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S24 - Balboa Theater Lease Amendment
• CITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. S24 September 14, 2004 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Manager's Office Sharon Wood, Assistant City Manager 644 -3222, swood @city.newport- beach.ca.us SUBJECT: Amended and Restated Lease By and Between the City of Newport Beach and the Balboa Performing Arts Theater Foundation Balboa Theater 707 East Balboa Boulevard ISSUE: • Should the City amend its lease of the Balboa Theater to the Balboa Performing Arts Theater Foundation? RECOMMENDATION: Approve and authorize the Mayor and City Clerk to execute the Amended and Restated Lease. DISCUSSION: Background: The City purchased the Balboa Theater in October 1998. Community Development Block Grant (CDBG) funds were used, and renovation and re- opening of the Theater were considered part of the City's efforts to revitalize the Balboa Peninsula. The City entered into a lease with the Balboa Performing Arts Theater Foundation in November 1998, and the lease was amended three times to reduce the insurance requirement and to allow more latitude in the historical accuracy of the Theater's rehabilitation. The original lease requires that the Theater improvements be consistent with a first class community theater. In their planning to meet this criterion, the Foundation • consistently has found that the existing Theater building is not large enough to be a viable venue for present day use. Two potential solutions to this problem were explored Amended and Restated Lease for Balboa Theater September 14, 2004 Page 2 in detail, and both were found to be infeasible. The first solution was to build a basement, which would have posed dewatering issues and the potential for impacts on surrounding properties. The second solution was to acquire or lease the property to the east of the Theater. Considerable negotiations with the property owner did not result in an agreement, making this option infeasible as well. Most recently, the Foundation has explored the addition of a second story to the Theater. This solution appears feasible, but it is not entirely consistent with the existing lease provisions. Additionally, as time has passed, the review process and the schedule for the Theater's rehabilitation have become more clear, and the Foundation has developed as an organization. Some provisions of the original lease are out of date, and some provisions are not as specific as they can be with current knowledge. Because the lease has been amended three times previously, and the new amendments occur throughout the document, staff is proposing an Amended and Restated Lease to avoid confusion in future administration of the lease. The attached Amended and Restated Lease shows changes from the original lease in strikeout and underline. Summary of Amendments: Recitals are added to provide background for the amended lease provisions. • Officers, employees, agents or representatives are deleted from the definition of Lessee so that only the Foundation, and not any individuals, has the right to exercise the option to purchase the property. Articles 6 and 7 are combined in a new and retitled Article 6 Long Range Plan, Budgets and Records. Amendments reflect the planning process, budget system and fund names used by the Foundation (e.g., Capital Campaign) and which are more reflective of the different phases and activities needed for the project. There are requirements for the Long Range Plan to be reviewed and revised at least once a year and to include fundraising strategies and efforts of the previous year as well as a schedule for completion of the Theater's rehabilitation. Article 7 Use of Property includes the opportunity for the Foundation to allow use of the Theater by other organizations for events and meetings. The language in Article 8 Required Improvements and Article 11 Alterations is changed to require that improvements to the Theater are consistent with a first class community multi -use Theater viable for present -day use, and that the improvements respect the design of the original front facade of the Theater to the maximum extent feasible. • LJ Amended and Restated Lease for Balboa Theater September 14, 2004 Page 3 Article 8 also has revisions reflecting the procedure for review and approval of plans that City staff and the Foundation believe are appropriate with our current knowledge of the project. Conceptual Design and Design Development Plans are still required, but the level of detail required in each is reduced to be more consistent with typical plan submittals for land use and building permits. Conceptual Design Plans will show exterior elevations and complete interior floor plans, and Design Development Plans will show exterior lighting, treatment, design, colors and materials, sound and projection systems and design and treatment of interior spaces. Final Plans and Specifications required in the original lease are deleted because they are the equivalent of construction drawings required as part of a building permit application. A new step of Final Design Plans is added to show interior design treatments, colors and materials, which are decisions that may be made after the issuance of building permits. The Schedule for Required Improvements, Section 8.7, is new. It provides specific timelines for all phases of planning, permitting and construction of the required improvements. We now know much more about the scope of the project than when the original lease was drafted, and it is now possible to set specific milestones for completion. Article 10 Status and Management of Lessee is changed to reflect the Foundation's by- laws and to require that the Foundation have an Executive Director. Corrections are made throughout the document to account for the new effective date. Environmental Review: This project has been reviewed by the Planning Department as part of a use permit application, and It has been determined that the proposed project Is categorically exempt from the requirements of the California Environmental Quality Act under Class 2 (Replacement or Reconstruction) which allows the replacement of a commercial structure with a new structure of approximately the same purpose and capacity. Submitted by: Sharon Wood Assistant City Manager Attachment: Amended and Restated Lease • RECORDING REQUESTED AND • WHEN RECORDED RETURN TO: City Clerk's Office City of Newport Beach 3300 Newport Boulevard P.O. Box 1768 Newport Beach, CA 92658 -8915 Space above this line for Recorder's use only. Exempt Recording Request per Government Code 6103 Contract No. 3248 AMENDED AND RESTATED LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THE TRETHEATER FOUNDATION • • AMENDED AND RESTATED LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS • THE-A-T-R €THEATER FOUNDATION This Amended and Restated Lease ( "Lease "), entered into as of November 2-3-- September 2004=1-988 (Effective Date) by and between the City of Newport Beach, a Charter City and municipal corporation ( "Lessor ") and the Balboa Performing Arts Theatr2Theater Foundation ( "Lessee "), is made with reference to the following: RECITALS A. Lessor is the owner of the property, structures and improvements, commonly known as the Balboa heatreTheater located at 707 E. Balboa Blvd in the City of Newport Beach ( "Property "). B. Lessee purchased the Property with Community Development Block Grant (CDBG) funds ( "Federal Funds ") from the United States Department of Housing and Urban Development. The Federal Funds were granted pursuant to Title 1 of the Housing and Community Development Act of • 1974 (42 U.S.C. 5301 et. seq.) as amended (Act) and the Regulations of 24 C.F.R. Section 570 e. seq. (Regulations). C. The Federal Funds were granted to Lessor, in part, to benefit low income residents and households in the vicinity of the Property and to revitalize the economy in the primary commercial area that serves these residents. D. Lessee is a non - profit corporation organized pursuant to and in compliance with the provisions of California law and is presently in good standing. Lessee was organized by, and its members include, individuals who reside in an around the Property and the area to be benefited by the use of the Federal Funds. E. The City Council of the City of Newport Beach (City Council) has determined that this Lease and the use of the Property as a Theatere is consistent with the City Charter, the Newport Beach General Plan and Zoning Ordinance and all other applicable Federal, State and local laws. F. The City Council has also determined that this Lease will benefit, and serve the interests of, the low income residents and business owners in the area for which the Federal Funds were granted. • I G. An original Lease was entered into as of November 23, 1998, and was amended on September 27 1999, December 13, 1999 and December 12. 2000 (collectively "Original Lease "), H. Lessee has pursued its responsibilities for Required Improvements outlined in the Original Lease, and has kept Lessor apprised of its progress. Lessor acknowledges that Lessee's development of plans for • the Required Improvements demonstrates the need to amend the Original Lease to enable Lessee to make the Property viable for present -day use as a first class community multi -use Theater. I. This Amended and Restated Lease replaces the Original Lease, and represents the parties' full agreement with regard to the Property. NOW, THEREFORE, in consideration of the terms, covenants and conditions in this Lease, Lessor and Lessee hereby agree as follows: • • 2 • ARTICLE 1 SUBJECT OF LEASE 1.1 Purpose of the Lease The purpose of this Lease is to require Lessee to renovate and rehabilitate the Property cons is#ent- with its - original- design- and -@�itestdre and, subsequent to renovation, require Lessee to operate a first - Blass- eor- nmunity- Theatffirst class community multi -use Theatere. The renovation and operation of the TheatreTheater is intended to serve the needs and interests of the residents and business owners in the area to be benefited through the use of the Federal Funds. 1.2 The Propert y The term "Property" includes the land described in Exhibit A and depicted in Exhibit B as well as the structure(s), any improvements and personal property. The- term = Theatre' = generally refers to -the- use -ef-the straetureFs)- iprevements and4i*tures -located-- en-the- P- reperty -as-a nen- profit- seiturat- and- perferrning arts eenter- 1.3 Lessor • Lessor is the City of Newport Beach, a Charter City and municipal corporation. The principal office of Lessor is located at City Hall, 3300 Newport Boulevard, Newport Beach, California 92658 -8915. For the purposes of this Lease, the term "Lessor" shall include all officers, employees, agents or representatives of Lessor. 1A Lessee Lessee is the Balboa Performing Arts T- heat%Theater Foundation. Lessee is a California non - profit public benefit corporation organized for the purpose of renovating, operating and maintaining the TheatreTheater and engaging in activities that will, among other things, serve the interests of, and benefit, the area commonly known as Central Balboa or Balboa Village. €or- the- prposes -ef this -- Lease- the - term -' L-essee -- shalt- instude- att-offiserS; employees - agents - -er representatives of- Lessee- ARTICLE 2 LEASE OF PROPERTY 2.1 Lease of Property Lessor leases the Property to Lessee, and Lessee leases the Property from Lessor for the Term and pursuant to the terms, provisions, covenants and 0 2 conditions of this Lease. Lessor reserves all rights to substances below the • surface of the Property and the right to produce or take any of those substances so long as the activities do not impair or interfere with the opevat +en- o"e&thetiss ef-the T- h(- atre-Purpose of this Lease. 2.2 Condition of Title The Property is leased subject to the Permitted Exceptions (Exhibit C) and other matters affecting title which do not inhibit, prevent or impair the operation; rnaintenanee -e Ise of the Theatre-Purpose of this Lease. ARTICLE 3 POSSESSION OF PROPERTY 3.1 Quiet Enjoyment Lessee shall be entitled to peaceably and quietly use and enjoy the Property for the Term, without hindrance or interruption by Lessor except for the exercise of Lessor's rights pursuant to this Lease. Lessor shall not be liable in damages or otherwise, because of the interruption or termination of any service provided by Lessor (such as, water or sewer service), or a termination, interruption or disturbance of any service attributable to any act or omission of Lessee. 3.2 Condition of Property • Lessee has investigated and researched all physical conditions of the Property that could affect Lessee's use, enjoyment and improvement of the Property including soil conditions, the condition of structures, and the condition of utilities. By execution of this Lease, Lessee shall be deemed to have accepted the Property in an "AS IS" condition. Lessor has provided Lessee with a report that confirms the presence of lead -based paint on the Property and Lessee acknowledges that substantial improvements, including seismic retrofit and remediation of the lead -based paint, will be necessary before the Property can be operated as a first -class community Theatere as required by this Lease. 3.3 Ownership of Improvements During the Term of this Lease, Lessee shall hold title to the improvements and personal property necessary or convenient to the operation or maintenance of the Theatere, such as fixtures, machinery, rigging, lighting, staging, merchandise, trade fixtures (collectively, Equipment) that have been constructed or placed on the Property 3 • • 3.4 Surrender of Property 3.4.1 On expiration of the Term or termination of this Lease, Lessee shall peaceably and quietly leave and surrender the Property and Equipment to Lessor, in good order, condition and repair, reasonable wear and tear and obsolescence excepted. Lessee shall deliver to Lessor all contracts, agreements, books, records, and other documents related to the operation, maintenance or use of the Property. 3.4.2 Upon the expiration of the Term or termination of this Lease and within ten (10) days of a written request by Lessor, Lessee shall immediately deliver to Lessor the following: (i) Documents reasonably necessary for Lessor's ownership of the Property and Equipment to be clearly reflected of record. (ii) Title insurance, surety bond, or other security reasonably acceptable to Lessor insuring Lessor against all claims and liens against the Property other than those incurred by Lessor or accepted by Lessor in writing. • (iii) All plans, surveys, permits and other documents relating to the Property as may be in the possession of Lessee at the time. 3.4.3 All documents and instruments to be delivered pursuant to this Subsection shall be in a form satisfactory to Lessor. ARTICLE 4 TERM /OPTION TO PURCHASE 4.1 Duration and Commencement The Term of this Lease shall commence on the Effective Date and shall expire on the twenty -fifth (25th) anniversary subject to early termination or Lessee's exercise of the option to purchase as provided in Section 4.3. 4.2 Option to Extend Any extension of this Lease, and the terms and conditions of the extension, shall be at Lessor's option, in its sole and absolute discretion. 4.3 Option to Purchase Lessee shall have the option to purchase the Property subject to satisfaction of • 4 the following: • 4.3.1 Lessee shall have completed the Required Improvements; and 4.3.2 Lessee shall have operated the TheatreTheater in full compliance with the provisions of Article 87 for a period of five (5) years; and 4.3.3 Lessee has given Lessor thirty (30) days written notice of its intention (notice of intent) to exercise the option to purchase; and 4.3.4 Lessee is not in default when the notice of intent is served or at close of escrow; and 4.3.5 Lessee, within fifteen (15) days after service of the notice of intent, opens an escrow for the purchase of the Property and deposits ten percent (10 %) of the purchase price into escrow. 4.4 Option - Purchase Price The purchase price of the Property shall be the sum of (1) the price paid by Lessor ($480,000) and (2) an amount equal to $480,000 multiplied by the cumulative percentage increase in the Consumer Price Index (All Urban • Consumers — Los Angeles, Anaheim Riverside — All Items) from the Effective dDate of the Original Lease (November 23 1998) to the date of the Notice of Intent. For example, if Lessee exercises the option nine (9) years after the Effective Date of the Original Lease and the increase in the CPI during that period is thirty percent (30 %), the purchase price would be $624,000. ($480,000 plus $144,000) 4.5 Right of First Refusal Lessee shall have the right of first refusal to purchase the Property prior to the sale to any third party. Lessor shall give Lessee sixty (60) days written notice of its intent to sell the Property and Lessee's right to purchase during that period. Lessee shall exercise the option by serving Lessor with written Notice of Intent to purchase within sixty (60) days after receipt of the notice of intent to sell and complying with Subsection 4.3.5. The purchase price for the Property shall be as specified in Section 4.4. ARTICLE 5 RENT /CONSIDERATION 5.1 No Money Payable by Lessee Lessee shall not pay money as rent to Lessor. 5 • 0 5.2 Other Consideration In consideration for this Lease, Lessee covenants that, during the Term, it wily 5.2.1 Operate and maintain a Theatrefirst class community multi -use Theater on the Property in full compliance with the terms and conditions of this Lease and at no cost to Lessor. 5.2.2 Maintain its non - profit status. 5.2.3 Construct the Required Improvements in accordance with the provisions of Article 98 and maintain the Property in accordance with this Lease at no cost to Lessor. 5.2.4 Defend, indemnify and hold Lessor harmless with respect to the renovation, use, maintenance and operation of the Property. 52.5 Use any excess revenue or funds for purposes related to the • operation of the Theatere or the revitalization of Central Balboa/Balboa Village. The term "excess revenue or funds" means any revenue or funds (other than the principal and interest of the Coatribu#ensCapital Campaign Fund) in excess of the amount projected in Lessee's then current Budget and which, in Lessee's reasonable determination, are not needed for Lessee's reserve account(s). AR-TICL €-r3 CONTRIBUTIONS -FUND Le&sez -s all- estabfis�aintain- at- a- finaRGial institutie +min- anassount- -}nsared-by F- 14W,F-SIAC or- similar-ir Ltra �eparate fund- (Centributiens FuRd}�e- purpose of aeceptingsontributions from aay -- source— L- essee -&4aH - use- the- Centributiens- F- u -nd-to pay fo4l- the-imprGvufl4e4-.ts- requir4L- by- this-.Lease- and/or -to- suppeA# the- operatierrand maintenance of the-- T-heatre-- 6essea- shal1 establish and maintairr-ar -e going -fund raising program as part-of - its- Opera4ens -- and - Marketing 9perations P-4ar- Article -T -and use As best- efferts to ensure -the success -of the - program: ARTICLE 76 ANNUAL LONG RANGE PLAN, BUDGET/ AND OP €RATIONRECORDS AND MARKETING PLAN 76.1 SudgeYT+mingLong Range Plan • 6 F- -I L Lessee shall prepare, and submit to the- Lessor, a Long Range Plan which projects fundraising renovation marketing and operational expectations and financial needs from initial planning up to and including active n- annaa4- udget teRanGe and operations of the Theatere (BuE4getLong Range Plan). The initial Long Range Plan shall be adopted within sixty (60) days after the Effective Date. The Long Range Plan shall be reviewed and updated/revised from time to time at least once per Vear, to reflect changes to renovation plans, fundraising strategies and goals performances /events and marketing-programs. The Lonq Range Plan shall comply with and provide information relevant to, the provisions of Articles 7 and 8 and specify in reasonable detail (as appropriate given the status of the project) the following_ (i) fundraising needs and efforts including a report on fundraisinq efforts for the prior year; (ii) schedule for completion of Required Improvements; ON proposed number of performances and /or events and (iv) marketing plan for the Theater including _ programs for attracting attendees and efforts to integrate the operation of the Theater into efforts to revitalize the local economy. The f*st- �etl-ong Range Plan shall be adopted;- and - submitted to Lessor, within sixthirty (630) days of adoption or any material modification.after the F'- �ffestrve- Date,- Subsequent ^l R dgetS ^hall be submitted � . to Lesser -ne later thafl f (teen-(- 15) -days after adeptien- by Le see- 7 1 2 F- 'r-e�suisien • Lessee- shal --v"-e Lesse., with- material- modifisati©ns or-4&v'siens to the adeptior ,by- Lessee- 67-.4 -3- Yew end G Ransial- -Statement 1 67.2 Sontents- ofAnnual Budget Lessee shall prepare and submit to Lessor an annual budgetT-he (Budget which shall be based on the Lona Ranqe Plan and indicate more specifically the expectations and financial needs and sources for the current fiscal year. The Budget shall specify in reasonable detail (as appropriate given the status of renovation).- (i) the- prop osed- rates- and- ehar-ges- for4he -, isp. of thp Thpa;rP: -(ii) the balance in all funds and accounts maintained by Lessee; (iii) all projected revenues and sources of funds for the fiscal year,, (iiiv) the expenditures proposed to be made by Lessee in fulfilling its obligations pursuant to this 7 • • Lease;; and iv marke} ^^ (_) �- p;eg:a.^�- and-- sos ± °., --(v;) --ail other proposed expenditures of Lessee., (vii)- the -pr- ins+ pal- balanc-e- of-the- Gentr-ibufiens -F -End; {vrti)- inserne €roe- fhe qtr- ibufe., �� mod- and x) �as"�raes if -any Lessee has prepared Budgets as required by the Original Lease. Subsequent Budgets and material modifications or revisions to the Budget shall be submitted within fifteen (15) days after adoption by Lessee. • 67.3 Year End Financial Statement Within ninety (90) days after the last day of Lessee's fiscal year Lessee shall submit to Lessor a cash flow statement itemizinq all of its revenues and expenditures for that fiscal year. 9pe4:atiens- and - Mar- keting -Plan l=essee- shall-prepare- and- adept--ar}- apemtiens and- Marketing- Rlan49peratiens P- Ian} - during -the Term -Tbe- initial -- 9peratiens- Plan- shall -be adapted- ene- hu4dre4 and- eight -y- -(4-80) -- days-- prier--te- anticipated-- sernpletien --of- he- Required ImprQVements- To Operatiens -P-lan shall -be -rev ised -frern- time-te- time-te-reflest new per#ermanc-es /even -ts- new - fund -rai sing. - strategies and -new 04:- -revised marketing prsgrams -- -The Qperatiens- Plan- shalk- semply- with, -- and- pravide infermafion -- relevant --te -the previsions - of -A4ir- -8 -- and - specify- in- r-easenable detail (as- appropriate- given-the status- 9f- renovatienH4 perferrnanses;- meetinrgs, concerts and- ether - events at the- T-heatre-that have been -or- are prepared te-be; scheduled-- (ii)-- pererm- form ers and-- events - which - Lessee- is-- aGWely- seeking -to schedule at-the Theatre.4iii) -a- rear- keting-Pla, f^� tre-ineluding-pregrams fer- attrasfing-a#tendees- and -eff© its -te- integrate-the- eperat; ^�f' -the Theatre -into e€ farts- te- revital+ ze- th e- 4ec- aa- esene�ny- ar}d-- (iv)- f�+nd- raising- e#for- ts- insludi ng -a report --en - fund- raising- efforts -for 4he- p4er - yeas The- 9pera#ens- Wan- sha4 -be subm4ted- to Lessor- within - fifteen- -- days - a#er- adoption-- any- material modification: 67.4 Records Lessee shall keep and maintain complete, accurate and customary records and books of account on all sales, whether for cash or on credit, all business transactions made with respect to the Property during each fiscal year, and the principal and income of the Capital Campaignontribetions Fund. These records shall be retained intact for a period of not less than three (3) years after the end of each fiscal year to which the records and books of account pertain. Lessor and representatives of the United States Government shall be entitled, upon reasonable notice and during business hours, to inspect and make copies of any and all of the records and books of account. 1 671.5 Audit • 8 Lessor and /or the United States Government shall, once per fiscal year, be • entitled to conduct an audit of all records and books of account that Lessee is required to maintain. Lessee shall submit to Lessor a copy of any audit prepared at the request of Lessee or any other party. ARTICLE 87 USE OF PROPERTY 87.1 Permitted Use The Property shall be used primarily for the operation of a first class cultural and performing iercommunity multi -use ( Theatere) open to the general public. Lessee shall operate the Theatere in accordance with the standards specified in this Lease and the relevant Operations Plan. Lessee may, in conjunction with performances, events and fund - raising activities, conduct incidental operations such as limited food service or catering, on premises sale of alcoholic beverages (provided Lessee obtains all required governmental permits and approvals), concessions, and retail sales directly related to performances or fund raising events- (Permitted Uses). Lessee may conduct benefits, fund - raising events, previews, receptions and similar activities where admission is restricted subject only to compliance with this Lease. Lessee may • allow nonprofit eiviG, eharitablc-7-edUGat;en - community and other organizations to periodically use the Theatere for fund raising, education, or community events and business meetings in accordance with this Lease and the Operations Plan. Lessee may conduct fund - raising and similar events on the Property after completion of the improvements contemplated by Section 88.2 (Seismic Retrofit) and before completion of Required Improvements subject to issuance of a Special Events Permit by Lessor. 87.2 Performances /Frequency Lessee shall operate the Theatere in a prudent and businesslike manner reasonably calculated to assist in the efforts of Lessor and others to revitalize the local economy and in full compliance with the Operations Plan. A.2. � --yee- shall- se-hedule -and- present -perfermansesor- GultuFal -ev, � on at least -one hundred - 0-98 } - days - of -t#e Twelve ( -12) -month per-ied commeRCing —s xty— (69) -- days-- after_eompietien ef— Required 8 2 2 2 2 1 Pssee- shall, - for- eas#--subsegueRt- twelve-02)-month period; tied± lo_and present per#oFinanses- or-oultu al- events OR at least one hundred -and fifty (150) days. 9 • • 8.2-3— Operation of the Theatere is the fundamental consideration for this Lease and Lessee shall ensure and promote the maximum reasonable use of the Theatere by performers, artists, and entertainers likely to attract patrons. The Theatere shall be operated consistent with the standards, practices and procedures utilized by first class multi -use community Ttheateres in other jurisdictions. 1 78.3 Program Standards Lessee shall operate the Theatere in a manner reasonably calculated to achieve the following objectives: 87.3.1 Provide frequent and high quality performances and cultural events to attract patrons to the Theatere and Central Balboa /Balboa Village. 78.3.2 To serve as a catalyst to the revitalization of the economy of the area to be benefited by use of the Federal Funds. 78.3.3 To make the Theatere accessible to, and enjoyable by, as wide a • potential audience as possible including the low income residents of the area to be benefited by the use of Federal Funds; 78.3.4 To utilize the skill, ability and energy of members of the community in combination with a capable and experienced professional staff to fund and complete the renovation as well as operate and maintain a first -- class— %mmunity-- TheaErflrst class community multi -use Theatere. 1 78.4 Cooperation Lessor and Lessee shall, at least ninety (90) days prior to completion of the Required Improvements, commence discussion of a parking validation program that would allow patrons of the Theatere to use public parking at reduced rates. Lessor and Lessee shall also discuss ways to integrate operation of the Theatere into programs for the economic revitalization of Central Balboa /Balboa Village. 78.5 Change of Use Lessee shall not use, or conduct any activities on, the Property except the Permitted Uses without the prior written consent of Lessor, which consent may • 10 be withheld at Lessor's sole discretion. • 1 78.6 Compliance with Laws Lessee shall not use the Property in a manner liable to create a public or private nuisance or liable to cause structural injury to the Theatere. Lessee shall not conduct any operation that would invalidate any insurance coverage required of Lessee. Lessee shall not violate any local, state or federal law in the renovation, maintenance, or operation of the Property or Theatere. Lessee shall obtain any required permit(s) from the City and approval from the Department of Alcohol Beverage Control prior to any sale of alcoholic beverages on or from the Property. 78.7 Zoning and Planning Lessor acknowledges that the use of the Property as a Theatere is a legal non- conforming use as that term is defined in Title 20 of the Newport Beach Municipal Code (Zoning Code). Lessee shall be entitled to repair, alter, and modify the structures and improvements on the Property in accordance with the provisions of the Zoning Code provided Lessee complies with the provisions of this Lease. Lessee shall also use the Property in conformance with the provisions of the Central Balboa Specific Plan. Approvals granted by Lessor pursuant to Article 8 of this Lease shall not substitute for land use and • development approvals and hermits required by Titles 15 and 20 of the Newport Beach Municipal Code. 1 78.8 Nondiscrimination 87.8.1 Lessee shall not discriminate against any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the renovation, operation, enjoyment or occupancy of the Property. 78.8.2 Lessee shall not discriminate against any employee or applicant for employment because of race, color, religion, sex, national origin, age or handicap. Lessee shall take positive steps to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex, national origin, age or handicap. Lessee shall post in conspicuous places, available to employees and applicants for employment, notices specifying the non - discrimination provisions of this Lease. Lessee shall, in all solicitations or advertisements for employees placed by or on behalf of Lessee, state that all qualified applicants will receive consideration for employment without regard to race, 11 • • color, religion, sex, national origin, age or handicap. Lessee shall not discriminate on the basis of age in violation of any provision of the Age Discrimination Act of 1975. Lessee shall not discriminate against, or with respect to, any otherwise qualified handicapped individual as provided in Section 504 of the Rehabilitation Act of 1973. 78.8.3 Lessee agrees not to discriminate on the basis of sex, marital status, race, color, religion, creed, ancestry or national origin of any person with respect to any agreement, license, or contract related to the renovation, operation, use or occupancy of the Property. All such contracts, licenses, agreements shall contain non- discrimination provisions substantially similar to this Lease. ARTICLE 98 REQUIRED IMPROVEMENTS 1 98.1 Lessee's Obligations The Property requires substantial renovation and rehabilitation to be used as, or considered, a first — class-- e- 9mrrmnity-- T#eaWirst class community multi -us_e Theatere. Lessee shall design, obtain building permits for, and then construct the improvements specified in this Article (Required Improvements) at Lessee's sole • cost and expense 1 98.2 Seismic Retrofit/Remediation. The primary structure on the Property is an unreinforced masonry building constructed prior to 1935 and is subject to the provisions of Chapter 15.07 of the Newport Beach Municipal Code (Earthquake Hazard in Existing Buildings). In addition, a preliminary investigation of the Property has revealed some lead - based paint. Lessee shall submit to Lessor, plans and specifications for improvements to the Property necessary to comply with the provisions of Chapter 15.07 (Seismic Retrofit) and a plan to remediate the lead based paint ( Remediation). Lessee shall retain a licensed contractor to construct the Seismic Retrofit and complete the Remediation. Lessee shall complete the Seismic Retrofit and the Remediation no later than the date on which the Required Improvements are required to be completed. Lessee shall be solely responsible for all costs and expenses associated with the Seismic Retrofit and the Remediation. 1 98.3 Conceptual Design Plans • 12 Lessee shall prepare, and submit to Lessor for approval, a- proposed • eConceptual Design Plans for the design-, and construction - furnishing -and equipping of the Property for use as a first class community multi -use theatreTheater (Conceptual Design Plans). -The Conceptual Design PlaR -Plans shall be prepared by a licensed architect. The Conceptual Design Plans shall generally describe those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theatere constructed in the 1920's. The Conceptual Design Plans shall include, without limitation, (1) seating layout - and - design; (2) stage and dressing room layout an4- design -(3) lobby and concession area- designlayout; (4) StFUGtUFal med4ieatens necessary te-een ty- wFtt�- un + #erm- cedeO7 (�) interior design -eler 8Rts 3- an�',- ,a- t;eat,FAe- Rt=(6) exterior- design - and - treatment; {7) seund- and -projection systems; -(3)- lighting sy r and des gn� (°Tpublic area layout - design} -and treatment; and stage- ©rshestra- pit•- and -roll- down- backdrepAe ^^ °^ + + ^ ° °r^ ° ^t exterior elevations. Lessor's right to approve the Conceptual Design Plans shall be limited to ensuring that the improvements contemplated by the Conceptual Design Plans are consistent with a first- elass- eemmuni"eatrfirst class community multi -use Theatere viable for present -day use and_ -that the improvements respect the desiqn of the original front facade of the Theater to the maximum extent feasible. reasenably- Eensistent-^d;.' n'he -Cuidetkies -fer -the Rehabg4atien -of k stsr4G-,'�tractur espublished- by4he- gesretaFy of - Interior. The Conceptual Design Plans shall be deemed approved if Lessor -fails to serve written notice of disapproval within thirty (30) days following submittal. Lessor's • approval shall not be unreasonably withheld and any disapproval by Lessor shall specify with particularity the components of the Conceptual Design Plans disapproved, the reasons for disapproval and alternatives that Lessor would approve. The Parties shall agree on a Conceptual Design Plan within sixty (60) days of submittal. 1 88.4 Design Development Plans Subsequent to approval of the Conceptual Design Plan, Lessee shall submit Design Development Plans to Lessor for approval. The Design Development Plans shall be based on, consistent with and amplify on the information provided in the Conceptual Design Plans. The Design Development Plans shall include; (1) spesif+s- iMer+ep-and -- exterior lighting P-plans and design; (2) spee+fis infer - matron regardng the color, material, treatment and design of all inter OF a ad exterior elements; (3) sound and projection systems (4) desiqn and treatment of interior spaces; and (3J schedules showing the principal stages, phases and timing of construction. Lessor's right of approval, which shall not be unreasonably withheld, shall be limited to a determination that the Design Development Plans are based on and consistent with the approved Conceptual Design Plans. The Design Development Plans shall be deemed approved if Lessor fails to give written notice of disapproval within thirty (30) days after 13 • • submittal. Lessor shall specify with particularity those components of the Design Development Plans disapproved, the reasons for disapproval and the alternative(s) Lessor would approve. The Parties shall agree on dDesign Development Plans within sixty (60) days after submittal. • • 9.5 Fi al- P-lap -s- arid- Seee+# eatiops ' a - s• ' z s• e_ a z s te obtaiR e a .as s a s z .s a e : •s :a _s •_ a • •_ •. _ . _ a 's D •' - • e s. ■ .ss Les&o .sa ' s z ns wi#4R 69 1 98.65 Building Permits Lessee shall apply for all necessary building permits from Less or- MN4a-- oae -(a) yea r -- after-the ffeetive -Bate. Lessee shall diligently process any corrections and changes to the submittals that are necessary to comply with State and local law and to ensure consistency with approved F-iaal Design Development Plans -aad Spesi#isatians. Lessee sip° - oe -tf e{�#+ea_. -e s +tt+r Fiaai Plans - aad S,peeit+ sat+ e�t4e-- deea+Neats;,-eGe&sar-y -4a obtain - building pe mits assu444 �9 s64ab4444arthat pufpase— Lessee shall also obtain all permits or approvals required of any other governmental entity having jurisdiction over the Property or any modification to the Property. In the event that another governmental agency with jurisdiction over the Property requires modification of the FinalDesign Development Plans- a4;d-- Spes+fieatiens, the modifications shall be submitted to Lessor for review and approval. Lessor shall not unreasonably withhold or delay the issuance of building permits. Lessor shall pay all building permit fees, planning fees and other fees and charges normally imposed on similar projects. 8.6 Final Design Plans 14 Subsequent to approval of Design Development Plans Lessee shall submit Final • Design Plans to Lessor for approval. Final Design Plans shall be based on consistent with and amplify on the information provided in the Development Design Plans. The Final Design Plans shall include all interior design treatments colors and materials. Lessor's right of approval which shall not be unreasonably withheld shall be limited to a determination that the Final Design Plans are based on and consistent with the approved Design Development Plans. The Final Desiqn Plans shall be deemed approved if Lessor fails to give written notice of disapproval within thirty (30) days after submittal. Lessor shall specify with particularity those components of the Final Design Plans disapproved. the reasons for disapproval and the alternative(s) Lessor would approve. The Parties shall agree on Final Design Plans within sixty (60) days after submittal. 98.7 GoRstruetien- ef-Schedule for Required Improvements Lessee shall submit plans, diliqently -pursue their approval. and begin construction of Required Improvements accordinq to the following schedule. ! •e s. s - .e• Required ImpKwe s s e -- e six y4Oy-day,; after E)f-afl s- •s es ' -s_ -s s - - s• - s Conceptual Design Plans I Thirty (30) days after Effective Date —) Complete application for Use Permit and Thirty (30) days after Effective Date Development Plan Review Complete application for Coastal Sixty (60) days after approval of Use Development Permit (CDP) Design Development Plans Permit and Development Plan Review One hundred eighty (180) days after I approval of CDP Complete Building Permit application One hundred eighty (180) days after of CDP —LapprgLval Begin construction Upon reaching 70% of budqet for Required Improvements, but no later than one (1) year after issuance of building ermits Final Design Plans Upon approval of framing by Lessor's Building D_epart_ment CmmnletP cnnstruction I One (1) vear anti six (M mnnths after bui 15 • �J 1 98.8 General Requirements 9-.848.8.1 The Required Improvements shall be constructed in compliance with the provisions of this Lease that regulate, or relate to, the construction, alteration or maintenance of improvements on the Property. Lessee acknowledges that the reviews and approvals required by this Section, with the exception of the issuance of building permits, are proprietary activities related to Lessor's ownership of the Property and separate and distinct from any review or approval conducted by Lessor in its municipal capacity. Lessee also acknowledges that any approval given pursuant to this Section, except the issuance of building permits, does not bind Lessor when acting in its governmental capacity. 9- 8- 28.8.2 Lessor has designated the Committee to Promote Revitalization of the Peninsula (PROP), or its successor, to review, and approve or disapprove, the Conceptual Design Plans, the Design Development Plans and the Final Design Plans -and- ,Specifications. Lessee —shall provide PROP- -vv4U -�- imenthly -- repo rs--on—tbe - status—ef—the renovation - -of— the — Property. - -- Lessee may request City Council • review of any decision by PROP disapproving submittals by serving a request for review within fifteen days after receipt of the notice of disapproval. 98.9 Extensions Lessee may request, and the City Manager of the City of Newport Beach may grant, an extension of up to sixty (60) days with respect to any of the deadlines specified in this Article. The City Council of the City of Newport Beach may, upon a showing of good cause, grant extensions in excess of sixty (60) days. The extensions authorized by this Section are in addition to any extension resulting from force majeure. ARTICLE 10 -9 REPAIRS AND MAINTENANCE Lessee recognizes that the TheatreTheater is a designated local historical landmark and is to be maintained as such. Lessee shall, at Lessee's expense, perform all routine and recurring maintenance necessary to keep the Theatere in first class condition and in accordance with the standards in this Lease. Lessee shall, at a minimum perform the following: (i) the maintenance of the exterior surfaces of the Theatere (including patching and resurfacing the roof membrane and painting or other protective treatment • 16 of the exterior wall of the Theatere); (ii) maintenance of the public rest rooms (including • repairs or replacements of tile or rest room fixtures); (iii) the maintenance of electrical systems serving the Property and Theatere and the repair and replacement of components; (iv) maintenance of all pipes and plumbing systems serving the Theatere and Property, and the repair and replacement of components; and (v) the maintenance of all building service equipment (including HVAC equipment, conveyancing systems, and fire, life safety, and emergency equipment) and the repair and replacement of components. As soon as reasonably practicable following the completion of Required Improvements, Lessee shall prepare and submit to Lessor a schedule for the periodic inspection and maintenance by Lessee of the Theatere. Lessee shall revise the schedule for maintenance from time to time during the Term as necessary to maintain the Theatere to the standards required by this Lease. Lessee shall have the benefit of all warranties available to Lessor with respect to the Theatere or any component thereof. Lessee shall not be responsible for the cost of and repair or maintenance required because of the acts or omissions of Lessor. Lessee may terminate this Lease If the cost of repairing or replacing any of the structural, roof, main electrical, plumbing, building service or fire /life safety components of the Theatere would make continued operation of the Theatere economically infeasible. ARTICLE 101 STATUS AND MANAGEMENT OF LESSEE 101.1 Nonprofit Status During the Term, Lessee shall maintain its status as a California public benefit • nonprofit corporation in full compliance with the California Nonprofit Corporation Law (California Corporation Code Section 5000 et seq.). Lessee shall also maintain its qualification as a tax - exempt organization under 501(c)(3) of the Internal Revenue Code (or any successor statute). 10.2 By -Laws During the Term Lessee shall maintain By -Laws governing the management and operation of the Foundation and provide Lessor with a current copy of the By -Laws. 'x E 44ng -the- Term; -Lessee shall appoint an- Fxecutive- ConNnittee consisting Mere than -f vex- Members.- ..The- ExecutNre�emm +„ tee sh y Lessee-to inter-act - with-- ess0Faad- preMptdy- respend-te-prebleM-s- ef- ceaGems expressed by Lessor members general pub4G- relative -to -the -- operation o#- the= Fheatre. Lessees hall - also-- appoint - an- - Advisory- Board- er-Advisery Co imittee that is resPORS ble- feF- turad -rai sing - Lessee May- appoint -er- establish ether— Beards or Qremmittees -4o-- perforrn-- specific functions relative two -t 17 • 0 • 1 40.3 Employment of Staff During the Term, Lessee shall ase -its- best- ef#ofts -ta -- employ a professional Executive Director to manage the day to day renovation and /or operation of the Theatere,to interact with Lessor and promptly respond to problems or concerns expressed by Lessor or members of the general public relative to the renovation and /or operation of the Theater, and to perform such other duties as Lessee may assign. Lessee shall use its best efforts to fill a vacancy caused by separation of an Executive Director within one hundred eighty (180) days.The- Executive Directe, °— — be-appeinted at least— ninety- -(98)- -days - prier to - anticipated completion of- Requ+red lmpro-vements- ARTICLE 112 ALTERATIONS 1 112.1 Written Consent Except as otherwise provided in this Article, Lessee shall obtain the written consent of Lessor prior to making any structural or nonstructural alterations to the Property. All structural and nonstructural alterations to the Property shall conform to the Theatere's designation as a local landmark and shall respect the design of the original front fagade of the Theater to the maximum extent feasible. shall be---- eonsistent —with the-- or-igin-al— design_ -- and— arehitectu-r-e —of t-he TheatreTheater. - -as -well as the G�iidelines - for - the - Rehabilitation -ef- Histor-ie Structures- pabGshed by the- Secretary lnterior -- Lessee shall be solely responsible for all costs and expenses incurred in making any alteration. All alterations shall be surrendered with the Property when this Lease expires or terminates. 121.2 Notice of Non - responsibility Structural and nonstructural alterations shall not be commenced until ten (10) days after Lessor has received written notice from Lessee stating the date work is to commence so that Lessor can post and record an appropriate Notice of Non - Responsibility. Structural alterations shall be made by a licensed contractor. ARTICLE 132 PAYMENT OF UTILITIES, TAXES, CHARGES AND FEES 1 1321 Public and Private Utility Services Lessee will pay all charges for all public or private utility services and all sprinkler 18 systems and interior protective services provided to or for the Property. Lessee • will comply with the terms and conditions of contracts relating to such services. Lessor shall not be liable for any failure or defect in the supply of any utility. 1 132.2 Taxes Assessments Fees and Charges Lessee covenants to pay when due all applicable taxes, assessments, fees, charges, and levies of every type and character, including all interest and penalties, that are imposed, assessed or levied on the Property, any occupancy or use of the Property, or any income derived from the Property. 123.3 Proof of Payment Lessee agrees to furnish to Lessor, upon request, proof of the timely payment of any tax, assessment, levy, fee or charge or other. Lessee may pay any assessment or tax in installments if legally permissible to do so. In the event Lessee elects to pay assessments or taxes in installments, Lessee shall be liable only for those installments which become due and payable during the Term of this Lease. 132.4 Payment by Lessor Lessor shall have the right to pay any assessment, tax, fee or charge before the • due date if Lessor has an objectively reasonable belief that Lessee is unwilling or unable to make the payment. In such event, Lessee shall fully reimburse Lessor within ten (10) days of written notice of payment by Lessor. 132.5 Property Taxes not Valid The obligation of Lessee to pay taxes shall not be construed as evidence that Lessor or Lessee believe that any tax is legal. This Lease is intended only to obligate Lessee to pay taxes if legally imposed. 132.6 Notice of Possessory Interest; Payment of Taxes and Assessments on Value of Entire Lease Premises In accordance with California Revenue and Taxation Code Section 107.6(a) and Health and Safety Code Section 33673, Lessor states that by entering into this Lease, a possessory interest subject to property taxes may be created, and if so, that Lessee shall pay taxes upon the assessed value of the entire property and not merely the assessed value of its leasehold interest. Lessee or other party in whom the possessory interest is vested may be subject to the payment of property taxes levied on such interest. 19 • 0 l J • I ARTICLE 143 LIENS 143.1 Indemnification Lessee shall indemnify, defend and hold Lessor and the Property free, clear and harmless from any claims, liens, demands, charges, encumbrances or litigation arising directly or indirectly out of (1) Lessee's use, occupancy or operation of the Property or (2) any work performed on, material furnished to the Property. Lessee shall pay, prior to delinquency, for all work performed on, and material furnished to, the Property which may result in a lien on the Property and shall use its best efforts to keep the Property and TheatfeTheater free and clear of all mechanic's liens and similar liens. 1 134.2 Satisfaction of Liens Lessee shall fully pay and discharge a judgment or lien affecting the Property upon entry of final judgment in any action contesting any claim of lien (if final judgment establishes the validity of all or a portion of the lien). Lessee shall also pay any lien within fifteen (15) days after notice of the filing of any lien that Lessee does not contest. Lessee shall reimburse Lessor upon demand for any and all loss, damage and expense, including reasonable attorneys' fees, incurred by Lessor with respect to any judgment or lien resulting from the acts or omissions of Lessee related to the Property. Lessor shall have the right to satisfy any judgment or lien if Lessee fails or refuses to do so and Lessee shall fully reimburse Lessor in such event. 1 143.3 Notice to Lessor Lessee shall give Lessor written notice of any claim or lien filed against the Property and any action or proceeding instituted affecting the title to the Property. 143.4 Notice of Non - Responsibility Lessor shall have the right to post and maintain on the Property any Notice of Non - Responsibility authorized by law. ARTICLE 154 154.1 Indemnity INDEMNIFICATION Lessee shall defend, indemnify and hold harmless Lessor from and against any and all legal or administrative proceedings, claims, reasonable attorneys' fees 20 and costs, expenses, penalties, actual damages, punitive damages and losses, • including indemnity claims, in any way related to (1) the improvement, use, maintenance, or operation of the Property (ii) this lease (iii) the use, release, generation, storage or disposal of Hazardous Materials (as defined in Section 164.76 on the Property or TheatreTheater, (iv) compliance or non - compliance with any federal, state or local environmental law, ordinance, rule or regulation, (v) any accident or injury to, or death of, persons or damage to property occurring on or about the Property (vi) the removal, clean -up, encapsulation, detoxification or any other action taken by Lessee or any other party, directly or indirectly arising out of the presence of Hazardous Materials in, on or around the Property. 164.2 CERCLA Liability Lessee agrees that this Lease is intended to operate as an indemnification under Section 9607(e)(1) of the Comprehensive Environmental Response, Compensation and Liability Act ( CERCLA), as amended, and the California Hazardous Substances Act (CHSA), as amended. 1 154.3 Expense of Proceedings The defense of any suit, action, legal or administrative proceeding that may be • threatened, brought or instituted against Lessor that is the subject to the indemnity provided in this Lease shall be conducted at Lessee's sole expense by legal counsel selected and approved by Lessor. 154.4 Release Lessee waives, releases and forever discharges Lessor from any and all suits, causes of action, legal or administrative proceedings, claims, demands, liabilities, losses, costs, interest, attorneys' fees, expenses, penalties, actual damages, punitive damages and losses, known or unknown, which Lessee ever had, now has, or may have in the future that are in any way related to (i) the condition; status, quality, nature, contamination or environmental state of the Property including Lessee's claims under the CERCLA, the Carpenter-Presley- Tanner Hazardous Substance Account Act and any other federal, state or local law, ordinance or regulation, or common law theory of recovery, pertaining to the presence, release, clean -up or containment of Hazardous Materials on the Property. 154.5 Waiver of California Civil Code Section 1542 Section 1542 of the California Civil Code states: 21 is • A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which, if known by him, must have materially affected his settlement with the debtor. Lessee knowingly and voluntarily waives its rights pursuant to California Civil Code Section 1542. Lessee fully understands the consequences of this waiver and has been advised of the consequences by legal counsel. The Parties intend this Lease will be effective as a bar to Lessee's Claims. 154.6 Definition of Hazardous Materials The term "Hazardous Materials" means, without limitation, gasoline, petroleum products, explosives, radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic substances, polychlorinated biphenyls or related or similar materials, asbestos or any other substance or material that may be defined as a hazardous, toxic or dangerous substance, material, waste, pollutant or contaminant under any federal, state or local environmental law, ordinance, rule or regulation as now or at any time hereafter in effect, including, without • limitation, (a) CERCLA, (b) the Federal Water Pollution Control Act, (c) the Clean Air Act (d) the Resource Conservation and Recovery Act, (e) the Toxic Substances Control Act, (0 the Hazardous Materials Transportation Act, (g) the Carpenter - Presley- Tanner Hazardous Substance Account Act, (h) Hazardous Waste Control Law, and the (i) the Porter - Cologne Water Quality Control Act (California Water Code Section 13000 et seq). ARTICLE 165 INSURANCE 1 165.1 Insurance to be Maintained Lessee shall take out and maintain, no later than thirty (30) days after the Effective Date and for the Term of this Lease, at Lessee's sole cost and expense, the following insurance. 16.5.1.1 Comprehensive General Liability in an amount not less than f+vetwo million dollars ($62,000,000) combined single limit per occurrence. Lessor and its officials, employees and representatives shall be covered as additional insureds with respect to liability arising out of activities by or on behalf of Lessee or in connection with the use or occupancy of the Property. Coverage shall be in a form acceptable to Lessor and shall be primary and non- • 22 contributing with any insurance or self- insurance maintained by • Lessor or Lessee. Any third party permitted to use the Propert y pursuant to Paragraph 7.1 of this Lease shall provide the same insurance unless this requirement is waived or modified in writing by Lessor's City manager. 165.1.2 Workers' Compensation Insurance as required by the Labor Code of the State of California. 156.1.3 "All Risk" Property Insurance (Operations) including coverage against the perils of earthquake, fire, explosion of machinery or equipment, and vandalism covering the full replacement cost of all improvements and fixtures on the Property. Lessor shall be added as insured under the standard loss payable endorsement. Lessee waives all rights of subrogation against Lessor for any damage to the improvements or fixtures covered by collectable commercial insurance. Lessee's obligations to provide insurance under this paragraph shall apply to all improvements and fixtures on the Property without regard to the date of construction or installation. Lessee's obligation to provide this coverage is contingent on the availability of coverage at commercially reasonable rates. 165.1.4 Property Insurance - Construction. During construction of any • improvements on the Property, Lessee shall maintain Builder's Risk Insurance against "all risk" of physical loss, including the perils of fire, collapse and transit, with commercially reasonable deductibles, covering the total cost of work performed, equipment, supplies and materials furnished on a replacement cost basis. Lessee's obligation to provide this coverage is contingent on the availability of coverage at commercially reasonable rates. 156.2. Acceptable Terms of Coverage Acceptable insurance coverage shall be placed with carriers admitted to write insurance in California, or carriers with a rating of or equivalent to AVIII by A. M. Best & Company. Any deviation from this standard shall require the specific written approval by Lessor. Any deductibles or self- insured retentions must be declared to and approved by Lessor. At the option of Lessor, Lessee may be required to reduce or eliminate such deductibles or self- insured retentions or to procure a bond guaranteeing payment of losses and related expenses and costs. Coverage under each policy shall not be suspended, avoided or canceled by either party except after thirty (30) days prior written notice to Lessor. Lessee shall furnish City and Lessor with certificates of insurance and with original 23 0 r� LJ • • endorsements effecting coverage required by this Lease. The certificates and endorsements for each insurance policy shall be signed by a person authorized by the insurer to bind coverage on its behalf. 165.3 Index The limits of insurance coverage required by this Article shall be adjusted on each seven (7) year anniversary of the Effective Date. The adjustment shall reflect the percentage increase for the preceding seven (7) years in the Consumer Price Index for All Urban Consumers, Los Angeles- Anaheim- Riverside. All Items (1982 -84 Base), published by the Bureau of Labor Statistics, Department of Labor. Consumer Price Index. 1 165.4 Waiver of Subrogation Each policy of insurance procured pursuant to this Article shall contain, if feasible, either (i) a waiver by the insurer of the right of subrogation against either party for negligence of such party, or (ii) a statement that the insurance shall not be invalidated should any insured waive, in writing prior to a loss, any or all right of recovery against any party for loss accruing to the property described in the insurance policy. Lessor and Lessee waive any and all rights of recovery against the other for any loss or damage to that Party arising from any cause insured against under the insurance policies required by this Article. ARTICLE 17-6 DAMAGE BY FIRE OR CASUALTY 1 176.1 Lessee to give Notice In case of any material damage to or destruction of the Property, Lessee will promptly give written notice to Lessor generally describing the nature and extent of the damage or destruction. 1 176.2 Restoration Except as provided in Section 187.3, in the event of damage to or destruction of the Property, Lessee shall repair and restore the Property to its original condition (subject to changes necessary to comply with then existing laws and any changes in design approved by Lessor), at Lessee's sole cost and expense. To the extent the insurance proceeds are insufficient to cover the cost of such repair and restoration, Lessee shall make up the deficiency out of Lessee's own funds. The repair and restoration shall be commenced within a reasonable period of time following the casualty and shall be completed with due diligence. Lessee shall have the option to terminate this Lease and surrender possession of the Property to Lessor if the event the cost of such repair and restoration exceeds 24 the sum of (i) the amount of insurance proceeds available to Lessee plus (ii) the • amount of the deductible by an amount which Lessee reasonably determines renders reconstruction of the Property economically infeasible. In the event of such a termination, Lessee shall pay to Lessor the amount of the deductible and assign to Lessor any and all rights Lessee may have to the insurance proceeds- 1 176.3 Casualty Late in Term Lessee or Lessor shall have the right to terminate this Lease on ninety (90) days written notice If (i) the Property is damaged or destroyed subsequent to the fifteenth (15th) year of the Term, (ii) the costs of restoration and repair are estimated to exceed fifty percent (50 %) of the then full replacement cost of the Property (excluding land costs /value), and (iii) Lessee elects not to repair or restore the Property. In such event, Lessor shall have the right to receive and retain all insurance proceeds paid or payable to Lessee on account of any damage or destruction to the Property. 1 176.4 Application of Insurance Proceeds In the event that Lessee is required to restore the Property pursuant to Section 176.2, proceeds from policies of insurance required by Article 165 and which are • received on account of any damage to or destruction of the Property (less the costs, fees and expenses incurred in the collection), shall be applied as follows: 176.4.1 Lessee shall furnish to Lessor satisfactory evidence to Lessor of the total cost of Restoration pursuant to Section 176.2. Lessee shall then furnish to Lessor satisfactory evidence that it has available the total amount of money which, when added to the insurance proceeds received, shall be sufficient to pay the cost of such Restoration. 47- .-0- 2-16.4.2 Assuming satisfaction of the conditions of subsection [176.4.1) net insurance proceeds shall be paid to Lessee, unless Lessee is in Default, to fund restoration. Payments from the proceeds of insurance for restoration shall be made only upon written request of Lessee accompanied by a certificate of an architect to the effect that the amount requested has been paid or is then due, is properly a cost of restoration, and there are no mechanic's or similar liens for labor or material supplied in connection with the restoration to date. 176.4.3 Upon completion of restoration and assuming Lessee is not in default, excess insurance proceeds shall first be paid to Lessor 25 • • to the extent of its actual expenses incurred in the restoration, then to Lessee as working capital ARTICLE 187 EMINENT DOMAIN 187.1 Lease Governs The rights and obligations of the Parties with respect to any Award shall be as provided in this Article if there is any Taking during the Term of this Lease. 178.2 Termination of Lease This Lease shall terminate effective on the date of surrender of possession of the Property to the condemning authority in the event of a Total Taking. Lessee shall continue to observe and perform all of the terms, covenants and conditions of this Lease until the date of termination. 187.3 Partial Taking — Restoration If there is a Partial Taking, Lessee may, at its sole cost and expense, whether or not the condemnation award is sufficient for the purpose, promptly commence • and diligently proceed to effect restoration of the Property as nearly as possible to the condition and character immediately prior to such Taking. 178.4 Distribution of Award All awards and damages received on account of any Taking, whether partial or total, including interest received (Award), shall be paid promptly by the person(s) receiving the same to an escrow agent mutually acceptable to Lessor and Lessee to be distributed upon appropriate instruction from the Parties. 1 178.5 Allocation of Award — Partial Taking Any Award in a Partial Taking shall be distributed by escrow in the following order of priority: 187_.5.1 First, to Lessor and Lessee to reimburse all costs and expense incurred in the collection of the Award, including fees and expenses incurred in the condemnation proceeding, 178.5.2 Second, to Lessor, as reimbursement for the costs and expenses of restoration of the Property and as those costs and expenses are incurred by Lessee; • 26 178.5.3 Third, if Lessor and Lessee are unable to agree upon the • allocation of the balance of the Award, if any, it shall be deposited by escrow into a court of competent jurisdiction to be equitably allocated by the court. 178.6 Allocation of Award —Temporary Taking In the event of a Taking for temporary use or occupancy, this Lease shall continue in full force and effect and Lessee shall be entitled to claim, recover and retain any Award made on account of such temporary Taking. However, if the period of temporary Taking extends beyond the Term, the Award shall be apportioned between Lessor and Lessee as of the date of expiration. 178.7 Allocation of Award — Total Takinq Any Award in a Total Taking shall be distributed by escrow in the following priority: 187.7.1 First, to Lessor and Lessee to reimburse for all costs and expenses incurred by each in the collection of the Award; 178.7.2 Second, if Lessor and Lessee are unable to agree upon the • allocation, the balance of the Award shall be deposited by escrow into a court of competent jurisdiction to be equitably allocated by the court. The determination of the value of Lessee's and Lessor's respective interests in the Property shall be made as if the Lease were to continue in full force and effect until the Expiration Date. 1 178.8 Conduct of Proceedings Lessee and Lessor shall jointly participate in and prosecute /defend any action or proceeding involving a Taking of the Property by condemnation or under the power of eminent domain and shall jointly make any compromise or settlement. 1 178.9 Notices Any Party receiving notice of or becoming aware of any condemnation proceedings shall promptly give written notice to the other party. ARTICLE 198 ASSIGNMENT AND SUBLETTING Lessee may not assign or sublet this Lease or any portion of the Property, without Lessor's prior written consent which consent may be withheld in Lessor's sole 27 • • discretion. However, Lessee may grant such licenses, permits and concessions as are reasonable, appropriate and customary to promote a Permitted Use and are in accordance with the Operations Plan. Lessor may, at any time during the Term and in its sole discretion, assign this Lease or its interest in the Property to a non - profit entity. ARTICLE -2 019 LEASEHOLD MORTGAGES Lessee shall have no right to encumber its interest in this Lease, the Property or the TheatreTheater without Lessor's prior written consent, which consent may be withheld in Lessor's sole discretion. ARTICLE 240 PERFORMANCE OF LESSEE'S COVENANTS 1 240.1 Right of Performance If Lessee fails to pay any tax, fee or other charge in accordance with Article -13 within the time period required or shall fail to pay for or maintain any of the insurance policies provided for in Article 176 within the time required, or to make any other payment or perform any other act within the time required by this Lease, then Lessor may, after 30 days' written notice to Lessee (or without notice in case of an emergency) and without waiving or releasing Lessee: • 240.1.1 Pay the tax, assessment, fee or charge payable by Lessee pursuant to this Lease; or 240.1.2 Pay for and maintain any insurance policies required by this Lease; or 240.1.3 Make any other payment or perform any other act that Lessee is required to pay or perform pursuant to this Lease. 1 240,2 Reimbursement and Damages Lessee shall reimburse Lessor for all costs and expenses incurred by Lessor in the exercise of its rights pursuant to Section 2'f0.1. ARTICLE 221 REPRESENTATIONS 1 221.1 Lessor's Representations Lessor represents to Lessee that: 221.1.1 Lessor owns the Property in fee simple subject only to the Permitted Exceptions and other matters affecting title that do not • 28 inhibit, prevent or impair the operation, maintenance or use of the • -T #eatreTheater. 221.1.2 Lessor has the power and authority to enter into this Lease and perform all the obligations of Lessor hereunder. 1 221.2 Lessee's Representations Lessee represents to Lessor that: 221.2.1 Lessee has examined the Property and finds it will be fit for use as a cultural and performing arts center in accordance with this Lease and the Operations Plan upon completion of Required Improvements. 221.2.2 Lessor has not made any representations or warranties regarding the condition of the Property, or its suitability for the construction of Required Improvements or the operation and maintenance of a TheatreTheater consistent with this Lease and the Operations Plan. 221.2.3 Lessee has the right, power and authority to enter into this Lease and to perform all the obligations of Lessee. • 221.2.4 Lessee is a California public benefit nonprofit corporation in full compliance with the provision of the California Nonprofit Corporation Law (California Corporation Code Section 5000 et seq.), and is a tax exempt organization under 501(c)(3) of the Internal Revenue Code. ARTICLE 232 DEFAULTS, REMEDIES AND TERMINATION 232.1 Legal Actions 2321.1 Institution of Legal Actions In addition to any other rights or remedies, either Party may institute legal action to cure, correct, or remedy any default, to recover damages for any default, or to obtain any other remedy consistent with the purpose of this Lease. Any legal action shall be filed in the County of Orange, State of California. ► • 1 232.1.2 Applicable Law The laws of the State of California shall govern the interpretation and enforcement of this Lease. 1 232.2 Rights and Remedies are Cumulative Except with respect to rights and remedies expressly declared to be exclusive in this Lease, the rights and remedies of the Parties are cumulative. 1 232.3 Occurrence of Default The following acts or omissions shall be considered material breaches of this Lease if Lessee fails to cure the default within thirty (30) days after written notice of default from Lessor or, if cure is not feasible within thirty (30) days, Lessee has failed to commence cure within thirty (30) days or fails to diligently complete the cure: 223.3.1 The failure of Lessee to comply with the provisions of Article 98 related to the design and construction of Required Improvements. • I 223.3.2 The failure of Lessee to operate the Theatere in compliance with the provisions of Article 37 related to frequency and quality of performances and events. 223.3.3 The failure of Lessee to maintain the Property as specified in Article 109. 223.3.4 The failure of Lessee to restore or repair the Property in the event of damage or destruction 223.3.5 The failure of Lessee to pay any fee, tax, charge, or assessment when due or the failure to reimburse Lessor in the event Lessor pays the fee, tax, charge or assessment. 1 223.4 Remedies If Lessee has materially breached this Lease then a Default shall be deemed to have occurred, Lessor may give written termination notice to Lessee, and on the date specified in the notice this Lease shall terminate. In addition to the right of termination, Lessor shall have the following additional rights and remedies: 232.4.1 Lessor shall have the immediate right to reenter the Property • 30 and /or the TheatreTheater, take possession of the Property and /or • Theatere, any and all Equipment, books and records, contracts and any other property. 223.4.2 Lessor may, at its option, enforce all of its rights and remedies under this Lease, including the right to recover the consideration and all other sums payable as they become due. Lessor shall also be entitled to recover from Lessee all costs of maintenance and preservation of the Property and /or the Theatere, and all costs, including attorneys' and receiver's fees, incurred in connection with the appointment of and performance by a receiver to protect the Property. 223.4.3 Lessor shall be entitled to recover all money payable to Lessee related to the operation and use of the Theatere, all bank accounts, accounts receivable, working capital and cash reserves (if any after payment of Lessee's debts), and the balance in the Contributions Fund. ARTICLE 243 PERMITTED CONTESTS • Lessee, at no cost or expense to Lessor, may contest (after prior written notice to Lessor), by appropriate legal proceedings conducted with due diligence, the amount or validity or application, of any Imposition or lien, provided that the proceedings suspend collection from Lessor and any action against the Property. If Lessee fails to contest the matter, or fails to protect Lessor and Lessor's interest in the Property, Lessor may contest or settle the matter in its sole discretion and obtain reimbursement from Lessee. ARTICLE 264 ENTRY BY LESSOR Lessor may enter the Property at reasonable times for the purpose of inspecting, servicing or posting notices, protecting the Property and /or the Theatre Theater, or for any other lawful purposes, including showing the Property to prospective purchasers or lessees. ARTICLE 265 FORCE MAJEURE Any prevention, delay, non - performance or stoppage due to any of the following causes shall be excused: any regulation, order, act, restriction or requirement or limitation imposed by any Federal, State or municipal government; acts of God; acts or omissions of Lessor; fire, explosion or floods; strikes, walkouts or inability to obtain materials; war, 31 • • riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Lessee. ARTICLE 276 MISCELLANEOUS 276.1 Notices. All notices and other communications shall be in writing, shall be sent by first class registered or certified United States mail, postage prepaid, and shall be deemed to have been given two (2) days after the day of mailing, addressed: To Lessor; City Manager City of Newport Beach 3300 Newport Blvd. Newport Beach, CA, 92658 -8915 With a copy to: City Attorney's Office City of Newport Beach • 3300 Newport Blvd. Newport Beach, CA, 92658 -8915 or at such other addresses as Lessor shall have furnished to Lessee; and To Lessee; Executive Director Balboa Performing Arts Theatere Foundation P.O. Box 752 Balboa. CA 92661 With- a-Gepy to Steve Brea -" Brernberg & 'eager 62-9 - Newport Center -Orwe 11.m_ €leer Newpor-t-Beaeh-rCA; 92669 or-at- sash- ether addresses as Lesse. °,ha:1- ave furnished - Lessor- 4i- w4tiRg- • 32 276.2 No Claims Against Lessor • Nothing in this Lease constitutes any consent or request by Lessor for the performance of any labor or services or the furnishing of any materials to the Property 1 267.3 Integration This Lease, and the exhibits, are the entire Agreement between the Parties, and there are no agreements or representations between the Parties except those specified in this Lease. This Lease supersedes any prior negotiations, representations, discussions or agreements between the Parties with respect to the Property and /or the Theatere. Except as otherwise provided, no subsequent change or addition to this Lease shall be binding unless in writing and signed by the Parties. 267.4 No Waiver By Lessor To the extent permitted by law, no failure by Lessor to insist upon the strict performance of any term of this Lease, or to exercise any right, power or remedy upon a Default under this Lease, shall constitute a waiver. • 267.5 Severability If any term of this Lease or any application thereof shall be declared invalid or unenforceable by a court of competent jurisdiction, the remainder of this Lease shall not be affected. Unless otherwise expressly provided, any approval or consent of Lessor required shall not be unreasonably withheld or delayed. This Lease shall be binding upon and inure to the benefit of and be enforceable by the respective successors of the parties. 1 267.6 Holding Over A tenancy for month to month shall result if Lessee remains in possession of the Property or the TheatfeTheater with the consent of Lessor after the expiration of the Term. The month to month tenancy shall be on the same terms and conditions as contained in this Lease. 267.7 No Partnership This Lease does not cause Lessor to be a partner of Lessee, a joint venturer with Lessee, or a member of a joint enterprise of Lessee relative to the operation 33 • • of the TheatreTheater or otherwise. 267.8 Federal Funds Provisions • No Federal appropriated funds shall be paid, by or on behalf of Lessee to any person for the purpose of influencing or attempting to influence an officer or employee of any Federal agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement. If any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, and officer or employee of Congress or an employee of a Member of Congress in connection with this Federal contract, grant, loan or cooperative agreement, Lessee shall complete and submit Standard Form -LLL, "Disclosure Form to Report Lobbying," in accordance with its instructions. Lessee shall require that the language of this certification be included in the award documents for all contracts, subcontracts, and agreements. 267.9 Time of the Essence Time is of the essence relative to all of the terms, provisions, covenants and conditions of this Lease. FOR LESSOR CITY OF NEWPORT BEACH Dennis- O'Neil Tod W. MayorRidgeway Mayor for City of Newport Beach FOR LESSEE BALBOA PERFORMING ARTS TH €AT-R €TH EATER FOUNDATION • 34 •Day^,a- D°tt;tNancy Gardner Dated P-resideatChairman, Board of Directors of Balboa Performing Arts Theatere Foundation APPROVED AS TO FORM CITY OF NEWPORT BEACH: RebeA H- 6a�am Robin Clauson Acting City Attorney for City of Newport Beach ATTEST: CITY OF NEWPORT BEACH Dated LaVonne Harkless City Clerk for City of Newport Beach FL.1sa" haf e4\ da1 Pr ©jests\BalbeaTheatreTheater�Lea FinalLea6e329388:d©s • 35 • • STATE OF CALIFORNIA COUNTY OF C appeared before me } }ss } personally personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is /are subscribed to the within instrument and acknowledged to me that he /she /they executed the same in his /her /their authorized capacity(ies), and that by his /her /their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. • WITNESS my hand and official seal. • Signature (This area for official notarial seal) Title of Document Lease By and Between The City of Newport Beach and The Balboa Performing Arts TheatreTheater Foundation Date of Document Beeemt�er -3 1998 No. of Pages 32 Other Signatures not Acknowledged: 1