Company shall promptly
resolve any disputed amounts pursuant to the dispute resolution mechanism set
forth in Article 6 below.

 

(c) Disbursements shall include, but not be limited to, actual cash amounts paid
by the Company or the Parent on behalf of the Company with respect to
pre-Closing periods, including (i) amounts paid after October 31, 2005 for
checks issued by the Company or Parent on behalf of the Company on or before
October 31, 2005 that had not cleared the banks on October 31, 2005, which
amounts were reflected on the October 31, 2005 balance sheet as negative cash
amounts, (ii) checks issued by the Company or Parent on behalf of the Company
subsequent to October 31, 2005, but before the Closing that have not cleared the
banks as of the Closing, (iii) workers compensation, general liability, auto
insurance, health and similar insurance premiums paid by the Parent on behalf of
the Company with respect to periods prior to the Closing, whether accrued prior
to or after the Closing, and (iv) other amounts paid by the Company or by the
Parent on behalf of the Company with respect to periods prior to the Closing,
but for which invoices are received or accruals are made after the Closing Date.
Deposits shall include, but not be limited to, actual cash amounts received by
the Company or the Parent on behalf of the Company subsequent to October 31,
2005, but before the Closing that have not been reflected in the Company’s
accounts as of the Closing. Disbursements and Deposits will be accounted for in
accordance with Parent’s accounting practices consistent with past periods.

 

3. REPRESENTATIONS AND WARRANTIES.

 

3.1 Representations and Warranties of the Company and the Parent. The Company
and the Parent represent and warrant to the Buyer as follows:

 

(a) Organization, Authority and Qualification of the Company. The Company is a
corporation duly organized and validly existing under the laws of the State of
South Carolina and the Company has full corporate power and authority to own or
lease its properties and to carry on its business in such state. The Parent is a
corporation duly organized and validly existing under the laws of the State of
Delaware, and the Parent has full corporate power and authority to own or lease
its properties and to carry on its business in such state. Each of the Parent
and the Company has the full corporate power and authority to execute, deliver
and perform this Agreement, and this Agreement has been duly and validly
executed and delivered by each of the Parent and the Company and constitutes the
valid and legally binding obligation of each of the Parent and the Company,
subject to general equity principles, enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting the rights of creditors generally.

 

(b) No Violation. Neither the Parent nor the Company is in default under or in
violation of its Articles of Incorporation or Bylaws.

 

(c) Title to Properties; Absence of Liens and Encumbrances. The Company owns
good and indefeasible title to the Assets, free and clear of all claims, liens,
security interests, charges, leases, encumbrances, licenses or sublicenses and
other restrictions of any kind and nature, other than the claims, liens,
security interests, charges, leases,

 

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encumbrances, licenses or sublicenses either included among the Assumed
Liabilities or specifically set forth on Schedule 3.1(c) hereto (“Permitted
Encumbrances”).

 

3.2 Representations and Warranties of the Buyer. The Buyer and Guarantor,
jointly and severally, represent and warrant to the Parent and the Company as
follows:

 

(a) Organization, Authority and Qualification of the Buyer. The Buyer is a
corporation duly organized and validly existing under the laws of the State of
South Carolina and the Buyer has full corporate power and authority to own or
lease its properties and to carry on its business in such state. The Buyer has
the full corporate power and authority to execute, deliver and perform this
Agreement, and this Agreement has been duly and validly executed and delivered
by the Buyer and constitutes the valid and legally binding obligation of the
Buyer, subject to general equity principles, enforceable in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally.

 

(b) No Violation. The Buyer is not in default under or in violation of its
Articles of Incorporation or Bylaws.

 

(c) Certain Fees. The Buyer has not employed any broker or finder or incurred
any other liability for any brokerage fees, commissions or finders’ fees in
connection with the transactions contemplated hereby.

 

(d) Financial Information. The financial and management reports (including,
without limitation, WIP schedules) heretofore delivered or made by Buyer,
Guarantor or the Company to the Parent are, to the Buyer’s knowledge, true and
correct in all material respects and do not omit to state any fact necessary to
make any of them, in light of the circumstances in which made, not misleading.
All executed change orders have been recorded, all agreed change orders have
been executed or are listed on Schedule 3.2(d), and all checks and cash received
by the Company and its employees have been deposited.

 

3.3 No Warranty. The Buyer and the Guarantor acknowledge that the Guarantor,
through previous ownership and/or management of the Company, is familiar with
the Assets and the operations of the Company, and has access to any information
pertaining thereto and has made such information available to Buyer. Neither the
Company nor the Parent, nor any of their respective directors, officers,
employees, agents or representatives has made, or shall be deemed to have made,
and no such person shall be liable for, or bound in any manner by, and Buyer and
the Guarantor have not relied upon and will not rely upon, any express or
implied representations, warranties, guaranties, promises or statements
pertaining to the Business or Assets except as specifically provided in this
Section 3. The Buyer and the Guarantor acknowledge that in making the decision
to enter into this Agreement and to consummate the transactions contemplated
hereby, they have relied solely on the basis of their own independent
investigation of the Business and the Assets and upon the express written
representations, warranties and covenants in this Agreement. Without diminishing
the scope of the express written representations, warranties and covenants of
the Company and the Parent in this Agreement and without affecting or impairing
their right to rely thereon, the Buyer and the Guarantor acknowledge that
(a) they have not relied, in whole or in part, on any information contained in
documents, materials or other information provided to them by, or

 

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on behalf of, Company or the Parent, and (b) neither Company nor the Parent is
making any representations or warranties with respect to (i) any such documents,
materials or other information, other than, in each case, as set forth in this
Agreement or (ii) the value, condition, merchantability, marketability,
profitability, suitability or fitness for a particular use or purpose of the
Assets. ACCORDINGLY, THE ASSETS ARE BEING TRANSFERRED “AS IS, WHERE IS.” EXCEPT
FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 3.1 OF THIS
AGREEMENT, THE COMPANY AND PARENT MAKE ABSOLUTELY NO REPRESENTATIONS OR
WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, REGARDING THE ASSETS, INCLUDING
WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, OR THE ABILITY OF THE COMPANY TO ASSIGN THE ASSETS, OR
OBTAIN CONSENTS TO ANY ASSIGNMENT.

 

4. COVENANTS; ACTION SUBSEQUENT TO CLOSING.

 

4.1 Access to Books and Records. Until the third anniversary of the Closing
Date, the Parent and the Company shall afford, and will cause its affiliates to
afford (subject to the provisions of applicable laws), to the Buyer, its
counsel, accountants and other authorized representatives, during normal
business hours, reasonable access to the books, records and other data of the
Company and the Business that are retained by the Company or the Parent with
respect to periods ending on or prior to the Closing Date to the extent that
such access may be reasonably required by the Buyer to facilitate (i) the
investigation, litigation and final disposition of any claims which may have
been or may be made against the Buyer in connection with the Business or
(ii) for any other reasonable business purpose. Following the Closing, the Buyer
shall prepare, on behalf of the Company, all regularly prepared financial
reports and statements for periods up to and including the Closing Date, shall
deliver such reports to the Parent on or before January 12, 2006, and shall sign
a “Representation Compliance Letter” with respect to all such financial reports
and statements, and shall cooperate with and provide assistance to the Parent
and the Company in their financial and tax reporting obligations for the periods
up to and including the Closing Date. Buyer agrees to submit within 60 days of
the Closing all close-out documentation (as built drawings, QC commissioning and
acceptance documents) and any other documents required to be submitted by IES
Contractors, Inc. under the Master Service Contractor Agreement entered into
between IES Contractors, Inc. and Jones Lang LaSalle Americas, Inc. for the
benefit of Electronic Data Systems Corporation and the U.S. Navy.

 

4.2 Mail. The Parent and the Company authorize and empower the Buyer on and
after the Closing Date to receive and open all mail received by the Buyer
relating to the Business or the Assets and to deal with the contents of such
communications in any proper manner. The Parent and the Company shall promptly
deliver to the Buyer any mail or other communication received by them after the
Closing Date pertaining to the Business or the Assets. The Buyer shall promptly
deliver to the Parent any mail or other communication received by it after the
Closing Date pertaining to the Excluded Assets or Retained Liabilities, and any
cash, checks or other instruments of payment in respect of the Excluded Assets.
As soon as is practicable after the Closing Date, and in no event more than ten
days thereafter, the Buyer shall mail to its customers and vendors a notice of
the sale in the form provided by the Parent, with such changes thereto as Buyer
and Parent shall agree.

 

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4.3 No Consent Contracts. To the extent that any contract of the Company
included in the Assets may not be assigned without the consent of any third
party, and such consent is not obtained prior to Closing (such contracts
referred to as “No Consent Contracts”), this Agreement and any assignment
executed at Closing pursuant hereto shall not constitute an assignment thereof,
but to the extent permitted by law shall constitute an equitable assignment by
the Company and assumption by the Buyer of the Company’s rights and obligations
under the applicable No Consent Contract, with the Company making available to
the Buyer the benefits thereof (including without limitation, if requested by
Buyer, the enforcement of such No Consent Contracts on behalf of Buyer at
Buyer’s expense) and the Buyer performing the obligations thereunder on the
Company’s behalf. At the request of Buyer, the Parent and the Company shall
reasonably cooperate in obtaining any required third party consents following
the Closing.

 

4.4 Preparation and Filing of Certain Tax Forms. The Buyer shall prepare and
timely submit to Parent for signature and timely filing all Forms W-2, 940, 941
and 1099 with all appropriate Governmental Entities, including without
limitation any summary schedules and transmittal forms, as well as any similar
filings required by any state or local Governmental Entity, with respect to all
wages and other reportable payments or any sales tax liability for the partial
year in 2005 ending on the Closing Date. As used herein, “Governmental Entity”
means any court or tribunal in any jurisdiction (domestic or foreign) or any
public, governmental or regulatory body, agency, department, commission, board,
bureau or other authority or instrumentality, domestic or foreign. The Buyer
shall pay all administrative amounts owed as a result of or otherwise related to
such filings with the exception of any tax, interest, or penalties associated
with periods prior to the Closing. The Company will pay, on or before they
become due, any employment taxes withheld by it which have not been previously
paid. The Buyer, Parent and the Company shall cooperate in making all such
filings and shall make available to the others such information (subject to the
provisions of applicable law) as any of them requires to assure such filings are
made on a timely and accurate basis.

 

4.5 The Parent Name and Logos. As soon as practicable (but in any event within
90 days) after the Closing Date, the Buyer, at its expense, shall remove all of
the Parent and its affiliates’ (other than the Company’s) names and logos from
all of the Assets. Except as specifically provided in Section 1, nothing in this
Agreement shall constitute a license or authorization for the Buyer to use in
any manner any name, logo or mark owned by or licensed to the Company, the
Parent or their respective affiliates which bears any reference to IES or any
subsidiary of IES other than the Company. The name “H R Allen” and “ H. R.
Allen, Inc.” shall become the exclusive property of the Buyer following the
Closing and shall not be used by the Company, Parent or their respective
affiliates; provided that Parent will be given a reasonable period of time (not
to exceed 90 days) to change the Company’s name after the Closing Date.

 

4.6 Leased Assets. In the event that the parties are unable to obtain the
required consents for the assignment by the Company and assumption by Buyer of
the leases on the vehicles listed on Schedule 4.6 attached hereto, then, at the
Closing, the Buyer, at its expense and with the cooperation of the Parent and
the Company, shall pay off or refinance the leases and in connection therewith
shall obtain the release of Parent and the Company for all liability under such
vehicle leases. As soon as practicable (but in any event within 90 days) after
the Closing Date, the Buyer, at its expense, shall pay off or refinance the
leases on the other assets, if any, listed on Schedule 4.6

 

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attached hereto, and in connection therewith shall obtain the release of Parent
and the Company for all liability under such leases.

 

4.7 Chubb Bonds. Buyer agrees that at the Closing it shall execute and deliver
to the Federal Insurance Company and its subsidiary or affiliated insurers and
any applicable co-sureties (collectively, “Federal”), a General Agreement of
Indemnity in the form attached as Exhibit B, pursuant to which Buyer and
Guarantor agree to (i) indemnify Federal with respect to the performance and
completion of the bonded obligations as set forth therein; and (ii) replace
within ninety (90) days the bonds identified as Cancelable Bonds therein. If,
after the Closing, the amount of Bonded Obligations is increased due to the
issuance of a rider, supplement or amendment to an existing bond, then Buyer
will pay Parent $15 per $1,000 of increase to reimburse Parent for the
additional premium it will incur plus handling charges. Buyer further agrees to
continue to provide to Federal monthly written reports (with a copy to the
Parent) as to the progress of the completion of the bonded jobs. Buyer and
Guarantor further agree to provide, from time to time and at the request of the
Parent, a certificate or certificates certifying that the Cancelable Bonds have
been replaced, and as to such other matters concerning the performance by the
Buyer of its post-closing obligations under this Agreement as Parent shall
request.

 

4.8 Retained Claims. The Company shall retain liability for certain insured
claims as set forth in Schedule 1.5, paragraph 5 (the “Retained Claims”). The
Buyer and the Guarantor agree to cooperate with the Company and the Parent in
the defense of the Retained Claims and to make reasonably available the Buyer’s
personnel and facilities for that purpose. The Company shall retain as Excluded
Assets and not transfer to the Buyer all books and records associated with the
Retained Claims; provided, the Buyer shall be entitled to retain copies or be
given reasonable access to such records to the extent permitted by applicable
law.

 

4.9 Excluded Accounts. The Buyer and the Guarantor agree to cooperate with the
Company and the Parent in the collection of the Excluded Accounts and to make
reasonably available the Buyer’s personnel and facilities for that purpose, and
to turn over to the Company or Parent all funds received on account thereof
within five days of receipt. Amounts not turned over to the Company within five
days under the immediately preceding sentence shall bear interest at the Prime
Rate of Interest then in effect as published by the Wall Street Journal plus 5%.
The Company shall retain as Excluded Assets and not transfer to the Buyer all
books and records associated with the Excluded Accounts. If the Parent and the
Company have not collected $1,254,943 of the Excluded Accounts on or before 180
days from the Closing Date, then the Buyer and Guarantor, jointly and severally,
shall be obligated to remit to the Parent interest on the unpaid amount at a
rate of Prime Rate of Interest then in effect plus four percent (4%) within five
days of the end of every calendar month until the shortfall is paid in full,
provided further, however, that if such shortfall is not paid in full within
fifteen months of the Closing Date, then the Buyer and the Guarantor, jointly
and severally, shall be obligated to remit to the Parent the amount of any
remaining shortfall, plus any accrued and unpaid interest, on the last day of
the fifteenth month following the Closing Date. Promptly after the receipt by
the Parent of all amounts owed by the Buyer hereunder, the Company shall assign
to the Buyer, without warranty of any kind other than the warranty in
Section 3.1(c) above, any uncollected Excluded Accounts plus all books and
records associated with the Excluded Accounts.

 

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5. INDEMNIFICATION.

 

5.1 Survival. The representations and warranties of the Company, the Parent, the
Buyer and the Guarantor contained in Section 3 of this Agreement shall survive
the consummation of the transactions contemplated herein; provided that all such
representations and warranties of the Buyer, the Company and the Parent shall be
of no further force and effect, and no claim for indemnification for breach of
representations and warranties pursuant to this Section 5 may be brought for any
reason, after the expiration of twelve (12) months from the Closing Date (the
“Survival Period”), except for the representations and warranties contained in
Section 3.1(c), which shall survive indefinitely. Anything to the contrary
notwithstanding, a claim for indemnification which is made but not resolved
prior to the expiration of the Survival Period may be pursued and resolved after
such expiration.

 

5.2 Indemnification by the Company.

 

(a) In accordance with and subject to the provisions of this Section 5, the
Company and the Parent shall indemnify and hold harmless the Buyer from and
against and in respect of any and all loss, damage, diminution in value,
liability, cost and expense, including reasonable attorneys’ fees and amounts
paid in settlement (collectively, the “Buyer Indemnified Losses”), suffered or
incurred by the Buyer by reason of, or arising out of (i) any misrepresentation
or breach of representation or warranty of the Company or the Parent contained
in this Agreement, or in any schedules delivered to the Buyer by or on behalf of
the Company or the Parent pursuant to this Agreement; (ii) the breach of any
covenant or agreement of the Company or the Parent contained in this Agreement;
or (iii) the Retained Liabilities.

 

(b) The Company and the Parent shall reimburse the Buyer on demand for any Buyer
Indemnified Losses suffered by the Buyer with respect to matters other than
claims, actions or demands brought, made or instituted by a third party (“Third
Party Claims”). With respect to Third Party Claims, the Company and the Parent
shall reimburse the Buyer on demand for any Buyer Indemnified Losses suffered by
the Buyer, based on the judgment of any court of competent jurisdiction or
pursuant to a bona fide compromise or settlement in respect of any Buyer
Indemnified Losses. The Company and the Parent shall have the opportunity to
defend at their expense any claim, action or demand for which the Buyer claims
indemnity against the Company or the Parent; provided that: (i) the defense is
conducted by reputable counsel; (ii) the defense is expressly assumed in writing
within twenty (20) days after written notice of the claim, action or demand is
delivered to the Company and the Parent; and (iii) counsel for the Buyer may
participate at all times and in all proceedings (formal and informal) relating
to the defense, compromise and settlement of the claim, action or demand at the
expense of the Buyer.

 

5.3 Indemnification by the Buyer.

 

(a) In accordance with and subject to the provisions of this Section 5, the
Buyer and Guarantor shall, jointly and severally, indemnify and hold harmless
the Company, the Parent and their respective affiliates (for purposes of this
Section 5, the “Company Indemnitees”) from and against and in respect of any and
all loss, damage, diminution in

 

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value, liability, cost and expense, including reasonable attorneys’ fees and
amounts paid in settlement (collectively, the “Company Indemnified Losses”),
suffered or incurred by the Company Indemnitees by reason of, or arising out of
(i) any misrepresentation or breach of representation or warranty of the Buyer
or Guarantor contained in this Agreement, or in any schedules delivered to the
Company or the Parent by or on behalf of the Buyer or Guarantor pursuant to this
Agreement; (ii) or the breach of any covenant or agreement of the Buyer or
Guarantor contained in this Agreement; (iii) the Assumed Liabilities, including,
without limitation, any liability to sureties with respect to bonded jobs; or
(iv) the operation of the Business following the Closing, including, but not
limited to, any claims made by Transferred Employees concerning COBRA, the WARN
Act, unemployment claim liability, or any similar matters as a result of the
termination by Buyer of the Transferred Employees.

 

(b) The Buyer and the Guarantor, jointly and severally (the “Buyer Indemnifying
Parties”), shall reimburse the Company Indemnitees on demand for any Company
Indemnified Losses suffered by the Company Indemnitees with respect to matters
other than Third Party Claims. With respect to Third Party Claims, the Buyer
Indemnifying Parties shall reimburse the Company Indemnitees on demand for any
Company Indemnified Losses suffered by the Company Indemnitees, based on the
judgment of any court of competent jurisdiction or pursuant to a bona fide
compromise or settlement in respect of any Company Indemnified Losses. The Buyer
Indemnifying Parties shall have the opportunity to defend at their expense any
claim, action or demand for which the Company Indemnitees claim indemnity
against the Buyer Indemnifying Parties; provided that: (i) the defense is
conducted by reputable counsel; (ii) the defense is expressly assumed in writing
within twenty (20) days after written notice of the claim, action or demand is
delivered to the Buyer Indemnifying Parties; and (iii) counsel for the Company
and the Parent may participate at all times and in all proceedings (formal and
informal) relating to the defense, compromise and settlement of the claim,
action or demand at the expense of the Company and the Parent.

 

5.4 Limitation and Payment on Claims. No claim shall be brought under this
Section 5 for breach of any representation or warranty in Section 3 of this
Agreement, and no party hereto shall be entitled to receive any payment with
respect thereto, until such time as, and only to the extent that, the aggregate
amount of such claim(s) that such party has exceeds $50,000 (the “Deductible”);
provided, however, that the Deductible shall not apply to any obligations under
Section 2.3. Anything to the contrary notwithstanding, no party shall be liable
under this Section 5 for Buyer Indemnified Losses or Company Indemnified Losses
in excess of the Purchase Price.

 

5.5 Sole Remedy. The sole remedy of the Company, the Parent and the Buyer
Indemnifying Parties for breach of the representations and warranties set forth
in Section 3 shall be pursuant to this Section 5.

 

6. DISPUTE RESOLUTION.

 

6.1 Arbitration.

 

(a) Any controversy, dispute or claim arising out of or relating in any way to
this Agreement or the other agreements contemplated by this Agreement or the
transactions

 

10

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arising hereunder (including the validity, interpretation or applicability of
this Section 6.1) shall be settled exclusively by final and binding arbitration
in Houston, Texas. Such arbitration will apply the laws of the State of Texas
and the commercial arbitration rules of AAA to resolve the dispute, and will be
administered by the AAA.

 

(b) Written notice of arbitration must be given within one year after the
notifying party has knowledge of accrual of the claim on which the notice is
based. If the claiming party fails to give notice of arbitration within that
time, the claim shall be deemed to be waived and shall be barred from either
arbitration or litigation.

 

(c) Such arbitration shall be conducted by one independent and impartial
arbitrator to be selected by mutual agreement of the parties, if possible. If
the parties fail to reach agreement regarding appointment of an arbitrator
within thirty (30) days following receipt by one party of the other party’s
notice of arbitration, the arbitrator shall be selected from a list or lists of
proposed arbitrators submitted by AAA. Unless the parties agree otherwise, the
arbitrator shall be a licensed attorney with at least ten years of experience in
the practice of law. The selection process shall be that which is set forth in
the AAA commercial arbitration rules then prevailing, except that (A) the number
of preemptory strikes shall not be limited and (B), if the parties fail to
select an arbitrator from one or more lists, AAA shall not initially have the
power to make an appointment but shall continue to submit additional lists until
an arbitrator has been selected, but if no such arbitrator is selected within
sixty (60) days after the receipt of the first notice of arbitration, the AAA
shall have the power to make an appointment and shall promptly do so. Initially,
however, promptly following its receipt of a request to submit a list of
proposed arbitrators, AAA shall convene the parties in person or by telephone
and attempt to facilitate their selection of an arbitrator by agreement. If the
arbitrator should die, withdraw or otherwise become incapable of serving, a
replacement shall be selected and appointed in a like manner.

 

(d) The arbitrator shall render an opinion setting forth findings of fact and
conclusions of law with the reasons therefor stated. A transcript of the
evidence adduced at the hearing shall be made and shall, upon request, be made
available to either party. The fees and expenses of the arbitrator shall be
shared equally by the parties and advanced by them from time to time as
required; provided that at the conclusion of the arbitration, the arbitrator may
award costs and expenses (including the costs of the arbitration previously
advanced and the fees and expenses of attorneys, accountants and other experts).
No pre-arbitration discovery shall be permitted, except that the arbitrator
shall have the power in his or her sole discretion, on application by either
party, to order pre-arbitration examination of the witnesses and documents that
the other party intends to introduce in its case-in-chief at the arbitration
hearing. The arbitrator shall render his or her opinion and/or award within
ninety (90) days of the conclusion of the arbitration hearing. The arbitrator
shall not be empowered to award to either party any punitive damages in
connection with any dispute between them arising out of or relating in any way
to this Agreement or the other agreements contemplated hereby or the
transactions arising hereunder or thereunder, and each party hereby irrevocably
waives any right to recover such damages. The arbitration hearings and award
shall be maintained in confidence.

 

11

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Notwithstanding anything to the contrary provided in this Section 6.1 and
without prejudice to the above procedures, either party may apply to any court
of competent jurisdiction for temporary injunctive or other provisional judicial
relief if such action is necessary to avoid irreparable damage or to preserve
the status quo until such time as the arbitrator is selected and available to
hear such party’s request for temporary relief. The award rendered by the
arbitrator shall be final and not subject to judicial review and judgment
thereon may be entered in any court of competent jurisdiction.

 

7. EMPLOYEE MATTERS.

 

7.1 Hiring.

 

(a) The Buyer shall offer to hire (subject to each employee’s agreement),
effective as of the Closing Date, all of the employees of the Company on the day
immediately prior to the Closing Date, active or inactive (such employees being
hereafter referred to as the “Transferred Employees”) at a comparable job and at
a rate of pay not less than each such Transferred Employee’s pay as of the
Closing Date. Upon request of the Buyer, the Company shall provide the Buyer
reasonable access (subject to the provisions of applicable law) to data
(including computer data) regarding the ages, dates of hire, compensation and
job description of the Transferred Employees.

 

(b) The Buyer shall assume and be responsible for any severance costs associated
with the termination of the Transferred Employees’ employment with the Company.
The Buyer shall discharge all liabilities and claims based on occurrences or
conditions first occurring or commencing on or after the Closing Date with
respect to Transferred Employees arising out of their employment with the Buyer
after the Closing Date, including, but not limited to, any claims arising out of
any employee benefit plan, policy, program or arrangement maintained at any time
by the Buyer (a “Buyer Plan” or collectively, the “Buyer Plans”), except Buyer
shall not assume any liabilities with respect to the WARN Act or COBRA benefits
for any terminations occurring prior to the Closing Date (unless provided
otherwise by law or pursuant to applicable regulations) nor shall the Company or
the Parent be liable under the WARN Act, COBRA, or state unemployment claims law
for any Transferred Employee terminated by Buyer after the Closing.

 

(c) At Closing, the Buyer shall establish and make available a group medical
plan for the Transferred Employees and their dependents that is substantially
similar to the group medical plan available to the Transferred Employees
immediately prior to Closing. The Buyer shall credit the Transferred Employees
with all service of the Transferred Employees recognized under the employee
benefit plans, policies, programs, or arrangements maintained by the Parent or
the Company (the “Parent Plans”) as service with the Buyer for purposes of
eligibility to participate, vesting and levels of benefits available, under all
Buyer Plans. The Buyer shall waive any coverage waiting period, pre-existing
condition and actively-at-work requirements under the Buyer Plans for the
Transferred Employees and shall provide that any expenses incurred before the
Closing Date by a Transferred Employee (and his or her dependents) during the
calendar year of the Closing shall be taken into account for purposes of
satisfying the applicable deductible, coinsurance and maximum out-of-pocket
provisions, and applicable annual and/or lifetime

 

12

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maximum benefit limitations of the Buyer Plans. Any reports or other information
provided to Buyer by the Company or the Parent in connection with Buyer
performing his obligations under this Section 7.1(c) shall be at the sole
expense of the Buyer.

 

7.2 Benefits. Except as provided in Section 7.1(b), the Buyer shall be
responsible for the payment of all amounts of wages, bonuses and other
remuneration (including discretionary benefits and bonuses) payable to the
Transferred Employees of the Company accrued with respect to periods on or prior
to the Closing (except for any employment taxes actually withheld by the
Company) together with amounts payable to such employees in connection with
events occurring on or prior to the Closing. In addition, the Buyer shall be
responsible for:

 

(a) all vacation pay and pay for other compensated absences earned or accrued by
the Transferred Employees as of the close of business on the Closing Date to the
appropriate employee, including any related payroll burden (FICA and other
pension or other employee benefit plan contributions and employment taxes) with
respect thereto to the appropriate Governmental Entity or other person, to the
extent such pay has been accrued on the books of the Company at such close of
business, based upon the remuneration of such employees normally used in
computing such pay for other compensated absences; and

 

(b) amounts accrued under the Integrated Electrical Services, Inc. 401(k)
Retirement Savings Plan (the “Parent 401(k) Plan”) for the Transferred Employees
as of the Closing Date but not yet transferred to the trustee of the Parent
401(k) Plan, including without limitation, the accrued match, accrued payroll
deductions representing elective deferrals, loan repayments and accrued profit
sharing contribution, if any.

 

7.3 Parent 401(k) Plan. The Company, the Parent and the Buyer agree that, as
soon as practicable after Closing, but in any event within 30 days of the
Closing Date, the Buyer shall establish a qualified 401(k) retirement savings
plan (the “Buyer’s 401(k) Plan”) in accordance with Section 414(l) of the
Internal Revenue Code of 1986, as amended (the “Code”), and the regulations
promulgated thereunder. Within 60 days after the Buyer’s 401(k) Plan is
established and ready to accept transfers, the Parent shall cause the transfer
to the Buyer’s 401(k) Plan of the account balances in the Parent 401(k) Plan of
the Transferred Employees. In connection with such transfer, the following
provisions shall apply:

 

(a) The account balances of the Transferred Employees transferred to the Buyer’s
401(k) Plan shall be subject to the provisions of the Buyer’s 401(k) Plan
effective as of the date of transfer; provided, however that the Buyer’s 401(k)
Plan shall continue any benefits under the Parent 401(k) Plan as required under
Section 411(d)(6) of the Code; and

 

(b) The outstanding loan of any Transferred Employee shall not be in default as
a result of the Transferred Employee’s termination of employment with the Parent
or the Company, but such loan shall be transferred to the Buyer’s 401(k) Plan in
accordance with (a) above.

 

The Buyer shall provide acceptable evidence to the Parent that the Buyer’s
401(k) Plan meets the requirements of Section 401(a) of the Code prior to the
date of such transfer. The Buyer, the Parent and the Company agree to take
whatever action, including but not limited to plan amendments and

 

13

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resolutions, to effectuate the transfer of the Transferred Employee’s account
balances according to this section from the Parent 401(k) Plan to the Buyer’s
401(k) Plan.

 

Notwithstanding the foregoing, nothing in this Section 7 shall be deemed or
construed to give rise to any rights, claims, benefits, or causes of action to
any Transferred Employee or third party whatsoever (including any Governmental
Entity), and shall be limited as provided by applicable law. In the event Buyer
has established and Parent has approved any plans required hereunder and Buyer
maintains such plans for at least six months following the Closing Date, Buyer
shall be deemed to have satisfied its obligations hereunder to establish and
maintain such plans.

 

8. MISCELLANEOUS.

 

8.1 Notices. All notices and communications required or permitted hereunder
shall be in writing and may be given by (a) depositing the same in the United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, (b) by delivering the
same in person to an officer or agent of such party, or (c) overnight delivery
service. Such notice shall be deemed received on the date (i) on which it is
actually received if sent by overnight delivery service or hand delivery, or
(ii) on the third business day following the date on which it is mailed. For
purposes of notice, the addresses of the parties hereto shall be:

 

If to the Parent or the Company:

 

Integrated Electrical Services, Inc.

1800 West Loop South, Suite 500

Houston, Texas 77027

Attention: Chief Financial Officer

 

With a copy to:

 

Integrated Electrical Services, Inc.

1800 West Loop South, Suite 500

Houston, Texas 77027

Attention: Chief Legal Officer

 

If to the Buyer or Guarantor:

 

c/o H.R. Allen, Inc.

2675 Rourk Street

Charleston, SC 29405

Attention: Mr. Herbert R. Allen, Jr.

 

14

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With a copy to:

 

Buist Moore Smythe McGee P.A.

5 Exchange Street

P.O. Box 999

Charleston, South Carolina 29401

Attention: Mr. James M. Wilson

 

or such other address as any party hereto shall specify pursuant to this
Section 8.1 from time to time.

 

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

 

8.3 Governing Law. The validity and effect of this Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of Texas,
without regard to its conflicts of laws rules.

 

8.4 Successors and Assigns. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective permitted heirs,
successors and assigns. Neither the Company, the Parent, the Buyer nor the
Guarantor may assign, delegate or otherwise transfer any of their rights or
obligations under this Agreement without the written consent by each other party
hereto.

 

8.5 Partial Invalidity and Severability. All rights and restrictions contained
herein may be exercised and shall be applicable and binding only to the extent
that they do not violate any applicable laws and are intended to be limited to
the extent necessary to render this Agreement legal, valid and enforceable. If
any term of this Agreement, or part thereof, not essential to the commercial
purpose of this Agreement shall be held to be illegal, invalid or unenforceable
by a forum of competent jurisdiction, it is the intention of the parties that
the remaining terms hereof, or part thereof, shall constitute their agreement
with respect to the subject matter hereof, and all such remaining terms, or
parts thereof, shall remain in full force and effect. To the extent legally
permissible, any illegal, invalid or unenforceable provision of this Agreement
shall be replaced by a valid provision which will implement the commercial
purpose of the illegal, invalid or unenforceable provision. In the event that
one party’s consummation of the transaction pursuant to this Agreement is
rescinded or otherwise unwound by order of any court of competent jurisdiction,
the other party shall be entitled to reimbursement of its expenses incurred in
connection herewith, including attorney’s fees and financing costs.

 

8.6 Waiver. Any term or condition of this Agreement may be waived at any time by
the party which is entitled to the benefit thereof, but only if such waiver is
evidenced by a writing signed by such party. No failure on the part of any party
hereto to exercise, and no delay in exercising, any right, power or remedy
created hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or remedy by either party preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. No waiver by either party hereto of any breach of or default in any term
or condition of this Agreement shall constitute a

 

15

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waiver of or assent to any succeeding breach of or default in the same or any
other term or condition hereof.

 

8.7 Headings. The headings of particular provisions of this Agreement are
inserted for convenience only and shall not be construed as a part of this
Agreement or serve as a limitation or expansion on the scope of any term or
provision of this Agreement.

 

8.8 Entire Agreement; Amendments. This Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof (including without limitation any letters of intent executed by
the parties), and this Agreement contains the sole and entire agreement between
the parties with respect to the matters covered hereby. This Agreement shall not
be altered or amended except by an instrument in writing signed by or on behalf
of the party against whom enforcement is sought.

 

8.9 Disclosure of Agreement Terms. Neither Buyer nor the Guarantor shall
disclose the terms and conditions of this Agreement to any person or entity
without the prior written consent of an executive officer of the Parent or as
required by applicable law or an order from a court or administrative body of
competent jurisdiction (but only to the extent so required and only after giving
reasonable prior notice to the Company and the Parent and cooperating with the
Company and the Parent in any efforts to legally oppose such disclosure). The
foregoing notwithstanding, the Buyer and the Guarantor shall be permitted to
make such disclosures to their accountants, lawyers, financial institutions,
lending sources, senior employees and related parties as may be appropriate,
provided that such parties are bound by the foregoing nondisclosure provisions.

 

8.10 Number and Gender. Where the context requires, the use of the singular form
herein shall include the plural, the use of the plural shall include the
singular, and the use of any gender shall include any and all genders.

 

[Remainder of page intentionally left blank]

 

16

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IN WITNESS WHEREOF, this Agreement has been executed effective as of the date
set forth above.

 

PARENT:

INTEGRATED ELECTRICAL SERVICES, INC.

By:

   

Name:

   

Title:

    COMPANY:

H. R. ALLEN, INC.

By:

   

Name:

   

Title:

   

BUYER:

ALLEN SERVICES, INC.

By:

        Herbert R. Allen, Jr., President      

GUARANTOR:

          Herbert R. Allen, Jr.      

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EXHIBIT A

 

BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT

 

This BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT (“Bill of Sale”) is
entered into as of the ___ day of December, 2005, by and among INTEGRATED
ELECTRICAL SERVICES, INC., a Delaware corporation (the “Parent”), H. R. ALLEN,
INC., a South Carolina corporation (the “Company”) and ALLEN SERVICES, INC., a
South Carolina corporation (the “Buyer”).

 

RECITALS

 

WHEREAS, pursuant to the terms of that certain Asset Purchase Agreement (the
“Purchase Agreement”) dated as of even date herewith by and among the Buyer, the
Parent, the Company, and Herbert R. Allen, Jr., individual, the Company and the
Parent agreed to convey the Assets to the Buyer and the Buyer agreed to assume
the Assumed Liabilities. In order to evidence such conveyance and assumption,
the parties desire to enter into this Bill of Sale.

 

WHEREAS, all capitalized terms used herein but not defined herein shall have the
meanings ascribed to them in the Purchase Agreement.

 

ASSIGNMENT

 

NOW, THEREFORE, for and in consideration of the mutual covenants, agreements,
and benefits contained herein, the sum of TEN DOLLARS ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Parent do hereby BARGAIN, GRANT, SELL, CONVEY,
TRANSFER, DELIVER and ASSIGN unto Buyer all the Assets other than the Real
Property (the “Conveyed Assets”).

 

The Conveyed Assets are hereby conveyed free and clear of all encumbrances other
than the Permitted Encumbrances.

 

TO HAVE AND TO HOLD the Conveyed Assets unto the Buyer and its successors and
assigns forever; and the Company and the Parent do hereby bind themselves and
their successors and assigns to WARRANT AND FOREVER DEFEND title to the Conveyed
Assets in accordance with the terms and provisions of the Purchase Agreement.

 

The Buyer, upon execution below, accepts this Bill of Sale, and to the extent
provided for in the Purchase Agreement, hereby assumes the Assumed Liabilities,
but no others.

 

This assignment shall be binding upon and shall inure to the benefit of the
parties hereto and their respective permitted successors and assigns.

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This Bill of Sale may be executed in any number of counterparts, and each
counterpart shall for all purposes be deemed to be an original.

 

This Bill of Sale is subject to all terms and conditions contained in the
Purchase Agreement and nothing herein shall be deemed to alter, amend, or
supersede the Purchase Agreement, the terms of which shall in all respects be
controlling.

 

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the parties hereto have executed this Bill of Sale effective
as of the date set forth above.

 

PARENT:

INTEGRATED ELECTRICAL SERVICES, INC.

By:

   

Name:

   

Title:

    COMPANY:

H. R. ALLEN, INC.

By:

   

Name:

   

Title:

   

BUYER:

ALLEN SERVICES, INC.

By:

   

Name:

   

Title:

   

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EXHIBIT B

 

FORM OF GENERAL AGREEMENT OF INDEMNITY

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CHUBB GROUP OF INSURANCE COMPANIES

 

LOGO [g97569img001.jpg]                         15 Mountain View Road, P.O. Box
1615, Warren, New Jersey 07061-1615

 

GENERAL AGREEMENT OF INDEMNITY

 

WHEREAS, the undersigned (hereinafter individually and collectively called
“Indemnitor”) desires FEDERAL INSURANCE COMPANY or any of its subsidiary or
affiliated insurers (hereinafter called “Company”) to execute bonds including
undertakings and other like obligations (hereinafter referred to as bond or
bonds) on its behalf and also desires the execution of bonds on behalf of
individuals, partnerships, corporations, limited liability companies or any
other similarly unincorporated associations of members (hereinafter called
“Affiliates”).

 

WHEREAS, from time to time the Indemnitor may be a participant in joint ventures
with others, and bonds will be required on behalf of the Indemnitor along with
the other participants in such joint ventures.

 

WHEREAS, Indemnitor is the successor-in-interest to H.R. ALLEN, INC., a South
Carolina corporation (along with any other affiliate or related entity whose
assets have been or will be assigned to Indemnitor hereinafter individually and
collectively called “Seller”) as the assignee of all bonded contract
obligations, which Indemnitor has expressly assumed without reservation.

 

NOW, THEREFORE, in consideration of the Company executing said bond or bonds,
and the undersigned Indemnitor hereby requests the execution thereof, and in
consideration of the consent of Company to the assignment and assumption of the
bonded obligations formerly undertaken by the Seller, as well as the sum of One
Dollar paid to the Indemnitor by said Company, the receipt whereof is hereby
acknowledged, the Indemnitor, being benefited by the execution and delivery of
said bond or bonds, including, without limitation all Bonds previously issued
prior to the date of this Agreement for the Seller, the bonded obligations of
which have been expressly assumed without reservation by Indemnitor(s) and as to
which Indemnitor(s) have agreed, and do hereby agree, to assume full
responsibility for work in place as well as the prompt and proper performance
and completion of all such bonded obligations, including, without limitation
those bonded obligations listed on Exhibit A attached hereto, hereby agrees that
it will at all times jointly and severally indemnify and save harmless said
Company from and against any and all loss, cost, damage or expense, including
court costs and attorneys’ fees, which it shall at any time incur by reason of
its execution and/or delivery of said bond or bonds or its payment of any claim
or liability thereunder and will place the said Company in funds to meet all its

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liability under said bond or bonds promptly on request and before it may be
required to make any payment thereunder and that the voucher or other evidence
of payment by said Company of any such loss, cost, damage, expense, claim, or
liability shall be prima facie evidence of the fact and amount of the
Indemnitor’s liability to said Company under this Agreement.

 

IT IS UNDERSTOOD AND AGREED that with respect to any bonds on behalf of the
Indemnitor participating in a joint venture that if specific application is
filed with the Company for such bonds the liability of the Indemnitor to the
Company with respect to such joint venture bonds shall be limited to the amount
expressly set forth in said application.

 

IT IS UNDERSTOOD AND AGREED that all of the terms, provisions, and conditions of
this Agreement shall be extended to and for the benefit not only of the Company
either as a direct writing company or as a co-surety or reinsurer but also for
the benefit of any surety or insurance company or companies with which the
Company may participate as a co-surety or reinsurer and also for the benefit of
any other company which may execute any bond or bonds at the request of the
Company on behalf of the Indemnitor .

 

IT IS UNDERSTOOD AND AGREED that this Agreement is in addition to all other
rights and agreements which Company may have or be a party to in connection with
Bonds previously issued for the benefit of Seller and that the assumption of
responsibility therefor by Indemnitors as herein provided shall not constitute a
waiver or release by Company of any rights Company may have to seek and recover
indemnity from third parties having liability in connection with the issuance of
such Bonds including, but not limited to, the obligations and liabilities of
Integrated Electrical Services, Inc., H.R. Allen, Inc., or their affiliates.

 

IT IS UNDERSTOOD AND AGREED that, notwithstanding anything herein to the
contrary, Indemnitor’s agreements, covenants, and all obligations under this
General Agreement of Indemnity is limited to (1) the obligations assumed by
Indemnitor (the “Assumed Obligations”) under the Asset Purchase Agreement
(“APA”) by and among Integrated Electrical Services, Inc. (“IES”), H.R. Allen,
Inc., Allen Services, Inc., and Herbert R. Allen, Jr., and (2) Company’s
obligations under the bonds listed on Exhibit A attached hereto. Furthermore,
Indemnitor has acknowledged and agreed that Indemnitor’s obligation to perform
or otherwise discharge the Assumed Obligations is secured by certain assets
acquired by Indemnitor under the APA (the “Collateral”), said Collateral
acquired subject to that certain Underwriting, Continuing Indemnity, and
Security Agreement dated as of January 14, 2005, executed by and among Company,
IES, and certain IES affiliates, including H.R. Allen, Inc.

 

IT IS UNDERSTOOD AND AGREED, that Indemnitor will replace Bond No. 81566022 and
Bond No. 81878156 identified on Exhibit A (the “Cancelable Bonds”) no later than
ninety (90) days from the execution of this Agreement, and hereby acknowledges
and consents that the Cancelable Bonds will be canceled upon the earlier of
(i) the date of issuance of a replacement bond or (ii) the date upon which
Federal issues notice of cancellation in compliance with the terms the
Cancelable Bonds to be canceled thereby. Indemnitor’s obligation under this
Agreement with respect to any bond or bonds canceled or replaced as contemplated
herein will remain with respect to such liability accruing under said bond or
bonds.

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IT IS FURTHER UNDERSTOOD AND AGREED that the Indemnitor, its heirs, successors
and assigns are jointly and severally bound by the foregoing conditions of this
Agreement.

 

IN WITNESS WHEREOF the Indemnitor has signed this instrument this, the ________
day of __________, 2005.

 

WITNESS:

     

ALLEN SERVICES, INC., a South Carolina corporation

            By:                

Its:

   

WITNESS:

     

HERBERT R. ALLEN, JR.

                 

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CORPORATE ACKNOWLEDGMENT

 

STATE OF                                         

COUNTY OF                                         

 

On this              day of                     , 2005, before me personally
came                                      to me known, who, being by me duly
sworn, did depose and say that he resides in the State of                     ;
and that he is the                          of ALLEN SERVICES, INC. a South
Carolina corporation, the corporation described in and which executed the
foregoing instrument; that he knows the corporate seal of said Corporation; that
the seal affixed to said instrument is such corporate seal; that it was so
affixed by order and authority of the Board of Directors of said Corporation;
and that he signed his name thereto by like order and authority.

 

(SEAL)

          NOTARY PUBLIC

My commission expires:

 

 

INDIVIDUAL ACKNOWLEDGMENT

 

STATE OF                                         

COUNTY OF                                         

 

On this              day of                     , 2005, before me personally
came HERBERT R. ALLEN, JR., to me known, who, being by me duly sworn, did depose
and say that he resides in the State of South Carolina; and that he executed the
foregoing instrument for the purposes therein contained.

 

(SEAL)

          NOTARY PUBLIC

My commission expires:

 

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Schedule 1.1 – Assets

 

1. The Assets include only the following:

 

(a) The tracts of land, all as more particularly described in Schedule 1.1(a)
hereto, together with all buildings, structures, fixtures and other improvements
situated thereon, all mineral rights and all easements, privileges,
rights-of-ways, riparian and other water rights, lands underlying any adjacent
streets or roads, appurtenances and licenses pertaining to or accruing to the
benefit of such land (such land and such improvements and other rights and
assets pertaining to such land being hereinafter collectively referred to as the
“Real Estate”);

 

(b) The equipment, furniture, furnishings, machinery, vehicles, tools, spare
parts, dies, fuels, lubricants, maintenance and housekeeping supplies and other
tangible personal property associated with the Business listed on the asset
listing attached hereto as Schedule 1.1(b) (collectively, the “Equipment”);

 

(c) The rights of the Company affecting the Business under the contracts,
agreements and arrangements; purchase commitments for materials and other
services; and agreements with suppliers, personal property lessors, personal
property lessees, licensors, licensees, consignors listed on Schedule 1.1(c)
hereto (excluding, however, any direct or indirect rights to collateral for
surety bonds or for premium refunds associated therewith).

 

(d) The intellectual property, and any good will associated therewith identified
on Schedule 1.1(d) hereto;

 

(e) The inventories of raw materials, work in process, finished goods and
packaging materials of the Company set forth on Schedule 1.1(e) hereto;

 

(f) The deposits, prepayments and prepaid expenses relating to the operations of
the Company set forth on Schedule 1.1(f) hereto;

 

(g) All accounts receivable of the Company as of the Closing Date as set forth
on Schedule 1.1 (g) hereto.

 

(h) The other assets of the Company listed on Schedule 1.1(h).

 

(i) Other items of tangible personal property (i) used in the ordinary course of
business of the Company, (ii) located on the Company’s premises or jobsites,
(iii) having a value in the case of each item of less than $1,000, and (iv) not
required, pursuant to the accounting policies and procedures of the Parent and
the Company, to be listed as an asset on the Company’s balance sheet.

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

 

Schedule 1.1(a) – Real Estate

 

See attached property descriptions.

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

 

Schedule 1.1(b) – Equipment

 

See attached list.

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

 

Schedule 1.1(c) – Contracts

 

See list attached as Schedule 1.1(e).

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

 

Schedule 1.1(d) – Intellectual Property

 

See attached list.

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

 

Schedule 1.1(e) – Work in Process

 

See attached listing of work-in-process.

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

 

Schedule 1.1(f) – Deposits and Prepaid Expenses

 

See attached list.

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

 

Schedule 1.1(g) – Accounts Receivable

 

See attached list; provided, however, accounts listed on Schedule 1.2 are not
“Assets” and are retained by the Company.

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

 

Schedule 1.1(h) – Other Property

 

See attached list.

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

 

Schedule 1.5 – Retained Liabilities

 

1. All liabilities of the Company pursuant to that certain Indenture, dated
January 28, 1999, by and among Parent, the subsidiaries named therein and State
Street Bank and Trust Company, as Trustee, for the 9 3/8% Series A and B Senior
Subordinated Notes of Parent due 2009.

 

2. All liabilities of the Company pursuant to that certain Indenture, dated
May 29, 2001, by and among Parent, the subsidiaries named therein and State
Street Bank and Trust Company, as Trustee, for the 9 3/8% Series C and D Senior
Subordinated Notes of Parent due 2009.

 

3. All liabilities under that certain Pledge Agreement and Loan and Security
Agreement, each dated August 1, 2005, by and among Parent, certain of its
subsidiaries, Bank of America, N.A., as Agent, and the various financial
institutions party thereto from time to time.

 

4. All liabilities under that certain Interim Pledge Agreement, dated
September 9, 2004, that Certain Underwriting, Continuing Indemnity and Pledge
Agreement dated January 14, 2005, and that certain Restated Pledge Agreement
dated January 14, 2005, as all of such agreements are amended from time to time,
by and among Parent, Federal Insurance Company and its affiliates and
subsidiaries and their respective co-sureties and reinsurers, except as to
liabilities assumed by Buyer (i) under that certain General Agreement of
Indemnity in the form attached as Exhibit B to this Agreement, and (ii) with
respect to claims made in relation to released bonds on completed jobs of the
Company and/or the Buyer.

 

5. All liabilities of the Company, if any, owed to Parent or to the following
affiliates of Parent (but only to the following affiliates): Integrated
Electrical Finance, Inc., IES Management LP, IES Management ROO, LP, IES
Properties, Inc. and IES Reinsurance, Ltd.

 

6. (a) All liabilities for workers compensation claims made by employees of the
Company with respect to occurrences prior to the Closing Date, including without
limitation, the following:

 

    

Claim Number

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

       

Date of Loss

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

    

Status

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

    

Claimant

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

   Incurred

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

H.R. Allen

   2E037595    WC    08/06/2003      Open     

MATTHEWS, JEFFREY

   21,306

H.R. Allen

   E3103108    WC    03/31/2005      Open     

HOLLOWAY, LEON

   7,549

H.R. Allen

   E3110647    WC    04/25/2005      Open     

HILL, WILLIAM

   10,165

H.R. Allen

   2E027837    WC    04/13/1999      Open     

BRITT, DAVID

   106,336

H.R. Allen

   2E031311    WC    05/12/1999      Open     

LEE, NEWBY

   68,376

H.R. Allen

   2E034561    WC    02/13/2002      Open     

HIGGINS, TONY

   71,635

H.R. Allen

   2E037736    WC    11/10/2003      Open     

LOWRIMORE, JAMES

   13,838

H.R. Allen

   2A611598    WC    10/01/2003      Open     

WRIGHT, ANTHONY T

   4,053

H.R. Allen

   2A611570    WC    08/10/2004      Open     

LEHEW, HARRY

   24,786

H.R. Allen

   2E812663    WC    08/05/2004      Open     

JAGGERS, CLYDE

   51,597

H.R. Allen

   E3101131    WC    02/25/2005      Open     

RICHBURG, WAYMOND M

   9,672

H.R. Allen

   E3119970    WC    07/22/2005      Open     

LESLY, JASON

   707

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

     Claim Number

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

        Date of Loss

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

     Status

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

    

Claimant

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

   Incurred

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

H.R. Allen

   E3121146    WC    08/24/2005      Open      DOYLE, RICHARD    422

H.R. Allen

   2A611566    WC    09/21/2004      Open      BURR, ANTHONY    71,601

H.R. Allen

   2A824053    WC    11/24/2004      Open      CHASTAIN, ADAM C    2,620

H.R. Allen

   10958    WC    10/25/2005      Open      PINSON, JOSEPH     

H.R. Allen

   10925    WC    10/1/2005      Open      RAY, PAUL     

H.R. Allen

   10923    WC    9/15/2005      Open      REYES, SALVADOR     

H.R. Allen

   10904    WC    7/22/2004      Open      LONGSHORE, ROBERT     

H.R. Allen

   10881    WC    9/13/2005      Open      MCGUINESS, PATRICK     

H.R. Allen

   10878    WC    9/8/2005      Open      WHITE, JOHN     

H.R. Allen

   10872    WC    9/6/2005      Open      ENOS, DALE     

H.R. Allen

   10787    WC    7/21/2005      Open      HUGHES, JASON     

H.R. Allen

        WC    11/09/2005      Open      JOHNSON, EAD     

 

(b) All liabilities for occurrences prior to the Closing Date under only the
following claims:

 

     Claim Number

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

        Date of Loss

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

    

Status

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

    

Claimant

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

   Incurred

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

H.R. Allen

   2A935740    GL    12/13/2004      Open      STALL HIGH SCHOOL    1,400

H.R. Allen

   E3749558    GL    11/01/2004      Open      CHRIST OUR KING LIFE    5,249

 

7. All liabilities associated with any federal or state income taxes owed by the
Parent and its consolidated group (including, without limitation, the Company).
All liabilities of the Company under this Agreement.

 

8. All liabilities insured under Parent’s General Liability insurance policies,
provided, however, that in the case of each insured occurrence, (i) Buyer shall
reimburse the Company for and indemnify and hold it harmless with respect to the
first $25,000 of such losses, and (ii) in the case of the first three
occurrences in which losses exceed $25,000, the Buyer shall reimburse the
Company for and indemnify and hold it harmless with respect to one-half of any
out of pocket costs and expenses of Parent and Company (in excess of the $25,000
paid by Buyer pursuant to clause (i) above), including defense costs and
expenses and cost of settlement or amounts paid in satisfaction of any judgment,
incurred to satisfy Parent’s deductible or self-insured retention under such
policies, up to a limit of payments by Buyer of $100,000 in such costs and
expenses per each of the first three such occurrences. With respect to any
matters for which Buyer is required to reimburse the Company under this
paragraph, the Parent and the Company shall control the defense of such any such
claims pursuant to the provisions of any applicable insurance policies, but, to
the extent Buyer is required to reimburse the Company, the Parent and the
Company shall consult with Buyer and its counsel with respect to such defense
and allow Buyer and its counsel to participate in all proceedings (formal or
informal) relating to the defense, compromise and settlement of the claims at
the expense of the Buyer.

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

 

Schedule 1.2 – Excluded Accounts

 

See attached list.

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

 

Schedule 3.1(c) – Permitted Encumbrances

 

See matters listed on Schedule 4.6.

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

 

Schedule 3.2(d) – Change Orders

 

See attached list.

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

 

Schedule 4.6 – Leased Assets

 

1. See attached list of Leased Vehicles, the leases on which are to be assumed
by Buyer at Closing.

 

2. Lease on tire balancer referred to in Financing Statement File #
020328-1141281 filed with the SC Secretary of State.

 

3. See attached list of other equipment leases.