Document:

Agreement and Fifth Amendment to Credit Agreement

 EXHIBIT 10.1 
  
 AGREEMENT AND FIFTH AMENDMENT TO 
 CREDIT AGREEMENT 
  
 This
Agreement and Fifth Amendment to Credit Agreement (this “Amendment”) dated as of March 31,2005 among the financial institutions (collectively, the “Banks”) party to the Credit Agreement (as such term is hereinafter
defined); INTEGRATED ELECTRICAL SERVICES, INC. (the “Borrower”), and JPMORGAN CHASE BANK, N.A. (successor by merger to Bank One, NA, with its main office in Chicago, Illinois), as administrative agent (in such capacity, the
“Administrative Agent”) for the Banks; 
  
 W I T N E S S E T H: 
  
 WHEREAS, the Borrower, the Banks and the Administrative Agent executed and delivered that certain Credit Agreement (as heretofore amended and
supplemented, the “Credit Agreement”) dated as of February 27, 2004; and 
  
 WHEREAS, the Borrower, the Banks and the Administrative Agent now desire to amend the Credit Agreement to (a) shorten the stated maturity of the Notes; (b) provide for certain required prepayments; (c) change the
interest rate applicable to the Notes and certain rates and fees payable under the Credit Agreement; (d) modify certain financial covenants, and (e) otherwise amend the Credit Agreement; 
  
 NOW, THEREFORE, in consideration of the premises and the mutual agreements, representations and warranties herein set forth,
and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties hereby agree as follows: 
  
 Section 1. Section 1.1 of the Credit Agreement is hereby amended to add thereto the following definitions, which shall read in their entirety as
follows: 
  
 “Litigation Proceeds
Receipt” means the receipt by any Restricted Entity of any cash directly or indirectly on account of the Watkins Litigation. 
  
 “Watkins Litigation” means Davis Electrical Constructors, Inc. v. Watkins Engineers-Constructors, Inc. and Fireman’s
Fund Insurance Company, Cause No. C02-0694MJJ in the United States District Court for the Northern District of California. 
  
 Section 2. The following definitions contained in Section 1.1 of the Credit Agreement are hereby amended to read in their entirety as follows:

  
 “Applicable Margin” means
(a) 3% with respect to the Prime Rate Tranche; (b) 4% with respect to the Net Letter of Credit Exposure, and (c) 1% (or, after the Revolving Loan Maturity Date, 1.5%) with respect to the lesser of (1) the Letter of Credit Exposure or (2) the balance
in the Letter of Credit Collateral Account (the intent of this clause (c) being to impose a charge of 1% (or, after the Revolving Loan Maturity Date, 1.5%) per annum with respect to cash-secured Letters of Credit). 

 “Net Cash Proceeds” means, with respect to (a) the Litigation Proceeds
Receipt, the cash, including payments in respect of deferred payment obligations when received in the form of cash, received directly or indirectly on account of the Watkins Litigation, minus $3,306,000, and (b) any Asset Sale, the proceeds thereof
received by any Restricted Entity in the form of cash, including payments in respect of deferred payment obligations when received in the form of cash (except to the extent that such obligations are financed or sold with recourse to any Restricted
Entity) net of (1) brokerage commissions and other fees and expenses (including, without limitation, fees and expenses of legal counsel and investment bankers, recording fees, transfer fees and appraisers’ fees) related to such Asset Sale; (2)
provisions for all taxes payable as a result of such Asset Sale; (3) amounts required to be paid to any Person (other than a Restricted Entity) owning a beneficial interest in the assets subject to the Asset Sale; (4) payments made to permanently
retire Debt where payment of such Debt is secured by the assets or properties the subject of such Asset Sale, and (5) appropriate amounts to be provided by a Restricted Entity as a reserve required in accordance with generally accepted accounting
principles against any liabilities associated with such Asset Sale and retained by a Restricted Entity after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with such Asset Sale; but any amounts remaining after adjustments, revaluations or liquidations of such reserves shall constitute Net Cash Proceeds. 
  
 “Prepayment Proceeds” means, with respect
to the Litigation Proceeds Receipt, any Asset Sale or Eligible Junior Interest Sale, either (a) 75% of the Net Cash Proceeds realized from the resolution of Watkins Litigation, (b) 80% of all Net Cash Proceeds (including, if applicable, cash
proceeds received over time as and when the same are received) from such Asset Sale or (c) 75% of all net cash proceeds (including, if applicable, cash proceeds received over time as and when the same are received) from such Eligible Junior Interest
Sale, as the case may be, plus (b) the aggregate of all Revolving Loan Borrowings and Swing Loans made in the five Business Days before such event. 
  
 “Revolving Loan Maturity Date” means the earlier of (a) August 31, 2005 or (b) the date the Borrower terminates the
Available Revolving Loan Commitments in accordance with Section 2.2(e). 
  
 “Swing Line Commitment” means the obligation of the Swing Line Lender to make Swing Line Loans pursuant to Section
2.4 in an aggregate principal amount at any one time outstanding not to exceed $1,000,000. 
  
 Section 3. Section 2.2(c)(ii) of the Credit Agreement is hereby amended to read in its entirety as follows: 
  
 (ii) Upon the Litigation Proceeds Receipt or any Asset Sale or Junior Interests Sale by any Restricted Entity, the Borrower shall use the
Prepayment 
  

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 Proceeds within one Business Day after receipt to make deposits into the Letter of Credit Collateral
Account until the Net Letter of Credit Exposure is zero, then to prepay (A) first, the principal of the Prime Rate Tranche with respect to the Revolving Loan, (B) second, the principal of the Swing Line Loan, (C) third, unpaid accrued interest on
the Prime Rate Tranche with respect to the Revolving Loan, and (D) fourth, unpaid accrued interest on the Swing Line Loan, with any balance to be retained by the Restricted Entities. If the aggregate outstanding principal amount of the Revolving
Loan Borrowings plus the aggregate outstanding principal amount of Swing Line Loans plus the Letter of Credit Exposure ever exceeds the Revolving Loan Commitments, then a prepayment on the Revolving Loan Borrowings and Swing Line Loans in the amount
of such excess shall be immediately due and payable and, upon the repayment of the Revolving Loan Borrowings and the Swing Line Loans in full (with application as described in the immediately preceding sentence), the Borrower shall immediately
deposit the remainder in the Letter of Credit Collateral Account. None of the requirements of Section 2.2(c)(i) with respect to the prepayment of the Revolving Loan shall be applicable to mandatory prepayments under this Section
2.2(c)(ii). 
  
 Section 4. Section 2.2(c)(iii) of the
Credit Agreement is hereby amended to read in its entirety as follows: 
  
 (iii) Notwithstanding anything in the Credit Documents to the contrary, at no time shall an amount (the “Exposure Amount”) equal to the sum of (A) the Revolving Loan plus (B) the Letter of Credit
Exposure plus (C) the Swing Line Loan be greater than an amount (the “Limit Amount”) equal to the lesser of (x) the numerator of the ratio computed pursuant to Section 5.5(e), as reflected in the most recent information
delivered to the Administrative Agent, or (y) the sum of $56,000,000 plus the Excess Cash Collateral; and if the Exposure Amount shall ever exceed the Limit Amount, then the Borrower shall immediately prepay the Revolving Loan and the Swing Line
Loan in at least the amount of such excess (or, if the Revolving Loan and the Swing Line Loan have been paid in full, the Borrower shall provide cash collateral to be held in the Letter of Credit Collateral Account in an amount at least equal to
such excess). No Bank shall be obligated to make a Revolving Loan Advance, the Issuing Bank shall not be obligated to issue a Letter of Credit and the Swing Line Lender shall not be obligated to make a Swing Line Borrowing, if as a result thereof
the Exposure Amount would then exceed the Limit Amount. “Excess Cash Collateral” means, on any date, the excess, if positive, of the balance then on deposit in the Letter of Credit Collateral Account over (a) $5,600,000 if such date
is in May 2005; (b) $6,500,000 if such date is in June 2005; (c) $8,600,000 if such date is in July 2005, and (d) $15,600,000 if such date is in August 2005. 
  
  

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 Section 5. Effective as of May 20, 2005, Section 2.2(e) of the Credit Agreement is hereby amended
to read in its entirety as follows: 
  
 (e)
Reduction of Commitments. The Revolving Loan Commitments is $60,000,000. The Borrower shall have the right, upon at least three Business Days’ irrevocable notice to the Administrative Agent, to terminate in whole or reduce ratably in
part the Revolving Loan Commitments; provided that (1) each voluntary partial reduction shall be in the aggregate amount of $1,000,000 or in integral multiples of $1,000,000 in excess thereof and (2) the Borrower may not reduce the Revolving
Loan Commitments if the Available Revolving Loan Commitment would be less than zero; provided further that the Borrower may terminate the Revolving Loan Commitment if (x) the Borrower pays all Credit Obligations and other amounts owing then
owing to the Administrative Agent, the Issuing Bank and any Bank under the Credit Documents and (y) either the Borrower (A) pays to the Administrative Agent an amount equal to the Net Letter of Credit Exposure to be held in the Letter of Credit
Collateral Account and applied in accordance with Section 2.3(g) or (B) provides the Issuing Bank with one or more back-up letters of credit, each in form and substance and issued by a financial institution satisfactory to the Issuing Bank in
its sole, absolute and unfettered discretion. Any voluntary or mandatory reduction or termination of the Revolving Loan Commitments pursuant to this Section 2.2(e) shall be permanent, with no obligation of the Banks to reinstate such
Revolving Loan Commitments, and the facility fees provided for in Section 2.5(a) shall thereafter be computed on the basis of the Revolving Loan Commitments, as so reduced. 
  
 Section 6. Section 2.3(d) of the Credit Agreement is hereby amended to read in its entirety as follows: 

 
 (d) Cash Collateralization of Letters of Credit.
In the event that any Letters of Credit shall be outstanding according to their terms after the Revolving Loan Maturity Date, the Borrower shall either (1) pay to the Administrative Agent an amount equal to the Net Letter of Credit Exposure to be
held in the Letter of Credit Collateral Account and applied in accordance with paragraph (g) below or (2) provide the Issuing Bank with one or more back-up letters of credit, each in form and substance and issued by a financial institution
satisfactory to the Issuing Bank in its sole, absolute and unfettered discretion; and upon the provision of such cash collateral or back-up letter(s) of credit and the payment of all Credit Obligations and other amounts owing to the Administrative
Agent, the Issuing Bank and any Bank under the Credit Documents, then (x) the Administrative Agent shall release all of the other Collateral, in due form and at the Borrower’s cost; (y) the Banks shall be released from their several obligations
under Sections 2.3(c)(i) to make Revolving Loan Advances to reimburse drawings under Letters of Credit and under Section 2.3(b) to purchase participating interests in Letters of Credit, and (z) all letter of credit fees accruing after
the Revolving Loan Maturity Date shall be for the account of the Issuing Bank. 
  

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 Section 7. There is hereby added to the Credit Agreement a new Section 2.3(g)(iv), which shall
read in its entirety as follows: 
  
 (iv) The
Borrower agrees that the balance in the Letter of Credit Collateral Account on each date indicated below shall equal the lesser of (A) the Letter of Credit Exposure on such date or (B) the sum of (1) the Prepayment Proceeds relating to any
Litigation Proceeds Receipt plus (2) the corresponding amount indicated below: 
  

				
	 Date

	  	 Minimum Letter of Credit
 Collateral Account

	 May 31, 2005
	  	$	6,500,000
	 June 30, 2005
	  	$	8,600,000
	 July 31, 2005
	  	$	15,600,000

  
 Section 8.
Section 2.5(a) of the Credit Agreement is hereby amended to read in its entirety as follows: 
  
 (a) Commitment Fees. The Borrower shall pay to the Administrative Agent for the ratable benefit of the Banks an unused commitment
fee of 1.5% per annum on the average daily amount by which (i) the aggregate amount of the Revolving Loan Commitments exceeds (ii) the outstanding principal amount of the Revolving Loan plus the Letter of Credit Exposure. The unused commitment fee
shall accrue from the date of this Agreement and be due and payable in arrears on May 31, 2005, on the last day of each month thereafter and on the Revolving Loan Maturity Date. 
  
 Section 9. The last sentence of Section 2.5(b) of the Credit Agreement is hereby amended to read in its entirety as
follows: 
  
 The Borrower shall pay each such letter of credit
fee for each Letter of Credit in arrears within ten days after when billed therefor by the Issuing Bank (the first such invoice to be issued as of May 31, 2005 and subsequent invoices to be issued as of the last day of each month thereafter) and
upon the Revolving Loan Maturity Date. 
  
 Section 10.
Section 5.2(b) of the Credit Agreement is hereby amended to read in its entirety as follows: 
  
 (b) Monthly and Quarterly Reports. As soon as available and in any event not later than 30 days after the end of each calendar
month (including the end of any calendar month which is also the end of a calendar quarter) and 45 days after the end of each calendar quarter, and in each case in form and substance acceptable to the Administrative Agent, (i) a copy of the
internally prepared consolidated financial statements of the Borrower for such month or quarter, as the case may be, and for the fiscal year to date period ending on the last day of such month or quarter, including therein the consolidated balance
sheets of the Borrower as of the end of such month or quarter and the consolidated statements of income, and cash flows for such month or quarter and 

  

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for such fiscal year to date period, setting forth the consolidated financial position and results of the Borrower for such month or quarter and fiscal year
to date period, all in reasonable detail and duly certified by a Responsible Officer of the Borrower as having been prepared in accordance with generally accepted accounting principles, including those applicable to interim financial reports which
permit normal year end adjustments and do not require complete financial notes (it being understood that the monthly financial reports at the end of any calendar quarter may be different than the quarterly financial statements), (ii) a completed
Compliance Certificate duly certified by a Responsible Officer of the Borrower, (iii) a completed Contract Status Report duly certified by a Responsible Officer of the Borrower, (iv) an aging of accounts receivable by Restricted Entity, and (v) an
aging of accounts payable by Restricted Entity; 
  
 Section
11. Section 5.5 of the Credit Agreement is hereby amended to read in its entirety as follows: 
  
 (a) Minimum EBITDA. As of the last day of each calendar month indicated below, the Borrower shall have consolidated EBITDA for the
indicated period then ending of at least the corresponding amount indicated below: 
  

				
	 Period

	  	Minimum EBITDA

	 Month ending April 30, 2005
	  	$	2,000,000
	 Two months ending May 31, 2005
	  	$	4,200,000
	 Three months ending June 30, 2005
	  	$	6,600,000

  
 Compliance with this
paragraph (a) shall be determined in the applicable Compliance Certificate based upon the financial reports contained in Schedule A of the Compliance Certificate. 
  
 (b) Maximum Credit Obligations to EBITDA Ratio. As of June 30, 2005, the Borrower shall not permit
the ratio of (1) the sum of the Revolving Loan, the Swing Line Loan and the Net Letter of Credit Exposure as of such date to (2) the Core Group EBITDA of the Borrower for the preceding four fiscal quarters then ended, to be greater than 2.00 to 1.
Compliance with this paragraph (b) shall be determined in the applicable Compliance Certificate based upon the financial reports contained in Schedule A of such Compliance Certificate. 
  
 (c) Minimum Interest Coverage Ratio. As of June 30,
2005, the Borrower shall not permit the ratio of (i) the Core Group EBITDA of the Borrower for the preceding four fiscal quarters then ended to (ii) Interest Expense of the Borrower for the preceding four fiscal quarters then ended to be less than
1.20 to 1. Compliance with this paragraph (c) shall be determined in the applicable Compliance Certificate based upon the financial reports contained in Schedule A of such Compliance Certificate. 
  

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 (d) Minimum Core Group EBITDA. As of the last day of each calendar month indicated
below, the Borrower shall have a Core Group EBITDA for the three months then ending of at least the corresponding amount indicated below: 
  

				
	 Three Months Ending

	  	Minimum Core Group EBITDA

	 April 30, 2005
	  	$	6,124,000
	 May 31, 2005
	  	$	7,367,000
	 June 30, 2005
	  	$	8,400,000

  
 But each amount
specified as “Minimum Core Group EBITDA” above shall be automatically reduced if any Subsidiary which was a member of the Core Group ceases to be a member of the Core Group, starting with the month as of which such Subsidiary sells all or
substantially all of its assets, by multiplying such amount by the quotient of (x) the Core Group EBITDA of the continuing members of the Core Group divided by (y) the Core Group EBITDA of such Subsidiary and the continuing members of the Core
Group, and upon each such reduction (1) the Borrower shall give notice of the new minimum Core Group EBITDA amounts as part of the Compliance Certificate delivered for such month and (2) the schedule above shall be automatically amended to reflect
such reduced amounts (and if another Subsidiary which was a member of the Core Group ceases to be a member of the Core Group, then the same process shall be followed to reduce the minimum Core Group EBITDA, starting with the amended minimum Core
Group EBITDA). Compliance with this paragraph (d) shall be determined in the applicable Compliance Certificate based upon the financial reports contained in Schedule A of the Compliance Certificate. 
  
 (e) Asset Coverage Ratio. As of the last day of each
calendar month, beginning with April 2005, the Borrower shall not permit the ratio of (1) 50% of consolidated Unbonded Accounts Receivable, net of retainage, to the extent not already deducted in the determination of Unbonded Accounts Receivable, to
(2) the sum of (i) the Revolving Loan plus (ii) the Letter of Credit Exposure plus (iii) the Swing Line Loan to be less than 1.00 to 1. Compliance with this paragraph (e) shall be determined in a report, duly certified by a Responsible
Officer of the Borrower and delivered no later than 30 days after the end of the relevant calendar month. 
  
 Section 12. Section 6.1(c) of the Credit Agreement is hereby amended to read in its entirety as follows: 
  
 (c) Breach of Covenant. (i) Any breach by the
Borrower of any of the covenants contained in Sections 5.1(a) (with respect to the Borrower), 5.2, 5.3, 5.4, 5.5, 5.6, 5.7, 5.8, 5.9, 5.10, 5.13, 5.19 or
5.22; (ii) any breach by the Borrower of the covenant contained in Section 2.3(g)(iv) which remains uncured for 21 days or (iii) any breach by any Credit Party of any other covenants contained in this Agreement, or any other Credit
Document and such breach of such other 

  

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covenant is not cured within 30 days following the earlier of knowledge of such breach by a Responsible Officer of such Credit Party or the receipt of
written notice thereof from the Administrative Agent; 
  
 Section 13. Refinancing. The Borrower has informed the Administrative Agent and the Banks that the Borrower intends to terminate the Revolving Loan Commitments (including making provision for the Letters of Credit) on or
before August 31, 2005. In connection with such goal, the Borrower agrees to (a) deliver to the Administrative Agent (1) by no later than June 15, 2005, a statement duly certified by a Responsible Officer, attesting to the Borrower’s receipt of
at least one term sheet from a financial institution or other suitable Person describing such a transaction, and that the same has not been withdrawn, and (2) by no later than July 15, 2005, a copy of a commitment reasonably acceptable to the
Administrative Agent, as to form, substance and identity of proposed creditor(s), and accepted by the Borrower, describing such a transaction and providing for its closing no later than August 31, 2005, and (b) by no later than May 31, 2005, engage
one or more individuals or entities, each reasonably satisfactory to the Administrative Agent, to 
  

	 	•	 	Oversee and be responsible for all divestures, including supervising any investment bankers, brokers or other parties engaged to sell Subsidiaries of the Borrower or the
substantially all of the assets of any such Subsidiary, including, meeting and negotiating with prospective purchasers, evaluating and recommending favorable transactions to the Board of Directors of the Borrower; 

  

	 	•	 	Oversee and be responsible for all refinancing efforts, including supervising other parties engaged in the refinancing process, meeting and negotiating with prospective lenders,
evaluating and recommending favorable transactions to the Board of Directors of the Borrower; and 

  

	 	•	 	Immediately develop an alternative course of action in the event that a refinancing is not successful. 

  
 The Administrative Agent and the Lenders shall have full and unfettered access to any Person performing any of the functions described
above, who shall promptly provide information and analysis as may be requested from time to time, to the extent permitted by any applicable confidentiality agreement between any Restricted Entity and one or more third parties. 
  
 Section 14. Vehicle Titles. The Borrower shall deliver, or
cause to be delivered, to the Administrative Agent by no later than 30 days after the effectiveness of this Amendment, the original certificates of title to each motor vehicle owned by any Restricted Entity with a depreciated historical cost
(determined in accordance with GAAP) of more than $10,000, accompanied by any form necessary to cause the Lien of the Administrative Agent to be noted thereon. 
  

Section 15. Conditions. This Amendment shall not become effective until (a) this Amendment has been executed and delivered by the
Borrower and the Majority Banks; (b) the Borrower shall have paid to the Administrative Agent, for the account of each Bank and the Issuing Bank, an amendment fee equal to $315,000 (provided that, if the Borrower terminates the Available
Revolving Loan Commitments as provided in Section 2.2(e) of the Credit Agreement before August 31, 2005, then each Bank severally agrees to rebate its share of such amendment 

  

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fee times the quotient of (A) the number of days between March 31, 2005 and the Revolving Loan Maturity Date divided by (B) 153); (c) the Borrower shall have
deposited, or caused to be deposited, in the Letter of Credit Collateral Account an additional $3,000,000 over the amount then required to be in the Letter of Credit Collateral Account on the day of deposit under the Credit Agreement as in effect
immediately before the effectiveness of this Amendment; (d) the Borrower shall have paid, to the extent invoiced, all out-of-pocket expenses of the Administrative Agent required to be reimbursed or paid by the Borrower under the Credit Documents,
such expenses to include the legal fees of Locke Liddell & Sapp LLP, counsel to the Administrative Agent, and of FTI Consulting, Inc., advisor to such counsel; (e) the Borrower shall have executed and delivered, or caused the appropriate
Subsidiary to execute and deliver, to the Administrative Agent such documents as the Administrative Agent may reasonably require to allow amounts due hereunder to be electronically debited from a specified account of such Credit Party as the
Borrower may designate (and the Borrower, on behalf of itself or such other Credit Party, as appropriate, hereby authorizes the Administrative Agent to cause the payment of such amounts by electronic funds transfer); (f) the Borrower shall have
delivered to the Administrative Agent a certificate of the Secretary or an Assistant Secretary as to the resolutions of the Board of Directors of the Borrower authorizing the execution and delivery of this Amendment, and (g) the Administrative Agent
shall have received such other documents and instruments (including Security Documents) as it may reasonably request; provided, however, that if all of such conditions are not satisfied by 2:00 p.m., Houston time, on May 23, 2005, then this
Amendment shall be of no force or effect. 
  
 Section 16.
Representations True; No Default. The Borrower represents and warrants that the representations and warranties contained in the Credit Documents are true and correct in all material respects on and as of the date hereof as though made on and
as of such date. The Borrower hereby certifies that, after giving effect to this Amendment, no event has occurred and is continuing which constitutes a Default or an Event of Default. 
  
 Section 17. Ratification. Except as expressly amended hereby, the Loan Documents shall remain in full force
and effect. The Credit Agreement, as hereby amended, and all rights and powers created thereby or thereunder and under the other Credit Documents are in all respects ratified and confirmed and remain in full force and effect. 
  
 Section 18. Release. The Borrower, for itself and its
successors, assigns, receivers, trustees, shareholders, directors, officers, employees and agents, hereby RELEASES, ACQUITS and FOREVER DISCHARGES the Administrative Agent and each Bank, and each of their respective predecessors, successors,
assigns, representatives, officers, directors, employees, attorneys and agents (collectively, the Administrative Agent, the Banks and the above-described Persons receiving a release hereunder are hereinafter referred to as the “Released
Parties”), from any and all “Claims,” as that term is defined below, which the Borrower may have against any of the Released Parties that directly or indirectly arise in connection with the Credit Documents, the transactions
contemplated thereby, the Credit Obligations, or the servicing or administration of the Credit Obligations, including, but not limited to, Claims: 
  
 (a) based upon or arising out of breach of contract, breach of commitment, breach of promise or representation, breach of funding commitment or other
commitments or breach of obligations of any kind; 
  

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 (b) based upon or arising out of tort, violation of law or regulations, unconscionable acts, deceptive
trade practices, lack of good faith or fair dealing, lack of commercial reasonableness, or breach of specific relationships, such as a partner, fiduciary, trust or confidential relationship; 
  
 (c) based upon or arising out of fraud, dominion, control, alter ego,
instrumentality, misrepresentation, negligent misrepresentation, duress, coercion, undue influence, interference, negligence or gross negligence, business interruption or lost profits, slander, libel or damage to reputation; 
  
 (d) based upon or arising out of estoppel, promissory estoppel or waiver;

  
 (e) disputing, contesting or objecting to the validity or
enforceability of the Credit Obligations or any Credit Document or any claim, rights, remedies, obligations and indebtedness thereunder; 
  
 (f) arising out of, connected with, or resulting from usury or penalty or damages therefor, from any advances or loans, or from the contracting for,
charging, taking, reserving, collecting or receiving interest in excess of the Highest Lawful Rate; 
  
 (g) based upon or arising out of any alleged breach by the Administrative Agent or any Bank of an alleged promise to the Borrower regarding the Credit
Obligations or the Credit Documents; 
  
 (h) based upon or arising
out of any alleged misrepresentation to the Borrower relating to the Credit Obligations or the Credit Documents; 
  
 (i) based upon or arising out of any alleged intentional or negligent infliction of mental distress, tortuous interference with contractual relations,
tortuous interference with governance or prospective business advantage, or mistake; 
  
 (j) based upon or arising out of any negotiations or discussions between the Borrower, on one hand, and the Administrative Agent or any Bank, on the other hand; 
  
 (k) based upon or arising out of any act, failure to act, event, omission,
transfer, payment or transaction occurring on or before the date hereof; and 
  
 (l) for damages, injunctive relief, and attorneys’ fees. 
  
 The purpose of this Section is to release Claims. Nothing in this Section is an admission of merit or liability regarding any Claim released herein. In any action, claim, lawsuit or proceeding by the Administrative
Agent or any Bank to enforce or interpret this Section, (x) the Borrower shall 

  

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be obligated and liable to pay the attorneys fees and expenses of the Administrative Agent and the Banks and (y) the Administrative Agent and the Banks, in
addition to all other relief, shall be entitled to an award against the Borrower for their attorneys’ fees and expenses, including attorneys’ fees and costs on appeal. 
  
 Section 19. Claims. As used herein, “Claims” shall mean any and all claims, counterclaims,
demands, actions, causes of actions, suits, debts, costs, dues, sums of money, accounts, bonds, bills, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, expenses, obligations and
liabilities whatsoever, known or unknown, at law or in equity, irrespective of whether such Claims arise out of contract, tort, violation of laws or regulations or otherwise, which the Borrower or any of its Subsidiaries ever had, now has or
hereafter can, shall or may have against any Released Party for, upon, or by reason of any act, event, conduct, omission, matter, cause or thing whatsoever from any time before the date hereof. 
  
 Section 20. No Transfer; No Other Claim. The Borrower
represents and warrants to the Administrative Agent and each Bank that the Borrower (a) has not assigned or otherwise transferred to any Person any alleged Claim that the Borrower had, has or may have had against any Released Party and (b) is not
aware of any events, facts or grounds that provide, or could provide, for any dispute, Claim, action, lawsuit, arbitration or administrative claim of any sort against any Released Party. 
  
 Section 21. Definitions and References. Any term used herein that is defined in the Credit Agreement shall
have the meaning therein ascribed to it. The terms “Agreement” and “Credit Agreement” as used in the Credit Documents or any other instrument, document or writing furnished to the Administrative Agent or any Bank by the Borrower
and referring to the Credit Agreement, shall mean the Credit Agreement as hereby amended. 
  
 Section 22. Miscellaneous. This Amendment (a) shall be binding upon and inure to the benefit of the Borrower, the Banks, the Administrative Agent and their respective successors, assigns, receivers and
trustees (but the Borrower shall not assign its rights hereunder without the express prior written consent of the Majority Banks); (b) may be modified or amended only by a writing signed by the party against whom the same is to be enforced;
(c) may be executed in several counterparts, and by the parties hereto on separate counterparts, and each counterpart, when so executed and delivered, shall constitute an original agreement, and all such separate counterparts shall constitute but
one and the same agreement, and (e) together with the other Credit Documents, embodies the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes all prior agreements, consents and
understandings relating to such subject matter. 
  
 THE CREDIT
DOCUMENTS (INCLUDING THIS AMENDMENT) REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. 
  
 THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

  
  

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 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective
authorized officers as of the day and year first above written. 
  

			
	BORROWER:
	
	INTEGRATED ELECTRICAL SERVICES, INC.
		
	By:	 	 /s/ Herbert R. Allen

	Name:	 	Herbert R. Allen
	Title:	 	President & Chief Executive Officer
	
	BANKS:
	
	JPMORGAN CHASE BANK, N.A.,
	f/k/a Bank One, N.A.
		
	By:	 	 /s/ Bruce A. Shilcutt

	Name:	 	Bruce A. Shilcutt
	Title:	 	Vice President
	
	U.S. BANK NATIONAL ASSOCIATION
		
	By:	 	 /s/ Timothy N. Scheer

	Name:	 	Timothy N. Scheer
	Title:	 	Vice President
	
	BANK OF SCOTLAND
		
	By:	 	 /s/ Amena Nabi

	Name:	 	Amena Nabi
	Title:	 	Assistant Vice President

  
 [Unnumbered
signature page to Integrated Electrical Services, Inc. 
 Agreement and Fifth Amendment to Credit Agreement] 

			
	LaSALLE BANK NATIONAL ASSOCIATION
		
	By:	 	 /s/ David L. Sauerman

	Name:	 	David L. Sauerman
	Title:	 	Senior Vice President
	
	WELLS FARGO BANK, N.A.
		
	By:	 	 /s/ Roger Fruendt

	Name:	 	Roger Fruendt
	Title:	 	Senior Vice President
	
	AMEGY BANK, N.A.,
	f/k/a Southwest Bank of Texas, N.A.
		
	By:	 	 /s/ Laif Afseth

	Name:	 	Laif Afseth
	Title:	 	Senior Vice President
	
	CITIBANK TEXAS, N.A.
	f/k/a First American Bank SSB Houston
		
	By:	 	 /s/ Dave Martin

	Name:	 	Dave Martin
	Title:	 	Senior Vice President

  
 [Unnumbered
signature page to Integrated Electrical Services, Inc. 
 Agreement and Fifth Amendment to Credit Agreement] 
  
  

			
	ALLIED IRISH BANK, P.L.C.
		
	By:	 	  

	Name:	 	  

	Title:	 	  

		
	By:	 	  

	Name:	 	  

	Title:	 	  

	
	AIB DEBT MANAGEMENT LIMITED
		
	By:	 	  

	Name:	 	  

	Title:	 	  

		
	By:	 	  

	Name:	 	  

	Title:	 	  

	
	REGIONS BANK
		
	By:	 	  

	Name:	 	  

	Title:	 	  

	
	FIRST BANK & TRUST
		
	By:	 	 /s/ Andrew Schmidt

	Name:	 	Andrew Schmidt
	Title:	 	Vice President

  
 [Unnumbered
signature page to Integrated Electrical Services, Inc. 
 Agreement and Fifth Amendment to Credit Agreement] 

			
	HIBERNIA NATIONAL BANK
		
	By:	 	 /s/ Tammy Boyd

	Name:	 	Tammy Boyd
	Title:	 	Senior Vice President
	
	RZB FINANCE LLC
		
	By:	 	 /s/ John A. Valiska

	Name:	 	John A. Valiska
	Title:	 	First Vice President
		
	By:	 	 /s/ Eric Salat

	Name:	 	Eric Salat
	Title:	 	Group Vice President

  
 [Unnumbered
signature page to Integrated Electrical Services, Inc. 
 Agreement and Fifth Amendment to Credit Agreement]Commercial Lease between A-1 Moving and Storage and Registrant

 Exhibit 10.1 
  
 COMMERCIAL LEASE 
 1353 Dayton Street, Salinas, California 
  
 This Commercial Lease (the “Lease”) is made and entered into on May 23, 2005 (the “Execution Date”), by and between A-1 Moving & Storage, a California General Partnership
(“Landlord”), and Excelligence Learning Corporation, a Delaware corporation (“Tenant”). 
  
 Landlord is the fee owner of that certain real property commonly known as 1353 Dayton Street, Salinas, California, Assessor Parcel Number 177-141-063
which includes a 39,600 square foot building and parking areas (the “Property”). Tenant desires to lease from Landlord that certain portion of the Property consisting of warehouse space of approximately 20,000 square feet and an
upstairs office space of 3500 square feet as shown on the attached Exhibit A (the “Leased Premises”), together with access to parking and to the area servicing the building as further described in Section 3.05 and Section
3.06 of this Lease. Landlord, for and in consideration of the rent to be paid by Tenant and of the covenants and provisions to be kept and performed by Tenant under this Lease, hereby leases to Tenant effective the Commencement Date (defined below),
and Tenant agrees to lease from Landlord, the Leased Premises. 
  
 ARTICLE 1 - TERM OF LEASE 
  
 Section 1.01.
Term. 
  
 This Lease shall be for a term of five (5) years (the
“Lease Term”), commencing at 12:01 A.M. on the Commencement Date (defined as June 1, 2005) unless terminated earlier pursuant to the provisions of this Lease. Provided that Tenant is not in default, Tenant shall have the right to
extend the Lease Term for one additional period of five (5) years (the “Option Period”), which shall commence on June 1, 2010 (the “Option Commencement Date”). Tenant shall notify Landlord in writing not less than
six (6) months prior to the Option Commencement Date of its decision to extend the Lease Term through the Option Period. Within sixty (60) days prior to the Option Commencement Date, the parties shall mutually agree upon the Base Rent for the Option
Period, which shall reflect the prevailing fair market value for the Leased Premises during the Option Period (the “Option Period Base Rent”). In the event that the parties are unable to agree on the Option Period Base Rent, the
parties shall engage a third party arbitrator experienced in the leasing sector of the real estate industry (the “Arbitrator”) to determine the Option Period Base Rent, which shall not be higher than the amount Landlord proposes,
nor lower than the amount Tenant proposes. The costs and expenses of the Arbitrator shall be borne equally between Landlord and Tenant. In addition to paying the Option Period Base Rent, Tenant shall pay Additional Rent (as hereinafter defined) for
the Leased Premises in accordance with the provisions set forth below in Section 2.05. 
  
 Section 1.02. Holding Over. 
  
 In the event Tenant
holds over and continues in possession of the Leased Premises after expiration of the Lease Term, Tenant’s continued occupancy of the Leased Premises shall be considered a month-to-month tenancy subject to all the terms and conditions of this
Lease. 

 ARTICLE 2 - RENT 
  
 Section 2.01. Monthly Base Rent. 
  
 Beginning on the Commencement Date in Section 1.01, the monthly Base Rent for the Lease shall be due and payable in the following amounts:

  

			
	Rental Period

	 	Monthly Base Rent

	June 1, 2005 to September 30, 2005	 	$13,225 per month
	October 1, 2005 to June 30, 2007	 	$14,450 per month
	July 1, 2007 to May 31, 2010	 	$14,625 per month
	Option Period	 	As determined in accordance with Section 1.01

  
 The monthly Base Rent shall be due on
the Commencement Date and on the first of each month thereafter during the Lease Term. If the term of the Lease begins on a day other than the first day of the month, the Base Rent due at the Commencement Date shall be prorated to the end of the
month and the rent paid upon execution of the Lease shall be applied to the first full calendar month of the Lease. 
  
 Section 2.02. Prepaid Rent and Security Deposit. 
  
 No prepaid rent has been paid by Tenant. On execution of this Lease, Tenant shall deposit with Landlord $13,225 as a security deposit for the performance by Tenant of the
provisions of this Lease. If Tenant is in default, Landlord can use the security deposit, or any portion of it, to cure the default or to compensate Landlord for all damage sustained by Landlord resulting from Tenant’s default. Tenant shall
immediately on demand pay to Landlord a sum equal to the portion of the security deposit expended or applied by Landlord as provided in this paragraph so as to maintain the security deposit in the sum initially deposited with Landlord. If Tenant is
not in default at the expiration or termination of this Lease, Landlord shall return the security deposit to Tenant. Landlord’s obligations with respect to the security deposit are those of a debtor and not a trustee. Landlord can maintain the
security deposit separate and apart from Landlord’s general funds or can commingle the security deposit with Landlord’s general and other funds. Landlord shall not be required to pay Tenant interest on the security deposit. 
  
 Section 2.03. Late Charge. 
  
 Tenant acknowledges that late payment by Tenant to Landlord of rent will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult and impracticable to fix. Such costs include, without limitation, processing and accounting charges, and late charges that may be imposed on
Landlord by the terms of any encumbrance and note secured by any encumbrance covering the Leased Premises. Therefore, if any installment of rent due from Tenant on the 1st of the month is not received by Landlord on or before the 10th day of the month, Tenant shall pay to Landlord an additional sum of five percent (5%) of the overdue rent as a late charge. By initialing in the place provided below, the parties agree that this late
charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of late payment by Tenant. Acceptance of any late charge shall not constitute a waiver of Tenant’s default with respect to the overdue amount, or
prevent Landlord from exercising any of the other rights and remedies available to Landlord. 
  

			
	Landlord: /s/ MS	 	                     Tenant: /s/
JM

  
 Section 2.05. Additional
Rent. 
  
 All amounts payable by Tenant under this Lease other than the
Base Rent under Section 2.01 shall be deemed “Additional Rent” and the term Rent under this Lease shall mean the Base Rent and Additional Rent. Landlord shall estimate in advance and charge to Tenant the following costs, to be paid
with the Base Rent on a monthly basis throughout the Lease Term: 
  

	 	(a)	The Tenant’s proportionate share of all Real Property Taxes for which Tenant is liable under Section 2.06 of the Lease; 

	 	(b)	The Tenant’s proportionate share of all utility costs (if utilities are not separately metered and billed directly to Tenant) for which Tenant is liable under Section 2.07;

  

	 	(c)	The Tenant’s proportionate share of all insurance premiums for which Tenant is liable under Section 5.05; 

  

	 	(d)	The Tenant’s proportionate share of all Outside Area Maintenance (“OAM”) costs for which Tenant is liable under Section 6.03; and 

  

	 	(e)	The Tenant’s proportionate share of the cost and expense of repairs to the “building systems” of the Building made by the Landlord under Section 4.02(b).

  
 For purposes of this Lease, Tenant’s
proportionate share of the items described above is 59.34% of the total of such items for the Property. 
  
 Collectively, the Real Property Taxes, Utility Costs, Insurance Costs, and OAM Expenses (if not paid by Tenant directly) shall be the “Total
Operating Costs”. Landlord may adjust its estimates of Total Operating costs no more than two times per fiscal year based upon Landlord’s experience and reasonable anticipation of costs. Such adjustments shall be effective as of the
next Rent payment date after notice to Tenant. Within 120 days after the start of each fiscal year during the Lease Term, Landlord shall deliver to Tenant a statement prepared in accordance with generally accepted accounting principles setting forth
in reasonable detail, the Total Operating Costs paid or incurred by Landlord during the preceding fiscal year. Within 30 days after Tenant’s receipt of such statement, there shall be an adjustment between Landlord and Tenant, with payment to or
credit given by Landlord (as the case may be) in order that Landlord shall receive the entire amount of Tenant’s share of such costs and expenses for such period. Unless the Lease provides otherwise, Tenant shall pay all Additional Rent then
due with the next monthly installment of Base Rent. 
  
 Section 2.06.
Real Property Taxes. 
  
 Tenant shall pay its proportionate share (as
defined in Section 2.05) of all Real Property Taxes on the Property attributable to the Lease Term. Tenant shall make such payments in accordance with Section 2.05. If Landlord shall receive a refund of any real property taxes with respect to which
Tenant shall have paid to, or on behalf of, Landlord, Landlord shall pay to Tenant the amount of such refund after deducting therefrom the costs and expenses incurred in connection therewith. “Real Property Tax” shall mean taxes,
assessments (special, betterment, or otherwise), levies, fees, rent taxes, impositions, excises, charges, water and sewer rents and charges, and all other government levies and charges, general and special, ordinary and extraordinary, foreseen and
unforeseen, which are imposed or levied upon or assessed against the Property or any Rent or other sums payable by any Tenants or occupants thereof. 
  
 Section 2.07. Utilities. 
  
 To the extent separately metered, Tenant shall pay promptly, directly to the appropriate provider, the cost of all natural gas, heating, cooling, energy, light, power,
sewer service, telephone, water, refuse disposal and other utilities and services supplied to the Leased Premises allocable to Lease Term and any additional period the Tenant occupies the Leased Premises, together with any related installation or
connection charges or deposits. With respect to any utilities that are separately metered, Landlord shall not be liable for damages, consequential or otherwise, nor shall there be any Rent abatement arising out of any curtailment or interruption
whatsoever in utility services. In addition, Tenant shall pay its proportionate share of (as defined in Section 2.05) of any utilities described in this Section 2.07 attributable to the Property which are not separately metered or separately billed.

 Section 2.08. Personal Property Taxes. 
  
 Tenant shall pay before they become delinquent all taxes, assessments, and other charges
levied or imposed by any governmental entity on Tenant’s possession of the premises, the furniture, trade fixtures, appliances, and other personal property placed by Tenant in, on, or about the Leased Premises including, without limiting the
generality of the other terms used in this section, any shelves, counters, vaults, vault doors, wall safes, partitions, fixtures, machinery, plant equipment, office equipment, television or radio antennas, and communication equipment brought within
the Leased Premises by Tenant. 
  
 ARTICLE 3 - USE OF LEASED
PREMISES 
  
 Section 3.01. Permitted Use. 

 
 During the Term of this Lease, the Leased Premises shall be used for the exclusive
purpose of manufacturing, warehousing, distribution, and ancillary office uses in the operating and conducting of Tenant’s business in the manner presently conducted, for uses normally incident to that purpose, and for no other purpose. Tenant
shall not use or permit the Leased Premises to be used for any other purpose without the prior written consent of Landlord. 
  
 Section 3.02. Insurance Hazards. 
  
 Tenant shall not commit or permit the commission of any acts within the Leased Premises nor use or permit the use of the Leased Premises in any manner that will increase
the existing rates for or cause the cancellation of any fire, liability, or other insurance policy insuring the Leased Premises or the improvements on the Leased Premises. Tenant shall, at its own cost and expense, comply with any and all
requirements of Landlord’s insurance carriers necessary for the continued maintenance at reasonable rates of fire and liability insurance policies on the Leased Premises and the improvements within the Leased Premises. 
  
 Section 3.03. Waste or Nuisance. 
  
 Tenant shall not commit or permit the commission by others of any waste within the Leased
Premises. Tenant shall not maintain or commit any nuisance as defined in Civil Code Section 3479 within the Leased Premises. Tenant shall not use or permit the use of the Leased Premises for any unlawful purpose. 
  
 Section 3.04. Compliance With Laws. 
  
 Tenant shall at Tenant’s own cost and expense comply in all material respects with all
statutes, ordinances, regulations, and requirements of all governmental entities, both federal and state and county or municipal, relating to Tenant’s specific use and occupancy of the Leased Premises, including without limitation those
statutes, ordinances, regulations, and requirements now in force and those subsequently enacted or effective. 
  
 Section 3.05. Parking Space. 
  
 Landlord will designate parking spaces marked “Reserve” for use by Tenant among the existing parking spaces for the building, and shall allocate the number of spaces to Tenant in the same proportion as the square footage of
the Leased Premises bears to the square footage of the entire building, but in no event fewer than twenty (20) contiguous parking spaces. 
  
 Section 3.06. Access to Dayton Street. 
  
 Landlord will provide Tenant with unobstructed access for trucks and employees to enter the Leased 

 Premises from Dayton Street and along the narrow side of the building, including adequate space for such trucks to
properly access the delivery area and the roll-up doors at the Leased Premises, and to turn to properly enter and exit for deliveries. Tenant (and its employees and invitees) shall use reasonable care and obey all applicable ordinances or laws
regarding parking and entering or exiting public property near or adjacent to the Leased Premises. 
  
 Section 3.07. Hazardous Materials. 
  
 As used in this Lease, the term “Hazardous Material” shall mean any flammable items, explosives, radioactive materials, oil, hazardous or toxic substances, material or waste or related materials,
including any substances defined as or included in the definition of “hazardous substance”, “hazardous wastes”, “hazardous materials” or “toxic substances” now or subsequently regulated under any applicable
Federal, state or local laws or regulations, including without limitation petroleum-based products, paints, solvents, lead, cyanide, DDT, printing inks, acids, pesticides, ammonia compounds and other chemical products, asbestos, PCBs and similar
compounds, and including any different products and materials which are subsequently found to have adverse effects on the environment or the health and safety of persons. Tenant shall not cause or permit any Hazardous Material to be generated,
produced, brought upon, used, stored, treated or disposed of in or about the Property in any reportable amount, and all Hazardous Material to be generated, produced, brought upon, used, stored, treated or disposed of in or about the Property shall
be in compliance with all applicable laws, rules, and regulations. 
  
 If the
transportation, storage, use or disposal of Hazardous Materials within the Leased Premises by Tenant results in the contamination of the soil or surface or ground water or loss or damage to person(s) or property, then Tenant agrees to: (a) notify
Landlord immediately of any contamination, claim of contamination, loss or damage, (b) after consultation with the Landlord, clean up the contamination in full compliance with all applicable statutes, regulations and standards and (c) indemnify,
defend and hold Landlord harmless from and against any claims, suits, causes of action, costs and fees, including attorney’s fees and costs, arising from or connected with any such contamination, claim of contamination, loss or damage. Tenant
shall not be responsible for any Hazardous Materials generated, produced, brought upon, used, stored, treated or disposed of in or about the Property in any reportable amount prior to the Commencement Date. Tenant agrees to fully cooperate with
Landlord and provide such documents, affidavits and information as may be requested by Landlord (i) to comply with any environmental law, (ii) to comply with the request of any lender, purchaser or tenant, and/or (iii) for any other reason deemed
necessary by Landlord in its sole discretion. Tenant shall notify Landlord promptly in the event of any spill or other release of any Hazardous Material at, in, on, under or about the Leased Premises which is required to be reported to a
governmental authority under any environmental law, will promptly forward to Landlord copies of any notices received by Tenant relating to alleged violations of any environmental law and will promptly pay when due any fine or assessment against
Landlord, Tenant or the Leased Premises relating to any violation by Tenant of an environmental law during the term of this Lease. If a lien is filed against the Leased Premises by any governmental authority resulting from the need to expend or the
actual expending of monies arising from an act or omission, whether intentional or unintentional, of Tenant, its agents, employees or invitees, or for which Tenant is responsible, resulting in the releasing, spilling, leaking, leaching, pumping,
emitting, pouring, emptying or dumping of any Hazardous Material into the waters or onto land located within or without the State where the Leased Premises is located, then Tenant shall, within thirty (30) days from the date that Tenant is first
given notice that such lien has been placed against the Leased Premises (or within such shorter period of time as may be specified by Landlord if such governmental authority has commenced steps to cause the Leased Premises to be sold pursuant to
such lien) either (i) pay the claim and remove the lien, or (ii) furnish a cash deposit, bond, or such other security with respect thereto as is satisfactory in all respects to Landlord and is sufficient to effect a complete discharge of such lien
on the Leased Premises. Landlord shall have the right, but not the obligation, without in any way limiting Landlord’s other rights and remedies under this Lease, to enter upon the Leased Premises, or to take such other actions as it deems
necessary or advisable, to investigate, clean up, remove or remediate any Hazardous Materials or contamination by Hazardous Materials present on, in, at, under or emanating from the Leased Premises or the Property in violation of Tenant’s
obligations under this Lease or under any laws regulating 

 Hazardous Materials. Notwithstanding any other provision of this Lease, Landlord shall have the right, at its election,
in its own name or as Tenant’s agent, to negotiate, defend, approve and appeal, at Tenant’s expense, any action taken or order issued by any governmental agency or authority with any governmental agency or authority against Tenant,
Landlord or the Leased Premises or Property relating to any Hazardous Materials or under any related law or the occurrence of any event or existence of any condition that would cause a breach of any of the covenants set. forth in this Section 3.07.
Prior to or promptly after the expiration or termination of this Lease, Landlord may require an environmental audit of the Leased Premises by a qualified environmental consultant. If such audit finds that there has been an occurrence of any event or
existence of any condition that would constitute a breach by Tenant of any of the covenants set forth in this Section 3.07, then Tenant shall pay the costs of such audit and shall, at its sole cost and expense, take all reasonable actions
recommended in such audit to remediate any environmental conditions. The provisions of this Section 3.07 shall survive the expiration or earlier termination of this Lease. 
  
 Section 3.08. Signs and Auctions. 
  
 Tenant shall not place any signs on the Property without Landlord’s prior written consent, which shall not be unreasonably withheld or
delayed. Except in the ordinary course of business, Tenant shall not conduct or permit any auctions or sheriff’s sales at the Property. Landlord may place customary “For Sale” or “For Lease” signs on the Leased Premises.

  
 Section 3.09. Landlord’s Access. 
  
 Landlord or its agents may enter the Leased Premises at all reasonable times to show the
Leased Premises to potential buyers, investors or, within the last six (6) months of the Lease Term, tenants; to do any other act or to inspect and conduct tests in order to monitor Tenant’s compliance with all applicable environmental laws and
all laws governing the presence and use of Hazardous Material; or for any other purpose Landlord deems necessary. Landlord shall give Tenant prior notice (which may be oral) of such entry, except in the case of an emergency, in which event Landlord
shall make reasonable efforts to notify Tenant. 
  
 Section 3.10.
Installation and Removal of Trade Fixtures. 
  
 Tenant shall have the
right at any time and from time to time during the Term of this Lease, at Tenant’s sole cost and expense, to install and affix in, to, or on the Leased Premises any items, herein called “trade fixtures,” for use in Tenant’s trade
or business that Tenant may, in Tenant’s sole discretion, deem advisable. Any and all trade fixtures that can be removed without structural damage to the Leased Premises or any building or improvements on the Leased Premises shall, subject to
Section 3.11 of this Lease, remain the property of the Tenant and may be removed by Tenant at any time before the expiration or earlier termination of this Lease, provided Tenant repairs any damage caused by the removal. 
  
 Section 3.11. Unremoved Trade Fixtures. 
  
 Any trade fixtures that are not removed from the Leased Premises by Tenant within 30 days
after the expiration or earlier termination of this Lease regardless of cause shall be deemed abandoned by Tenant and shall automatically become the property of Landlord as owner of the real property to which they are affixed. 

 ARTICLE 4 - MAINTENANCE, REPAIRS, AND ALTERATIONS 
  
 Section 4.01. Condition of Property. 
  
 (a) Landlord’s Work. Landlord covenants and agrees
to repair or replace (as needed) the roof over the entire building on the Leased Premises (the “Building”) by no later December 1, 2005, as required to ensure the roof is in good condition and repair, and otherwise in compliance
with applicable laws, at all times during the Lease Term. In addition, Landlord agrees to install lockable doors providing entry into the office area of the Building within thirty (30) days of the Execution Date (the repair or replacement of the
roof and the installation of lockable doors are collectively referred to herein as, the “Landlord’s Work”). Landlord agrees to cause all of Landlord’s Work to be performed in a good and workmanlike manner. 
  
 (b) As-Is Condition. Except for the Landlord’s Work
discussed above in Section 4.01(a), Tenant accepts the Leased Premises in their “As-Is” condition as of the execution of the Lease, subject to all recorded matters, laws, ordinances, and governmental regulations and orders. Except as
provided herein, Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation as to the condition of the Leased Premises or the suitability of the Leased Premises for Tenant’s intended use. Tenant represents
and warrants that Tenant has made its own inspection of and inquiry regarding the condition of the Property and is not relying on any representations of Landlord with respect thereto. 
  
 Section 4.02. Maintenance by Landlord. 
  
 In addition to the Landlord’s Work above in Section 4.01(a), 
  
 (a) Landlord shall, at its own cost and expense, maintain in good condition and repair the structural elements of the
Building. For purposes of this section, “structural elements” shall mean the exterior roof, structural supports, and foundation of the Building, exterior walls, exterior windows, exterior ceilings, exterior lights, glazing and slab floors;
and 
  
 (b) Landlord shall maintain in good condition and repair
the building systems of the Building. For purposes of this section, “building systems” shall mean electrical, plumbing, fire protection, heating, ventilation and air conditioning systems. Tenant shall pay Landlord its proportionate share
(as defined in Section 2.05) for the cost and expense of such repairs and maintenance to the “building systems” of the Building. Tenant shall make such payments in accordance with Section 2.05. 
  
 Landlord shall not be liable for any damages to Tenant or the property of Tenant resulting
from Landlord’s failure to make any repairs required by this Section unless written notice of the need for those repairs has been given to Landlord by Tenant and Landlord has failed for a period of 30 days after receipt of the notice, unless
prevented by causes not the fault of the Landlord, to make the needed repairs. Notwithstanding anything in this Section to the contrary, Tenant shall promptly reimburse Landlord for the full cost of any repairs made pursuant to this Section required
because of the negligence or other fault, other than normal and proper use, of Tenant or its employees or agents or subtenants, if any. Landlord and its agents shall have the right to enter the Leased Premises at all reasonable times (and at any
time during an emergency) for the purpose of inspecting them or to make any repairs required to be made by Landlord under this Lease. 
  
 Section 4.03. Maintenance by Tenant. 
  
 Except as otherwise expressly provided in Section 4.02 of this Lease, Tenant shall at its own cost and expense keep and maintain all portions of the Leased Premises in
good order and repair and in as safe and clean a condition as they were when received by Tenant from Landlord, reasonable wear and tear excepted. Tenant’s obligation to repair shall specifically include necessary repairs to the interior walls,
floor coverings, drop ceilings, painting and maintenance of interior walls, the interior and exterior portions of all doors for the Leased Premises. If any portion of the Leased Premises or any system or equipment in the Leased Premises which Tenant
shall be obligated to repair cannot be fully repaired or restored, Tenant shall promptly replace such portion of the Leased Premises or system or equipment, regardless of 

 whether the benefit of such replacement extends beyond the Lease Term; but if the benefit or useful life extends beyond
the Lease Term, the cost of such replacement shall be prorated between the Landlord and Tenant based on the remaining portion of the Lease Term. 
  
 Section 4.04. Improvements to Leased Premises. 
  
 Tenant shall not make any improvements to the Leased Premises without Landlord’s prior written consent, which shall not be unreasonably withheld. Landlord shall be
under no obligation to construct or pay for any alterations or improvements, and any Tenant improvements or alteration approved by Landlord in writing shall be at Tenant’s sole expense. 
  
 Section 4.05. Liens. 
  
 Tenant shall keep the Leased Premises free and clear from any and all liens, claims, and
demands for work performed, materials furnished, or operations conducted on the Leased Premises at the instance or request of Tenant. In the event that Landlord approves any material Tenant alterations requested by Tenant, then, at least 10 days
before any work commences or any materials are delivered for any approved alterations, additions, improvements, or repairs Tenant is making to the Leased Premises, Tenant shall give written notice to Landlord when the work is to commence or the
materials are to be delivered. Landlord shall then have the right to post and maintain on the Leased Premises any notices that are required to protect Landlord and Landlord’s interest in the Leased Premises from any liens for work and labor
performed or materials furnished in making the alterations, additions, improvements, or repairs; provided, however, that it shall be the duty of Tenant, and nothing contained in this section shall excuse performance of that duty, to keep the Leased
Premises free and clear of all liens, claims, and demands for work performed, materials furnished, or operations conducted on the Leased Premises at the instance or request of Tenant. 
  
 Furthermore, any and all alterations, additions, improvements, and fixtures, except furniture and trade fixtures, made or placed in or on
the Leased Premises by Tenant or any other person shall on expiration or earlier termination of this Lease, become the property of Landlord and remain on the Leased Premises. Landlord shall have the option, however, on expiration or termination of
this Lease, of requiring Tenant, at Tenant’s sole cost and expense, to remove any or all such alterations, additions, improvements, or fixtures from the Leased Premises. 
  
 Section 4.06. Inspection By Landlord. 
  
 Tenant shall permit Landlord and Landlord’s agents, representatives, or employees to enter the Leased Premises at all reasonable times
upon reasonable notice for the purpose of inspecting the Leased Premises to determine whether Tenant is complying with the terms of this Lease, for the purpose of doing other lawful acts that may be necessary to protect Landlord’s interest in
the Leased Premises, and for the purpose of performing Landlord’s duties under this Lease. 
  
 Section 4.07. Surrender of Leased Premises. 
  
 On expiration or earlier termination of this Lease, Tenant shall promptly surrender and deliver the Leased Premises to Landlord in as good condition as they are now at the Commencement Date, excluding reasonable wear
and tear, and repairs required to be made by Landlord under this Lease. 
  
 ARTICLE 5 - INSURANCE AND INDEMNITY PROVISIONS 
  
 Section 5.01. Liability Insurance. 
  
 During the
Lease Term and for any additional period in which the Tenant shall remain in the Leased Premises (the “Occupancy Period”), the Tenant shall maintain in effect commercial general liability insurance insuring Tenant against liability
for bodily injury, property damage (including loss of use of 

 property) and personal injury at the Leased Premises. Such insurance shall name Landlord as an additional insured. The
amount of such insurance shall be One Million Dollars ($1,000,000) per occurrence. The liability insurance obtained by Tenant under this Section 5.01 shall (i) be primary and (ii) insure Tenant’s obligations to Landlord under Section 5.08. The
amount and coverage of such insurance shall not limit Tenant’s liability nor relieve Tenant of any other obligation under this Lease. Landlord may also obtain commercial general liability insurance in an amount and with coverage determined by
Landlord insuring Landlord against liability with respect to the Leased Premises and the Property. The policy obtained by Landlord shall not be contributory, shall not provide primary insurance, and shall be excess over any insurance maintained by
Tenant. 
  
 Section 5.02. Worker’s Compensation Insurance.

  
 During the Occupancy Period, Tenant shall maintain in effect
Worker’s Compensation Insurance (including Employees’ Liability Insurance) in the statutory amount covering all employees of Tenant employed or performing services at the Leased Premises, in order to provide the statutory benefits required
by the laws of the state in which the Leased Premises are located. 
  
 Section 5.03. Automobile Liability Insurance. 
  
 During the Occupancy Period, Tenant shall maintain in effect Automobile Liability Insurance, including but not limited to, passenger liability, on all owned, non-owned, and hired vehicles used in connection with the Leased Premises, with a
combined single limit per occurrence of not less than One Million Dollars ($1,000,000) for injuries or death of one or more persons or loss or damage to property. 
  
 Section 5.04. Personal Property Insurance. 
  
 During the Occupancy Period, Tenant shall maintain in effect Personal Property Insurance covering leasehold improvements paid for by Tenant
and Tenant’s personal property and fixtures from time to time in, on, or at the Leased Premises, in an amount not less than 100% of the full replacement cost, without deduction for depreciation, providing protection against events protected
under “All Risk Coverage”, as well as against sprinkler damage, vandalism, and malicious mischief. Any proceeds from the Personal Property Insurance shall be used for the repair or replacement of the property damaged or destroyed, unless
this Lease is terminated under an applicable provision herein. If the Leased Premises are not repaired or restored following damage or destruction in accordance with other provisions herein, Landlord shall receive any proceeds from the Personal
Property Insurance allocable to Tenant’s leasehold improvements. 
  
 Section 5.05. Landlord’s Property and Rental Income Insurance. 
  
 During the Lease Term, Landlord shall maintain in effect all risk insurance covering loss of or damage to the Property in the amount of its replacement value with such endorsements and deductibles as Landlord shall
determine from time to time. Landlord shall have the right to obtain flood, earthquake, and such other insurance as Landlord shall determine from time to time or shall be required by any lender holding a security interest in the Property. Landlord
shall not obtain insurance for Tenant’s fixtures or equipment or building improvements installed by Tenant. During the Lease Term, Landlord shall also maintain a rental income insurance policy, with loss payable to Landlord, in an amount equal
to one year’s Base Rent, plus estimated real property taxes, operating expenses, and insurance premiums. Tenant shall not do or permit anything to be done which shall invalidate any such insurance. Any increase in the cost of Landlord’s
insurance due to Tenant’s use or activities at the Leased Premises shall be paid by Tenant to Landlord as Additional Rent hereunder. 

 Section 5.06. Payment of Insurance Premiums. 
  
 Landlord shall pay the premiums of the insurance policies maintained by Landlord under 5.01
(if applicable) and Section 5.05 , and, Tenant shall reimburse Landlord for its proportionate share of such premiums in accordance with Section 2.05. Tenant shall pay directly the premiums of the insurance policies maintained by Tenant under
Sections 5.01, 5.02, 5.03 and 5.04. 
  
 Section 5.07. General
Insurance Provisions. 
  
 (a) Written Cancellation
Notice. Any insurance which Tenant shall be required to maintain under this Lease shall include a provision which requires the insurance carrier to give Landlord not less than thirty (30) days’ written notice prior to any cancellation
or modification of such coverage. 
  
 (b) Certificate of
Insurance. Prior to the earlier of Tenant’s entry into the Leased Premises or the Commencement Date, Tenant shall deliver to Landlord an insurance company certificate that Tenant maintains the insurance required by Sections 5.01, 5.02,
5.03 and 5.04 and not less than thirty (30) days prior to the expiration or termination of any such insurance, Tenant shall deliver to Landlord renewal certificates therefor. Tenant shall provide Landlord with copies of the policies promptly upon
request from time to time. If Tenant shall fail to deliver any certificate or renewal certificate to Landlord required under this Lease within the prescribed time period, when that failure continues for 10 (ten) days after written notice of
Tenant’s failure is given by Landlord by Tenant, or if any such policy shall be canceled or modified during the Lease Term without Landlord’s consent, Landlord may obtain such insurance, in which case Tenant shall reimburse Landlord, as
additional Rent, for 110% of the cost of such insurance within ten (10) days after receipt of a statement of the cost of such insurance. Landlord acknowledges that as of the date of this Lease, it has (i) reviewed and approved the certificate
delivered by Tenant, and agrees that it complies with the requirements contained in this Article V, or (ii) waived the requirement for Tenant to deliver a certificate in compliance with the requirements set forth in this Lease. 
  
 (c) Insurance Company Rating. Tenant shall maintain all
insurance required under this Lease with companies having a “General Policy Rating” of A- as set forth in the most current issue of the Best Key Rating Guide. Landlord and Tenant, on behalf of themselves and their insurers, each hereby
waive any and all rights of recovery against the other, or against the officers, partners, employees, agents, or representatives of the other, for loss of or damage to its property or the property of others under its control, if such loss or damage
shall be covered by any insurance policy in force (whether or not described in this Lease) at the time of such loss or damage. All property insurance carried by either party shall contain a waiver of subrogation against the other party to the extent
such right shall have been waived by the insured party prior to the occurrence of loss or injury. 
  
 Section 5.08. Indemnity. 
  
 To the fullest extent permitted by law, Tenant hereby waives all claims against Landlord, its agents, advisors, employees, members, officers, directors, partners, trustees, beneficiaries and shareholders (each a “Landlord
Party”), and the agents, advisors, employees, members, officers, directors, partners, trustees, beneficiaries and shareholders of each Landlord Party (collectively the “Indemnitees”) for damage to any property or injury to
or death of any person in, upon or about the Leased Premises or the Property arising at any time and from any cause, except to the extent caused by the negligence or willful misconduct of Landlord, its agents, employees or contractors, and Tenant
shall hold Indemnitees harmless from and defend Indemnitees from and against all claims, liabilities, judgments, demands, causes of action, losses, damages, costs and expenses including reasonable attorney’s fees for damage to any property or
injury to or death of any person arising in or from (i) the use or occupancy of the Leased Premises by Tenant or persons claiming under Tenant, except to the extent caused by the negligence or willful misconduct of Landlord, its agents, employees or
contractors, or (ii) arising from the negligence or willful misconduct of Tenant or its employees, in, upon or about the Property, or (iii) arising out of any breach or default by Tenant under this Lease. The provisions of this Section 5.09 shall
survive the expiration or termination of this Lease with respect to any damage, injury, or death occurring prior to such time. 

 ARTICLE 6 - OUTSIDE AREAS 
  
 Section 6.01. Outside Areas. 
  

As used in this Lease, “Outside Areas” shall mean all areas within the Property which are outside the building envelope, including, but not limited
to, parking areas, driveways, sidewalks, access roads, landscaping, and planted areas. So long as any changes do not materially impact Tenant’s access to the Leased Premises or availability of parking spaces to Tenant on the Leased Premises,
Landlord, from time to time, may change the size, location, nature, and use of any of the Outside Areas, convert Outside Areas into leaseable areas, construct additional parking facilities (including parking structures) in the Outside areas, and
increase or decrease Outside Area land or facilities. Tenant acknowledges that such activities may result in inconvenience to Tenant. Such activities and changes are permitted if Landlord provides written notification to Tenant of such activities
and changes at least thirty (30) days prior to the activities and changes, and the activities and changes do not materially affect Tenant’s use of the Leased Premises. 
  
 Section 6.02. Use of Outside Areas. 
  
 Tenant shall have the nonexclusive right to use the Outside Areas for the purposes intended, subject to such reasonable rules and
regulations (“Rules and Regulations”) as Landlord may establish or modify from time to time and as initially set forth in Exhibit B; provided, however, that Landlord shall not modify the Rules and Regulations in any material
respect after the date of this Lease without Tenant’s consent. Tenant shall abide by all such Rules and Regulations and shall use its best efforts to cause others who use the Outside Areas with Tenant’s express or implied permission to
abide by Landlord’s Rules and Regulations. At any time, Landlord may close any Outside Areas to perform any acts in the Outside Areas as, in Landlord’s reasonable judgment, are desirable to maintain or improve the Property as long as such
closure or performance of any acts does not materially affect Tenant’s use of the Property. Tenant shall not interfere with the rights of Landlord, other tenants, or any other person entitled to use the Outside Areas. 
  
 Section 6.03. Outside Area Maintenance. 
  
 Tenant shall maintain the Outside Areas in good order, condition and repair. Outside Area
maintenance expenses (“OAM Expenses”) are all costs and expenses associated with the operation and maintenance of the Outside Areas excluding the structural elements that Landlord is required to maintain under Section 4.02(a).
Tenant shall pay its proportionate share of OAM Expenses in accordance with Section 2.05. 
  
 ARTICLE 7 - DESTRUCTION OF LEASED PREMISES 
  
 Section 7.01. Damage to Leased Premises. 
  
 (a) Continuation of Lease. Tenant shall notify Landlord in writing immediately upon the occurrence of any damage to the Leased Premises. If the Leased Premises shall be only partially damaged (i.e., the
restoration shall be estimated by Landlord to require less than six (6) months from the date of such damage) and if the proceeds received by Landlord from the insurance policies described in Section 5.05 shall be sufficient to pay for the necessary
repairs, this Lease shall remain in effect and Landlord shall repair the damage as soon as reasonably possible. Landlord may elect (but shall not be required) to repair any damage to Tenant’s fixtures, equipment, or improvements at
Tenant’s expense. 
  
 (b) Election of Landlord Whether
to Continue Lease. If the insurance proceeds received by Landlord shall not be sufficient to pay the entire cost of repair, or if the damage shall not be covered by the insurance policies which Landlord shall maintain under Section
5.05, Landlord may elect either to (i) 

 repair the damage as soon as reasonably possible, in which case this Lease shall remain in full force and effect, or (ii)
terminate this Lease as of the date the damage occurred. Landlord shall notify Tenant within thirty (30) days after receipt of notice of the occurrence of the damage whether Landlord elects to repair the damage or terminate this Lease. If Landlord
shall elect to repair the damage, Tenant shall pay Landlord the portion of the “deductible amount” under Landlord’s insurance allocable to the damage to the Leased Premises and, if the damage shall have been due to an act or omission
of Tenant, or Tenant’s employees, agents, contractors or invitees, the difference between the actual cost of repair and any insurance proceeds received by Landlord. 
  
 (c) Damage During Last 6 Months of Lease. If the damage to the Leased Premises shall occur during the last six
(6) months of the Lease Term and such damage shall be estimated by Landlord to require more than thirty (30) days to repair, either Landlord or Tenant may elect to terminate this Lease as of the date the damage shall have occurred, regardless of the
sufficiency of any insurance proceeds. The party electing to terminate this Lease shall give written notification to the other party of such election within ten (10) days after Tenant’s notice to Landlord of the occurrence of the damage.

  
 Section 7.02. Temporary Reduction of Rent. 
  
 If the Property shall be destroyed or damaged and Landlord shall repair or restore the
Property pursuant to the provisions of this Article 7, any Rent payable during the period of such damage, repair and/or restoration shall be reduced according to the degree, if any, to which Tenant’s use of the Leased Premises shall be
impaired. Except for such possible reduction in Base Rent, insurance premiums and real property taxes, Tenant shall not be entitled to any compensation, reduction or reimbursement from Landlord as a result of any damage, destruction, repair, or
restoration of the Property. 
  
 Section 7.03. Waiver.

  
 Tenant waives the protection of California Civil Code Sections 1932 and
1933(4) and any other statute, code or judicial decision which shall grant a tenant the right to terminate a lease in the event of the damage or destruction of the leased property and the provisions of this Article 7 shall govern the rights and
obligations of Landlord and Tenant in the event of any damage or destruction of or to the Property. 
  
 ARTICLE 8 - CONDEMNATION 
  
 Section 8.01. Condemnation. 
  
 If more than twenty percent (20%) of the floor area of the Leased Premises or more than twenty-five percent (25%) of the parking on the Property shall be taken by eminent domain either Landlord or Tenant may terminate this Lease as of the
date the condemning authority takes title or possession, by delivering notice to the other within ten (10) days after receipt of written notice of such taking (or in the absence of such notice, within ten (10) days after the condemning authority
shall take title or possession). If neither Landlord nor Tenant shall terminate this Lease, this Lease shall remain in effect as to the portion of the Leased Premises not taken, except that the Base Rent shall be reduced in proportion to the
reduction in the floor area of the Leased Premises. If this Lease shall be terminated, any condemnation award or payment shall be distributed to the Landlord. Tenant shall have no claim against Landlord for the value of the unexpired lease term or
otherwise. 
  
 ARTICLE 9 - ASSIGNMENT 
  
 Section 9.01. Restriction Against Subletting or Assignment. 

 
 Other then assigning this Lease to Tenant’s subsidiaries, Tenant shall not encumber,
assign, sublet, or otherwise transfer this Lease, any right or interest in this Lease, or any right or interest in the Leased Premises or any of the improvements that may now or hereafter be constructed or installed on the Leased Premises without
first obtaining the express written consent of Landlord. Tenant shall not sublet the 

 Leased Premises or any part of the Leased Premises or allow any other person, other than Tenant’s agents, servants,
and employees, to occupy the Leased Premises or any part of the Leased Premises without the prior written consent of Landlord. A consent by Landlord to one assignment, one subletting, or one occupation of the Leased Premises by another person shall
not be deemed to be a consent to any subsequent assignment, subletting, or occupation of the Leased Premises by another person. Any encumbrance, assignment, transfer, or subletting without the prior written consent of Landlord, whether voluntary or
involuntary, by operation of law or otherwise, is void and shall, at the option of Landlord, terminate this Lease. The consent of Landlord to any assignment of Tenant’s interest in this Lease or the subletting by Tenant of the Leased Premises
or parts of the Leased Premises shall not be unreasonably withheld. 
  
 Section 9.02. Landlord’s Consent. 
  
 If
Tenant shall assign or sublease all or any portion of the Leased Premises after obtaining the Landlord’s consent as provided in Section 9.01, the following shall apply: 
  
 (a) Tenant shall pay to Landlord as Additional Rent fifty percent (50%) of the Proceeds (defined below) on such transaction
(such amount being Landlord’s share) as and when received by Tenant, unless Landlord shall give notice to Tenant and the assignee or subtenant that Landlord’s Share shall be paid by the assignee or subtenant to Landlord directly. Proceeds
shall mean (a) all Rent and all fees and other consideration paid for or in respect of the assignment or sublease, including fees under any collateral agreements less (b) the Rent and other sums payable under this Lease (in the case of a sublease of
less than all of the Leased Premises, allocated to the subleased premises) and all reasonable costs and expenses directly incurred by Tenant in connection with the execution and performance of such assignment or sublease for reasonable real estate
broker’s commissions, costs associated with marketing the Leased Premises for such assignment or sublease and reasonable costs of renovation or construction of tenant improvements required under such assignment or sublease. Tenant shall be
entitled to recover such reasonable costs and expenses before Tenant shall be obligated to pay Landlord’s Share to Landlord. 
  
 (b) Tenant shall provide Landlord a written statement certifying all amounts to be paid from any assignment or sublease of the Leased Premises within
thirty (30) days after the transaction shall be signed and from time to time thereafter on Landlord’s request, and Landlord may inspect Tenant’s books and records to verify the accuracy of such statement. On written request, Tenant shall
promptly furnish to Landlord copies of all the transaction documentation, all of which shall be certified by Tenant to be complete, true and accurate. Tenant shall promptly reimburse Landlord for all legal costs and expenses incurred by Landlord in
connection with a request for a sublease or assignment of this Lease. 
  
 ARTICLE 10 - DEFAULT AND TERMINATION 
  
 Section
10.01. Tenant’s Default. 
  
 The occurrence of any of the
following shall constitute a material default and breach of this Lease by Tenant: 
  
 (a) Any failure by Tenant to pay the rent or to make any other payment required to be made by Tenant under this Lease, when that failure continues for 10 days after written notice of Tenant’s failure is given by
Landlord to Tenant. 
  
 (b) The abandonment or vacation of the
Leased Premises by Tenant (the absence of Tenant from or the failure by Tenant to conduct business on the Leased Premises for a period in excess of 14 consecutive days shall constitute an abandonment or vacation for purposes of this Lease).

 (c) A failure by Tenant to observe and perform any other provision of this Lease to be observed or
performed by Tenant, when that failure continues for 30 days after written notice of Tenant’s failure is given by Landlord to Tenant; provided, however, that if the nature of that default is such that it cannot reasonably be cured within 30-day
period, Tenant shall not be deemed to be in default if Tenant commences that cure within the 30-day period and thereafter diligently prosecutes it to completion. 
  
 (d) The making by Tenant of any general assignment for the benefit of creditors; the filing by or against Tenant of a
petition to have Tenant adjudged a bankrupt or of a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant, it is dismissed within 60 days); the appointment of a
trustee or receiver to take possession of substantially all of Tenant’s assets located at the Leased Premises or of Tenant’s interest in this Lease, when possession is not restored to Tenant within 30 days; or the attachment, execution, or
other judicial seizure of substantially all of Tenant’s assets located at the Leased Premises or of Tenant’s interest in this Lease, when that seizure is not discharged within 30 days. 
  
 The notices provided for in subsections (a) through (c) of this Section 10.01 are not
intended to replace, but rather are in addition to, any required statutory notices for unlawful detainer proceedings under Code of Civil Procedure Section 1161 et seq. 
  
 Section 10.02. Termination of Lease and Recovery of Damages. 
  
 In the event of any default by Tenant under this Lease, in addition to any other remedies
available to Landlord at law or in equity, Landlord shall have the right to terminate this Lease and all rights of Tenant hereunder by giving written notice of the termination. No act of Landlord shall be construed as terminating this Lease except
written notice given by Landlord to Tenant advising Tenant that Landlord elects to terminate the Lease. In the event Landlord elects to terminate this Lease, Landlord may recover from Tenant: 
  
 (a) Any unpaid rent that had been earned at the time of termination of the
Lease; 
  
 (b) The amount by which the unpaid rent that would have
been earned after termination of the Lease until the time of award exceeds the amount of rental loss that Tenant proves could have been reasonably avoided; 
  
 (c) The amount by which the unpaid rent for the balance of the Term of this Lease after the time of award exceeds the amount of rental loss that Tenant
proves could be reasonably avoided; and 
  
 (d) Any other amount
necessary to compensate Landlord for all detriment proximately caused by Tenant’s failure to perform its obligations under this Lease. 
  
 Section 10.03. Landlord’s Right to Continue Lease in Effect After Breach. 
  
 If Tenant breaches this Lease and abandons the Leased Premises before the expiration of the Term, Landlord may continue this Lease in effect
by not terminating Tenant’s right to possession of the Leased Premises, in which event Landlord shall be entitled to enforce all its rights and remedies under this Lease, including the right to recover the rent specified in this Lease as it
becomes due under this Lease. For as long as Landlord does not terminate this Lease, Tenant shall have the right to assign or sublease the Leased Premises with the Landlord’s prior written consent. Landlord shall not unreasonably withhold
consent. No act of Landlord, including but not limited to Landlord’s entry on the Leased Premises, efforts to relet the Leased Premises, or maintenance of the Leased Premises, shall be construed as an election to terminate this Lease unless a
written notice of that intention is given to Tenant or unless the termination of this Lease is decreed by a court of competent jurisdiction. 

 Section 10.04. Landlord’s Right to Relet. 
  
 In the event Tenant breaches this Lease, Landlord may enter on and relet the Leased Premises
or any part of the Leased Premises to a third party or third parties for any term, at any rental, and on any other terms and conditions that Landlord in its sole discretion may deem advisable, and shall have the right to make alterations and repairs
to the Leased Premises. Tenant shall be liable for all of Landlord’s costs in reletting, including but not limited to remodeling costs required for the reletting. In the event Landlord relets the Leased Premises, Tenant shall pay all rent due
under and at the times specified in this Lease, less any amount or amounts actually received by Landlord from the reletting. 
  
 Section 10.05. Landlord’s Right to Cure Tenant Defaults. 
  
 If, after receipt of the required notice as provided for in Section 10.01, Tenant breaches or fails to perform any of the covenants or
provisions of this Lease, Landlord may, but shall not be required to, cure Tenant’s breach. Any sum expended by Landlord, with the then maximum legal rate of interest, shall be reimbursed by Tenant to Landlord with the next due rent payment
under this Lease. 
  
 Section 10.06. Cumulative Remedies.

  
 The remedies granted to Landlord in this Article shall not be exclusive
but shall be cumulative and in addition to all remedies now or hereafter allowed by law or provided in this Lease. 
  
 Section 10.07. Waiver of Breach. 
  
 The waiver by Landlord of any breach by Tenant of any of the provisions of this Lease shall not constitute a continuing waiver or a waiver of any subsequent breach by
Tenant either of the same or another provision of this Lease. 
  
 Section
10.08. Landlord’s Default. 
  
 In the event Landlord fails to
observe or perform any provision of this Lease, including but not limited to providing Tenant with unobstructed access to the Leased Premises as set forth in Section 3.06, Tenant shall be entitled to pursue all remedies available to Tenant under
applicable law including, without limitation, the right to an abatement of rent from the period commencing with the date in which Tenant notifies Landlord of any default to the date in which Landlord reasonably cures such default. 
  
 ARTICLE 11 - SUBORDINATION, ATTORNMENT, AND ESTOPPEL CERTIFICATES

  
 Section 11.01. Subordination. 
  
 At Landlord’s election, this Lease shall be automatically subordinated to any ground
lease, deed of trust or mortgage encumbering the Property, any advances made on the security thereof and any renewals, modifications, consolidations, replacements or extensions thereof; whenever made or recorded, provided that Tenant obtain a
non-disturbance and attornment agreement on reasonable market terms and provisions reasonably acceptable to the lender and Tenant. Tenant shall cooperate with Landlord and any lender which shall acquire a security interest in the Property or the
Lease. Tenant shall execute such further documents and assurances as such lender may require, provided that Tenant’s obligations under this Lease shall not be increased in any material way (the performance of ministerial acts shall not be
deemed material), and Tenant shall not be deprived of its rights under this Lease, If any ground lessor, beneficiary or mortgagee elects to have this Lease prior to the lien of its ground lease, deed of trust or mortgage and gives written notice
thereof to Tenant, this Lease shall be deemed prior to such ground lease, deed of trust or mortgage whether this Lease is dated prior or subsequent to the date of said ground lease, deed of trust or mortgage or the date of recording thereof.

 Section 11.02. Attornment. 
  
 If Landlord’s interest in the Property is acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or successor to Landlord’s interest in the Property and recognize such transferee or successor as Landlord under this Lease. Tenant waives the protection of any statute
or rule of law which shall give Tenant any right to terminate this Lease or surrender possession of the Leased Premises upon the transfer of Landlord’s interest. 
  
 Section 11.03. Signing of Documents. 
  
 Tenant shall sign and deliver any instrument or documents necessary or appropriate to evidence any such attornment or subordination or
agreement to do so. 
  
 Section 11.04. Estoppel Certificates.

  
 (a) Tenant Estoppel. Within ten (10) days
after Landlord’s request, Tenant shall execute, acknowledge and deliver to Landlord a written statement certifying: (i) that none of the terms or provisions of this Lease have been changed (or if they have been changed, stating how they have
been changed); (ii) that this Lease has not been canceled or terminated; (iii) the last date of payment of the Base Rent and other charges and the time period covered by such payment; (iv) that Landlord is not in default under this Lease (or if
Landlord is claimed to be in default, setting forth such default in reasonable detail); and (v) such other information with respect to Tenant or this Lease as Landlord may reasonably request or which any prospective purchaser or encumbrancer of the
Property may require. Landlord may deliver any such statement by Tenant to any prospective purchaser or encumbrancer of the Property, and such purchaser or encumbrancer may rely conclusively upon such statement as true and correct. If Tenant shall
not deliver such statement to Landlord within such ten (10) day period Landlord, and any prospective purchaser or encumbrancer, may conclusively presume and rely upon the following facts: (i) that the terms and provisions of this Lease have not been
changed except as otherwise represented by Landlord; (ii) that this Lease has not been canceled or terminated except as otherwise represented by Landlord; (iii) that not more than one months Base Rent or other charges have been paid in advance; and
(iv) that Landlord is not in default under this Lease. In such event, Tenant shall be estopped from denying the truth of such facts. 
  
 (b) Landlord Estoppel. Within ten (10) days after Tenant’s request, Landlord shall execute, acknowledge and deliver to Tenant a written
statement certifying: (i) that none of the terms or provisions of this Lease have been changed (or if they have been changed, stating how they have been changed); (ii) that this Lease has not been canceled or terminated; (iii) the last date of
payment of the Base Rent and other charges and the time period covered by such payment; (iv) that Tenant is not in default under this Lease (or if Tenant is claimed to be in default, setting forth such default in reasonable detail); and (v) such
other information with respect to Landlord or this Lease as Tenant may reasonably request or which any prospective purchaser or encumbrancer of Tenant may require. Tenant may deliver any such statement by Landlord to any prospective purchaser or
encumbrancer of Tenant, and such purchaser or encumbrancer may rely conclusively upon such statement as true and correct. If Landlord shall not deliver such statement to Tenant within such ten (10) day period Tenant, and any prospective purchaser or
encumbrancer, may conclusively presume and rely upon the following facts: (i) that the terms and provisions of this Lease have not been changed except as otherwise represented by Tenant; (ii) that this Lease has not been canceled or terminated
except as otherwise represented by Tenant; (iii) that not more than one months Base Rent or other charges have been paid in advance; and (iv) that Tenant is not in default under this Lease. In such event, Landlord shall be estopped from denying the
truth of such facts. 
  
 ARTICLE 12 - MISCELLANEOUS

  
 Section 12.01. Force Majeure—Unavoidable Delays.

  
 If the performance of any act required by this Lease to be performed by
either Landlord or Tenant is 

 prevented or delayed by reason of an act of God, strike, lockout, labor troubles, inability to secure materials,
restrictive governmental laws or regulations, or any other cause except financial inability that is not the fault of the party required to perform the act, the time for performance of the act will be extended for a period equivalent to the period of
delay, and performance of the act during the period of delay will be excused. However, nothing contained in this section shall excuse the prompt payment of rent by Tenant as required by this Lease or the performance of any act rendered difficult
solely because of the financial condition of the party required to perform the act. 
  
 Section 12.02. Attorneys’ Fees. 
  
 If any
litigation is commenced between the parties to this Lease concerning the Leased Premises, this Lease, or the rights and duties of either in relation to the Leased Premises or to this Lease, the party prevailing in that litigation shall be entitled
to, in addition to any other relief that may be granted in the litigation, a reasonable sum as and for its attorneys’ fees in that litigation that are determined by the court in that litigation or in a separate action brought for that purpose.

  
 Section 12.03. Notices. 
  
 Except as otherwise expressly provided by law, any and all notices or other communications
required or permitted by this Lease or by law to be served on or given to either party to this Lease by the other party to this Lease shall be in writing and shall be deemed duly served and given when personally delivered to the party to whom they
are directed, or in lieu of personal service, when deposited in the United States mail, first-class postage prepaid, addressed to Tenant and Landlord as follows: 
  

							
	To Landlord:	  	 Mark Scarr
 A-1 Moving & Storage
 1359-B Dayton Street
 Salinas, CA 93901
	  	With a copy to:	  	 William H. Stoffers
 1418 South Main Street, Suite
202
 Salinas, CA 93908

				
	To Tenant:	  	 Vice President — Operations
 Excelligence Learning
Corporation
 2 Lower Ragsdale Drive, Suite 200
 Monterey, CA
93940
	  	With a copy to:	  	 General Counsel
 Excelligence Learning
Corporation
 2 Lower Ragsdale Drive, Suite 200
 Monterey, CA
93940

  
 All notices or billings which are
mailed will be deemed received three business days after deposit in the United States mail. Either party, Tenant or Landlord, may change its address for the purpose of this section by giving written notice of that change to the other party in the
manner provided in this section. 
  
 Section 12.04. Binding on Heirs
and Successors. 
  
 This Lease shall be binding on and shall inure to the
benefit of the heirs, executors, administrators, successors, and assigns of Landlord and Tenant, but nothing in this section shall be construed as a consent by Landlord to any assignment of this Lease or any interest therein by Tenant. 

 
 Section 12.05. Partial Invalidity. 
  
 If any provision of this Lease is held by a court of competent jurisdiction to be either
invalid, void, or unenforceable, the remaining provisions of this Lease shall remain in full force and effect unimpaired by the holding. 
  
 Section 12.06. Sole and Only Agreement. 
  
 Except for that certain Agreement Subject to Conditions Precedent, dated as of April [11], 2005 between Landlord and Tenant (the “Side Agreement”), this
instrument constitutes the sole and only full, final, and 

 complete agreement between Landlord and Tenant respecting the Leased Premises, the leasing of the Leased Premises to
Tenant, or the Lease term created under this Lease, and correctly sets forth the obligations of Landlord and Tenant to each other as of its date. Any agreements or representations respecting the Leased Premises or their leasing by Landlord to Tenant
not expressly set forth in the Side Agreement or this Lease are null and void. All prior negotiations between the parties are subsumed into the Side Agreement or this Lease to the extent they have been agreed to, and if not agreed to by the parties
such negotiations are not set forth in the terms and conditions of the Side Agreement or this Lease. This Lease may not be extended, amended, modified, altered, or changed, except in a writing signed by Landlord and Tenant. 
  
 Section 12.07. Time of Essence. 
  
 Time is expressly declared to be of the essence in this Lease. 
  
 Section 12.08. Brokerage Commission. 
  
 The parties acknowledge and agree that no broker is involved in this Lease. Each party shall
hold harmless the other party from all damages resulting from any claims that may be asserted against the other party by any broker, finder, or other person, with whom the other party has or purportedly has dealt. 
  
 [signature page follows] 

 This Lease is executed on May 23, 2005, at Salinas, California. 
  
 Landlord: 
  
 A-1 Moving & Storage, a California General Partnership 
  

			
	By:	 	 /s/ Mark Scarr

	 	 	Mark Scarr, General Partner

  
 Tenant: 
  
 Excelligence Learning Corporation, a Delaware corporation 
  

			
	By:	 	 /s/ Judith McGuinn

	 	 	Judith McGuinn
	 	 	Executive Vice President and Chief Operating Officer

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