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SEIFERT ZUROMSKI LLP
Mark J. Seifert (SBN 217054)
Jon-Patrick A. Jones (SBN 333173)
100 Pine Street, Suite 1250 ELECTRONICALLY
San Francisco, California 94111
Tel. (415) 999-0901 FILED
Superior Court of California,
Fax (415) 901-1123 County of San Francisco
Email: mseifert@szllp.com
Email: jjones@szllp.com 03/29/2024
Clerk of the Court
BY: JAMES FORONDA
Attorney for Plaintiffs MM111POTR LP, Deputy Clerk
CHRISTOPHER J. HARNEY,
and CHRISTINA M. HARNEY
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF SAN FRANCISCO
10 MM111POTR LP, a California limited Case No. CGC-24-613496
partnership; CHRISTOPHER J. HARNEY,
11 an individual; and CHRISTINA M. HARNEY, | COMPLAINT FOR DAMAGES FOR
an individual, BREACH OF LEASE
12
Plaintiffs, Unlimited Civil Case
13
VS.
14
EQ3 INC., a Delaware corporation, and
15 DOES | through 25, inclusive,
16 Defendants.
17
18 Plaintiffs MM111POTR LP, CHRISTOPHER J. HARNEY, and CHRISTINA M.
19 HARNEY (“Plaintiffs”) allege as follows:
20 1 Plaintiff MM111POTR LP is and at all relevant times mentioned herein was a
21 limited partnership organized and existing under the laws of the State of California, and authorized]
22 to do business in California.
23 2 Plaintiff CHRISTOPHER J. HARNEY is and at all relevant times mentioned
24 herein was an individual doing business in California.
25 3 Plaintiff CHRISTINA M. HARNEY is and at all relevant times mentioned herein
26 was an individual doing business in California. Plaintiffs MM111POTR LP, CHRISTOPHER J.
27 HARNEY, and CHRISTINA M. HARNEY are collectively referred to herein as “Plaintiffs”.
28
COMPLAINT
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4 Plaintiffs are the owner of the commercial property located at and commonly
known as 2299 Alameda Street, California 94107 (the “Premises”).
5 The Premises is located in the County of San Francisco, State of California.
6. Plaintiffs are informed and believe and thereon allege that defendant EQ3 INC.
(“Tenant”) is and at all relevant times mentioned herein was a Delaware corporation doing
business in the County of San Francisco, State of California.
7 The true names and capacities, whether individual, corporate, associate or
otherwise, of defendants DOES 1 through 25, inclusive, are unknown to Plaintiffs, who therefore
sue these defendants by fictitious names pursuant to Code of Civil Procedure Section 474.
10 Plaintiffs will ask leave of this Court to amend this complaint when said true names and capacities
11 have been ascertained.
12 8 Plaintiffs are informed and believe and thereon allege that at all relevant times
13 mentioned herein each defendant was the agent, employee, co-venturer, partner, or in some
14 manner agent or principal, or both, of each and every other defendant and was acting within the
15 course and scope of such agency or employment.
16 9 On or about February 27, 2014, Thomas F. Murphy and Martina Murphy as
17 Settlors and Trustees of the Murphy Trust UDT Dated October 3, 2003, CHRISTOPHER J.
18 HARNEY, and CHRISTINA M. HARNEY (collectively, “Original Landlord”), as landlord, and
19 Tenant, as tenant, entered into a written lease (the “Lease’’) for the Premises, as described in the
20 Lease. A true and correct copy of the Lease is attached hereto as Exhibit 1 and incorporated
21 herein by this reference.
22 10. On or around December 27, 2019, MM111POTR LP became a co-owner of the
23 Premises and the successor to the rights of Thomas F. Murphy and Martina Murphy as Settlors
24 and Trustees of the Murphy Trust UDT Dated October 3, 2003 under the Lease.
25 11. Prior to the filing of this action, defendants went into possession of the Premises.
26 12. Plaintiffs have fully performed their obligations and duties under, and all
27 conditions of, the Lease.
28 13. Paragraph 4.1 of the Lease provides that Rent, which includes Base Rent and all
COMPLAINT
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other monetary obligations of tenant under the Lease, is payable on or before the first day of each
calendar month.
14. Tenant breached the Lease by failing to pay Base Rent and charges in the amount
of $49,829.27 after the same was due and payable under the Lease on April 1, 2020. Tenant
further breached the Lease during each month thereafter by failing to pay the full amount of Base
Rent and charges when the same were due and payable under the Lease. By way of example, and
without limitation, Tenant breached the Lease by failing to pay Base Rent and charges in the
amount of $53,875.85 after the same was due and payable under the Lease on January 3, 2023.
15. Plaintiffs caused to be delivered to Tenant a Notice to Pay Rent or Quit dated
10 October 24, 2023 (the “Notice to Pay Rent or Quit”), stating the amount of rent and charges due in
11 the estimated sum of $592,205.26 pursuant to Code of Civil Procedure Section 1161.1, requiring
12 Tenant to pay that sum or deliver possession of the Premises within three (3) business days after
13 service of the Notice to Pay Rent or Quit, and stating Plaintiffs’ election to declare a forfeiture of
14 the Lease. A true and correct copy of the Notice to Pay Rent or Quit is attached hereto as
15 Exhibit 2 and incorporated herein by this reference.
16 16. In compliance with Code of Civil Procedure Section 1162, the Notice to Pay Rent
17 or Quit was served on Tenant on October 24, 2023 by a Registered California Process Server. A
18 true and correct copy ofthe Proofof Service by said Registered California Process Server is
19 attached hereto as Exhibit 3 and incorporated herein by this reference.
20 17. More than three (3) days elapsed after the service of the Notice to Pay Rent or Quit
21 and Tenant failed to comply with the requirements of the same on or before the date specified.
22 The Lease thereupon was terminated as of the end of the day on October 27, 2023.
23 18. On or about November 22, 2023, Plaintiffs and Tenant entered into a partial
24 settlement agreement (the “Partial Settlement Agreement”) pertaining to possession of the
25 Premises. A true and correct copy of the Partial Settlement Agreement is attached hereto as
26 Exhibit 4 and incorporated herein by this reference. As stated therein, Plaintiffs reserved their
27 rights, among other things, to recover damages, costs, and attorney’s fees owed by Tenant.
28
COMPLAINT
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19. On or about January 2, 2024, Tenant vacated and relinquished possession of the
Premises.
FIRST CAUSE OF ACTION
(Breach of Lease)
20. Plaintiffs reallege and incorporate herein by reference each and every allegation set
forth in the preceding paragraphs as if fully set forth.
21. Plaintiffs have fully performed their obligations and duties under, and all
conditions of, the Lease.
22. Tenant breached the Lease by failing to pay Base Rent and charges in the amount
10 of $49,829.27 after the same was due and payable under the Lease on April 1, 2020. Tenant
11 further breached the Lease during each month thereafter by failing to pay the full amount of Base
12 Rent and charges, including late fees of 10% of each overdue amount, when the same were due
13 and payable under the Lease.
14 23. The total amount of unpaid Base Rent and other charges (exclusive of interest,
15 costs, and attorney’s fees) due and owing as of the filing of this Complaint is $662,822.96, which
16 figure is net of (a) Tenant’s partial payments to date, and (b) Tenant’s security deposit of
17 $40,000.00.
18 24. Tenant further breached the Lease by failing to pay interest on any of the unpaid
19 amounts owed at a rate of 10% per annum. Prejudgment interest also will accrue at the rate of
20 10% per annum from and after the filing of this Complaint.
21 25. Section 20 of the Lease provides as follows: “In any action or proceeding which
22 Landlord or Tenant brings against the other party in order to enforce its respective rights
23 hereunder or by reason of the other party failing to comply with all of its obligations hereunder or
24 to otherwise construe or interpret this Lease, whether for declaratory or other relief, the non-
25 prevailing party therein agrees to pay all costs incurred by the prevailing party therein, including
26 reasonable attorneys’ fees, to be fixed by the court, and said costs and attorneys’ fees shall be
27 made a part of the judgment in said action. A party shall be deemed to have prevailed in any
28 action (without limiting the definition of prevailing party) if such action is dismissed upon the
COMPLAINT
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payment by the other party of the amounts allegedly due or the performance of obligations which
were allegedly not performed, or if such party obtains substantially the relief sought by such party
in the action, regardless [of] whether such action is prosecuted to judgment.”
26. Plaintiffs have retained the law firm Seifert Zuromski LLP to prosecute this action
and accordingly have incurred, and seek an award of, their as yet unascertained attorney’s fees and
costs.
WHEREFORE, Plaintiffs pray for judgment against defendants, and each of them, jointly
and severally, as follows:
1 For the unpaid Base Rent and other charges due, owing, and unpaid under the
10 Lease (exclusive of interest, costs, and attorney’s fees) in the amount of $662,822.96;
11 2. For interest due until the date of the filing of this Complaint on each amount owed
12 at a rate of 10% per annum.
13 3 For prejudgment interest at the rate of $10% per annum from and after the filing of
14 this Complaint;
15 4 For costs of suit incurred herein, including reasonable attorney’s fees; and
16 5 For such other and further relief as the Court may deem just and proper.
17
Date: March 29, 2024 SEIFERT ZUROMSKI LLP
18
19
ark J. Seifert
20 Attorney for Plaintiffs MM111POTR LP,
CHRISTOPHER J. HARNEY, and
21 CHRISTINA M. HARNEY
22
23
24
25
26
27
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COMPLAINT
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EXHIBIT 1
ek
LEASE
SF RENTS
BASIC LEASE INFORMATION
DATE:
LANDLORD: CHRISTOPHER J. HARNEY, CHRISTINA M.
HARNEY AND THOMAS F. MURPHY AND
MARTINA MURPHY AS SETTLORS AND
TRUSTEES OF THE MURPHY TRUST UDT
DATED OCTOBER 3, 2003
LANDLORD’S ADDRESS: clo Ss
1485 Bayshore Blvd #101
San Francisco, CA 94124
Attn: Portfolio Manager
Phone: (415) 330-3500
Fax: (415) 467-0991
TENANT? EQ3 Ine.
‘TENANT’S ADDRESS BEFORE EQ3 Inc.
(COMMENCEMENT: 70 Lexington Park
Winnipeg, MB, Canada, R2G 412
Phone: 204-988-5600
Fax: 204-988-5604
TENANT’S ADDRESS AFTER EQ3 Inc.
(COMMENCEMENT: 2299 Alameda St
San Francisco, CA, 94107
Phone:
Email:
PREMISES: One story showroom space, consisting of
approximately 18,600 square feet, more commonly
known as 2299 Alameda Street, San Francisco,
California, as more particularly shown on Exhibit A,
attached hereto
BUILDING: The certain designer showroom building located in
San Francisco, California, commonly known as
Potrero Place, with approximately 60,000 rentable
square feet of space.
PROPERTY: That certain improved property located in San
Francisco, California with APN 3919-001, as more
particularly shown on Exhibit A, attached hereto.
nee
TERM: Ten (10) Years
7 ee
a. Commencement Date: February J&, 2014 or Sooner subject to Lease being
signed by all
Ha
te
b. Expiration Date: February, 2024, subject to amendment based on
Commencement Date
BASE RENT:
@
a. Rent Schedule:
May 1, 2014 -Feb. 28, 2015 $10.000.00/month
pm
Mar. 1, 2015 — Feb. 29, 2016 $40,000.00/month
Mar. 1, 2016 — Feb. 28, 2017 $40,000.00/month
Mar. 1, 2017
— Feb, 28, 2018 $41,200.00/month
Mar. 1, 2018 - Feb. 28, 2019 $42,436.00/month
Mar. 1, 2019 — Feb, 29, 2020 $43,709.00/month
Mar. 1, 2020 — Feb. 28, 2021 $45,020.00/month
I, 2021 — Feb. 28, 2022 $46,371.00/month
Mar. 1, 2022— Feb, 28, 2023 $47,762.00/month
Mar. 1, 2023 Feb. 29, 2024 $49,195.00/month
OPTION(S) TO EXTEND TERM: Ene) Option(s) to Extend Term, per ADDENDUM.
TAXES: Landlord to pay Base Year, Tenant to pay Percentage
Share of any increase over the Base Year.
OPERATING EXPENSES: As per Section 6
‘UTILITIES: Paid by Tenant
BASE YEAR: 2014
SECURITY DEPOSIT: Forty Thousand Dollars ($40,000.00)
‘TENANT’S PERCENTAGE SHARE: 31%
PERMITTED USE: Fumiture showroom and sales
PREPAID RENT: $40,000.00
REAL ESTATE BROKERS:
a. Landlord’s Broker C&M Commercial Properties
db. Commission to be paid to Landlord’s
Broker Separate Agreement
Tenant’s Broker Fandel Retail Group
Commission to be paid by Landlord to
Tenant’s Broker Separate Agreement
EXHIBITS AND ADDENDA
Exhibit A: Diagram of Premises
Exhibit B: Work Letter Agreement
Exhibit C: Commencement Date Certificate
Exhibit D: Rules
ExhibitE: Disability Access Obligations Notice
Exhibit F: EQ3 Plans
ADDENDUM ONE: Option to Extend Lease
ADDENDUM TWO: Corporate Guaranty
ii &
THIS LEASE (this "Lease") dated as of February,
LEASE
2299 ALAMEDA STREET) Ty f
, 2014, is entered into by and between
CNS
CHRISTOPHER J. HARNEY, CHRISTINA M, HARNEY AND THOMAS F. MURPHY AND
MARTINA MURPHY AS SETTLORS AND TRUSTEES OF THE MURPHY TRUST UDT DATED
OCTOBER 3, 2003 (collectively, "Landlord"), and EQ3 Ine. ("Tenant").
1 Defini ns. The following terms shall have the meanings set forth below:
1.1.Building. The term "Building" shall have the meaning set forth in the
Basic Lease Information.
1.2, Building Common Areas. The term "Building Common Areas" shall mean
the areas and facilities within the Building provided and designated by Landlord for the general use,
convenience or benefit of Tenant and other tenants and occupants of the Building (e.g., common
stairwells, stairways, hallways, shafts, elevators, restrooms, janitorial telephone and electrical closets,
pipes, ducts, conduits, wires and appurtenant fixtures servicing the Building).
1,3. Commencement
Date. The term "Commencement Date" shall have the
meaning set forth in the Basic Lease Information.
1.4,Common Areas, The term "Common Areas" shall mean the Building
Common Areas and the Property Common Areas.
1.5. Premises, The term "Premises" shail have the meaning set forth in the
Basic Lease Information.
1.6.Peoperty. The term “Property” shall have the meaning set forth in the
Basic Lease Information.
1.7. Property Common Areas. The term "Property Common Areas" shall mean
the areas and facilities within the Property provided and designated by Landlord for the general use,
convenience or benefit of Tenant and other tenants and occupants of the Property (¢.g., walkways, traffic
aisles, access ways, utilities and communications conduits and facilities).
1.8. Rentable Area. The term "Rentable Area" shall mean the rentable area of
the Premises and the Building as reasonably determined by Landlord. The parties agree that for all
purposes under this Lease, the Rentable Area of the Premises and the Building shall be deemed to be the
number of rentable square feet identified in the Basic Lease Information.
1.9. Term. The term "Term" shall have the meaning set forth in the Basic
Lease Information.
2. Premises.
2.1, Demise, Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, for the Term, at the Rent and upon the conditions set forth below, the Premises, together with
the right in common to use the Common Areas.
2.2. Condition Upon Delivery, Tenant acknowledges that it has had an
opportunity to thoroughly inspect the Premises and, subject to Landlord’s obligations under Section 9.2
and the Work Letter Agreement (if any), Tenant accepts the Premises in its existing "as is" condition,
with all faults and defects and without any representation or warranty of any kind, express or implied.
2.3, Reserved Rights. Landlord reserves the right to do the following from time
to time:
(a) Changes, To install, use, maintain, repair, replace and relocate pipes,
ducts, shafts, conduits, wires, appurtenant meters and mechanical, electrical and plumbing equipment and
appurtenant facilities for service to other parts of the Building or the Property, including without
limitation, above the ceiling surfaces and below the floor surfaces and within the walls of the Premises.
and in the central core areas of the Building and in the Building Common Areas, and to install, use,
‘maintain, repair, replace and relocate any pipes, ducts, shafts, conduits, wires, appurtenant meters and
mechanical, electrical and plumbing equipment and appurtenant facilities servicing the Premises, which
are located either in the Premises or elsewhere outside of the Premises;
(b) Boundary Changes. To change the boundary lines of the Property:
oy
(©) acility Changes. To alter or relocate the Common Areas or any facility
within the Property;
@ Services. To install, use, maintain, repair, replace, restore or relocate
public or private facilities for communications and utilities on or under the Building and/or Property; and
(@® Other. To perform such other acts and make such other changes in, to or
with respect to the Common Areas, Building and/or Property as Landlord may reasonably deem
appropriate,
2.4. Work Letter Agreement. Landlord and Tenant shall each perform the work
required to be performed by it as described in the Work Letter Agreement attached hereto as ExhibitB.
3. Term.
3.1,Commencement Date. The Term shall be for the period of time specified
in the Basic Lease Information unless sooner terminated as hereinafter provided. The Term shall
commence on the Commencement Date (as provided in the basic lease information). For purposes of this
Lease, the first "Lease Year" shall mean the period commencing on the Commencement Date and ending
twelve (12) months thereafter, except that if the Commencement Date is other than the first calendar day
of a calendar month, the first "Lease Year" shall mean the period commencing on the Commencement
Date and ending on the last calendar day ofthe twelfth (12") full calendar month after the
Commencement Date. Thereafter, the term "Lease Year" shall mean a period equal to twelve full
calendar months, except that if the Commencement Date is other than the first calendar day of a calendar
month the final "Lease Year" shail be extended as necessary to ensure that the Lease expires at the end of
the Term.
3,2. Delay in Delivery. If for any reason Landlord has not delivered to Tenant
possession of the Premises by the Commencement Date, this Lease shall remain in effect and Landlord
shall not be liable to Tenant for any loss or damage resulting therefrom; provided, however, Tenant shall
not be obligated to pay Rent unless and until Landlord delivers possession of the Premises with
Landlord’s work completed as set forth in the attached Work Letter Agreement. In the event of a delay in
delivery of the Premises, the Commencement Date shall be delayed on a calendar day-for-calendar day
basis, Notwithstanding anything to the contrary in this Lease, Tenant shall have the option to cancel this
Lease if the Premises is not delivered within one hundred and twenty (120) calendar days of the
Commencement Date, as such estimated delivery date is extended by Tenant delays and force majeure
delays, Tenant’s right to cancel this Lease shall expire ten (10) calendar days following the expiration of
the above-referenced one hundred and twenty (120) calendar day period.
4. Rent.
4.1. Base Rent. For purposes of this Lease, the term "Rent" shall mean the
Base Rent, Prepaid Rent, all additional rent and all of the other monetary obligations of Tenant under this
Lease. Upon execution of this Lease, Tenant shall pay to Landlord the Prepaid Rent set forth in the Basic
Lease Information. Tenant shall pay to Landlord the Base Rent specified in the Basic Lease Information
in advance on or before the first calendar day of each and every successive calendar month following the
Commencement Date, If the Term commences on other than the first (1") calendar day of a calendar
month, the first (1) payment of Base Rent shall be appropriately prorated on the basis of the number of
calendar days in such calendar month, Tenant’s payment of any Prepaid Rent shall be credited against
Tenant’s obligation to pay Base Rent beginning as of the Commencement Date. If, at any time, Tenant is
in default of any term, condition or provision of this Lease, to the fullest extent permitted by law, any
express or implicit waiver by Landlord of Tenant's requirement to pay Base Rent during any period of
time from and after the Lease Date shall be null and void and Tenant shall immediately pay to Landlord
all Base Rent so expressly or implicitly waived by Landlord.
4.2. Adjustment to Base Rent. The monthly Base Rent shall be adjusted
annually in accordance with the schedule listed in the Basic Lease Information.
4.3, Additional Rent. Tenant shall pay, as additional rent, all amounts that
‘Tenant is required to pay to Landlord under this Lease in addition to ‘Tenant's obligation to pay to
Landlord the monthly Base Rent whether or not the same is designated "additional rent." Tenant shall
pay to Landlord all additional rent upon Landlord’s written request or otherwise as provided in this Lease.
All payments due from Tenant to Landlord hereunder shall be made to Landlord without setoff,
counterclaim, deduction or offset of any kind, in lawful money of the United States of America at
Landlord’s address for notices hereunder, or to such other person or at such other place as Landlord may
from time to time designate in writing to Tenant.
4.4,Late Payment. Tenant acknowledges that late payment of Rent to Landlord
will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which is extremely
difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges and
2
late charges that may be imposed on Landlord by the terms of any trust deed covering the Premises.
Accordingly, if any installment of Rent or any other sums due from Tenant shall not be received by
Landlord when due, Tenant shall pay to Landlord a late charge in an amount equal to ten percent (10%) of
such overdue amount. The parties agree that such late charge represents a fair and reasonable estimate of
the costs Landlord will incur by reason of late payment by Tenant. Acceptance of such late charge by
Landlord shall not constitute a waiver of Tenant’s default with respect to such overdue amount, or prevent
Landlord from exercising any of the other rights and remedies granted hereunder.
4,5, Interest. In addition to the imposition of a late payment charge pursuant to
Section 4.4 above, any Rent that is not paid when due shall bear interest from the date due until paid at
the rate that is the lesser of ten percent (10%) per annum (the "Interest Rate") or the maximum rate
permitted by law. Payment of interest shall not excuse or cure any default hereunder by Tenant.
5. Taxes
5.1, Tenant’s Obligation, Commencing after the Base Year, Tenant shall pay to
Landlord as Additional Rent Tenant’s Percentage Share of any and all Excess Taxes. “Excess Taxes”
shall mean, with respect to any calendar year following the Base Year, the amount, if any, by which
Taxes for such calendar year exceed the amount of Taxes paid by Landlord in the Base Year.
5.2. Definition. For the purpose of this Lease, Taxes shall mean all federal,
state and local governmental taxes, assessments and charges of every kind or nature, whether general,
special, ordinary or extraordinary, which Landlord shall pay or become obligated to pay because ofor in
connection with the ownership, leasing, management, control or operation of the Property or any of its
components (including any personal property used in connection therewith), which may also include any
rental or similar taxes levied in lieu of or in addition to general real and/or personal property taxes, For
purposes hereof, Taxes for any year shall be Taxes which are assessed for any period of such year,
whether or not such Taxes are billed and payable in a subsequent calendar year. It is acknowledged by
Landlord and Tenant that Proposition 13 was adopted by the voters of the State of California in the June,
1978 election, and that assessments, taxes, fees, levies and charges may be imposed by governmental
agencies for such purposes as fire protection, street, sidewalk, road, utility construction and maintenance,
refuse removal and for other governmental services which formerly may have been provided without
charge to property owners or occupants, It is the intention of the parties that all new and increased
assessments, taxes, fees, levies and charges due to Proposition 13, or any other cause are to be included
within the definition of Taxes for purposes of this Lease. Notwithstanding the foregoing, Taxes shall not
include any federal or state inheritance, general income, gift or estate taxes, except that if a change occurs
in the method of taxation resulting in whole or in part in the substitution of any such taxes, or any other
assessment, for any Taxes as above defined, such substituted taxes or assessments shall be included in the
Taxes,
5.3. Personal Property Taxes. ‘Tenant shall pay or cause to be paid, not less
than ten (10) calendar days prior to delinquency, any and all taxes and assessments levied upon all of
‘Tenant’s trade fixtures, inventories and other personal property in, on or about the Premises. When
possible, Tenant shall cause Tenant’s personal property to be assessed and billed separately from the real
or personal property of Landlord, On request by Landlord, Tenant shall furnish Landlord with
satisfactory evidence of payment of Tenant’s business personal property taxes and deliver copies of such
business personal property tax bills to Landlord.
5.4. ‘Taxes on Tenant Improvements. Notwithstanding any other provision
hereof, Tenant shall pay to Landlord the full amount of any increase in Taxes during the Term resulting
from any and all alterations and tenant improvements of any kind whatsoever placed in, on or about or
made to the Premises, Building or Property for the benefit of, at the request of, or by Tenant.
5.5. Estimates, Tenant shall pay to Landlord each month at the same time and
in the same manner as monthly Base Rent one-twelfth (1/12th) of Landlord’s estimate of the amount of
Taxes payable by Tenant for the then-current calendar year. If at any time it appears to Landlord that
‘Tenant's Share of Taxes payable for the current calendar year will vary from Landlord’s estimate,
Landlord may give notice to Tenant of Landlord’s revised estimate for the calendar year, and subsequent
payments by Tenant for the calendar year shall be based on the revised estimate, Within one hundred
twenty (120) calendar days afier the close of each calendar year, or as soon after such 120-calendar day
period as practicable, Landlord shall deliver to Tenant a statement in reasonable detail of the actual
amount of Taxes payable by Tenant for such calendar year, Landlord’s failure to provide such statement
to Tenant within the 120-calendar day period shall not act as a waiver and shall not excuse Tenant or
Landlord from making the adjustments to reflect actual costs as provided herein. If on the basis of such
statement Tenant owes an amount that is less than the estimated payments for such calendar year
previously made by Tenant, Landlord shall credit such excess against the next payment of Rent due. If on
the basis of such statement Tenant owes an amount that is more than the estimated payments for such
calendar year previously made by Tenant, Tenant shall pay the deficiency to Landlord within fifteen (15)
calendar days after delivery of the statement. In addition, if, after the end of any calendar year or any
annual adjustment of Taxes for a calendar year, Taxes are incurred or billed to Landlord that are
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attributable to any period within the Term, Landlord shall notify Tenant of its share of such additional
Taxes and Tenant shall pay such amount to Landlord within ten (10) calendar days after Landlord's
written request therefor. The obligations of Landlord and Tenant under this Section with respect to the
reconciliation between the estimated and actual amounts of Taxes payable by Tenant shall survive the
expiration or earlier termination of this Lease.
6. Operating Expenses
6.1. Tenant's Obligation. Tenant shall pay to Landlord as additional rent Tenant’s
Percentage Share of ail Operating Expenses, as defined below.
6.2. Definition of Operating Expenses, The term "Operating Expenses" shall include all
expenses and costs of every kind and nature which Landlord shall pay or become obligated to pay
because of or in connection with the ownership, operation, repair and/or maintenance of the Building,
Common Areas and/or Property, the surrounding property, and the supporting facilities, including,
without limitation: (A) property management fees and expenses, (B) all maintenance, janitorial and
security costs, (C) costs for all materials, supplies and equipment; (D) all costs of water, heat, gas power,
clectricity, refuse collection, parking lot sweeping, landscaping and other utilities and services relating to
the Common Areas; (E) all costs of capital improvements to the Building or Common Areas made to
achieve compliance with federal, state and local law not in effect as of the date of this Lease or to
improve the operating efficiency of the Building or the Project, all of which costs will be amortized over
such reasonable period as Landlord shall determine, together with interest upon the unamortized balance
at the Interest Rate or such other higher rate as may have been paid by Landlord on funds borrowed for
the purpose of making the alterations or improvements; (F) premiums for insurance maintained by
Landlord pursuant to this Lease or with respect to the Building or the Property; (G) costs for repairs,
replacements (including, without limitation, replacement of the roof membrane), uninsured damage or
insurance deductibles and general maintenance of the Building, Common Areas and Property, but
excluding any repairs or replacements paid for out of insurance proceeds or by other parties; (H) all costs
of maintaining machinery, equipment and directional signage or other markers; and (1) the share
allocable to the Building of dues and assessments payable under any reciprocal easement or common
area maintenance agreements or declarations or by any owners associations affecting the Building or the
Property.
63 Estimates of Operating Expenses, Tenant shall pay to Landlord each
month at the same time and in the same manner as monthly Base Rent one-twelfth (1/12th) of Landlord’s
estimate of the amount of Operating Expenses payable by Tenant for the then-current calendar year. If at
any time it appears to Landlord that Tenant’s Share of Operating Expenses payable for the current
calendar year will vary from Landlord’s estimate, Landlord may give notice to Tenant of Landlord's
revised estimate for the calendar year, and subsequent payments by Tenant for the calendar year shall be
based on the revised estimate. Within one hundred twenty (120) calendar days after the close of each
calendar year, or as soon after such 120-calendar day period as practicable, Landlord shall deliver to
Tenant a statement in reasonable detail of the actual amount of Operating Expenses payable by Tenant
for such calendar year. Landlord’s failure to provide such statement to Tenant within the 120-calendar
day period shall not act as a waiver and shall not excuse Tenant or Landlord from making the
adjustments to reflect actual costs as provided herein for the previous year only. For clarity, Landlord
shall not have the right to reassess Operating Expenses for years preceding the previous year. If on the
basis of such statement Tenant owes an amount that is less than the estimated payments for such
calendar year previously made by Tenant, Landlord shall credit such excess against the next payment of
Rent due. If on the basis of such statement Tenant owes an amount that is more than the estimated
payments for such calendar year previously made by Tenant, Tenant shall pay the deficiency to Landlord
within fifteen (15) calendar days after delivery of the statement. In addition, if, after the end of any
calendar year or any annual adjustment of Operating Expenses for a calendar year, Operating Expenses
are incurred or billed to Landlord that are attributable to any period within the Term (e.g., sewer district
flow fees), Landlord shall notify Tenant of its share of such additional Operating Expenses and Tenant
shall pay such amount to Landlord within ten (10) calendar days after Landlord’s written request
therefor. The obligations of Landlord and Tenant under this Section 6.4 with respect to the
reconciliation between the estimated and actual amounts of Operating Expenses payable by Tenant for
the last year of the Term shall survive the expiration or earlier termination of this Lease.
7. Permitted Use.
7.1, Use and Compliance with Laws. The Premises shall be used and occupied
by Tenant solely for the Permitted Use set forth in the Basic Lease Information. Tenant shall, at Tenant’s
expense, comply promptly with all applicable federal, state and local laws, regulations, ordinances, rules,
orders, and requirements in effect during the Term relating to the condition, use or occupancy of the
Premises. Tenant shall not use or permit the use of the Premises in any manner that will tend to create
‘waste or a nuisance, or that unreasonably disturbs other tenants or neighbors of the Premises, Building or
Project, nor shall Tenant place or maintain any signs, antennas, awnings, lighting or plumbing fixtures,
loudspeakers, exterior decoration or similar devices on the Premises, Building or the Property or visible
from the exterior of the Premises without Landlord’s prior written consent, which consent shall not be
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unreasonably denied. Tenant shall not use any corridors, sidewalks, stairs, elevators or other areas
outside ofthe Premises for storage or any purpose other than access to the Premises. Tenant shall not use,
keep or permit to be used or kept on the Premises any foul or noxious gas or substance, nor shall Tenant
do or permit to be done anything in and about the Premises which would violate the terms of any
covenants, conditions or restrictions affecting the Building or the Property, or the Rules (as defined
herein). Tenant shall cooperate with Landlord and other tenants in the Building with respect to Tenant's
use of the loading docks and shall not leave any truck unattended by or near the loading docks. Tenant
acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty
with respect to the Premises, Building or with respect to the suitability or fitness of either for the conduct
of Tenant’s business or for any other purpose.
7.2.No Representations Regarding Property or Premises. Tenant
acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty
with respect to the Premises or the Property with respect to the suitability or fitness of either for the
conduct of Tenant's business or for any other purpose. Tenant further acknowledges that Landlord and its
representatives have not made any representation or warranty as to whether the Premises or the Property,
including without limitation, any restrooms or elevators located therein, comply with any Accessibility
Laws. In the event that the Premises are alleged or determined to be in noncompliance with any
Accessibility Laws, Tenant shall be entitled to undertake, at its sole cost and expense, any improvements
to the Premises necessary to cause such areas to comply with any Accessibility Laws, subject to the
Landlord's approval, which approval shall not be unreasonably withheld and shall be obtained pursuant to
the procedures for Alterations. Landlord shall not be obligated to alter, modify, renovate, undertake or
pay for any improvements to the Premises or the Property (or any portion thereof) in the event that the
Premises or the Property (or any portion thereof) are alleged or determined to be in noncompliance with
any Accessibility Laws.
7.3, Compliance with Laws. Tenant shall, at Tenant's expense, comply
promptly with all Laws in effect during the Term relating to the condition, use or occupancy of the
Premises, and shall make any alterations, additions, modifications, renovations or other improvements
required to comply with all such Laws. Without limiting the foregoing, Tenant specifically agrees that
Tenant shall be solely responsible for ensuring that the Premises, and its use and occupancy of the
Premises and Property, complies with all Accessibility Laws. Pursuant to California Civil Code Section
1938, Landlord states that, as of the date of this Lease, the Premises has not undergone inspection by a
“Certified Access Specialist" to determine whether the Premises meet all applicable construction-related
accessibility standards under California Civil Code Section 55,53.
7.4, Disability Access. As required by San Francisco Administrative Code
Chapter 38, Landlord and Tenant agree as follows:
PLEASE NOTE: DISABILTY ACCESS OBLIGATIONS NOTICE
‘The Property may not currently meet all applicable construction-related
accessibi standards, including standards for public restrooms and ground floor
entrances and exits,
By executing this Lease and the Disability Access Obligations Notice attached to this Lease as Exhibit E,
Tenant confirms that Tenant has read and understood the Disability Access Obligations Notice. Tenant
further acknowledges and agrees that prior to Tenant’s entering into this Lease, Landlord has provided the
following notices to Tenant: (i) the Disability Access Obligations Notice Under San Francisco
Administrative Code Chapter 38 attached hereto as Exhibit E and incorporated herein by this reference
and (ii) a copy of the Small Business Commission's Access Information Notice in English. The Access
Information Notice is also available through the San Francisco Office of Small Business and their website
7.5. Signs. Tenant shall not attach or install any sign to or on any part of the
outside of the Premises, the Building or the Property, or in the halls, lobbies, windows or elevator banks
of the Building without Landlord’s prior written consent, which consent shall not be unreasonably
withheld. For clarity, Landlord has provided permission to Tenant to install, at its cost, two signs at the
entrance of the Premises and one additional sign at the end of the Building facing Potrero. All such
exterior signage shall be in compliance with applicable laws and Tenant shall obtain all approvals and
permits necessary for the installation of such signage. If Landlord consents to Tenant's signage, the
Tenant, upon expiration or earlier termination of this Lease, shall remove such signage and shall return
the affected areas to their condition existing immediately prior to the placement or erection of said sign or
signs, subject to normal wear and tear.
7.6. Use of Common Areas.
7.6.1. Right to Use Common Areas. Landlord gives Tenant and its authorized
employees, agents, customers, representatives and invitees the nonexclusive right to use the Common
Areas with others who are entitled to use the Common Areas, subject to Landlord’s rights as set forth in
Oy
this Section 7.3,
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7.6.2, Rules. All Common Areas shall be subject to the exclusive control and
management of Landlord and Landlord shall have the right to establish, modify, amend and enforce
reasonable rules and regulations with respect to the Common Areas. Tenant acknowledges receipt of a
copy of the current rules and regulations (the "Rules") attached hereto as Exhibit D and agrees that they
may, from time to time, be modified or amended by Landlord in a commercially reasonable manner,
‘Tenant agrees to abide by the Rules; to cause its concessionaires and its and their employees and agents to
abide by the Rules; and to use its best efforts to cause its customers, invitees and licensees to abide by the
Rules.
7.6.4, Use. Landlord shall have the right to close temporarily any portion of
the Common Areas for the purpose of discouraging use by parties who are not tenants or customers of
tenants; to use portions of the Common Areas while engaged in making additional improvements or
repairs or alterations to the Property; to use or permit the use of the Common Areas by others to whom
Landlord may grant or have granted such rights; and to do and perform such acts in, to, and with respect
to, the Common Areas as in the use of good business judgment Landlord shall determine to be
appropriate for the Project.
7.7, Environmental Matters.
WTA, Hazardous Materials. The term "Hazardous Materials" as used herein
means any petroleum products, asbestos, polychlorinated biphenyls, P.C.B.’s, or chemicals, compounds,
materials, mixtures or substances that are now or hereafter defined or listed in, or otherwise classified as a
"hazardous substance", "hazardous rial", “hazardous waste' nt7 ‘extremely hazardous waste”,
"infectious waste", "toxic subs
Preview
SEIFERT ZUROMSKI LLP Mark J. Seifert (SBN 217054) Jon-Patrick A. Jones (SBN 333173) 100 Pine Street, Suite 1250 ELECTRONICALLY San Francisco, California 94111 Tel. (415) 999-0901 FILED Superior Court of California, Fax (415) 901-1123 County of San Francisco Email: mseifert@szllp.com Email: jjones@szllp.com 03/29/2024 Clerk of the Court BY: JAMES FORONDA Attorney for Plaintiffs MM111POTR LP, Deputy Clerk CHRISTOPHER J. HARNEY, and CHRISTINA M. HARNEY SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN FRANCISCO 10 MM111POTR LP, a California limited Case No. CGC-24-613496 partnership; CHRISTOPHER J. HARNEY, 11 an individual; and CHRISTINA M. HARNEY, | COMPLAINT FOR DAMAGES FOR an individual, BREACH OF LEASE 12 Plaintiffs, Unlimited Civil Case 13 VS. 14 EQ3 INC., a Delaware corporation, and 15 DOES | through 25, inclusive, 16 Defendants. 17 18 Plaintiffs MM111POTR LP, CHRISTOPHER J. HARNEY, and CHRISTINA M. 19 HARNEY (“Plaintiffs”) allege as follows: 20 1 Plaintiff MM111POTR LP is and at all relevant times mentioned herein was a 21 limited partnership organized and existing under the laws of the State of California, and authorized] 22 to do business in California. 23 2 Plaintiff CHRISTOPHER J. HARNEY is and at all relevant times mentioned 24 herein was an individual doing business in California. 25 3 Plaintiff CHRISTINA M. HARNEY is and at all relevant times mentioned herein 26 was an individual doing business in California. Plaintiffs MM111POTR LP, CHRISTOPHER J. 27 HARNEY, and CHRISTINA M. HARNEY are collectively referred to herein as “Plaintiffs”. 28 COMPLAINT -1- 4 Plaintiffs are the owner of the commercial property located at and commonly known as 2299 Alameda Street, California 94107 (the “Premises”). 5 The Premises is located in the County of San Francisco, State of California. 6. Plaintiffs are informed and believe and thereon allege that defendant EQ3 INC. (“Tenant”) is and at all relevant times mentioned herein was a Delaware corporation doing business in the County of San Francisco, State of California. 7 The true names and capacities, whether individual, corporate, associate or otherwise, of defendants DOES 1 through 25, inclusive, are unknown to Plaintiffs, who therefore sue these defendants by fictitious names pursuant to Code of Civil Procedure Section 474. 10 Plaintiffs will ask leave of this Court to amend this complaint when said true names and capacities 11 have been ascertained. 12 8 Plaintiffs are informed and believe and thereon allege that at all relevant times 13 mentioned herein each defendant was the agent, employee, co-venturer, partner, or in some 14 manner agent or principal, or both, of each and every other defendant and was acting within the 15 course and scope of such agency or employment. 16 9 On or about February 27, 2014, Thomas F. Murphy and Martina Murphy as 17 Settlors and Trustees of the Murphy Trust UDT Dated October 3, 2003, CHRISTOPHER J. 18 HARNEY, and CHRISTINA M. HARNEY (collectively, “Original Landlord”), as landlord, and 19 Tenant, as tenant, entered into a written lease (the “Lease’’) for the Premises, as described in the 20 Lease. A true and correct copy of the Lease is attached hereto as Exhibit 1 and incorporated 21 herein by this reference. 22 10. On or around December 27, 2019, MM111POTR LP became a co-owner of the 23 Premises and the successor to the rights of Thomas F. Murphy and Martina Murphy as Settlors 24 and Trustees of the Murphy Trust UDT Dated October 3, 2003 under the Lease. 25 11. Prior to the filing of this action, defendants went into possession of the Premises. 26 12. Plaintiffs have fully performed their obligations and duties under, and all 27 conditions of, the Lease. 28 13. Paragraph 4.1 of the Lease provides that Rent, which includes Base Rent and all COMPLAINT -2- other monetary obligations of tenant under the Lease, is payable on or before the first day of each calendar month. 14. Tenant breached the Lease by failing to pay Base Rent and charges in the amount of $49,829.27 after the same was due and payable under the Lease on April 1, 2020. Tenant further breached the Lease during each month thereafter by failing to pay the full amount of Base Rent and charges when the same were due and payable under the Lease. By way of example, and without limitation, Tenant breached the Lease by failing to pay Base Rent and charges in the amount of $53,875.85 after the same was due and payable under the Lease on January 3, 2023. 15. Plaintiffs caused to be delivered to Tenant a Notice to Pay Rent or Quit dated 10 October 24, 2023 (the “Notice to Pay Rent or Quit”), stating the amount of rent and charges due in 11 the estimated sum of $592,205.26 pursuant to Code of Civil Procedure Section 1161.1, requiring 12 Tenant to pay that sum or deliver possession of the Premises within three (3) business days after 13 service of the Notice to Pay Rent or Quit, and stating Plaintiffs’ election to declare a forfeiture of 14 the Lease. A true and correct copy of the Notice to Pay Rent or Quit is attached hereto as 15 Exhibit 2 and incorporated herein by this reference. 16 16. In compliance with Code of Civil Procedure Section 1162, the Notice to Pay Rent 17 or Quit was served on Tenant on October 24, 2023 by a Registered California Process Server. A 18 true and correct copy ofthe Proofof Service by said Registered California Process Server is 19 attached hereto as Exhibit 3 and incorporated herein by this reference. 20 17. More than three (3) days elapsed after the service of the Notice to Pay Rent or Quit 21 and Tenant failed to comply with the requirements of the same on or before the date specified. 22 The Lease thereupon was terminated as of the end of the day on October 27, 2023. 23 18. On or about November 22, 2023, Plaintiffs and Tenant entered into a partial 24 settlement agreement (the “Partial Settlement Agreement”) pertaining to possession of the 25 Premises. A true and correct copy of the Partial Settlement Agreement is attached hereto as 26 Exhibit 4 and incorporated herein by this reference. As stated therein, Plaintiffs reserved their 27 rights, among other things, to recover damages, costs, and attorney’s fees owed by Tenant. 28 COMPLAINT 3- 19. On or about January 2, 2024, Tenant vacated and relinquished possession of the Premises. FIRST CAUSE OF ACTION (Breach of Lease) 20. Plaintiffs reallege and incorporate herein by reference each and every allegation set forth in the preceding paragraphs as if fully set forth. 21. Plaintiffs have fully performed their obligations and duties under, and all conditions of, the Lease. 22. Tenant breached the Lease by failing to pay Base Rent and charges in the amount 10 of $49,829.27 after the same was due and payable under the Lease on April 1, 2020. Tenant 11 further breached the Lease during each month thereafter by failing to pay the full amount of Base 12 Rent and charges, including late fees of 10% of each overdue amount, when the same were due 13 and payable under the Lease. 14 23. The total amount of unpaid Base Rent and other charges (exclusive of interest, 15 costs, and attorney’s fees) due and owing as of the filing of this Complaint is $662,822.96, which 16 figure is net of (a) Tenant’s partial payments to date, and (b) Tenant’s security deposit of 17 $40,000.00. 18 24. Tenant further breached the Lease by failing to pay interest on any of the unpaid 19 amounts owed at a rate of 10% per annum. Prejudgment interest also will accrue at the rate of 20 10% per annum from and after the filing of this Complaint. 21 25. Section 20 of the Lease provides as follows: “In any action or proceeding which 22 Landlord or Tenant brings against the other party in order to enforce its respective rights 23 hereunder or by reason of the other party failing to comply with all of its obligations hereunder or 24 to otherwise construe or interpret this Lease, whether for declaratory or other relief, the non- 25 prevailing party therein agrees to pay all costs incurred by the prevailing party therein, including 26 reasonable attorneys’ fees, to be fixed by the court, and said costs and attorneys’ fees shall be 27 made a part of the judgment in said action. A party shall be deemed to have prevailed in any 28 action (without limiting the definition of prevailing party) if such action is dismissed upon the COMPLAINT -4- payment by the other party of the amounts allegedly due or the performance of obligations which were allegedly not performed, or if such party obtains substantially the relief sought by such party in the action, regardless [of] whether such action is prosecuted to judgment.” 26. Plaintiffs have retained the law firm Seifert Zuromski LLP to prosecute this action and accordingly have incurred, and seek an award of, their as yet unascertained attorney’s fees and costs. WHEREFORE, Plaintiffs pray for judgment against defendants, and each of them, jointly and severally, as follows: 1 For the unpaid Base Rent and other charges due, owing, and unpaid under the 10 Lease (exclusive of interest, costs, and attorney’s fees) in the amount of $662,822.96; 11 2. For interest due until the date of the filing of this Complaint on each amount owed 12 at a rate of 10% per annum. 13 3 For prejudgment interest at the rate of $10% per annum from and after the filing of 14 this Complaint; 15 4 For costs of suit incurred herein, including reasonable attorney’s fees; and 16 5 For such other and further relief as the Court may deem just and proper. 17 Date: March 29, 2024 SEIFERT ZUROMSKI LLP 18 19 ark J. Seifert 20 Attorney for Plaintiffs MM111POTR LP, CHRISTOPHER J. HARNEY, and 21 CHRISTINA M. HARNEY 22 23 24 25 26 27 28 COMPLAINT -5- EXHIBIT 1 ek LEASE SF RENTS BASIC LEASE INFORMATION DATE: LANDLORD: CHRISTOPHER J. HARNEY, CHRISTINA M. HARNEY AND THOMAS F. MURPHY AND MARTINA MURPHY AS SETTLORS AND TRUSTEES OF THE MURPHY TRUST UDT DATED OCTOBER 3, 2003 LANDLORD’S ADDRESS: clo Ss 1485 Bayshore Blvd #101 San Francisco, CA 94124 Attn: Portfolio Manager Phone: (415) 330-3500 Fax: (415) 467-0991 TENANT? EQ3 Ine. ‘TENANT’S ADDRESS BEFORE EQ3 Inc. (COMMENCEMENT: 70 Lexington Park Winnipeg, MB, Canada, R2G 412 Phone: 204-988-5600 Fax: 204-988-5604 TENANT’S ADDRESS AFTER EQ3 Inc. (COMMENCEMENT: 2299 Alameda St San Francisco, CA, 94107 Phone: Email: PREMISES: One story showroom space, consisting of approximately 18,600 square feet, more commonly known as 2299 Alameda Street, San Francisco, California, as more particularly shown on Exhibit A, attached hereto BUILDING: The certain designer showroom building located in San Francisco, California, commonly known as Potrero Place, with approximately 60,000 rentable square feet of space. PROPERTY: That certain improved property located in San Francisco, California with APN 3919-001, as more particularly shown on Exhibit A, attached hereto. nee TERM: Ten (10) Years 7 ee a. Commencement Date: February J&, 2014 or Sooner subject to Lease being signed by all Ha te b. Expiration Date: February, 2024, subject to amendment based on Commencement Date BASE RENT: @ a. Rent Schedule: May 1, 2014 -Feb. 28, 2015 $10.000.00/month pm Mar. 1, 2015 — Feb. 29, 2016 $40,000.00/month Mar. 1, 2016 — Feb. 28, 2017 $40,000.00/month Mar. 1, 2017 — Feb, 28, 2018 $41,200.00/month Mar. 1, 2018 - Feb. 28, 2019 $42,436.00/month Mar. 1, 2019 — Feb, 29, 2020 $43,709.00/month Mar. 1, 2020 — Feb. 28, 2021 $45,020.00/month I, 2021 — Feb. 28, 2022 $46,371.00/month Mar. 1, 2022— Feb, 28, 2023 $47,762.00/month Mar. 1, 2023 Feb. 29, 2024 $49,195.00/month OPTION(S) TO EXTEND TERM: Ene) Option(s) to Extend Term, per ADDENDUM. TAXES: Landlord to pay Base Year, Tenant to pay Percentage Share of any increase over the Base Year. OPERATING EXPENSES: As per Section 6 ‘UTILITIES: Paid by Tenant BASE YEAR: 2014 SECURITY DEPOSIT: Forty Thousand Dollars ($40,000.00) ‘TENANT’S PERCENTAGE SHARE: 31% PERMITTED USE: Fumiture showroom and sales PREPAID RENT: $40,000.00 REAL ESTATE BROKERS: a. Landlord’s Broker C&M Commercial Properties db. Commission to be paid to Landlord’s Broker Separate Agreement Tenant’s Broker Fandel Retail Group Commission to be paid by Landlord to Tenant’s Broker Separate Agreement EXHIBITS AND ADDENDA Exhibit A: Diagram of Premises Exhibit B: Work Letter Agreement Exhibit C: Commencement Date Certificate Exhibit D: Rules ExhibitE: Disability Access Obligations Notice Exhibit F: EQ3 Plans ADDENDUM ONE: Option to Extend Lease ADDENDUM TWO: Corporate Guaranty ii & THIS LEASE (this "Lease") dated as of February, LEASE 2299 ALAMEDA STREET) Ty f , 2014, is entered into by and between CNS CHRISTOPHER J. HARNEY, CHRISTINA M, HARNEY AND THOMAS F. MURPHY AND MARTINA MURPHY AS SETTLORS AND TRUSTEES OF THE MURPHY TRUST UDT DATED OCTOBER 3, 2003 (collectively, "Landlord"), and EQ3 Ine. ("Tenant"). 1 Defini ns. The following terms shall have the meanings set forth below: 1.1.Building. The term "Building" shall have the meaning set forth in the Basic Lease Information. 1.2, Building Common Areas. The term "Building Common Areas" shall mean the areas and facilities within the Building provided and designated by Landlord for the general use, convenience or benefit of Tenant and other tenants and occupants of the Building (e.g., common stairwells, stairways, hallways, shafts, elevators, restrooms, janitorial telephone and electrical closets, pipes, ducts, conduits, wires and appurtenant fixtures servicing the Building). 1,3. Commencement Date. The term "Commencement Date" shall have the meaning set forth in the Basic Lease Information. 1.4,Common Areas, The term "Common Areas" shall mean the Building Common Areas and the Property Common Areas. 1.5. Premises, The term "Premises" shail have the meaning set forth in the Basic Lease Information. 1.6.Peoperty. The term “Property” shall have the meaning set forth in the Basic Lease Information. 1.7. Property Common Areas. The term "Property Common Areas" shall mean the areas and facilities within the Property provided and designated by Landlord for the general use, convenience or benefit of Tenant and other tenants and occupants of the Property (¢.g., walkways, traffic aisles, access ways, utilities and communications conduits and facilities). 1.8. Rentable Area. The term "Rentable Area" shall mean the rentable area of the Premises and the Building as reasonably determined by Landlord. The parties agree that for all purposes under this Lease, the Rentable Area of the Premises and the Building shall be deemed to be the number of rentable square feet identified in the Basic Lease Information. 1.9. Term. The term "Term" shall have the meaning set forth in the Basic Lease Information. 2. Premises. 2.1, Demise, Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, for the Term, at the Rent and upon the conditions set forth below, the Premises, together with the right in common to use the Common Areas. 2.2. Condition Upon Delivery, Tenant acknowledges that it has had an opportunity to thoroughly inspect the Premises and, subject to Landlord’s obligations under Section 9.2 and the Work Letter Agreement (if any), Tenant accepts the Premises in its existing "as is" condition, with all faults and defects and without any representation or warranty of any kind, express or implied. 2.3, Reserved Rights. Landlord reserves the right to do the following from time to time: (a) Changes, To install, use, maintain, repair, replace and relocate pipes, ducts, shafts, conduits, wires, appurtenant meters and mechanical, electrical and plumbing equipment and appurtenant facilities for service to other parts of the Building or the Property, including without limitation, above the ceiling surfaces and below the floor surfaces and within the walls of the Premises. and in the central core areas of the Building and in the Building Common Areas, and to install, use, ‘maintain, repair, replace and relocate any pipes, ducts, shafts, conduits, wires, appurtenant meters and mechanical, electrical and plumbing equipment and appurtenant facilities servicing the Premises, which are located either in the Premises or elsewhere outside of the Premises; (b) Boundary Changes. To change the boundary lines of the Property: oy (©) acility Changes. To alter or relocate the Common Areas or any facility within the Property; @ Services. To install, use, maintain, repair, replace, restore or relocate public or private facilities for communications and utilities on or under the Building and/or Property; and (@® Other. To perform such other acts and make such other changes in, to or with respect to the Common Areas, Building and/or Property as Landlord may reasonably deem appropriate, 2.4. Work Letter Agreement. Landlord and Tenant shall each perform the work required to be performed by it as described in the Work Letter Agreement attached hereto as ExhibitB. 3. Term. 3.1,Commencement Date. The Term shall be for the period of time specified in the Basic Lease Information unless sooner terminated as hereinafter provided. The Term shall commence on the Commencement Date (as provided in the basic lease information). For purposes of this Lease, the first "Lease Year" shall mean the period commencing on the Commencement Date and ending twelve (12) months thereafter, except that if the Commencement Date is other than the first calendar day of a calendar month, the first "Lease Year" shall mean the period commencing on the Commencement Date and ending on the last calendar day ofthe twelfth (12") full calendar month after the Commencement Date. Thereafter, the term "Lease Year" shall mean a period equal to twelve full calendar months, except that if the Commencement Date is other than the first calendar day of a calendar month the final "Lease Year" shail be extended as necessary to ensure that the Lease expires at the end of the Term. 3,2. Delay in Delivery. If for any reason Landlord has not delivered to Tenant possession of the Premises by the Commencement Date, this Lease shall remain in effect and Landlord shall not be liable to Tenant for any loss or damage resulting therefrom; provided, however, Tenant shall not be obligated to pay Rent unless and until Landlord delivers possession of the Premises with Landlord’s work completed as set forth in the attached Work Letter Agreement. In the event of a delay in delivery of the Premises, the Commencement Date shall be delayed on a calendar day-for-calendar day basis, Notwithstanding anything to the contrary in this Lease, Tenant shall have the option to cancel this Lease if the Premises is not delivered within one hundred and twenty (120) calendar days of the Commencement Date, as such estimated delivery date is extended by Tenant delays and force majeure delays, Tenant’s right to cancel this Lease shall expire ten (10) calendar days following the expiration of the above-referenced one hundred and twenty (120) calendar day period. 4. Rent. 4.1. Base Rent. For purposes of this Lease, the term "Rent" shall mean the Base Rent, Prepaid Rent, all additional rent and all of the other monetary obligations of Tenant under this Lease. Upon execution of this Lease, Tenant shall pay to Landlord the Prepaid Rent set forth in the Basic Lease Information. Tenant shall pay to Landlord the Base Rent specified in the Basic Lease Information in advance on or before the first calendar day of each and every successive calendar month following the Commencement Date, If the Term commences on other than the first (1") calendar day of a calendar month, the first (1) payment of Base Rent shall be appropriately prorated on the basis of the number of calendar days in such calendar month, Tenant’s payment of any Prepaid Rent shall be credited against Tenant’s obligation to pay Base Rent beginning as of the Commencement Date. If, at any time, Tenant is in default of any term, condition or provision of this Lease, to the fullest extent permitted by law, any express or implicit waiver by Landlord of Tenant's requirement to pay Base Rent during any period of time from and after the Lease Date shall be null and void and Tenant shall immediately pay to Landlord all Base Rent so expressly or implicitly waived by Landlord. 4.2. Adjustment to Base Rent. The monthly Base Rent shall be adjusted annually in accordance with the schedule listed in the Basic Lease Information. 4.3, Additional Rent. Tenant shall pay, as additional rent, all amounts that ‘Tenant is required to pay to Landlord under this Lease in addition to ‘Tenant's obligation to pay to Landlord the monthly Base Rent whether or not the same is designated "additional rent." Tenant shall pay to Landlord all additional rent upon Landlord’s written request or otherwise as provided in this Lease. All payments due from Tenant to Landlord hereunder shall be made to Landlord without setoff, counterclaim, deduction or offset of any kind, in lawful money of the United States of America at Landlord’s address for notices hereunder, or to such other person or at such other place as Landlord may from time to time designate in writing to Tenant. 4.4,Late Payment. Tenant acknowledges that late payment of Rent to Landlord will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which is extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges and 2 late charges that may be imposed on Landlord by the terms of any trust deed covering the Premises. Accordingly, if any installment of Rent or any other sums due from Tenant shall not be received by Landlord when due, Tenant shall pay to Landlord a late charge in an amount equal to ten percent (10%) of such overdue amount. The parties agree that such late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant. Acceptance of such late charge by Landlord shall not constitute a waiver of Tenant’s default with respect to such overdue amount, or prevent Landlord from exercising any of the other rights and remedies granted hereunder. 4,5, Interest. In addition to the imposition of a late payment charge pursuant to Section 4.4 above, any Rent that is not paid when due shall bear interest from the date due until paid at the rate that is the lesser of ten percent (10%) per annum (the "Interest Rate") or the maximum rate permitted by law. Payment of interest shall not excuse or cure any default hereunder by Tenant. 5. Taxes 5.1, Tenant’s Obligation, Commencing after the Base Year, Tenant shall pay to Landlord as Additional Rent Tenant’s Percentage Share of any and all Excess Taxes. “Excess Taxes” shall mean, with respect to any calendar year following the Base Year, the amount, if any, by which Taxes for such calendar year exceed the amount of Taxes paid by Landlord in the Base Year. 5.2. Definition. For the purpose of this Lease, Taxes shall mean all federal, state and local governmental taxes, assessments and charges of every kind or nature, whether general, special, ordinary or extraordinary, which Landlord shall pay or become obligated to pay because ofor in connection with the ownership, leasing, management, control or operation of the Property or any of its components (including any personal property used in connection therewith), which may also include any rental or similar taxes levied in lieu of or in addition to general real and/or personal property taxes, For purposes hereof, Taxes for any year shall be Taxes which are assessed for any period of such year, whether or not such Taxes are billed and payable in a subsequent calendar year. It is acknowledged by Landlord and Tenant that Proposition 13 was adopted by the voters of the State of California in the June, 1978 election, and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such purposes as fire protection, street, sidewalk, road, utility construction and maintenance, refuse removal and for other governmental services which formerly may have been provided without charge to property owners or occupants, It is the intention of the parties that all new and increased assessments, taxes, fees, levies and charges due to Proposition 13, or any other cause are to be included within the definition of Taxes for purposes of this Lease. Notwithstanding the foregoing, Taxes shall not include any federal or state inheritance, general income, gift or estate taxes, except that if a change occurs in the method of taxation resulting in whole or in part in the substitution of any such taxes, or any other assessment, for any Taxes as above defined, such substituted taxes or assessments shall be included in the Taxes, 5.3. Personal Property Taxes. ‘Tenant shall pay or cause to be paid, not less than ten (10) calendar days prior to delinquency, any and all taxes and assessments levied upon all of ‘Tenant’s trade fixtures, inventories and other personal property in, on or about the Premises. When possible, Tenant shall cause Tenant’s personal property to be assessed and billed separately from the real or personal property of Landlord, On request by Landlord, Tenant shall furnish Landlord with satisfactory evidence of payment of Tenant’s business personal property taxes and deliver copies of such business personal property tax bills to Landlord. 5.4. ‘Taxes on Tenant Improvements. Notwithstanding any other provision hereof, Tenant shall pay to Landlord the full amount of any increase in Taxes during the Term resulting from any and all alterations and tenant improvements of any kind whatsoever placed in, on or about or made to the Premises, Building or Property for the benefit of, at the request of, or by Tenant. 5.5. Estimates, Tenant shall pay to Landlord each month at the same time and in the same manner as monthly Base Rent one-twelfth (1/12th) of Landlord’s estimate of the amount of Taxes payable by Tenant for the then-current calendar year. If at any time it appears to Landlord that ‘Tenant's Share of Taxes payable for the current calendar year will vary from Landlord’s estimate, Landlord may give notice to Tenant of Landlord’s revised estimate for the calendar year, and subsequent payments by Tenant for the calendar year shall be based on the revised estimate, Within one hundred twenty (120) calendar days afier the close of each calendar year, or as soon after such 120-calendar day period as practicable, Landlord shall deliver to Tenant a statement in reasonable detail of the actual amount of Taxes payable by Tenant for such calendar year, Landlord’s failure to provide such statement to Tenant within the 120-calendar day period shall not act as a waiver and shall not excuse Tenant or Landlord from making the adjustments to reflect actual costs as provided herein. If on the basis of such statement Tenant owes an amount that is less than the estimated payments for such calendar year previously made by Tenant, Landlord shall credit such excess against the next payment of Rent due. If on the basis of such statement Tenant owes an amount that is more than the estimated payments for such calendar year previously made by Tenant, Tenant shall pay the deficiency to Landlord within fifteen (15) calendar days after delivery of the statement. In addition, if, after the end of any calendar year or any annual adjustment of Taxes for a calendar year, Taxes are incurred or billed to Landlord that are 3 ] hn fe attributable to any period within the Term, Landlord shall notify Tenant of its share of such additional Taxes and Tenant shall pay such amount to Landlord within ten (10) calendar days after Landlord's written request therefor. The obligations of Landlord and Tenant under this Section with respect to the reconciliation between the estimated and actual amounts of Taxes payable by Tenant shall survive the expiration or earlier termination of this Lease. 6. Operating Expenses 6.1. Tenant's Obligation. Tenant shall pay to Landlord as additional rent Tenant’s Percentage Share of ail Operating Expenses, as defined below. 6.2. Definition of Operating Expenses, The term "Operating Expenses" shall include all expenses and costs of every kind and nature which Landlord shall pay or become obligated to pay because of or in connection with the ownership, operation, repair and/or maintenance of the Building, Common Areas and/or Property, the surrounding property, and the supporting facilities, including, without limitation: (A) property management fees and expenses, (B) all maintenance, janitorial and security costs, (C) costs for all materials, supplies and equipment; (D) all costs of water, heat, gas power, clectricity, refuse collection, parking lot sweeping, landscaping and other utilities and services relating to the Common Areas; (E) all costs of capital improvements to the Building or Common Areas made to achieve compliance with federal, state and local law not in effect as of the date of this Lease or to improve the operating efficiency of the Building or the Project, all of which costs will be amortized over such reasonable period as Landlord shall determine, together with interest upon the unamortized balance at the Interest Rate or such other higher rate as may have been paid by Landlord on funds borrowed for the purpose of making the alterations or improvements; (F) premiums for insurance maintained by Landlord pursuant to this Lease or with respect to the Building or the Property; (G) costs for repairs, replacements (including, without limitation, replacement of the roof membrane), uninsured damage or insurance deductibles and general maintenance of the Building, Common Areas and Property, but excluding any repairs or replacements paid for out of insurance proceeds or by other parties; (H) all costs of maintaining machinery, equipment and directional signage or other markers; and (1) the share allocable to the Building of dues and assessments payable under any reciprocal easement or common area maintenance agreements or declarations or by any owners associations affecting the Building or the Property. 63 Estimates of Operating Expenses, Tenant shall pay to Landlord each month at the same time and in the same manner as monthly Base Rent one-twelfth (1/12th) of Landlord’s estimate of the amount of Operating Expenses payable by Tenant for the then-current calendar year. If at any time it appears to Landlord that Tenant’s Share of Operating Expenses payable for the current calendar year will vary from Landlord’s estimate, Landlord may give notice to Tenant of Landlord's revised estimate for the calendar year, and subsequent payments by Tenant for the calendar year shall be based on the revised estimate. Within one hundred twenty (120) calendar days after the close of each calendar year, or as soon after such 120-calendar day period as practicable, Landlord shall deliver to Tenant a statement in reasonable detail of the actual amount of Operating Expenses payable by Tenant for such calendar year. Landlord’s failure to provide such statement to Tenant within the 120-calendar day period shall not act as a waiver and shall not excuse Tenant or Landlord from making the adjustments to reflect actual costs as provided herein for the previous year only. For clarity, Landlord shall not have the right to reassess Operating Expenses for years preceding the previous year. If on the basis of such statement Tenant owes an amount that is less than the estimated payments for such calendar year previously made by Tenant, Landlord shall credit such excess against the next payment of Rent due. If on the basis of such statement Tenant owes an amount that is more than the estimated payments for such calendar year previously made by Tenant, Tenant shall pay the deficiency to Landlord within fifteen (15) calendar days after delivery of the statement. In addition, if, after the end of any calendar year or any annual adjustment of Operating Expenses for a calendar year, Operating Expenses are incurred or billed to Landlord that are attributable to any period within the Term (e.g., sewer district flow fees), Landlord shall notify Tenant of its share of such additional Operating Expenses and Tenant shall pay such amount to Landlord within ten (10) calendar days after Landlord’s written request therefor. The obligations of Landlord and Tenant under this Section 6.4 with respect to the reconciliation between the estimated and actual amounts of Operating Expenses payable by Tenant for the last year of the Term shall survive the expiration or earlier termination of this Lease. 7. Permitted Use. 7.1, Use and Compliance with Laws. The Premises shall be used and occupied by Tenant solely for the Permitted Use set forth in the Basic Lease Information. Tenant shall, at Tenant’s expense, comply promptly with all applicable federal, state and local laws, regulations, ordinances, rules, orders, and requirements in effect during the Term relating to the condition, use or occupancy of the Premises. Tenant shall not use or permit the use of the Premises in any manner that will tend to create ‘waste or a nuisance, or that unreasonably disturbs other tenants or neighbors of the Premises, Building or Project, nor shall Tenant place or maintain any signs, antennas, awnings, lighting or plumbing fixtures, loudspeakers, exterior decoration or similar devices on the Premises, Building or the Property or visible from the exterior of the Premises without Landlord’s prior written consent, which consent shall not be 4 A ) unreasonably denied. Tenant shall not use any corridors, sidewalks, stairs, elevators or other areas outside ofthe Premises for storage or any purpose other than access to the Premises. Tenant shall not use, keep or permit to be used or kept on the Premises any foul or noxious gas or substance, nor shall Tenant do or permit to be done anything in and about the Premises which would violate the terms of any covenants, conditions or restrictions affecting the Building or the Property, or the Rules (as defined herein). Tenant shall cooperate with Landlord and other tenants in the Building with respect to Tenant's use of the loading docks and shall not leave any truck unattended by or near the loading docks. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises, Building or with respect to the suitability or fitness of either for the conduct of Tenant’s business or for any other purpose. 7.2.No Representations Regarding Property or Premises. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises or the Property with respect to the suitability or fitness of either for the conduct of Tenant's business or for any other purpose. Tenant further acknowledges that Landlord and its representatives have not made any representation or warranty as to whether the Premises or the Property, including without limitation, any restrooms or elevators located therein, comply with any Accessibility Laws. In the event that the Premises are alleged or determined to be in noncompliance with any Accessibility Laws, Tenant shall be entitled to undertake, at its sole cost and expense, any improvements to the Premises necessary to cause such areas to comply with any Accessibility Laws, subject to the Landlord's approval, which approval shall not be unreasonably withheld and shall be obtained pursuant to the procedures for Alterations. Landlord shall not be obligated to alter, modify, renovate, undertake or pay for any improvements to the Premises or the Property (or any portion thereof) in the event that the Premises or the Property (or any portion thereof) are alleged or determined to be in noncompliance with any Accessibility Laws. 7.3, Compliance with Laws. Tenant shall, at Tenant's expense, comply promptly with all Laws in effect during the Term relating to the condition, use or occupancy of the Premises, and shall make any alterations, additions, modifications, renovations or other improvements required to comply with all such Laws. Without limiting the foregoing, Tenant specifically agrees that Tenant shall be solely responsible for ensuring that the Premises, and its use and occupancy of the Premises and Property, complies with all Accessibility Laws. Pursuant to California Civil Code Section 1938, Landlord states that, as of the date of this Lease, the Premises has not undergone inspection by a “Certified Access Specialist" to determine whether the Premises meet all applicable construction-related accessibility standards under California Civil Code Section 55,53. 7.4, Disability Access. As required by San Francisco Administrative Code Chapter 38, Landlord and Tenant agree as follows: PLEASE NOTE: DISABILTY ACCESS OBLIGATIONS NOTICE ‘The Property may not currently meet all applicable construction-related accessibi standards, including standards for public restrooms and ground floor entrances and exits, By executing this Lease and the Disability Access Obligations Notice attached to this Lease as Exhibit E, Tenant confirms that Tenant has read and understood the Disability Access Obligations Notice. Tenant further acknowledges and agrees that prior to Tenant’s entering into this Lease, Landlord has provided the following notices to Tenant: (i) the Disability Access Obligations Notice Under San Francisco Administrative Code Chapter 38 attached hereto as Exhibit E and incorporated herein by this reference and (ii) a copy of the Small Business Commission's Access Information Notice in English. The Access Information Notice is also available through the San Francisco Office of Small Business and their website 7.5. Signs. Tenant shall not attach or install any sign to or on any part of the outside of the Premises, the Building or the Property, or in the halls, lobbies, windows or elevator banks of the Building without Landlord’s prior written consent, which consent shall not be unreasonably withheld. For clarity, Landlord has provided permission to Tenant to install, at its cost, two signs at the entrance of the Premises and one additional sign at the end of the Building facing Potrero. All such exterior signage shall be in compliance with applicable laws and Tenant shall obtain all approvals and permits necessary for the installation of such signage. If Landlord consents to Tenant's signage, the Tenant, upon expiration or earlier termination of this Lease, shall remove such signage and shall return the affected areas to their condition existing immediately prior to the placement or erection of said sign or signs, subject to normal wear and tear. 7.6. Use of Common Areas. 7.6.1. Right to Use Common Areas. Landlord gives Tenant and its authorized employees, agents, customers, representatives and invitees the nonexclusive right to use the Common Areas with others who are entitled to use the Common Areas, subject to Landlord’s rights as set forth in Oy this Section 7.3, 5 mY 7.6.2, Rules. All Common Areas shall be subject to the exclusive control and management of Landlord and Landlord shall have the right to establish, modify, amend and enforce reasonable rules and regulations with respect to the Common Areas. Tenant acknowledges receipt of a copy of the current rules and regulations (the "Rules") attached hereto as Exhibit D and agrees that they may, from time to time, be modified or amended by Landlord in a commercially reasonable manner, ‘Tenant agrees to abide by the Rules; to cause its concessionaires and its and their employees and agents to abide by the Rules; and to use its best efforts to cause its customers, invitees and licensees to abide by the Rules. 7.6.4, Use. Landlord shall have the right to close temporarily any portion of the Common Areas for the purpose of discouraging use by parties who are not tenants or customers of tenants; to use portions of the Common Areas while engaged in making additional improvements or repairs or alterations to the Property; to use or permit the use of the Common Areas by others to whom Landlord may grant or have granted such rights; and to do and perform such acts in, to, and with respect to, the Common Areas as in the use of good business judgment Landlord shall determine to be appropriate for the Project. 7.7, Environmental Matters. WTA, Hazardous Materials. The term "Hazardous Materials" as used herein means any petroleum products, asbestos, polychlorinated biphenyls, P.C.B.’s, or chemicals, compounds, materials, mixtures or substances that are now or hereafter defined or listed in, or otherwise classified as a "hazardous substance", "hazardous rial", “hazardous waste' nt7 ‘extremely hazardous waste”, "infectious waste", "toxic subs