ASSET PURCHASE AGREEMENT

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:

1.1 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;

(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.

2

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.

2.1 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

3

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.

3.1 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,

4

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

5

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.

4.1 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.

6

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

7

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.

8

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