Document:

exv10w7

 

Exhibit 10.7

AMENDMENT TO MANAGEMENT RETENTION AGREEMENT

     THIS AMENDMENT TO MANAGEMENT RETENTION AGREEMENT is dated as of March 3, 2006 (this
“Amendment”), by and among Youbet.com, Inc., a Delaware corporation (“Youbet”), UT
Group, LLC, a Delaware limited liability company (“Seller”), Joe Tracy (“Tracy”)
and Terry Woods (“Woods”). Capitalized terms that are not defined elsewhere in this
Amendment shall have the meanings ascribed to such capitalized terms in the Agreement (as defined
below).

RECITALS

     A. Youbet, Seller, Tracy and Woods are parties to that certain Management Retention Agreement,
dated as of February 10, 2006 (the “Agreement”).

     B. Pursuant to Section 11 of the Agreement, Youbet, Seller, Tracy and Woods desire to amend
the Agreement upon the terms and conditions set forth in this Amendment.

AGREEMENTS

     In consideration of the mutual covenants of the parties as hereinafter set forth and other
good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the
parties hereto hereby agree as follows:

     1. Recitals. Effective as of the date first set forth above, the section entitled
“RECITALS” of the Agreement is amended and restated in its entirety to read as follows:

R E C I T A L S

     A. Youbet and Seller are parties to that certain Stock Purchase Agreement, dated as of
November 30, 2005 (as amended, modified or supplemented from time to time, the “Purchase
Agreement”), by and among Youbet, UT Gaming, Inc., a Delaware corporation
(“Purchaser”), Seller and United Tote Company (“United Tote”), pursuant to
which Purchaser, a wholly-owned subsidiary of Youbet, acquired from Seller all of the
capital stock of United Tote.

     B. As a material inducement to cause Youbet and Purchaser to enter into the Purchase
Agreement, Tracy entered into that certain Restricted Stock Purchase Agreement (the
“Tracy Restricted Stock Purchase Agreement”), dated November 30, 2005, by and
between Tracy and Youbet and that certain Lock-Up Agreement (the “Tracy Lock-Up
Agreement”), dated November 30, 2005, by and between Youbet and Tracy, and Woods entered
into that certain Restricted Stock Purchase Agreement (the “Woods Restricted Stock
Purchase Agreement” and, together with the Tracy Restricted Stock Purchase Agreement,
the “Restricted Stock Purchase Agreements”), dated November 30, 2005, by and between
Woods and Youbet and that certain Lock-Up Agreement (the “Woods Lock-Up Agreement”
and, together with the Tracy Lock-Up

 

 

Agreement, the “Lock-Up Agreements”), dated November 30, 2005, by and between
Youbet and Woods.

     C. Upon the Closing (as defined in the Purchase Agreement), the Restricted Stock
Purchase Agreements and Lock-Up Agreements were terminated and Youbet, Purchaser, Tracy and
Woods replaced the incentives for Tracy and Woods to remain in the employ of United Tote
after the Closing (as defined in the Purchase Agreement) provided under such agreements with
the incentives contemplated in the Agreement.

     D. Tracy serves as the Vice President, Game Development of United Tote pursuant to
the terms of that certain Employment Agreement, dated as of September 5, 2003, by and
between Tracy and United Tote, as amended by that certain First Amendment to Employment
Agreement, dated November 30, 2005, and by that certain Second Amendment to Employment
Agreement, dated March 3, 2006 (the “Tracy Employment Agreement”).

     E. Tracy desires to continue to serve as Vice President, Game Development of United
Tote in accordance with the terms of the Tracy Employment Agreement.

     F. Effective as of the date hereof and in connection herewith, Woods and United Tote
have entered into that certain Settlement and General Release Agreement, dated as of March
3, 2006 (the “Release Agreement”), pursuant to which Woods resigned from his
position as the President and Chief Operating Officer of United Tote and waived any and all
claims against United Tote and certain other released parties, including, but not limited
to, those arising in connection with that certain Employment Agreement, dated as of
September 5, 2003, by and between Woods and United Tote, as amended by that certain First
Amendment to Employment Agreement, dated November 30, 2005 (the “Woods Employment
Agreement”).

     G. Woods remains bound by certain provisions of the Woods Employment Agreement.

     H. Woods and Purchaser are parties to that certain Non-Compete Agreement, dated as of
November 30, 2005 (the “Non-Compete Agreement”).

     2. Termination of Certain Agreements. Effective as of the date first set forth above,
Section 1 of the Agreement is amended and restated in its entirety to read as follows:

     1. Termination of Certain Agreements. The parties hereto hereby acknowledge
and agree that, upon the Closing, the Restricted Stock Purchase Agreements and Lock-Up
Agreements terminated and became null and void, without any liability of any party to any
other party thereunder.

     3. Payments upon Termination of Employment. Effective as of the date first set forth
above, Section 2 of the Agreement is amended and restated in its entirety to read as follows:

 

 

     2. Payments upon Termination of Tracy’s Employment.

     (a) In the event that Tracy ceases to be employed by United Tote, Youbet or any other
direct or indirect subsidiary of Youbet prior to February 9, 2007 for any reason, (i) Youbet
shall have the right to set off $500,000 against any amounts due or outstanding under the
$1.8 Million Note (as defined in the Purchase Agreement), or (ii) if the $1.8 Million Note
has been voluntarily prepaid, Youbet and Seller shall jointly direct the escrow agent in
writing to pay $500,000 to Youbet from the escrow account established pursuant to Section
2(b) of the $1.8 Million Note (the “Retention Escrow Account”), by delivery of
written notice of such termination and Youbet’s exercise of either such right to Seller;
provided, that this Section 2(a) shall not apply in the event (i) United Tote,
Youbet or any other direct or indirect subsidiary of Youbet terminates Tracy’s employment
without “Cause”, as defined in the Tracy Employment Agreement, (ii) Tracy’s employment is
terminated as a result of him suffering any mental or physical impairment or disablement
that prevents him from performing his duties as an employee of United Tote, Youbet or any
other direct or indirect subsidiary of Youbet for a period of 90 days (whether or not
consecutive) in any 180 day period or (iii) Tracy’s employment is terminated as a result of
his death, and after such termination described in clause (i) or (ii) Tracy ceases to be
employed by United Tote, Youbet or any other direct or indirect subsidiary of Youbet.

     (b) In the event that prior to February 9, 2007, Woods breaches Sections 5, 6, 7 or 8
of the Woods Employment Agreement or any provision of the Non-Compete Agreement or the
Release Agreement (collectively, the “Woods Covenants”), Youbet shall have the right
to set off $500,000 against any amounts due or outstanding under the $1.8 Million Note, or
(ii) if the $1.8 Million Note has been voluntarily prepaid, Youbet and Seller shall jointly
direct the escrow agent in writing to pay $500,000 to Youbet from the Retention Escrow
Account, by delivery of written notice of such breach and Youbet’s exercise of either such
right to Seller. Nothing contained in this Agreement shall be deemed to amend the terms and
conditions of the Woods Covenants in any respect.

     (c) For the avoidance of doubt, the obligations set forth in Sections 2(a) and (b) are
cumulative, such that if, prior to February 9, 2007, Tracy ceases to be employed by United
Tote, Youbet or any other direct or indirect subsidiary of Youbet and Woods breaches any of
the Woods Covenants, an aggregate of $1,000,000 shall be subject to set off by Youbet or
payment from the Retention Escrow Account.

     (d) Seller, Tracy and Woods hereby agree that (i) with respect to each of Tracy and
Woods, if Youbet sets off $500,000 against amounts due and outstanding under the $1.8
Million Note or is paid $500,000 from the Retention Escrow Account as provided in either
Section 2(a) or (b), then such $500,000 shall be deemed to be an advance to
Tracy or Woods, as applicable, on distributions to be made pursuant to Section 7.2 of
Seller’s Limited Liability Company Agreement, dated as of September 5, 2003, as amended (the
“Seller LLC Agreement”; and any such advance, a “Deemed Executive
Distribution”), and shall appropriately reduce distributions to be made thereafter by
Seller to Tracy or Woods, as applicable, under Section 7.2 of the Seller LLC Agreement, when
and as made by Seller, and (ii) that appropriate adjustments, as determined by Seller’s
board of directors, will be made to the allocations of “Profits” and “Losses”, as
applicable, to take into account any such Deemed Executive Distribution.

 

 

     4. Management Retention Agreement not a Service Contract. Effective as of the date
first set forth above, Section 3 of the Agreement is amended and restated in its entirety to read
as follows:

     3. Management Retention Agreement not a Service Contract. This Agreement is
not an employment or service contract, this Agreement shall not be deemed to create (nor
shall it be interpreted or construed as creating) any service contract or an employment or
service relationship and nothing herein shall be deemed to create in any way whatsoever any
obligation on Tracy’s part to continue in the employ of United Tote or its affiliates, or of
United Tote or its affiliates to continue Tracy’s employment.

     5. Full Force and Effect. Except as is expressly stated herein, the Agreement, as
further modified by this Amendment, shall remain in full force and effect and unchanged.

     6. Counterparts. This Amendment may be executed simultaneously in several
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Amendment, to the extent signed and delivered by means of a
facsimile machine, e-mail of a PDF file or other electronic transmission, shall be treated in all
manner and respects as an original agreement or instrument and shall be considered to have the same
binding legal effect as if it were the original signed version thereof delivered in person. At the
reasonable request of any party hereto, each other party hereto shall re-execute original forms
thereof and deliver them to all other parties. No party hereto shall raise the use of a facsimile
machine, e-mail of a PDF file or other electronic transmission to deliver a signature or the fact
that any signature or agreement or instrument was transmitted or communicated through the use of a
facsimile machine, e-mail of a PDF file or other electronic transmission as a defense to the
formation or enforceability of a contract and each such party forever waives any such defense.

     7. Governing Law; Consent To Jurisdiction. THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER AND THE INTERPRETATION OF THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK (WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW) APPLICABLE TO CONTRACTS EXECUTED
AND TO BE PERFORMED IN SUCH STATE. EACH PARTY HERETO CONSENTS TO THE PERSONAL JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK IN CONNECTION WITH ANY CLAIM OR DISPUTE ARISING IN CONNECTION WITH
THIS AMENDMENT. ANY ACTION OR PROCEEDING SEEKING TO ENFORCE ANY PROVISION OF, OR ANY RIGHT ARISING
OUT OF THIS AMENDMENT MAY BE BROUGHT AGAINST EACH PARTY HERETO IN THE COURTS OF THE STATE OF NEW
YORK.

     8. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY,
UNCONDITIONALLY, IRREVOCABLY AND INTENTIONALLY FOREVER WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY
JURY IN RESPECT OF ANY LITIGATION (WHETHER ARISING IN TORT OR CONTRACT) BASED ON, OR ARISING OUT
OF, UNDER OR IN CONNECTION WITH, THIS AMENDMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (VERBAL OR WRITTEN) OR ACTION OF ANY PERSON OR ANY EXERCISE BY ANY PARTY OF THEIR
RESPECTIVE RIGHTS UNDER THIS

 

 

AMENDMENT (INCLUDING WITHOUT LIMITATION ANY ACTION TO RESCIND OR CANCEL THIS AMENDMENT OR ANY
CLAIMS OR DEFENSES ASSERTING THAT THIS AMENDMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR
VOIDABLE). THIS PROVISION IS A MATERIAL INDUCEMENT TO ENTER INTO THIS AMENDMENT.

     9. Headings. The subject headings of this Amendment are included for purposes of
convenience only and shall not affect the construction or interpretation of any of its provisions.

     10. No Strict Construction. The language used in this Amendment will be deemed to be
the language chosen by the parties hereto to express their mutual intent, and no rule of strict
construction will be applied against any party hereto.

     11. Entire Agreement. All references in the Agreement, or otherwise to the Agreement,
hereafter shall be deemed to include the Agreement as amended by this Amendment.

     IN WITNESS WHEREOF, the parties have executed this Amendment to Management Retention Agreement
as of the date first above written.

	 	 	 	 	 
	 	YOUBET.COM, INC.

 	 
	 	By:  	/s/ Gary W. Sproule
 	 
	 	Name:  	Gary W. Sproule 	 
	 	Title:  	Chief Financial Officer 	 
	 
 
	 	UT GROUP, LLC

 	 
	 	By:  	/s/ Robert E. Michalik
 	 
	 	Name:  	Robert E. Michalik 	 
	 	Title:  	Vice President 	 
	 
	 	 	 
	 	                                  /s/ Joe Tracy
 	 
	 	Joe Tracy 	 
	 
	 	 	 
	 	                                  /s/ Terry Woods
 	 
	 	Terry Woodsexv10w5

 

Exhibit 10.5

January 23, 2006

Board of Directors

Chairman

Integrated Electrical Services, Inc.

1800 West Loop South

Suite 500

Houston, TX 77027

Attn: Special Restructuring Committee

Dear Gentlemen:

	 	 	 
	Re:

	 	Management Services

     We are pleased to set forth the terms of the engagement of Glass & Associates, Inc. (“Glass”)
by Integrated Electrical Services, Inc. (the “Company”), effective as of January 18, 2006.

     1. Services. The Company engages Glass for the purpose of providing the services described on
attached Schedule 1. Sanford Edlein, as representative of Glass, will serve as Chief Restructuring
Officer to the Company under this Agreement. Glass may provide the services under this Agreement
through other principals, employees or consultants of Glass from time to time as required during
the course of the engagement. Glass will provide oversight of the engagement under this Agreement
from its Regional Office in Dallas, Texas.

     2. Independent Contractor; No Fiduciary Relationship. Glass is an independent contractor, and
no employee or agent of Glass is an employee of Company. As an independent contractor, Glass will
have complete and exclusive charge of the management and operation of its business, including
hiring and paying the wages and other compensation of all of its employees and agents, and paying
all bills, expenses and other charges incurred or payable with respect to the operation of its
business, and will be responsible for all employment, withholding and income and other taxes
incurred in connection with the operation and conduct of its business. Glass employees will not be
considered employees of the Company. Nothing in this Agreement is intended to create, shall be
construed as creating or be deemed to create a fiduciary relationship between the Company and Glass
(other than Sanford Edlein, in his capacity as Chief Restructuring Officer).

     3. Information and Access. Glass shall have full access to all personnel, books, and records
of and advisors to the Company and, if Glass so desires, a working relationship with the entire
internal organization of Company. Company represents and warrants that, except as disclosed to
Glass in writing, all information made available to Glass will, to the best of the Company’s
knowledge, at all times during the period of the engagement of Glass under this Agreement be
complete and correct in all material respects and will not contain any untrue

Glass & Associates, Inc. www.glass-consulting.com

New York Canton Charlotte Chicago Dallas Detroit Frankfurt/M. Houston London

 

 

statement of material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in light of the circumstances under which such statements are
made. Company further represents and warrants that any projections or other information provided
by it to Glass will have been prepared in good faith and will be based on assumptions which, in
light of the circumstances under which they are made, are reasonable, although it is recognized
that projections are based on assumptions that may or may not prove to be accurate. Company
acknowledges that, in rendering its services hereunder, Glass will be using and relying on the
information (and information available from public sources and other sources deemed reliable by
Glass) without independent verification thereof by Glass or independent appraisal by Glass of any
of the Company’s assets. Glass does not assume responsibility for the accuracy or completeness of
the information or any other information regarding the Company.

     4. Oversight of Engagement. Glass, and any employee of Glass serving as an interim officer
under this Agreement, shall report only to, and its engagement shall be subject to the exclusive
supervision of, the Special Restructuring Committee (the “Restructuring Committee”) of the
Company’s Board of Directors (the “Board”), whose members are all of the independent directors of
the Board. Except for such oversight, the actions and decisions of Glass shall not be subject to
review by any other officer of the Company. Glass shall work collaboratively with the
Restructuring Committee, the Board, Company’s senior management team, Company’s other professionals
and the ad hoc committee of the senior subordinated noteholders (“the “Ad Hoc Committee”) in
performing its engagement under this Agreement. The Ad Hoc Committee and its representatives and
advisors shall have complete access to Glass.

     5. Compensation.

          5.1 Glass shall be compensated for its services under this Agreement as set forth on attached
Schedule 2 and shall be reimbursed for its reasonable expenses. Glass reviews and revises its
hourly billing rates effective January 1 of each year.

          5.2 Reimbursable expenses include direct out-of-pocket expenses incurred on the engagement
including reasonable costs for meals, travel and travel related expenses, outside printing and
reproduction services, and courier, overnight and other delivery services. Reimbursable expenses
also include an administrative charge of 2% of hourly fee billings for indirect costs including
long-distance phone charges, cell phone charges, facsimiles, normal postage, in-house photocopying
and in-house printing. The reasonable fees and expenses of attorneys consulted or engaged by Glass
to assist it under this Agreement not to exceed $5,000 without prior approval from Company, not to be unreasonably
withheld, shall be reimbursable expenses. Services of other third parties consulted or engaged by
Glass to assist it under this Agreement shall be reimbursable expenses provided that such
consultation or engagement has been approved in advance by the Board.

          5.3 Company has paid Glass an initial deposit of $100,000 (the “Deposit”) (inclusive of the
$50,000 deposit previously paid to Glass pursuant to its December 22, 2005 engagement letter with
Company (the “Prior Letter”)), which will be held in a separate Glass bank account for client
deposits. If Glass’ engagement under this Agreement is terminated

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before Glass’ fees based on its hourly rates equal the Deposit Glass shall nonetheless be entitled
by Company to retain the full amount of the Deposit as consideration for undertaking the engagement
under this Agreement and for the services provided before termination. Glass may only withdraw
amounts from the Deposit in order to return it to Company or to apply all or any portion of the
Deposit to amounts due to Glass under this Agreement. If Company pays an invoice from Glass after
Glass has applied funds from the Deposit to amounts due under that invoice Glass will deposit to
the account for client deposits the lesser of the amount of the payment made or the amount
withdrawn from the Deposit. Company hereby grants Glass a security interest in and lien upon the
Deposit to secure payment of all amounts due to Glass under this Agreement and any damages
resulting from a breach by the Company of this Agreement, including as a result of a rejection of
this Agreement in a bankruptcy case. Glass’ fees and reimbursable expenses will be billed as
provided on Schedule 2 and shall be due and payable upon receipt of invoice.

          5.4 Glass shall permit Company to inspect Glass’ time and expense records in Glass’ offices
during normal business hours on reasonable advance notice to verify Glass’ invoices. Glass shall
provide the Company with an itemized report of expenses on a monthly basis.

     6. Testimony. Except for testimony which is within the scope of services set forth on
Schedule 1 for which Glass will be compensated as provided on Schedule 2, if Glass is required in
any legal proceeding to deliver testimony in connection with the services provided under this
Agreement, Company agrees to pay Glass a fee at Glass’ then prevailing hourly rates for witness
preparation and court appearances, in addition to the reasonable fees and expenses of outside
counsel retained by Glass to advise in connection with such testimony and other reimbursable
expenses incurred by Glass in connection with the testimony.

     7. Non Solicitation of Glass Employees. For one year after termination of Glass’ engagement
under this Agreement the Company shall not hire, retain or utilize (other than through Glass) the
services of any Glass employee or former employee who has been employed by Glass in the ninety (90) day period
preceding hire by Company. The Company further agrees that any violation shall result in
liquidated damages in the amount of 50% of the hired employee’s total compensation during their
first year of employment by Company. Payment of liquidated damages for violation of this Agreement
may be billed and shall be payable as an additional reimbursable expense under this Agreement and
shall not be subject to any requirement of advance authorization by Company or any other limitation
that may apply to other fees and expenses payable to Glass under this Agreement.

     8. Use of Name and Work Product. The Company acknowledges that all information (written or
oral) generated by Glass in connection with its engagement is intended solely for benefit and use
of the Company (limited to its management, including the Board). The Company agrees that no such
information shall be used for any other purpose or reproduced, disseminated, quoted or referred to
with attribution to Glass at any time, in any manner or for any purpose other than within the
Company or to the Ad Hoc Committee and its advisors, in each case without Glass’ prior written
consent (which consent shall not be unreasonably withheld), except

3

 

as required by law, stock exchange rules or valid legal process (and after advance notice to
Glass). Without limiting the foregoing, the Company shall not, and shall not authorize anyone else
to, use Glass’ name or use or make available to third parties any written materials (including
extracts or excerpts therefrom or abstracts thereof) or other work product prepared by Glass
pursuant to this Agreement in connection with obtaining or extending credit, offering or selling
securities or other assets or in any representations to third parties without Glass’ prior written
consent, except to the Ad Hoc Committee and its advisors and except for references to Glass’
engagement in public filings and in the proposed Disclosure Statement. Glass is authorized, at its
expense, to place a customary “tombstone” advertisement or similar announcement with respect to its
engagement hereunder in such form and in such media as Glass deems appropriate and reasonably
acceptable to the Company.

     9. Standard of Care and Warranty Disclaimer. Glass performs its services in accordance with
standards of skill and care generally observed by “turnaround” consultants of recognized national
standing in the United States. If Glass fails to meet such standards the sole remedy of Company
shall be to terminate this Agreement and recover any direct damages Company may prove. Neither
Glass nor any of its directors, shareholders, officers, employees, consultants or other agents
(collectively with Glass the “Glass Parties”) shall be liable for any lost or loss of profits, any
indirect, incidental or consequential damages, or any claim, loss or expense for which
indemnification would be provided under Section 10 of this Agreement. In performing its services
under this Agreement Glass is not assuming any responsibility for the Company’s decision to pursue
or not to pursue any business strategy or to effect or not to
effect any restructuring, business combination, refinancing or other transaction, nor shall
Glass be responsible for providing any tax, legal or other specialist advice. Glass makes no
representations or warranties, express or implied, concerning the value of its services or the
results that may be obtained therefrom. Glass’ engagement shall not constitute an audit, review,
compilation or any other type of financial statement reporting or consulting engagement that is
subject to the rules of the AICPA or other state and national professional bodies.

     10. Limitation of Liability and Indemnity; Insurance.

          10.1 Glass’ sole obligation under this Agreement is to the Company, and any advice (written or
oral) given by Glass to the Company in connection with Glass’ engagement under this Agreement is
solely for the use and benefit of the Company. In no event, regardless of the legal theory
advanced, shall any Glass Party be responsible to the Company or liable to any third party other
than for gross negligence, willful misconduct, bad faith or knowing violation of law or for conduct
Glass did not in good faith believe was in, or at least not opposed to, the best interests of the
Company. The obligations of Glass are solely corporate obligations, and no officer, director,
employee, agent, shareholder or controlling person of Glass shall be subject to any personal
liability whatsoever to any person, nor will any such claim be asserted by the Company, whether on
its own behalf or on behalf of any other person.

          10.2 The Company shall indemnify, defend and hold harmless the Glass Parties against any and
all claims, costs, demands, damages, assessments, actions, suits or other proceedings, liabilities,
judgments, penalties, fines or amounts paid in settlement, expenses, and

4

 

reasonable attorneys fees (whether incurred at the trial or appellate level, in an arbitration, in
bankruptcy (including, without limitation, any adversary proceeding, contested matter or
application), or otherwise and notwithstanding any limitation set forth in Section 5 above)
(collectively “Claims”) arising out of, connected with or related to the services performed under
this Agreement, whether or not such Claims are attributable in whole or in part to negligence by
Glass, other than Claims that are finally determined by judgment or in binding arbitration to have
resulted from (a) acts or omissions by Glass that involve gross negligence, willful misconduct, bad
faith or a knowing violation of law or (b) conduct that Glass did not in good faith believe was in,
or at least not opposed to, the best interests of the Company. Glass shall give prompt written
notice to the Company of any Claim for which indemnification may be claimed hereunder, and the
parties shall then cooperate as reasonably required to defend such Claim; provided, that the right
of the Glass Parties to indemnification shall not be affected by any failure or delay by Glass to
give such notice, except to the extent that the rights and remedies of the indemnifying party shall
have been materially prejudiced as a result of such failure or delay. The Company shall pay all
reasonable costs and expenses, including attorneys’ fees, incurred by Glass to enforce its rights under this Agreement.
The Company agrees that, without Glass’ prior written consent (which will not be unreasonably
withheld), the Company will not settle, compromise or consent to the entry of any judgment in any
pending or threatened claim, action, or proceeding or investigation in respect of which
indemnification or contribution has been sought hereunder (whether or not Glass or any other Glass
Party are an actual or potential party to such claim, action or proceeding or investigation),
unless such settlement, compromise or consent includes an unconditional release of each Glass Party
from all liability arising out of such claim, action or proceeding or investigation.

     10.3 If for any reason the foregoing indemnification is determined to be unavailable to any
Glass Party or insufficient to fully indemnify any such person, then the Company will contribute to
the amount paid or payable by such person as a result of any such claims in such proportion as is
appropriate to reflect both the relative benefit and the relative fault of the Company on the one
hand, and the Glass Parties on the other hand, and any other relevant equitable considerations in
connection with the matters as to which such claims relate; provided, however, that in no event
shall the amount to be contributed by all Glass Parties in the aggregate exceed the amount of
compensation actually received by Glass under this Agreement.

     10.4 In addition to the indemnification provided by Section 10.2 or 10.3, any Glass employee
serving as an officer or director of the Company or any of its subsidiaries or affiliates shall be
entitled to the benefit of the most favorable indemnities provided by the Company to its officers
and directors, whether under the Company’s governing documents, by contract or otherwise.

     10.5 Immediately upon execution of this Agreement, and as a condition to the obligations of
Glass hereunder, the Company shall use its best efforts to cause Glass and its agents and employees
to be added as additional named insureds on the Company’s comprehensive general liability insurance
policies and Sanford Edlein to be specifically included and covered under the Company’s directors’
and officers’ liability insurance policies (“D&O

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Policies”). The Company shall give Glass not less than 30 days’ written notice if for any reason
other than the termination of his services as Chief Restructuring Officer Mr. Edlein will cease to
be covered under the Company’s D&O Policies or if the terms of the Company’s D&O Policies will be
amended in any respect materially affecting Mr. Edlein’s coverage thereunder.

     11. Confidentiality.

          11.1 All information disclosed to Glass by the Company in connection with Glass’ engagement
under this Agreement, including without limitation information acquired from the Company’s
employees or inspection of the Company’s property, and confidential information disclosed to Glass by third parties
representing or acting for or on behalf of Company, shall be considered Confidential Information.
Confidential Information shall not include information which (a) is now or subsequently becomes
generally known or available by publication, commercial or otherwise, through no fault of Glass,
(b) is known by Glass at the time of the disclosure provided such information did not come from a
source known by Glass to be bound by confidentiality agreement with the Company or otherwise
prohibited from disclosing information to Glass by a contractual, legal or fiduciary obligation,
(c) is independently developed by Glass without the use of any Confidential Information, (d) is
information that the parties agree in writing may be disclosed by Glass, (e) is or becomes
available to Glass on a non-confidential basis from a source other than Company, provided that, to
Glass’ knowledge, such source was not prohibited from disclosing such information to Glass by a
legal, contractual or fiduciary obligation owed to Company or (f) is information that must, upon
advice of counsel to Glass, be disclosed pursuant to applicable law or legal, regulatory, or
administrative process after compliance with the provisions hereof.

          11.2 Glass shall keep all Confidential Information confidential and shall use the Confidential
Information solely for purpose of providing the services to be furnished pursuant to this
Agreement. Glass may make reasonable disclosures of Confidential Information to third parties in
connection with the performance of its engagement under this Agreement (provided, however, such
disclosure is made pursuant to a confidentiality agreement in form and substance reasonably
satisfactory to the Company) and in connection with any dispute between Glass and the Company under
or concerning this Agreement and Glass will have the right to disclose to others in the normal
course of business its involvement with the Company. Any written information produced by Glass
shall be treated as Confidential Information, shall be delivered solely to the Company and, except
as required by law or legal process, shall not be provided to any third party without the Company’s
consent.

          11.3 If Glass receives any request (by order, subpoena or other legal process) to produce any
Confidential Information, Glass will, unless prohibited by law or process, use its best efforts to
provide the Company with timely notice of such request and, at the Company’s request and expense,
cooperate with the Company in any action the Company deems necessary or appropriate under the
circumstances to protect the confidentiality of the Confidential Information and will disclose only
that Confidential Information that Glass is legally required to disclose.

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     12. Termination. Glass’ engagement may be terminated at any time by the Company, and Glass
may terminate its engagement at any time, in each case by written notice and without liability or
continuing obligation to the Company or Glass, except that following such termination Glass shall
remain entitled to any compensation accrued pursuant to Section 5 but not yet paid prior
to termination and to reimbursement of expenses incurred prior to termination pursuant to
Section 5; provided however, that Glass shall not be entitled to any compensation or reimbursement
of expenses or any unused portion of the Deposit if Company terminates this Agreement for Glass’
conduct described in clause (a) or (b) of Section 10.2. Upon termination Glass may apply the
Deposit to any amounts due under this Agreement, and any unused portion of the Deposit will be
returned to the Company. All provisions of this Agreement, other than Sections 1 and 3, shall
survive termination of Glass’ engagement under this Agreement.

     13. Modification. No modification, amendment or addition to, or waiver of any provisions of
this Agreement shall be valid or enforceable unless in writing and signed by all parties.

     14. Legal Construction. The validity, interpretation and enforceability of this Agreement
shall be determined in accordance with the substantive laws of the State of New York, exclusive of
choice of law provisions. If any provisions of this Agreement shall for any reason be held by a
court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision hereof, and this
Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been
contained herein and to give effect as nearly as possible to the intent of the parties. This
Agreement is the product of negotiations between the parties in which each has had the opportunity
to be advised by counsel of its choosing, and therefore the rule of construction that an agreement
is construed against the drafter thereof shall not be applicable to this Agreement. No action or
proceeding, regardless of form, arising out of or related to this Agreement or the services
provided by Glass pursuant to this Agreement may be brought by the Company or Glass more than
twelve (12) months after the claim or cause of action first arose.

     15. No Third Party Benefit. This Agreement is made solely for the benefit of the parties
hereto, and no third party shall acquire any claim against Glass as a result of this Agreement.

     16. Alternative Dispute Resolution. Any claim or dispute concerning, relating to or arising
out of this Agreement shall be resolved by binding arbitration in accordance with the rules of the
American Arbitration Association or such other rules as may be agreed to by the parties. The
arbitration shall be conducted in a location mutually agreed by the parties. If the parties fail
to agree on the location within 30 days after either party requests arbitration, the arbitration
shall be conducted in New York, New York. The prevailing party in any arbitration under this
Agreement shall be entitled to recover from the other as part of the arbitration award reasonable
costs and fees, including reasonable attorney’s fees. Any arbitration award may be enforced by a
court of competent jurisdiction in accordance with New York law. In the event legal action to
enforce the arbitration award is necessary the prevailing party shall be entitled to recover
its costs and expenses, including reasonable attorneys fees (whether incurred at the trial

7

 

or appellate level, in an arbitration, in bankruptcy (including, without limitation, any adversary
proceeding, contested matter or application), or otherwise) in such action and in any appeals
therefrom or reviews thereof.

     17. Notices. All notices under or concerning this Agreement shall be in writing, may be given
by personal delivery, overnight mail or United States mail, shall be effective only upon actual
receipt, and shall be delivered to the party receiving notice at the address set forth in this
Agreement.

     18. General Provisions. This Agreement shall be binding on the parties and their respective
successors and assigns, but neither party may assign any benefit or delegate any duty under this
Agreement, voluntarily or by operation of law, without the written consent of the other party.
This Agreement constitutes the parties’ entire agreement with respect to its subject matter and is
intended to supercede all prior negotiations, discussions and agreements including the Prior
Agreement, and fully to integrate the parties’ agreement. This Agreement may be executed by
facsimile and in any number of counterparts, each of which shall constitute an original and all of
which shall constitute one agreement.

     If the foregoing correctly sets forth our understanding and agreement please so indicate by
signing and returning the enclosed copy of this letter, immediately sending by wire transfer the
additional portion of the Deposit in the amount of $50,000, and signing and retaining the
duplicate we are enclosing for your records. We look forward to working with you on this
engagement.

	 	 	 	 	 	 	 
	Sincerely,	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	Title:
	 	 	 	 	 
	 

	 	 	 
	Glass & Associates, Inc.	 	 
	8350 N. Central Expressway, Suite 1150	 	 
	Dallas, Texas 75206	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	AGREED TO AND ACCEPTED	 	 	 	, 2006. 
	 

	 	 	 	 	 
	 
	 	 	 	 	 	 
	Integrated Electrical Services, Inc.	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	Name:
	 	 	 	 	 
	 	 	 	 
	Title:
	 	 	 	 	 
	 	 	 	 
	Address:
	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 

8

 

Schedules:

Schedule 1: Description of Services

Schedule 2: Compensation

9

 

Schedule 1: Description of Services

Chief Restructuring Officer

General:

As the Chief Restructuring Officer (“CRO”), reporting to the Restructuring Committee, Mr. Edlein
and the Glass team will work closely with the Restructuring Committee, the Board, executives and
staff of IES, outside attorneys, investment bankers, other advisors and the Ad Hoc Committee and
its advisors to insure that the strategic direction of the reorganization (operational, financial
and general restructuring) of the Company is carefully constructed, approved and timely
implemented to preserve and maximize enterprise value. As CRO, Mr. Edlein shall have responsibility
and authority to manage all aspects of the Company’s financial and operational restructuring and
shall supervise the Company’s management and advisors in connection therewith.

Scope of work shall include but limited to:

	 	•	 	Oversight of all financial and operating restructuring activities such as:

	 	•	 	Financial

	 	•	 	Review and implementation of cash management system that would
enhance the visibility of operating unit performance and insure that
cash is controlled on a company wide basis.
	 
	 	•	 	Supervision of vendor classification and payment control
	 
	 	•	 	Oversight of key vendor negotiations including landlords
	 
	 	•	 	Supervision and review of accounts receivable and billing
processes
	 
	 	•	 	Design and development (if needed) of forecasting tools (13 weeks
and annual) to integrate the expected business unit performance into
the cash forecast and borrowing base calculations.
	 
	 	•	 	Review and analysis of variances from cash forecasts and
supervision of forecast revisions
	 
	 	•	 	Liquidity plan and contingency analysis
	 
	 	•	 	Review of the claims and risk management systems and procedures
	 
	 	•	 	Flash reporting and dashboard of key indicators

	 	•	 	Operational

	 	•	 	Review and analysis of:

	 	•	 	Business unit forecasts including planned gross margin
improvement, revenue enhancements and expense controls.
	 
	 	•	 	Project bidding and performance initiatives
	 
	 	•	 	Variation analysis and plan modifications based upon
performance

10

 

	 	•	 	Flash reporting
	 
	 	•	 	Strategy and services including cap ex needs
	 
	 	•	 	Review, assessment and implementation of various operating unit
integration and centralization initiatives (operationally and
financially)
	 
	 	•	 	Potential economies of scale including cross utilization of
specialty staff, equipment overhead
	 
	 	•	 	Strategic improvements including consolidation of activities
either by line of business, region or other appropriate
classification
	 
	 	•	 	Review of home office organization, structure and costs
	 
	 	•	 	Feasibility analysis of business units to sell or liquidate
	 
	 	•	 	Assist in the development of general revenue enhancement and cost
containment strategies

	 	•	 	Evaluation of key management personnel
	 
	 	•	 	Lead and control the continuous communication process with all key constituencies.
	 
	 	•	 	Lead the development of an interim business plan which captures the strategies and tactics
necessary to preserve the business for the long run and short term needs.
	 
	 	•	 	Assessment of management, policy, operations, facilities, equipment and operating
practices.
	 
	 	•	 	Oversight of all restructured or new debt, including DIP and Exit financing and surety
bonding.
	 
	 	•	 	Active involvement in the operating activities within the company to insure that the
operating plan is consistent with the restructuring process and that interim objectives are
attained.
	 
	 	•	 	Participate in the drafting of all public announcements.
	 
	 	•	 	Other such duties as approved by the Board.
	 
	 	•	 	Assist in Bankruptcy filing and oversee the development of a plan of reorganization, and,
if necessary, preparation of all financial reporting including monthly operating reports.

11

 

Schedule 2: Compensation

Glass Hourly Rates

(In effect on the date of this Agreement)

	 	 	 	 	 
	Principal
	 	$	375 to $550 per hour	 
	Case Director
	 	$	325 to $450 per hour	 
	Senior Associate
	 	$	250 to $380 per hour	 
	Consultant
	 	$	200 to $300 per hour	 
	Clerical/Administrative
	 	$75 to  $95 per hour
	Out-of-Pocket Expenses
	 	at Cost

	1.	 	Except as provide below, Glass shall be compensated for its services under this
Agreement on an hourly basis at its standard hourly rates as set forth above. Invoices for
fees and reimbursable expenses will be submitted on a monthly basis and are due and payable
upon receipt.
	 
	2.	 	Specific rates for this project will be:

	 	 	 	 	 
	Professional	 	     Role	 	Hourly Rate
	 
	Sanford Edlein
	 	Chief Restructuring Officer	 	$425
	Sam Heigle
	 	Case Director	 	$300
	Tom Russell
	 	Senior Consultant	 	$300
	Ken Ollwerther
	 	Consultant	 	$250
	Kris Horner
	 	Consultant	 	$225
	Shaun Donnellan
	 	Quality Control	 	$450

	3.	 	The time for other professionals, as required, will be charged per our standard rate
schedule above.

12

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