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HomeMy WebLinkAboutBalboa Boulevard East, 707 (Balboa Arts Theater)Q EXCLUSIVE NEGOTIATING AGREEMENT Q3 This EXCLUSIVE NEGOTIATING AGREEMENT ("Agreement") is made and entered into as of RP91�_ 1Z , 2016 ("Effective Date"), by and between the City of Newport Beach, a California charter city and municipal corporation ("City"), and Lab Holding, LLC, a California limited liability company ("Lab Holding"). City and Lab Holding are sometimes hereinafter individually referred to as a "Party" and collectively as the "Parties." RECITALS: The following Recitals are a substantive part of this Agreement and are incorporated herein: A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of the City. B. Pursuant to the Newport Beach Municipal Code and City Council Policy F-7, the City conducted an analysis to determine the maximum or open market value of the property that is the subject of this Agreement, using an appraisal by a reputable and independent professional appraiser to determine the highest and best use of the property, and the highest value of the property. C. In seeking revenue equivalent to the open market value of the highest and best use of the property, the City conducted an open bid or proposal process to ensure the highest financial return on the property that is the subject of this Agreement. D. City desires to sell to Lab Holding certain real property in need of design, redevelopment, and improvements, which property consists of approximately 5,200 square feet located at 707-709 East Balboa Boulevard in Newport Beach, California 92661 (A.P.N. 048-135- 02), and is depicted on Exhibit "A" attached hereto and incorporated herein ("Site"). E. Lab Holding is an experienced firm in restoration of historic structures and operating event/performance venues who has proposed the restoration and operation of the Balboa Theater as a multi-purpose events/performance venue on the Site ("Proposal"). The Proposal, which may be subject to refinement and modification as mutually agreed to by the Parties during negotiations, is generally described in the Proposal Description attached hereto and incorporated herein as Exhibit `B." F. The Parties desire to enter into this Agreement to establish a period during which they will cooperate to explore the feasibility of developing the Proposal on the Site and during which time Lab Holding shall have the exclusive right to negotiate with City with respect to the terms of an agreement or agreements to provide for the Proposal ("Definitive Agreement"). COVENANTS: Based upon the foregoing Recitals, which are incorporated herein by this reference, and for good and valuable consideration, the receipt and sufficiency of which is acknowledged by both Parties, City and Lab Holding agree as follows: 1. Good Faith Negotiations. During the entire Negotiation Period (defined in Section 2), City and Lab Holding shall negotiate in good faith pursuant to the terms set forth herein to achieve the objectives and accomplish the tasks described in this Agreement. Nothing herein shall be deemed a covenant, promise, or commitment by either Party to approve or enter into a Definitive Agreement with the other Party on any particular terms or conditions. The Parties' approval and execution of this Agreement is merely an agreement with respect to certain tasks preliminary to the drafting and execution of the Definitive Agreement and an agreement to enter into a period of negotiations according to the concepts presented herein, reserving full and final discretion with City and Lab Holding as to the final terns of the Definitive Agreement as required by law. If for any reason City and Lab Holding have not each executed a mutually acceptable Definitive Agreement by the expiration of the Negotiation Period, and provided that the Parties have not committed a material default hereunder, this Agreement shall automatically terminate and shall be of no fiuther force or effect. During the period of exclusive negotiation, the City covenants and agrees to negotiate exclusively with the Lab Holding and shall not solicit another party for the Site or enter into any agreement with any other party regarding the development of the Site. The City acknowledges and agrees that but for this exclusivity, Lab Holding would not have entered into this Agreement. 2. Term of Agreement. The term of this Agreement ("Negotiation Period") shall be nine (9) months after the Effective Date; provided, however, that the City Manager, on behalf of the City, and Lab Holding shall have the right to approve an extension of the Negotiation Period for a cumulative maximum of three (3) months without the requirement of any official action by the City Council or an amendment of this Agreement, if the City Manager and Lab Holding determine, in their sole and absolute discretion, that satisfactory progress is being made to achieve the objectives and complete the tasks set forth herein but such extension is necessary to finalize discussions or negotiations on mutually satisfactory terms. 3. Certain Parameters for Negotiation. The following nonexclusive list of items related to the Proposal shall be the subject of negotiations during the Negotiation Period: (a) Scope of development and improvements for a multi-purpose events/performance venue of approximately 5,200 square feet; (b) Scope of the entitlements required for the project (including, but not limited to, City of Newport Beach, California Coastal Commission, California Environmental Quality Act, and California Alcohol Beverage Control); (c) Development schedule for the Proposal; Lab Holding, LLC Exclusive Negotiating Agreement Page 2 (d) The fair market purchase price which Lab Holding will pay for a fee simple interest in the Site and terms and conditions of the conveyance of the fee simple interest to Lab Holding; (e) Deed restrictions to be recorded against the Site by City, including but not limited to, a deed restriction on title limiting the use of the Site to any of the following listed uses: theater, cultural center, event center, or other related performing arts uses. Ancillary commercial use of the property shall be permitted; (f) City's first right of repurchase option to repurchase the property from Lab Holding, should Lab Holding elect not to redevelop property as theater use; and (g) Escrow instructions and conditions for the closing of escrow. 4. Reserved. 5. Land Use & Environmental Requirements. The development of the Proposal shall be subject to all rules, regulations, standards, and criteria required by law and as set forth in the City's General Plan, Coastal Land Use Plan, zoning regulations, this Agreement, and the Definitive Agreement. Lab Holding shall be responsible for all costs related to the Proposal incurred after the Effective Date, including, but not limited to, consultant fees and Architectural Services ("Costs"). 6. Physical Condition of the Site. City and Lab Holding shall cooperate and exchange such information as may be available to either of them regarding the physical condition of the Site (or applicable portions thereof). 7. Hazardous Material Assessment. Within ten (10) days of the Effective Date, the City shall provide Lab Holding without charge, copies of reports, studies, surveys and other data and information on the physical condition of the Site. The Definitive Agreement may address applicable clean-up issues, if any. In the event an environmental audit evidences a need for clean-up of any portion of the Site, the City, by this Agreement, does not agree in any respect to undertake or complete such clean-up. In the event that during the Negotiating Period Lab Holding conducts or causes to be conducted any environmental audits and/or testing on any portion of the Site, Lab Holding shall submit copies of any reports resulting from such tests or studies to the City. Such environmental audits and/or testing shall be conducted at the sole cost and expense of Lab Holding. Neither Party makes any representation or warranty as to the accuracy or completeness of reports prepared by third parties and delivered to the other Party. Lab Holding shall indemnify, defend and hold harmless City from and against all claims, liabilities or damages, and including expert witness fees and reasonable attorneys' fees and costs, arising out of any such testing, inspection or investigatory activity on the Site by Lab Holding. hi addition, following any such testing, inspection or investigatory activity, Lab Holding shall return, and repair if necessary, the Site to the condition it was in prior to the Lab Holding's investigatory activities. Lab Holding, LLC Exclusive Negotiating Agreement Page 3 Miscellaneous. 8.1 Notices. Any notices, requests or approvals given under this Agreement from one Party to another may be personally delivered, or deposited with the United States Postal Service for mailing, postage prepaid, to the address of the other Party as stated in this paragraph, and shall be deemed to have been given at the time of personal delivery or, if mailed, on the third day following the date of deposit in the course of transmission with the United States Postal Service. Notices shall be sent as follows: notices between the Parties shall be delivered in writing to the following addresses: To City: Dave Kiff City Manager 100 Civic Center Drive Newport Beach, CA 92660 With a copy to: Lauren Wooding Whitlinger Real Property Administrator 100 Civic Center Drive Newport Beach, CA 92660 To Lab Holding: Lab Holding, LLC Attn: Shaheen Sadeghi 709 Randolph Avenue Costa Mesa, CA 92626 8.2 Termination. Each Party reserves the right to terminate this Agreement, with or without cause, upon thirty (30) calendar days' prior written notice to the other Party, thereby withdrawing from such negotiations without any liability to the other Party, except that (i) each Party shall be obligated to promptly return to the other Party all information and materials which such Party has received from the other Party pursuant to this Agreement, (ii) Lab Holding shall be responsible for payment of any work Lab Holding contracted to have performed under this Agreement, and (iii) the rights and obligations of the Parties set forth in Section 8 shall remain in full force and effect. The Parties, by their respective execution hereof, knowingly agree, notwithstanding anything herein to the contrary, that, except with respect to the rights and obligations set forth in Section 8 hereof, neither of them shall have any right to specific performance of this Agreement, nor any other equitable or damage remedies under the law. Each Party makes such release with full knowledge of Civil Code Section 1542 and hereby waive any and all rights thereunder to the extent of this release, if such Section 1542 is applicable. Section 1542 of the Civil Code provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known bi him or her must have materially y f ctgd his or her settlem btor.,, Ci 's Initials Lab olding's Initials Lab Holding, LLC Exclusive Negotiating Agreement Page 4 8.3 Lab Holding Documents. In the event of termination of this Agreement, for any reason including, but not limited to, expiration, termination or breach of this Agreement, Lab Holding shall deliver to the City, within ten (10) business days, a copy of all surveys, soils/environmental reports, site plans, pro formas, and other documents prepared by Lab Holding or third parties that are associated in any way with this Agreement. Notwithstanding the foregoing, in no event, however, shall Lab Holding be obligated to make available (or cause to be made available) any proprietary or confidential documents including reports or studies that have been superseded by subsequent reports or studies, or any of the following confidential and proprietary materials: (1) information contained in financial analyses or projections (including Lab Holding's budgets, and capital account information); (2) material that is subject to attorney- client privilege or that is attorney work product; (4) organizational, financial and other documents relating to Lab Holding or its affiliates (other than evidence of due authorization and organization, and the financing plan required under this Agreement); or (5) material that Lab Holding is legally required not to disclose other than by reason of legal requirements voluntarily assumed by Lab Holding after the Effective Date. Lab Holding makes no representation or warranty as to the accuracy or completeness of reports prepared by third parties and delivered to the City. 8.4 Cooperation. The Parties agree to cooperate with each other in promptly supplying information and analyses relating to the Proposal. 8.5 Assignment. Neither Party shall have the right to assign any of their rights or obligations set forth in this Agreement without the written consent of the other Party, which consent may be withheld in such other Party's sole and absolute discretion. Any assignment must be in writing and executed by both assignor and assignee to be enforceable and after the effective date of the assignment the assignor shall be released and discharged from any liability or responsibility hereunder. 8.6 Entire Agreement, Amendments, and Waivers. This Agreement sets forth the entire agreement between the Parties with respect to the subject matter set forth herein and supersedes all prior discussions and negotiations between the Parties with respect thereto. No amendment to this Agreement shall be effective unless set forth in a writing signed by an authorized signator of each Party. No waiver of any provision of this Agreement shall be enforceable against a Party unless it is set forth in a writing executed by such Party. For purposes of amendments, the City Manager is an authorized signatory on behalf of the City. 8.7 Administrative Costs and Expenses, Lab Holding De osit. Lab Holding shall be responsible for all costs and expenses incurred by the City and/or Lab Holding related to this Agreement including, but not limited to, architectural and consultant fees, costs of City staff time related to any applications, other fees and permits, and attorney fees. 8.8 Assurances to Act in Good Faith. The City and Lab Holding each agree to take all actions contemplated by this Agreement, and shall use their respective best efforts to negotiate a Definitive Agreement in accordance with the provisions of this Agreement. Lab Holding, LLC Exclusive Negotiating Agreement Page 5 8.8 Attorney's Fees. In the event of any litigation or legal action between the Parties arising out of or concerning this Agreement, the prevailing Party shall not be entitled to recover from the other Party its attorney's fees and costs. 8.9 Interpretation. This Agreement shall be interpreted as a whole and in accordance with its fair meaning and as if each Party participated equally in its drafting. Captions are for reference only and are not to be used in construing meaning. 8.10 Governing Law. This Agreement shall be governed by the laws of the State of California. Any legal action brought under this Agreement must be instituted in the Superior Court of Orange County, State of California, in an appropriate court in that county, or in the Federal District Court in the Central District of California. 8.11 Purpose of Agreement. It is expressly understood and agreed by the Parties that this is an Agreement regarding the conduct of exclusive good faith contract negotiations only and does not convey any interest in the Site whatsoever. This Agreement is not intended to constitute a binding agreement by the City to sell the Site or commit the City to develop all or any portion of Site, to financially participate with Lab Holding in the development of the Proposal, nor is it intended to constitute a binding agreement to enter into a Definitive Agreement or any other contract. No Party shall be legally bound to consummate construction of the Proposal unless and until a Definitive Agreement or other contract has been executed and delivered by the Parties. Notwithstanding any other provision hereof, neither Lab Holding nor the City shall be under any obligation to approve or execute any Definitive Agreement during or upon conclusion of the Negotiating Period. Any Party may refuse to approve and execute any Definitive Agreement at its sole and absolute discretion, with or without cause. In the event that a Definitive Agreement is approved and executed by the Parties, this Agreement shall be superseded by such Definitive Agreement. It is expressly understood that notwithstanding this Agreement, the Proposal may be modified or not implemented at all depending on a number of factors including but not limited to compliance with the California Environmental Quality Act. 8.12 No Commissions. The City shall not be liable for any real estate commission or any broker's fees which may arise in relation to the Proposal. The City represents that it has engaged no broker, agent, or finder in connection with this transaction, and Lab Holding agrees to hold the City harmless from any claim by any broker, agent, or finder retained by Lab Holding. Agreement. 8.13 Time of Essence. Time is of the essence of each provision set forth in this [SIGNATURES ON FOLLOWING PAGE] Lab Holding, LLC Exclusive Negotiating Agreement Page 6 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement to be effective as of the date first set forth hereinabove. APPROVED AS TO FORM: Date: 1 i Aaron C. Harp IIV City Attorney ATTEST: Date: .2 . Leilani I. Brown City Clerk,0o0,!1 CITY OF NEWPORT BEACH, a California munic1-1,6—A corporation and charter city niate• Mayor LAB HOLDING, LLC: a California limited liability. company Date: Name: ShaheetASadeghl Title: President A Member Lab Holding, LLC Exclusive Negotiating Agreement Page 7 EXHIBIT A DEPICTION OF THE PROPERTY Lab Holding, LLC Exclusive Negotiating Agreement Page A-1 EXHIBIT B PROPOSAL DESCRIPTION Lab Holding, LLC Exclusive Negotiating Agreement Page B-1 0 J �p NEWPORT BEACH I n LA I, October 17, W15 I a.b h o I d i n g I I c Lauren Wooding Whitlinger Real Property; Administrator . City of Newport Beach,- 100 Civic Center Drive 01; .Newport Beach, CA 93660 . :Dear Ms. Wooding Whitlinger; �. Thankyou for the opportunity to provide this additional. information on our offer to purchase the Balboa Theatre. We are excited by the opportunity to resurrect this community amenity for Balboa Village. • Our firms. interest is in bringing the Theatre back and operating,as,a multi-purpose events/ . performance venue. As such, the two City: conditions placed on the purchase of the prop- erty are acceptable. We will refer to the building as the BalboaTheatre, the Historic Balboa . Theatre or The Balboa: 'Following, you will fin4 detailed information on our firm's .experience' in restoring historic structures and in operating event/performance venues. We understand the importance these landmarks play in our community and would be hon- ored to have the opportunity to work with this building. Please contact Chris Bennett from our office if you require further information. He can be reached at 949.933.5296 or at chris@thelab.com. �:.. Sincerely, Shaheen Sadeghi I President 0 LAB Holding 116 Using historic references, the LAB team will restore the original architecture of the Balboa Theater with a prominent marquee. Further study will be made on the design of the marquee and whether the original 20's wrought iron design or the historic neon design would be suitable. The central entry will be restored with the two side bays re-established as store- fronts for the on-ste cafe and box office. Further study will be done on the historic interior to determine what can be brought back while ensuring flexibility as a multi -use space. Interior colors, materials and finishes will be in keeping with the period of the building. BA WIA s FA!1 biOND MAN 'r4N% W-1 ,_ ILLUMINATED_''" RESTORE WINDOW'5 CORNER SIGN STANDOFF AND FRONT BUILDIND FACADE b I UKt tHUNI 140-0 -.#, STOREFRONT 0 --=�== F: . �f HAI.i, - rm � 711 .k� ItF KITACE COLORS ■■ ■ ■ The LAB team intends to restore the original facade of the Balboa Theatre bringing back the historic marquee. We plan on simplifying the current proposed interior layout to make the space more conducive and flexible for multi -use events and performances while remaining within the currently approved development envelope. The main focus of our due diligence will be understanding how we can remain within substantial conformance of the current approved plans and due diligence to confirm construction estimations. Once under contract, we will share detailed plans with City staff to confirm our con- formance with approved plans and what plans may be required for building modifications. We will also have our construction manager, architect and contractors on site to physically inspect the building. We are requesting a 45 day due diligence period to undertake this work. The acquisition and construction will be financed with a construction loan. Following, please find a draft proforma showing our construction assumptions. These assumptions will be tested during the due diligence period and prior to closing escrow. First and foremost, we view the Balboa Theater as a local historic treasure and as such should be repurposed to serve the local community maintaining its original entertainment mission. The LAB (Little American Business) therefore proposes the following in keeping with our long tradition of celebrating small business and site specific community based proj- ects. We propose the following for the historic Balboa Theater based on our event venue experience in the local marketplace. Amenities would include 3 •primary components: (t) intimate neighborhood cafe open to the public and also serving as the catering kitchen for events in the theater ; (2) small scale live music stage (standing room only) for patrons includ- ing pub counter; (3) adjoining gathering room for rental by guests for private celebrations (i.e. meetings, small weddings, etc.). We may propose a flexible connection between the two event spaces allowing these to be combined into one larger space when more seating may be required. The inspiration for the core element of our model is the highly acclaimed Rockwood Mu- sic Hall of New York City. (rockwoodmusichall.com). Having booked local musicians over the course of the last 20 years at the LAB and CAMP properties, and now on a weekly basis for the vibrant Anaheim Packing House, we believe the OC music scene needs a home with his- torical soul. The Rockwood venue is unique in that it offers musicians a comfortable small stage to debut new songs and material to a small audience with manageable short sets; and patrons enjoy an entertaining rotation of various musicians without intimidating door/ticket charges in an informal and relaxing environment. MARKETING The LAB boasts a strong marketing framework with more than 20 years of brand rec- ognition to a local artistically inclined audience. We believe cross promotion between the LAB, CAMP and Anaheim Packing House patrons via our social media networks and event programming would be a natural fit and support for initial marketing efforts of the Balboa Theater. 50 �1 We suggest allocating approximately 1500 sq.ft. for the primary music performance room; with another 1500 sq.ft. for the private event space, which could also serve as a secondary stage room for special event nights (i.e. jazz series, acoustic night, etc). The cafe could occu- py approximately 2000 sq.ft. and pub counter within the entertainment rooms approximately 200 sq.ft. Our team of event management professionals are already in place to conceptualize various musical programs as well as cross promote via our existing private event and wedding businesses. We have longstanding relationships with the AOCVCB, various local music pro- moters, meeting management professionals as well as event vendors/suppliers for a smooth transition to this new venue opportunity. FINANCIAL As with our various existing venue businesses, we believe the successful financial model involves reliance on several components to provide a consistent income base. (1) The Balboa Theater cafe would provide a consistent rental income source as an independent amenity i.e. tenant. (2) the small stage room would generate income from the pub counter (with perhaps a one drink minimum for the over 21 yrs. crowd. Potential ticket sales would only be enforced if there were larger name musicians appearing, akin to the Rockwood model). (3) The primary source of income would be in the rental of the 2nd stage room for private celebrations. We have learned that being on site and word of mouth is paramount for the success of the pri- vate rentals. Therefore, the exposure of the venue to the weekly musical guests would be a natural opportunity to expose the public to the amenity of the private rental. We would project rental of the cafe at market rents (approximately $2/sq.ft. plus percent- age rent); pub counter (self owned and managed) income combined with approximately 4-8 pri- vate room rentals per month which is highly achievable for this unique and historic property. We would be happy to tour you through some of our existing operations so you can see both the quality of building rehabilitation and the venue operations. 15-1 NEWPORT BEACH City Council Staff Report COUNCIL STAFF REPORT CITY OF April 12, 2016 Agenda Item No. 15 ABSTRACT: The City of Newport Beach issued a request for proposals for offers to purchase the vacant Balboa Theater property located on the Balboa Peninsula in June 2015. After a thorough review of the proposals, staff is recommending approval of an exclusive negotiating agreement (ENA) with Lab Holding, LLC, to allow the City and Lab Holding, LLC to negotiate the terms of a purchase and sale agreement for disposition of the Balboa Theater property, located at 707-709 East Balboa Boulevard. RECOMMENDATION: a) Find the execution of the Exclusive Negotiating Agreement is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines; and b) Approve and authorize the Mayor and City Clerk to execute a one-year exclusive negotiating agreement with Lab Holding, LLC, in substantially the same form as the attachment to the staff report. FUNDING REQUIREMENTS: No funding is required for this item. TO:HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM:Kimberly Brandt, Community Development Director - 949-644-3232, kbrandt@newportbeachca.gov PREPARED BY:Lauren Whitlinger, Real Property Administrator Seimone Jurjis, Assistant Community Development Director, CBO PHONE:949-644-3236 TITLE:Approve an Exclusive Negotiating Agreement between the City of Newport Beach and Lab Holding, LLC, for Negotiation of Terms of the Sale of the Balboa Theater Property, Located at 707-709 E. Balboa Boulevard Approve an Exclusive Negotiating Agreement between the City of Newport Beach and Lab Holding, LLC, for Negotiation of Terms of the Sale of the Balboa Theater Property, Located at 707-709 E. Balboa Boulevard April 12, 2016 Page 2 15-2 DISCUSSION: Theater History The Balboa Theater is located near the Balboa Pier between Washington and Main Streets (see below and Attachment B for location maps). The building was operated as a theater from the time it was built in the late 1920’s, until the theater closed in 1992. After the City’s acquisition of the site in 1998, the property was leased to the Balboa Performing Arts Theatre Foundation (Foundation). After termination of the lease agreement between the City and Foundation in 2014, the City considered developing the site as a community center. However, with the opening of the nearby Marina Park Community Center, City Council directed staff to offer the property for sale, and obtain offers from private parties to purchase and redevelop the site. Selection Process In compliance with California Government Code subsection 54222, the City issued a Notice of Surplus Land on June 11, 2015; the City received a response from California State Parks declining to lease or purchase the property; no interest letters were received from the County of Orange, Newport-Mesa Unified School District, or any other notified agency. In June 2015, the City advertised the property for sale soliciting proposals for buyers to purchase and redevelop the site. The City received five proposals, including The Balboa Theater Approve an Exclusive Negotiating Agreement between the City of Newport Beach and Lab Holding, LLC, for Negotiation of Terms of the Sale of the Balboa Theater Property, Located at 707-709 E. Balboa Boulevard April 12, 2016 Page 3 15-3 Cortland Company, Lab Holding, LLC, 801 Balboa, LLC, Save Newport, and Teles Properties. City representatives interviewed The Cortland Company, Lab Holding, LLC, 801 Balboa, LLC, and Save Newport in March 2016; Teles Properties had declined to continue in the selection process. After careful review and consideration of the proposals, staff believes the proposal from Lab Holding, LLC (The Lab), will best meet the City’s objectives to redevelop the property, establish a business that will complement the existing Balboa Village business community, and provide space for a multi-use community event center. Staff recommends that City Council enter into an Exclusive Negotiating Agreement (ENA) with The Lab to establish a timeframe for the City and The Lab to cooperatively work together to refine the scope of the project and to negotiate terms of a purchase and sale agreement. Once the terms of a purchase and sale agreement have been negotiated, and specific details of the project have been determined, staff will return to the City Council for consideration of the final sale of the property. Proposed ENA Agreement Staff has prepared an ENA (Attachment A) to outline a timeframe and conditions under which the City and The Lab can negotiate a purchase and sale agreement, and outline the scope of development for the property. The proposed terms of the ENA are: 1. The length of the agreement will be for one year, with an extension option that does not cumulatively exceed three months, unless terminated as provided by the agreement. 2. The following non-exclusive list of items shall be researched and developed, in order to negotiate the deal points of a purchase and sale agreement: a) Scope of development and improvements for a multi-purpose events/performance venue; b) Scope of the entitlements required for the project (including, but not limited to: City of Newport Beach, California Coastal Commission, California Environmental Quality Act, and California Alcohol Beverage Control); c) Development schedule for the Proposal; Approve an Exclusive Negotiating Agreement between the City of Newport Beach and Lab Holding, LLC, for Negotiation of Terms of the Sale of the Balboa Theater Property, Located at 707-709 E. Balboa Boulevard April 12, 2016 Page 4 15-4 d) The fair market purchase price which The Lab will pay for a fee simple interest in the property, and terms and conditions of the conveyance of the fee simple interest to Lab Holding, LLC; e) Deed restrictions to be recorded against the property, by the City, including but not limited to: a deed restriction on title limiting the use of the property to any of the following listed uses: theater, cultural center, event center, or other related performing arts uses. Ancillary commercial use of the property shall be permitted; f) City’s first right of repurchase option to repurchase the property from Lab Holding, LLC, should The Lab elect not to redevelop the property as a theater use; and g) Escrow instructions and conditions for the closing of escrow. 3. The Lab to be solely responsible for any costs related to the preparation of design documents in order to determine the scope of the development. The City Attorney’s office has reviewed the agreement and approved it as to form. Contract Summary Proposed Contract Vendor Name Lab Holding, LLC Term 1 year, three-month extension option Escalation Clause N/A Revenue/Year N/A Cost/Year N/A Cost/Contract Term (est)N/A Selection Process Sole Source or RFP/RFQ RFP Method (QBS vs. Low Bid)QBS # of Respondents 5 # of Qualified Respondents 4 ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Approve an Exclusive Negotiating Agreement between the City of Newport Beach and Lab Holding, LLC, for Negotiation of Terms of the Sale of the Balboa Theater Property, Located at 707-709 E. Balboa Boulevard April 12, 2016 Page 5 15-5 Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). ATTACHMENTS: Attachment A – Exclusive Negotiating Agreement Attachment B – Maps Attachment A Exclusive Negotiating Agreement 15-6 EXCLUSIVE NEGOTIATING AGREEMENT This EXCLUSIVE NEGOTIATING AGREEMENT (“Agreement”) is made and entered into as of ______________, 2016 (“Effective Date”), by and between the City of Newport Beach, a California charter city and municipal corporation (“City”), and Lab Holding, LLC, a California limited liability company (“Lab Holding”). City and Lab Holding are sometimes hereinafter individually referred to as a “Party” and collectively as the “Parties.” R E C I T A L S: The following Recitals are a substantive part of this Agreement and are incorporated herein: A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of the City. B. Pursuant to the Newport Beach Municipal Code and City Council Policy F-7, the City conducted an analysis to determine the maximum or open market value of the property that is the subject of this Agreement, using an appraisal by a reputable and independent professional appraiser to determine the highest and best use of the property, and the highest value of the property. C. In seeking revenue equivalent to the open market value of the highest and best use of the property, the City conducted an open bid or proposal process to insure the highest financial return on the property that is the subject of this Agreement. D. City desires to sell to Lab Holding certain real property in need of design, redevelopment, and improvements, which property consists of approximately 5,200 square feet located at 707-709 East Balboa Boulevard in Newport Beach, California 92661 (A.P.N. 048-135- 02), and is depicted on Exhibit “A” attached hereto and incorporated herein (“Site”). E. Lab Holding is an experienced firm in restoration of historic structures and operating event/performance venues who has proposed the restoration and operation of the Balboa Theater as a multi-purpose events/performance venue on the Site (“Proposal”). The Proposal, which may be subject to refinement and modification as mutually agreed to by the Parties during negotiations, is generally described in the Proposal Description attached hereto and incorporated herein as Exhibit “B.” F. The Parties desire to enter into this Agreement to establish a period during which they will cooperate to explore the feasibility of developing the Proposal on the Site and during which time Lab Holding shall have the exclusive right to negotiate with City with respect to the terms of an agreement or agreements to provide for the Proposal (“Definitive Agreement”). 15-7 C O V E N A N T S: Based upon the foregoing Recitals, which are incorporated herein by this reference, and for good and valuable consideration, the receipt and sufficiency of which is acknowledged by both Parties, City and Lab Holding agree as follows: 1. Good Faith Negotiations. During the entire Negotiation Period (defined in Section 2), City and Lab Holding shall negotiate in good faith pursuant to the terms set forth herein to achieve the objectives and accomplish the tasks described in this Agreement. Nothing herein shall be deemed a covenant, promise, or commitment by either Party to approve or enter into a Definitive Agreement with the other Party on any particular terms or conditions. The Parties’ approval and execution of this Agreement is merely an agreement with respect to certain tasks preliminary to the drafting and execution of the Definitive Agreement and an agreement to enter into a period of negotiations according to the concepts presented herein, reserving full and final discretion with City and Lab Holding as to the final terms of the Definitive Agreement as required by law. If for any reason City and Lab Holding have not each executed a mutually acceptable Definitive Agreement by the expiration of the Negotiation Period, and provided that the Parties have not committed a material default hereunder, this Agreement shall automatically terminate and shall be of no further force or effect. During the period of exclusive negotiation, the City covenants and agrees to negotiate exclusively with the Lab Holding and shall not solicit another party for the Site or enter into any agreement with any other party regarding the development of the Site. The City acknowledges and agrees that but for this exclusivity, Lab Holding would not have entered into this Agreement. 2. Term of Agreement. The term of this Agreement (“Negotiation Period”) shall be one (1) year after the Effective Date; provided, however, that the City Manager, on behalf of the City, and Lab Holding shall have the right to approve an extension of the Negotiation Period for a cumulative maximum of three (3) months without the requirement of any official action by the City Council or an amendment of this Agreement, if the City Manager and Lab Holding determine, in their sole and absolute discretion, that satisfactory progress is being made to achieve the objectives and complete the tasks set forth herein but such extension is necessary to finalize discussions or negotiations on mutually satisfactory terms. 3. Certain Parameters for Negotiation. The following nonexclusive list of items related to the Proposal shall be the subject of negotiations during the Negotiation Period: (a) Scope of development and improvements for a multi-purpose events/performance venue of approximately 5,200 square feet; (b) Scope of the entitlements required for the project (including, but not limited to, City of Newport Beach, California Coastal Commission, California Environmental Quality Act, and California Alcohol Beverage Control); (c) Development schedule for the Proposal; 15-8 (d) The fair market purchase price which Lab Holding will pay for a fee simple interest in the Site and terms and conditions of the conveyance of the fee simple interest to Lab Holding; (e) Deed restrictions to be recorded against the Site by City, including but not limited to, a deed restriction on title limiting the use of the Site to any of the following listed uses: theater, cultural center, event center, or other related performing arts uses. Ancillary commercial use of the property shall be permitted; (f) City’s first right of repurchase option to repurchase the property from Lab Holding, should Lab Holding elect not to redevelop property as theater use; and (g) Escrow instructions and conditions for the closing of escrow. 4. Reserved. 5. Land Use & Environmental Requirements. The development of the Proposal shall be subject to all rules, regulations, standards, and criteria required by law and as set forth in the City's General Plan, Coastal Land Use Plan, zoning regulations, this Agreement, and the Definitive Agreement. Lab Holding shall be responsible for all costs related to the Proposal incurred after the Effective Date, including, but not limited to, consultant fees and Architectural Services (“Costs”). 6. Physical Condition of the Site. City and Lab Holding shall cooperate and exchange such information as may be available to either of them regarding the physical condition of the Site (or applicable portions thereof). 7. Hazardous Material Assessment. Within ten (10) days of the Effective Date, the City shall provide Lab Holding without charge, copies of reports, studies, surveys and other data and information on the physical condition of the Site. The Definitive Agreement may address applicable clean-up issues, if any. In the event an environmental audit evidences a need for clean-up of any portion of the Site, the City, by this Agreement, does not agree in any respect to undertake or complete such clean-up. In the event that during the Negotiating Period Lab Holding conducts or causes to be conducted any environmental audits and/or testing on any portion of the Site, Lab Holding shall submit copies of any reports resulting from such tests or studies to the City. Such environmental audits and/or testing shall be conducted at the sole cost and expense of Lab Holding. Neither Party makes any representation or warranty as to the accuracy or completeness of reports prepared by third parties and delivered to the other Party. Lab Holding shall indemnify, defend and hold harmless City from and against all claims, liabilities or damages, and including expert witness fees and reasonable attorneys’ fees and costs, arising out of any such testing, inspection or investigatory activity on the Site by Lab Holding. In addition, following any such testing, inspection or investigatory activity, Lab Holding shall return, and repair if necessary, the Site to the condition it was in prior to the Lab Holding’s investigatory activities. 15-9 8. Miscellaneous. 8.1 Notices. Any notices, requests or approvals given under this Agreement from one Party to another may be personally delivered, or deposited with the United States Postal Service for mailing, postage prepaid, to the address of the other Party as stated in this paragraph, and shall be deemed to have been given at the time of personal delivery or, if mailed, on the third day following the date of deposit in the course of transmission with the United States Postal Service. Notices shall be sent as follows: notices between the Parties shall be delivered in writing to the following addresses: To City: Dave Kiff City Manager 100 Civic Center Drive Newport Beach, CA 92660 With a copy to: Lauren Wooding Whitlinger Real Property Administrator 100 Civic Center Drive Newport Beach, CA 92660 To Lab Holding: Lab Holding, LLC Attn: Shaheen Sadeghi 709 Randolph Avenue Costa Mesa, CA 92626 8.2 Termination. Each Party reserves the right to terminate this Agreement, with or without cause, upon thirty (30) calendar days ’ prior written notice to the other Party, thereby withdrawing from such negotiations without any liability to the other Party, except that (i) each Party shall be obligated to promptly return to the other Party all information and materials which such Party has received from the other Party pursuant to this Agreement, (ii) Lab Holding shall be responsible for payment of any work Lab Holding contracted to have performed under this Agreement, and (iii) the rights and obligations of the Parties set forth in Section 8 shall remain in full force and effect. The Parties, by their respective execution hereof, knowingly agree, notwithstanding anything herein to the contrary, that, except with respect to the rights and obligations set forth in Section 8 hereof, neither of them shall have any right to specific performance of this Agreement, nor any other equitable or damage remedies under the law. Each Party makes such release with full knowledge of Civil Code Section 1542 and hereby waive any and all rights thereunder to the extent of this release, if such Section 1542 is applicable. Section 1542 of the Civil Code provides as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” __________ __________ City’s Initials Lab Holding’s Initials 15-10 15-11 8.3 Lab Holding Documents. In the event of termination of this Agreement, for any reason including, but not limited to, expiration, termination or breach of this Agreement, Lab Holding shall deliver to the City, within ten (10) business days, a copy of all surveys, soils/environmental reports, site plans, pro formas, and other documents prepared by Lab Holding or third parties that are associated in any way with this Agreement. Notwithstanding the foregoing, in no event, however, shall Lab Holding be obligated to make available (or cause to be made available) any proprietary or confidential documents including reports or studies that have been superseded by subsequent reports or studies, or any of the following confidential and proprietary materials: (1) information contained in financial analyses or projections (including Lab Holding’s budgets, and capital account information); (2) material that is subject to attorney- client privilege or that is attorney work product; (4) organizational, financial and other documents relating to Lab Holding or its affiliates (other than evidence of due authorization and organization, and the financing plan required under this Agreement); or (5) material that Lab Holding is legally required not to disclose other than by reason of legal requirements voluntarily assumed by Lab Holding after the Effective Date. Lab Holding makes no representation or warranty as to the accuracy or completeness of reports prepared by third parties and delivered to the City. 8.4 Cooperation. The Parties agree to cooperate with each other in promptly supplying information and analyses relating to the Proposal. 8.5 Assignment. Neither Party shall have the right to assign any of their rights or obligations set forth in this Agreement without the written consent of the other Party, which consent may be withheld in such other Party’s sole and absolute discretion. Any assignment must be in writing and executed by both assignor and assignee to be enforceable and after the effective date of the assignment the assignor shall be released and discharged from any liability or responsibility hereunder. 8.6 Entire Agreement, Amendments, and Waivers. This Agreement sets forth the entire agreement between the Parties with respect to the subject matter set forth herein and supersedes all prior discussions and negotiations between the Parties with respect thereto. No amendment to this Agreement shall be effective unless set forth in a writing signed by an authorized signator of each Party. No waiver of any provision of this Agreement shall be enforceable against a Party unless it is set forth in a writing executed by such Party. For purposes of amendments, the City Manager is an authorized signatory on behalf of the City. 8.7 Administrative Costs and Expenses; Lab Holding Deposit. Lab Holding shall be responsible for all costs and expenses incurred by the City and/or Lab Holding related to this Agreement including, but not limited to, architectural and consultant fees, costs of City staff time related to any applications, other fees and permits, and attorney fees. 8.8 Assurances to Act in Good Faith. The City and Lab Holding each agree to take all actions contemplated by this Agreement, and shall use their respective best efforts to negotiate a Definitive Agreement in accordance with the provisions of this Agreement. 15-12 8.9 Attorney’s Fees. In the event of any litigation or legal action between the Parties arising out of or concerning this Agreement, the prevailing Party shall not be entitled to recover from the other Party its attorney’s fees and costs. 8.10 Interpretation. This Agreement shall be interpreted as a whole and in accordance with its fair meaning and as if each Party participated equally in its drafting. Captions are for reference only and are not to be used in construing meaning. 8.11 Governing Law. This Agreement shall be governed by the laws of the State of California. Any legal action brought under this Agreement must be instituted in the Superior Court of Orange County, State of California, in an appropriate court in that county, or in the Federal District Court in the Central District of California. 8.12 Purpose of Agreement. It is expressly understood and agreed by the Parties that this is an Agreement regarding the conduct of exclusive good faith contract negotiations only and does not convey any interest in the Site whatsoever. This Agreement is not intended to constitute a binding agreement by the City to sell the Site or commit the City to develop all or any portion of Site, to financially participate with Lab Holding in the development of the Proposal, nor is it intended to constitute a binding agreement to enter into a Definitive Agreement or any other contract. No Party shall be legally bound to consummate construction of the Proposal unless and until a Definitive Agreement or other contract has been executed and delivered by the Parties. Notwithstanding any other provision hereof, neither Lab Holding nor the City shall be under any obligation to approve or execute any Definitive Agreement during or upon conclusion of the Negotiating Period. Any Party may refuse to approve and execute any Definitive Agreement at its sole and absolute discretion, with or without cause. In the event that a Definitive Agreement is approved and executed by the Parties, this Agreement shall be superseded by such Definitive Agreement. It is expressly understood that notwithstanding this Agreement, the Proposal may be modified or not implemented at all depending on a number of factors including but not limited to compliance with the California Environmental Quality Act. 8.13 No Commissions. The City shall not be liable for any real estate commission or any broker's fees which may arise in relation to the Proposal. The City represents that it has engaged no broker, agent, or finder in connection with this transaction, and Lab Holding agrees to hold the City harmless from any claim by any broker, agent, or finder retained by Lab Holding. 8.14 Time of Essence. Time is of the essence of each provision set forth in this Agreement. [SIGNATURES ON FOLLOWING PAGE] 15-13 15-14 15-15 EXHIBIT A DEPICTION OF THE PROPERTY 15-16 EXHIBIT B PROPOSAL DESCRIPTION 15-17 15-18 15-19 15-20 15-21 15-22 15-23 15-24 15-25 15-26 Attachment B Maps 15-27 Feet Imagery:2009-2013 photos provided by Eagle Imaging www.eagleaerial.com Every reasonable effort has been made to assure the accuracy of the data provided, however, The City of Newport Beach and its employees and agents disclaim any and all responsibility from or relating to any results obtained in its use. Disclaimer: 3/30/2016 0 2,0001,000 Newport Beach GIS 15-28 Feet Imagery:2009-2013 photos provided by Eagle Imaging www.eagleaerial.com Every reasonable effort has been made to assure the accuracy of the data provided, however, The City of Newport Beach and its employees and agents disclaim any and all responsibility from or relating to any results obtained in its use. Disclaimer: 3/30/2016 0 400200 Newport Beach GIS 15-29 Feet Imagery:2009-2013 photos provided by Eagle Imaging www.eagleaerial.com Every reasonable effort has been made to assure the accuracy of the data provided, however, The City of Newport Beach and its employees and agents disclaim any and all responsibility from or relating to any results obtained in its use. Disclaimer: 3/30/2016 0 8040 Newport Beach GIS 15-30 CITY OF NEWPORT BEACH - City Council Staff Report June 9, 2015 Agenda Item No. 22 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Kimberly Brandt, Community Development Director — (949) 644-3226, kbrandt@newportbeachca.gov PREPARED BY: James Campbell, Principal Planner PHONE: (949) 644-3210 or Jcampbell@newportbeachca.gov TITLE: Balboa Theater - Notice of Change of Intended Use and Sale, Located at 707 East Balboa Boulevard ABSTRACT: The Balboa Theater was acquired in 1998 by the City using Federal Community Development Block Grant (CDBG) funds. The property is located at 707 East Balboa Boulevard in Balboa Village. The City Council has expressed a desire to dispose of this underperforming asset. Federal Regulation 24 CFR §570.505 requires the City to provide notice of, and opportunity to comment on, any proposed change of use or intended use of the property. This hearing will partly satisfy the Federal public participation requirement. RECOMMENDATION: a) Conduct a public hearing; b) Find the change of the intended use and sale of the Balboa Theater building and property exempt from environmental review pursuant to Section 15312 (Surplus Government Property Sales) of the California Environmental Quality Act Guidelines, California Code of Regulations, Title 14, Chapter 3; c) Direct staff to take necessary steps to sell the property and return to the City Council with the purchase and sale agreement; d) Direct staff to complete all necessary administrative activities consistent with U.S. Department of Housing and Urban Development requirements to document the disposition of the Balboa Theater; and e) Direct staff to begin planning for future use of the proceeds from the sale of the property consistent with CDBG requirements. FUNDING REQUIREMENTS: The City funded one hundred percent of the acquisition of the Balboa Theater property with CDBG funds. Total acquisition costs in 1998 were $489,461.18. Since acquisition, the City has not invested other funds into the property that impacted its value; therefore, Federal regulations (§570.505) specify that all 22-1 proceeds from the sale of the property be defined as program income to the CDBG program for future use by the City for CDBG-eligible activities. In 1998, the Balboa Theater was acquired by the City of Newport Beach with CDBG funds. The City partnered with the Balboa Theater Foundation (Foundation) who worked for many years to raise the necessary capital to renovate the building to open and operate the facility. The theater was intended to assist two target census block groups that contain over 1,500 housing units. Unfortunately, the Foundation was unsuccessful in their extensive efforts and the theater was not renovated and never opened. As a result, the grant funded acquisition did not achieve a national objective required for use of CDBG funds. The City still owns the facility, and given the unsuccessful effort to open the facility and the passage of time, the City Council has expressed a desire to sell the property leading to a change of the intended use. Federal regulations (§570.505) allows a CDBG recipient to change the use or planned use of a grant acquired property only after the recipient provides affected citizens with reasonable notice of, and opportunity to comment on, any proposed change. Notice has been provided of this hearing as described below. Consideration of written and oral comments received during the hearing will satisfy Federal public participation requirements. Proceeds from the sale of the property will be designated for future CDBG-eligible activities. CDBG funds can be used to address a variety of community needs when benefiting low- and moderate -income individuals or households, including but not limited to: . Community and senior services and facilities . Fair housing enforcement and landlord/tenant mediation . Homeless prevention and domestic violence programs . Commercial fagade improvements . Street and sewer improvements . Disabled (ADA) accessibility improvements . Housing programs . Section 108 loan payments Staff will initiate planning for future projects based on community needs identified in the recently adopted 2015-2019 Consolidated Plan. ENVIRONMENTAL REVIEW: Staff recommends the City Council find the sale of the Balboa Theater exempt from the California Environmental Quality Act ("CEQA") pursuant to Section 15312 (Surplus Government Property Sales) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential to have a significant effect on the environment. The property is presently developed and has no habitat value. The sale of the property would also qualify under Section 13501 (Existing Facilities) and the use of the property and adjacent properties has not changed since 1998 when the City acquired the property. NOTICING: Notice of this item was published in the Daily Pilot, posted on the property (707 East Balboa Boulevard), sent to Balboa Peninsula homeowners associations and Balboa Village Business Owners Association, and it was posted to the City's website and email news/alert subscription service. 22-2 EWPo NOTICE OF PUBLIC HEARING FOR THE POTENTIAL CHANGE OF INTENDED USE OF THE BALBOA THEATER NOTICE IS HEREBY GIVEN that the City of Newport Beach is considering the change of use and potential sale of the former Balboa Theater located at 707 East Balboa Boulevard. The City purchased the property in 1998, in partnership with a local non-profit group, with the intent to renovate the former theater and operating it as a performing arts theater and community assembly venue. The project was a component of a larger revitalization effort for Balboa Village that would have benefited several Census Block Groups that have higher concentrations of low- and moderate -income households. The theater has not been renovated and has remained closed since acquisition. Acquisition of the property was accomplished with the use of Federal Community Development Block Grant (CDBG) funds. Prior to a change of proposed use, Federal Regulation 24 CFR §570.505 requires that the City provide notice of, and opportunity to comment on, any proposed change of use. It is the present intent of the City to terminate the CDBG project and sell the property; therefore the intended use will not be achieved. NOTICE IS HEREBY FURTHER GIVEN that pursuant to Federal Regulation 24 CFR §570.505, the City is providing this notice that the City Council will hold a public hearing on the proposed disposition of the property. The public is invited to provide comments to the City Council at the following public hearing to be held: DATE: June 9, 2015 TIME: 7:00 p.m. LOCATION: City Council Chambers, 100 Civic Center Drive, Newport Beach, CA 92660 NOTICE IS HEREBY FURTHER GIVEN that the public is also invited to submit written comments for consideration by the City Council prior to changing the use or disposing of the property. All written comments should be submitted to the Office of the City Clerk at 100 Civic Center Drive, Newport Beach, California 92660 no later than 4:00 p.m. June 9, 2015. Questions may be addressed to James Campbell, Principal Planner, Community Development Department at 100 Civic Center Drive, Newport Beach, California 92660. You may also call (949) 644-3210 or email Jcampbell(a)-newportbeachca.gov with any questions concerning the proposed action described in this notice. NOTICE IS HEREBY FURTHER GIVEN that it is the objective of the City to comply with Section 504 of the Rehabilitation Act of 1973, as amended, the Americans with Disabilities Act (ADA) of 1990 and the ADA Amendment Act of 2008, the Fair Housing Act, and the Architectural Barriers Act in all respects. If you require public documents in an accessible format, the City will make reasonable efforts to accommodate your request. If you require a disability -related accommodation to attend or participate in a public hearing, including auxiliary aids or services, please contact the City Clerk's Office at least 48 hours prior to the meeting at (949) 644-3005. P0 ( 4ii C�� Leilani I. Brown, MMC, City Clerk City of Newport Beach Publish: May 30, 2015 CITY CLERK'S OFFICE AFFIDAVIT OF POSTING On J S — 2!q , 2015, 1 posted 2 Site Notices of the Notice of Public Hearing regarding: Potential Change of Intended Use of the Balboa Theater Location(s) Posted: 707 j BAB 130 /_13LL�,,D a SO)t-NF S ON 7 -RE GveNr_/L E/l/ P90AIT o f t R E 9 U I L 0 s'v& Date of City Council Public Hearing / Meeting: June 9, 2015 Signature S /IN (0 SiUD%Nt P F Print Name, Title Bios Angeles Times ME DIA G ROU P PROOF OF PUBLICATION (2015.5 C.C.P.) STATE OF ILLINOIS County of Cook I am a citizen of the United States and a resident of the County aforesaid; I am over the age of eighteen years, and not a party -to or interested in the action for which the attached notice was published. I am a principal clerk of the Newport Harbor News Press Combined With Daily Pilot, which was adjudged a newspaper of general circulation on June 19, 1952, Cases A24831 for the City of Newport Beach, County of Orange, and State of. California. Attached to this Affidavit is a true and complete copy as was printed and published on the following date(s): May 30, 2015 I certify (or declare) under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Dated at Chicago, 1111 901 on this day of 20. ignaturej 435 N. Michigan Ave. Chicago, IL 60611 3317847 - Newport Harbor News Press Combined With Daily Pilot Page 1 of 2 Sold To: City of Newport Beach - C000072031 100 Civic Center Dr NEWPORT BEACH,CA 92660 Bill To: City of Newport Beach - CU00072031 100 Civic Center Dr NEWPORT BEACH,CA 92660 NOTICE OF PUBLIC HEAM40 FOR THE POTENTIAL CHANGE OF INTENDED USE OF THE BALROA THEATER go T %; E t 8 H ER E ay a f V E K that P * 7 , �«,Vw 19 o ou h m CcM, tre and poterAzj awe of the at ,he Czty purohaoza tire rrty m 7tx Z. in paWrsr sh,'P wit,,, a lees= :or, -pmrr gm. op, Wt h the infant t -z re,,rz". t* I a f l 7 t M, or a 2 1 C 7 an C;aor a I i a 9 as 0 P; " e = "ng ar ta The rqai�rvwlm,, thstwa0J `ave bentftd swarol Census Woe,, asaryup-z teat have of ii -m- and moderate'. hW1&VdS The tams has n'M bel &M t',as mrminsd closed r Asqursftion of the ase ,f Federal Lo, m.mty Dave"opnWat Black Grant "WeG" knds. cppn-�ia F b ccr—enz. on &TV propce*d diar,40 '4 uae. Present i7reet Of the ady to te-Ml-,atz itsa C0541 va-Ct Seg Sha Property; therefore t" Mlorlead uss .:1 ae z=Veved, NOTICE 95 HEREBY FURTHER GWEN IN- F,dusl Ragulavar 24 CF1, JZ70.r!5, the nay,.it r7 -,,v }ri-S n=a t,-- ttm --ftv coumml a�tig hc?aaP� bft noaring ,-q the prnxnd -Impoeefon of lea pmp*f' q Tt-Zlpubk is lnqted to vovide to 1W at the foit�ving wb5c, boarng tc, be N, - DATE. Jla 0� 1:1915 TIME: 7100 P m LOCATION. 1M*y C okm tit m I N, C,4, Ce. tor Dr-ro NY,,Mcr! Sca,-., CA,5,Ml ounce IS HEREBY FURTHER GIVEN Wat *A pubiv- sly 0 irylit ad to 5 1& -1-11 mar :tin s ,Mmerts. 1'1i11C-,Mmerta hr Somideralbr, by Vtm C?,,, rel FTfWr I ci=47* 11rla :size PC% 'nq cl hten -A fr; IV _r�M,vm, , Sub -AN tc ttko t, -e 0'4-k at M Wit Center Orve, Newp,,q Strech, Csafmia T,10MMlle-= 6MR 4:M aM >rvla S. 15. 04seft'M -,,Tj be addessed to Imnaz :,SrOhvi. P�,'mcvsf cvnnx€,+y DMV0lCqMM4 ceparl,�,mrilzt 100 crvaDr,,ra Ntmp'sA Bead". C-,?.1'vr 5 2.Mfl. You Meya',sis Catira,40) 644-a-710 or en -Mil 1—=�- with STW quDstiom Cc, ftcemirg the p-pczed �mn daswbed -n Om valae. NOTICE IS HEREBY FURTHER GIVEN true 1 ss the "bectwo ot the C:ry to momplywilt, Sacti"n SS -4 Vf the Rrhmaii,--tonAre of 11173, as; s, dad. faro Saznarer tr. aRh azz-b1ii-5ac ActJkOX,, of 197r. ard ,',a ADAAew-dm,4rt A -t :' em's, tI'. Far Hous q Art, e,,,d sz,7ws ,xv " la M-S;sects if you zsqui'v aublc doourmtntsm ar 2CCIMSIbio It"'tnW, ttlaCIll" Will Mla,4Sfasaenable offn7ft' f6fated wm> r,~aaadzbon M ovnd cf qxt=PWV 0 a pub , tlew-vc zludgv a'altiTari side or Tmvmes, plmaae zon tm-t tec, coy cwks office at least AS -sa or * lt^e Msettnq w;qW31,U4-3005 itysf Nomcrt Beach 3317847 - Newport Harbor News Press Combined With Daily Pilot Page 2 of 2 r y€ ! C RECORDING REQUESTED BY AND-'� WHEN RECORDED RETURN TO,,, { City of Newport Beach 100 Civic Center Drive P.O. Box 1768 r Newport Beach, California 92658-8915 1 Attn: City Clerk Recorded in Official Records, Orange County Hugh Nguyen, Clerk -Recorder NO FEE I 0 00006$*��� 2015000162426 8:27 am 03131115 47 411 T01 8 0.00 0.00 0.00 0.00 21.00 0.00 0.00 0.00 (Exempt From Recording Fees Pursuant to Government Code § 27383) (SPACE ABOVE THIS LINE FOR RECORDER'S USE ONLY) TERMINATION OF LEASEHOLD This Termination of Leasehold is made this Z` TH day of March, 2015, by and between the CITY OF NEWPORT BEACH, hereinafter called "Lessor," and the Balboa Performing Arts Theatre Foundation, hereinafter called "Lessee." RECITALS A. Lessor and Lessee executed a Lease entitled "Lease By and Between the City of Newport Beach and the Balboa Performing Arts Theatre Foundation" ("Lease"), on December 11, 1998, which was recorded January 29, 1999, by the County Recorder of Orange County, California as Instrument No. 19990066742. By the terms of the Lease, the following described property was leased to Lessee until November 23, 2023. Lots 4 and 5, Block 10, Balboa Tract, in the City of Newport Beach, as shown on a map recorded in Book 4, Page(s) 11, of Miscellaneous Maps, in the office of the County Recorder of Said County. B. Lessor and Lessee executed the First Amendment to Lease on September 27, 1999, which was recorded April 14, 2000, by the County Recorder of Orange County, California as Instrument No. 20000181651 to amend insurance requirements. C. Lessor and Lessee executed the Second Amendment to Lease on December 13, 1999, which was recorded April 14, 2000, by the County Recorder of Orange County, California as Instrument No. 20000181652 to delete the requirement for interior improvements to be consistent with the Guidelines for the Rehabilitation of Historic Structures ("Guidelines") published by the Secretary of the Interior. D. Lessor and Lessee executed the 12, 2000, which was recorded February 26, County, California as Instrument No. 20010 Third Amendment to Lease on December 2001, by the County Recorder of Orange 087259 to modify provisions that require certain exterior improvements consistent with the Guidelines. E. Lessor and Lessee executed an Amended and Restated Lease on September 14, 2004, which was not recorded, to amend the Lease to enable Lessee to make the property viable for present-day use as a first class community multi -use Theatre. F. On October 2, 2014 Lessor served Lessee with a Notice of Material Breach for failing to adhere to the Schedule for Required Improvements detailed in Lease Section 8.7 (attached hereto as Exhibit A and incorporated herein by reference). The Notice gave thirty (30) days to cure. G. Thereafter, after failing to cure within thirty (30) days, Lessor served Lessee with a Notice of Termination of Lease (attached hereto as Exhibit B and incorporated herein by reference), thereby terminating the Lease on November 12, 2014. Lease. H. This Termination of Leasehold is to memorialize the termination of the [SIGNATURES ON NEXT PAGE] NOW, THEREFORE, in consideration of the mutual promises, covenants, benefits, obligations and agreements set forth herein. The Parties agree as follows: 1. The Lease was terminated effective November 12, 2014 and the Parties agree to discharge and release each other from all obligations under the Lease as of said date. 2. This Termination of Leasehold shall be recorded with the County Recorder of Orange County pursuant to California Government Code Section 37393, IN WITNESS WHEREOF, the parties have caused this Termination of Leasehold to be executed on the dates written below. APPROVED AS TO FORM: CITY ATTORNEY'S OFFICE Date: 7-115'. 1� By:�' Aaron C�Ha#p thm mizr/ia` City Attorney ATTEST: a Date: By: Leilani I. Brown City Clerk CITY OF NEWPORT BEACH, a California municipal corporation Date: 3120 (c Dave K(ff City Manager LEESSEE Date: fJ3-/7—/-t� By: O -J , � Evelyn Hartf - r Executive Director, Balboa Performing Arts Theatre Foundation [END OF SIGNATURES] ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of ®R-Rrt CSF, } ss. On wA ta; i2 C ,ti l -i 20 15 before me, lrtvrrtr� tant�t 1Ml5lYE Notary Public, personally appeared [=: V au'(P4 P4 ZZ C— ij A P 1 , who 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 signatures(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. 1 certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. de- - - ANN N- - - WITNnE Commission # 2045022 S my hand and official seal. < : „ Notary Public - caiitorma Orange County My Comm. iree Oct 12 20174 Signature seal) ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of ORh1N CSF. } ss. On Innf-kc" 2D 20I ' before me, JcNwrE12 ANfy nv %,UYE-f Notary Public, personally appeared DAME KLFF '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 signatures(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS=handofficial seal. ! • �'" ' -""" """ MULVEY = .:0 Commission # 2045022 z Notary Public - CaBtornla orange County IV- c��gnaturie- M Comn,Exirea0ct12,20/7~ (seal) j on an MV14 • • Y • 1 COMMUNITY DEVELOPMENT October 2, 2014 Delivery via First Class U.S. Mail Executive Director C/O Evelyn Hart Balboa Performing Arts Theatre Foundation P.O. Box 752 Balboa, CA 92661 RE: Notice of Material Breach Matter No.: Al 0-00276 Dear Ms. Hart: Please be advised that as a result of the Balboa Performing Arts Theatre Foundation's ("Foundation") failure to adhere to the Schedule for Required Improvements detailed in Section 8.7 of the Amended and Restated Lease dated September 14, 2004 ("Lease'), the City of Newport Beach ("City") hereby places the Foundation on notice of the City's intent to terminate the Lease. As such, please accept this letter as a formal Notice of Default. Pursuant to Section 22.3 of the Agreement, the Foundation has thirty (30) days to cure. If no remedy is made on or before November 1, 2014, you will thereafter be served with a Notice of Termination. ' c e , a r n 0oding Whitlinger Real perty Administrator copy to file 100 Civic Center Drive - Post Office Box 1768 • Newport Beach, California 92658-8915 Telephone: (949) 644-3200 • Fax: (949) 644-3229 - www.newportbeachea.gov • COMMUNITY DEVELOPMENT November 12, 2014 Delivery via First Class U.S. Mail Executive Director C/O Evelyn Hart Balboa Performing Arts Theatre Foundation P.O. Box 752 Balboa, CA 92661 RE: Notice of Termination of Lease Matter No.: A10-00276 Dear Ms. Hart: The City of Newport Beach hereby terminates the Amended and Restated Lease dated September 14, 2004 ("Lease") as a result of the Balboa Performing Arts Theatre Foundation's ("Foundation") failure to adhere to the Schedule for Required Improvements detailed in Section 8.7. Pursuant to Section 22.3 of the Lease, the Foundation was previously served with a formal Notice of Default and failed to correct the default within the thirty day cure period. Thus, the Lease is hereby terminated effective immediately. sin rely, La o ding Whitlinger Real Property Administrator copy to file 100 Civic Center Drive - Post Office Box 1768 • Newport Beach, California 92658-8915 Telephone: (949) 644-3200 • Fax: (949) 644-3229 • www.newportbeachca.gov i ATTACHMENT A (Correct Version) RECORDING REQUESTED AND WHEN RECORDED RETURN TO: AM IP March 11, 2014 Study Session Item No. SS2 and Agenda Item No. 17 City Clerk's Office {� t`CGaf&A P`r City of Newport Beachj �� ( ► 9 CIWOd1 3300 Newport Boulevard ` ,Ir 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 s � � I AMENDED AND RESTATED LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATER FOUNDATION This Amended and Restated Lease ("Lease"), entered into as of September , 2004 (Effective Date) by and between the City of Newport Beach, a Charter City and municipal corporation ("Lessor") and the Balboa Performing Arts Theater 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 Theater 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 Theater 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. 2 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. 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: 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 and, subsequent to renovation, require Lessee to operate a first class community multi -use Theater. The renovation and operation of the Theater 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 Property 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. 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. 1.4 Lessee Lessee is the Balboa Performing Arts Theater Foundation. Lessee is a California non-profit public benefit corporation organized for the purpose of 3 renovating, operating and maintaining the Theater 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. 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 terns, provisions, covenants and conditions of this Lease. Lessor reserves allrights 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 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 Purpose of this Lease. ARTICLE 3 POSSESSION OF PROPERTY 3.1 Quiet Eniovment 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 Theater as required by this Lease. 4 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 Theater, such as fixtures, machinery, rigging, lighting, staging, merchandise, trade fixtures (collectively, Equipment) that have been constructed or placed on the Property 3.4 Surrender of Pro ertjt 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 TERMIOPTION 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 (25t) anniversary subject to early termination or Lessee's Fa 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 the following: 4.3.1 Lessee shall have completed the Required Improvements; and 4.3.2 Lessee shall have operated the Theater in full compliance with the provisions of Article 7 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 dose 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 Date 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. 6 Ll 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 RENTICONSIDERATION 5.1 No Money Payable by Lessee Lessee shall not pay money as rent to Lessor. 5.2 Other Consideration In consideration for this Lease, Lessee covenants that, during the Term, it will: 5.2.1 Operate and maintain a first 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 8 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. 5.2,5 Use any excess revenue or funds for purposes related to the operation of the Theater 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 Capital 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). ARTICLE 6 LONG RANGE PLAN, BUDGET AND RECORDS 6.1 Long Range Plan Lessee shall prepare, and submit to Lessor, a Long Range Plan which projects fundraising, renovation, marketing and operational expectations and financial 7 needs, from initial planning up to and including active operations of the Theater (Long 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 year, to reflect changes to renovation plans, fundraising strategies and goals, performances/events, and marketing programs. The Long 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 fundraising efforts for the prior year; (Y) schedule for completion of Required Improvements; (iii) 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 Long Range Plan shall be submitted to Lessor within thirty (30) days of adoption or any material modification. 6.2 Annual Budaet Lessee shall prepare and submit to Lessor an annual budget (Budget), which shall be based on the Long Range 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 balance in all funds and accounts maintained by Lessee; (Iii all projected revenues and sources of funds for the fiscal year, (iii) the expenditures proposed to be made by Lessee in fulfilling its obligations pursuant to this Lease; and (iv) all other proposed expenditures of Lessee. 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. 6.3 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 itemizing all of its revenues and expenditures for that fiscal year. 6.4 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 Campaign 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 13 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. 6.5 Audit 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 7 USE OF PROPERTY 7.1 Permitted Use The Property shall be used primarily for the operation of a first class community multi -use Theater open to the general public. Lessee shall operate the Theater 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 community and other organizations to periodically use the Theater for fund raising, education, 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 8.2 (Seismic Retrofit) and before completion of Required improvements subject to issuance of a Special Events Permit by Lessor. 7.2 Performances/Frequency Lessee shall operate the Theater 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. Operation of the Theater is the fundamental consideration for this Lease and Lessee shall ensure and promote the maximum reasonable use of the Theater by performers, artists, and entertainers likely to attract patrons. The Theater shall be operated consistent with the standards, practices and procedures utilized by first class multi -use community theaters in other jurisdictions. 9 7.3 7.4 7.5 Program Standards Lessee shall operate the Theater in a manner reasonably calculated to achieve the following objectives: 7.3.1 Provide frequent and high quality performances and cultural events to attract patrons to the Theater and Central Balboa/Balboa Village. 7.3.2 To serve as a catalyst to the revitalization of the economy of the area to be benefited by use of the Federal Funds. 7.3.3 To make the Theater 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, 7.3.4 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 community multi -use Theater. 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 Theater to use public parking at reduced rates. Lessor and Lessee shall also discuss ways to integrate operation of the Theater into programs for the economic revitalization of Central Balboa/Balboa Village. Chance 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 be withheld at Lessor's sole discretion. 7.6 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 Theater. Lessee shalt 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 Theater. 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 10 7.7 `I J Property. Zoning and Planning Lessor acknowledges that the use of the Property as a Theater 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, after, 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 permits required by Titles 15 and 20 of the Newport Beach Municipal Code. 7.8 Nondiscrimination 7.8.1 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. 7.8.2 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, 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. 7.8.3 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 11 such contracts, licenses, agreements shall contain non- discrimination provisions substantially similar to this Lease. ARTICLE 8 REQUIRED IMPROVEMENTS 8.1 Lessee's Obligations The Property requires substantial renovation and rehabilitation to'be used as, or considered, a first class community mufti -use Theater. 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 8.2 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 iicensed 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. 8.3 Conceptual Design Plans Lessee shall prepare, and submit to Lessor for approval, proposed Conceptual Design Plans for the design and construction of the Property for use as a first class community mufti -use Theater (Conceptual Design Plans), The Conceptual Design 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 theater constructed in the 1920's. The Conceptual Design Plans shall include, without limitation, (1) seating layout; (2) stage and dressing room layout (3) lobby and concession arealayout; (4) public area layout; and (5). 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 class community multi -use Theater viable for present- day use, and that the improvements respect the design of the original front 12 facade of the Theater to the maximum extent feasible.. 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. 8.4 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) exterior fighting plans and design; (2) color, material, treatment and design of all exterior elements; (3) sound and projection systems; (4) design and treatment of interior spaces, and (5) 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 submittal. Lessor shall specify with particularity those components of the Design Development Plans disapproved, the reasons for disapproval and the aftemative(s) Lessor would approve. The Parties shall agree on Design Development Plans within sixty (60) days after submittal. 8.5 Buildina Permits Lessee shall apply for all necessary building permits from Lessor. 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 Design Development Plans. 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 Design Development Plans, 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 Subsequent to approval of Design Development Plans, Lessee shall submit Final 13 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 Design 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 alternatives) Lessor would approve. The Parties shall agree on Final Design Plans within sixty (60) days after submittal. 8.7 Schedule for Required Improvements Lessee shall submit plans, diligently pursue their approval, and begin construction of Required Improvements according to the following schedule. Conce tual Desi n Plans Thi 30) ays after Effective Date Complete application for Use Thirty (30) days after Effective Date Permit and Development Plan Review Complete application for Coastal Sixty (60) days after approval of Use Development Permit CDP Permit and Development Plan Review Design Development Plans One hundred eighty (180) days after Approval of CDP Complete Building Permit One hundred' eighty (18D) days after application approval of CDP Begin construction Upon . reaching 70% of budget 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 Department Complete construction One (1) year and sic (6) months after issuance of building permits 8.8 General Requirements 8.8.1 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 14 building permits, are proprietary activities related to Lassoes 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. 8.8.2 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. Lessee may request City Council review of any decision by PROP disapproving submittals by serving a request for review within fifteen days atter receipt of the notice of disapproval. 8.9 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 9 REPAIRS AND MAINTENANCE Lessee recognizes that the Theater 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 Theater in first class condition and in accordance with the standards in this Lease. Lessee shall, at a minimum perform the following: (1) the maintenance of the exterior surfaces of the Theater (including patching and resurfacing the roof membrane and painting or other protective treatment of the exterior wall of the Theater); (ti) maintenance of the public rest rooms (including repairs or replacements of the or rest room fixtures); (Tiro the maintenance of electrical systems serving the Property and Theater and the repair and replacement of components; (iv) maintenance of all pipes and plumbing systems serving the Theater and Property, and the repair and replacement of components; and (y) 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 Theater. Lessee shall revise the schedule for maintenance from time to time during the Term as necessary to maintain the Theater to 15 the standards required by this Lease. Lessee shall have the benefit of all warranties available to Lessor with respect to the Theater 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 Theater would make continued operation of the Theater economically infeasible. ARTICLE 10 STATUS AND MANAGEMENT OF LESSEE 10.1 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. 10.3 Employment of Staff During the Term, Lessee shall employ a professional Executive Director to manage the day to day renovation and/or operation of the Theater, 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. ARTICLE 11 ALTERATIONS 11.1 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 Theaters designation as a local landmark and shall respect the 16 design of the original front fegade of the Theater to the maximum extent feasible. Theater. 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. 11.2 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 12 PAYMENT OF UTILITIES, TAXES, CHARGES AND FEES 12.1 Public and Private Utility Services Lessee will pay all charges for all public or private utility services and all sprinkler 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. 12.2 Taxes. Assessments. Fees and Chames 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. 12.3 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. 12.4 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 17 within ten (10) days of written notice of payment by Lessor. 12.5 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. 12.6 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. ARTICLE 13 LIENS 13.1 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 Theater free and Gear of all mechanic's liens and similar liens. 13.2 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 18 fully reimburse Lessor in such event. 13.3 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. 13.4 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 14 INDEMNIFICATION 14.1 Indemni Lessee shall defend, indemnify and hold harmless Lessor from'and against any and all legal or administrative proceedings, claims, reasonable attorneys' fees 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 14.6 on the Property or Theater, (iv) compliance or non-compliance with any federal, state or local environmental law, ordinance, rale or regulation, (v) any accident or injury to, or death of, persons or damage to property occurring on or about the Property (vl) 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. 14.2 CERCL.A Liability Lessee agrees that this Lease is intended to operate as an indemnificatiori 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. 14.3 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. 19 0 14.4 Release 11 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 (1) 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. 14.5 Waiver of California Civil Code Section 1542 Section 1542 of the California Civil Code states: 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. 14.6 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 biphenyis 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, (f) 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 20 01 0 (California Water Code Section 13000 et seq). ARTICLE 15 INSURANCE 15.1 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. 15.1.1 Comprehensive General Liability in an amount not less than two million dollars ($2,000,000) 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-contributing with any insurance or self-insurance maintained by Lessor or Lessee. Any third party permitted to use the Property 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. 15.1.2 Workers' Compensation Insurance as required by the Labor Code of the State of California. 15.1.3 "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 insuranceunder 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. 15.1.4 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, 21 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. 15.2. Acceptable Terms of Coverage Acceptable insurance coverage shall be placed with carriers admitted to mite 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 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. 15.3 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. 15.4 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. 22 ARTICLE 16 DAMAGE BY FIRE OR CASUALTY 16.1 Lessee to sive 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. 16.2 Restoration Except as provided in Section 17.3, 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 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. 16.3 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. 16.4 Molication of Insurance Proceeds In the event that Lessee is required to restore the Property pursuant to Section 16.2, proceeds from policies of insurance required by Article 15 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: 23 16,4.1 Lessee shall furnish to Lessor satisfactory evidence to Lessor of the total cost of Restoration pursuant to Section 16.2. 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. 16.4.2 Assuming satisfaction of the conditions of subsection 16.4.1 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. 16.4.3 Upon completion of restoration and assuming Lessee is not in default, excess insurance proceeds shall first be paid to Lessor to the extent of its actual expenses incurred in the restoration, then to Lessee as working capital ARTICLE 17 EMINENT DOMAIN 17.1 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. 17.2 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. 17.3 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. 24 17.4 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. 17.5 Allocation of Award — Partial Taking Any Award in a Partial Taking shall be distributed by escrow in the following order of priority:' 17:5.1 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; 17.5.2 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; 17.5.3 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. 17.6 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. 17.7 Allocation of Award —Total Taking Any Award in a Total Taking shall be distributed by escrow in the following priority: 17.7.1 First, to Lessor and Lessee to reimburse for all costs and expenses incurred by each in the collection of the Award; 17.7.2 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 25 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. 17.8 Conduct of Proceedings Lessee and Lessor shall jointly participate in and prosecuteidefend 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. 17.9 Notices Any Party receiving notice of or becoming aware of any condemnation proceedings shall promptly give written notice to the other party. ARTICLE 18 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 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 19 LEASEHOLD MORTGAGES Lessee shall have no right to encumber its interest in this Lease, the Property or the Theater without Lessor's prior written consent, which consent may be withheld in Lessor's sole discretion. ARTICLE 20 PERFORMANCE OF LESSEE'S COVENANTS 20.1 Right of Performance If Lessee falls to pay any tax, fee or other charge in accordance with Article 12 within the time period required or shall fall to pay for or maintain any of the insurance policies provided for in Article 15 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: RIP 20.1.1 Pay the tax, assessment, fee or charge payable by Lessee pursuant to this Lease; or 20.1.2 Pay for and maintain any insurance policies required by this Lease; or 20.4.3 Make any other payment or perform any other act that Lessee is required to pay or perform pursuant to this Lease. 20.2 Reimbursement and Damaaes Lessee shall reimburse Lessor for all costs and expenses incurred by Lessor in the exercise of its rights pursuant to Section 20.1. ARTICLE 21 REPRESENTATIONS 21.1 Lessor's Representations Lessor represents to Lessee that: 21.1.1 Lessor owns the Property in fee simple subject only to the Permitted Exceptions and other matters affecting title that do not inhibit, prevent or impair the operation, maintenance of use of the Theater. 21.1.2 Lessor has the power and authority to enter into this Lease and perform all the obligations of Lessor hereunder. 21.2 Lessee's Representations Lessee represents to Lessor that: 21.2.1 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. 21.2.2 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 Theater consistent with this Lease and the Operations Plan. 21.2.3 Lessee has the right, power and authority to enter into this Lease 27 and to perform all the obligations of Lessee. 21.2.4 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 at seq.), and is a tax exempt organization under 501(c)(3) of the Internal Revenue Code. ARTICLE 22 DEFAULTS, REMEDIES AND TERMINATION 22.1 Legal Actions 22.1.1 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. The laws of the State of California shall govern the interpretation and enforcement of this Lease. 22.2 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. 22.3 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: 22.3.1 The failure of Lessee to comply with the provisions of Article related to the design and construction of Required Improvements. 22.3.2 The failure of Lessee to operate the Theater in compliance with the 28 provisions of Article 7 related to frequency and quality of performances and events. 22.3.3 The failure of Lessee to maintain the Property as specified in Article 9. 22.3.4 The failure of Lessee to restore or repair the Property in the event of damage or destruction 22.3.5 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. 22.4 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: 22.4.1 Lessor shall have the immediate right to reenter the Property and/or the Theater, take possession of the Property and/or Theater, any and all Equipment, books and records, contracts and any other property. 22.4.2 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 Theater, 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. 22.4.3 Lessor shall be entitled to recover all money payable to Lessee related to the operation and use of the Theater, 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 23 PERMITTED CONTESTS Lessee, at no cost or expense to Lessor, may contest (after prior written notice to 29 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 24 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 Theater, or for any other lawful purposes, including showing the Property to prospective purchasers or lessees. ARTICLE 25 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, riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Lessee. ARTICLE 26 MISCELLANEOUS 26.1 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 30 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 Theater Foundation P.O. Box 752 Balboa, CA 92661 26.2 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 26.3 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 Theater. Except as otherwise provided, no subsequent change or addition to this Lease shall be binding unless in writing and signed by the Parties. 26A 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. 26.5 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 31 Lease shall be binding upon and inure to the benefit of and be enforceable by the respective successors of the parties. 26.6 Holding Over A tenancy for month to month shall result if Lessee remains in possession of the Property or the Theater 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. 26.7 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 of the Theater or otherwise. 26.8 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. 26.9 Time of the Essence Time is of the essence relative to all of the terms, provisions, covenants and conditions of this Lease. (The next page is the signature page.) 32 0 FOR LESSOR CITY OF NEWPORT BEACH Tod W. Ridgeway Mayor for City of N ort Bea FOR LESSEE BALBOA PERFORMING ARTS THEATER FOUNDATION Theater 11 Dated !'lt —Oq of Directors of Balboa Performing Arts APPROVED AS TO FORM CITY OF NEWPORT BEACH: Robin Clauson Acting City Attorney for City of Newport Beach ATTEST: CITY OF NEWPORT BEACH LaVonne Harkless City Clerk for City of Newport Beach Dated !"/&-o7 Dated 9 -,A o -o f 33 E LEGAL DESCRIPTION 11 All that real property situated in the City of Newport Beach Counry of Orange, State of California and more particularly described as follows: Sots 4 and 5, Block 10, Balboa Tract, in the City of Newport Beach, as shown on a map recorded in Book 4, Page(s) 11, of Miscellaneous Maps, in the office, of the County Recorder of said County. I xr xr tx.• t t I f I I i i { I [ F xr i t i f I t � I.I �I I it 9 ntb # 1k, AL EY le b F 3 W } I t I 1 I i N I I i i { I [ F xr I 1 I 1 OCEAN w a laa1kx3 Pi J 2807234 Exhibit C A. General and special taxes and assessments collected with taxes for the fiscal year 1998-1999. Total: First installment: Second Installment: $4,018.90 2,009.45 Open 2,009.45 Open Homeowners' Exemption: $0 Code: 07-001 Parcel 048-135-02 B. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Section 75, et seq. of the Revenue and Taxation Code of the State of Californla 1. Covenants, conditions and restrictions (deleting any restrictions indicating any preference, limitation or discrimination based on race, color, religion, sex, handicap, familial status or national origin) as set forth in the document Recorded: in book 153 page 225 of Deeds 2.. Covenants, conditions and restrictions (deleting any restrictions indicating any preference, limitation or discrimination based on race, color, religion, sex, handicap, familial status or national origin) as set forth in the document Recorded: in book 3377 page 501, Official Records Said covenants, conditions and restrictions provide that a violation thereof sball not defeat or render invalid the lien of any mortgage or deed of trust made in good faith and for value. 3. Water rights, claims or title to water, whether or not shown by the public records. 4. Matters which may be disclosed by an inspection or by a survey of said land that is satisfactory to this Company, or by inquiry of the parties in possession thereof. An inspection of said land has been ordered; upon its completion we will advise you of our findings. CtsA Pm!4minaq Rcpoet Fo= (Rw. 111195) page i of 2 2807239 S. Rights of the parties in possession of said land, under unrecorded leases. Please submit copies of said leases for our examination. . 6. Before issuing its policy of title insurance, this Company will require evidence, satisfactory to the Company, that the vestee corporation named herein: (a) was duly incorporated on the date of acquisition of title hereinafter set forth and (b) is now of good standing in the state where it was formed: Date of Acquisition: October 17, 1995 7. This Company will require a corporate resolution of the board of directors form the corporation(s) vested .herein, authorizing this transaction and the execution of the documents necessary to complete it in accordance with instructions given to the Company. Note No. 1: The only conveyances affecting said land recorded within six (6) months of the date of this report are as follows: None. Note No. 2: The premium for a policy of title insurance, if issued, will be based on 80%. cc: Land America Attn: Linda Hamiltoa Page 2 of 2 CLTA Ptvl'unimq Rcport Form (Rev. 1!1/95) CITY OF NEWPORT BEACH City Council Staff Report March 11, 2014 Agenda Item No. 17. TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Dave Kiff, City Manager — (949) 644-3002, dkiff@newportbeachca.gov PREPARED BY: Dave Kiff PHONE: 949-644-3001 TITLE: Balboa Village Theater - Lease Amendment, Contribution ABSTRACT: Supporters of the Balboa Village Theater have asked the City to amend its current lease with the City and have the City participate with up to $2 million to improve the Theater to a level at which it can open. In exchange, the Theater's Foundation would raise $2 million for tenant improvements, AN equipment, and enough resources to begin operations. RECOMMENDATION: Council Member Mike Henn's recommendation is that the Council agree in concept to the Foundation's proposal. FUNDING REQUIREMENTS: If the Foundation's request is approved, the City would allocate $2 million towards the Theater's construction and possibly an additional cost for Construction Management. DISCUSSION: Brief History. The Balboa Theater is located at 707 East Balboa Boulevard, and operated as a theater as far back as 1928. The Theater closed in 1992. In an effort to revitalize the Balboa Village area, the City worked with the then -formed Theater Foundation to have the City purchase the Theater for $480,000 in October 1998 using Community Development Block Grant (CDBG) funds. The City entered into a lease with the Balboa Performing Arts Theater Foundation in November 1998 to manage and operate the Theater. 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 (current version of the lease provided as Attachment A). 265 Later, the City contributed $175,000 to assist the Theater Foundation to complete plans for a large-scale renovation. The estimated cost of the renovation at the time (2011) was $4.8 million. To pay for the renovation, the Foundation intended to use $800K from cash on hand as well as $4M in donations from large donor givers. At the time of a Council presentation about the renovation (September 2011), the Foundation hoped to begin construction within a few months. Today, a new Foundation Board has asked the Council consider a new plan and direction - this is: . An exterior remodeling project that is smaller in scope — that portion (exterior) estimated at $2M and funded by the City. The project would restore and improve the shell of the building, with some tenant improvements (seating) as well as theater -ready lighting and sound. . A 50 -year lease with the City. . Rent back to the City would be 2.5%d of ticket revenue. . The Foundation would raise and hold on deposit $2M for tenant improvements, the sound/lighting, enough to cover Year 1 Operations, and "adequate reserves to support the initial years of the Theater's operations." . Only when the Foundation's $2M was raised and set aside would the City's $2M be used. . The Foundation's $2M would be in addition to $400,000 that is in hand today. . The Foundation would provide a "fully articulated business plan authored by a ... firm that supports to the City's satisfaction the successful operation of the theater over time." The Foundation notes that the City "would be responsible for funding the design and construction of the shell so the building is 'tenant ready' ... " It is not certain what this entails, and whether, should the City hire a construction management firm to do the work, the CM's costs are included in the $2M. Given the significant CIP program underway at Public Works, it is not likely that the City can manage this project with existing resources. For more information about the Foundation's proposal, please see Attachment B. Representatives of the Foundation, including Mr. Steve Beazley and Mr. Don Hecht, will attend the Study Session to speak more about this proposal. ENVIRONMENTAL REVIEW: CEQA work has been completed on the Theater project, and permits (including a Coastal Development Permit and a building permit for a previous design) have been issued. NOTICING: Noticed according to the Brown Act (at least 72 hours in advance of the meeting). This item was also on the Study Session agenda for this same day. ATTACHMENTS: Name ❑ Attachment A - Current Lease.odf ❑ Letter from Foundation to Mike Henn - 1-20-2014.odf Description: Attachment A - Current Lease Attachment B - Letter from Foundation to Mike Henn 266 ATTACHMENT A 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 Section 27383 I'mmill 0A 11920080 VRAM" 1[11111 111 HI 57 AMENDED AND RESTATED LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATER FOUNDATION This Amended and Restated Lease ("Lease"), entered into as of September _ 2011 ("Effective Date")•by and between the City of Newport Beach, a charter city and municipal corporation ("Lessor") and the Balboa Performing Arts Theater Foundation, a California non-profit public benefit corporation ("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 Theater located at 707 East Balboa Blvd in the City of Newport Beach ("Property") as depicted in the attached Exhibit "A", which is incorporated herein by reference. B. Lessor 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 et. 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 theater 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. 2 M 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, and as amended and restated on September 14, 2004 (collectively "Original Lease'). H. This 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: 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 and, subsequent to renovation, require Lessee to operate a first class community multi -use theater as contemplated in Section 7.1. The renovation and operation of the theater 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 Property 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 thereto. 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. 1.4 Lessee Lessee is the Balboa Performing Arts Theater Foundation. Lessee is a California non-profit public benefit corporation organized for the purpose of renovating, operating and maintaining the Theater 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. 3 q7 269 1.5 Termination of Original Lease The Original Lease shall terminate and be of no further affect upon the execution of this Lease by the parties. 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 (as defined in Section 4.1 below) and pursuant to the terms, provisions, covenants and 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 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 purpose of this Lease. ARTICLE 3 POSSESSION OF PROPERTY 3.1 Quiet Enioyment 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 0 L[ 6 270 remediation of the lead-based paint, will be necessary before the Property can be operated as a first-class community theater 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 theater, such as fixtures, machinery, rigging, lighting, staging, merchandise, trade fixtures (collectively, "Equipment") that have been constructed or placed on the Property. Title to the Equipment shall automatically pass to the Lessor at the expiration or termination of this Lease as provided in Section 3.4. 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 assurances 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. 5 ARTICLE 4 TERWOPTION TO PURCHASE 4.1 Duration and Commencement The Term of this Lease shall commence on the Effective Date and shall expire on the fiftieth (50th) 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 the following: 4.3.1 Lessee shall have completed the Required Improvements (as defined in Section 8.1); and 4.3.2 Lessee shall have operated the theater in full compliance with the provisions of Article 7 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 topurchase; and 4.3.4 Lessee is not in default in any of the terms of this Lease when the notice of intent is served and/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. 4.3.6 Lessee may only use the Property for the permitted uses contemplated in Section 7.1. At the time of transfer Lessee shall record a deed restriction against the Property limiting its use to the permitted uses in Section 7.1. The deed restriction shall include a reversion clause providing that if Lessee uses or attempts to use the Property for any use not contemplated in Section 7.1 the Property shall automatically revert to the Lessor, without any consideration due to Lessee. m 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 Date 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. For purposes of clarity, if the Property is sold at any time during the Term to a third party, the option to purchase the Property (on the terms set forth in Sections 4.3 and 4.4) shall remain in full force and effect, shall not be affected by such sale, and shall be binding upon such purchaser. If requested by Lessee, Lessor agrees to execute, acknowledge, and deliver a Memorandum of Lease, in form mutually acceptable to Lessor and Lessee, which shall include, among other provisions, disclosure of Lessee's option to purchase the Property and its right of first refusal. ARTICLE 5 RENTICONSIDERATION 5.1 No Money Payable by Lessee Lessee shall not pay money as rent to Lessor. 5.2 Other Consideration In consideration for this Lease, Lessee covenants that, during the Term, it will: 5.2.1 Operate and maintain a first class community multi -use Theater on the Property in full compliance with the terms and VA 273 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 8 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. 5.2.5 Use any excess revenue or funds for purposes related to the operation of the theater 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 Capital 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). ARTICLE 6 LONG RANGE PLAN, BUDGET AND RECORDS 6.1 Long Range Plan Lessee shall prepare, and submit to Lessor, a plan which projects fundraising, renovation, marketing and operational expectations and financial needs including active operations of the theater ("Long 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, not more frequently than once per year, to reflect changes to renovation plans, fundraising strategies and goals, active operations including performances/events, and marketing programs. The Long 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 fundraising efforts for the prior year; (ii) schedule for completion of Required Improvements; (iii) 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. 6.2 Annual Budget Lessee shall prepare and submit to Lessor an annual budget ("Budget"), which D 274 shall be based on the Long Range 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 balance in all funds and accounts maintained by Lessee; (ii) all projected revenues and sources of funds for the fiscal year; (iii) the expenditures proposed to be made by Lessee in fulfilling its obligations pursuant to this Lease; and (iv) all other proposed expenditures of Lessee. Lessee has prepared Budgets as required by the Original Lease. Subsequent Budgets, and material modifications. or revisions to the Budget, shall be submitted within forty five (45) days after adoption by Lessee. 6.3 Year End Financial Statement Within. ninety (90) days -after the last day of Lessee's fiscal year, June 30`h, Lessee shall submit to Lessor a financial statement including a profit and loss statement itemizing all of its revenues and expenditures for that fiscal year, a balance sheet .and statement of cash flow, all prepared in accordance with generally accepted accounting standards. 6.4 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 Campaign 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. 6.5 Audit 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 7 USE OF PROPERTY 7.1 Permitted Use The Property shall be used primarily for the operation of a first class community 275 multi -use theater open to the general public. Lessee shall operate the theater 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 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 community and other organizations to periodically use the theater for fund raising, education, 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 before completion of Required Improvements subject to issuance of a Special Events Permit by Lessor. 7.2 Performances/Frequency Lessee shall operate the' theater 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. Operation of the theater is the fundamental consideration for this Lease and Lessee shall ensure and promote the maximum reasonable use of the theater by performers, artists, and entertainers and other permitted users likely to attract patrons. The theater shall be operated consistent with the standards, practices and procedures utilized by first class multi -use community theaters in other jurisdictions. 7.3 Program Standards Lessee shall operate the theater in a manner reasonably calculated to achieve the following objectives: 7.3.1 Provide frequent and.high quality performances and cultural events to attract patrons to the theater and Central Balboa/Balboa Village. 7.3.2 To. serve as a catalyst to the revitalization of the economy of the area to be benefited by use of the Federal Funds. 7.3.3 To make the theater 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; 7.3.4 To utilize the skill, ability and energy of members of the community in combination with a capable and experienced professional staff to 10 fund and complete the renovation as well as operate and maintain a first class community multi -use theater. 7.4 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 be withheld at Lessors sole discretion. 7.5 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 theater. 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 theater. 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. 7.6 Zoning and Planning Lessor acknowledges that the use of the Property as a theater 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. Approvals granted by Lessor pursuant to Article 8 of this Lease shall not substitute for land use and development approvals and permits required by the Newport Beach Municipal Code. 7.7 Nondiscrimination 7.7.1 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. 7.7.2 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 11 277 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, 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. 7.7.3 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 8 REQUIRED IMPROVEMENTS 8.1 Lessee's Obligations The Property requires substantial renovation and rehabilitation to be used as, or considered, a first class community multi -use theater. Lessee shall design, obtain building permits for, and then construct the improvements specified in this Article ("Required Improvements) at Lessee's cost and expense. However, Lessor shall waive all building permit and plan fees associated with the Required Improvements. 8.2 Intentionally omitted 8.3 Conceptual Design Plans and Use Permit Lessee obtained Use Permit #2004-003 (PA2004-032) from City Planning Department on September 23, 2004. Lessee prepared, and submitted to Lessor for approval, proposed Conceptual Design Plans for the design and construction of the Property for use as a first class community multi -use theater ("Conceptual Design Plans"). The Conceptual Design Plans were be prepared by a licensed architect. The Conceptual Design Plans generally described those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theater constructed in the 1920's. The Conceptual Design Plans included, (1) seating layout; (2) stage and dressing room layout (3) lobby IV: SGS 278 and concession area layout; (4) public area layout; and (5). exterior elevations. Lessor approved the Conceptual Design Plans on April 19, 2005 (Approval -in - Concept No. 0976-2005) in connection with Lessee's Coastal Development Permit application. 8.4 Design Development Plans Subsequent to approval of the Conceptual Design Plan, Lessee completed Design Development Plans on April 19, 2011 The Design Development Plans were based on, consistent with and amplified the information provided in the Conceptual Design Plans. The Design Development Plans included (1) exterior lighting plans and design; (2) color, material, treatment and design of all exterior elements; (3) sound and projection systems; (4) design and treatment of interior spaces. The Design Development Plans were incorporated into the Plan Check Plan set and submitted to the City on June 15 2011 with the application for a building permit. 8.5 Building Permits Lessee applied for all necessary building permits from Lessor on June 15, 2011 and is currently awaiting approval 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 Design Development Plans. 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 Design Development Plans, 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 waive all building permit fees, planning fees and other fees and charges normally imposed on similar projects. 8.6 Final Design Plans 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. Lessor shall specify with particularity those components of the Final Design Plans disapproved, the reasons for disapproval and the altemative(s) Lessor would approve. The parties shall agree on Final Design Plans within sixty (60) days 13 274 after submittal. 8.7 Schedule for Required Improvements Lessee shall submit plans, diligently pursue their approval, and begin construction of Required Improvements according to the following schedule. Complete Building Permit One hundred eighty (180) days after initial application Building Permit application which is December 15th, 2011 Begin construction Upon reaching 50% of budget for Required Improvements, but no later than two (2) years after issuance of building permits. Lessee is required to request time extensions, as provided under Lessor's Municipal Code, to ensure the building permit(s) remains valid prior to construction Final Design Plans Upon approval of framing by Lessor's Building Department Complete construction One (1) year and six (6) months after start of construction. 8.8 General Requirements 8.8.1 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. 8.8.2 Lessor shall designate an appointed committee of three (3) members, comprised of the City Manager or his or her designee, the Community Development Director or his or her designee, and the City's Building Official or his or her designee to review, and approve or disapprove, the Conceptual Design Plans, the Design Development Plans and the Final Design Plans. Lessee may request City Council review of any decision by the appointed M committee disapproving submittals by serving. a request for review within fifteen (15) days after receipt of the notice of disapproval. 8.9 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 9 REPAIRS AND. MAINTENANCE Lessee recognizes that the theater 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 theater 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 theater (including patching and resurfacing the roof membrane and painting or other protective treatment of the exterior wall of the theater); (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 theater and, the repair and replacement of components; (iv) maintenance of all pipes and plumbing systems serving the theater 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 shalt prepare and submit to Lessor a schedule for the periodic inspection and maintenance by Lessee of the theater. Lessee shall revise the schedule for maintenance from time to time during the Term as necessary to maintain the theater to the standards. required by this Lease. Lessee shall have the benefit of all warranties available to Lessor with respect to the theater 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 theater would make continued operation of the theater economically infeasible. 15 v,t.i ARTICLE 10 STATUS AND MANAGEMENT OF LESSEE 10.1 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. ARTICLE 11 ALTERATIONS 11.1 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 theater's designation as a local landmark and shall respect the design of the original front fagade of the theater to the maximum extent feasible. 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. 11.2 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 12 PAYMENT OF UTILITIES, TAXES, CHARGES AND FEES 12.1 Public and Private Utility Services Lessee will pay all charges for all public or private utility services and all sprinkler systems and interior protective services provided to or for the Property. Lessee 16 ! r. 282 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. 12.2 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. 12.3 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. 12.4 Payment by Lessor Lessor shall have the right to pay any assessment, tax, fee or charge before the due date if Lessor has a 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. 12.5 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. 12.6 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. 17 2 Yi ARTICLE 13 LIENS 13.1. 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 theater free and clear of all mechanic's liens and similar liens. 13.2 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. 13.3 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. 13.4 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 1.4 INDEMNIFICATION 14.1 Indemnitv Lessee shall defend, indemnify and hold harmless Lessor from and against.any and all legal or administrative proceedings, claims, reasonable attorneys' fees and costs, expenses, penalties, actual damages, punitive damages and losses, M -, Et. 2$4`C7y 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 14.6 on the Property or theater, (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. 14.2 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. 14.3 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. 14.4 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. 14.5 Waiver of California Civil Code Section 1542 Section 1542 of the California Civil Code states: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor 19 GJ 285 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. 14.6 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, (f) 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 Sections 13000 et seq). ARTICLE 15 INSURANCE 15.1 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. 15.1.1 Comprehensive General Liability in an amount not less than two million dollars ($2,000,000) 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- contributing with any insurance or self-insurance maintained by Lessor or Lessee. Any third party permitted to use the Property pursuant to Paragraph 7.1 of this Lease shall provide the same RRE jo 286 insurance, unless this requirement is waived or modified, in writing, by Lessor's City manager. 15.1.2 Workers' Compensation Insurance as required by the Labor Code of the State of California. 15.1.3 "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. 15.1.4 Property Insurance -Construction. During construction of any improvements on the Property, Lessee shall maintain Builders 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. 15.2. 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 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. 21 2 FJ 15.3 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 Angel es -An a heim- .Riverside. All Items (1982-84 Base), published by the Bureau of Labor Statistics, Department of Labor. Consumer Price Index. 15.4 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 16 DAMAGE BY FIRE OR CASUALTY 16.1 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. 16.2 Restoration Except as provided in Section 17.3, 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 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 22 A 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. 16.3 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. 16.4 Application of Insurance Proceeds In the event that Lessee is required to restore the Property pursuant to Section 16.2, proceeds from policies of insurance required by Article 15 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: 16.4.1 Lessee shall furnish to Lessor satisfactory evidence to Lessor of the total cost of Restoration pursuant to Section 16.2. 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. 16.4.2 Assuming satisfaction of the conditions of subsection 16.4.1 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. 16.4.3 Upon completion of restoration and assuming Lessee is not in default, excess insurance proceeds shall first be paid to Lessor to the extent of its actual expenses incurred in the restoration, then to Lessee as working capital 23 0 289 ARTICLE 17 EMINENT DOMAIN 17.1 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. 17.2 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. 17.3 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. - 17.4 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. 17.5 Allocation of Award — Partial Takinq Any Award in a Partial Taking shall be distributed by escrow in the following order of priority: 17.5.1 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; 17.5.2 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; 17.5.3 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 24 the court. 17.6 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. 17.7 Allocation of Award —Total Taking Any Award in a Total Taking shall be distributed by escrow in the following priority: 17.7.1 First, to Lessor and Lessee to reimburse for all costs and expenses incurred by each in the collection of the Award; 17.7.2 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. 17.8 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. 17.9 Notices Any party receiving notice of or becoming aware of any condemnation proceedings shall promptly give written notice to the other party. ARTICLE 18 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 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. Notwithstanding any provision to the contrary, (i.) `*7 �9� 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, and (ii) if the Property is sold, transferred, or assigned during the Term to a third party, the consent of the successor lessor to any assignment or subletting of the Lease or any portion of the Property by Lessee may not be unreasonably withheld, delayed, or conditioned. ARTICLE 19 LEASEHOLD MORTGAGES Lessee shall have no right to encumber its interest in this Lease, the Property or the theater without Lessors prior written consent, which consent may be withheld in Lessor's sole and absolute discretion. ARTICLE 20 PERFORMANCE OF LESSEE'S COVENANTS 20.1 Right of Performance If Lessee fails to pay any tax, fee or other charge in accordance with Article 12 within the time period required or shall fail to pay for or maintain any of the insurance policies provided for in Article 15 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: 20.1.1 Pay the tax, assessment, fee or charge payable by Lessee pursuant to this Lease; or 20.1.2 Pay for and maintain any insurance policies required by this Lease; or 20.1.3 Make any other payment or perform any other act that Lessee is required to pay or perform pursuant to this Lease. 20.2 Reimbursement and Damaqes Lessee shall reimburse Lessor for all costs and expenses incurred by Lessor in the exercise of its rights pursuant to Section 20.1. ARTICLE 21 REPRESENTATIONS 21.1 Lessors Representations 26 2976' Lessor represents to Lessee that: 21.1.1 Lessor owns the Property. in fee simple subject only to the Permitted Exceptions and other matters affecting title that do not inhibit, prevent or impair the operation, maintenance or use of the theater. 21.1.2 Lessor has the power and authority to enter into this Lease and perform all the obligations of Lessor hereunder. 21.2 Lessee's Representations Lessee represents to Lessor that 21.2.1 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. 21.2.2 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 theater consistent with this Lease and the Operations Plan. 21.2.3 Lessee has the right, power and authority to enter into this Lease and to perform all the obligations of Lessee. 21.2.4 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 22 DEFAULTS, REMEDIES AND TERMINATION 22.1 Legal Actions 22.1.1. Institution of Lec al 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 27 with the purpose of this Lease. Any legal action shall be filed in the County of Orange, State of California. 22.1.2 Applicable Law The laws of the State of California shall govern the interpretation and enforcement of this Lease, with venue in Orange County. 22.2 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. 22.3 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: 22.3.1 The failure of Lessee to comply with the provisions of Article 8 related to the design and construction of Required Improvements. 22.3.2 The failure of Lessee to operate the theater in compliance with the provisions of Article 7 related to frequency and quality of performances and events. 22.3.3 The failure of Lessee to maintain the Property as specified in Article 9. 22.3.4 The failure of Lessee to restore or repair the Property in the event of damage or destruction 22.3.5 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. 22.4 Remedies If Lessee has materially breached this Lease after expiration of all applicable cure periods 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 M the following additional rights and remedies: 22.4.1 Lessor shall have the right to terminate this Lease with or without cause upon ninety (90) days written notice to Lessee and reenter the Property and/or the theater, take possession of the Property and/or theater, any and all Equipment, books and records, contracts and any other property. In the event of termination under this section Lessor shall owe no compensation to Lessee. 22.4.2 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 theater, 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. 22.4.3 Lessor shall be entitled to recover all money payable to Lessee related to the operation and use of the theater, 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 23 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 Lessors interest in the Property, Lessor may contest or settle the matter in its sole discretion and obtain reimbursement from Lessee. ARTICLE 24 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 theater, or for any other lawful purposes, including showing the Property to prospective purchasers or lessees. 29 -73 295 ARTICLE 25 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, riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Lessee. ARTICLE 26 MISCELLANEOUS 26.1 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 Theater Foundation P.O. Box 752- Balboa, 52Balboa, CA 92661 26.2 No Claims Against Lessor Nothing in this Lease constitutes any consent or request by Lessor for the KH I IJ96 performance of any labor or services or the furnishing of any materials to the Property 26.3 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 Theater. Except as otherwise provided, no subsequent change or addition to this Lease shall be binding unless in writing and signed by the parties. 26.4 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. 26.5 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. 26.6 Holding Over A tenancy for month-to-month shall result if Lessee remains in possession of the Property or the theater 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. 26.7 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 of the theater or otherwise. 31 r� 297 26.8 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. 26.9 Time of the Essence Time is of the essence relative to all of the terms, provisions, covenants and conditions of this Lease. [SIGNATURES ON NEXT PAGE] 32 RM FOR LESSOR CITY OF NEWPORT BEACH Michael F. Henn Mayor for City of Newport Beach FOR LESSEE BALBOA PERFORMING ARTS THEATER FOUNDATION Chairman, Board of Directors. of Balboa Performing Arts Theater Foundation APPROVED AS TO FORM CITY OF NEWPORT BEACH: AroHarp City Attorney for City of Newport Beach ATTEST: CITY OF NEWPORT BEACH Leilani Brown City Clerk for City of Newport Beach. Exhibit "A"—Property Depiction Dated Dated Dated Dated [END OF SIGNATURES] 33 I� 299 ATTACHMENT B "[W RUN% % fib NOR R fNVNDOM PlUfl(•DPH(f•iHfPIER•fllm•fDV(PlIOH January 20, 2014 Councilmember Mike Henn Newport Beach City Council 100 Civic Center Drive Newport Beach, Ca 92660 Dear Councilmember Henn, Delivered by e-mail The Balboa Performing Arts Theater Foundation, as the Balboa Village Theatre, hereby requests consideration by the City Council of Newport Beach of the proposal set forth below for an amended Lease of the building at 707 E. Balboa Blvd for the purposes of operating a performing arts theatre. Whereas, the area known as the Balboa Village has been in need of substantial rejuvenation for more than a decade,and Whereas, community efforts to build a theatre and spark area rehabilitation have been well intentioned but unsuccessful thus far, and Whereas, the building is an empty shell, of four structurally unsound walls, a holed roof open to the sky, with a sandy floor, ready either for demolition or restoration, and Whereas, the rehabilitation of Balboa Village cannot succeed without City's active and positive involvement and leadership, and Whereas, a revitalized and attractive Balboa Village area with a keystone Theatre will attract visitors, investment and development, increase the economic viability of the Village and raise neighborhood property values, Therefore, the BPATF submits this proposal for City Council consideration and adoption: 1. The City passes a resolution affirming its approval in concept to rehabilitate the current Theatre property at 707 E. Balboa Blvd which it owns to tenant -ready status, so that it can be occupied and leased as a community performing arts theatre by BPATF, subject to the conditions outlined below. 2. Our architects and contractor estimate that the all -in cost of this would be approximately $2 million, subject to confirmation by the City. 3. The City's actual approval to proceed with construction would be conditioned on the following: 1) negotiation of a mutually agreeable minimum 50 year lease that contemplates BPATF to be responsible for all interior tenant improvements necessary to successfully operate as a theatre; 2) the 300 lease will specify rent payable to the City in the amount of 2.5% of ticket revenue to provide the City the opportunity to recoup its investment; 3) BPATF will raise and have on deposit prior to the expenditure of any City funds for the project $2 million in unencumbered cash donations for tenant improvements and resources such as designing and installing first class theatre systems, first year's start-up costs of operation, and adequate reserves to support the initial years of theater's operations. The $2 million would be in addition to the net cash reserves on deposit in the Foundation, currently totaling approximately $400,000, and 4) BPATF will present a fully articulated business plan authored by a respected performing arts consulting firm that supports to the City's satisfaction the potential for successful operation of the theatre over time. 4. With the conditional approval in concept in place as described above, BPATF will then move forward with developing an expanded Board and fund raising through community action in order to fulfill the $2 million donation commitment. 5. Until the BPATF has the $2 million in a segregated bank account dedicated for tenant improvements and resources listed above, the City will not lift one shovel of dirt, or expend one penny on the rehab, and in this way the City has not risked anything, but has demonstrated its commitment to the community and support of the Balboa Village Theatre revitalization. Without City support, as outline above, the BPATF will be unable to move with the BVT project. Attached to this correspondence is a brief project description with a set of rough financial estimates and deal points expressing the projected investment by the City of Newport Beach and BPATF. Also attached is a set of schematic design drawings of the building presented as a theatre. Councilmember Henn, you have been an ardent supporter of the BPATF and revival of the Theatre and of the Balboa Village area. We are thankful for your concern, consideration and leadership on behalf of your District, and request you to lead the efforts to gain Council approval and spark the project. We at BPATF stand shoulder to shoulder with the City, and hope the Council will rise to the opportunity. In all sincerity, we believe this is the make -or -break moment. Sine qua non. Sincerely, For the Balboa Performing Arts Theater Foundation Dr. Donald Hecht, Chair Dr. Steven Beazley, President/CEO 301 BALBOA VILLAGE T N E A T R E Project Description Building Remodel at 707 E. Balboa Blvd. for the Purpose of Operating as a Theatre Prepared for: City of Newport Beach January 20, 2014 MH M ORO K PM 1MIN fOQ011O8 AIViI(•DA0(1.1AEAl1A•11IM-[ 0V(AIIA0 Project Description 302 Table of Contents History Mission III. City-BPATF Partnership IV. Facility Design Features V. Financial Investment Plan VI. Schematic Design Drawings 303 Theatre Histo The Balboa Village Theatre dates back to 1928, when J. P. Greeley constructed a performing arts facility at 707 E. Balboa Blvd. called the Ritz Theater, a state-of-the-art theatrical facility for vaudeville and small theater productions. In 1939, the Ritz was renamed the Balboa Theater, and its emphasis turned to film. Many of the best loved Hollywood movies were screened at the Balboa Theater during the 1940s, 50s, and 60s. By the mid- 1970s, the Theater turned into a popular revival/art film house. The Balboa Theater closed its doors in 1992, and the venue sat dark and deserted until the Foundation was formed in 1996 with the goal of reviving and rebuilding the Theater under the new name of the Balboa Village Theatre. II. Mission The Balboa Village Theatre's mission is to create and implement a venue for performing arts, film, theatre and arts education activities to meet the needs of Newport Beach and the surrounding Orange County community. Under the guidance of its Board of Directors, the Foundation has been working in partnership with the City of Newport Beach, which purchased the structure in 1998. The City is leasing the building to the Foundation to operate as a first-class, 300 -seat multi -use theater that will benefit and enrich the entire community, while meanwhile being self-sustaining. III. City-BPATF Partnership The Foundation is proposing that the City of Newport Beach amend the lease to the foundation under the following terms and conditions: 1. The City grants its approval in concept to rehabilitate the current Theatre property at 707 E. Balboa Blvd which it owns to tenant -ready condition, so that it can be occupied and leased as a community performing arts theatre by BPATF. 2. Our architects and contractor estimate that the all -in cost of this would be approximately $2 million, subject to confirmation by the City. 3. The City's actual approval to proceed with construction would be conditioned on the following: 1) negotiation of a mutually agreeable minimum 50 year lease that contemplates BTPATF to be responsible for all interior tenant improvements necessary to successfully operate as a theatre; 2) the lease will specify rent payable to the City in the amount of 2.5% of ticket revenue to provide the City the opportunity to recoup its investment; 3) BPATF will raise and have on deposit prior to the expenditure of any City funds on the project $2 million in unencumbered cash donations for tenant improvements and resources such as designing and installing first class theatre systems, first year's start-up costs of operation, and adequate reserves to support the initial years of theater's operations. The $2 million would be in addition to the net cash reserves on deposit in the Foundation, currently totaling approximately $400,000; and 4) BPATF will present a fully articulated business plan authored by a respected performing arts consulting firm that supports to the City's satisfaction the potential for successful operation of the theatre over time. 4. With the conditional approval in concept in place as described above, BPATF will then move forward with developing an expanded Board and fund raising through community action in order to fulfill the $2 million donation commitment. 304 5. Until the BPATF has the $2 million in a segregated bank account dedicated for tenant improvements and resources listed above, the City will not lift one shovel of dirt, or expend one penny on the rehab, and in this way the City has not risked anything, but has demonstrated its commitment to the community and support of the Balboa Village Theatre revitalization. IV. Facilitv Desien Features The foundation is proposing a remodel design approach to the existing 5,130 square foot building. This entails keeping the building to a single floor and making improvements to the building to make it a shell in which theatrical systems and equipment may be installed. The City of Newport Beach would be responsible for funding the design and construction of the shell so the building is "tenant ready" for the foundation to design, fund and install the state of the art production elements that enable the building to operate as a theatre. Exterior Imorovements The exterior of the theatre would remain intact with minor modifications including fresh paint in the existing color scheme, windows installed in their current opening locations, a box office window(s) on the lower left sided of the building and advertising window boxes on the right hand side of the theatre entrance doors A new theatre marquee would be designed in the spirit of the original 1920's marquee. The foundation would design and fund the marquee. Interior Imorovements Improvements to the floor, ceiling, roof and addressing seismic considerations with the walls of the current structure would be the primary focus. Infrastructure required by code for assembly of 300 persons would be constructed such as restrooms, fire sprinkler, lighting and mechanical, electrical and plumbing improvements as designed by the City. This interior shell would facilitate the installation of a catwalk system, theatrical lighting, audio-visual systems, acoustic drapery, modular staging that can be sized to the performance, modular risers for seats. A movie screen would be installed which could be rolled up into the catwalks when not used. A film projector would also be installed in the catwalk system. The stage will be 24-36" high theatrical platforms joined to create the size of stage necessary for the performance. Seating capacity will be maximum 300 with 143 fixed seats in stadium style built to span over the top of the restrooms, 157 portable seats able to be added to the stadium configuration, moved to create a % configuration around a stage, moved to four sides of the stage to create theatre in the round or removed altogether to create an open floor. 305 A backstage green room will include a pre -show staging area as a well as two restrooms. Dressing rooms, when needed, would be rented hotel rooms from the Balboa Inn, which exists across the 10 foot alley behind the theatre. All of the theatre systems would be temporary installations and removable should the building ever be used for purposes other than a theatre. The Foundation would agree to design and fund all elements of the theatre systems. The design would allow the foundation to operate in compliance with the Lease issued by the City of Newport Beach and maintain all the conditions contained in the current coastal permit including adhering to the operating hours restrictions during the summer months. V. Financial Investment Plan A. Total Project Investment: $ 4.000.000 Based on a $2 million dollar investment match of Lessor (City of Newport Beach) and Lessee(BPATF) Lessor Investment (City of Newport Beach) Tenant Ready Building Investment Investment Year Design/Construction of Building $ 2,000,000 2014-2015 Lessee Investment (BPATF) Theatre/Support Investment Investment Year Theatre Systems Equipment $ 800,000 2014-2015 Pre -opening Year Operations $ 450,000 2014-2015 3 Year operations support/reserves $ 750,000 ($250k per year) 2015-2018 Total $ 2,000,000 B. Rent Structure 1) For each year of lease, Lessee agrees to pay Lessor rent at the rate of 2.5% of ticket revenue, with the first year rent free 2) Estimated rent per year of lease, subject to adjustment based on the final business plan financial projections: $40,000 306 VI. Schematic Drawings of Balboa Village Theatre A. Stadium Style Seating n CENTER LINE SECTION U SECOND FLOOR PLAN 3 CATWALK FLOOR PLAN �'Wffsfa m_ i FIRST FLOOR PLAN e AOOI 307 DDOCII �� �i 3 CATWALK FLOOR PLAN �'Wffsfa m_ i FIRST FLOOR PLAN e AOOI 307 Schematic Drawings of Balboa Village Theatre (Continued) B. % Configuration Seating 4 CENTER LINE SECTION Z SECOND FLOOR PIAN jsfa IJ CAP ALK FLOOR PLAN FIRST FLOOR PLAN Im 11— A - m �OCI01 Z SECOND FLOOR PIAN jsfa IJ CAP ALK FLOOR PLAN FIRST FLOOR PLAN Im 11— A - m "Received After Agenda Printed" Study Session Item No. 2 and Agenda Item No. 17 Rieff, Kim March 11, 2014 From: Keith Curry [CURRYK@pfm.comj Sent: Tuesday, March 11, 2014 1:42 PM To: Rieff, Kim Subject: Fwd: Balboa Village Theatre Proposal on agenda for March 11th Council Meeting Please print and distribute to council per Janet. Thanks Sent from my Whone Begin forwarded message: From: Janet Ray <janetmarierav(a.gmail.com> Date: March 9, 2014, 2:49:50 PM PDT To: Nancy Gardner <gardnerncvnaol.com>, Keith Curry <CURRYK(a),pfin.com>, Leslie Daigle <leslieidaigle(@,,aol.com>, "Mhenn527(@,,hotmail.com" <Mhenn52764hotmail.com>, "RhillAnewportbeachca.gov" <RhillAnewportbeachca.gov>, "Tpetros@a newportbeachca.gov" <Tpetrosna,newoortbeachca.gov>, Edward & Lynn Selich <edselich0lroadrunner.com> Cc: Walkie Ray <walkie7l2Qgmai1.com> Subject: Balboa Village Theatre Proposal on agenda for March 11th Council Meeting Newport Beach City Council Members: The Balboa Village Theatre is taking a new direction under the leadership of Dr. Donald Hecht, the new Chair, and Dr. Steven Beazley, President/CEO, which we fully endorse. My husband, Walkie, and I have been longtime supporters of the Balboa Village Theatre and we are very excited and enthusiastic to see a plan incorporating a Black Box theatre design. This approach is feasible financially and flexible from a programming point of view. I urge all of you to get behind this proposal to be presented to the NB City Council on Tuesday, March 11. Thank you, Janet and Walkie Ray Electronic mail sent through the Internet is not secure. Therefore, we cannot represent that the information in this e-mail, and any attachments, is complete, accurate, uncorrupted, timely or free of viruses or that such information will not be intercepted by third parties. This e-mail, and any attachments, contains information that is, or may be, covered by electronic communications privacy laws, and is also confidential and proprietary in nature. If you are not the intended recipient, please be advised that you are legally prohibited from retaining, using, copying, distributing, or otherwise disclosing this information in any manner. Instead, please reply to the sender that you have received this communication in error, and then immediately delete it. Thank you in advance for your cooperation. CITY OF � NEWPORT BEACH C7IFORN' City Council Staff Report UGI ;� n 7n11 Agenda Item No.--r— October 25, 2011 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Manager's Office Dave Kiff, City Manager 949-644-3002, dkiff@newportbeachca.gov PREPARED BY: Rob Houston, Assistant to the City Manager APPROVED: C. - TITLE: Balboa Theater Potential Lease Amendments and Proposed Beach Festival Discussion ABSTRACT: On September 13, 2011 the Balboa Theater lease was presented to City Council with amendments for their review and approval. City Council raised questions regarding the procedures for any potential sale of the property and directed staff to research this item and bring the lease back for review. The Balboa Performing Arts Theater Foundation has now asked for additional time to review the proposed changes to the lease. A Beach Festival sponsored by the Balboa Performing Arts Theater Foundation is also described for Council's review and direction. RECOMMENDATION: 1. Continue consideration of the Lease Amendment to a future meeting. 2. Waive Council Policy B-13 to allow alcohol to be sold at the Balboa Theater Beach Festival fundraiser event tentatively set for Fall 2012 at Peninsula Park Field contingent upon all conditions of the Special Event Permit process being met. FUNDING REQUIREMENTS: There is no fiscal impact related to this item. BEACH FESTIVAL DISCUSSION: As part of the Balboa Theatre fundraising effort, a Music Festival is being planned for a Saturday in October 2012 at Peninsula Park located adjacent to the Balboa Pier. Staff has met twice with the Balboa Theatre Foundation and The Producing Group to discuss Balboa Theater Potential Lease Amendments and Proposed Beach Festival Discussion October 11, 2011 Page 2 concept of the proposed festival that would take place on the grass sports field between A and B streets. The entire grass field would be fenced in which would contain an entertainment stage and areas for food, vendors, VIP and portable restrooms as illustrated in Attachment A. It should be noted that the Theatre Foundation would intend for this to be an annual event. A portion of the parking lot adjacent to the park will be used for staging and participant drop off. Entrance fees will be charged for the event that would take place from approximately fpm-10pm. Several bands would be scheduled throughout the. day to attract up to 5,000 participants and target demographic ages of 35 and up with genres such as 80's pop, Surf Pop, Indie Rock or Classic Adult Contemporary. The festival is in the early planning stages and will require further detail to truly understand the logistics necessary to successfully implement the event. High level discussions have included permit and staff costs. Also identified were anticipated challenges requiring the Producing Group to address through the planning process which includes offsite parking options, noise generated from amplified sound, traffic control and the selling of alcohol. Noise impacts to the nearby residents would be unavoidable due to their close proximity to the park. However, the event organizer would work closely with residents to notify them well in advance and direct the sound system out towards the ocean to minimize impacts as best possible. The event organizer also understands that they would be responsible for all related permit, lot closure revenue loss, and City staffing costs. All known aspects of the event as described would fall within the guidelines of the Special Event permit process with the exception of alcohol sales. Council policy B-13 limits alcohol to certain public facilities which does not include parks. Waiver of this policy is recommendation based on the Newport Beach based non-profit status of the Balboa Theater and their fundraising needs. If Council supports these efforts as outlined, staff will work with The Producing Group to develop a comprehensive event plan. ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is categorically exempt under the California Environmental Quality Act ("CEQA") pursuant to Section 15302(b) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). 14 Balboa Theater Potential Lease Amendments and Proposed Beach Festival Discussion October 11, 2011 Page 3 Submitted by: Dave Kiff City Manager Attachments: A. Map of Beach Festival Layout 5 41 �- F✓ j'� sy{ y �� aye.' 4` �'�•Y .!`�� 4 t r M �1 +c• n s > 4 'n r �r5yk", ° �`Y• ';n .,y w �, .� e err. � ' � .� t1pY!'�� a}''i+- {4t .,6 r�s�yE� r e �- y e�� ^• ,�'JF F� '"t-�}qf �" Y Fd igc�3'�. tr f' w, Wt✓A t x• a+, r u,. 14' CITY OF � SEW PO^,r p @ z NEWT BEACH C9�00.��P City Council Staff Report Agenda Item No. ii October 11, 2011 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Manager's Office Dave Kiff, City Manager 949-644-3002, dkiff@newportbeachca.gov PREPARED BY: Rob Houston, Assistant to the City Manager APPROVED: TITLE: Balboa Theater Potential Lease Amendments ABSTRACT: On September 13, 2011 the Balboa Theater lease was presented to City Council with amendments for their review and approval. City Council raised questions regarding the procedures for any potential sale of the property and directed staff to research this item and bring the lease back for review at the September 27, 2011 Council meeting. The Balboa Performing Arts Theater Foundation has now asked for additional time to review the proposed changes to the lease. RECOMMENDATION: Continue this item to the October 25, 2011 meeting. Submitted by: -b�,�- "a Dave Kiff City Manager ��WPoQr CITY OF NEWPORT REACH c.. 9,FowN'' City Council Staff Report 'ndLUem No 16 September 13, 20 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Manager's Office Dave Kiff, City Manager 949-644-3002, dkiff@newportbeachca.gov PREPARED BY: Rob Houston, Assistant to the City Manager APPROVED: TITLE: Balboa Theater Potential Lease Amendments ABSTRACT: The Balboa Theater Lease is presented to City Council with amendments for their review and approval. RECOMMENDATION: Approve proposed amended and restated Balboa Theater Lease with the Balboa Performing Arts Theater Foundation. FUNDING REQUIREMENTS: There is no fiscal impact related to this item. DISCUSSION: Background: The City purchased the Balboa Theater in October of 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 originally entered into a lease with the Balboa Performing Arts Theater Foundation in November 1998. This lease requires the Foundation to renovate and rehabilitate the Property and, subsequent to renovation, require them to operate a first class community multi -use theater. The renovation and operation of the theater is intended to serve the needs and interests of the residents and business owners in the area. Subsequent amendments to this lease have occurred to clarify a number of items including; reducing insurance requirements, allowing more latitude in the historical Balboa Theater Potential Lease Amendments September 13, 2011 Page 2 accuracy of the Theater's rehabilitation, clarifying the Foundations operating procedures, and confirming timelines for the theater reconstruction schedule. This amended lease attached to this report contains both changes recommended by Council at the July 27, 2010 Council meeting where the Balboa Theater status and lease were discussed, and items that the Foundation requests be incorporated into the lease. Potential Lease Amendments: The following proposed lease amendments are put forward by staff and/or the Foundation for City Council to approve. In an effort to focus this review the substantive amendment recommendations are detailed in the attached list and outlined in the redline attachment, whereas minor edits are only shown in the redline document. Potential amendments are presented in the order they appear within the lease, not order of priority. 1. The Foundation requests that the lease term be amended to 50 years from the current 25 year lease. (Section 4.1) This change was contemplated during the Council discussion in July of 2010 but section 420 of the City Charter in place at the time prohibited City leases to be signed in excess of a 25 year term. The section 420 of the City Charter was repealed in the November 2010 Charter Amendment action and allows 50 year leases to be entered into. 2. City staff recommend the inclusion of Section 4.3.6 to clarify that the use restrictions currently in place for the Theater property would remain in effect and be recorded as a deed restriction in the event that the property was ever purchased by the lessee. 3. The Foundation requests that their right of first refusal to purchase the Theater property remain in full force if the property is purchased by an entity other than the Foundation. (Section 4.5) 4. City Staff recommend that Section 6.1 be clarified in that a plan outlining the fundraising, renovation, marketing, operational expectations, and financial needs for the theater not more than once per year when material changes to those plans occur. 5. The Foundation requests that the 15 day requirement for the submission of the Foundation's annual budget be extended to 45 days from the time of theif budget adoption. (Section 6.2) 6. City Staff recommend that Section 6.3 be amended to detail the Foundation financial documents to be submitted at the end of each fiscal year. I Balboa Theater Potential Lease Amendments September 13, 2011 Page 3 7. City Staff recommend that Section 7.6 be simplified to confirm the requirements that the Theater can only be used in accordance to the Zoning code. 8. In accordance with the direction that City Council gave at the July 27, 2010 Council meeting, City Staff recommend that Section 8.1 be clarified to confirm that the City will waive all building permit and fees associated with the construction of the Theater. 9. City Staff recommend that Section 8.2 be removed from the lease document as the seismic retrofit and additional remediation work was completed in an earlier phase of work and no longer applicable. 10. The Foundation .requests that. Sections 8.2, 8.3, 8.4 and 8.5 be amended as outlined to update the information and work to be completed to reflect the current status of the Theater construction project. 11. City Staff recommend that Section 8.5 be amended to delete the wording that grants approval to Final design plans if the City does not respond in writing within 30 days of plan submittal. 12. The Foundation recommends that the schedule table in Section 8.7 be updated to only include current and future actions as well as request that construction could begin at the point that 50% of the budget for required improvements is acquired. This reduces the current 70% threshold before construction can begin. The Foundation also requests that they be allowed to have up to two years to begin construction, from the one year currently in the lease. 13. City Staff recommend updating Section 8.8.2 to have a new committee consisting of three members, the City Manager or his or her designee, the Community Development Director or his or her designee, and the City's Building Official or his or her designee, to review the Foundations plans for the Theater. 14. The Foundation recommends deleting section 10.3 that specifies the employment of an Executive Director as they have eliminated that position and function as a volunteer organization. 15. The Foundation request that Article 18 be amended to allow their lease to transfer to a new building owner if the property were sold to a third party. 16. City Staff recommend amending Section 22.4.1 to include provision for the City to have the right to terminate the lease at any time with 90 days written notice. I Balboa Theater Potential Lease Amendments September 13, 2011 Page 4 ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act ("CEQA") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). Submitted by: Dave Kiff City Manager Attachments: A. Balboa Theater Lease Red Line version B. Balboa Theater Lease amended version C. Map q �F ' .e.' tF\il. • Pr't:'h� x Ate'. -ty �3 � f� tc �s ApTrZp z'`';� rhe ` r%'•�p -,,Qe= 'qG�. r 3 < 10 'VMIN`YII�, ..v , ti k az�a f S } t• \`\ p.;N��C§' e\�i �"�ti elh a. o 0 t ^'o Y`02 '14 ' Balboa " NFR�NTq<,P�" " r� .�a 5\ t ✓i -r I. +.; a sx,s"Si'.�+_ r Q ra � x -.+i-. �rci 'r ��� a'�'a�� ' p �.r�I ,�..7tisi y?szw"`r�.,t•-;;<a' '' ' � _ r; F10.454 8 ti e ` PCII-4 AP Oq ,0�EAR K R 5V s 8 73p OgAC —0 25 s0 Feet m � �` ♦z m� 5 09/0612011 BalOoa Theater r 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 Section 273836193 Cnntrart No. 3248 i �! M,�- 0s 111111111 i 11" Min: A i AMENDED AND RESTATED LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATER FOUNDATION This Amended and Restated Lease (""Lease"D, entered into as of September _, 2011 G4 ("Effective Date") by and between the City of Newport Beach, a Gcharter cGity and municipal corporation (""Lessor-") and the Balboa Performing Arts Theater Foundation, a California non-profit public benefit corporation (""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 Theater located at 707 East- Balboa Blvd in the City of Newport Beach (""Prope rty"J. B. Lessoree purchased the Property with Community Development Block Grant CCDBGJ 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 ("ActJ and the Regulations of 24 C.F.R. Section 570 et. 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 tTheater 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. 5 G. An original Lease was entered into as of November 23, 1998, and was amended on September 27, 1999, December 13, 1999, and aad December 12, 2000, and as amended and restated on aad-September 14. 2004 (collectively T'Original Lease""). EN -- -01 e: - e -10- WIMNINOW-01im— 111 IMIN Ht. This Ameaded and—I?estat 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: 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 and, subsequent to renovation, require Lessee to operate a first class community multi -use Ttheater as contemplated in Section 7.1.: The renovation and operation of the Ttheater 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 Property 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 thereto. 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. 3 I 1.4 Lessee Lessee is the Balboa Performing Arts Theater Foundation. Lessee is a California non-profit public benefit corporation organized for the purpose of renovating, operating and maintaining the Theater 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. 1.5 Termination of Original Lease The Original Lease shall terminate and be of no further affect upon the execution of this Lease by the parties. 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 (as defined in Section 4.1 below) and pursuant to the terms, provisions, covenants and 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 P -purpose of this Lease. 2.2 Condition of Title— The Property is leased subject to the P -permitted €exceptions (Exhibit C) and other matters affecting title which do not inhibit, prevent or impair the €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 0 10 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 Ttheater 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 Ttheater, such as fixtures, machinery, rigging, lighting, staging, merchandise, trade fixtures (collectively, "Equipment") that have been constructed or placed on the Property. Title to the Equipment shall automatically pass to the Lessor at the expiration or termination of this Lease as provided in Section 3.4. 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 seGufity—assurances 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. 5 3.4.3 All documents and instruments to be delivered pursuant to this Ssubsection shall be in a form satisfactory to Lessor. ARTICLE 4 TERWOPTION TO PURCHASE 4.1 Duration and Commencement The Term of this Lease shall commence on the Effective Date and shall expire on the fiftiethtweaty-fifth (250'h) 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 the following: 4.3.1 Lessee shall have completed the Required Improvements (as defined in Section 8.1); and 4.3.2 Lessee shall have operated the Ttheater in full compliance with the provisions of Article 7 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 in any of the terms of this Lease when the notice of intent is served and/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. 4.3.6 Lessee may only use the Property for the permitted uses contemplated in Section 7.1. At the time of transfer Lessee shall record a deed restriction against the Property limiting its use to the permitted uses in Section 7.1. The deed restriction shall include a reversion clause providing that if Lessee uses or attempts to use 0 the Property for any use not contemplated in Section 7.1 the Property shall automatically revert to the Lessor, without any consideration due to Lessee. 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 Date 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. For purposes of clarity, if the Property is sold at any time during the Term to a third party, the option to purchase the property (on the terms set set forth in Sections 4.3 and 4.4) shall remain in full force and effect, shall not be affected by such sale, and shall be binding upon such purchaser. If requested by Lessee, Lessor agrees to execute, acknowledge, and deliver a Memorandum of Lease, in form mutually acceptable to Lessor and Lessee, which shall include, among other provisions, disclosure of Lessee's option to purchase the property and its right of first refusal. ARTICLE 5 RENT/CONSIDERATION 5.1 No Money Payable by Lessee Lessee shall not pay money as rent to Lessor. 5.2 Other Consideration 7 13 In consideration for this Lease, Lessee covenants that, during the Term, it will: 5.2.1 Operate and maintain a first 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 8 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. 5.2.5 Use any excess revenue or funds for purposes related to the operation of the Ttheater 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 Capital 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). ARTICLE 6 LONG RANGE PLAN, BUDGET AND RECORDS - 6.1 Long Range Plan Lessee shall prepare, and submit to Lessor, a L-Gnq­!;�a plan which projects fundraising, renovation, marketing and operational expectations and financial needs_,d-including active operations of the Ttheater LLong 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. not more frequently than at least once per year, to reflect changes to renovation plans, fundraising strategies and goals,active operations including performances/events, and marketing programs. The Long 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 fundraising efforts for the prior year; (ii) schedule for completion of Required Improvements; (iii) proposed number of performances and/or events; and (iv) marketing plan for the Ttheater including programs for attracting attendees and efforts to integrate the operation of the Ttheater into rl H 6:2 Annual Budget Lessee shall prepare and submit to Lessor an annual budget ("Budget'), which shall be based on the Long Range 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 balance in all funds and accounts maintained by Lessee; (ii) all projected revenues and sources of funds for the fiscal year; (iii) the expenditures proposed to be made by Lessee in fulfilling its obligations pursuant to this Lease; and (iv) all other proposed expenditures of Lessee. Lessee has prepared Budgets as required by the Original Lease. Subsequent Budgets, and material modifications or revisions to the Budget, shall be submitted within fifteeR forty five 4545) days after adoption by Lessee. 6.3 Year End Financial Statement Within ninety (90) days after the last day of Lessee"s fiscal year, June 3&.; Lessee shall submit to Lessor a financialeash flew statement including a profit and loss statement itemizing all of its revenues and expenditures for that fiscal year, a balance sheet and statement of cash flow, all prepared in accordance with generally accepted accounting standards. - 6.4 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 Campaign 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. 6.5 Audit 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. 0 15 ARTICLE 7 USE OF PROPERTY 7.1 Permitted Use The Property shall be used primarily for the operation of a first class community multi -use Ttheater open to the general public. Lessee shall operate the Ttheater 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 community and other organizations to periodically use the Ttheater for fund raising, education, 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 --ee' nen,nle+ien of the imprevemeRtc entemptatori y conn 8.2 (SeiSFRiG RetFGf4�ci,o t) and_before completion of Required Improvements subject to issuance of a Special Events Permit by Lessor. 7.2 Performances/Frequency Lessee shall operate the Ttheater 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.— Operation of the Ttheater is the fundamental consideration for this Lease and Lessee shall ensure and promote the maximum reasonable use of the tTheater by performers, artists, and entertainers and other permitted users likely to attract patrons. The Ttheater shall be operated consistent with the standards, practices and procedures utilized by first class multi -use community theaters in other jurisdictions. 7.3 Program Standards Lessee shall operate the Ttheater in a manner reasonably calculated to achieve the following objectives: 7.3.1 Provide frequent and high quality performances and cultural events to attract patrons to the Ttheater and Central Balboa/Balboa Village. 10 7.3.2 To serve as a catalyst to the revitalization of the economy of the area to be benefited by use of the Federal Funds. 7.3.3 To make the Ttheater 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; 7.3.4 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 community multi -use Ttheater. 61 we -111111— RN Kee. SRI C 7.45 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 be withheld at Lessor"s sole discretion. 7.56 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 Ttheater. 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 Ttheater. 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. 1 7.67 Zoning and Planning Lessor acknowledges that the use of the Property as a Ttheater 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 11 I-7 structures and improvements on the Property in accordance with the provisions of the Zoning Code provided Lessee complies with the provisions of this Lease. Approvals granted by Lessor pursuant to Article 8 of this Lease shall not substitute for land use and development approvals and permits required by T419s4roon "� the Newport Beach Municipal Code. 7.78 Nondiscrimination 7.78.1. 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. 7.78.2 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, 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. 7.78.3 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 8 REQUIRED IMPROVEMENTS 8.1 Lessee"s Obligations W The Property requires substantial renovation and rehabilitation to be used as, or considered, a first class community multi -use Ttheater. _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 However, Lessor shall waive all building permit and plan fees associated with the Required Improvements. '- _ Intentionallyomitted - e masenp, e dUinn . . 8.3 Conceptual Design Plans and Use Permit Lessee obtained Use Permit #2004-003 (PA2004-032) from City Planning Department on September 23, 2004. Lessee shall prepared, and submitted to Lessor for approval, proposed Conceptual Design Plans for the design and construction of the Property for use as a first class community multi -use Ttheater ("Conceptual Design Plans._ The Conceptual Design Plans wereshall be prepared by a licensed architect. The Conceptual Design Plans shall generally described those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theater constructed in the 1920' s. The Conceptual Design Plans shall included, without ImmitatiOR; (1) seating layout; (2) stage and dressing room layout (3) lobby and concession area_layout; (4) public area layout; and (5). exterior elevations. Lessor2s e� approved the Conceptual Design Plans on April 19, 2005 (Approval -in -Concept No. 0976-2005) in connection with Lessee's Coastal Development Permit application. shall he limited to that the ante entemnl^te.d by the c-enrGeept uel hada Plane aFe onsistent with .a fret Glass Gomm pity malt' use Ttheater viable far present day use, Rd that the im a onto respeGt the design of the n ninal_freRt fagade_Of the ntLieater to them m e)de tt feasible. The (annnent el Den'nn Plano ch -.II 13 8.4 Design Development Plans Subsequent to approval of the Conceptual Design Plan, Lessee completed shaa submit Design Development Plans on April 19, 2011 to LesseF fef appFa al. The Design Development Plans shall be were based on, consistent with and amplifiedy ea—the information provided in the Conceptual Design Plans. The Design Development Plans &P.A included (1) exterior lighting plans and design; (2) color, material, treatment and design of all exterior elements; (3) sound and projection systems; (4) design and treatment of interior spaces,- The Design Development Plans were incorporated into the Plan Check Plan set and submitted to the City on June 15 2011 with the application for a building ep rmit and (5) SGhed les ShE)W nn the Ip al stages phases and timin Of w0thheld, shall be ;tea t„ a ,tete.. Rat,nn that the nesig neveloprneRt Mans e based OR Rd n..n rent with the approved septaal Design -Plan s. The e - e - .� �_ �_ ON 8.5 Building Permits Lessee-shal-appliedy for all necessary building permits from Lessor on June 15, 2011 and is currently awaiting approval- 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 Design Development Plans. 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 Design Development Plans, 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 waivepay all building permit fees, planning fees and other fees and charges normally imposed on similar projects. 14 d' 8.6 Final Design Plans 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 F'Ral Pesi. gR Dl.eno shall he deemed approved I.f Lesser fails fo give .ritu:en n fu'o a ef disap . 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 Rparties shall agree on Final Design Plans within sixty (60) days after submittal. 8.7 Schedule -for Required Improvements Lessee shall submit plans, diligently pursue their approval, and begin construction of Required Improvements according to the following schedule. GGRGeptual-- Design $laRs ' Pee n4per 1. 7n4ATh;.f„ (30days after 0feGfive4)2te Sernp.Iete a�4isater—fer lyse Permit ; nd—D`relopment Wan Review FehFyan4 7n4,RT,h:"rhy(30) days after Gffe� �ot;ae gate C)dy (60) days after ppreval of Use Per+n Design Pevelenmepf DlaRS QRP hQnd ed eighty (180) da after appFeval of GDP Complete Building Permit application One hundred eighty (180) days after €ffective—Pateinitial Building Permit application which is December 15th, 2011 Begin construction Upon reaching 50% of budget for Required Improvements, but no later than two (2) years after issuance of building permits. Lessee is required to request time extensions as provided under Lessor's Municipal Code, to ensure the building permit(s) remains valid prior to constructionUpen--reashfRg—�270%—e# bud -get of Re- or mnnn.c_t�it ne later than h.,00ne /74 \ . after 'sou apGe m4tG 061 Final Design Plans Upon approval of framing by Lessor -"s Building Department Complete construction One (1) year and six (6) months after emits Start of construction. 8.8 General Requirements 8.8.1 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 S••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 SSsection, except the issuance of building permits, does not bind Lessor when acting in its governmental capacity. 8.8.2 Lessor shall hasdesignatedan appointed committee the Cern., l#pe t o. to Revitalization of the — ei Ruc o /DR(lp1 nr its sayscssar—,o f three (3) members, comprised of the City Manager or his or her designee, the Community Development Director or his or her designee, and the City's Building Official or his or her designee to review, and approve or disapprove, the Conceptual Design Plans, the Design Development Plans and the Final Design Plans. Lessee may request City Council review of any decision by the appointed committeeP4t9P disapproving submittals by serving a request for review within fifteen LLdays after receipt of the notice of disapproval. 8.9 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 9 REPAIRS AND MAINTENANCE [TV ry'. 0 Lessee recognizes that the Ttheater 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 Ttheater 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 Ttheater (including patching and resurfacing the roof membrane and painting or other protective treatment of the exterior wall of the Ttheater); (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 Ttheater and the repair and replacement of components; (iv) maintenance of all pipes and plumbing systems serving the Ttheater 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 Ttheater. Lessee shall revise the schedule for maintenance from time to time during the Term as necessary to maintain the Ttheater to the standards required by this Lease. Lessee shall have the benefit of all warranties available to Lessor with respect to the Ttheater 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 Ttheater would make continued operation of the Ttheater economically infeasible. ARTICLE 10 STATUS AND MANAGEMENT OF LESSEE 10.1 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 Bby- Waws. 17 ARTICLE 11 ALTERATIONS 11.1 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 Ttheater"s designation as a local landmark and shall respect the design of the original front fagade of the Ttheater to the maximum extent feasible. T, eateF. 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. 11.2 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 12 PAYMENT OF UTILITIES, TAXES, CHARGES AND FEES 12.1 Public and Private Utility Services Lessee will pay all charges for all public or private utility services and all sprinkler 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. 12.2 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 M., or use of the Property, or any income derived from the Property. 12.3 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. 12.4 Payment by Lessor Lessor shall have the right to pay any assessment, tax, fee or charge before the due date if Lessor has an ebjestively 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. 12.5 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. 12.6 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. ARTICLE 13 LIENS 13.1 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. 19 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 Ttheater free and clear of all mechanic -"s liens and similar liens. 13.2 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. 13.3 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. 13.4 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 14 INDEMNIFICATION 14.1 Indemni Lessee shall defend, indemnify and hold harmless Lessor from and against any and all legal or administrative proceedings, claims, reasonable attorneys" fees 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 14.6 on the Property or Ttheater, (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 99 of the presence of Hazardous Materials in, on or around the Property. 14.2 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. 14.3 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. 14.4 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. 14.5 Waiver of California Civil Code Section 1542 Section 1542 of the California Civil Code states: 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 Lessees Claims. 21 14.6 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, (f) 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 Sections 13000 et seq). ARTICLE 15 INSURANCE 15.1 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. 15.1.1 Comprehensive General Liability in an amount not less than two million dollars ($2,000,000) 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- contributing with any insurance or self-insurance maintained by Lessor or Lessee. Any third party permitted to use the Property 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. 15.1.2 Workers" Compensation Insurance as required by the Labor Code of the State of California. 15.1.3 ""All RiskT Property Insurance (Operations) including coverage against the perils of earthquake, fire, explosion of 22 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. 15.1.4 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. Lessees obligation to provide this coverage is contingent on the availability of coverage at commercially reasonable rates. 15.2. 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 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. 15.3 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, 23 Department of Labor. Consumer Price Index. 15.4 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. 24 3D ARTICLE 16 DAMAGE BY FIRE OR CASUALTY 16.1 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. 16.2 Restoration Except as provided in Section 17.3, 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 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. 16.3 Casualty Late in Term Lessee or Lessor shall have the right to terminate this Lease on ninety (90) days written notice ilf (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. 16.4 Application of Insurance Proceeds In the event that Lessee is required to restore the Property pursuant to Section 16.2, proceeds from policies of insurance required by Article 15 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: 25 J� 16.4.1 Lessee shall furnish to Lessor satisfactory evidence to Lessor of the total cost of Restoration pursuant to Section 16.2. 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. 16.4.2 Assuming satisfaction of the conditions of subsection 16.4.1 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. 16.4.3 Upon completion of restoration and assuming Lessee is not in default, excess insurance proceeds shall first be paid to Lessor to the extent of its actual expenses incurred in the restoration, then to Lessee as working capital ARTICLE 17 EMINENT DOMAIN 17.1 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. 17.2 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. 17.3 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. PJW p 17.4 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. 17.5 Allocation of Award — Partial Taking Any Award in a Partial Taking shall be distributed by escrow in the following order of priority: 17.5.1 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; 17.5.2 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; 17.5.3 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. 17.6 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. 17.7 Allocation of Award — Total Taking Any Award in a Total Taking shall be distributed by escrow in the following priority: 17.7.1 First, to Lessor and Lessee to reimburse for all costs and expenses incurred by each in the collection of the Award; 17.7.2 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 27 33 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. 17.8 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. 17.9 Notices Any 42party receiving notice of or becoming aware of any condemnation proceedings shall promptly give written notice to the other party. ARTICLE 18 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 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. Notwithstanding any provision to the contrary, 1 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 (ii) if the Property is sold, transferred, or assigned during the Term to a third party, the consent of the successor lessor to any assignment or subletting of the Lease or any portion of the Property by Lessee may not be unreasonably withheld, delayed or conditioned.. ARTICLE 19 LEASEHOLD MORTGAGES Lessee shall have no right to encumber its interest in this Lease, the Property or the Ttheater without Lessor"s prior written consent, which consent may be withheld in Lessor"s sole and absolute discretion. ARTICLE 20 PERFORMANCE OF LESSEE"S COVENANTS 20.1 Right of Performance If Lessee fails to pay any tax, fee or other charge in accordance with Article 12 within the time period required or shall fail to pay for or maintain any of the insurance policies provided for in Article 15 within the time required, or to make m SLI 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: 20.1.1 Pay the tax, assessment, fee or charge payable by Lessee pursuant to this Lease; or 20.1.2 Pay for and maintain any insurance policies required by this Lease: or 20.1.3 Make any other payment or perform any other act that Lessee is required to pay or perform pursuant to this Lease. 1 20.2 Reimbursement and Damages Lessee shall reimburse Lessor for all costs and expenses incurred by Lessor in the exercise of its rights pursuant to Section 20.1. ARTICLE 21 REPRESENTATIONS 21.1 Lessors Representations Lessor represents to Lessee that: 21.1.1 Lessor owns the Property in fee simple subject only to the Permitted Exceptions and other matters affecting title that do not inhibit, prevent or impair the operation, maintenance or use of the Ttheater. 21.1.2 Lessor has the power and authority to enter into this Lease and perform all the obligations of Lessor hereunder. 21.2 Lessee -"s Representations Lessee represents to Lessor that: 21.2.1 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. 21.2.2 Lessor has not made any representations or warranties regarding the condition of the Property, or its suitability for the 29 3 construction of Required Improvements or the operation and maintenance of a Ttheater consistent with this Lease and the Operations Plan. 21.2.3 Lessee has the right, power and authority to enter into this Lease and to perform all the obligations of Lessee. 21.2.4 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 22 DEFAULTS, REMEDIES AND TERMINATION 22.1 Legal Actions 22.1.1 Institution of Legal Actions In addition to any other rights or remedies, either P -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. 22.1.2 Applicable Law The laws of the State of California shall govern the interpretation and enforcement of this Lease, with venue in Orange County. 22.2 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 Pparties are cumulative. 22.3 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: 30 22.3.1 The failure of Lessee to comply with the provisions of Article 8 related to the design and construction of Required Improvements. 22.3.2 The failure of Lessee to operate the Ttheater in compliance with the provisions of Article 7 related to frequency and quality of performances and events. 22.3.3 The failure of Lessee to maintain the Property as specified in Article 9. 22.3.4 The failure of Lessee to restore or repair the Property in the event of damage or destruction 22.3.5 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. 22.4 Remedies If Lessee has materially breached this Lease after expiration of all applicable cure periods 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: 22.4.1 Lessor shall have the immediate right to terminate this Lease with or without cause upon ninety (90) days written notice to Lessee and reenter the Property and/or the Ttheater, take possession of the Property and/or Ttheater, any and all Equipment, books and records, contracts and any other property. In the event of termination under this section Lessor shall owe no compensation to Lessee. 22.4.2 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 Ttheater, 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. 22.4.3 Lessor shall be entitled to recover all money payable to 31 Lessee related to the operation and use of the Ttheater, 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 23 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 Lessors interest in the Property, Lessor may contest or settle the matter in its sole discretion and obtain reimbursement from Lessee. ARTICLE 24 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 Ttheater, or for any other lawful purposes, including showing the Property to prospective purchasers or lessees. ARTICLE 25 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, riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Lessee. ARTICLE 26 MISCELLANEOUS 26.1 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 32 City of Newport Beach 3300 Newport Blvd. Newport Beach, CA, 92658-8915 33 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 Theater Foundation P.O. Box 752 Balboa, CA 92661 26.2 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 26.3 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 Theater. Except as otherwise provided, no subsequent change or addition to this Lease shall be binding unless in writing and signed by the P -parties. 26.4 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. 26.5 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 34 Lease shall be binding upon and inure to the benefit of and be enforceable by the respective successors of the parties. 26.6 Holding Over A tenancy for month—to—month shall result if Lessee remains in possession of the Property or the Ttheater 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. 26.7 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 of the T -theater or otherwise. 26.8 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. 26.9 Time of the Essence Time is of the essence relative to all of the terms, provisions, covenants and conditions of this Lease. [The next page is the signature page.] 35 FOR LESSOR CITY OF NEWPORT BEACH Michael F. HennTed W. Ridgeway Mayor for City of Newport Beach FOR LESSEE BALBOA PERFORMING ARTS THEATER FOUNDATION Dated NaRGY GardneF Chairman, Board of Directors of Balboa Performing Arts Theater Foundation APPROVED AS TO FORM CITY OF NEWPORT BEACH: Dated Aaron HarpRebiR Clausen Aeting City Attorney for City of Newport Beach ATTEST: CITY OF NEWPORT BEACH Leilani Brown'kaVen�,.,e Ha ss City Clerk for City of Newport Beach M } STATE OF CALIFORNIA }ss COUNTY OF } before me , personally appeared , 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 Title of Document (This area for official notarial seal) Amended and Restated Lease By and Theater Foundation Date of Document September 44, 201104 No. of Pages 33 Other Signatures not Acknowledged: 1 '1!3 U� 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 Section 27383 Fail, !, X15 AMENDED AND RESTATED LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATER FOUNDATION This Amended and Restated Lease ("Lease"), entered into as of September _ 2011 ("Effective Date")•by and between the City of Newport Beach, a charter city and municipal corporation ("Lessor") and the Balboa Performing Arts Theater Foundation, a California non-profit public benefit corporation ("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 Theater located at 707 East Balboa Blvd in the City of Newport Beach ("Property") as depicted in the attached Exhibit "A", which is incorporated herein by reference. B. Lessor 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 et. 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 theater 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. 2 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, and as amended and restated on September 14, 2004 (collectively "Original Lease'). H. This 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: 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 and, subsequent to renovation, require Lessee to operate a first class community multi -use theater as contemplated in Section 7.1. The renovation and operation of the theater 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 Property 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 thereto. 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. 1.4 Lessee Lessee is the Balboa Performing Arts Theater Foundation. Lessee is a California non-profit public benefit corporation organized for the purpose of renovating, operating and maintaining the Theater 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. 3 q7 1.5 Termination of Original Lease The Original Lease shall terminate and be of no further affect upon the execution of this Lease by the parties. 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 (as defined in Section 4.1 below) and pursuant to the terms, provisions, covenants and 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 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 purpose of this Lease. ARTICLE 3 POSSESSION OF PROPERTY 3.1 Quiet Enioyment 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 0 L1 0 remediation of the lead-based paint, will be necessary before the Property can be operated as a first-class community theater 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 theater, such as fixtures, machinery, rigging, lighting, staging, merchandise, trade fixtures (collectively, "Equipment") that have been constructed or placed on the Property. Title to the Equipment shall automatically pass to the Lessor at the expiration or termination of this Lease as provided in Section 3.4. 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 assurances 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. 5 qn ,l ARTICLE 4 TERWOPTION TO PURCHASE 4.1 Duration and Commencement The Term of this Lease shall commence on the Effective Date and shall expire on the fiftieth (50th) 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 the following: 4.3.1 Lessee shall have completed the Required Improvements (as defined in Section 8.1); and 4.3.2 Lessee shall have operated the theater in full compliance with the provisions of Article 7 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 topurchase; and 4.3.4 Lessee is not in default in any of the terms of this Lease when the notice of intent is served and/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. 4.3.6 Lessee may only use the Property for the permitted uses contemplated in Section 7.1. At the time of transfer Lessee shall record a deed restriction against the Property limiting its use to the permitted uses in Section 7.1. The deed restriction shall include a reversion clause providing that if Lessee uses or attempts to use the Property for any use not contemplated in Section 7.1 the Property shall automatically revert to the Lessor, without any consideration due to Lessee. m bo 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 Date 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. For purposes of clarity, if the Property is sold at any time during the Term to a third party, the option to purchase the Property (on the terms set forth in Sections 4.3 and 4.4) shall remain in full force and effect, shall not be affected by such sale, and shall be binding upon such purchaser. If requested by Lessee, Lessor agrees to execute, acknowledge, and deliver a Memorandum of Lease, in form mutually acceptable to Lessor and Lessee, which shall include, among other provisions, disclosure of Lessee's option to purchase the Property and its right of first refusal. ARTICLE 5 RENTICONSIDERATION 5.1 No Money Payable by Lessee Lessee shall not pay money as rent to Lessor. 5.2 Other Consideration In consideration for this Lease, Lessee covenants that, during the Term, it will: 5.2.1 Operate and maintain a first class community multi -use Theater on the Property in full compliance with the terms and VA 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 8 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. 5.2.5 Use any excess revenue or funds for purposes related to the operation of the theater 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 Capital 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). ARTICLE 6 LONG RANGE PLAN, BUDGET AND RECORDS 6.1 Long Range Plan Lessee shall prepare, and submit to Lessor, a plan which projects fundraising, renovation, marketing and operational expectations and financial needs including active operations of the theater ("Long 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, not more frequently than once per year, to reflect changes to renovation plans, fundraising strategies and goals, active operations including performances/events, and marketing programs. The Long 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 fundraising efforts for the prior year; (ii) schedule for completion of Required Improvements; (iii) 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. 6.2 Annual Budget Lessee shall prepare and submit to Lessor an annual budget ("Budget"), which D shall be based on the Long Range 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 balance in all funds and accounts maintained by Lessee; (ii) all projected revenues and sources of funds for the fiscal year; (iii) the expenditures proposed to be made by Lessee in fulfilling its obligations pursuant to this Lease; and (iv) all other proposed expenditures of Lessee. Lessee has prepared Budgets as required by the Original Lease. Subsequent Budgets, and material modifications. or revisions to the Budget, shall be submitted within forty five (45) days after adoption by Lessee. 6.3 Year End Financial Statement Within ninety (90) days -after the last day of Lessee's fiscal year, June 30`h, Lessee shall submit to Lessor a financial statement including a profit and loss statement itemizing all of its revenues and expenditures for that fiscal year, a balance sheet .and statement of cash flow, all prepared in accordance with generally accepted accounting standards. 6.4 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 Campaign 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. 6.5 Audit 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 7 USE OF PROPERTY 7.1 Permitted Use The Property shall be used primarily for the operation of a first class community multi -use theater open to the general public. Lessee shall operate the theater 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 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 community and other organizations to periodically use the theater for fund raising, education, 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 before completion of Required Improvements subject to issuance of a Special Events Permit by Lessor. 7.2 Performances/Frequency Lessee shall operate the' theater 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. Operation of the theater is the fundamental consideration for this Lease and Lessee shall ensure and promote the maximum reasonable use of the theater by performers, artists, and entertainers and other permitted users likely to attract patrons. The theater shall be operated consistent with the standards, practices and procedures utilized by first class multi -use community theaters in other jurisdictions. 7.3 Program Standards Lessee shall operate the theater in a manner reasonably calculated to achieve the following objectives: 7.3.1 Provide frequent and.high quality performances and cultural events to attract patrons to the theater and Central Balboa/Balboa Village. 7.3.2 To serve as a catalyst to the revitalization of the economy of the area to be benefited by use of the Federal Funds. 7.3.3 To make the theater 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; 7.3.4 To utilize the skill, ability and energy of members of the community in combination with a capable and experienced professional staff to 10 fund and complete the renovation as well as operate and maintain a first class community multi -use theater. 7.4 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 be withheld at Lessors sole discretion. 7.5 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 theater. 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 theater. 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. 7.6 Zoning and Planning Lessor acknowledges that the use of the Property as a theater 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. Approvals granted by Lessor pursuant to Article 8 of this Lease shall not substitute for land use and development approvals and permits required by the Newport Beach Municipal Code. 7.7 Nondiscrimination 7.7.1 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. 7.7.2 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 11 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, 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. 7.7.3 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 8 REQUIRED IMPROVEMENTS 8.1 Lessee's Obligations The Property requires substantial renovation and rehabilitation to be used as, or considered, a first class community multi -use theater. Lessee shall design, obtain building permits for, and then construct the improvements specified in this Article ("Required Improvements) at Lessee's cost and expense. However, Lessor shall waive all building permit and plan fees associated with the Required Improvements. 8.2 Intentionally omitted 8.3 Conceptual Design Plans and Use Permit Lessee obtained Use Permit #2004-003 (PA2004-032) from City Planning Department on September 23, 2004. Lessee prepared, and submitted to Lessor for approval, proposed Conceptual Design Plans for the design and construction of the Property for use as a first class community multi -use theater ("Conceptual Design Plans"). The Conceptual Design Plans were be prepared by a licensed architect. The Conceptual Design Plans generally described those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theater constructed in the 1920's. The Conceptual Design Plans included, (1) seating layout; (2) stage and dressing room layout (3) lobby IV: 5ci_. and concession area layout; (4) public area layout; and (5). exterior elevations. Lessor approved the Conceptual Design Plans on April 19, 2005 (Approval -in - Concept No. 0976-2005) in connection with Lessee's Coastal Development Permit application. 8.4 Design Development Plans Subsequent to approval of the Conceptual Design Plan, Lessee completed Design Development Plans on April 19, 2011 The Design Development Plans were based on, consistent with and amplified the information provided in the Conceptual Design Plans. The Design Development Plans included (1) exterior lighting plans and design; (2) color, material, treatment and design of all exterior elements; (3) sound and projection systems; (4) design and treatment of interior spaces. The Design Development Plans were incorporated into the Plan Check Plan set and submitted to the City on June 15 2011 with the application for a building permit. 8.5 Building Permits Lessee applied for all necessary building permits from Lessor on June 15, 2011 and is currently awaiting approval 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 Design Development Plans. 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 Design Development Plans, 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 waive all building permit fees, planning fees and other fees and charges normally imposed on similar projects. 8.6 Final Design Plans 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. Lessor shall specify with particularity those components of the Final Design Plans disapproved, the reasons for disapproval and the altemative(s) Lessor would approve. The parties shall agree on Final Design Plans within sixty (60) days 13 after submittal. 8.7 Schedule for Required Improvements Lessee shall submit plans, diligently pursue their approval, and begin construction of Required Improvements according to the following schedule. Complete Building Permit One hundred eighty (180) days after initial application Building Permit application which is December 15th, 2011 Begin construction Upon reaching 50% of budget for Required Improvements, but no later than two (2) years after issuance of building permits. Lessee is required to request time extensions, as provided under Lessor's Municipal Code, to ensure the building permit(s) remains valid prior to construction Final Design Plans Upon approval of framing by Lessor's Building Department Complete construction One (1) year and six (6) months after start of construction. 8.8 General Requirements 8.8.1 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. 8.8.2 Lessor shall designate an appointed committee of three (3) members, comprised of the City Manager or his or her designee, the Community Development Director or his or her designee, and the City's Building Official or his or her designee to review, and approve or disapprove, the Conceptual Design Plans, the Design Development Plans and the Final Design Plans. Lessee may request City Council review of any decision by the appointed 'J6 committee disapproving submittals by serving a request for review within fifteen (15) days after receipt of the notice of disapproval. 8.9 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 9 REPAIRS AND. MAINTENANCE Lessee recognizes that the theater 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 theater 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 theater (including patching and resurfacing the roof membrane and painting or other protective treatment of the exterior wall of the theater); (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 theater and, the repair and replacement of components; (iv) maintenance of all pipes and plumbing systems serving the theater 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 theater. Lessee shall revise the schedule for maintenance from time to time during the Term as necessary to maintain the theater to the standards. required by this Lease. Lessee shall have the benefit of all warranties available to Lessor with respect to the theater 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 theater would make continued operation of the theater economically infeasible. 15 ARTICLE 10 STATUS AND MANAGEMENT OF LESSEE 10.1 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. ARTICLE 11 ALTERATIONS 11.1 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 theater's designation as a local landmark and shall respect the design of the original front fagade of the theater to the maximum extent feasible. 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. 11.2 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 12 PAYMENT OF UTILITIES, TAXES, CHARGES AND FEES 12.1 Public and Private Utility Services Lessee will pay all charges for all public or private utility services and all sprinkler systems and interior protective services provided to or for the Property. Lessee 16 ! r. 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. 12.2 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. 12.3 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. 12.4 Payment by Lessor Lessor shall have the right to pay any assessment, tax, fee or charge before the due date if Lessor has a 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. 12.5 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. 12.6 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. 17 ARTICLE 13 LIENS 13.1 . 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 theater free and clear of all mechanic's liens and similar liens. 13.2 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. 13.3 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. 13.4 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 14 INDEMNIFICATION 14.1 Indemnitv Lessee shall defend, indemnify and hold harmless Lessor from and against any and all legal or administrative proceedings, claims, reasonable attorneys' fees and costs, expenses, penalties, actual damages, punitive damages and losses, M 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 14.6 on the Property or theater, (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. 14.2 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. 14.3 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. 14.4 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. 14.5 Waiver of California Civil Code Section 1542 Section 1542 of the California Civil Code states: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor 19 GJ 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. 14.6 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, (f) 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 Sections 13000 et seq). ARTICLE 15 INSURANCE 15.1 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. 15.1.1 Comprehensive General Liability in an amount not less than two million dollars ($2,000,000) 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- contributing with any insurance or self-insurance maintained by Lessor or Lessee. Any third party permitted to use the Property pursuant to Paragraph 7.1 of this Lease shall provide the same RRE insurance, unless this requirement is waived or modified, in writing, by Lessor's City manager. 15.1.2 Workers' Compensation Insurance as required by the Labor Code of the State of California. 15.1.3 "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. 15.1.4 Property Insurance -Construction. During construction of any improvements on the Property, Lessee shall maintain Builders 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. 15.2. 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 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. 21 i J 15.3 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 Angel es -An a heim- Riverside. All Items (1982-84 Base), published by the Bureau of Labor Statistics, Department of Labor. Consumer Price Index. 15.4 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 16 DAMAGE BY FIRE OR CASUALTY 16.1 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. 16.2 Restoration Except as provided in Section 17.3, 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 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 22 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. 16.3 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. 16.4 Application of Insurance Proceeds In the event that Lessee is required to restore the Property pursuant to Section 16.2, proceeds from policies of insurance required by Article 15 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: 16.4.1 Lessee shall furnish to Lessor satisfactory evidence to Lessor of the total cost of Restoration pursuant to Section 16.2. 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. 16.4.2 Assuming satisfaction of the conditions of subsection 16.4.1 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. 16.4.3 Upon completion of restoration and assuming Lessee is not in default, excess insurance proceeds shall first be paid to Lessor to the extent of its actual expenses incurred in the restoration, then to Lessee as working capital 23 0 ARTICLE 17 EMINENT DOMAIN 17.1 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. 17.2 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. 17.3 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. - 17.4 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. 17.5 Allocation of Award — Partial Takinq Any Award in a Partial Taking shall be distributed by escrow in the following order of priority: 17.5.1 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; 17.5.2 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; 17.5.3 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 24 the court. 17.6 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. 17.7 Allocation of Award —Total Taking Any Award in a Total Taking shall be distributed by escrow in the following priority: 17.7.1 First, to Lessor and Lessee to reimburse for all costs and expenses incurred by each in the collection of the Award; 17.7.2 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. 17.8 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. 17.9 Notices Any party receiving notice of or becoming aware of any condemnation proceedings shall promptly give written notice to the other party. ARTICLE 18 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 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. Notwithstanding any provision to the contrary, (i.) `*7 Ga 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, and (ii) if the Property is sold, transferred, or assigned during the Term to a third party, the consent of the successor lessor to any assignment or subletting of the Lease or any portion of the Property by Lessee may not be unreasonably withheld, delayed, or conditioned. ARTICLE 19 LEASEHOLD MORTGAGES Lessee shall have no right to encumber its interest in this Lease, the Property or the theater without Lessors prior written consent, which consent may be withheld in Lessor's sole and absolute discretion. ARTICLE 20 PERFORMANCE OF LESSEE'S COVENANTS 20.1 Right of Performance If Lessee fails to pay any tax, fee or other charge in accordance with Article 12 within the time period required or shall fail to pay for or maintain any of the insurance policies provided for in Article 15 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: 20.1.1 Pay the tax, assessment, fee or charge payable by Lessee pursuant to this Lease; or 20.1.2 Pay for and maintain any insurance policies required by this Lease; or 20.1.3 Make any other payment or perform any other act that Lessee is required to pay or perform pursuant to this Lease. 20.2 Reimbursement and Damaqes Lessee shall reimburse Lessor for all costs and expenses incurred by Lessor in the exercise of its rights pursuant to Section 20.1. ARTICLE 21 REPRESENTATIONS 21.1 Lessors Representations 26 -76 Lessor represents to Lessee that: 21.1.1 Lessor owns the Property in fee simple subject only to the Permitted Exceptions and other matters affecting title that do not inhibit, prevent or impair the operation, maintenance or use of the theater. 21.1.2 Lessor has the power and authority to enter into this Lease and perform all the obligations of Lessor hereunder. 21.2 Lessee's Representations Lessee represents to Lessor that 21.2.1 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. 21.2.2 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 theater consistent with this Lease and the Operations Plan. 21.2.3 Lessee has the right, power and authority to enter into this Lease and to perform all the obligations of Lessee. 21.2.4 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 22 DEFAULTS, REMEDIES AND TERMINATION 22.1 Legal Actions 22.1.1 Institution of Lec al 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 27 �i i with the purpose of this Lease. Any legal action shall be filed in the County of Orange, State of California. 22.1.2 Applicable Law The laws of the State of California shall govern the interpretation and enforcement of this Lease, with venue in Orange County. 22.2 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. 22.3 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: 22.3.1 The failure of Lessee to comply with the provisions of Article 8 related to the design and construction of Required Improvements. 22.3.2 The failure of Lessee to operate the theater in compliance with the provisions of Article 7 related to frequency and quality of performances and events. 22.3.3 The failure of Lessee to maintain the Property as specified in Article 9. 22.3.4 The failure of Lessee to restore or repair the Property in the event of damage or destruction 22.3.5 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. 22.4 Remedies If Lessee has materially breached this Lease after expiration of all applicable cure periods 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 M the following additional rights and remedies: 22.4.1 Lessor shall have the right to terminate this Lease with or without cause upon ninety (90) days written notice to Lessee and reenter the Property and/or the theater, take possession of the Property and/or theater, any and all Equipment, books and records, contracts and any other property. In the event of termination under this section Lessor shall owe no compensation to Lessee. 22.4.2 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 theater, 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. 22.4.3 Lessor shall be entitled to recover all money payable to Lessee related to the operation and use of the theater, 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 23 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 Lessors interest in the Property, Lessor may contest or settle the matter in its sole discretion and obtain reimbursement from Lessee. ARTICLE 24 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 theater, or for any other lawful purposes, including showing the Property to prospective purchasers or lessees. 29 -73 ARTICLE 25 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, riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Lessee. ARTICLE 26 MISCELLANEOUS 26.1 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 Theater Foundation P.O. Box 752 Balboa, CA 92661 26.2 No Claims Against Lessor Nothing in this Lease constitutes any consent or request by Lessor for the KH I,] performance of any labor or services or the furnishing of any materials to the Property 26.3 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 Theater. Except as otherwise provided, no subsequent change or addition to this Lease shall be binding unless in writing and signed by the parties. 26.4 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. 26.5 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. 26.6 Holding Over A tenancy for month-to-month shall result if Lessee remains in possession of the Property or the theater 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. 26.7 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 of the theater or otherwise. 31 26.8 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. 26.9 Time of the Essence Time is of the essence relative to all of the terms, provisions, covenants and conditions of this Lease. [SIGNATURES ON NEXT PAGE] 32 FOR LESSOR CITY OF NEWPORT BEACH Michael F. Henn Mayor for City of Newport Beach FOR LESSEE BALBOA PERFORMING ARTS THEATER FOUNDATION Chairman, Board of Directors of Balboa Performing Arts Theater Foundation APPROVED AS TO FORM CITY OF NEWPORT BEACH: AroHarp City Attorney for City of Newport Beach ATTEST: CITY OF NEWPORT BEACH Leilani Brown City Clerk for City of Newport Beach. Exhibit "A"—Property Depiction Dated Dated Dated Dated [END OF SIGNATURES] 33 I� } STATE OF CALIFORNIA }ss COUNTY OF } before me personally appeared , 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 tome 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 persons) 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 :Amended and Restated Lease By and Between The City of Newport Beach and The Balboa Performing Arts Theater Foundation Date of Document : September 2011 No. of Pages Other Signatures not Acknowledged: 1 w 8.7 Schedule for Required Improvements Lessee shall submit plans, diligently pursue their approval, and begin construction of Required Improvements according to the following schedule. Complete Building Permit One hundred eighty (180) days after initial application Building Permit application which is December 15", 2011 Begin construction Unless extended by the City Manager for Lessor, within two (2) years of the issuance of Building Permits, Lessee shall have fifty percent (50) of the budget for the entire improvements, and begin construction. Prior to entering into a contract or amendment to any contract for the construction of any work of improvement to the Property. Lessee shall provide satisfactory proof to the City Manager for Lessor of available funding equal to at least Upon -reaching -one hundred and ten percent (110%)50916 of the amount necessary budget -to complete the applicable work of improvement. foF Required -Improvements -but no -tater -than two-(24-years-after-issua nee-ef-building peFmits—Lessee-is-Fequire-'d to Fequest time —exten siens—as—previded—AndeF Lessor -s -Municipal -God e,-tp-en sure ---;he building -permit( -)-remains valid-*rier--to senstFaotion Final -Design -Plans Upon approval-of-fFaming-by-L-esseF_s Buildin - Ftment Complete construction One (1) year and six (6) months after start of construction. 22.4 Remedies fIb - °I -13 -II Formatted: Font: Arial — I If Lessee has materially breached this Lease after expiration of all applicable cure periods 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 Field Code Changed the following additional rights and remedies: 22.41 Lesser sha;l-have the right -to terminate th'^ease-with--er-- hoot wase-epon ninety (99) days-"ttpn notinp Inand reepAeF the --Property -and/or-the-theater,--take-possession-of-the-Rroperty and/er— beater—any—and—all—€gaipment—books—and--records; Gent rads-and-aRyether-preperty—ln the event -of -termination -under this-section-L-esser-shaN-owe-no-sompensatien-to Lessee. 22.4.12 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 theater, 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. 22.4.22 Lessor shall be entitled to recover all money payable to Lessee Lneiacodechancem related to the operation and use of the theater, 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. M I(• 00 N( E•1HEA1Ek-III M 010Q(9110N • 15 Member Board • Bergeson, Marian • Burress, Marnie • Emmi, Catherine • Hart, Evelyn • King, Jo • Mandel, Jerry • Mortenson, Kay • Pennington, Todd • Posnikoff, Judy • Ray, Janet • Siegel, Seth • Smith, Craig • Telem, Yaron • Vasquez, Socorro • Youngquist, Andy • BALBOA THEATER: • Important city-wide asset for Newport Beach. • A much-needed addition to the Newport Beach cultural and performing arts scene. • The City's only professional performing arts venue serving a broad variety of performing arts interests. 2 hl Oh PROMI 01S NOR [000090 M I(•DPN(I-IH[PI[R-[I[ M -[E q(ATION • BALBOA VILLAGE REVITALIZATION • The Balboa Theater is a lynchpin for Village revitalization. • An operating theater will stimulate restaurants and other businesses. • It will increase City revenues. • It will encourage investment in the Nautical Museum and other Village improvements. Rnnf And -L- 3 hl oh ROD NRiS IMIR 19 M1168 M I(-DP8U•IHIRIER•fllM-[E Q(R119� • FLEXIBLE, STATE -OF - ART DESIGN • Design by J. S. Fisher and Associates, noted theater architect. • 300 seat capacity. • Seats fully retractable. • Design for flexibility and sustainability. • Can serve a variety of performing arts needs. Ell hl Oh PIRIORM18 AlS NhIlk M 0010N M I(•DRN(I-INIhIIR•II[M-[0V(RI19N BUILDING NEAR "SHOVEL READY" STATUS • Coastal permit renewed. • Building permit pending (possibly next 30 days). • Contractor discussions proceeding. • Plan to initiate construction * FY 2011-12.* Depends on funding & lease renewal From this: To this: T 5 Bhl Oh PROM18 Alf IND IMPROO MI(•DPN(I-IHIhIER•[I[M-[E V(R110N LEASE STATUS • Lease updating on agenda for Council evening session. Important precedent for moving ahead. Lease term and conditions are important requirement for potential donors. Seats extended �6I; ' Seats retracted under balcony 0 91 oh PRIORM18 AlS WhIlk 10000168 M I(•09N(I-IHIhI[k-[HHl•EDV(R116H OPERATIONS •An important addition to cultural enrichment in Newport Beach. •Programs will appeal to entire community. •Plan to retain an experienced firm to program and operate theater. •Have pilot program for opening season with name musical groups, entertainers, film, drama and dance prospects. Season Without Walls The Elixir of hi gh PROMIN4 MI(•DPN(I-IHIRI[k-HIM•[DQ(0116N • THE PRODUCING GROUP Key personnel: John Sullivan, Ken Phebus, Chris Ricci. • Experience staging concerts, theater, and other performing arts. • Producer at Mark Taper Forum; Circle Repertory Theater, NY; the Summer Concert Series, Costa Mesa; LA County Museum of Art, and others. • Ken Phebus lived in Newport Beach, saw movies at Balboa Theater; • Experience includes The Coach House, San Juan Capistrano, Ventura Theater, Grove of Anaheim, and Pacific Amphitheater This Music Festival featured: Pepper, SOJA, Iration, Tomorrow's Bad Seeds, Suburban Legends and more at the Queen Mary Event Park, a large grass park located out in front of the legendary Queen Mary. Attendance 5,700, profitable, no incidents. A , Sept. 3, 2011 at the Queen Mary Event Park featuring ' ON I [' 04 �� t SHER suLu jUnds 71 BRIBOR ROD RRif IND 19 W116 mwirou+a Iiuiiu Im tPuiunor OPERATING FINANCES Planning for theater to be self-supporting, independent of donations. Professional operator will book programs and jump-start operations. Incentive fee based on profitable programming. PROFORMA (Opening Season Model) ($million) Operating revenue 4.95 Programming costs -4.42 Gross income 0.53 G&A and development -0.36 Plus Executive Committee 0.10 Net Operations Revenue, excluding donations 0.27 Projected 5 -year cash flow: approx. $3 million 0 B91 Oh PROMIK PI IND INN1108 M I(•DP8(I-IHIhIER•fllm•EDV(hI10H • FUNDRAISING STATUS • $3.57 million raised 1995-96 to 2009-10. 9 $410,000 raised 2010-2011, best year since 2004. • All operational and admin expenses paid by Directors. • Donations restricted 100% to design and construction • Current cash and pledges in hand $800,000. ❑ Campaign $8 M ■ Money Raised $3.98 M Administrative costs reduced by 90% from $200,000 per year to $20,000 per year by all - volunteer organization in 2009. IN HIM KROHN AlS I WN [MMION OIVSI(•DRN(E•IHEAIIk-IIIM-10V(PI100 • FUND RAISING FY 2011=2012 (began7/1) • Established "Balboa Producers," 10 donors @$100,000 each to raise $1 million. Have lead gift of $100,000. • Executive Committee pledges $100,000 annually. • In process of initiating Balboa Theater Endowment Fund at OCCF with anonymous pledge of $100,000. • Capital campaign committee oversees program • Public event to announce building permit (October, 2011). • Year-end fund appeal (November, 2011). 11 hl 6h PRIN18 Alf NOR NUNNN MI(-DINN•IH[RIIR-III M -IDQ(hI108 • CAPITAL CAMPAIGN PLAN • On-going private meetings with potential donors. • Identify lead gift (Dec 2011). • Total campaign need: $4.8 million for construction. a. $800,000 cash and pledges in hand. b. $1,000,000 Balboa Producers. c. $1,000,000 lead gift. d. $227,000 from Beach Festival (Sept 2012). e. Balance from community -wide capital campaign. 12 hi oh RINI ( 011 Rhilk 100ohligN (IIVSI(•DA8N-IHIhI[k-H[ I1•EDV(AI10N THE BALBOA PERFORMING ARTS THEATER FOUNDATION THANKS THE CITY OF NEWPORT BEACH FOR ITS SUPPORT. 13 MR PERFORMA RR1S 18E01ER 100000H M I(-DPdU•IHERItR-IIIM•IDQ(PII0H STRATEGIC BUS/NESS PLAN (Rev 2 June 2011) ..TO THIS: Balboa Performing Arts Theater Foundation PO Box 752 Newport Beach, CA 92661 June, 2011 TABLE OF CONTENTS Page Number ExecutiveSummary..................................................................2 Description of Project................................................................3 • History of Theater • Case Statement • Theater Renderings Community Benefits..................................................................9 • Benefits to Balboa Village • Benefits to the City of Newport Beach • Orange County Benefits MarketAnalysis........................................................................10 • Need for a 300 Seat Theater • Marketing Approach • Sales Plan • Typical Productions • Theater Rental Opportunities • Corporate Uses • The Arts Learning Center • Future -Satellite and Digital Applications Programming........................................................................ 12 • Outdoor Fundraising Festival • Opening Season: July 1,2013 • Program revenues and expenses FinancialPlans........................................................................17 • Donations and Endowments Plan • Combined Revenue and Cost Forecasts • Construction Cost Estimate -Theater • Annual Operating Budget • Cash Flow Analysis • Return on Investment • Contingency Plan Organization..........................................................................20 • Broad-based Community Support • Local Business Involvement and Support • Local Government Support • Board of Directors • Staff RiskAnalysis.........................................................................21 • Principal Risks • Risk Management Plan Schedule of Activities...............................................................22 • Construction Schedule • Operational Milestones APPENDICES........................................................................23 A. Five Year Profit and Loss Forecast and Assumptions B. Typical Space Rental Rates C. The Producing Group Executive Summary The Balboa Performing Arts Theater Foundation is a non-profit organization created for the purpose of restoring and operating the historic Balboa Theater. The theater is currently undergoing renovation, which, when complete, will allow it to operate as a performing arts theater offering music, dance, theater, film, and education. It will be available for rental by both non-profit and for-profit organizations. It will operate an arts education program for the enrichment of children and adults. It will fulfill a critical role in the revitalization of the Balboa Village by creating a unique entertainment venue in the area. The theater building is owned by the City of Newport Beach and is leased to the Balboa Performing Arts Theater Foundation for twenty-five years with no annual fee. The current lease will expire in 2023. The Foundation is in the process of renovating the existing theater structure to create a new 300 -seat performing arts venue. The rebuilt theater will have several features designed to insure its financial viability. First, it will have telescoping seating for maximum flexibility in planning and conducting performances. The seats can be retracted, leaving an open floor for round tables or other seating arrangements. The stage and seating design is planned to provide perfect sight lines under a variety of operating conditions. Finally, there will be an attractive roof deck area with views of the ocean and bay that will be available for fund-raising events, corporate meetings, and other rental events. Balboa Performing Arts Theater Foundation plans to invest an additional $5 million in renovating and upgrading the existing building. This will create an asset that will generate additional tax revenues for the city of Newport Beach and will help revitalize the Balboa Village. For every dollar of theater revenue, experience indicates an additional 1.85 dollars of revenue accrues to local restaurants and other business, resulting in additional tax revenues for the city as well as new sources of revenues for local businesses. In addition, as part of the greater Newport/Balboa Village improvement plan, the existence of the Theater as a dynamic business force in the area will cause property values to increase in the surrounding area, further increasing the property tax basis for the Village. The Balboa Theater expects to cover its operating costs through earned revenue derived from bookings of the 300 -seat venue. These bookings will include theatrical events and building rentals, course fees from an Arts Learning Center, and concessions and product sales at the venue. Theater earnings will be supplemented by donations generated by annual fund raising program underwriting, support guilds and endowment income. The Foundation plans to establish a long-term endowment fund to enhance the Theater's ability to offer educational and community benefit programs. Description of Project ® History of Theater The Balboa Theater was constructed in 1928. Originally known as The Ritz, it opened as a vaudeville theater complete with an orchestra pit. In the 1930s, the theater was modified to present movies. In the 1980s, competition from nearby cinema megaplexes began impacting the economic viability of the theater. Attendance declined and the Theater was closed. In 1996, a group of local citizens came together to establish the Balboa Performing Arts Theater Foundation, for the express purpose of renovating the theater and returning a valued asset to the community. In 1998 the City of Newport Beach acquired the property for $480,000 and leased it back to the Foundation. 3 Case Statement for the Balboa Performing Arts Theater "I believe that ... even in a small city or a village, a great theater is the outward and visible sign of an inward and probable culture." - Sir Laurence Olivier The capital campaign to renovate and restore the Balboa Theater will raise the necessary funds to create an intimate venue for performing arts, film and arts education activities to meet the needs of Newport Beach, the communities surrounding Newport Beach and the wider Orange County community. The project has been envisioned to expand the Theater's original design as a movie house into an intimate, state-of-the-art performing arts facility that will support: ® Live music, dance and theatrical performances e The screening of first -run and classic films o The presentation of lectures and seminars o An Arts Learning Center, and e The occasional use as a business conference center While the Theater's original facade has been preserved and will constitute an important element of its redesign, the entire interior of the theater will be newly engineered and constructed to meet the expanded use of the building. A brand new third floor, a roof top entertainment deck, artist dressing rooms, restrooms, elevators and a fully functioning lobby will be incorporated into the building's design to meet the requirements and needs of a modern performing arts facility. The Theater has long served Newport Beach and Orange County as a movie house. There is great affection towards and desire for the Theater to reopen and to once again serve as the cultural hub and identity of Balboa Village and the surrounding environs of Newport Beach. The renovation project has been enthusiastically embraced by the community and community leaders, and has been called "the pride of our community" by well-known Orange County arts philanthropist, Socorro Vasquez. Kris Elftmann (president of Noelle Marketing Group) sees the renovation as "a real golden opportunity for the community to have a wonderful little theater," while Jerry Mandel (past president of the Orange County Performing Arts Center) believes that the Theater's reopening presents "an enormous opportunity for all of us in Orange County." The Theater's expanded use as a performing arts facility will draw upon existing relationships between the Balboa Performing Arts Theater Foundation and top -tier arts institutions throughout Orange County. It will serve as an intimate venue in which to experience live performances that will be unique in Orange County. This will enable the Theater to present artistic talent under its own aegis, as well as acting as adjunct to arts interests throughout the county, such as the Newport Beach Film Festival, the Pacific Symphony, the Laguna Playhouse and Bowers Museum. Expansion of the Theater's offerings to include performing arts in addition to its traditional movie house fare is an initiative that is being embraced with a firm understanding of the market dynamics of the 21 st century. The dominance of multiplex movie theaters has directly impacted the viability of stand-alone, single -screen venues like the Balboa Theater. Redesigning the Theater as a multiuse facility will transform the Theater into a flexible performance space that we believe will prove to be a template for community-based venues of similar size and scope. We believe that this built-in flexibility will enhance donor cultivation and ticket sales, while supporting economic revitalization of the immediate area in ways that a more -limited use facility could not. "Art washes from the soul the dust of everyday life." —Pablo Picasso Upon completion of this campaign: o The Balboa Theater will be transformed from a single -screen movie theater into a multiuse performance space ® The restored and expanded -use facility will serve as a new, exciting and organic point of interest in Balboa Village e The renovated facility will provide opportunities for professional development, top-flight artistic programming and educational outreach ® The redesigned facility will provide an acoustically vibrant venue for the presentation of live arts events ® The renovated Theater will enhance already existing relationships between the Balboa Theater and major arts groups throughout Orange County, while providing opportunities for performances unique to the size and scope of the Theater G The Theater's roof top entertainment deck will provide a unique venue for a variety of social and civic functions that will directly benefit neighboring businesses and the Balboa Village in general G The Theater will operate primarily during summer evenings and the beach off- season, targeting its outreach and programming to the residents of Newport Beach and greater Orange County ® The Theater's reopening will serve as an anchor for the revitalization and transformation of Balboa Village, solidifying the Village's unique and historic cache as a desired tourist and educational destination e The Theater's reopening will expand local businesses' economic opportunities beyond their traditional tourist season • The Theater's redesign and reopening will further enhance the existing desirability of Newport Beach as a choice place of residence "We are committed to serving and fulfilling our community's artistic needs," avowed BPATF Board member Janet Ray, "by collaborating with a diverse group of arts and community organizations to realize our shared vision of creating an intimate performing arts venue in the heart of Newport Beach." • Theater Renderings The renderings that follow illustrate how the Foundation and its architects have brought to life the vision of an "artistic jewel for Balboa Village" Figure 1 is a rendering of the exterior (front fagade) of the theater, showing how the historic element of the theater will be maintained. Figure 2 illustrates how the roof deck might be used for a reception. Figure 3 is an elevation drawing. Figure 4 shows the seating layout with the seats extended. Figure 5 shows the seats retracted and the theater arranged in a cabaret style. In addition to the unique architectural treatment of the theater, the Foundation's engineers have created a structure which meets current codes and seismic requirements (the existing theater did not) and that has the electrical and mechanical features to handle both cinema and live performances, with rapid conversion from one format to the other. The design also incorporates provision for expansion to the latest new digital/satellite technologies at a future date. Figure 1: Rendering of Theater Figure 2: Roof Deck Reception Figure 3: Elevation View FLEXIBLE SEATING = ENDLESS POSSIBILITIES! �, �� �.. �. _�- `� . �r �� �� �� �� �� ::== pp!Nf- I .roe Community Benefits O Benefits to .Balboa Village The Balboa Theater has been an integral part of Balboa Village for nearly eighty years. It has a tremendous emotional appeal to thousands of Southern Californians who have fond memories of visiting the Theater while spending spring vacation in Newport or on Balboa Island, or during family vacations in the area during the summer. The Theater has also been a key element in the entertainment offerings of the Village, along with the Pavilion, the Fun Zone, the historic Balboa Ferry, the Balboa Pier and now, the Newport Harbor Nautical Museum. When the theater renovation is complete, it will operate as a performing arts theater offering music, dance, theater, film, and education through its Arts Learning Center. It will be available for rental by both non-profit and for-profit organizations. It will operate an arts education program for the enrichment of children and adults. It will fulfill a critical role in the revitalization of the Balboa Village by creating a unique entertainment venue in the area. In addition to the esthetic contributions the theater will bring to the Village, it will be the centerpiece of the economic revitalization of the area. Since it is within "walkable" distance for many hundreds of local residents, it will reduce traffic in and out of the area for those residents who would otherwise go off the Peninsula seeking entertainment. More importantly, it will attract visitors to the area, where they will shop in local stores and dine in local restaurants. Studies indicate that to encourage spending by visitors and tourists, local attractions must be such that a stay of at least 4 hours is likely. The Theater provides this balance point to the other attractions in Balboa Village. G Benefits to the City of Newport Beach Principal benefits to the City of Newport Beach are economic. Through the volunteer and non- profit efforts of the Foundation, Balboa Village will witness the emergence of a multi-million dollar asset. The Theater will reduce urban blight, increase property values in the Balboa Village, and act as a stimulus to local restaurants and businesses. In addition, Newport Beach will see an increase in tax revenues, both directly from the theater and from the increase in local business revenues created by the theater's presence. From the theaters annual budget of $5 million, approximately $1 million per year will flow back into local businesses, leading to new tax receipts by the City. For every dollar of theater ticket revenue, experience indicates an additional 1.85 dollars of revenue accrues to local restaurants and other business, resulting in additional spending of approximately $7 million per year in the community. In addition, as part of the greater Newport/Balboa Peninsula improvement plan and as a stimulus to increase property values in the surrounding area, the Theater will increase the property tax basis for the Village. ® Orange County Benefits The Theater will provide an intimate venue for live performing arts, film, and arts education activities to meet the needs of our surrounding Orange County area. In size, geographic location, and scope of services to be provided, the Balboa Performing Arts Theater fills a needed gap in Orange County's entertainment market, as established by meetings with the executive directors of the Barclay Theatre, the Orange County Perfonning Arts Center, Chapman University, The Newport Harbor Nautical Museum and others. IM Market Analysis Need for a 300 Seat Theater The ticket -buying audiences—the market—for performances at the Balboa Theater will come predominantly from the greater Newport Beach area, including Costa Mesa, Huntington Beach, Santa Ana, Corona del Mar, Laguna Beach, and Irvine. Each of these communities is represented in our mailing list of 5,000 persons and organizations who have participated in Balboa Theater activities. Within each of these communities, there are specific constituents to whom we will direct marketing efforts such as schools, senior groups, performing groups, and tourists. We will tailor our marketing instruments to address and create an interest for the enjoyment of performances at a small venue, also benefiting from the services of the Newport Beach Convention and Visitors Bureau. We will also offer performances not available elsewhere in the community. Orange County rightly boasts of its wealth of large and mid-size theaters with national reputations for excellence. complete with tremendously loyal audiences. We do not intend to compete with these institutions, but rather to complement their work by offering performances best -suited to a small, intimate, venue. With the growing popularity of alternative performance venues such as coffee houses, cabarets and store -front theaters in Orange County, there is a steadily increasing interest in more personal arts experiences. Accordingly, we plan to market to audiences who value the intimacy of a 300 -seat live performance theater. ® Marketing Approach The theater has also begun to foster strong connections with other leading arts institutions and local schools and universities, in the planning and production of special projects, festivals and performances. The staff, patrons, students and faculties of these collaborating institutions will become a targeted Balboa Theater market for ticket sales and arts education activities. Demographic information on the communities within the market range of the Balboa Theater indicate an increasing number of families with young children and seniors interested in participating in the performing arts. The Balboa Theater's programming and arts education activities will embrace both these groups with intriguing, high quality performances and competitive ticket prices. o Sales Plan Ticket sales will be marketed through a variety of techniques including: An annual season brochure outlining all major events; direct mail to specific markets for individual performances and festivals; media advertising in newspapers, cable television, and radio as appropriate; and marketing through City of Newport Beach publications. Internet marketing will also be utilized. As a result of the successful "Season Without Walls" program, the theater already has a subscriber base of over 100 individuals and corporations, enabling it to "hit the ground running" with ticket sales once operations begin. Theater rentals will be marketed primarily by the Theater staff through meetings with potential buyers, corporate clients, and by working closely with the Newport Convention and Visitors Bureau. Staff will also use mailings to local performing groups and meeting managers. Tickets will be sold singly, or through a subscription program to offer a discount to major buyers. Tickets will be sold for Balboa Theater sponsored events and productions, including also those sold by outside groups renting the theater. The Balboa Theater plans to establish an Arts Learning Center that will offer courses in drama, music and dance for all age groups from children to seniors. Pricing levels will be based upon current market trends, sponsorship contributions, and expenses, with a constant goal of maintaining a balance between competitive ticket prices and recovery of operational costs. C Typical Productions The Balboa Theater will offer a wide range of programming in all of the classic art forms, including music, dance, theater and film. This programming will be tailored to the size and seating capacity of the theater, an approach that has already been effectively showcased through our ongoing Season Without Walls. The Theater will also provide a perfect setting for readings and lectures by nationally known authors and lecturers. Most importantly, an education component will extend our programming reach into the very fiber of the community, enhancing our performances with the enlightenment and hands-on experience that bring the arts to life on a very personal level. A representative season of arts programming would feature 12-16 musical performances, 2-4 lectures, 2-3 dance programs, and 1-2 theatrical productions, and 3-4 films per month, with the bulk of the performances occurring on Thursday through Sunday. The cinematic arts would be highlighted through participation as a presenting theater in the Newport Beach Film Festival, a "classic" movie series, and a surf -themed summer of Movies at the Beach. The next section of this plan describes detailed programming for the first year of operation. ® Theater: Rental Opportunities As Orange County grows in population and in cultural diversity, there is an increasing need for professional venues for young and blossoming performing groups, as well as alternative spaces for mature companies to experiment with new or different art without the overhead required by a large hall. The Irvine Barclay Theatre was built, in part, to address this growing need. Based on discussions with Doug Rankin, president of the Barclay Theatre, it is unable to accommodate all the requests it receives for rental dates. Bob Bassett, Dean of Chapman University's Film School, states that the college produces hundreds of student films per year and would love to have nearby venue where student films could be featured. Rita Stenlind, Executive Director of the Newport Harbor Nautical Museum, has initiated a new lecture series but notes that the Museum has limited seating in its present facilities. It could attract much larger audiences if a 300 -seat venue was available. Other local arts leaders who have gone on record to voice support for the Balboa Theater and its collaborative approach are John Forsyte, President, Pacific Symphony, Dean Corey, Executive Director of the Philharmonic Society, and Jerry Mandel, Past President, Orange County Performing Arts Center. The theater auditorium, the roof deck, or both can be rented. Rentals would come from the Foundation's marketing efforts, from referrals from other arts organizations (such as the Barclay Theater) and from local groups including the UCf film program and Chapman College. The Newport Nautical Museum could require as many as 12 days per year for its lecture series. Corporate meetings and fundraising events by local non-profit organizations would add another 24 days per year based on expressions of interest from local businesses. Weddings, receptions, student films; and other types of private events would bring the total to 50 days per year o Corporate Uses The theater will be promoted for corporate uses through the formation of a "Corporate Affiliates" program. This will commence with the current corporate sponsors of the Theater and with those corporations represented on the Board of Directors of the Foundation. The use of the theater as a venue for special corporate meetings, annual meetings, and technical/scientific 12 meetings will be promoted through local branches of professional societies such as the American Institute of Architects (AIA), the American Society of Civil Engineers, (ASCE), and others. Local universities are another potential user for larger, professional gatherings which can benefit from the theater's state -of the -art audio-visual equipment. O The Arts Learning Center Successful non-profit organizations incorporate a variety of educational programs in their offerings. These programs, aimed at age groups from elementary school to seniors, span the range from dance, music and drama to film making. Programs also would be developed in collaboration with the Performing Arts Center, Discovery Science Center, the Newport Harbor Nautical Museum and others. Initially, two 12 -week courses would be offered four times per year for a total of 8 classes. These classes would be 1 -hour long and would be taught by local musicians and other artists. Tuition would be charged. e Future -Satellite and Digital Applications We are on the cusp of a new revolution in digital entertainment. The technology exists today to distribute high quality cinema, sporting events, or interactive educational or corporate events via wireless technology. Since the Balboa Theater is located in the center of a high technology community, it is to be expected that the Theater can lead innovation in satellite, wireless -based, and digital performances. These can include corporate programs, educational television offerings, or paid performance sporting or entertainment events. The Theater is designed to permit the installation of the equipment needed to provide this capability. Imagine coming to the Balboa Theater to hear a concert via satellite "Live from the Met." Programming The Theater Board recognizes that the opening season must be a success, and for this reason has sought professional advice. As a pro-bono service to the Balboa Performing Arts Theater Foundation, specialists from The Producing Group, LLC., a professional entertainment booking organization, have developed a plan for an Outdoor Fundraising Festival to raise money operations working capital, plus a detailed plan for the Theater's opening season. As booking agents, The Producing Group will secure talent for performances, make arrangements, and negotiate contracts, in exchange for a monthly fee. To develop the first year programming, two months (March and July) were programmed in detail, with March being an "average" month and July being a peak attendance month. The proformas for these months are based on actual costs for the proposed talent and other expenses are based on The Producing Group's expertise and experience in the Orange county market. (See Appendix C for The Producing Group's qualifications). Experience shows that not a lot of programs are booked in December and January, when the emphasis is on some holiday events, children's Christmas or Hanukkah parties, or theater rental for corporate holiday parties. Concession sales are also reduced during these periods. Besides the detailed programming developed for March and July, The Producing Group also prepared pro forma income statements for a major Outdoor Fundraising Festival, (a beach gala event), and also for a typical wedding function. The programs selected by The Producing Group are primarily musical performers by noted artists. In addition, the monthly schedules include time slots for 2 private parties per months (weddings or other functions) and three to four films. Each month has a ten to twelve "dark nights." These could be utilized for rentals or other types of performances, such as chamber music, dance, or drama, which the Theater might wish to offer. Such productions must be selected on the basis of what the theater stage and facilities can accommodate, and what would appeal to the Theater's patrons. 13 The first year programming includes a limited sample of educational programs that the theater proposes to offer. These will be primarily day -time programs during non -summer months and are described separately in this business plan. Outdoor Fundraising Festival It is proposed to hold the Outdoor Fundraising Festival on the beach near the Balboa Pier in the fall of 2012. The Outdoor Fundraising Festival would raise approximately $227,000, which funds would be used as working capital for the first full season to commence July 1, 2014. The program would include four major performing groups taking part in a beach front concert. We believe that it would be feasible to achieve attendance of 4,000 for this event (BPATF's beach surfing movies attracted 2,000 attendees in the past.) In addition there would be a VIP program for 500 invited guests and donors. Besides raising funds for operations, this event would reassure prospective donors that the project is moving forward to becoming a reality. See Table 1 for a break down of costs and revenue for this event. Opening Season: July 1, 2013 A tentative date for the formal opening of the theater, based on anticipated schedule to obtain a building permit (Application filed June 201 1) and allowing 3 months for permitting, 18 months for construction, and 3 months for punch list and final fit out, would be June 2013, with the first full season commencing July 1, 2013. For the opening season, The Producing Group proposes an exciting selection of diverse entertainers it has booked in the past. Among the performers planned are America, an American folk rock band, noted for songs such as "Sandman,"and "Don't Cross the River;" Basia (an incredible original sound); Joan Baez and Judy Collins, folk music. (Collins performed at Bill Clinton's inauguration); Michael Bolton; J. J. Cale; Shawn Colvin; Tears for Fears, an English new wave band; Bruce Hornsby; Arlo Guthrie; Indigo Girls, an American folk rock duo, really good; Al Jareau, huge name forjazz, great voice; Rickie Lee Jones, top pop, rock, and more recentlyjazz female vocalist; Cowboy Junkies; Kenny Loggins, soft rock and known for numerous film sound tracks; Dave Mason, written many hits; Michael McDonald; Eddie Money, has a hundred hits, fun talented, probably a great show; Randy Newman; John Prine, great country sound; Todd Rundgren; Boz Skaggs, an American songwriter with top 20 hits such as "Silk Degrees" and "Look what you've done to me;" J. D. Souther; and others. The Producing Group has developed an estimate of revenues and expenses for the Balboa Theater's opening season, July 1, 2013 to June 30, 2014. The approach taken was to program two months in detail, July (a high month,) and March (an average month.) Using selected talent from their list, and with the beach venue and capacity of the Balboa Theater, The Producing Group believes that it could "sell out" a high proportion of the summer events. The monthly forecasts typically include 20-22 dates booked, 22 events (15 concerts, 3-5 movie screenings, 2 private parties, 9-10 dates dark. The dark days could be used for other types of performances or for rental to local groups, for example for student films. Tables 2 and 3 show the proposed programming and projected expenses and revenue for the performances planned for July and March.. 14 Table 1: OUTDOOR FUNDRAISING FESTIVAL PROFORMA Prepared by: The Producing Group Venue: Balboa Theater/Newport Beachfront Date of event: Fall, 2012 Name of event: Balboa Theater Beach Festival INCOME Capacity Price Gross Potential General Admission 1 4,000 $40.00 $160,000 VIP 500 $200.00 $100,000 Local Bands 1000 $20.00 $20,000 Concessions per person net $6.00 $33,000 Sponsorships $100,000 TOTAL INCOME $413,000 EXPENSES Description Price Cost Talent 1 TBD (Pro bono??) $0 Talent 2 TBD $20,000.00 $20,000 Talent 3 TBD $20,000.00 $20,000 Talent 4 TBD $20,000.00 $20,000 Advertising/PR Lump sum $24,000.00 $24,000 Ticket printing 5,000 $0.05/tick $250 500 $375 VENUE EXPENSES Security Olympic OC $4,000 $4,000 Police NPT PD $2,000 $2,000 Cleanup $800 $800 PRODUCTION Sound and Lights $8,000 $8,000 Generators $2,000 $2,000 Barricades $1,500 $1,500 Stage $8,000 $8,000 Runner $400 $400 Stage manager $500 $500 Stagehands $3,000 $3,000 Production Manager $1,000 $1,000 Hospo Manager $500 $500 Catering $2,000 $2,000 Communications $225 $225 Port Potties 1 40 $50 $2,000 Fencing $4,000 $4,000 VIP $3,500 $3,500 Promotion fees $18,000 $18,000 TOTAL EXPENSES $146,050 GROSS INCOME $266,950 Promoter's Incentive (15%) $40,042 NET INCOME TO BPATF $226,908 15 TABLE 2: March 2014 Proforma (Average Month Date/ Event No. of shows Ticket Talent Price Expense rExpense Total Expense Ticket sales to break even Percent sold to break even Projected Seat Sales Projected Ticket Revenue Projected Concession Revenue Net 1 GROUP 1 1 $34.50 261 87% 240 $8,280 51,200 2 GROUP 2 2 $25.00 Details to be developed after 520 87% 240 $6,000 $1,200 3 GROUP3 2 $35.00 meeting with talenta gents 514 86% 480 $16,8001 $2,400 4 GROUP4 I 1 $25.001 250 83% 480 512,0001 52,400 5 MOVIE SCREENING / Q &A 1 $15.00 1 200 67% 1 240 $3,600 $600 6 dark N/A $0 7 dark N/A $0 8 GROUP 5 1 $25.00 250 83% 240 $6,0001 51,200 9 GROUP 6 2 $25.001 520 87% 1 480 512,000 52,400 10 GROUP7 2 $35.00 514 86% 1 480 S16.8001 $2,400 11 private RECEPTIONarty-WEDGING 1 na N/A I NA $15,000INA 12 SPOKEN WORD 1 CONVERSATION with noted speaker 1 $25.00 200 679/6 240 56,000 S1,200 13 dark N/A SO 14 tlark N/A $0 15 GROUPS 1 $75.001 267 89% 1 240 S18,0001 51,200 16 GROUP 8 2 $75.00 533 890/ 1 480 $36,000 $2,400 17 GROUP 8 2 $75.00 533 89% 480 $36,000 $2,400 18 MOVIE SCREENING 1 Q &A 1 $15.00 200 67% 240 $3,600 5600 19 dark I I 1 N/A $0 20 dark I I N/A $0 _ 21 dark I I N/A $0 22 GROUP9 1 175.00 267 89% 240 $18,000 51,200 23 GROUP 10 2 H5.001 520 87% 480 512,000 $2,400 24 GROUP 11 2 $75.00 533 1 89% 480 $36,000 $2,400 25 private party 1 N/A I NA $10,000 NA &6A MOVIE SCREENING / Q I 1 $15.001 200 1 67% 240 53,600 S600 27 dark N/A 1 $0 28 dark N/A 1 0 29 GROUP 12 1 $34.501 261 87% 240 $8,280 $1,200 30 GROUP 13 2 $75.001 I 533 89% 480 $36,000 52,400 31 GROUP 14 2 $75.001 533 89% 1 480 536,000 $2,400 TOTALS 32 1 $316,500 $51,0001 $367,500 1 $355,960 $34,200 RECAP: Revenue/tickets I 5355,960 Concessions $34,200 Total Revenue 3901.60 Less expenses I $367,5001 _ Gross income 1 $22,6601 Agent's Fee S15klmo + 25% of net profit 1I 520,665 Theater Net Profit 1 $1,9951 1 m TABLE 3: July 2013 Proforma (Peak Month Date/ Event No. of shows Ticket Price Ticket sales Percent Projected to break sold to Seat even break even Sales Projected Ticket Revenue Projected Concession Revenue net 1 Mon dark NA 2 dark -� I NA 3 GROUP 15 1 534.501 Details to be developed after 261 A. 300 S10,350 $1,5001 4 GROUP 16 1 575.00 meeting with talentagents 267 1 89% 1 300 $22,500 $1,500 5 GROUP 16 I 2 575.00 533 1 89% I 600 1 $45,000 53,000 6 GROUP 16 2 $75.00 533 1 89% 600 $45,000 $3,000 7 MOVIE SCREENING /Q &A 1 $15.00 200 67% 210 $3,150 $525 12k NA 9 dark NA 10 dark I NA 11 AN EVENING OF CONVERSATION -SPECIAL GUEST -TBD 1 $25.00 200 67% 210 55,250 $525 12 GROUP 17 21$75.00 533 89% 1 600 $45,000 $3,000 13 GROUP 17 2 $75.00 533 1 89% 600 $45,000 $3,0001 14 MOVIESCREENING/ Q & A 11$15.001 200 1 67% 1 210 $3,150 5525 15 dark NA I I 16 dark NA 17 GROUP 18 1 $34.50 261 87% 280 $9,660 $1,400 18 GROUP 19 11$34.501 261 1 87% 290 $10,005 $1,4501 19 GROUP 20 11$75.001 267 1 89% 1 300 522,500 $1,5001 20 GROUP 21 1 11$75.001 1 267 89% 300 522,500 $1,500 21 MOVIE SCREENING / Q & A 1 $15.00 200 67% 210 53,150 $525 22 dark I NA 23 private party 1 NA $10,000 NA 24 GROUP22 1 $34.50 261 1 87% 1 290 $10,0051 $1,4501 25 GROUP23 1 1 $75.001 267 1 89% 1 300 S22,5001 $11,5001 26 GROUP 24 I 2 575.001 1 1 533 1 89% 1 580 543,500 $2,9001 27 GROUP 25 1 2 575.00 533 89% 1 580 543,500 $2,9001 28 private party -WEDDING RECEPTION AT 1:00 PM 1 na NA $15,000 NA 28 MOVIE SCREENING /Q1 & A AT 7:00 pro 1 $15.00 200 67% 210 53,150 5525 29 dark NA I 30 dark I NA 31 MOVIE SCREENING 10 &A 1 $15.00 200 67% 210 $3,150 $5251 TOTALS 28 $336,000 $48,000 $384,0001 $443,020 $32,750 RECAP: Revenues ickets 1 $443.020 Concessions I $32,750 Total Revenue 475 770 Less expenses 15384,000 Gross income 891,770 Agent's Fee $15k/mo + 25 of net profit I $37,943 Theater Net Profit I I I 553,828 I 17 Table 4 uses the July and March pro formas to forecast revenues and expenses for the entire year. Each month is adjusted to reflect how it would fare relative to the sample month of July as a typical high season month, and March as a typical low season month. For example, August is rated at 90% of July, October at 80%, and so on. The low season months are prorated based on March. Using these assumptions, a conservative estimate of annual earnings has been made. This table shows annual revenues to be $4.5 million, and with expenses of $3.9 million. Net income to the theater (after The Producing Group's fees) would be $269,064. This is after recovery of $519,900 of BPATF operating expenses, including salaries, utilities, and other indirect costs. Table 4: Balboa Pe ranina Arts Theater First Season July 2013 -June 2014 2012 2012-2013 2013 - ..T- 2014 DESCRIPTION SEPT OCTJUNE JULY AUGUST SEPT OCT NOV DEC JAN FEB Revenue/ 1Me Maid ler 10 09 09 ad 06 1 05 0.5 in MARCH APRIL MAY 10 11 1 12 JUNE fl TOTAL 10 FY 2014 Beach Cala $413900 TaW Sales SOHO 3143.020 $396,718 SM.718 4356.418 5285812 117/,580 $177.980 5555,980 55960 4391,558 4627152 5443020 34,180,292 Cdncemtmt $32.750 $29,675 529,675 528200 519,650 $17.100 517,1001 534.200 $34,200 537,820 1,040 834.200 $353,010 Trial Revenue $415,770 $628,193 26.193 5350,618 5285,682 5195,080 $ $390,180 ,180 5429,178 5688,182 4477220 54.543,302 TWI Ex naafi $146.050 Da for $386000 5365.600 4345800 $307,200 5230,400 5183.750 5367500 5387.500 $604,250 S6H.000 S386A00 53,944.550 Class Income 5288.950 (i(Ifl$f111LQIX1 591,770 462.553 $82 473,618 555.062 511,330 ,860 522,860 524,526 527,152 593.220 5508,752 Producer lam $40.042 537.913 $35,618 $35.848 533,350 528.768 17.833 $20.685 $20.665 $21,232 521.796 538,305 5325.868 Net lncarne 5228.908 553.626 548,545 546,565 560,082 526297 36.503 51.955 $1095 53.655 $5396 556.915 5250.066 Fa erase Oreakdovn Tatem 5338.000 ,400 5302.400 5288900 5201.600 5158,250 5318.500 5316500 5348150 5975.600566.000 50.1 00 336400 528.800 525.500 561000 551.000 SSB 100 581.200 518.000 5519.800 The operating staff to manage the theater for these programs would include a House Manager, (who oversees administration, ticketing, catering, etc.,) a Production Manager (who handles lighting, sound, and production aspects); a Facility Manager, (who handles building maintenance and production set-up and tear -down, and an Executive/Development Director, who is responsible for fundraising, theater rentals, the education program, and community liaison. Accounting, promotion, and catering would be contract services. The role and need for The Producing Group would be reviewed annually. Financial Plans • Revenue and Cost Forecasts There are five principal sources of earned revenue: programming (ticket sales), concession income, rentals, merchandise sales, and Leaming Center programs. Revenues will be supplemented by contributed income from individual and corporate donations, foundations, Board Member annual contributions, program underwriting and sponsorships, support guilds, and endowment interest. Revenues and operating costs are summarized in Table 5. Details and assumptions are shown in Appendix A. It is believed that these estimates are made on a sound basis. Ticket prices and sales are comparable to other institutions in the area and have been validated by the Season Without Walls experience over three years and by our programming consultants. Our SWOW ticket prices at $50 per event or $175 for a season are competitive, all the more so because each event included a reception with wine and food, making for a special evening experience. For example, here are some comparative prices: • Segerstrom Concert Hall: $26 to $99 • Samueli Theater: $50-$75 • Hollywood Bowl: 5 event subscriptions: (midweek) $185-$480; (special) $210-$580. These events do not include a reception. 18 TABLE 5: Balboa Performing Arts Theatre Foundation Projected Annual Cash Flow - Opening Season Programming & Marketing: Ticket & Rental Revenue Ticket Sales $4,190,292 Presenting = 80% of Total Revenue Concessions Revenue $706,020 Concessions = 16% of Ticket Revenue Rental Revenue $36,000 Rental = 24 days @57,500/day Merchandise Sales $5,000 Arts Leaning Center $9,600 Learning Center revenues offer growth possibilities Total Revenue $4,946,912 Programming & Marketing Costs Talent costs $3,424,650 Concessions Cost $353,010 50% of Concessions Revenue Producers fees $329,688 Education Salaries $86,400 Education instructors $4,000 $500 per class Marketing/Advertising $50,000 Ticket printing $3,600 80,000 @.50.05= 53,600 Payroll & Benefits $171,450 Rental Expenses $10,000 Total Prog. & Mktg. Costs $4,432,798 Net Programming & Mktg $514,114 Development: Annual Fundraising: Annual fundraising anticipated to be $200,000 to Individual Donations 5300,000 but not included to keep estimate conservative Corporate/Business Donations Board Donations $102,000 Program Underwriting Support Guilds Total Annual Fundraising $102,000 Development Costs Payroll and benefits $65,475 Mailing/printing $5,000 Total Development Costs $70,475 26% of funds raised Net Development $31,525 General & Administrative Costs: Payroll and benefits $95,175 Utilities, insurance, services $81,400 Maintenance and repairs $100,000 Allowance for repairs, maintenance, and upgrades Total G&A Costs $276,575 Total Earned Income $4,946,912 Approx. 104 % of total budget Total Fundraising Income $102,000 Approx. 6% of total budget at break-even point Total Costs ($4,779,848) Net Operations $269,064 Planned operations leaves a positive net cash flow Space rental charges have been validated by obtaining rates and annual income data from comparable institutions in the area. Other venues Use a variety of methods for space rental. For theaters, it could be on a per seat basis at $3 to $5 per seat, which would earn the Balboa Theater $900 to $1500 per event. Alternatively, some venues charge by the hour, by the square foot; or by the room being utilized. In each case, the basic rental costs are increased by the facility staff required to assist (as a minimum at least one person at $35 to $50 per hour), and by the equipment being used (furniture, projectors, etc.). Another approach involves adding a 19 percentage of ticket sales revenue to the facility rental costs. See Appendix B for typical rate sheets and data. Concession income and merchandise sales are also based on the operating experience of other theaters. Learning Center revenues are based on comparable programs at successful organizations in the Southern California area. We have included a modest forecast in this plan, but believe that this represents a significant growth potential for the Balboa Theater. The concept used by other successful organizations is to employ local artists as instructors in dance, ballet, music, drama, etc. and offer courses for students of all ages from children to seniors. Direct costs are minimal and there is no increase in overhead expenses. (Instructors are paid on a per course basis and only if the minimum sign-up requirement is met.) o Donations and Endowment Plan The Theater enjoys a broad base of local support. Cash contributions and pledges have enabled the Balboa Performing Arts Theater Foundation to complete Phase 1 of the theater renovation, namely, engineering studies and tests, preliminary designs, seismic strengthening of the building, a lengthy, 3 -year government approval process to amend the City of Newport Beach general plan and to secure Coastal Commission approval for the renovation program, award of a contract for final design, and finally to submit the plans for a building permit in June, 2010. In addition to the funds raised, there have been untold labor hours donated by volunteer groups over the past decade. Fund-raising for the capital campaign for renovation is comprised of both a direct-mail solicitation program and major gifts campaign guided by the Capital Campaign Committee of the Board. The goal of these efforts is two -fold: first, to raise the Phase 2 funds needed to complete construction and commence full operations, and second, to create an initial endowment fund of $ I million—with an ultimate goal of $5 million. This plan includes development costs but assumes zero development income for operating costs (other than committed Board member contributions). C Construction Cost Estimate -Theater The existing 1928 structure has been carefully evaluated and the measures required to bring it up to current building codes standards, make it seismically sound, and convert it to a performing arts theater have been identified. Demolition of the interior construction has been completed and the structure is ready to be renovated. The cost of renovating the theater is estimated to be $5 million if constructed in the near term while material and contractor prices are low due to the recession. *Annual Operating Costs Annual operating costs can be broken down into three main categories: Programming and Marketing, which includes artist's fees, Learning Center costs, and other programming business expenses; Development, which includes annual fundraising expenses; and General and Administrative costs. The Foundation operates in accordance with an annual budget that is approved by the Board of Directors. In 2006 the Board adopted a series of "Best Practices" standards to guide the operation of the Foundation. Monthly cost reports are prepared and reviewed by the CFO. In order to keep programs affordable to as wide an audience within Orange County as possible, program costs are maintained at a competitive level. The Foundation also is committed to supporting various arts education activities in the local community. Performing Arts venues in general are unable to support operations based on programming revenues alone. Earned revenues are supplemented through fundraising and donations. In this plan, the Balboa Theater has set a goal that programming revenues will cover 100% of operating costs, and no credit is taken for donations, corporate contributions, program underwriting, a support guild, and endowment earnings. The Foundation has a long-term goal of making the Theater completely self-supporting ?p through the establishment of an endowment fund which will generate additional revenues. Supporting details concerning projected operating costs and cash flow are found in Appendix A. Once full operations are initiated, a full-time staff of 5 persons is envisioned. This would include and Executive/Development Director, a Production manager, a House manager, and a Facilities manager. An Education director would be added at a later date. Burdened salaries for the operating staff is $418,500 per year o Return on Investment The City invested $480,000 to purchase the original Theater building and supplemented this with a contribution of $175,000 towards the final design. The Balboa Performing Arts Theater Foundation has expended $3 million on the project and is committed to investing an additional $5 million in the building. This will convert a historic facility that was bankrupt, did not meet building codes, and was generally an eyesore, into a Functional and beautiful part of Balboa Village. Tax revenues will repay the City's investment and in addition it will be left with a valuable capital asset. Organization C Broad-based community support In order to be successful in today's entertainment market, a small regional theater needs to appeal to a diversity of entertainment needs. It must be flexible and able to respond to the requirements of various media. Most importantly, it must enjoy a strong base of support from within the community it intends to serve. Local business involvement and support Economic development studies have demonstrated that entertainment venues serve to "anchor" commercial growth and development. In today's economy, where people have more leisure time, entertainment is an important element of community life. If resources do not exist locally, people will travel to locations where they can find entertainment that pleases them. Entertainment venues thus work synergistically with other local businesses (retail stores, hotels, restaurants, parking, etc.) to expand local business revenues and tax revenues. Studies show that for every dollar of revenue received by a theater, an additional 1.85 dollars is spent in the local area for meals, parking, and other expenses. The theater is a "draw" which brings in additional revenue tc the community. More importantly, a theater gives a sense of vitality to a community. It fosters other community actions and encourages community support and activity. This in turn creates an atmosphere where other businesses are encouraged to relocate and invest to be part of this new dynamic. The result is an increase in new businesses, new jobs, and a further expansion of the tax base. The Balboa Performing Arts Theater Foundation is a community-based organization that satisfies these requirements. The Foundation sprang out of a deep-seated conviction that renovation of the theater would be a stimulus to the local economy and would assist in the general improvement of the Balboa Village business climate. The strength of this conviction is amply demonstrated by the fact that the Foundation has persevered for more than ten years with the same key personnel in the fulfillment of this goal. C Local government support The support of the City of Newport Beach is critical to the success of the Theater. The Foundation Board is attempting to renovate a theater located in the heart of Newport's Balboa Village historic district. This area is currently characterized by limited parking, high commercial 21 vacancy rates, sub -marginal businesses, and a limited number of high quality restaurants and other attractions. Several "revitalization" studies have been conducted in the past but these led to largely cosmetic changes and did not address the underlying economic changes needed. Although one of the wealthiest cities in California, historically Newport Beach has not supported the arts in a meaningful way. Lack of a strong City commitment to the area is a disincentive to private investors and donors to the Theater. This situation began to change in 2010 when the City took steps to acquire the Balboa Market property to increase parking, and announced other plans to revitalize the Balboa Peninsula. In May 2010, the Newport Harbor Nautical Museum announced ambitious plans to renovate the Fun Zone area. If both the Nautical Museum and the Balboa Theater succeed in their plans, they will form the nucleus of an economic revival in Balboa Village. They must not be allowed to fail. a Board of Directors The Foundation provides the personnel and management expertise to operate the theater. The Foundation functions under the oversight of a Board of Directors. All Board members are recruited on the basis of their capacity to assist the Foundation in fulfilling its mission. The Directors represent many fields including business, arts, and education and bring a broad range of skills and expertise to the organization. The Board appoints the officers of the Foundation, who serve for the term prescribed by the bylaws. The Executive Board of the Board of Directors consists of the Chair of the Board, Vice Chair, Board Development, Vice Chair, Board Governance and Secretary/CFO. Combined, the individuals in these positions oversee all of the major areas of the Theater's business. In addition, subcommittees of the board and the community are formed as needed to oversee specific areas. Examples include: a Finance Committee —oversees annual budget for board approval, approves monthly financial statements and participates in the development of the long range strategic -plan. o Nominating Committee —recruits and recommends new board members and establishes board standards. o Season Without Walls Committee — Prepares a season of performances with the Executive Director for approval by full Board. Solicits sponsorship to support programming and coordinates the ticket sales effort. ® Staff: Day-to-day operations of the Foundation are conducted by part-time paid consultants and unpaid volunteers under the direction of the Board. Risk Analysis o Principal Risks The principal risks for this project are as follows: o Failure to raise funds necessary for the project ® Construction cost overruns o Failure to generate required revenues a Softening of the entertainment market o Natural disaster (fire/'flood/earthquake) Risk Management Plan The Foundation is committed to the Theater Renovation Project, and enjoys a broad base of community support. Since more than $3 million has already been raised, the Foundation's Board 22 is confident it eventually can find sources for the required funds. Any risk to the City of Newport Beach is mitigated, however, by the inherent value of the property. In the event that the project does not go forward, the property is located in a desirable location and the building could be converted to some other use. Construction cost overruns are not likely given the extent of preliminary engineering and building demolition and testing that have been performed. The construction cost estimates carry line item contingencies to cover possible unforeseen conditions likely to arise in the course of construction. If the theater is unable to generate the required level of revenues, the first mitigation strategy will be to scale back the level of operations until revenues and costs balance. The Foundation also believes it can attract a level of dedicated volunteer staff (docents and auxiliaries) to reduce general and administrative staff costs. Donations could supplement earned revenues, although we assume zero donations in this plan. The entertainment market will be emerging from a period of retrenchment brought about by the recession and economic downturn. On the cinema scene, there has been an intense consolidation, with thousands of marginal screens closed throughout the United States. The successful theater today must have flexibility. As the entertainment sector is reviving, the technology is changing rapidly. Flexibility to handle new media (satellite, digital) is critical. The "graying" of the population, and increased leisure time by the population as a whole, are still the drivers which made the idea of the Balboa Theater viable in the first place. Risks of natural disaster will be mitigated by Builder's Risk insurance during construction and by commercial general and public liability policies during operations. Schedule of Activities a Construction Schedule Final design is complete and permitting by the City of Newport Beach is underway. An allowance of 3 months (June -September) has been made for permitting and plan corrections. Construction will require 18 months if performed continuously as a single project (subject to availability of funds). The alternative is to phase the work as funding comes available. Three additional months have been allowed for punch list items and final outfitting of equipment. a Operational Milestones Key milestones in the reconstruction of the Balboa Theater are as follows a July, 2008: Selection of J. S. Fisher, Architect for final design a September 2009: Conceptual design and model completed a July, 2010: Final Design notice to proceed a May, 2010: Final design complete a June, 2011: Apply for building permit a 2011-2012: Break ground (Subject to adequate funding) 2013: Theater opens for first performance The opening of the Theater will be marked by a week-long series of local and Orange County festivities. The inaugural program will signal the transition from fundraising for the capital program to fundraising to create an endowment fund to provide ongoing support for the Theater's activities. The principal goal of the endowment fund campaign will be to create a 23 revenue source that ultimately can help support theater operations and in particular its educational mission. za APPENDICES A. Five Year Profit and Loss Forecast and Assumptions B. Typical Facility Rental Rates C. The Producing Group 25 A. Five Year Profit and Loss Forecast and Assumptions The following tables show details of the financial forecasts commencing with the first year of operation. At this point in time it is assumed that the capital campaign is complete and the building construction has been finished. Fiscal year 12 is defined as the commencement of operations, which gradually build up until fiscal year 16 when full operations are achieved. Appendix A 1 below explains the definitions of the various categories of revenue and expenses. Appendix A2 shows the revenue projections and outlines the assumptions behind them. Appendix A3 is the staffing plan with salary projections. Appendix A4 is the five-year cash flow forecast based on the revenue and expense projections. IX AI ix Al Performi n - Category Defin Building Design & Construction Includes all caoital imorovement costs associated with the buildina prior to theater ooenino. Development Costs (Capital Campaign) Includes expenses incurred to generate donations, including Development personnel and public relations costs orior to theater ooenino. Includes all general & administrative costs to support the on-going operation prior to theater opening, such as office rent, insurance, utilities, equipment and supplies, Property taxes, and payroll for Executive Director and other staff. Programming Includes ticket revenue, rental revenue, concession sales, and the associated costs to host events. includino artist fees. marketing. eaubment. and oavroll for Slane and Box On-going fundraising income from individuals, corporate sponsorships, support guilds, and special events, as well as the associated costs of raising these funds, including payroll for Development personnel. General & Administrative Costs Includes all general & administrative costs to support the on-going operation after theater opening, such as office rent, insurance, utilities, equipment and supplies, repairs and maintenance, property taxes, and payroll for Executive Director, Administrative Assistant, Facilities Manager and contract services (accounting, etc.) Appendix A3 Appendix A2 I I I Allocation % FTE Balboa Performing Arts Theatre Foundation Fringe @35% Total Compen- sation Program and marketing Develop- ment General and Admin Revenue Assumptions (Revenues in $000) Executive Director 1 $80,0001 $28,000 $108,0001 40% 45% 10% 5% Production manager 1 $70,0001 $24,500 $94,500 100% FY12FY13 FY FY15 FY16 Notes: # of Events (per year) 200 210 220 230 250 1 Avg. Revenue per Event 21 21 22 22 23 2 Total Ticket Revenue I 4,190 4,410 4,840 1 5,060 5,750 1 Avg. Concession income per Event 1 3.53 3.53 3.601 3.60 3.70 Total Concession Revenue 706 741 7921 828 925 # of Rentals (per year) 24 30 40 50 60 Avg. Rental Revenue 1.50 1.50 1.751 1.75 2.003 Note: Total Rental Revenue 36 45 70 88 120 staff Arts Learning Center # classes: 8 12 24 24 30 4 Avg. Revenue per Class 1.20 1.20 1.50 1.50 1.80 5 Total Arts Education Revenue 10 14 36 36 54 6 Merchandise Sales 5 5 7 7 10 Total Revenues 4,947 5,216 5,745 6,019 6,859 Notes: 1. Some days have 2 events/day:# 2.Revenue/event based on Table 3 as typical year 3.Rental fee/day is combination of auditorium ($2,000) and roof deck ($1,000) 4. Classes meet 12 times per quarter for 1 hour. Some classes off site. 5. Class fee is $100/student; $125/student in year 3; $150/student in year 5. 6. Minimum size is 6, average is 12, maximum is 25. Appendix A3 Salary Projections Base Year I I I Allocation % FTE Base Position° Salary Fringe @35% Total Compen- sation Program and marketing Develop- ment General and Admin Edu- cation Executive Director 1 $80,0001 $28,000 $108,0001 40% 45% 10% 5% Production manager 1 $70,0001 $24,500 $94,500 100% Education Coordinator $60,0001 $21,000 $81,000 100% House Manager $50,000 $17,500 $67,500 50% 25% 25% Facilities Manager $50,000 $17,500 $67,500 100% TOTAL PAYROLL 1 $310,0001 $108,500 $418,500 jBudget ($) Programing and Develop- General marketing ment and Admin Education Total (check) $43,200 $48,600 $10,8001 $5,400 $108,000 Note: $94,5001 1 $94,50010ther staff positions such as $01 $01 $0 $81,000 $81,000 ticket booth, ushers, etc. $33,7501 $16,875 $16,875 $67,500 will be volunteers and interns $0� $0 $67,500 $0 $67,500 $171,4501 $65,4751 $95,1751 $86,4001 $418,5001 27 Appendix A4 1 Balboa Performing Arts Theatre Foundation 1 1 Long Range Plan • Cash Flow Detail ($000) FY12 FY13 FY14 FY15 FY16 Beginning Cash Balance 0.00 2691 562 1,163 1,768 Income Ticket & Rental Revenue 1 1 1 1 Ticket Sales 1 4,190 4,410 4,840 50601 1 5,750 Concessions Revenue 706 741 792 828 925 Rental Revenue 36 45 70 80 120 Ads Learning Center 10 14 36 36 50 Merchandise/Auction Sales 5 5 7 7 10 Total Earned Revenue 4,947 1 5,215 1 5,745 6,019 6,855 General/Annual Fundraising; 1 Individual Donaficns Comorate/Business Donations 1 Foundation/Govt Donations 1 1 Board Donations 102 1021 1 102 102 102 Program Underwriting 1 Support Guilds Interest/Misc Income Total Annual Fundralsing 102 102 102 102 102 Totallncome 5,049 5,317 5,847 6,121 6,957 Expenses Programming & Marketing: 1 Talent costs 1 3,425 3,597 3,768 3,940 1 4,111 Concessions Cost 1 353 371 388 406 1 424 Producers fees 330 347 364 1 380 397 Education Salaries B6 89 92 94 97 Education instructors 4.0 6 121 1 12 15 Markefing/Advertising 50 55 60 60 65 Ticket printing 3.6 41 4 4 4 Payroll & Benefits 171 177 1821 T 187 193 Rental Expenses 10 101 11 12 12 Total Programming and Marketing 4.433 a,655 4.680 5.095 5,318 Development Costs: I Payroll & Benefits 65 67 69 72 74 Mailing/printing 5 6 6 7 7 Total Development 70 73 75 78 81 General & Administrative _ Payroll & Benefits 95 98 101 104 107 Computer Equip/Soft are 3.0 1.0 2.0 2.0 3.0 Dues and Subscriptions 1.6 1.6 _ 1.6 _ 1.6 1.6 FeeslPermits/Bank Fees 2.5 2.61 2.7 2.8 3.0 Insurance 8.8 8.9 9.01 9.11 9.2 MeetingslEntertainment 3.0 3.03.2 3.21 3.2 Misc. 1.0 1.0 1.0 1.01 1.0 Office Equip. & Furnishings 4.0 2.5 2.5 2.5 2.5 Education Lar rent 0.0 12 15 20 24 Office Supplies 3.5 3.61 3.7 3.8 3.9 Postage and Delivery 2.5 3.0 3.01 3.5 3.5 Printing & Reproduction 1.51 1.6 1.7 1.8 1.9 Professional Services 5.01 6.0 7.01 7.5' 8.0 Property Taxes 151 16 17 18 19 Repairs & Maintenance Fund 100 100 100 100 100 Uties 30 35 40 421 45 Total G&A 277 296 310 323 336 Total Expenditures 4,780 5,024 1 5,266 5,496 1 5,735 Not Operations 269 293 1 581 625 1 1,222 I Total Cash Inflows 5.049 5,317 1 5,847 6,121 1 6.957 Total Cash Outflows 4,780 5,024 5,266 5,496 1 5,735 Net Cash Flow 269 293 581 625 1,222 Cumulative 269 562 1,143 1766 2,990 Ending cash 269 562 1,143 1,768 2,990 Notes 1. Income based on Appentlix 2 2. Salary escalation 3. Program costs escalated 5%/ ear 28 B. Typical Space Rental Rates Performing arts venues rent their facilities using a variety of charging principles. One method is by the size of the space (typically for 24 hours usage), but it could also be based on an hourly rate, or per seat. Another approach involves adding a percentage of ticket sales revenue to the facility rental costs. In every case the basic rental costs are increased by the facility staff required to assist (as a minimum at least one person at $35 to $50 per hour); by the equipment being used (furniture, projectors, etc.). The charges are greater on the weekend compared to mid -week. For example, The Alex Theater in Glendale, California, has a base rental rate of $3,500 for Monday through Thursday, increasing to $4,000 for Friday and Sunday and $5,000 on Saturday. It is a 3 -tier theater. The orchestra seats 736, the terrace 181, and the balcony, 464, for a total of 1,381 seats. There are discounts for use by non-profit organizations or schools. Theater staff and equipment are added expenses. The Tower Theater in Bend, Oregon, seats 469 persons and has a basic rental fee of $1,000 per day plus 8% of gross ticket fees. Theater staff and equipment are added expenses. The 199 -seat Curtis Theater in Brea charges $140 per hour (4 hour minimum) with a $500 per day dark day fee (when it cannot be rented to others due to sets, etc.). Equipment is available at additional costs. The Discovery Science Center rents its space based on the number of attendees. For up to 175 persons (first floor only) the cost is $3,500 per event. For 500 persons (first and second floors) it is $5,000; for 1,000 persons, $7,500, and for 1,500 persons, $10,000. Typical rates sheets for the Bowers Museum in Santa Ana and the Balboa Theater in San Diego are illustrated on the next pages. 29 BOWERS MUSEUM Bowels Museum is one of Southern California's finest nmscums and Orange County's largest and alter the completion o1' bvo expansions since its opening in 1936. the original Spanish-Colwual building has been blended seamlessly with a more modem. state-cf-the-an wing. providing many Unique mad elegant settings for any type of evem. Contact the Special Events office 714-567-3623 for availability. DOROTHY AND DONALD KENNEDY WING AUDITORIUM (Nomla Kerslcne .Auditoriunrl SMIC of Ilic An .Audilonunl kith Scldium scaling. Gncsls 1-7110 scaled SSMURI ixt lour COURT (John AI. LCC Coun) Elegant Opcn Space for B;n ques and Special E%ents. Guests 1-3511 tiuded 1110 standing SN111IIII per how' HISTORIC MUSEUM BALCONYCovered ouWrnrs.:na 11 K, the Kc' e'1,u111a9d Guests 1-6oscnicd $225I0 per lour COURTYARD (blmgarel and Cleo Kc) Coumvard) Suitable for outdoor weddings, cockl:nl receptions- corporate eceptions.cogwr to functions. 1'undruscs. balls and conceas. Couneaul Evans will he Iumcd to In Restaurant if RAIN Occurs. Gucsis 1-1111 sealed 1001 stendwg $4(m.00 per hour' FLUOR GALLERY (Plein Art An Gallon.) hninenc imd great for coglomte droners, Resiricliou (NO RED WINE) Guests -5d srned 31 rounds x(1'1'hrncr scaling IW standing 5225.1111 per liour TANGATA RE—STAURANT & PATIO Unique selling, fabulous menu pmvldcd b.v Patina Catering Guests I. I 20scaled 219P staling CALL 714-367-36311 EXHIBIT VIEWING Is:ln option with emir rental of nnnwunl spice; there will be an addinond cost. 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Dlrrrmn S Uu U,her, S 11 Sl, CoJWRaa Chrr, k S I, Y. Me"Imedlw Sell,, SIGAU SvcurnylSi felt' Sen9rcs Sl.rge' U,u.r Ata.d.ovll'uhh, S.,M) Rep S17hn Ticko.rig Srr,Ic s rims hdcl Srlh'r Slit /', Faciliy A•rvi,cs flrrlunan Tlunlbrd[arpcnitr 5.180. I hrnu.gcr (..lily Wntkrr $lb Jil Ru.rv,•d S, I. Advance Sale I'vn11, BMW. Theater $7511 Civc Tllulrc $Ihnf) Ctoln Card lrans.mo I, 4.0044 rat all sale lnu,xtiuus Ticket Pmm�lg SO. 12S per Ii, ke' pnme.1 ly' liukr.ng .flim f ... ... I'Mo Amal,nu:news.", dn01., wqb T.• k, 1.119 I'll 11 el.1,11 31 C. The Producing Group, LLC. ABOUT THE PRODUCING GROUP The Producing Group (TPG) is a consulting firm that provides planning and strategic management support for independent entertainment venues. Since its founding in 2004, TPG has produced five seasons of summer concerts at the 8,500 -person -capacity Pacific Amphitheatre in Costa Mesa, CA, as well as outdoor music festivals in Las Vegas, NV, Modesto, CA and Galveston Island, TX, featuring an eclectic range of popular entertainers including Duran Duran, Bob Dylan, Black Eyed Peas, Alan Jackson, Maldita Vecindad, Paul Simon, B.B. King, Martina McBride, Bill Cosby, Scorpions and Willie Nelson, among many others. JOHN SULLIVAN John Sullivan, President of The Producing Group, has 40 years' experience working at the intersection of strategic communication and entertainment. He has successfully led and managed major cultural institutions, created strategy and advertising for numerous political and ballot measure campaigns, and has provided a broad range of planning and strategic communication services to corporations, trade associations and non-profit organizations in diverse fields including energy, healthcare, real estate and entertainment John produced the Summer Concert Series at the Pacific Amphitheatre in Costa Mesa, CA for five seasons, where he substantially grew the audience and brought the venue into profitability. A longtime producer of theater at The Mark Taper Forum in Los Angeles, The Circle Repertory Theater in New York and San Francisco's American ConservatoryTheater where for eight years he was Managing Director - John has also produced special events at such venues as Town Hall in New York City and The Los Angeles County Museum of Art. As Senior Vice President at the strategic communication company Winner/Wagner & Associates, John provided communication counsel and issue management support to organizations such as Exxon, GTE Mobilnet, and the California Home Builders Association. As an independent communications counsel, he has served a diverse range of clients, including Major League Rodeo, Holy Names College, Trammel Crow Company and the National Mining Association. For seven years, John was a consultant in the field of communication and popular culture at the Rand Corporation, and has served as a Visiting Fellow at the Aspen Institute. He is currently on the board of directors of the Foundation for the Great Park KEN PHEBUS Ken Phebus has been a dominant talent buyer for independent music venues in Southern California for over 30 years. He has unparalleled experience in start-up situations, having established booking policies and formats for numerous and diverse venues including The Coach House in San Juan Capistrano (S00 -person capacity); The Ventura Theatre (1,200 capacity); The Galaxy Theatre in Santa Ana (900 capacity); The Sun Theatre (now the Grove of Anaheim, 1700 capacity) and the reopening of the Pacific Amphitheatre in Costa Mesa (8,500 capacity). In an industry notorious for failure rates, Ken takes considerable satisfaction in the fact that all these venues have continued to operate successfully - some for decades - utilizing the formats he developed. Ken has provided talent for clubs, theaters, amphitheaters, fairs, festivals, casinos and private events throughout the country. A seven -time nominee for the Pollstar Nightclub Talent Buyer of the Year Award, Ken has booked 59 members of the rock and roll hall of fame, as well as most of the major artists of our time, including Duran Duran, Steely Dan, Steve Miller Band, Bob Dylan, Boston, ZZ Top, Jackson Browne, Juan Gabriel, Scorpions, Paul Simon, Seal, Van Halen, Toby Keith, Dave Chappelle, Luis Miguel, Velvet Revolver, Tina Turner, Ray Charles, Johnny Cash, The Byrds, and Miles Davis. CHRIS RICCI Chris Ricci has created and produced successful festivals, concerts and special events throughout California. As an experienced talent buyer, event producer and venue manager, Chris thoroughly understands the entertainment business and matches the right talent to the right setting; mobilizes and focuses marketing resources; handles ticketing and credentialing; and manages all aspects of technical production. The success of Modesto's X -Fest - a multi -stage festival that Chris has produced since 1999 - can be measured by the 20,000 -plus happy fans who annually Flock to the city's downtown streets for a day and evening of rock'n roll and by the positive energy this popular event has contributed to the revitalization of Modesto's central business district Chris is experienced in developing successful business relationships with talent agencies, and is adept in dealing with artist management, record labels, media, sponsors and government agencies. He is skilled in coordinating these resources to create events that are popular, safe and profitable. "RECEIVED AFTER AGENDA Brown, Leilani From: Harp, Aaron Sent: Tuesday, September 13, 2011 7:52 AM To: Brown, Leilani Subject: FW: BALBOA THEATHER POTENTIAL LEASE AMENDMENTS This e-mail was received by the City Council in regards to Agenda Item No. 14. From: Gard nerncy(a)aol.com [mailto:Gardnerncy@aol.coml Sent: Monday, September 12, 20114:00 PM To: Harp, Aaron Subject: Fwd: BALBOA THEATHER POTENTIAL LEASE AMENDMENTS From: wdildine36(a)aol.com To: dkiff(a)newportbeachca.gov CC: mhenn527(a)hotmail.com, rhill(a)newportbeachca.gov, edselich(a)roadrunner.com, leslieidaigleaaol.com, gardnerncy(a)aol.com, currvkCa)pfm.com, parandigm(a.aol.com Sent: 9/12/2011 2:54:24 P.M. Pacific Daylight Time Subj: BALBOA THEATHER POTENTIAL LEASE AMENDMENTS Reference is made to AGENDA ITEM No. 14 of September 12, 2011 Council Meeting, regarding the above mentioned subject. Since this is City owned Property (not subject to MECHANICS LIENS), and the "Lessee shall hold title to the improvements...... and "on expiration of the Term or termination of this lease, Lessee shall peaceably and quietly leave and surrender the Property and Equipment to Lessor,........ is the City PROTECTED that the project will be completed and all indebtedness satisfied? On Public property, those furnishing works of improvement MUST provide BONDS as a guarantee of their performance Hopefully everything goes as planned, but WHAT IF, does the City become liable? Bill Dildine From: Shirley Oborny Originals to: City Clerk Mary Lonich Copies to: Sharon Wood Evelyn Tseng Message: Amended and Restated Lease by and between the City of NB and the Balboa Performing Arts Theater Foundation. Per Robin Clauson, lease does not need to be recorded. Item #F524, C-3248. Date: 09/20/2004 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 00t ri.,►�', Achy CI A4fV(xV1 GIQat50�� 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 THE BALBOA PERFORMING ARTS THEATER FOUNDATION ., AMENDED AND RESTATED LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS . THEATER FOUNDATION This Amended and Restated Lease ("Lease") entered into as of September 2004 (Effective Date) by and between the City of Newport Beach, a Charter City and municipal corporation ("Lessor") and the Balboa Performing Arts Theater 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 Theater 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 Theater 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. 2 0 0 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: 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 and, subsequent to renovation, require Lessee to operate a first class community multi -use Theater. The renovation and operation of the Theater 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 Property 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. 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. 1.4 Lessee Lessee is the Balboa Performing Arts Theater Foundation. Lessee is a California non-profit public benefit corporation organized for the purpose of 3 renovating, operating and maintaining the Theater 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. 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 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 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 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 Theater as required by this Lease. 4 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 Theater, such as fixtures, machinery, rigging, lighting, staging, merchandise, trade fixtures (collectively, Equipment) that have been constructed or placed on the Property 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 TERMIOPTION 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 5 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 the following: 4.3.1 Lessee shall have completed the Required Improvements; and 4.3.2 Lessee shall have operated the Theater in full compliance with the provisions of Article 7 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 Date 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. 6 0 0 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 RENTICONSIDERATION 5.1 No Money Payable by Lessee Lessee shall not pay money as rent to Lessor. 5.2 Other Consideration In consideration for this Lease, Lessee covenants that, during the Term, it will: 5.2.1 Operate and maintain a first 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 8 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. 5.2.5 Use any excess revenue or funds for purposes related to the operation of the Theater 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 Capital 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). ARTICLE 6 LONG RANGE PLAN, BUDGET AND RECORDS 6.1 Long Range Plan Lessee shall prepare, and submit to Lessor, a Long Range Plan which projects fundraising, renovation, marketing and operational expectations and financial 7 needs, from initial planning up to and including active operations of the Theater (Long 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 year, to reflect changes to renovation plans, fundraising strategies and goals, performances/events, and marketing programs. The Long 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 fundraising efforts for the prior year; (ii) schedule for completion of Required Improvements; (iii) 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 Long Range Plan shall be submitted to Lessor within thirty (30) days of adoption or any material modification. 6.2 Annual Budget Lessee shall prepare and submit to Lessor an annual budget (Budget), which shall be based on the Long Range 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 balance in all funds and accounts maintained by Lessee; (ii) all projected revenues and sources of funds for the fiscal year; (iii) the expenditures proposed to be made by Lessee in fulfilling its obligations pursuant to this Lease; and (iv) all other proposed expenditures of Lessee. 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. 6.3 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 itemizing all of its revenues and expenditures for that fiscal year. 6.4 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 Campaign 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 8 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. 6.5 Audit 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 7 USE OF PROPERTY 7.1 Permitted Use The Property shall be used primarily for the operation of a first class community multi -use Theater open to the general public. Lessee shall operate the Theater 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 community and other organizations to periodically use the Theater for fund raising, education, 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 8.2 (Seismic Retrofit) and before completion of Required Improvements subject to issuance of a Special Events Permit by Lessor. 7.2 Performances/FreauencX Lessee shall operate the Theater 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. Operation of the Theater is the fundamental consideration for this Lease and Lessee shall ensure and promote the maximum reasonable use of the Theater by performers, artists, and entertainers likely to attract patrons. The Theater shall be operated consistent with the standards, practices and procedures utilized by first class multi -use community theaters in other jurisdictions. 7.3 Program Standards Lessee shall operate the Theater in a manner reasonably calculated to achieve the following objectives: 7.3.1 Provide frequent and high quality performances and cultural events to attract patrons to the Theater and Central Balboa/Balboa Village. 7.3.2 To serve as a catalyst to the revitalization of the economy of the area to be benefited by use of the Federal Funds. 7.3.3 To make the Theater 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; 7.3.4 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 community multi -use Theater. 7.4 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 Theater to use public parking at reduced rates. Lessor and Lessee shall also discuss ways to integrate operation of the Theater into programs for the economic revitalization of Central Balboa/Balboa Village. 7.5 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 be withheld at Lessor's sole discretion. 7.6 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 Theater. 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 Theater. 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 10 0 Property. 7.7 Zoning and Planning Lessor acknowledges that the use of the Property as a Theater 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, after, 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 permits required by Titles 15 and 20 of the Newport Beach Municipal Code. 7.8 Nondiscrimination 7.8.1 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. 7.8.2 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, 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. 7.8.3 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 11 0 0 such contracts, licenses, agreements shall contain non- discrimination provisions substantially similar to this Lease. ARTICLE 8 REQUIRED IMPROVEMENTS 8.1 Lessee's Obligations The Property requires substantial renovation and rehabilitation to be used as, or considered, a first class community multi -use Theater. Lessee shall design, obtain building permits for, and then construct the improvements specked in this Article (Required Improvements) at Lessee's sole cost and expense 8.2 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. 8.3 Conceptual Design Plans Lessee shall prepare, and submit to Lessor for approval, proposed Conceptual Design Plans for the design and construction of the Property for use as a first class community multi -use Theater (Conceptual Design Plans). The Conceptual Design 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 theater constructed in the 1920's. The Conceptual Design Plans shall include, without limitation, (1) seating layout; (2) stage and dressing room layout (3) lobby and concession arealayout; (4) public area layout; and (5). 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 class community multi -use Theater viable for present- day use, and that the improvements respect the design of the original front 12 0 0 fagade of the Theater to the maximum extent feasible.. 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. 8.4 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) exterior lighting plans and design; (2) color, material, treatment and design of all exterior elements; (3) sound and projection systems; (4) design and treatment of interior spaces, and (5) 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 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 Design Development Plans within sixty (60) days after submittal. 8.5 Building Permits Lessee shall apply for all necessary building permits from Lessor. 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 Design Development Plans. 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 Design Development Plans, 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 Subsequent to approval of Design Development Plans, Lessee shall submit Final 13 0 0 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 Design 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. 8.7 Schedule for Required Improvements Lessee shall submit plans, diligently pursue their approval, and begin construction of Required Improvements according to the following schedule. Conceptual Design Plans Thi 30 days after Effective Date Complete application for Use Thirty (30) days after Effective Date Permit and Development Plan Review Complete application for Coastal Sixty (60) days after approval of Use Development Permit CDP Permit and Development Plan Review Design Development Plans One hundred eighty (180) days after approval of CDP Complete Building Permit One hundred eighty (180) days after application a royal of CDP Begin construction Upon . reaching 70% of budget for Required Improvements, but no later than one (1) year after issuance of building permits Final Design Plans Upon approval of framing by Lessor's Building Department Complete construction One (1) year and six (6) months after issuance of building permits 8.8 General Requirements 8.8.1 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 14 0 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. 8.8.2 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. 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. 8.9 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 9 REPAIRS AND MAINTENANCE Lessee recognizes that the Theater 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 Theater 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 Theater (including patching and resurfacing the roof membrane and painting or other protective treatment of the exterior wall of the Theater); (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 Theater and the repair and replacement of components; (iv) maintenance of all pipes and plumbing systems serving the Theater 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 Theater. Lessee shall revise the schedule for maintenance from time to time during the Term as necessary to maintain the Theater to 15 0 0 the standards required by this Lease. Lessee shall have the benefit of all warranties available to Lessor with respect to the Theater 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 Theater would make continued operation of the Theater economically infeasible. ARTICLE 10 STATUS AND MANAGEMENT OF LESSEE 10.1 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. 10.3 Employment of Staff During the Term, Lessee shall employ a professional Executive Director to manage the day to day renovation and/or operation of the Theater, 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. ARTICLE 11 ALTERATIONS 11.1 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 Theater's designation as a local landmark and shall respect the 16 design of the original front fagade of the Theater to the maximum extent feasible. Theater. 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. 11.2 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 12 PAYMENT OF UTILITIES, TAXES, CHARGES AND FEES 12.1 Public and Private Utility Services Lessee will pay all charges for all public or private utility services and all sprinkler 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. 12.2 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. 12.3 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. 12.4 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 17 within ten (10) days of written notice of payment by Lessor. 12.5 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. 12.6 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. ARTICLE 13 LIENS 13.1 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 Theater free and clear of all mechanic's liens and similar liens. 13.2 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 18 fully reimburse Lessor in such event. 13.3 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. 13.4 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 14 INDEMNIFICATION 14.1 Indemnitv Lessee shall defend, indemnify and hold harmless Lessor from and against any and all legal or administrative proceedings, claims, reasonable attorneys' fees 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 14.6 on the Property or Theater, (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. 14.2 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. 14.3 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. 19 0 0 14.4 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. 14.5 Waiver of California Civil Code Section 1542 Section 1542 of the California Civil Code states: 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. 14.6 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, (t) 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 20 0 (California Water Code Section 13000 et seq). ARTICLE 15 INSURANCE 15.1 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. 15.1.1 Comprehensive General Liability in an amount not less than two million dollars ($2,000,000) 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-contributing with any insurance or self-insurance maintained by Lessor or Lessee. Any third party permitted to use the Property 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. 15.1.2 Workers' Compensation Insurance as required by the Labor Code of the State of California. 15.1.3 "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. 15.1.4 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, 21 0 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. 15.2. 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 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. 15.3 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. 15.4 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. 22 ARTICLE 16 DAMAGE BY FIRE OR CASUALTY 16.1 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. 16.2 Restoration Except as provided in Section 17.3, 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 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. 16.3 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. 16.4 Application of Insurance Proceeds In the event that Lessee is required to restore the Property pursuant to Section 16.2, proceeds from policies of insurance required by Article 15 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: 23 9 0 16.4.1 Lessee shall furnish to Lessor satisfactory evidence to Lessor of the total cost of Restoration pursuant to Section 16.2. 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. 16.4.2 Assuming satisfaction of the conditions of subsection 16.4.1 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. 16.4.3 Upon completion of restoration and assuming Lessee is not in default, excess insurance proceeds shall first be paid to Lessor to the extent of its actual expenses incurred in the restoration, then to Lessee as working capital ARTICLE 17 EMINENT DOMAIN 17.1 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. 17.2 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. 17.3 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. 24 0 0 17.4 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. 17.5 Allocation of Award — Partial Taking Any Award in a Partial Taking shall be distributed by escrow in the following order of priority: 17.5.1 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; 17.5.2 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; 17.5.3 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. 17.6 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 temporaryTaking. 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. 17.7 Allocation of Award — Total Taking Any Award in a Total Taking shall be distributed by escrow in the following priority: 17.7.1 First, to Lessor and Lessee to reimburse for all costs and expenses incurred by each in the collection of the Award; 17.7.2 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 25 0 0 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. 17.8 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. 17.9 Notices Any Party receiving notice of or becoming aware of any condemnation proceedings shall promptly give written notice to the other party. ARTICLE 18 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 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 19 LEASEHOLD MORTGAGES Lessee shall have no right to encumber its interest in this Lease, the Property or the Theater without Lessor's prior written consent, which consent may be withheld in Lessor's sole discretion. ARTICLE 20 PERFORMANCE OF LESSEE'S COVENANTS 20.1 Right of Performance If Lessee fails to pay any tax, fee or other charge in accordance with Article 12 within the time period required or shall fail to pay for or maintain any of the insurance policies provided for in Article 15 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: W 0 9 20.1.1 Pay the tax, assessment, fee or charge payable by Lessee pursuant to this Lease; or 20.1.2 Pay for and maintain any insurance policies required by this Lease; or 20.1.3 Make any other payment or perform any other act that Lessee is required to pay or perform pursuant to this Lease. 20.2 Reimbursement and Damages Lessee shall reimburse Lessor for all costs and expenses incurred by Lessor in the exercise of its rights pursuant to Section 20.1. ARTICLE 21 REPRESENTATIONS 21.1 Lessor's Representations Lessor represents to Lessee that: 21.1.1 Lessor owns the Property in fee simple subject only to the Permitted Exceptions and other matters affecting title that do not inhibit, prevent or impair the operation, maintenance or use of the Theater. 21.1.2 Lessor has the power and authority to enter into this Lease and perform all the obligations of Lessor hereunder. 21.2 Lessee's Representations Lessee represents to Lessor that: 21.2.1 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. 21.2.2 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 Theater consistent with this Lease and the Operations Plan. 21.2.3 Lessee has the right, power and authority to enter into this Lease 27 and to perform all the obligations of Lessee. 21.2.4 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 22 DEFAULTS, REMEDIES AND TERMINATION 22.1 Legal Actions 22.1.1 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. 22.1.2 Applicable Law The laws of the State of California shall govern the interpretation and enforcement of this Lease. 22.2 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. 22.3 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: 22.3.1 The failure of Lessee to comply with the provisions of Article 8 related to the design and construction of Required Improvements. 22.3.2 The failure of Lessee to operate the Theater in compliance with the 28 0 0 provisions of Article 7 related to frequency and quality of performances and events. 22.3.3 The failure of Lessee to maintain the Property as specified in Article 9. 22.3.4 The failure of Lessee to restore or repair the Property in the event of damage or destruction 22.3.5 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. 22.4 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: 22.4.1 Lessor shall have the immediate right to reenter the Property and/or the Theater, take possession of the Property and/or Theater, any and all Equipment, books and records, contracts and any other property. 22.4.2 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 Theater, 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. 22.4.3 Lessor shall be entitled to recover all money payable to Lessee related to the operation and use of the Theater, 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 23 PERMITTED CONTESTS Lessee, at no cost or expense to Lessor, may contest (after prior written notice to 29 0 • 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 24 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 Theater, or for any other lawful purposes, including showing the Property to prospective purchasers or lessees. ARTICLE 26 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, riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Lessee. ARTICLE 26 MISCELLANEOUS 26.1 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 99 n u 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 Theater Foundation P.O. Box 752 Balboa, CA 92661 26.2 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 26.3 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 Theater. Except as otherwise provided, no subsequent change or addition to this Lease shall be binding unless in writing and signed by the Parties. 26.4 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. 26.5 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 31 0 0 Lease shall be binding upon and inure to the benefit of and be enforceable by the respective successors of the parties. 26.6 Holding Over A tenancy for month to month shall result if Lessee remains in possession of the Property or the Theater 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. 26.7 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 of the Theater or otherwise. 26.8 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. 26.9 Time of the Essence Time is of the essence relative to all of the terms, provisions, covenants and conditions of this Lease. [The next page is the signature page.] 32 0 FOR LESSOR CITY OF NEWPORT BEACH Tod W. Ridgeway Mayor for City of N ort Bea FOR LESSEE BALBOA PERFORMING ARTS THEATER FDMNDATION Theater 0 Dated I—&l Qq Dated �f & /6"-( of Directors of Balboa Performing Arts APPROVED AS TO FORM CITY OF NEWPORT BEACH: Dated / "l & - o 7 Robin Clauson Acting City Attorney for City of Newport Beach ATTEST: CITY OF NEWPORT BEACH Dated 9 ' d 0 —0 V LaVonne Harkless City Clerk for City of Newport Beach 33 LEGAL DESCRIPTION All that real property situated in the City of Newport Beach, County of Orange, State of California and more particularly described as follows: Lots 4 and 5, Block 10, Balboa Tract, in the City of Newport Beach, as shown on a map recorded in Book 4, Page (s) 11, of Miscellaneous Maps, in the office of the County Recorder of said County. EXHIBIT B i A377V 5 0 ♦ A �� a 0 1 1 1 W n y OI n Cyl Pkl vO tl i A377V 5 0 ♦ A �� a 0 1 1 1 W n O I 1 1 n i A377V 5 0 ♦ Iq 1 la Ir,. � �� a t i I i I I 1 ] 1 1 1 W O O I 1 1 I 1 I 1 1 t 1 t 1 I t -L b OH►'�3'�70a P Y e +y. ?C ALLEY a b y, ] p eAr 1 P q - y) �r•r 'v 32 • 9 It N✓300 e I 4 Il I p 4 �� a t i I i I I 1 ] U I n 1 I I I a ! I d, Nw Ir -W Iv i �p 2 N A317V y qIV Iq 1 1 4 Il I p 4 I ! l U I 1 I I I der A V♦;Ate d N _ 1 A 2807239 Exhibit C A. General and special taxes and assessments collected with taxes for the fiscal year 1998-1999. Total: $4,018.90 First Installment: 2,409.45 Open Second Installment: 2,009.45 Open Homeowners' Exemption: $0 Code: 07-001 Parcel: 048-135-02 B. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Section 75, et seq. of the Revenue and Taxation Code of the State of California. 1. Covenants, conditions and restrictions (deleting any restrictions indicating any preference, limitation or discrimination based on race, color, religion, sex, handicap, familial status or national origin) as set forth in the document Recorded: in book 153 page 225 of Deeds 2.. Covenants, conditions and restrictions (deleting any restrictions indicating any preference, limitation or discrimination based on race, color, religion, sex, handicap, familial status or national origin) as set forth in the document Recorded: in book 3377 page 501, Official Records Said covenants, conditions and restrictions provide that a violation thereof shall not defeat or render invalid the lien of any mortgage or deed of trust made in good faith and for value. 3. Water rights, claims or title to water, whether or not shown by the public records. 4. Matters which may be disclosed by an inspection or by a survey of said land that is satisfactory to this Company, or by inquiry of the parties in possession thereof. An inspection of said land has been ordered; upon its completion we will advise you of our findings. CLTA Preliminary Report Form (Rev. 111/95) Page 1 of 2 2807239 5. Rights of the parties in possession of said land, under unrecorded leases. Please submit copies of said leases for our examination. . 6. Before issuing its policy of title insurance, this Company will require evidence, satisfactory to the Company, that the vestee corporation named herein: (a) was duly incorporated on the date of acquisition of title hereinafter set forth and (b) is now of good standing in the state where it was formed: Date of Acquisition: October 17, 1995 7. This Company will require a corporate resolution of the board of directors from the corporation(s) vested herein, authorizing this Uansaction and the execution of the documents necessary to complete it in accordance with instructions given to the Company. Note No. 1: The only conveyances affecting said land recorded within six (6) months of the date of this report are as follows: None. Note No. 2: The premium for a policy of title insurance, if issued, will be based on 80%. .1p/lmk cc: Land America Attn: Linda Hamilton Page 2 of 2 CLTA Preliminary Report Form (Rev. 1/1/95) • 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 Restat*,ease 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. 0 Amended and Restatecease 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 0. 0 0 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 THE BALBOA PERFORMING ARTS THEAT ETHEATER FOUNDATION • C AMENDED AND RESTATED LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS • I Tuc�gETHEATER FOUNDATION This Amended and Restated Lease ("Lease"), entered into as of "tee 2-3—September 20044-998 (Effective Date) by and between the City of Newport Beach, a Charter City and municipal corporation ("Lessor") and the Balboa Performing Arts TheatreTheater 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 TMeatreTheater 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"). 0 0 H. Lessee has pursued its responsibilities for Required Improvements outlined in the Original Lease, and has kept Lessor apprised of its Lease to enable Lessee to make the Property viable for present-day use as a first class community mufti -use Theater. 1. 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: • • • 0 0 • 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 consistent with i4_ ?n_i design and aFch14^ t• ._ and, subsequent to renovation, require Lessee to operate a fiFst echos nemmunity Th ^* fi rst 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 Property 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" geneFally refers to the use of the struetui:e(s), and fivtU o Ionated on the Dro eFty as a non profit It al .. d peFfeirming aFt centeF. 1.3 Lessor • Lessor is the City of Newport Beach, a The principal office of Lessor is located Newport Beach, California 92658-8915. "Lessor" shall include all officers, em Lessor. • 1.4 Lessee Charter City and municipal corporation. at City Hall, 3300 Newport Boulevard, For the purposes of this Lease, the term ployees, agents or representatives of Lessee is the Balboa Performing Arts TheatreTheater 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. this Lease, the tenFR "Lessee" shall in..l,.a all OffiGeFS, empleyees, agents ren—N."o„entati Lessee. of Lesee. `^ 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 2 2.2 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 ope-wtion or west! eyes of }". R,e Theatre:Purpose of this Lease. 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, rnaontenanGe of use of the Theatres. Purpose of this Lease. ARTICLE 3 POSSESSION OF PROPERTY 3.1 Quiet Eniovment 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 personal property necessary or conven the Theatere, such as fixtures, i merchandise, trade fixtures (collectively, or placed on the Property shall hold title to the improvements and ient to the operation or maintenance of nachinery, rigging, lighting, staging, Equipment) that have been constructed 3 E • • 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 TERWOPTION 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 (25`") 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 0 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 Orioinal 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 3 RENT/CONSIDERATION 5.1 No Money Payable by Lessee Lessee shall not pay money as rent to Lessor. • 5 • • 5.2 Other Consideration 0 In consideration for this Lease, Lessee covenants that, during the Term, it will: 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 88 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. 5.2.5 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 GentributiensCapital 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). ARTICLE 76 ANNUAI LONG RANGE PLAN, BUDGET! AND OP€-RATIONRECORDS AND MARIZETI PLAN 0 6 .. .. - .....: ARTICLE 76 ANNUAI LONG RANGE PLAN, BUDGET! AND OP€-RATIONRECORDS AND MARIZETI PLAN 0 6 0 0 n LJ Lessee shall prepare, and submit to the -Lessor, a Lona Range Plan which projects fundraising, renovation, marketing and operational expectations and financial needs, from initial planning up to and including active a annual budget operations of the Theatere (EudgetLona 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 year, to reflect changes to renovation plans, fundraising strategies and goals, performances/events, and marketing programs. The Lona 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: p) fundraising needs and efforts, including a report on fundraising efforts for the prior year: 00 schedule for completion of Required Improvements: NO 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 firs*. ��adgetLong Range Plan shall be adopted, and submitted to Lessor, within si*thirty (630) days of adoption or anv material modification.afto; the €ffe4ve Date.g�—fin F- 1 64 67.2 Seatents-e#Annual Budget Lessee shall prepare and submit to Lessor an annual budgetThe JBudget which shall be based on the Long Ranae Plan and indicate more specifically the expectations and financial needs and sources for the current fiscal vear. The Budget shall specify in reasonable detail (as appropriate given the status of renovation), (i) the proposed Fates and ch^ s for the se of the T-heatr� r•` the r...,.., ..rte., .,, ,.:, balance in all funds and accounts maintained by Lessee;; (iii) all projected revenues and sources of funds for the fiscal year,, (fYY) the expenditures proposed to be made by Lessee in fulfilling its obligations pursuant to this • 7 0 • 0 0 0 - .... . lime - - fifteen 05) 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 itemizing all of its revenues and expenditures for that fiscal year. .. .. W, I'MORMININ "NOWIMM" WIN 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 Campaign9Rtribatieas 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. 19-7.5 Audit 9 0 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 1 87.1 Permitted Use The Property shall be used primarily for the operation of a first class sinal and P rfoFming ahr ^entercommunity mufti -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 eivie, GhaFitable, edunational and 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 98.2 (Seismic Retrofit) and before completion of Required Improvements subject to issuance of a Special Events Permit by Lessor. 1 57.2 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. 0 10 • I 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. 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 irst class community multi -use Theatere. 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 0 10 0 0 be withheld at Lessor's sole discretion. 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 rlavalnnmanf nnnrnvnk nnrl ncrmifc ren dre l k. , TSL _ I= -4 7n -4: 86- 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 0 9 • 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. 79.8.3 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 98.1 Lessee's Obligations The Property requires substantial renovation and rehabilitation to be used as, or considered, a f;«+ elass oemmunity Ttio t+first class community multi -use 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 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 0 12 0 0 Lessee shall prepare, and submit to Lessor for approval, a --proposed • sConceptual Design Plans for the design; and f construction, umi�,,s ing and equipping of the Property for use as a first class community multi -use theatm-Theater (Conceptual Design Plans). -The Conceptual Design Plan 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 layoutand d eeiga; (2) stage and dressing room layout and design (3) lobby and concession area-desigRlayout; (4) exter'er design and tFeatme t• 74 sound and PF9jeetion ..torn, ; mi lights. systems and 'fess ^n• (9) public area layout design and tFeat.. en ; and Q(19) stage, eFGhestFa pit and Fell down baekdFOp design and tFeatrman . 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 fiFst elass eammun4y thea4first class community multi -use Theatere 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. Feasanably reRsistent with the Guidelines for the 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. 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)^ecs,G;^t r;c, and—exterior lighting Pplans and design; (2) Gpe6 is color, material, treatment and design of all interier and exterior elements; (3) sound and prosection systems: (4) design 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. • W_ am 1 88.65 Building Permits Lessee shall apply for all necessary building permits from Lessor withiR one (1) year after the F=#eGtbve Date 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 Ffinal-Design Development Plans-aad Lessee shall have the eptinFinal Pians and suitability for that purpose. 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 F4naQesian Development Plans and SpeGifiGations, 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 Design 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 1 88.7 Schedule for Required Improvements ImprovementsLessee shall submit plans, diligently pursue their approval, and begin construction of Required .. . the following withiR sixty (60) days after approval of all �eqw'Fedl building peFmits by Lessor and- juNsdir,tion ever the Property. Lessee shall diligeRtly Pursue GORStFUGUOn of the Conceptual Design Plans 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 Permit and Development Plan Review Design Development Plans One hundred eighty (180) days after approval of CDP Complete Building Permit application One hundred eighty (180) days after approval of CDP Begin construction Upon reaching 70% of budget 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 BLiildinq Department Complete construction One (1) year and six (6) months after issuance of building permits 15 • 0 98.8 General Requirements 98.8.1 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 R28.8.2 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 Plan and SpesifcaNens. Lessee -shall provide PROP with h' fhl repeds en the status of the- Fenevatmen 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. 1 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 4-9-9 REPAIRS AND MAINTENANCE Lessee recognizes that the T#eatreTheater 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 0 9 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 104 STATUS AND MANAGEMENT OF LESSEE 104-.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. • 9 0 1 140.3 Employment of Staff During the Term, Lessee shall use its best efforts toemploya 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 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 facade of the Theater to the maximum extent feasible. Tf,, tYCTheater. as well as the Guide"Res f9F the Rehabilitation of HisteF;G 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 1 132.1 Public and Private Utility Services Lessee will pay all charges for all public or private utility services and all sprinkler 0 18 0 • 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 Pavment 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. L� • • ARTICLE 143 143.1 Indemnification LIENS 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 TheatreTheater 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. 1 143.4 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 154.76 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. 154.2 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. 1 154.4 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. 1 154.5 Waiver of California Civil Code Section 1542 Section 1542 of the California Civil Code states: 21 • 0 0 • 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. 164.6 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 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. 165.1.1 Comprehensive General Liability in an amount not less than fivetwo 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 0 contributing with any insurance or self-insurance maintained by • Lessor or Lessee. Any third party permitted to use the Property 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. 1 156.2. 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 0 0 • 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 1-76 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 167.3, 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. 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, (ir) the costs of restoration and repair are estimated to exceed fifty percent (50%) of the then full replacement cost of the Property (excluding land costsivalue), 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 17-6.4 Application of Insurance Proceeds In the event that Lessee is required to restore the Property pursuant to Section 17-6.2, proceeds from policies of insurance required by Article 1135 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: 17-6.4.1 Lessee shall furnish to Lessor satisfactory evidence to Lessor of the total cost of Restoration pursuant to Section 17-6.2. 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. 174216.4.2 Assuming satisfaction of the conditions of subsection [17-6.4.11 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. 17-6.4.3 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 167 EMINENT DOMAIN 1 167.1 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. 176.2 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. 167.3 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. 176.4 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. 176.5 Allocation of Award — Partial Taking Any Award in a Partial Taking shall be distributed by escrow in the following order of priority: 167.5.1 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; 176.5.2 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. 1 178.6 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 Taking 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 0 0 9 • 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. is ARTICLE4019 LEASEHOLD MORTGAGES Lessee shall have no right to encumber its interest in this Lease, the Property or the T#eatreTheater 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 17-6 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. 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 240.1. ARTICLE 221 REPRESENTATIONS 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 Theatre Theater. 221.1.2 Lessor has the power and authority to enter into this Lease and perform all the obligations of Lessor hereunder. 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 1 232.1 Legal Actions 232.1.1 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. • 29 0 • 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 87 related to frequency and quality of performances and events. 223.3.3 The failure of Lessee to maintain the Property as specified in Article409. 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 254 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 TheatreTheater'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 Is 0 • • riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Lessee. ARTICLE 27-6 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 32 • 1 276.2 No Claims Against Lessor u 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 TheatreTheater 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. 1 267.7 No Partnership 0 is 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 • 0 • I of the TheatreTheater or otherwise. CJ 1 267.8 Federal Funds Provisions 9 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. MayerRidgeway Mayor for City of Newport Beach FOR LESSEE BALBOA PERFORMING ARTS THEATRETHEATER FOUNDATION Dated 0 34 Dated DayRa RettitNancy Gardner ; Fesi en Chairman, Board of Directors of Balboa Performing Arts Theatere Foundation APPROVED AS TO FORM CITY OF NEWPORT BEACH: 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 Theate 35 • . STATE OF CALIFORNIA }ss COUNTY OF } • • On , before me , personally appeared , 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 : DeGeMbeF 3. 1999 No. of Pages 32 Other Signatures not Acknowledged: 1 0 APR 2 3 2002 AGENDA ITEM 13 C-324'9 Cash TO: Mayor and City Council FROM: Sharon Wood, Assistant City Manager SUBJECT: Balboa Theater Rehabilitation Project Recommendation 1. Direct staff whether to enter into negotiations for City acquisition of 111 Main Street. 2. If the City Council chooses to purchase 111 Main Street, direct staff to amend the Lease Agreement with the Balboa Performing Arts Theater Foundation as follows: a. Add the western third of 111 Main Street; b. Require the Foundation to contribute $200,000 towards the purchase of 111 Main Street; c. Require the Foundation to separate 111 Main Street into two shell buildings meeting Building Department requirements; and d. Add fundraising and construction milestones. Background The City Council discussed this project and the potential for additional City participation, through acquisition of the adjacent property at 111 Main Street (Orange Julius building), at a study session on February 26, 2002. The minutes and report for that meeting are attached. No action was taken, but Council members requested additional information from the Balboa Performing Arts Theater Foundation, including a business plan, what the Foundation could accomplish at various levels of fundraising success, and a cost estimate to bring the Theater to a shell exhibit. The Foundation has prepared a new Strategic Business Plan, which includes the information requested by the City Council. 0 0 Discussion The Foundation's plan provides information on community benefits of the Theater, market analysis, organization, fundraising, a financial plan, risk analysis and schedule. The construction schedule on pages 24 and 25 of the plan provides answers to the specific questions raised at the study session in February. The estimated cost of the Theater shell without the basement is $1,510,000. Construction of this phase and the improvements to the Orange Julius building could begin when the Foundation has $2,030,000. Completion of the Theater would not be started until an additional $3,440,000 is raised. As of March 30, 2001, the Foundation has a cash balance of nearly $2 million. In addition to a business plan for renovation and operation of the Theater, the plan provides an economic analysis of the City's participation in the project, including purchase of the Orange Julius building. The Foundation's commitment to contribute $200,000 towards acquisition of this building, made by board members at the February study session, is repeated in the business plan. Therefore, the analysis assumes an additional City investment of $1.4 million, making the City's total investment in the project $1.88 million. Staff notes that the City's investment would be over $2 million, as the City has agreed to pay plan check and permit fees for the renovation project. The Foundation's analysis also assumes that the Foundation will lease only the western one-third of the Orange Julius building, leaving the City with the asset of the eastern two- thirds of the building. The analysis suggests that the City could sell this asset for $1 million, approximately two-thirds of the assumed purchase price. Staff notes that the City's return on the eastern two-thirds of the Orange Julius building likely would be less, due to interior changes needed to make the building useable after its division. The Foundation's budget includes the basic work to divide the building in two (including an exterior masonry wall for each `hew" building), but does not include costs to relocate bathrooms and a stairway that may be necessary, depending on the use of the City's portion of the building. Even with interior changes, the City's investment in the project would be reduced to approximately $1 million, less than the Foundation's estimate of the Theater's value after renovation, $1.5 million. As a contingency plan in the event the Theater is not successful, the Foundation's plan shows that the City could convert the Theater into a retail building that would provide net annual income of $124,000. At a 9% capitalization rate, the Theater building's value would be approximately $1.3 million. The City also would own the western portion of the Orange Julius building, with a value of approximately $500,000. Conclusion Staff agrees with the Foundation that the Theater and 111 Main Street properties would have value in the future, even if their uses were changed, and that this reduces the City's risk in additional participation in the project. In addition, the Foundation's plan discusses many other economic and community development benefits that the Theater project 2 0 0 could provide to the City and the community (pages 7-9). These benefits were the City's original reason for working with the Foundation on purchase and rehabilitation of the Theater. Staff believes they are still valid, especially as the Foundation has quantified these benefits. The difficult task for the City Council is to balance the Theater's benefits to the community and the projected value of the properties against other community needs, and decide whether to make an additional investment in the Theater project. 1 0 f STRATEGIC COUNCIL AGENDA NO. 15 0 0 STRATEGIC BUSINESS PLAN BALBOA PERFORMING ARTS THEATER FOUNDATION 707 East Balboa Blvd., P.O. Box 752 Newport Beach, CA 92661 Prepared by the BPATF Board, BPATF Staff, And Community Volunteers Revision 3 April, 2002 a 9 TABLE OF CONTENTS 9 Page Number ExecutiveSummary ..........................................................................................................................1 Descriptionof Project.......................................................................................................................3 • History, of Theater. ..................................................................................................................... 3 • Mission and Vision....................................................................................................................3 • Drawings....................................................................................................................................3 CommunityBenefits.........................................................................................................................7 • Benefits to Balboa Peninsula....................:................................................................................7 • Benefits to the City of Newport Beach......................................................................................7 • Orange County Benefits.............................................................................................................9 MarketAnalysis ......................................... ....................................................................................... 9 • Need for a 350 Seat theater........................................................................................................9 • Marketing Approach................................................................................................................10 • Sales Plan.................................................................................................................................11 • Typical Productions.................................................................................................................11 • Theater Rental Opportunity .....................................................................................................11 • Corporate Uses.........................................................................................................................12 • Future -Satellite and Digital Applications.................................................................................12 • Revenue and Cost Forecast......................................................................................................12 • Fundraising Plan......................................................................................................................14 • Capital Campaign.....................................................................................................................14 • Annual Fund.............................................................................................................................15 • Support Guild Activities..........................................................................................................15 Organization....................................................................................................................................16 • Broad -Based Community Support ...........................................................................................16 • Local Business Involvement and Support ................................................................................16 Boardof Directors...................................................................................................................16 • Staff/Volunteers.......................................................................................................................17 TheDivas........................................................................................................................................18 FmmancialPlan..................................................................................................................................18 • Construction Cost Estimate-Theater........................................................................................18 • Renovation Cost -Orange Julius Bldg.......................................................................................21 . Annual Operating Costs...........................................................................................................21 • Cash Flow Analysis..................................................................................................................22 • Return of Capitol.....................................................................................................................22 • Contingency Plan.....................................................................................................................23 RiskAnalysis.. ........................................................ -- ... .............. ......... ............ ..................... 23 • Principal Risks.........................................................................................................................23 • Risk Management Plan............................................................................................................24 Scheduleof Activities.....................................................................................................................24 • Construction Schedule.............................................................................................................24 • Operational Milestones ............................................................................................................25 APPENDICES.................................................................................................................................26 A. Evidence of Community Support (letters) B. Curricula Vitae -Key personnel C. Construction Schedules D. Financial Schedules E. BT -2000 Donors F.WME5IXPortIlPdpw{Mb hgfti �AV A•FYnd1.9� R, Executive Summary The Balboa Performing Arts Theater Foundation is a non-profit organization created for the purpose of restoring and operating the historic Balboa Theater. The theater is currently undergoing renovations, which, when complete, will allow it to operate as a performing arts theater offering theater, musical theater, dance, music, children's productions and film. It will be available for rental by both non-profit and for-profit organizations. It will operate an arts education program for the enrichment of children and adults. It will fulfill a critical role in the revitalization of the Balboa Peninsula by creating a unique entertainment venue in the area. The theater building is owned by the City of Newport Beach and is leased to the Balboa Performing Arts Theater Foundation for twenty-five years with no annual fee. The current lease will expire in 2023. In the initial concept, the Foundation planned to renovate the existing theater structure to create a new venue. Subsequent engineering studies revealed a high cost and technical difficulties associated with this plan due to the need to create a basement for dressing rooms and toilet facilities. This revised plan is predicated on purchasing the adjacent building (711 E. Balboa Blvd.) that currently houses an Orange Julius franchise and other retail space (the "Orange Julius Building"), using the westerly one-third of that building for the required facilities, and eliminating the need for the basement. This plan requires the city of Newport Beach to invest an additional $1.4 million dollars to purchase the Orange Julius Building for lease -back to the Foundation. This, when added to the original investment of $480,000 for the theater, will make the City's total investment in the project equal to $1.88 million. The Foundation will contribute $200,000 to the purchase price of the Orange Julius Building. Furthermore, the Foundation plans to spend $4 million renovating the theater and an additiogal $300,000 upgrading the adjacent portion of the Orange Julius Building. At the conclusion of the construction program, the City will own two properties with a market value of approximately $3 million: $1.5 for the Orange Julius Building and $1.5 for the Theater valued as a theater. If the City sells the eastern two-thirds of the Orange Julius Building for $1.0 million, its total investment would be reduced to $880,000 on property having a market value of $2.0 million. If for some unforeseeable reason the Theater does not make it, the Orange Julius Building can be sold as a stand-alone facility, and the Theater can be converted to a commercial use. At that time the City would have two properties valued at $1.8 million; the westerly one-third for the Orange Julius Building valued at $0.5 million and the Theater valued as having a commercial use at $1.3 million. The bottom line is, that if for some reason the theater does not make it, the $1.8 million market value of the properties owned by the City, will be $920,000 greater than its $880,000 investment. F:4PabmRMitssrFwMmn�11F8n PY�Nw9MOLbc 1 [7J( 0 0 These capital payouts do not include the revenues the City will receive from expanded taxes. The theater's stabilized annual spending (year 3) of $753,000 is expected to generate additional tax receipts for the City. For every dollar of theater revenue, experience indicates an additional $1.85 of revenue accrues to local restaurants and other businesses. Indirect spending is typically $1.89 per dollar of theater expenses. The combined sum of these additional income streams is $2.992 million. In other words, the impact of the theater is to cause an additional $3 million to be spent annually in Newport Beach. In addition, as part of the greater Newport/Balboa Peninsula improvement plan, the existence of the Theater as a dynamic business force in the area will cause property values to increase in the surrounding area, further increasing the property tax basis for the peninsula. The goal of the Balboa Performing Arts Theater Foundation is to renovate the 1927 building and reopen the theater as a presenting and producing venue. With a seating capacity of 350, its fust year goal for audience is 100 performances at an average paid attendance of 60% or 21,000 attendees. Each year following the fust, the goal will be to offer 150 performances with average paid attendance of 31,500. Paid performances and rentals are projected to cover 80% of the annual operating budget by the second year. In addition, the Diva Support Guild is committed to raising a minimum of $100,000 per year, and the Foundation's Finance Committee has a long-term plan for establishing an endowment fund to enhance the Theater's ability to offer educational and community benefit programs. F.Ymw`6LBdwPnkmipM§ilpirfoun6GeX�0.1FSPYPYnAa90{@doe 2 6 Description of Project • History of Theater The Balboa Theater was constructed in 1927. Originally known as The Ritz, it opened as a vaudeville theater complete with an orchestra pit. In the 1930s, the theater was modified to present movies. In the 1980s, competition from nearby cinema megaplexes began impacting the economic viability of the theater. Attendance declined and the Theater was closed in 1992. In 1996, a group of local citizens under the leadership of Dayna Pettit came together to establish the Foundation, for the express purpose of renovating the theater and returning a valued asset to the community. In 1998 the City of Newport Beach acquired the property for $480,000 and leased it back to the Foundation. In 1999, two local firms committed to renovate the theater at cost, foregoing any profits on behalf of the Foundation. The firms are DMJMH+N, a nationally known architecttengineering firm with extensive entertainment experience for clients such as Warner Brothers Studios, Disney, Universal Studios, Edwards Theaters, etc.; and ALY Construction, a specialist in the construction of new theaters and the renovation on existing properties. ALY's client base includes hundreds of theater projects throughout the United States for clients which include AMC, Regal Cinema, Edwards, United Artists, Brendan, and others. • Mission and Vision The Mission Statement for the Balboa Performing Arts Theater is: "To create an intimate venue for live performing arts, film, and arts education activities to meet the needs of our surrounding Orange County area." Our vision is: "We will create an artistic jewel on the Balboa Peninsula where audiences will enjoy superlative performances of theater, musical theater, dance, classical and contemporary music, cinema, and children's fare. We will provide arts experiences that provoke laughter, tears, questions, perhaps answers, memories, and lively entertainment for audiences of all ages. With an audience capacity of 350, the Balboa Performing Arts Theater will attract audiences who value the intimacy and atmosphere of sharing in the personal and communal act of performing art." • Drawings The drawings which follow illustrate how the Foundation and its architects have brought to life the vision of an "artistic jewel on the Balboa Peninsula." Figure I is a rendering of the exterior (front fagade) of the theater, showing how the historic element of the theater FhaMtSpdvNwbeOUPybnyq MiMYrkuMOx�IDIlF8Ee1 WHIw901-02Coc I 0 r� will be maintained. Figure 2 is a rendering of the new theater lobby, which will feature a wall sculpture commemorating major donors. Figure 3 is a plan view of the theater showing the seating layout which provides unobstructed, intimate views from any location. Figure 4 is an interior elevation view that shows the use of stadium seating constructed on a flat floor. In the unlikely event the theater cannot maintain a successful operation, the seating can be removed and the theater building converted to a retail or commercial tenant. Figure 5 and 6 show views of the auditorium and the stage. Figure 1: Rendering of Front Facade of Theater Figure 2: Rendering of the Lobby F Wfe�4'BeEoe PeM mg Aai M!FUr SPANS PYn 3W-0 Um 4 Figure 3: Plan View of Theater Showing Seating Layout Figure 4: Interior Elevation View Showing Stadium Seating c w��esmenm.,aetae aum�m�nemm.wcwnuan�essre aeeca,a wmcm 5 0 0 Figure 5: View of Stage Figure 6: View of Auditorium F Ww�aw�.nmcerwe vam��pHemeee, Feu�u®neraix saa ctr.rw op oz eoc 6 In addition to the unique architectural treatment of the theater, the Foundation's engineers have created a structure which meets current codes and seismic requirements (the existing theater did not) and which has the electrical and mechanical features to handle both cinema and live performances, with rapid conversion from one format to the other. Also the design incorporates provision for expansion to the latest new digital/satellite technologies at a future date. Community Benefits • Benefits to Balboa Peninsula The Balboa Theater has been an integral part of the Balboa Peninsula for nearly eighty years. It has a tremendous emotional appeal to thousands of Southern Californians who have fond memories of visiting the Theater while spending Spring vacation in Newport or on Balboa Island, or during family vacations in the area during the summer. The Theater has also been a key element in the entertainment offerings of the Peninsula, along with the Fun Zone, the historic Balboa Ferry, the Pavilion, and the Pier. When the theater renovations are complete, it will operate as a performing arts theater offering performances in theater, musical theater, dance, music, children's productions and film. It will be available for rental by both non-profit and for-profit organizations. It will operate an arts education program for the enrichment of children and adults. It will fulfill a critical role in the revitalization of the Balboa Peninsula by creating a unique entertainment venue in the area. In addition to the esthetic contributions the theater will bring to the Peninsula, it will be the centerpiece of the economic revitalization of the area. Since it is within "walkable" distance for many hundreds of local residents, it will reduce traffic in and out of the area for those residents who would otherwise go off the Peninsula seeking entertainment. More importantly, it will attract visitors to the area, where they will shop in local stores and dine in local restaurants. Studies indicate that to encourage spending by visitors and tourists, local attractions must be such that a stay of at least 4 hours is likely. The Theater provides this balance point to the other attractions on the peninsula. • Benefits to the City of Newport Beach Principal benefits to the City of Newport Beach are economic. Through the volunteer and non-profit efforts of the Foundation, the City will acquire a multi-million dollar asset, which offers a high rate of return on the investment. In addition, the Theater will expand tax revenues for the City, reduce urban blight, and increase property values in the community. Fl..045036.*.%�ftb w Aro3Ael,F..,dM. PA1F'.dYPY,Pn3q{2tlx This plan requires the city of Newport Beach to invest an additional $1.4 million to purchase the Orange Julius Building for lease -back to the Foundation. This, when added to the original investment of $480,000 for the theater, will make the City's total investment in the project equal to $1.88 million. The Foundation will contribute $200,000 to the purchase price of the Orange Julius Building. Furthermore, the Foundation plans to spend $4 million renovating the theater and an additional $300,000 upgrading the Orange Julius Building. At the conclusion of the construction program, the City will own two properties with a market value of approximately $3.0 million: $1.5 million for the Orange Julius Building and $1.5 million for the Theater valued as a theater. The City could immediately sell the eastern two-thirds of the Orange Julius Building. Assuming that the sale nets the City $1.0 million, the City's total investment would be reduced to $880,000 on property having a market value of $2.0 million. To protect the City's investment, the Foundation has a contingency plan whereby if the Theater is not successful, the balance of the Orange Julius Building can be sold and the theater can be converted to retail or commercial use. In this case, the market value of the properties owned by the City ($1.8 million) still will be greater than its $880,000 investment. The total economic impact of the Balboa Theater after income and expenses have stabilized in year 3 will be comprised of the following spending categories: Direct Spending: ' $753,000 This is the amount the theater will directly spend on all personnel and operating expenses (see Year 3 in Table D-1). 2. Indirect Spending: $1,423,170 This is the amount of spending that occurs as personnel use their wages and as vendors use their receipts to purchase goods and services. A multiplier of 1.89 is used to estimate indirect spending; hence, the indirect spending estimate for the Balboa Theater is the direct spending of $753,000 by 1.89 (see Year 3 in Table D-1). 3. Indirect Audience Spending: $815,850 This is the amount of spending that occurs as audiences purchase restaurant meals, drinks, transportation, etc., over and above the cost of their tickets. Using the multiplier of 1.85, indirect audience spending is estimated by multiplying total admission revenues of $441,000 by 1.85 (see Year 3 in Table D-1). Note that these multipliers are obtained from the U.S. Department of Commerce, Economic and Statistics Administration, Bureau of Economic Analyses, Regional Input - Output Modeling System. F."mMdS�bN�6nMMmmYMi9tlx%buM,lbn`BPAlF3R9 %nlNve W@.tlo� 0 • Summing these spending categories gives the following total estimated economic impact: Total Direct Spending: $ 753,000 Total Indirect Spending: 1,423,170 Total Indirect Audience Spending: 815,850 Total Economic Impact: $2,992,020 It is needless to say this will have a significant economic impact in Balboa. The City will receive a healthy increase in tax revenue, the businesses will be healthier and, in conjunction with the Balboa Peninsula improvement plan, the Theater will act to drive up property values in the surrounding area, further increasing the property tax base on the peninsula. It is not unusual for the restoration of a theater to be used as the stimulus for the economic rebirth of a deteriorating neighborhood. Many cities have used a theater as an anchor for their downtown rejuvenation projects. Cities such as Pasadena, Santa Ana, Glendale, Long Beach, Coronado, Alhambra, Monrovia, Concord, Modesto and the granddaddy of them all, 42ad Street in New York, are but a few who have rejuvenated theaters as part of major renovation projects. • Orange County Benefits The Theater will provide an intimate venue for live performing arts, film, and arts education activities to meet the needs of our surrounding Orange County area. In size, geographic location, and scope of services to be provided, the Balboa Performing Arts Theater fills a needed gap in Orange County's entertainment market. Market Analysis • Need for a 350 -Seat Theater The ticket -buying audiences --the market --for performances at the Balboa Theater will come predominantly from the greater Newport Beach area, including Costa Mesa, Huntington Beach, Laguna Beach and Irvine. Each of these communities is represented in the Foundation's mailing list of 3,500 persons and organizations who have participated in Balboa Theater activities. F:L�fBAO§e�k9epuF,M�IpMik+., FWMLuf8FF7F9n,Phtlbi9 dO2Erc Within each of these communities, there are specific constituents to which we will direct marketing efforts such as schools, senior groups, performing groups, and tourists. The Foundation will tailor its marketing instruments to address and create an interest for the enjoyment of performances at a small venue. The Theater will also offer performances not available elsewhere in the community. Orange County rightly boasts of its wealth of large and mid-size theaters with national reputations for excellence, complete with tremendously loyal audiences. The Theater does not intend to compete with these institutions, but rather to complement their work by offering performances best -suited to a small, intimate, venue. With the growing popularity of alternative performance venues such as coffee houses, cabarets and store -front theaters in Orange County, there is a steadily -increasing interest in more personal arts experiences. Accordingly, the Foundation plans to market to audiences who value the intimacy of a 350 -seat live performance theater. • Marketing Approach The theater has also begun to foster strong connections with local schools and universities, in the planning and production of special projects, festivals and performances. The students and faculties of these partner schools will become a targeted Balboa Theater market for ticket sales and arts education activities. Demographic information on the communities within the market range of the Balboa Theater indicate an increasing number of families with young children and seniors interested in participating in the performing arts. The Balboa Theater's programming and arts education activities will embrace both these groups with intriguing, high-quality performances and affordable ticket prices. The Theater's Education Program is considered by marketing specialists to be an excellent method for increasing awareness and use of the Theater. Links to local colleges/universities (such as Chapman University), whose curricula include film and theater, are being established. The Newport Beach Film Festival wants to use the Balboa Theater as one of its major venues, and the Foundation Plans to work closely with them on this important event. Other "festival" type events, including cross marketing with local retailers and restaurants, can enhance theater revenues as well as increase Newport Beach tax revenues. Studies show that "length of stay" is the key to spending in the local community. The Theater Board is actively developing plans for pre -show and post -show experiences. Other examples under consideration include harbor boat tours, dinner cruises followed by theater, and so on. F:YemMSWYmOdBEa PvkM VMT FaNmn`8PAW9 F► 30{Oidoe ]0 P • • Sales Plan n LJ Ticket sales will be marketed through a variety of techniques including: An annual season brochure outlining all major events; direct mail to specific markets for individual performances and festivals; media advertising in newspapers, cable television, and radio as appropriate; and marketing through City of Newport Beach publications. Theater rentals will be marketed primarily through mailings to local performing groups and meeting managers. Tickets will be sold singly, or through a "Create -Your -Own -Subscription" program to offer a discount to major buyers. Tickets will be sold for Balboa Theater sponsored events and productions, as well as those by outside groups renting the theater. Balboa Theater services will also include its arts education program, offering courses, workshops, and lectureldemonstrations both in the theater and in local schools and community centers. Fees will be charged for each of these activities. The Shakespeare program currently offered by the Theater is an example. Pricing levels will be set by senior staff, with Board approval, based upon current market trends, sponsorship contributions, and expenses, with a constant goal of maintaining a balance between affordable ticket prices and recovery of overhead costs. • Typical Productions The primary programs offered by the Theater will be live performances in theater, musical theater, dance, music, children's productions, and cinema. In addition, there will be readings or lectures by nationally known authors or lecturers, including readings of original works. • Theater Rental Opportunity As Orange County grows in population and in cultural diversity, there is an increasing need for professional venues for young and blossoming performing groups, as well as alternative spaces for mature companies to experiment with new or different art without the overhead required by a large hall. Only ten years ago, Irvine Barclay Theater was built, in part, to address this growing need. According to a Los Angeles Times report in January 2001, the Barclay is now solidly booked and unable to accommodate all the requests it receives for rental dates. Estimates for the first years operating budget for the Balboa Theater are based on a schedule of 30 rental and 70 presented performances. The Newport Film Festival is a potential renter. i:`uamWANnh'BeDn P#&d ftT Pw�AW Al P� 504�Oz 11 'q • Corporate Uses The theater will be promoted for corporate uses through the formation of a "Corporate Affiliates" program. This will commence with the current corporate sponsors of the Theater and with those corporations represented on the Board of Directors of the Foundation. The use of the theater as a venue for special corporate meetings, annual meetings, and technical/scientific meetings will be promoted through local branches of professional societies such as the American Institute of Architects (AIA), the American Society of Civil Engineers (ASCE), and others. Local universities are another potential user for larger, professional gatherings which can benefit from the theater's state-of-the- art audio-visual equipment. • Future -Satellite and Digital Applications We are on the cusp of a new revolution in digital entertainment. The technology exists today to distribute high quality cinema, sporting events, or interactive educational or corporate events via wireless technology. Since the Balboa Theater is located in the center of a high technology community, it is to be expected that the Theater can lead innovation in satellite, wireless -based, and digital performances. These can include corporate programs, educational television offerings, or paid performance sporting or entertainment events. The Theater is designed to permit the installation of the equipment needed to provide this capability. • Revenue and Cost Forecast There are four principal sources of revenue: programming (ticket sales), rentals and concession income, unrestricted fundraising (underwriting and sponsorships), and interest. Future sources of income such as those resulting from future satellite/digital programs are not included here. Revenues and operating costs are summarized In Table 1. Details and assumptions are shown in the Appendices. FW,xdG0.9`migx'BEuPOWa ftt ft �Ws a PWNPW3M 12 0 0 TABLE 1 OPERATING ACT VITIES (DOLLARS IN THOUSANDS) YEAR During Year 1 after Year 2 after Year 3 after Construction Completion Completion Completion INCOME: Programming 15 294 382 441 Rentals/Concessions 0 38 51 57 Unrestricted fundraising 107 100 100 100 Interest 3 3 3 3 SUBTOTAL 125 435 535 601 EXPENSES Programming 24 150 200 225 Fundraising/Special Events 23 30 30 30 Endowment Campaign 24 + 0 0 0 General/Administrative 172 455 490 496 SUBTOTAL 243 635 720 753 NET ACTIVITY <118> <200> <184> <152> Number of Performances: 4 100 150 150 Typically Performing Arts Theaters do not operate at a profit. As shown in Table I above, in the third year after completion the theater will be operating at a $152,000 loss. It is felt that this loss will be representative of the following years as well. There is no doubt that the Divas, who are aheady raising over half of this amount without the theater even being open, will be able to significantly reach if not totally raise this amount. In a 1998 report prepared by A. Gray Anderson Center for Economic Research at Chapman University and The Orange County Business Committee for the Arts, Inc., total income and total expenses for Non-profit Arts Organizations in Orange County were analyzed. The results were that earned income averaged only 59% of Total Expenses and Contributed income made up the difference. What this points out is that there is a continuing need for fundraising. Currently the fundraising emphasis is on the Capital Campaign for Construction Funds, but after completion of construction there will be continuing efforts to solicit "Contributed" income. (Please refer to the Fundraising section of this Business Plan.) It should be emphasized that board person members are pledged to either give or get a minimum of $5,000 each. Currently there is a 12 -person board and it is expanding to its authorized 25 members. This means that the annual deficit will be covered in-house between the Divas ($100,000) and the board contributions ($125,000). Other fundraising activities will be focused on building a long-term endowment for the theater. cm..mocamo.v«am�ganmwrw�ar�hmaer.nwawozaoc 13 lb 0 0 • Fundraising Plan The Theater enjoys a broad base of local support. Cash contributions to date from all sources amount to over $2 million (see Table D4 in Appendix D). This figure does not consider the untold labor hours donated by volunteer groups over the past six years. Fund-raising for the capital campaign for renovation is comprised of both a direct-mail solicitation program and major gifts campaign guided by a professional consultant. The goal of these efforts is two -fold: First, to raise the balance of the funds needed to complete construction and commence operations; second, to create an endowment fund of $5 million (based on corporate and foundation grants) which will generate an additional $250,000 per year in interest income to expand the Theater's offerings and to subsidize community service efforts such as children's educational programs. To assist in designing a viable fundraising program, the Foundation has collaborated with several industry leaders, board members, and community members. An independent Capital Campaign Planning Study was conducted to assess the potential for the campaign and determine an appropriate fundraising strategy. Through this collaborative effort between volunteers and professionals, a fundraising strategy has been developed and will evolve as our organization grows. The strategy is basically broken down into three areas: 1) Capital Campaign, 2) Annual Fund, and 3) Support Guild Activities. Once the renovation is completed, the Foundation will add Endowment Growth as the fourth area. A brief summary of the comprehensive plan is described below. • Capital Campaign This campaign is complex and involves a gift model matrix as well as an overall "good old fashioned" public relations and marketing plan. Based on results from the Capital Campaign Planning Study, the Foundation follows a model gift matrix that identifies suggested contribution ranges and the number of donors required at a variety of ranges. A Campaign Steering Committee has been initiated to identify potential major donors/grantees, open doors to provide key prospects, and provide visible leadership and credibility to this program. To date the capital campaign has raised over $2 million. Recent successes include one gift of over $1 million, one of over $300,000, two over $50,000, five over $20,000, one at $15,000, nine $10,000 donations, ten $5,000 donations, and nearly 200 donations in the range of $1,000 to $3,000 each. "In -Kind" contributions of professional services valued at approximately $150,000 have also been received. The capital campaign also relies heavily on marketing and public relations efforts. The Foundation has conducted focus group sessions throughout the community and the overwhelming majority of participants agree that actually showing the public its vision through live performances is a very effective method of sharing the vision. As such, the board has designated funds to be used for a Sampler Series to raise public awareness about the project and the wonderful performances that will be a regular fixture of the theater once it opens. Recent programs include a delightful folk music concert at F:Yaxdtl50T�IM18hocPMm^nYMbiM6Fwtl�n`lPA1F6NMPw9Mffi.4x 14 Iq 0 0 Sherman Gardens, author book signings and discussions, holiday offerings, Shakespeare in Balboa, and an upcoming intimate jazz concert. • Annual Fund As the current mission of the Foundation is to raise funds for the renovation of the historic Balboa Theater, virtually all gifts are restricted for the construction. The Foundation, however, has implemented many fundraising programs that will eventually evolve into an annual campaign to support programs after the theater is in operation. These activities can appeal to a broader donor base and add to the "grass roots" feel of this effort. Current activities include small to mid-size special events such as the annual 5K Run for the Arts and the Balboa Ballroom Dance Bash. The Foundation also required annual board donations and sends out regular newsletters to report progress and appeal for support. Perhaps the most lucrative program is the BT 2000 program whereby 2,000 donors can give $1,000 each to have their names inscribed on an art glass wall designed into the lobby. The BT 2000 program was marketed heavily in late 2000, with an encouraging amount of return. Nearly 200 members of the local community have participated (see Appendix E). The Foundation is planning a new phase of the BT 2000 program to coincide with the construction groundbreaking. • Support Guild Activities The Balboa Theater Foundation has two support groups, the "Stagehands" and the "Divas," that assist in promoting awareness of this important renovation project through fundraising and other activities. The Stagehands, managed by staff, contribute countless volunteer hours providing administrative and special event support. This growing group plays an important role in keeping staff costs down and will eventually evolve into a corps of volunteer ushers. The Divas of the Balboa Theater, managed by a self-governing board, contribute immeasurably to the public relations and financial stability of the Foundation. In less than 3 years this group has grown to include 150+ dynamic women, and men, who are dedicated to the Balboa Theater. Through a myriad of special events, from hometown beach blanket BBQs to glamorous galas, the guild contributes approximately $100,000 per year to the Foundation. During this phase in the organization, these groups play an important role in fundraising and public relations to support the capital campaign. After the theater is in operation, these guilds will play a vital role in reducing financial deficits. u 0 Organization • Broad -Based Community Support 0 In order to be successful in today's entertainment market, a small performing arts theater needs to appeal to a diversity of entertainment needs. It must be flexible and able to respond to the requirements of various media. Most importantly, it must enjoy a strong base of support from within the community it intends to serve. • Local Business Involvement and Support Economic development studies have demonstrated that entertainment venues serve to "anchor" commercial growth and development. In today's economy, where people have more leisure time, entertainment is an important element of community life. If resources do not exist locally, people will travel to locations where they can find entertainment that pleases them. Entertainment venues thus work synergistically with other local businesses (retail stores, hotels, restaurants, parking, etc.) to expand local business revenues and tax revenues. Studies show that for every dollar of revenue received by a theater, an additional $1.85 is spent in the local area for meals, parking, and other expenses. The theater is a "draw" which brings in additional revenue to the community. More importantly, a theater gives a sense of vitality to a community. It fosters other community actions and encourages community support and activity. This in turn creates an atmosphere where other businesses are encouraged to relocate and invest to be part of this new dynamic. The result is an increase in new businesses, new jobs, and a further expansion of the tax base. The Balboa Performing Arts Theater Foundation is a community-based organization that satisfies these requirements. The Foundation sprang out of a deep-seated conviction that renovation of the theater would be a stimulus to the local economy and would assist in the general improvement of the Balboa Peninsula business climate. The strength of this conviction is amply demonstrated by the fact that the Foundation has persevered for more than six years with the same key personnel in the fulfillment of this goal. • Board of Directors The Foundation provides the staff and management expertise to operate the theater. The Foundation functions under the oversight of a Board of Directors made up of distinguished local citizens. The Board currently has twelve members. (Table 2). The Board appoints the officers of the Foundation. Day-to-day operations of the Foundation are guided by an Executive Committee including the President, the Chief Financial Officer, and the Secretary. All board members are recruited on the basis of their capacity F:MltlecrmiW.'Hmc.vawm. "a FWIM/( WAW SW PkAlm3� 16 Iq 0 0 to assist the Foundation in fulfilling its mission. All are affiliated with successful businesses and bring a broad range of business skills and expertise to the board. All are fully committed to the goals and mission of the Foundation. Curricula vitae of key personnel are listed in the Appendix. • Staff/Volunteers The Balboa Performing Arts Theater Foundation is a nonprofit organization which actively solicits contributions and ticket sales to offset its construction, operating, programming and fund-raising expenses. Any annual surplus will be applied toward the following season's expenses. The organization is guided by a Board of Directors whose volunteer members are representatives from many fields including business, education and the arts. Subcommittees of the board are responsible for overseeing specific areas of the organization including the finance committee, the nominating committee, the arts advisory council, and the Divas Support Guild. • The Finance Committee — prepares annual budget for board approval. Approves monthly financial statements prepared by staff. • The Nominating Committee — recruits and recommends new board members. • Arts Advisory Council — prepares a season of performances with Executive Director for approval by full board. Also recommends rental policies and price structures. • Divas of the Balboa Theater — the theater support guild; raises funds through special events and provides social occasions for their members to enhance their experiences at the Balboa Theater. Other Key Staff Include: Jill Forbath. The Foundation has engaged the services of a Marketing/Operations Management Consultant, a person with over 20 years of experience in both business and theater operations. Jill Forbath has her MBA from UC Irvine and has worked in the transportation, housing, computer, and recreation industries in marketing, management, and sales positions as well as running her own business in web design and marketing consultation. Additionally, she has worked as an artistic director in local theater in Orange County performing duties of programming, audience development, fundraising, box office and volunteer coordination, and daily operations. She is a local director, producer, and choreographer and the founder of the 9 year old West Coast Ten -Minute Play Project – a program with a national contest for playwrights and subsequent showcase festival for the winners. At this time, her duties will include daily operations as well as marketing and fundraising events. F1�PeM1„mb0.h1MlaFounEE WAU9x% 3dALdoc 17 20 0 Jennifer Wesoloski. Since April 2001, the Foundation has engaged a part-time Director of Finance, a person with 10 years of experience in not-for-profit accounting, reporting, and management. While working at KPMG Pete Marwick she completed the requirements to obtain a CPA license while specializing concurrently in management and reporting for art organizations and municipalities. She manages business activities, financial and tax reporting activities, and plays a key role with volunteer coordination, fundraising, and programming. The DIVAS In parallel with the formation of the Foundation, in 1999 a group of local residents created the DIVAS SUPPORT GUILD, an auxiliary organization charged with the responsibility to promote the mission and objectives of the theater and to assist in raising supplemental funding to support operations. Officers of the DIVAS are also listed in Table 1. This organization of nearly 150 local residents provides an impressive base of grass roots support for the Theater and the Foundation. It is broadly diverse and representative of the diverse interests of the community. All of the Diva fund-raising events are self-supporting and draw upon local businesses and individuals to underwrite expenses. The Diva organization is entirely staffed and operated by unpaid volunteers so that 100% of the net revenues go to offset the operating costs of the Foundation and Theater. During its first three years of operation, it has raised or forecasts raising $75,000 per year. Once the theater opens, the goal of the Divas will be to double their membership base and to increase their annual fundraising goal to $150,000. Financial Plan • Construction Cost Estimate -Theater The existing 1927 structure has been carefully evaluated and the measures required to bring it up to current building codes standards, make it seismically sound, and convert it to a performing arts theater have been identified. (See Figure 7.) Demolition of the interior construction has been completed and the structure is ready to be renovated. The initial plan called for lowering the ground floor (making a `basement") to create space for dressing rooms and restroom facilities. This approach requires dewatering the site during construction as well as costly bracing and other measures. During the demolition process it was also determined that the electrical service was tied into the adjoining structure, which further complicated the planned approach. The construction cost estimate for this approach is $5.6 million. This is considerably higher than the preliminary estimate of $4 million. As a result, the BPATF Board asked the architect and contractor to explore ways of reducing the construction cost while maintaining the original objectives of the renovation, and also to establish a phased plan of construction which would tie the construction to available funding. F:YmnY'.6NeMt9�Ge� M1M1mmK M 1MM fmdtim'EFAiF bts P4�M 3 ob2eoc is 0 0 At the time these studies were taking place, the adjoining property (711 E. Balboa Blvd.), which houses an Orange Julius franchise and other retail tenants, came on the market. Acquisition of this building would reduce the cost of renovating the theater building by eliminating the need for the basement. Approximately one-third of the Orange Julius Building (on the west side adjacent to the Theater) could be modified to provide the restrooms and other facilities needed by the theater, eliminating the need for the basement. The asking price for the Orange Julius Building is $1.6 million. The City has appraised the property at $1.4 million. In order for the City to purchase the property, the Foundation will contribute the additional $200,000 required. By eliminating the basement, the cost of renovating the theater is estimated to be $4.3 million. Details of the cost estimate are contained in the Appendices. 19 n LJ n U TABLE 2 DIRECTORS AND OFFICERS, BALBOA PERFORMING ARTS THEATER FOUNDATION AND DIVAS SUPPORT GUILD Balboa Performing Arts Theater Foundation, Board of Directors, 2001-2002 Dayna Pettit. President Agent, Cannery Village Realty, Community Leader Jo King, Secretary Broker Associate, Prudential California Realty Bill Wren, V .P. & CFO Chevron Land & Development Co., Retired Yaron Telem, Treasurer President, AIKO Enterprises Co. Ronald L. Baers, AIA Architect, President, Planning & Urban Design Resources Co. Amy Larson Educator, Actress, Financial Advisor Art Gronsky Community Leader Bart Hackley CPA, President, Teton Valley Country Club Stanley J. Kafka Executive, City National Bank Riki Kucheck Professor of Mathematics, Orange Coast College Terry Markowitz President, A la Carte Gourmet Restaurant & Catering Andrew Youngquist CEO and Chairman, ALY Construction Co. Divas Support Guild, Board of Directors, 2001-2002 Eve Komyei Producer Joanne Pavia Assistant Producer Peggy Whitehead VP/Director of Casting Mitzi Wells VP/Director of Community Relations Nancy Lynn Olson Treasurer SP Callaway Secretary Sue Cannon Past President Patti Tomaselli Past President Debbie Newmeyer Co -Director of Act I Debbie Schweickert Co -Director of Act I Joan Bernard Co -Director of Act II Marjorie Powers Co -Director of Act II Darby Manclark Co -Director of Act III Carol Durham Co -Director of Act III Nancy Irvine Co -Director of Act III Denice Mock Co -Director of Act III Carleen Brennan Stage Manager Carmen Christy Stage Manager Sally Hackley Stage Manager Kathy Bambeck Historian Linda Jensen Historian Lana Chandler Playbill Editor/Public Relations Fran Mulvania Playbill Editor/Public Relations F.NOM�lYnMl6Mo�MbmeOMiMYrFanl6'BP,11F9n PiNW 9UI�Ux W 0 0 • Renovation Cost -Orange Julius Bldg. In order to eliminate the basement, it will be necessary to modify the Orange Julius Building. The changes required will be to construct access to the theater, build out the restrooms and other facilities, and separate the electrical services. To provide maximum flexibility, the theater, the modified portion of the Orange Julius Building, and the remaining two-thirds of the Orange Julius Building, each will have its own electrical service and separate walls, to facilitate future subleasing. The construction cost to accomplish these changes is $300,000. Refer to the Appendices for details of the estimate. Not included in this cost estimate is the cost of new restrooms for the Orange Julius Building and modifications to one of the existing apartments on the second floor. 9E Figure 7 Artist's Rendering—Balboa Performing Arts Theater • Annual Operating Costs Annual operating costs can be broken down into three main categories: Programming, which includes artist's fees, arts education, and programming business expenses; Fundraising; and General and Administrative costs. The Foundation operates in accordance with an annual budget which is approved by the Board of Directors. Monthly cost reports are prepared and reviewed by the Chief Financial Officer. In order to keep programs affordable to as a wide an audience within Orange County as possible, program costs are maintained at a competitive level. The Foundation also is committed to support various arts education activities in the local community. As a result of these decisions by • 0 the Foundation, operating revenues alone are inadequate to cover operating expenses. The deficit (around 20%) is supplied by unrestricted contributions obtained through the DIVAS Support Guild and fundraising events. While this is typical for small regional theaters, the Foundation has a long-term goal of making the Theater completely self- supporting through the establishment of an endowment fund which will generate revenues equal to the additional 20% of costs not covered by program revenues. Supporting details concerning historical and projected operating costs are found in the Appendices. • Cash Flow Analysis A month -by -month cash flow analysis has been made for calendar year 2002, and through the end of construction. This analysis assumes that the Orange Julius acquisition proceeds on schedule and that the Phase 1 renovation begins when sufficient funds are available to complete the building shell. Phase 2 will start when funds are available to complete the Theater. Fund raising contributions are included, using estimates based on past historical performance. The rate of expenditures for construction are based on the cash flow needs of the Phased approach, to keep the analysis conservative. The schedules are included in the Appendix. • Return of Capital The City has invested $480,000 to purchase the original Theater building. In addition, this plan requires the city of Newport Beach to invest an additional $1.4 million dollars to purchase the Orange Julius Building for lease -back to the Foundation. This will make the City's total investment in the project equal to $1.88 million. The Foundation will contribute $200,000 to the purchase price of the Orange Julius Building. Furthermore, the Foundation plans to spend $4 million renovating and outfitting the theater and an additional $300,000 upgrading the Orange Julius Building. At the conclusion of the construction program, the City will own two properties with a market value of approximately $3 million: $1.5 for the Orange Julius Building and $1.5 for the Theater valued as a theater. If the City sells the eastern two-thirds of the Orange Julius Building for $1.0 million, its total investment would be reduced to $880,000 on property having a market value of $2.0 million. If for some unforeseeable reason the Theater does not make it, the Orange Julius Building can be sold as a stand-alone facility, and the Theater can be converted to a commercial use. At that time the City would have two properties valued at $1.8 million; the westerly one-third for the Orange Julius Building valued at $0.5 million and the Theater valued as having a commercial use at $1.3 million. The bottom line is, that if for some reason the theater does not make it, the $1.8 million market value of the properties owned by the City, will be $920,000 greater than its $880,000 investment. F.'opKtl�PMampNplleeb kentlYbn`8Yl�1FSbs PY,lNr90lOidx 22 25 0 41 Assumptions for this economic valuation, which are based on current trends in land, theater, and retail costs in the Newport Beach area, are as follows: Theater Land Value in 1998 Building Value in 1998 Purchase Price Land Value Today (5%/year escalation) Building Value Today Market Value of Reconstructed Theater with Seats and Fixtures ($230 SF) Cost to Remove Seats and Convert to Commercial Use ($30 SF) Value of Theater as Commercial Use Rental Income: Retail 6,500 SF @ $2 SF Estimated Expenses Net Operating Income Estimated Value @ A 9.0% Capitalization • Contingency Plan $400,000 80,000 $480,000 $500,000 Nil $1,500,000 $200,000 $156,000 /yr 32,000 $124,000 /yr $1,377,000 The construction cost estimates carry allowances for construction cost contingencies which are typical for this type of project. There is inherent contingency in the operating expense estimates in that operations can be scaled back (within limits) depending on the revenues being realized. The ultimate contingency takes into consideration that, for some unforeseen reason, the theater is deemed to be a non-viable operation. In this case the stadium seating would be removed and the building converted to a retail or commercial facility. The building (along with the adjacent Orange Julius structure) could then be leased or sold. If the properties were sold, the City of Newport Beach would realize a capital gain as described above. If the Theater building was converted to commercial use and leased, it alone would generate $156,000 in annual rents. Risk Analysis • Principal Risks The principal risks for this project are as follows: • Failure to raise funds necessary for the project • Construction cost overruns • Failure to generate required revenues • Softening of the entertainment market • Natural disaster (firetflood/earthquake) ::I�cPoMmniNbiM,brFaMoeon`8PAR9ea flnMedffiAx 23 A 0 • Risk Management Plan The Foundation is committed to the Theater Renovation Project, and enjoys a broad base of community support. Since over $2 million has already been raised, the Foundation's Board is confident it can find sources for the required funds. This risk can be mitigated, however, by the inherent value of the properties. In the event that the project does not go forward, the buildings are located in a desirable location and have considerable market value. Construction cost overruns are not likely given the extent of preliminary engineering and building demolition and testing which have been performed. In addition, elimination of the basement greatly simplifies the construction process and eliminates a major area of potential uncertainty. The construction cost estimates carry line item contingencies to cover possible unforeseen conditions likely to arise in the course of construction. These average 6.5% of the construction cost estimate and are adequate for this project. If the theater is unable to generate the required level of revenues, the first mitigation strategy will be to scale back the level of operations until revenues and costs balance. The Foundation also believes it can attract a level of dedicated volunteer staff (docents and auxiliaries) to reduce general and administrative staff costs. Emphasis can be shifted from performing arts to cinema or outside production companies to further balance costs. The entertainment market is emerging from a period of retrenchment brought about by the recession and over -construction. On the cinema scene, there has been an intense consolidation, with thousands of marginal screens closed throughout the United States. The successful theater today must have stadium seating. At the same time as the entertainment sector is demonstrating renewed vitality, the technology is changing rapidly. Flexibility to handle new media (satellite, digital) is critical. The "graying" of the population, and increased leisure time by the population as a whole, are still the drivers which made the idea of the Balboa Theater viable in the first place. Risks of natural disaster will be mitigated by Builder's Risk insurance during construction and by commercial general and public liability policies during operations. Schedule of Activities • Construction Schedule Construction will require 13.5 months if performed continuously as a single project, but it will be phased as funding becomes available. In this case, the work will be divided into three phases: Phase 1: Building Shell: Complete additional demolition as required, secure the building and make weather -tight with roof, walls, and a flat floor. Phase 2: Building Finishes: Install stadium seating and other tenant improvements 911 0 0 Phase 3: Modify Orange Julius Building In this scenario, construction would not be started on Phase 1 until the Foundation had $2,030,000 in the bank. This breaks downs as follows: Cost of the Theater Shell Without the Basement Cost of the Orange Julius Building Separation and Tenant Improvements(t) Operating Loss During Construction One Year's Operating Loss While Soliciting Funds to Complete the Theater if Necessary $1,510,000 300,000 70,000 150,000 $2,030,000 This (Phase 3) can be done in the first phase or delayed. In any event, the money must be set aside from the beginning to ensure that the building will be separated so the easterly two-thirds can be sold. Phase 2 would not be started until an additional $3,440,000 had been raised. This breaks down as follows: Cost to Complete the Theater $2,850,000 Operating Loss During Construction 90,000 First Season's Operating Deficit 200,000 Contingency 300,000 $3,449,000 A detailed construction schedule is shown in the Appendices. • Operational Milestones Key milestones in the reconstruction of the Balboa Theater are as follows: • March, 2002: Approval of revised business plan • May, 2002: Acquisition of the Orange Julius Building • July, 2002: Revised Plans to City • September, 2002: City Approves Plans • TBD: Raise an additional $1.7 million • TBD + 1 month: Notice to Proceed • TBD + 2 months: Initiate Phase 1 construction • TBD + 5 months: Initiate Phase 2 construction • TBD + 5 months: Initiate Phase 3 construction • TBD + 3.5 months: Theater opens for fust performance The opening of the Theater will be marked by a week-long series of local and Orange County festivities. The inaugural program will signal the transition from fundraising for the capital program to fundraising to create an endowment fund to provide on-going support for the Theater's activities. F:YmiddW3antlkiEoa PahnigMTM1,m FwN�n`�AiF80YPYeAw9 WA2tlx 25 0 0 APPENDICES A. Evidence of Community Support (letters) B. Curricula Vitae -Key Personnel C. Construction Schedules D. Financial Schedules • Table Dl: Three Year Profit and Loss Forecast and Assumptions • Table D2: Construction Cost Estimate—Theater Renovation and Orange Julius Bldg. Renovation • Table D3: Cash Flow Projections • Table D4: Historical Data: sources and uses of funds • Table D5: Six -Month Actuals: Income and Costs • Table D6: FY 2001-2002 Budget Methodology and Assumptions E. BT -2000 Donors w 1:1 1 II II II II �1 1 l 1 ........................................................................................................................................... ..... 1 APPENDIX A 1 Evidence of Community Support 1........................................................................................................................................................................: 1 1 1 II 0 C� 400 Main Street, Balboa, CA 92661 949/673-5245 FAX 949/673-8340 • www.catalinainfo.com March 22, 2002 To: Balboa Theater Foundation We here at the Balboa Pavilion would like to express our support for the Balboa Theater Foundation. The theater will be a beautiful addition to our downtown area. In addition, we believe that it will not only bring needed funds to Balboa but will also attract desirable visitors to this area yearround. We have watched the Foundation from the beginning as it has struggled to overcome the many hurtles in its path to complete this project. I truly believe this theater is a marvelous addition and an integral part of the revitalization of Balboa. We eagerly await the first performance at our new theater. Bob Black Catalina Passenger Service, Inc. 31 Doug Cavanaugh President/CEO March 22, 2002 Mayor Tod Ridgeway City Council Members City of Newport Beach 3300 Newport Boulevard Newport Beach, CA 92663 Dear Mayor Ridgeway and Council Members: Direct Line: 049) 894-7829 6.L 104 enum rubynr.fiewan.� The Ruby Restaurant Group wholeheartedly supports the Balboa Theatre Project. We feel that the theatre's renovation and opening would be an essential element in the downtown revitalization. We are also in favor of the City of Newport Beach acquiring the Grange Julius building as an important part of the expansion project. The revitalization will certainly benefit the residents as well as the merchants of the Balboa Peninsula. Thank you for your consideration. Sincerely, a 6W Newport center Drive. 8W69 85o a Newport Beach, CA 92M 1949) 644-7829 a Fart 194% 844.4628 a www.nrbys com 32 .-sem, •�,,/ Merchants[Ownerip 0 Balboa �S Byftsm Association 3/25/02 Mayor Tod Ridgeway City Council of Newport Beach Re: Balboa Theater, purchase of Orange Julius Building The Balboa Merchants Owners Association is in favor of the purchase of the Orange Julius building. We understand it is a vital factor in the restoration of the historic theater. It will reduce a major expenditure of the restoration process helping expedite the theaters' opening. The Balboa Theater is a unique gem -a community icon. It has been closed far too long. This theater is not just an Orange County Theater ... when it opens people from all over the world who have vacationed here will flock to Balboa. Nothing has stopped the dedicated Balboa Performing Arts Theater Foundation founded in 1996 from moving forward with their plans to reopen the Balboa Village. Sincerely, Balboa Merchants Owners Association &,K Gay Wassail -Kelly, President, Balboa Beacon News Penny Rodheim, V -P, Balboa Boat Rentals Bob Black. Sec/Treas., Catalina Flyer Patrick Moore, Balboa Fun Zone Rides Dayna Pettit, Cannery Village Realty Dave Walker, Habour House Coffee (out of town at time of polling) Butch Wilson, Balboa Saloon Scott St. John, Balboa Market Ben Swenson, Newport Landing Restaurant P.O. Box 840 Balboa, CA., 92661 Rnlhnn Rin the Sen -A Place to Be! 35 `n u March 21, 2002 ` Newport Beach City Council 3300 Newport Blvd. Newport Beach, CA The Honorable Mayor Ridgeway and' City Council Members: �p SfYLE p BJ's is proud to have been in business on the peninsula since 1979. We always have been and continue to be a big supporter of the Balboa Theater Project. The realization of this restoration effort would be beneficial to all.businesses in the village and draw renewed community interest toward this area. Acquiring the Orange Julius building as part of the expansion project would make this an even more attractive venue. Thank you for your consideration. Sincerely, o Rob DeLiema Vice President BJ's Restaurants CHICAGO PIZZA @ BREWERY, INC. 16162 BEACH BOULEVARD, SUITE 100.• HUNTINOTON BEACH, CA 82647 TELEPHONE 714.848.8747 FAX 71'4.848.5587. n ALY 0 • CONSTRUCTION, INC. BW,d� of P~Uot and Peopft March 20, 2002 Ms. Dayna Pettit BALBOA THEATRE PERFORMING ARTS FOUNDATION 707 East Balboa Blvd. Newport Beach, CA 92661 Dear Ms. Pettit: HAND DELIVERED I am writing to confirm my enthusiastic support for the Balboa Theatre project. This is the perfect opportunity for ALY Construction Inc. to play a leading role as a contributor to the Balboa Theatre project. I feel our contribution will help expand an interest in the arts in your community. I will provide some publicity through Hahn Communications describing the activities at the Performing Arts Foundation. We are excited and anticipate moving forward soon with the Balboa Theatre project. Sincer y' An w CEO & C Andrew L Youngquist Constructlon, Me - 275 E. Baker Street, Costa Mesa, CA 92626 • 949/629.4300 • Fax 949/629.4310 • w birtcherconstcom CA UC #73s757 -B 3� Q 0 D A T F! E S A Al D Newport Beach City Counsel 3300 Newport Blvd. Newport Beach, California March 21, 2002 Bear Counsel Members: alboa Jnrz 4 T A' E W F 0 n T This letter shall confirm that we strongh• support the Balboa Theatre Project. We have been working cooperatively with the foundation for the last several years and we feel that the Balboa Inn and its planned renovation can be a positive support for the theatre by- offering yoffering the needed food. beverage and lodging facilities. Furthermore, we feel that the renovation of the theatre will be a great catalyst for revitalizing the Balboa Village and the mix of related businesses in the vicinity. We also support the Balboa Theatre rehabilitation and the acquisition of the Orange Julius building by the City of Newport Beach to be a pan of The expansion of the project. This will add significantly to the revitalization of the Balboa Penir:sula and will bring us ife step closer to finding a destination point in this area. We feel this whole project willbenefit the merchants and the residents of the Balboa Peninsula in a positive manner. Respectfully, IvEchel Pourmussa Owner 2G; Main Scrr:c - Bal�o:: G ifo-ia 9266: • (7 C75-3412 A NEWPORT BEACH FILM FMMVAt. Dear M.-. Mayor and Members of the City Council. I'm wrtirg in s.,ppert of the Balboa theater project. The Balboa Theater would be a \vonde addition to the Balboa Peninsula and the cit} as a whole. For the past three ears the '.\- ewpon Beach Filth Festival has worked closely with several members of the Board of Directors tf ire Ball oa Theater to promote the idea and concept of a renovated facility: Joe bine currently serves on both of our boards as a valuable conduit for info mar=vn and uncle stn=dine. On be calf o: the festival stall I wish to encourage you to suppor the o^.going eff nnu of ;he Balboa T ?:eater foundation. Thank you for your time sod consideration. Sircerely. G -egg Schwenk Executive Director Newport Beach Film Festival 4S40 CAHPJS DRIVE • NEWPORT BEACH, CA 92660 • T: (949) 253-2880 • F. (949) 253-2881 March 22; 2002 To: Balboa Theater Foundation We here at the Balboa Pavilion would like to express our support for the Balboa Theater Foundation. The theater will be a beautiful addition to our downtown area. In addition, we believe that it will not only bring needed funds to Balboa but will also attract desirable visitors to this area yearround. We have watched the Foundation from the beginning as it has struggled to overcome the many hurtles in its path to complete this project. I truly believe this theater is a marvelous addition and an integral part of the revitalization of Balboa. We eagerly await the first performance at our new theater. Bill Caouette Tale of the Whale Restaurant 37� Balboa vilion Company • 400 Main StredWboa, Calif. 92661 (949) 675-1905 r March 22, 2002 To: Balboa Theater Foundation We here at the Balboa Pavilion would like to express our support for the Balboa Theater Foundation. The theater will be a beautiful addition to our downtown area. In addition, we believe that it will not only bring needed funds to Balboa but will also attract desirable visitors to this area yearround. We have watched the Foundation from the beginning as it has struggled to overcome the many hurtles in its path to complete this project. I truly believe this theater is a marvelous addition and an integral part of the revitalization of Balboa. We eagerly await the first performance at our new theater. Bette Tozer Balboa Pavilion Company MARINE RECREATION CENTER Catalina Passenger Service/Harbor Cruise/Sportfishatg(rals of the Whale Restaurant/Banquet Facilities �l $ac: 3y: i;S-Ti ;Ltarcu 21, 2002 9437238811; +Aar -27- a .3:2.^,P11; Pay- • • (N�EWPORTLANDJNG Dayma Pesti: President Balboa Performing Arts Theatre Fuundation Dear Dayyna. I just canted to let know now excited we here at Newport Larding are abour _he 71.DUYk11V37 Cn[1 IL:UyietlLUt ul illG Ddt+va Tl n.aut,. 7 slwah .t ..its ter r..:..r.rS:i.:., .•t:•••ula.. to the economy of our town. It should be a boon for nrarchants and restaurateurs alike. We look forward to the business pre -theatre and post -theatre crowds will briny;. I speak for the comers and managers of Newport Landing when I say you have our fW1 support for your project. I wish you the best of tuck. and I look forty d to tieing therr on opening night' Warmest Regards, Ben Swenson: _ General Manager Newport [.ending Reswurant RESTAURANT - 5n. F. 6099 31V v: p:r. Av_h. CA 9?Wil . (7,49!4;7S -Z37.' . Fuz iya91 a%S E bn? CORPORATE, OMCEs - 17g4Z Git1mv Avenue. Scn<=1'Q . irvi ¢. C.t 9261- . M11) 2d i-va; , tit's LOC qP Do" Sea Sportfishiug Private Fishing Charters Yacht Charters Whale Watch Jan. -� All Boats Inspected and Certified by: U.S. Coast Guard Safety First Complete Tackle Shop Sportfishing, Inc. 400 Main St., Balboa, CA 92661 (949) 673-1434 www.davevslocker.com DOUG FERRELL / MISE BULLARD / DON BROCKMAN - Owners March 22, 2002 To: Balboa Theater Foundation We here at the Balboa Pavilion would like to express our support for the Balboa Theater Foundation. The theater will be a beautiful addition to our downtown area. In addition, we believe that it will not only bring needed funds to Balboa but will also attract desirable visitors to this area yearround. We have watched the Foundation from the beginning as it has struggled to overcome the many hurtles in its path to complete this project. I truly believe this theater is a marvelous addition and an integral part of the revitalization of Balboa. We eagerly await the first performance at our new theater. No sTapl3 Davey's Locker portfishing 41 DMJMH+le March 18, 2002 Ms. Dayna Pettit President Balboa Theater Performing Arts Foundation 707 East Balboa Blvd. Newport Beach, CA 92661 Dear Ms. Pettit: 0 I am writing to confirm my enthusiastic support for the Balboa Theater project I first visited the theater in the 1950s, and then later had an opportunity to take my children there is the 1970s when "The Rocky Honor Picture Show° played at midnight on a Saturday eve. Since that time I have relocated to the Balboa peninsula. As a resident, I can see the great value the theater will bring to our community. The renovation of the theater will also support the $8 million investment in improvements the City of Newport Beach is making on the peninsula. I have committed ft full resources of our firm to help with designing a new and improved Balboa theater. We are dedicated to the challenge of making it a jewel of a performing arts venue. We are performing the work at something less than our cost We consider the profit on services which we are waiving a contribution to a project that is vital to the community. The staff we have assigned to project are enthused with it and have contributed many hours of personal time as well. As 1 haw told you previously, you can count on me for any volunteer support you require. I am happy to continue my efforts with fundraising, and Nancy and I will continue to support the Foundation financially to the extent we are able to do so as well. I know the project will be successful and am grateful that we have an opportunity to be part of it. Sincerely, c Craig B. Smith, hD. President DMJMH+N 999 Town & Country Road • Orange • California 92868 • (714) 567-2400 03!18/2002 01:29 FAX 19498730838 9 December 17, 1996 ...VALBO THEATRE -- .. .. ..... Dayna Pettit, President Balboa Performing Arts Theater Foundation 707 East Balboa Boulevard Balboa, CA, 92661 Dear Dayna: • The Balboa Peninsula Point Association is pleased to help support your efforts to bring our landmark Balboa Theater back to' life. Enclosed is our donation in the amount of S1,000. Our Point duellers are extremely impressed With the hard- earned progress your Founders and Board of Directors have made to date. We stand and applaud you. Best wishes for continued success, Ralph Bernard President i KENNETH A. R1811845 W. OLYMPIC BLVD., SUITE 1200, WESWR, LOS ANGELES, CA 90064 3101312.8600 NOV� 2d cs,a November 22,1999 -o ,. Mr. Stanley Kafka Executive VP/Manager City National Bank 9701 Wilshire Blvd Suite 600 Beverly Ifills, CA 90212 Dear Stan, It was mce seeing you and Qgi yesterday, and hearing the good news about the $1,000,000 contribution to the Balboa Performing Arts Theater and Foundation I am enclosing the balance of my pledge, a check for $10,000, which, together my previous contribution makes a total of $25,000. Please keep me posted as to the progress of the construction of the theater. r 1 NOW Ken Ruby y4 THE SEGERSTROM FOUNDATION 3315 FA[Rvaw ROAD • C05TA MESA, CALIFORNIA 92626 • (714) 546-0110 November 27,20W .Ms. Michele Roberge Executive Director Balboa Perfwnmg Arts Theatre Foundation 707 E., Balboa Blvd Balboa, CA 92661 Dear Ms. Roberge, On behalf of Henry T. Segerstrom and the Segerstrom Foundation, I am pleased to enclose a check in the amount of $5,000 designated for the Balboa Performing Arts Theatre Foundation. A& Segerstrom has personally selected the Balboa Performing. Arts Theatre Foundation as the recipient of this grant as part of the Segerstrom Foundation's Director's Grant Program. Very truly yours'',! vV� Nan W c3' Vice President, Grants Enclosure cc: Henry T. Segerstrom R O X B U R G 0 December 18,20M 0 Mrs. Dayna Petit To Chairman Balboa Performing Arts Theatre Foundation P.O. Box 752 �M COMMUNICATION COMMNIC�I TIOM Balboa, CA 92661 Dear Dayna: On behalf of Mark and I, and our staff and clients, we are pleased to send the enclosed check for $2,500 in support of the restoration of the Balboa Theatre. We are grateful to you and all of your devoted volunteers for the incredible job you have done to bring this project to a reality. Warmest regards to you and Michelle and the entire team for a joyous holiday. Most sincerely, e� Claudia D. Roxburgh THE R0XRV11611 AGF.\C1'. INC. 245 Fischer Avenue, Building B-4 . Costa Mesa, California 92626 phone: 714.556-4365. fax: 714-556.0877 interne[: www.mxburgh.com . e-mail: info®roxburgh.com On behalf of all Ford Motor Company employees in Orange County, I am pleased to forward i you the enclosed Ford Motor Company Fund check in the amount of $5,000 in support of the Balboa Performing Arts Theater Capital Campaign. Ford Motor Company is very proud to contribute to this effort to save this historic theater and revitalize the Balboa Peninsula. We applaud your efforts and look forward to the completion and Grand Reopening of the Balboa Theater. We also send you our best wishes for great holiday season and successful 2001. Sincerely, `o ob Tazlton Chairman Ford Motor Company Community Relations Committee 1 encl Y� A Ford Motor CWWM 2099 S. State College BIW., #620 Weetem Regional Pubic Aftra 011iee P.O. Bort 66026 Anaheim, Cardomis 926166026 USA 714 939.9696 Fax: 714 939-3M 8 December 22, 2000 Michele Roberge Executive Director The Balboa Performing Arts Theater Foundation 707 East Balboa Blvd. Balboa, CA 92661 Dear Michele: On behalf of all Ford Motor Company employees in Orange County, I am pleased to forward i you the enclosed Ford Motor Company Fund check in the amount of $5,000 in support of the Balboa Performing Arts Theater Capital Campaign. Ford Motor Company is very proud to contribute to this effort to save this historic theater and revitalize the Balboa Peninsula. We applaud your efforts and look forward to the completion and Grand Reopening of the Balboa Theater. We also send you our best wishes for great holiday season and successful 2001. Sincerely, `o ob Tazlton Chairman Ford Motor Company Community Relations Committee 1 encl Y� A • 0 • THE IRVINE COMPANY Carol A. Hoffman Vbe Praswent June 19, 2000 Michele Roberge, Executive Director The Balboa Performing Arts 'Theater Foundation 707 East Balboa Blvd. P. O. Box 752 Balboa, CA 92661 Re: Renovation Capital Campaign Dear Michele: I am pleased to enclose a check for $5,000 to help with the renovation of the historic Balboa Theater. We here at The Irvine Company wish you much success in raising the $3M you need to complete the renovation of the grand old theater. Sincerely, Carol Hotiman CH:pm Enclosure 550 Newport Center Drive, P.O. Box 6370, Newport Beach, California 92658-0370 • (949) 720-2303 q� Tod Whi+e 11201ES0 Batboy 604* B&Ooa, CaitfornFa 92.661 March 18, 2002 Mr. Bill Wren Chief Financial Officer The Balboa Theater 707 East Balboa Blvd. Balboa, CA 92661 Dear Bill, I'm writing to congratulate you and the Theater Board of Directors on your tenacious, competent efforts to revive the theater. Despite more than your share of unanticipated barriers, Board members have hung in there. Thank you! What a valuable asset it will be for the peninsula and the whole city when the building is done and the programming begins. We have given financial support to your efforts because we share the dream so well articulated by the Board for a year round, diverse program of theater, dance, classic movies, lectures, music, etc.—the full gamut of cultural and entertainment activities for children, families and adults. It's wonderful that the City of Newport has been so supportive of this project. Certainly the business district needs the shot in the arm that the New and Dynamic Balboa Theater will provide. S, rel Tod and Lands 'te 11 1 I 1 I I I I I D t APPENDIX B Resumes of Board Members I 1 I I 1 • • APPENDIX B Curricula Vitae -Key personnel BALBOA PERFORMING ARTS THEATER FOUNDATION Board of Directors, 2001-2002 The Foundation is fortunate to have a strong Board of experienced, local, business and entertainment people to establish policy and guide its operations. Board members include bankers, real estate specialists, certified public accountants, professors and teachers, contractors and architects, community leaders, developers, business men and business women, artists and actresses—a diverse, dedicated, and thoroughly committed group of community leaders! Dayna Pettit, President: Dayna has lived on the Balboa Peninsula for nearly 30 years. She has been active in the economic development of Balboa and has received numerous awards for community service including the Sunshine Award for dedicated service to Newport Beach in 1995 and Citizen of the Year by NHA C of C in 2001. She formed the Balboa Merchants and Owners Association ten years ago and served as President three years; she founded the Balboa performing Arts Theater Foundation eight years ago and has served as its President since inception. In her professional life, she is an agent with the Cannery Village Realty. Jo King, Secretary: Jo is a 15 -year resident of the Balboa Peninsula and a member of the Peninsula Point Homeowner's Association. She has served as Secretary of the Foundation's Board continuously. since 1996. A graduate of Stanford University, she has continued her association with the University through various alumni activities; including serving as President of the Orange County Stanford Association. Jo is active in many community organizations, including the Newport Beach Library Foundation, the Newporl Beach Film Festival Board, and the Orange County Museum of Art. She has been honored by The Prudential Foundation with the "Community Champions Award" in recognition of outstanding volunteer services for the past two years. She is a Broker - Associate of Prudential California Realty. William (Bill) Wren, V.P. & CFO: Bill and Joan Wren have lived in Balboa for over 30 years. After receiving his Master's Degree in business from Stanford University, Bill spent many years in the employment of Chevron Land & Development Co. Upon retiring from Chevron, he formed the William A. Wren Company, which consults with developers regarding the entitlements process throughout Orange and San Bernardino counties. Bill has served as President of the Balboa Peninsula Point Association three times, and was appointed by the Newport Beach City Council to the Balboa Peninsula Planning Committee. 51 Yaron Telem, Treasurer: Mr. Telem is President of AIKO Enterprises Co., an accounting firm specializing in commercial and real estate development clients. With a background in accounting and a degree from California State College, Dominguez Hills, Mr. Telem is well qualified to serve as the Foundation's Treasurer, a position he has held since the Foundation was organized in 1996. Mr. Telem and his family have been long- term supporters of the performing arts in Orange. He owns property in Newport Beach. Ronald L. Biters, AIA, Director: Ron Baers is President of Planning & Urban Design Resources Co. He has over 30 years of experience in architecture, planning, and urban design in California and Hawaii, where he is a recognized leader in his field. He is founding member and chair of the AIA Urban Design Committee. His work includes historic preservation planning, recreation and tourism planning, and large scale mixed use developments. He has lectured on or taught urban design at UCI, the University of Hawaii, and Drexel University. Amy Larson, Director: After graduating Cum Laude with a BA in Theater and BS in Secondary Education from Bowling Green State University, Ohio, Ms. Larson taught high school speech and English and served as drama coach for several years in southern Ohio. She is a founding member of the Alternative Repertory Theater. As an actress, she has appeared onstage in Los Angeles, Long Beach, San Francisco, and Hawaii. She received a Best Actress nomination for her portrayal of Carnelle in Miss Firecracker Contest at Newport Theater Arts. She has been associated with Morgan Stanley Dean Witter, a full service financial firm. She serves as Vice Char on the Board of Directors with Leadership Tomorrow, and is actively involved with several other community organizations. Art Gronsky, Director: A California native and Balboa peninsula resident since the age of eight, Art flew for the Navy in W.W.II and studied at UCLA and Berkeley. He owned the Balboa Pavilion from 1947-60. From 1963 to 1983, he operated "Art's Landing," now remodeled and known as Newport Landing. He received the Citizen of the Year award in 1992 and the Silver Anchor Award. He served as past president of the Newport Harbor Nautical Museum and was instrumental in its move to its new home on the Reuben E. Lee. Most importantly, Art knows all the best fishing spots in Newport Bay! Bart Hackley, Director: Bart Hackley has an MBA in International Business from Pepperdine University. He is a Certified Public Accountant, and has served as Founder, Officer, Director, and major shareholder in a number of banks, corporations, and a major foundation. He is currently a Director of Pepperdine University. He brings a wealth of knowledge and experience in syndications, non-profit organizations, taxes, and business management to the Foundation Board. He resides in Newport Beach. 0 9 Stanley J. Kafka, Director: Mr. Kafka attended the University of Southern California where he received BS degrees with majors in Finance and Real Estate. He then received a MBA degree Cum Laude from Pepperdine University. He has over 30 years of experience in the commercial real estate and banking business. He is currently an executive with City National Bank in the Real Estate Group. He is active in many community and charitable organizations. Riki Wendy S. Kucheck, Director: Ricki Kucheck is a Professor of Mathematics at Orange Coast College. She has several degrees, including a MA in mathematics from California State University at Fullerton. She has been very active in the Academic Senate at both the state and local levels. As a volunteer at the Laguna Playhouse, she gained first hand experience in the performing arts, from ticket sales in the box office to assistant directing. She is active in other community organizations and also serves on the Board of Leadership Tomorrow. Terry Markowitz, Director: Terry attended Sarah Lawrence College in New York where she was student body president and editor of the newspaper. Terry has had a long association with theater and art. She wrote Broadway drama reviews for her newspaper, acted professionally in summer stock in Denver, Colorado, and received her Masters degree in Art from California State University at Long Beach. In I986, she opened A La Carte Gourmet, a gourmet takeout restaurant and caterer now available in two locations. Andrew Youngqufst, Director: Andy Youngquist is Chairman and CEO ofALY Construction Co., a California General Building contractor that is licensed in 18 states. Prior to the formation of ALY Construction, Andy was President of Birtcher Construction, where he oversaw the construction of more than 30,000,000 square feet of commercial/industrial and tenant improvement projects. He developed and pioneered numerous innovations in the movie theater business, including multi -screen fihn complexes, new project delivery methods, stadium seating, and special techniques for construction and renovation. In the last decade, he has been responsible for the completion of over four million square feet of theater construction. He is co -inventor of a patented system used for stadium seating in theaters and public assembly buildings. He is a long-time resident of Newport Beach. 53 I I I I 1 It If II II II II II [AI II E APPENDIX C Construction Schedules 10 N M IftTiptim M & SIDE WALLS & EMO ELECTRICAL. $ TERMINATE I;DEMO.CAP d TERMINATE U/G UTILITIES AS NEEDED BRACE& SUPPORT FRONT WALL ' Ik;DEMO ROOF TOP EQUIPMENT & HVAC SYSTEM .r DEMO ROOF STRUCTURE ,�Ammjk DEMO ALLEY WALL 8 SIDE WALLS ; ; I INFILL BACKFILL UNDER STAGE AREA & ORCHESTRA PIT CERTIFY COMPACTIO4 OF BACKFILL RA UNDER SLAB PLUMBING & ELECTRICAL STUB-UP3 PREP & PLACiE SLAB ON GRAdE Lf�J7 Al ERECT MASONRY WALLS iACOUSTI: SLIDING L OR 0 ALLEY ERECT ROOF STRUUORE INSTALL ROOFING SYSTEM W/ SHEET METAL; STRUCTURAL STEEL EQUIPMENT PLATFORM STRUCT STEE . CAT WALK & STEA RIGGING M.E.P HOUGH -LFL OVERHEAD METAL IMETAL STUD STEEL `' WALLS d SOFFITS ETC. (r M.E.P. ROUGH -0N 0 WALLS & SOFFITS 'INSULATION DRYWALL, TAPE, SAND 6 TD'[TURE WObDEN SYAGE FL" f PRELIM PAINTING SH CARPENTRY &HARDWARE AISTiCAL PANELS & WALL COVERINGS LIGHT FIXTURES d RIGGING LIGHTING ADIUM SEATING LIGHTING INSTALL STAbIUM SEATING CARPETING d FLOORINGS r M.E.P. FINISHES, POSTERCASES & TRIM Ir DIRECTIONAL SIGNAGE 23JAN03r 13FE003 30JAN03 OBFES03 13FE003 20FES03 20FEB03 BALBOA THEATRE PERFORMING ARTS FOUNDATION PRELIlIIINARY SCHEDULE A.L.Y CONSTRUCTION SERVICES SH CARPENTRY &HARDWARE AISTiCAL PANELS & WALL COVERINGS LIGHT FIXTURES d RIGGING LIGHTING ADIUM SEATING LIGHTING INSTALL STAbIUM SEATING CARPETING d FLOORINGS r M.E.P. FINISHES, POSTERCASES & TRIM Ir DIRECTIONAL SIGNAGE a - Dur TEMPORARY PARTITIONS S DUST CONTROL SHORING 0 1ST FUR CI.G. JOIST J SAW'CUT S.O.G. FLOOR & THEATER WALL AC( r EXdAVATE DDOTINGS 0 S.O.G. C� FbRM/ RE(NF. & POUR FOObUGS DOUBLE MASONRY WALLS T02ND FUR UNDER SLAB UTILITIES PATCH& POURBACKSLAB; FRAME WALLS & CEIUNGS } ^ FUR OUTMASONRY WALL: M.Q.P. OM R WAIL ROUGH SWITCOGEARIJSTALL IOSULATI DRYWA*E & S CEILING REPAIR &TIE -M CERAMIC TILE OF DOOR FRAMES & F PAINTINGS Y -OAR GRID CE' DOORS'&14AS M.E.D. TRIP jlCARPETII YPI ITIONSB OUST co L L►: SHORING 0 FLOOR JOIST(2ND FUR) I SAW CUT FLI8OR J015T(2ND FIR) DEAD EXISTING WALLS MASONRY WALLS 1I RO' CMU WALL§ KLR6 F REPAIR I k4;UR UT MASONRY WALI4060 WALLS&CEI.I NI GS M.E.P. OM& WALL ROUT INSULATION DRYWALL. TAPEE y EILIiIG REPA�RS0 DOORFRAMES, _ h PAINTING -BAR DRID C M.E.0II.TRI rGARPEI 3000 TEMPORARY PARTITIONS & DUST CONTROL 5 21FEDD3 27FEB03414 3010 SHORRNG @ 1ST FLR CIG. JOIST 3 28FE803 04MARO3 3005 SAW CUT S.O.G. FLOOR S THEATER WALL ACCESS 3 OSMAR03 07MAR03 3020 EXCAVATE FOOTINGS ® S.O.G. 2 10MAR03 11MAR03 3030 FORM/ REINF. S POUR FOOTINGS 5 12MAR03 18MAR03 3040 DOUBLE MASONRY WALLS TO 2ND FLR t0 19MAR03 OtAPR03 3050 UNDER SLAB UTILITIES 10 02APR03 15APR03 3050 PATCHBPOUR BACKSLAB 2 i6APR03 17APR03 3070 FRAME WALLS & CEILINGS B 18APR03 29APR03 3090 FUR OUT MASONRY WALL 2 18APR03 21APRO3 3090 M.E.P. DM & WALL ROUGH4N 10 30APR03 13MAY03 3100 SWITCH GEAR INSTALL& TIE-IN' t0 14MAY03 27MAY03 3110 INSULATION 5 14MAY03 20MAY03 3120 DRYWALL, TAPE 8 SAND 15 16MAY03 05JUN03 9730 CEILING REPAIR& TIE-IN 5 16MAY03 22MAY03 3140 CERAMIC TILE 0 REST ROOMS 10 30MAY03 12JUN03 3150 DOOR FRAMES 8 FLOOR BASE 5 06JUN03 72JUN03 3160 PAINTING 5 13JUN03 1lUUN03 3170 743AR GRID CEILING 5 t8JUN03 24JUN03 3180 DOORS &HARDWARE 3 25JUN03 27JUN03 3190 M.E.P. TRIM & LIGHT FIXTURES 5 30JUN03 07JUL03 3200 CARPETING &SOFT FLOORING 5 OBJUL03 14JUL03 4000 TEMPORARY PARTITIONSBOUST CONTROL S 21FEB03 27FEB03MPO 4010 SHORING 0 FLOOR JOIST (2ND FLR) 2 05MAR03 06MAR03 40M SAW CUT FLOOR JOIST (2ND FLA) 2 0TMAR03 IOMAR03 4025 DEMO EXISTING WALLS 3 11MAM 13MAR03 4030 DOUBLE MASONRY WALLS TO ROOF 10 02APR03 15APR03 4010 TIE-IN CMU WALLS ®2ND FLRB ROOF STRUCTURE 5 18ppR03 22APR03 4050 ROOF REPAIR 0 TIE-IN 5 23APR03 29APR03 4070 FUR OUT MASONRY WALL 2 23APR03 24APR03 FRAME WALLS& CEILINGS 5 30APR03 06MAY03AME 4080 M.E.P, OM&WALL ROVGH-IN 10 D7MAY03 20MAY03 4090 INSULATION 5 2tMAY03 27MAY03 4100 DRYWALL, TAPE& SAND 75 23MAV03 12.IUN03 4110 CEILING REPAIRS 0 TIE-IN 5 3AY03 0 0M5JUN03 4140 DOOR FRAMES/ TRIM& FLOOR BASE 5 13JUN03 ISJUN03 4120 PAINTING 3 20JUN03 24JUND3 4730 T -BAR GRID CEILING 5 25JUN0 -D1JUL03 4150 M.E.P. TRIM LIGHT FIXTURES 5 02JUL03 OBJUL03 4160 CARPETS SOFT FLOORING 5 1DJUL03 IBJUL03 'ale R9vIGOn hg4 Nq Apppvgp BALBOA THEATRE PERFORMING ARTS FOUNDATION PRELIMINARY SCHEDULE A.L.Y CONSTRUCTION SERVICES rums CsfSc RULE - -- - �� N'�•-Y- BALAA THEATER RENAVWIDN PHASE 7 - BUILDING DEMOLITION Status Date: 08 -Mar -02 Report Summary: job No.: 01-20.1068 TOTAL GROSS BILLING THIS MONTHS Original Budget: $382,403 TOTAL GROSS 81WNG4; TO DATE S Currant Budget: $382,403 Original Completion: 2 MONTHS Current Completion: 2 MONTHS Start Date: T.B.D. 50 BAL&A THEATER REN041`10N irr MlJ1Y„fJ PHASE 2 - BUILDING FINISHES Status Date: 08 -Mar -02 Report Summary: Job No.: 07-20.1068 TOTAL GROSS BILLING THIS MONTH S Original Budget: $2,545,728 TOTAL GROSS BILLINGS TO DATE $ Current Budg& $2,545,728 Original Completion: 4 MONTHS Current Co"Mom 4 MONTHS Start Dare: T.B.D. irr MlJ1Y„fJ BA180A THEATER RENOOTION PHASE$ - BUILDING NEXT DOOR Status Date: 081MaF02 Report Summary: job No.: 01-20-1068 TOTAL GROSS DIWNC: THIS MONTH $ Original Budget: $301,829 TOTAL GROSS BILLINGS TO DATE S Current Budget: S301,829 Original Completion: 3 MONTHS Current Completion: 3 MONTHS Start Date: T.B.D. , �., �r �li� �i � ■�itlr� ��tt•Sll���l�rl•��� �■} i���� r ��i�=rte 0 0 .............................................................. APPENDIX D Financial Schedules Balboa Performing Arts Theaterflndation Operating Activities Three Year Revenue and Cost Forecast Table D-1 Income Programming Facility Services (Rentals & Concessions) Unrestricted Fundraising (1) Interest (2) Expenses Programming Fundraising and Special Events Capital/Endowment Campaign General & Administration Net Activity (3) Number of annual performances (4) During Construction 15,000 0 107,000 3,000 125,000 24,000 23,000 24,000 �J Years After r �.�.�. Year 2 After t Year 3 After 441,000 57,000 100,000 3,000 1 225,000 30,000 0 172,000 455,000 489,500 498,000 243,000 635,000 719,500 753,000 (118,000) (200,000) (184,000) (152,000) 4 100 150 150 Notes: 1) Fundraising Income includes income from support guild activities based on past performance. This line item does not include program specific grants or annual fund activities. See note 3 below. 2) Interest is conservative estimated based $200K balance at current money market rates at publication. 3) The net activity deficit indicates the amount the Foundation will be required to raise each year through special events, program underwriting, endowment interest, and annual fund drives. 4) Performances are projected to be 30% rental and 70% presented. • 9 TABLE G2 it ALY BALBOA THEATRE RENOVATION PRELIIANARY BUDGET RECAP CONMUaJoK NIC TOTAL AREA 9.486of FOBASEMFLOOR NT 9.906 of S�{'}B1' u ME BASEMENT 3.0>/ OY/d9r el Redw3snA PBgM6 /q.tOF SEATS 34 3401w 15•MW-02 DESCRIPRON PNsse1 DMnoWa1 �S4+7CI1 PhM2 PhM3 Fkfthn 6M9Neat Dr Teal Cost 01415 T a 199 S106/ 1134262 GIM FWMh SceffiolclbV 011670 Prolad T /Camra so vz000 075 SQ so IZZ-000 $79Z6 01720 SmaiAm 57590 SO so 02050 18500 so 1905,125 02140 Dowalsolm so M) so so 02160 ShMWO a 02600 Aohnft SO I so m 02520 Sld Cawft S1 W 50 $10,375 02OW 88e Urgiffammod smws 875 09900 Foofino, Daft S1181290 110 $11,1331 423 03381 Shotcroa 1 520883 520683 178771 S4SDW SM171 ark* Veneer 05100 Strucextl Steel $187.590 Simms m000 MIMUS 05110 Saw MsWabon Leben $0 W W SO 05700 1 560000 30 SODA" 06100 OEM IFWA$hCereenW $10.O00 SO $5000 3153.516 SioAw mew 7 18 _ _ 07100 W S0 07200 botdaecn -_ 60 954 $3404 07250 fjr�m so so so 07 Mapl s 076M 2 50 700 DDO 905 am SheMMefal 17877 $1500 19377 _ 07020 MolsUM I SSW 08005 Dopa/F fHandware f2,5W 507 750 57 08310 9 ACDUS5CW W S4500 $O S4 _ 08960 II Flre Cenaln 540900 so fMOW oem a Olen 1 590 $21 09200 PMMer yej-343B 198 oam 15,WO 197964 5252DO $17ZO54 OSWO Ceramic Tilo Floora Wells so 744,197 50 197 09510 AWUBft l 'li W 747 7 7 09520 Pantile B Curpim ._ $0 520656 524,§$6 09660 edmrVod flonrin $0 $20020 SO __ _ ResBieM Fi SO $1,841 now fd 1 Floor I Sol $30.570 so $3D.90 7%lmio 37" 1 $22.540 $2,625 $32,765 09950 all W $8250 SB W 10410 PmdrCasea so W 5o 5o 1 Ea0 1 100 4 MAccesmn" lPamdso 517= so 577980 10999 mim so SWOM SO 707 12880 Fool Grift 5250 54810 OW 114205 B a LMs --- P7,3`10 30 10 IS= Fee 750 52450 SD $23.2W _ 15400 Plwnbl 330610 531080 7690 15500 HVAC $15,800 $18 250 _ 16010 I Onl $143875 S2=5751 S30.0W $4T7,450 18W0 NeunkNj;Mge_ SO _.i 16760 Cprmardmm_ 0 W AlemrB yalem .J- _ __ - - W 17000 General Co idPocm 5325 808 S1116,w $78,508 _ 77230 Fiala Clesni __- - - $10060 56747 333 17910 P'erml a Fees 5'ebtclel 18100 Conbamoes 6,50 $1,391,202 190,428 52,341!LM $152,509 5278,184 $18,082 $4.015,679 $242,9X SuOtohil 17%0 2. $7.481.630 $Z? -824 52.498,502 SM926 $296298 $5,564 $4258.616 $74J50 Swolml 17899Fee 0.00% 51.5DO.454 SO 52.545.728 W 5301.629 so $4.333.366 SD Tadl $1,50l,45t 52,6/5,728 5301,529 54,333,586 Auv CerwseNrrTl m Ra PpIwl 43 0 NOTES TO TABLE D-2 BPATF THEATER CONSTRUCTION COSTS WITHOUT A BASEMENT AND BPATF CAPITAL REQUIREMENTS New Cost of Construction without a basement (1) Add theater's first year's Net Operational Expense Less cash available (2) New capital needed to open theater Cost of Theater shell without a basement Less cash available o> New capital needed to complete shell (3) $4,300,000 200,000 800,000 $3,700,000 $1,510,000 800,000 $ 710,000 Includes costs of $302,000 for building separation and tenant improvements. See Preliminary Budget Recap attached. a� Cash available Current cash on hand Less cash to City for purchase Less G&A during construction Net cash available $1,200,000 200,000 200,000 $ 800,000 (3) This is the logical holding point to allow time to raise additional capital if needed to complete the entire project. i,Y�bbb Wb�nyMiYrfMlv�TWvbbEbb2lc W Balboa Performing Arts Theater Foundation Cash Flow Projections - Phase 1 Table 0-3 Motes: 1) Phase 1 completes demolition as required, completes the building shell, secures the building, and makes weather -fight with roof, walls, and a flat floor. 2) Phases 1 will commence when the Foundation has a starting cash of $2 million. This consist of funds needed for construction ($1,509,453), operating losses during construction ($66,435), interim operations during additional fundraising period ($150,000), reserved funds reserved for Phase 3 ($300,000). Phase 3 is designed to commence at any time based on Citys schedule. 0 �i Month 1 Month 2 Month 3 Month 4 Month 5 Month 8 Month 7 Month 8 Total OPERATING ACTIVITY Receipts Programming Fundraising Interest Total Disbursements Programming Fundralsing General and Administrative Total Net Operating Activity 2,315 1,000 250 0 1,000 250 1,775 1,000 250 D 21,000 250 0 1,000 250 3,850 11,000 250 0 1,000 250 3,200 51,000 250 3,565 1,250 3,025 21250 1,250 15,100 1,250 54,450 101,140 5,125 0 0 0 0 7,775 1,700 4,525 450 450 2,450 20,450 450 8,300 450 450 14,250 14,250 14,250 14,250 14,750 14,250 14,250 14,750 19,825 14,700 16,700 34,700 15,200 30,325 16,400 19,725 167,575 (16,260) 13.450 13,675 (13,450) 13,950) 15,225 15,150 34,725 66,435 CONSTRUCTION 11) 0 153,000 (229,403) (113,000) (225,000) (338,000) (271,000) (180,050 1,509,453 CUMULATIVE CASH FLOW Starting rash Monthly Cumulative Cash Flow Ending Cash 2,027,717 2,011,457 1,845,007 1,001.929 1,475,479 1,236,529 883,304 597,154 (16,260) (166,450 243,078 (126,450) (238,950) (353,225) (286,150 145,325 2,011,457 1,845,007 1,801,929 1,475,479 1,236,529 883,304 597,154 451,829 Motes: 1) Phase 1 completes demolition as required, completes the building shell, secures the building, and makes weather -fight with roof, walls, and a flat floor. 2) Phases 1 will commence when the Foundation has a starting cash of $2 million. This consist of funds needed for construction ($1,509,453), operating losses during construction ($66,435), interim operations during additional fundraising period ($150,000), reserved funds reserved for Phase 3 ($300,000). Phase 3 is designed to commence at any time based on Citys schedule. 0 �i Balboa Performing Arts Theater Foundation Cash Flow Projections - Phases 2 & 3 Table D-3 Notes: 1) Phase 2 includes building finishes, Installation of stadium seating, and other tenant improvements. Phase 3 modifies the Orange Julius Building which includes building separation, restroom facilities, dressing room, administrative offices, and storage. 1) Phases 2 & 3 will commence when the Foundation has a starting cash of $3.4 million, This consist of funds needed for construction ($2,847,557), operating losses during oonstruction($88,495), the first operating season ($200,090), and a contingency ($300,000). M • Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month a OPERATING ACTIVITY Receipts Programming Fundraising Interest Total Disbursements Programming Fundraising General and Administrative Total Net Operating Activity 2,315 1,000 250 0 1,000 250 1,775 1,000 250 0 21,000 250 0 1,000 250 3,850 11,000 250 0 1,000 250 3,200 51,000 250 3,565 1,250 3,025 21,250 1,250 15,100 1,250 54AW 5,125 0 0 0 0 7,775 1,700 450 450 2,450 20,450 450 8,300 450 14,970 14,970 14,970 14,970 15,470 18,470 21,370 4,525 450 21,870 20,545 15,420 17,420 35,420 15,920 34,545 23,520 26,845 16,980) 14,170 14,395) 14,170 14,670 19,445 22,270 27,805 CONSTRUCTION (1) 0 510,000 (763,000) 63,000) (509,728) (91,000 120,000 90,829 CUMULATIVE CASH FLOW Starting cash (2) Monthly Cumulative Cash Flow Ending Cash 3,436,052 16,980) 3,419,072 (524,170) 2,894,902 777,395) 2,117,507 777,170) 1,340,337 (524,398) 815,939 110,445) 705,494 142,270 563,224 63,224) 3,419,072 2,894,902 2,117,507 1,340,337 815,939 705,494 563,224 500,000 Notes: 1) Phase 2 includes building finishes, Installation of stadium seating, and other tenant improvements. Phase 3 modifies the Orange Julius Building which includes building separation, restroom facilities, dressing room, administrative offices, and storage. 1) Phases 2 & 3 will commence when the Foundation has a starting cash of $3.4 million, This consist of funds needed for construction ($2,847,557), operating losses during oonstruction($88,495), the first operating season ($200,090), and a contingency ($300,000). M • Balboa Performing Arts Theater Foundation Sources and Uses of Funds As of January 2002 Table D-4 In Thousands Donations: Net Activity Prior to 99/00 Fiscal Year * 387 Donations and Interest Income - 99/00 fiscal year and after " 1,680 Divas donations 99/00 fiscal year and after 115 Total Donations 2,182 Expenses (99100 fiscal year and after) Renovation Expenses: Seismic Retrofitting and Engineering 173 Architecture and Theater Design 281 Construction Management 41 U: Programming Expenses (net investment in Sampler Series) 32 Fundraising: 38 Capital Campaign Consultant 36 Printed Materials 45 Newsletters 26 Other (meetings, donor receptions, ground breaking, etc.) 13 Postage and Reprographics 120 General and Administrative: FT Salaries 155 PT Salaries 38 PR/Community, Relations Consultant 33 Rent and Utilities 28 Taxes, Insurance, Fees and Permits 52 Computer Equipment and Office Supplies 12 Postage and Reprographics 8 Misc. (meetings, conferences, professional services) 8 Total Expenditures 981 Current Cash and Investment Balance 1,201 During this period the Foundation secured a long -tern no cost lease for the $480K city owned building. " Includes net donations from special events a 64 • Balboa Performing Arts TheateriOndation Statement of Activities - Summary December 2001 Table D.5 December Year to Date Year to Date Variance Actual Actual Budget (Unfavorable) UNRESTRICTED ACTIVITY Income Programming 3,458 5,932 7,940 (2,008) Facility Services 56 131 0 131 Fundraising 9,870 35,738 37,700 (11962) Interest 1,500 14,067 11,940 2,127 14,884 55,868 57,580 (1,712) Expenses Programming 4,293 11,559 12,900 1,341 Facility Services 0 0 0 0 Fundralsing 147 35,708 46,446 10,738 General & Administration 12,138 78,857 95,332 16,475 16,578 126,124 154,678 28,554 Net Activity (1,694) (70,256) (97,098) 2"42 TEMP. RESTRICTED ACTIVITY Receipts Pending Pending Capital Campaign 0 11,290 0 0 ST 2000 1,200 13,400 0 0 Best Seat in the House - 0 0 0 0 Programming 0 1,700 0 0 1,200 26,390 0 0 Disbursements Capital Outlay 4,185 73,499 0 0 Programming 0 0 0 0 4,185 73,499 0 0 (2,985) (47,109) 0 0 PERMANENTLY RESTRICTED Endowment Revenue 0 0 0 0 CASH SUMMARY 7M/01 Current Year 12131101 Beg Cash Activity Ending Cash Unrestricted - Operating Fund 1,417,258 (70,256) 1,347,002 Temp. Rest. - Capital Campaign (122,979) (48,809) (171,788) Temp. Rest. - Preservation Fund 0 1,700 1,700 Penn. Rest. - Endowment 0 0 0 1,294,279 (117,365) 1,176 914 a 64 l Balboa Performing MIs Theater Foundation Statenwnt of Activities - Detail 1�� Deeember31,2001 I yen Receipts Programmhg Ticket Sales Arts Education Facilty Servicas Concessions Fundrahig Cleneral Fund Divas (net) Program Under w" Special Events Total Reapta Disbursements Pmgranvrft General Season Programming Business Exp Ads Education Fundraising General Expanses Special Events Capital Campaign General & Adninfsaaaon Papal 8 Seneft Advertbhg and PR Dues end Subac 11 1, 1 FoeNPa bA3wk Fees Insurance Legal Fees MeetiogatEnedanmem ksac OBlee Equip. 8 Fumbhhgs Office Rem Oface Supplies Postage and Delivery Printing 6 Rep aduc0on Probational Services Property Taxes UtiBbs TOYS Disbursements Net Aa0vity Receipts Capital Campaign ST 2000 Best Seat In the House Pmgmmmhg DisWrsemenb Capital Outlay Reservation Fund 3.458 6,791 7,790 0 141 150 3,458 5,932 7,940 66 131 0 56 131 0 8,515 11,465 8,000 655 308 10,000 0 0 1,700 500 20,717 20,000 _ 9,870 35,738 37,700 11500 14A67 11,940 14.864 55386 STAN 0 97 4.293 11,105 12,900 0 454 0 0 0 D 4,293 11,559 12RW 0 4,165 5,500 0 9,581 10,000 147 21,962 30,946 147 35,708 48,448 11,000 62,418 73,63200 0 0 900.00 0 116 $00.00 0 84 250.00 0 4,490 4250.00 0 0 2500.00 as 606 250.00 50 363 250.00 0 0 500.00 650 313W 3,300.00 183 578 1,000.00 102 702 750.00 0 97 250.OD 48 192 1,30D.0D 0 4,723 4,500.00 120 1.288 120D.00 12,138 78,8.57 95,332 16378 126,124 154.876 (1,884) (70268) (97,098) SAM 2,127 1,795 1,335 419 11214 900 384 166 2.500 500 D 422 48 153 1,108 4,195 MAN Pending pmrding 0 11200 0 0 1,200 13A00 0 0 0 0 0 0 0 1.700 0 0 1,20026.3W 0 0 4,195 MAN 0 0 0 0 0 0 4,185 73,499 0 0 8,985) 147,708) 0 0 Beg Cash Activity Ending Crib dcletl- Opera" Fund IA17,259 (70258) 1,347,003 Rest - Capital Campaign (122.979) (48,810) (171,789) Rest - Programs" 0 1,700 1.700 Rat -Endowmwd 0 0 0 1294,250 1777,3881 1.176,874 Balboa Performing Asheatre Foundation Statement of Activities — Analytical Review Six Months Ending December 31, 2001 Overall Cash Balance Overall cash is down $117,366 June 30, 2001 to $1,176,366. In the first six months, the money market earned $14,067. Cash balances are categorized and tracked according to the legal restrictions placed on the funds by the donors. The most significant cash inflows in the first six months include $27K in restricted capital gifts, $14K in interest income, $12K in general fund donations, $4K in Diva donations, and a net $1 OK from the 5Krun. The most significant expenditures year to date include $74K for capital outlay to project design and construction management, $30K to full-time salaries, $18K to part time salaries, $10K to Public(Community Relations Consultant, $4K on payroll taxes and benefits, $21K on capital campaign consultant and printed campaign materials, $51K net investment in the sampler series, $41K in winter newsletter, $61K on rent and utilities, $10K in property taxes and general insurance, and $2K on office supplies, professional services, postage, fees, meetings, reprographics and miscellaneous. Budget to Actual Variances The majority of variances are carry over variances from prior months and have been outlined in prior reports or simply relate to timing of transactions. New significant variances that have not been previously discussed are 1) the theater received $5,500 more in unrestricted donations than anticipated, and 2) the theater did not hold a capital campaign donor cultivation event in the 1St half of the year that was budgeted for $3,750. Programming As stated above, the theater's year to date net investment in the sampler series is $5,314. The overall net investment committed in the 2001-2002 budget is $9,460. We sold 267 tickets to the Christmas Pudding and ended up realizing a positive budget -to - actual variance of $1,126. The Executive Committee has reviewed the budget for the February 22, 2002 event with A.B. Yehoshua and submits the program budget for board approval. The program will be co-sponsored with the Jewish Community Scholars Program and the theater's net investment is budgeted for $3,997. Upcoming Activity In January, the theater will be receiving the third $10K installment of a five-yearl$50K gift from the Pacific Life Foundation. The Foundation has also been selected to receive a $10K gift from local chapter of a national women's organization (The Ebell Club). January expenses are basically budgeted for "business as usual". When we learn news regarding the City's commitment to purchase the adjacent building (or not), we plan on spending budgeted funds for another newsletter and BT 2000 campaign. 70 Balboa Performing Arts0eater Foundation • Statement of Position December 31, 2001 Assets Cash Assets $1,176,914 BT -2000 Pledge Receivable 1,500 Mufti -year Pledge Receivable 30,000 Construction in Process at 6/30/01 322,229 ** Office Equipment 2,803 Total $1,533,446 Liabilities and Net Assets Payroll Taxes Payable $ 2,954 Unrestricted Net Assets 1,669,081 Temporarily Restricted Net Assets (138,589) Total $1,533,446 • Cash balances do not include the approximate $25K in the Diva General Bank Account. ** For cash flow management purposes, current year capital outlay is tracked as expense until year-end. 71 ' Balboa Performing Arta Theater Foundation 2001.2002 Budget Operating Bridget • Table D-6 200012001 2001902 Actual& Budoet Unrestricted Receipts Interest . 64,224 22"1 Trial Unrestricted Receipts 203,686 144,461 Unresblefsd Oisbmsemenb Programming Programming 1,294,279 157,083 General Season T,800 Ticket Sales 672 14,190 0 Ads Education 1 017 300 1,689 14,490 doled -Operating Fund Fundrelsing (157,083) Fundraising General Fxpeness 8,813 15,000 General Fund 27,691 12,000 Capital Campaign Divas (Net) 73.616 75.900 81,096 Special Everts 38.446 20AD0 Interest . 64,224 22"1 Trial Unrestricted Receipts 203,686 144,461 Unresblefsd Oisbmsemenb Programming 1,289,739 4,540 1,294,279 157,083 General Season T,800 23,650 Programming Business EV 738 0 Arts Education 850 0 9.388 23,650 doled -Operating Fund Fundrelsing (157,083) 1260,175 General Fxpeness 8,813 15,000 Special Events 27,986 10,000 Capital Campaign 44,297 52.000 0 81,096 77,000 General & Adrrtirietre6011 Payroll & Benefits 110,538 159,265 Advertising and PR 6.413 8,800 Dune and Subscriptions 988 1.000 Fees4'smtitsRank Fees 160 SOD insurance "1,000 4,250 Legal Fees 0 5.OD0 MeetingsrEntarialnment 394 500 Mise 731 500 Office Equip & Furnishings 513 11000 Office Rem 6,050 SAW office supplies 2,408 2.900 Postage and Delivery 1,761 1 50D Printing & Reproduction 1O3 500 Professional Services 1,587 2,600 Property Taves 4,638 4,500 Utilities 2,360 2,400 139,644 20D,915 Total Unrestricted Disburserments 230.1271 301,585 Net Unrestricted Ac#ft (26,461) (157,083. Endowment Revenue LATHE CASH FLOW Slar" cash Monthly Cumulative Cash Flow Ending Cash 1,289,739 4,540 1,294,279 157,083 1.294,279 1,137,199 SUMMARY' 711181 01102 6130102 Beg Cash AM" Ending Cash doled -Operating Fund 1,417,258 (157,083) 1260,175 Rest -Capital Campaign (122,979) 0 (122.979 Rant - Preservation Fund 0 0 0 Rest - Endowment 0 0 0 .t • Approved 10V18101 iz 0 Balboa Performing Arts Theatre Foundation 2001-2002 Budget Methodology and Assumptions The budget process used to create the 2001/2002 Budget for the Balboa Performing Arts Theater Foundation mirrors generally accepted industry standards. Additional concessions were made to ensure this budget also met the needs of a "start-up" organization and a Capital Campaign. Basically the budget is broken down into four activities: Programming, Fundraising, General and Administrative, and Capital Receipts/Outlay. The Capital Receipts/Outlay section will be presented after the City and Board formalize the project direction. Several layers of detail and considerations exist beyond what is presented to you in this summary form. Finance and Executive Committee members, employees, and consultants were involved with the assumptions for all budgeted activities. The following assumptions were used in preparing the 2001-2002 budget to comply with the Theater's short-term goals and long-term Business Plan. A. Ticket sales for the sampler series are budgeted at approximately $14K for 4 events with a 601/6 cost recovery ratio for related programming expenses. B. Unrestricted donations are budgeted at $30K less than 2000/2001 due to prioritizing capital campaign efforts and budgeting for only one theater sponsored special event that nets $1 OK. C. Interest is budgeted based on a conservative estimate of 2% of projected monthly cash balances. D. General fundraising expenses include 3 newsletters at full value; however, we are hoping to have some of the costs donated. E. The total capital campaign expenses are expected to total approximately 5% of the $4M . campaign, or $200K, and spread over 2-3 years. Until we have a solid construction plan that is in line with the City's expectations and support level, we recommend a "scaled down" capital. campaign for 2001/02 totaling $52K that covers contracted staff, printing and design, BT 2000 cultivation, and major donor cultivation. F. Payroll includes salaries for the Executive Director, Operations Manager, Public Relations Consultant, Community Relations Director and Secretary. G. For the most part, other G&A expenses will stay the same. The budget for insurance is a bit higher than the 2000/2001 actuals because the 2000/2001 general liability was paid in early in June 2000 and therefore is not included in the 2000/01 fiscal year. H. Overall, the Unrestricted Operating Budget is expected to net a negative $132K, which is $106K less than the actual $26K loss in the prior year. $30K of the $106K net difference accounts for a reduction in unrestricted donations in lieu of restricted donations for the capital campaign and $20K of the difference is from a conservative projection for interest revenue. The only other significant increase is the addition of an Operations Manager and a Community Relations Director. i� v..�ow.ir,a.mru�r,q 7� 0 1 0 General Notes • The target unrestricted fundraising disbursement/receipts (excluding capital campaign expenses) is 24%. • The capital budget and target ratios will be presented after the City and Board formalize the project direction. 7L f I I 1 I I I I I J II If II 0 APPENDIX E Donors .................................. � BT -2000 0 BT -2000 DONORS C, J In Chronological Order as of January 9, 2002 Recognition No DP Donor Name Date Michael Craig Same 11-23-99 Bill & Willie Richman Same 11-24-99 Kenny Vick & Christina O'Beck Bill & Willie Richman 11-24-99 M & M Frank H. Trane Same 12-3-99 Meta Going (may change wording) Meta Going 12-14-99 Geoffrey & Carol Davis Same 12-20-99 Mary & Ed Hall Same 12-21-99 Ron, Sandy, Mike & Jennifer Baers Same 1-7-00 John & Liz Wallace Same 12-27-99 Robert Levin & Debra Winston -Levin Same 1-10-00 Phyllis & Charles Bell Same 1-24-00 Gayle & Roy Jones Same 1-28-00 Peggy & Timm Crull Same 2-9-00 Peggy & Timm Crull Will decide 2-9-00 Nancy & Craig Smith Same 2-14-00 John & Kay Brown, Jennifer, Amy & Sarah John & Kay Brown 2-14-00 Russel & Hannah Kully Same 2-16-00 Eva Reed Armbruster Same 2-18-00 Dorothy Beauchamp Same 2-28-00 George & Nancy Dahl & Family Same 2-28-00 LLWW Foundation Same 2-29-00 Phil & Toni Doane Same 3-7-00 Bert & Colleen Hall Same 3-21-00 Brooke D. Fulford Same 3-22-00 William & Marion Bifford Peter -Gretchen -Jan Brosius Christian Faber William &Marion Bif ford 4-14-00 Mel & Pauline Ventura Same 4-14-00 Molly & Neal Brockmeyer Same 6-2-00 Sid & Mildred Mayberry Avonelle & Dick Kone 6/6/00 F� P'OW"ft lleYr FW T�- DVW 76 Recognition No DP Donor Name Date -77 Woodie & Rosalie Mayberry For Sam & Roan Furmanski Martin & Virginia Furmanski 6-16-00 Jack & Kathy Brown & Family Same 6-23-00 C.J. Se erstrom & Sons Same 7-3-00 William & Kathalleyne McCullough Pacific Media Group 7/3/00 Hensel Phelps Construction Co. Wayne Lindholm 7/5/00 Joe & Barbara Genshlea Same 7/6/00 In Memory of Dr. Edward Deeb, Sr. Marion Deeb & Family 7-31-00 Jack Balderston Same 8/2/00 Louise S. Greeley Same 8/29/00 AECOM Technology Corp. Ray Holdsworth 8/31/00 Dr. Peter S. Bing Same 9/1/00 Michael & Christine Muench with sons Bryce & Kyle Michael & Christine Muench 9/11/00 Edward D. Halvajian Family Foundation Same 9/26/00 Doug, Julie, Taryn & Skyler Gam Same 9/27/00 Eileen Forsberg PLEDGE 10/2/00 Marian L. Turpin Same 10/2/00 John & Sandy Wessman Same 10/5/00 Arlene & David Rose Same 10/6/00 Chandler P. Desforges & Luke C. Desforges Peter Desforges 10/12/00 Rhodes Family: Win, Bryce, Emery & Adam Winifred Rhodes 10/16/00 Clint & Pat Hoose Same 10/16/00 Theresa & Breeann Schmidt Katitza Schmidt 10/16/00 Lorie & Tom O'Loughlin Same 10/24/00 Joi Dell Hurd Same 10/24/00 Jim & Michele Muth Same 10/26/00 Dr. David & Leann .Benvenuti Same 10/26/00 Tony & Kathy Shaw Family Same 10/30/00 -77 0 0 Recognition No DP Donor Name Date Elouise & David Gogerty — Jesse & Trevor Miller Same 10/30/00 Pat Lopez Same 10/30/00 Gus & May Chabre Same 10/30/00 Edie & Perry Grant Same 10/30/00 David & Sylvia McEwen Same 10/30/00 R. Scott Dee Same 10/30/00 Philip & Carol Westbrook Same 10/30/00 Richard & Stephanie Scott Same 10/30/00 Ed & Anne Hirschman Same 11/2/00 Lopez, Hodes, Restaino, Milman, Skikos & Polos Same 11/2/00 Garth & Tracy Blumenthal Same 11/7/00 Jane & Richard P. Taylor Same 11/7/00 Ballet Montmartre Same 11/7/00 Peter & Gloria Hoffman & Family Same 11/7/00 Nancy R. Stem Same 11/7/00 Jim & LuAnn Jalet Same 11/7/00 Donald & Q. Ann Rogers Same 11/10/00 Don & Jan Webb & Don, Kellie, Cameron & Paige Webb Don & Jan Webb 11/15/00 Bill & Sally Hurt Same 11/17/00 Bob & Karen Rogers in honor of Howard & Trudi Rogers Bob & Karen Rogers 11/21/00 Joyce Jack Same 11/27/00 Cathi & Les Klingerman — Celebrate 25 Years Dr. & Mrs. P.L. Klingetman 11/27/00 Don & Doris Peterson Same 11/27/00 Irvine Apartment Communities same 12/4/00 Bob & Dayna Pettit Same' 12/5/00 Robert E. & Janet A. Mays & Family Same 12/5/00 Secondo & Dona Colombero Same 12/6/00 Peggy Crull Same* 12/12/00 The Remley Family Same* 12/14/00 IV 0 0 Recognition No DP Donor Name Date Stephen & Pamela Thorne Same* 12/14/00 . Theodore Robins Ford, established 1921 in Balboa Bob Robins 12114/00 Tod White Tod & Linda White 12/18/00 Linda White Tod & Linda White 12/18/00 STLN White Family Foundation Tod & Linda White 12/18/00 Dana & Bill Wysong John & Patricia Stanley 12/18/00 Doug & Beth Stanley John & Patricia Stanl 12/18/00 Dex & Jo Stanley John & Patricia Stanley 12/18/00 Dan & Jeannie Stanley John & Patricia Stanley 12/18/00 SEBCO Industries, Inc. — Sam & Margaret Barker Sam & Margaret Barker 12/18/00 Mr. & Mrs. Dave Tax, Newport Beach, CA Dave Tax 12/18/00 Kingsley & Jack Croul Jack Croul 12/18/00 Victoria & John Miller X Same 12/20/00 The Allison Family Robert Allison $1,250 12/20/00 Steve & Jenny Mizusawa Same 12/20/00 Herb & Kathy Cook Same 12/20/00 Jennifer & John & Matteson Wesoloski Same 12/20/00 Carol A. Hoffman Same 12/21/00 Peter & Harriet Pallette X Same 12/21/00 David, Stefanie & Riley Beek Same 12/27/00 Leona Aronoff Same 12/27/00 George & Phyllis Drayton Same 12/28/00 Judith & Willis Lon ear X Same 12/29/00 Lyle & Janis Eisel X Same 12/29/00 John Thomas & Viola Fischbeck Leggett Same 12/29/00 Michael Gannon (may change) Same 12/29/00 Bambi Wiltchik X Same 12/28/00 Bill, Sherrie, Senzie, Heather & John Underwood Same 12/28/00 Joan & Bill Wren Same 12/30/00 Basil & Judi Witt Family Same 1/3/01 7q 0 Recornition No DP Donor Name Date Wallace Jeffs X Same 1/3/01 Derek Johnson, Lynn Iba & Dashiell & Blaise Johnson Same 1/3/01 Valerie Hilton Howard Same 1/3/01 The Steve A. Morrill Family—Michele, Starla & Brant Rosemary Morrill 12/29/00 Robert Know Family Same 12/31/00 In memory of Donna Baers, a great supporter of performing arts Ron Baers 12/29/00 Al & Denise Frink Same 1/5/01 MarilynC. Brewer Same 1/8/01 John, Debra, Jack & John Pagliassotti Same 1/01/01 Jo, Paul, Jr., Jonathan & Stephanie Kin Same 1/15/01 Jan Debay Same 1/22/01 William, Donel & Joseph Wiles Same 1/22/01 Charles & Irene Vermeulen Same 1/22/01 Louise Alden McClure Brooke McClure-Wizel 1/23/01 Lido Isle Woman's Club Nancy Helm 2/1/01 Terry & Mark Markowitz Terry Markowitz 2/5/01 John & Kay Munshower & Family Same 2/5/01 In memory of Edith "Granny" Tobin Tom Tobin 2/13/01 Ed & Louise Maloney Same 2/19/01 Peter J. & Joan L. Ka lams Same 2/19/01 Jule C. Marshall X Same 2/20/01 Rosann M. Seidner Same 2/22/01 The Greg & Cindy Dillion Family Same 3/12/01 Don & Winnie Spengler Same 3/16/01 The O Hill Family Robert O Hill 3/19/01 The Gardners — Tina, Gina, Irene, Lillian, Peg & Emie Irene Gardner 3/19/01 The Leveilles — Roc, I I Irene Gardner 3/19/01 IN CI Recognition No DP Donor Name Date Mary, Bill, Edna & Irene Everett & Betty Spriggs Same 3/28/01 Mr. & Mrs. Andrew J. Evans II X Same 3/28/01 Ira & Gail Rosenstein X Same 4/3/01 The Zielinski Family Same 4/3/01 Allan & Sandy Fainbar Same 4/3/01 Mr. & Mrs. John H, Siegel Same 4/5/01 Michael & Sonja Saltman Same 4/16/01 Thomas & Caroline Maddock Same 4/25/01 Andy & Betsy Ackerman Same 4/25/01 Kelly Pauls -Cummings Same 4/25/01 Bob & Pat Seymour Same 5/9/01 Ross & Kathy Stewart Same 5/14/01 Ann Van Ausdeln Same 5/29/01 Mr. & Mrs. Frank Trane Same second 'ft 5/29/01 Louis Sands IV Same 5/29/01 Louis, Patti & Logan Tomaselli Same 5/29/01 Viva & Paul M. Medina Same 5/30/01 In Appreciation — The Ruth Beier Family Ruth Beier & Susan Lee Martinez 6/1/01 Dr. Stewart & Emily Wright Same 6/7/01 Edward (Duke) & Evelyn Hill Evelyn Hill 6-18-01 Jack & Pat McMillan in memory of Dennis Danell Jack & Pat McMillan 6/18-01 Dr. Rajendra G. Desai Same 6/18/01 Robert M. & Marjie A. Bennett Same 6/26101 Sofia Christiana Abre o Jon Myers 7/2/01 Homer, Aimee, Brad & Heather Bludau Same 712101 Dorothy A. Needelman Same 7/5/01 Dr. Stanford Green Same 8/16/01 The Edward Giddings Family Patricia Giddings 8/28/01 Mickey & Susan Schwartz Same 9/28/01 Leslie & Larry Miller Elouise R. Go ert 12/7/01 91 0 0 Recognition Nn i7P Donor Name Date Dana McNeill Same 12/27/01 Cam, Suzanne, Alanna, Same 12/28/01 Campbell, Kira & Dain Woods Howard & Helen House Same 12/28/01 Family Foundation Mar Klas Ph.D. Same 12/31/01 Total $176,251 cash $1,750 in-kind vo� art .RECONOMIC'll -A m,� j SHE NON,PR+ The Orange County Business Committee for the Arts would like to express their appreciation to Dr: James L. Doti, President of Chapman University, who generously volunteered his tune to serve as Project Director of this Economic Impact Report and to Dr. Esmael Adibi, Director of the A. Gary Anderson Center for Economic Research, and staff for their assistance toward the completion of this report. In addition, the OCBCA ,rcrtefidly acknowledges the generorts grant support .fmm the fbllaiving: _4E I.t Gi 14�:N C "fornia Arts Council all 1 �5- T H F V P LeTv w'Wer T Y 0ei®iue & Touche LLP /\ Coln right© f 998 kl file Orange Counn. Business Comminee for irre Arts. Cope hzg for (,filer then personal ase rn' infernal reference withonl express permission of fill, c'olni righi owner is expms.slY pmhihited. 1-1 0 The goal of the OCBCA is to encourage support of the arts and to encourage new and increased support from the business community. We hope that this study will create a heightened awareness in the business and cultural communities of the relationship of the arts to the economy and community. Our deep gratitude to Dr. James L. Doti, president of Chapman University, who has once again generously volunteered his time to serve as project director for this economic impact study and to Dr. Esmael Adibi, director of the A. Gary Anderson Center for Economic Research, and his staff for their invaluable assistance with this project. On behalf of the Orange County Business Committee for the Arts, we wish to express our appreciation to First American Title for underwriting the printing costs of the study and to The limes Orange County for creation of the graphics used on the cover. In addition, we extend our heartfelt thanks to the California Arts Council, Boeing, Deloitte & Touche LLP, Fluor Corporation, The Orange County Register and the US Trust Company of California for generously providing grant support toward the completion of this study. DonaldP. Kennedy Chairman OCBCA Chairman of the Board First American Financial Corporation l ' Betty R ss Found' Executive Director OCBCA 695 '1'mvn Caner ❑ri,, - suite Roll • Cusrn Mess, California 9!626 • '14;-54-0866 hup:- VN%e,0CB('SC0>L\I iARTS.ORG , ::--- BUSINESS COMMITTEE FOR THE ARTS INC. Fall 1998 ltfficcn Dear Reader, %k� ,Aairn,.•„ The Orange County Business Committee for the Arts, in collaboration ILunn. 11, N,,1,11, with the A. Gary Anderson Center for Economic Research at Chapman "•'"°""'•""' University, is pleased to present a fourth economic impact study, The Economic Impact of the Nonprofit Arts on Orange County. This report, for the year 1997, is a professional, factual study which presents an �:;,:,�: •.�,.. overview of cultural organizations by quantifying and describing the economic and social impacts of the responding institutions. 0 The goal of the OCBCA is to encourage support of the arts and to encourage new and increased support from the business community. We hope that this study will create a heightened awareness in the business and cultural communities of the relationship of the arts to the economy and community. Our deep gratitude to Dr. James L. Doti, president of Chapman University, who has once again generously volunteered his time to serve as project director for this economic impact study and to Dr. Esmael Adibi, director of the A. Gary Anderson Center for Economic Research, and his staff for their invaluable assistance with this project. On behalf of the Orange County Business Committee for the Arts, we wish to express our appreciation to First American Title for underwriting the printing costs of the study and to The limes Orange County for creation of the graphics used on the cover. In addition, we extend our heartfelt thanks to the California Arts Council, Boeing, Deloitte & Touche LLP, Fluor Corporation, The Orange County Register and the US Trust Company of California for generously providing grant support toward the completion of this study. DonaldP. Kennedy Chairman OCBCA Chairman of the Board First American Financial Corporation l ' Betty R ss Found' Executive Director OCBCA 695 '1'mvn Caner ❑ri,, - suite Roll • Cusrn Mess, California 9!626 • '14;-54-0866 hup:- VN%e,0CB('SC0>L\I iARTS.ORG CHAPMAN U n i v e r s i t y Orange, California 92866 Office of The President (714) 997-6611 0 FAX (714) 997-6887 September, 1998 Dear Reader: It has been a rewarding experience for the A. Gary Anderson Center for Economic Research to partner with the Orange County Business Committee for the Arts (OCBCA) in examining the economic impact of nonprofit arts organizations in Orange County. These are the only such studies that have been conducted on a regular basis for a metropolitan area. The value of having such studies conducted over a given interval of time (every four years) is made clear when comparing changes in the economic impact of nonprofit arts organizations. Two important caveats are in order: First of all, with all the care we have taken to be as accurate as possible in measuring the economic impact, there is much that has been omitted. For example, we were not able to include the important economic impact that our colleges and universities have in the presentation of performing arts events. Many other community groups that perform or stage dance, music and art shows have also been omitted. As great as the measured economic impact this study suggests, these omissions point to the fact that the economic contribution of the arts is even greater than that reported in our analysis. A second caveat is also necessary. Nonprofit arts organizations enrich our lives in ways that cannot be measured by dollars and cents. The programs made possible by these organizations excite our hearts and minds. They also help us understand our rich cultural heritage and in doing so bring us together as a community. As always, I wish to thank Betty Moss, director of the OCBCA, for her leadership in making it possible to complete this report. I am also grateful to the director of the Anderson Center, Dr. Esmael Adibi, for his contribution of time and talent in completing the study. Finally, I wish to thank the sponsors of this project whose financial support helped bring to light an aspect of the arts that is often ignored --namely, their role in contributing significantly to the economy of Orange County. W Doti University 0 0 i iContents I. Summary and Highlights .............................. 1 H. Description of Survey ................................ 4 III. Attendance and Ticket Prices ............................ 6 IV. Employment Impact ................................ 7 V. Income.......................................8 VI. Income by Organization Category ........................ 10 VII. Expenses ..................................... 12 VIII. Expenses by Organization Category ....................... 13 IX. Economic Impact ................................. 14 X. Economic Impact b Organization P Y g Category ................... 15 XI. Comparison of the 1989, 1993, and 1997 Studies ................ 16 XII. Projected Economic Impact in 1998 ....................... 22 XIII. Future Plans and Challenges ........................... 23 Appendix A: Sample Survey ............................... 26 Appendix B: Statistical Results ............................. 31 i I. Summary and Highlights The Survey Following the mailing of survey forms on April 1, 1998, completed surveys were received from 50 of the largest nonprofit arts organizations in Orange County during the May to July, 1998 period. To the extent that a number of smaller organizations are not represented, the economic impact measured in this study represents an underestimate of the true impact. • Survey respondents reported their most recent actual operating performances that, on average, covered the fiscal year ending December 31, 1997. Respondents also projected operating performances into their next fiscal period. • Nonprofit arts organizations represented in the survey included all of the large and many of the smaller organizations in categories defined as "dance," "mu- sic," "presenter," "theatre," and "museums." Attendance and Employment Impact • A more accurate picture of the nonprofit arts impact on the community can be obtained by analyzing the attendance at arts events and employment in these organizations. • • Of approximately 2.9 million total admissions, almost 44 percent or roughly 1,259,000 were free admissions. Admission revenues totaled $30.4 million. Of that total, $25.0 million or 82 percent emanated from the performing arts organizations. • Not including free admissions, the average paid admission for a performing arts event was $26.98, for museums was $2.18, and for other events was $12.10. • Nonprofit arts organizations employed a total of 4,725 paid positions, making these organizations taken as a whole Orange County's 8th largest non-govem- ment employer. • Volunteers contributed almost 592,000 hours, roughly equivalent to 285 full-time paid positions. • 894 directors or trustees served on boards of nonprofit arts organizations. 0 0 Income, Expenses and Economic Impact An estimate ofthe economic impact ofnonprofit arts organizations can be obtained by adding the direct spending of nonprofit arts organizations on personnel and operating expenses and the indirect spending of individuals on secondary purchases, restaurant meals, drinks, transportation, etc. Such an estimate helps give perspective to the significant role the arts play in the overall business vitality of our economy. • Government grants and private donations totaled $35.1 million. • Museums received 33.9 percent of all government grants to nonprofit arts organizations. Performing Arts organizations and Other organizations received 28.9 and 37.2 percent of all government grants respectively. • Contributions totaled $35 million, with $7.1 million (20.2 percent) going to museums, $21.2 million (60.4 percent) going to the performing arts and $6.8 million (19.4 percent) going to all other organizations. Earned income, comprised mainly of admission revenues, was $45.8 million. • There was direct spending of $77.9 million on all personnel and operating expenses, comprised of $45.5 million in personnel expenses (58.4 percent) and $32.5 million (41.6 percent) in operating expenses. • Indirect spending of 147.4 million in the arts occurred as a result of personnel and vendor secondary spending. • Audience spending on restaurant meals, drinks, transportation, etc. over and above the ticket cost is estimated at $56.2 million. • The total economic impact of the responding nonprofit arts organizations was $281.6 million of which museums contributed $27 million, performing arts contributed $199.1 million, and other organizations contributed $55.5 million. Comparison With 1989 and 1993 Economic Impact Studies The economic impact of nonprofit arts organizations on Orange County as estimated in the earlier 1989 and 1993 economic impact studies are compared to the 1997 economic impact estimated in the current study. • Paid admissions decreased 3.4 percent since the last survey. 2 0 9 • A sharp increase in free children's admissions occurred, increasing from 236,373 free admissions in 1993 to 727,029 free admissions in 1997—an increase of 208 percent over the four year period. • Average ticket prices decreased by $2.79 since 1989 to approximately $18.76. • Full-time employment increased on average 6.3 percent each year between 1989 and 1997. • Total contributions increased 24.0 percent during the 1993-97 period. • Operating expenditures increased 7.4 percent between 1993 and 1997 while personnel expenditures leaped by 22.2 percent over the same period. • The total economic impact increased by 11.6 percent over the 1993-97 period. Projections and Future Challenges Arts organizations were asked to supply income and expense projections for their coming fiscal years as well as respond to a series of questions relating to their plans and challenges for the future. • Arts organizations are more optimistic than our last survey calling for a 7.4 percent increase in the total economic impact in 1998. This compares to a projected rate of increase of 4.7 percent in the 1994 survey • Contributions are expected to decline by 1.3 percent in 1998. • Total income is expected to increase in 1998 by 4.1 percent as compared to a projected increase of 6.7 percent in total expenses. • Not surprisingly, those organizations that perceive private donor and government support as significant on presentations received most of that support. • There is a widely shared view that volunteerism will become "more important" in future years and that their organizations will grow larger. 0 0 0 • Il. Description of Survey The survey form shown in Appendix A was mailed on April 1, 1998. This survey instrument is virtually identical to the survey form mailed on May 29, 1990 and April 1, 1994, that formed the basis for the 1989 and 1993 studies entitled, "The Economic Impact of the Nonprofit Arts in Orange County." Except for projected income and expenses, the information presented in this study relates to the arts organizations' last fiscal year. These varied by organization with some fiscal years ending as early as June 1997 and some ending as late as July 1998. The average fiscal year end was December 1997. With the exception of the projected income and expense data, therefore, the information presented in this study, on average, covers the 1997 calendar period, as compared to the 1989 and 1993 coverage of the previous arts impact studies in Orange County. Care was taken to ensure that all the respondents in the previous study returned completed survey instruments for the current study. Of the 37 original participants in 1989, 24 responded to the current survey. In Section XI, the results of the 1989 and 1993 economic studies are compared with current findings. The arts organizations listed on the following page participated in this survey. We wish to express our appreciation to each of these organizations for their investment of time and resources to respond and complete the survey form. 1] 0 0 Survey Participants Museums: Anaheim Museum* Bowers Museum* Children's Museum at LaHabra* City of Brea Gallery** Discovery Museum* Fullerton Museum Center* Laguna Art Museum* Orange County Museum of Art* The Irvine Museum** Other: Art Institute of Southern California Arts Orange County** City of Brea Cultural Center Festival of Arts of Laguna Beach Huntington Beach Art Center Imagination Celebration of Orange County** Irvine Fine Arts Center* KOCE-TV Public Television Muckenthaler Cultural Center* Orange Art Association" Orange County Art & Jazz Festival** Orange County High School of the Arts Foundation Placentia Art Association Sawdust Festival Corp.** Very Special Arts California** Performing Arts: Dance Anaheim Ballet Ballet Pacifica* Dance Kaleidoscope of Orange County** Festival Ballet Theatre St. Joseph Ballet Company* Music All American Boys Chorus* Buena Park Community Chorus Capistrano Valley Symphony Laguna Chamber Music Society* Opera Pacific* Orange County Youth Symphony Orchestra* Pacific Chorale* Pacific Symphony Association* William Hall Master Chorale* Presenter Orange County Performing Arts Center* Philharmonic Society of Orange County* Theatre City of Brea Curtis Theatre** Fullerton Civic Light Opera* Irvine Barclay Theatre La Habra Community Theatre Laguna Playhouse* San Clemente Community Theatre Shakespeare Orange County* South Coast Repertory* STOP -GAP* Vanguard Theatre Ensemble" * Participated in '89, '93, and '97 studies. * * New participant in 97 study. 40 40 0 0 0 III. Attendance and Ticket Prices Attendance figures for the responding nonprofit arts organizations are reported below. Performing Arts include all arts organizations that describe themselves either as "music," "theatre," "dance," or "presenter." References: 1. See line 1, column B in Appendix B. 2. See line 1, columm A in Appendix B. 3. See line 1, colurmi C in Appendix B. 4. See line 2, columm B in Appendix B. 5. See line 2, column A in Appendix B. 6. See line 2, column C in Appendix B. 7. See line 3, column B in Appendix B. 8. See line 3, column A in Appendix B. 9. See line 3, column C in Appendix B. Average ticket prices, calculated by dividing total admission revenues by the number ofpaid admissions, are shown below: Free Other Organization Organization Paid Children's Free Total Category Admissions Admissions Admissions Admissions Museums 299,5501 59,3994 255,2937 614,242 Performing Arts 924,7622 410,3805 94,8548 1,429,996 Other 394,9223 257,2506 181,7069 833,878 Total 1,619,234 727,029 531,853 2,878,116 Percentage of Total 56.3 25.3 18.4 100.0 References: 1. See line 1, column B in Appendix B. 2. See line 1, columm A in Appendix B. 3. See line 1, colurmi C in Appendix B. 4. See line 2, columm B in Appendix B. 5. See line 2, column A in Appendix B. 6. See line 2, column C in Appendix B. 7. See line 3, column B in Appendix B. 8. See line 3, column A in Appendix B. 9. See line 3, column C in Appendix B. Average ticket prices, calculated by dividing total admission revenues by the number ofpaid admissions, are shown below: References: 1. See line 24, column B in Appendix B. 2. See line 24, column A in Appendix B. 3. See line 24, column C in Appendix B. 2. 4. See line 1, columm B in Appendix B. S. See line 1, colunn A in Appendix B. 6. See line 1, columm C in Appendix B. Calculated Organization Admission Paid Average Category Revenues Admissions Ticket Price Museums $ 653,3811 299,5504 $ 2.18 Performing Arts $ 24,952,0652 924,7625 $ 26.98 Other $ 4,778,9443 394,9226 $12.10 Total $ 30,384,390 1,619,234 $ 18.76 References: 1. See line 24, column B in Appendix B. 2. See line 24, column A in Appendix B. 3. See line 24, column C in Appendix B. 2. 4. See line 1, columm B in Appendix B. S. See line 1, colunn A in Appendix B. 6. See line 1, columm C in Appendix B. IV. Employment Impact [I The responding nonprofit arts organizations employed a total of 4,725 full-time, part-time, and contracted positions. Full-time Positions 4791 Part-time Positions: 2,4042 Contracted Positions: 1,8423 Total Paid Positions: 4,725 References: 1. See line 6, column D in Appendix B. 2. See line 7, colurtm D in Appendix B. 3. See line 8, colunm D in Appendix B. In addition to the paid positions, volunteers (ushers, clerical, tour guides, etc.) contributed 592,085 hours to the responding organizations. This is roughly equivalent to 285 full-time positions. A total of 894 directors or trustees are reported to have served on volunteer boards of the reporting organizations. Of course, the total number of individuals employed by arts organizations is much greater than the figures shown here. Many more independent performers, writers, directors, artists, etc., would add significantly to the reported total. Nonetheless, even the conservatively reported figure of 4,725 positions would make non- profit arts organizations a major employer in Orange County. The following comparison suggests that these organizations taken as a whole in 1997 represent Orange County's 8th largest non-government employer. Employer Number of Employees Walt Disney Company 12,633 Boeing Company 11,000 Tenet Healthcare Corp. 10,500 American Stores Company 7,900 St. Joseph Health System 6,535 BankAmerica Corp. 5,300 Tricon Global Restaurants, Inc. 4,820 Nonprofit Arts Organizations 4,725 Ralphs Grocery Company 4,688 Pacific Telesis Corp. 4,650 Dayton Hudson Corp. 4,145 Memorial Health Services 4,028 Toshiba Corp. 3,989 PacificCare Health Systems, Inc. 3,800 Marriott International, Inc. 3,482 1] 7 0 V. Income �J Total income of the responding nonprofit arts organizations are comprised of two major income categories: 1. Contributed Income: $35,051,090 This is the amount of income derived from government grants and contributions from the private sector. See line 23, column D in Appen- dix B. 2. Earned Income: $45,798,732 This is the amount of income derived from admission revenues and the sale of other goods and services. See line 30, column D in Appendix B. Summing these income categories gives total income. Total Contributed Income: $ 35,051,090 Total Earned Income: $ 45,798,732 Total Income: $ 80,962,215 The following pie chart shows a finer breakdown of income. Note that the white areas show contributed income and the shaded areas show earned income. Other Earned Income 19.0% Total Income Private Donations 36.3% E 37.5% ;overnment Grants 7.2% osions The following figure shows the percentage distribution of the sources of contributed income. Percentage Distribution of Contributed Income -Government Grants 16.6 Individuals 124.8 Business/ Corporate 12.3 -Foundations & Grants 17.0 Membershis 11.4 Fundraising Events 13.3 Other 4.6 0 5 10 15 20 25 30 0 11 11 11 0 • VI. Income by Organization Category The following figures break down income by major organization category. Organization Number Contributed Earned Total Category Surveyed Income Income Income Museums 9 $ 7,067,1371 $ 2,098,4054 $ 9,277,935' Performing Arts 26 $ 21,186,6842 $ 34,262,3155 $ 55,448,9998 Other 15 $ 6,797,2693 S 9,438,0126 $ 16,235,2819 Total 50 $ 35,051,090 $ 45,798,732 $ 80,962,215 Percentage of Total 43.3 56.7 100.0 References: ® 1993 1. See line 23, column B in Appendix B. 6. See line 30, column C in Appendix B. 2.. See line 23, column A in Appendix B. 7. See line 31, column B in Appendix B. 3. See line 23, column Cin Appendix B. 8. 'See line 31, column A in Appendix B. 4. See line 30, column B in Appendix B. 9. See line .31, column C in Appendix B. 5. See line 30, colunm.A in Appendix. B. The following pie charts show the distribution of contributed income from individuals, business, and foundations, and contributed income from all government grants (federal, state, and local) on the basis of individual organization categories. Distribution of Contributed Income from Individuals, Business, Foundations & Grants Government Grants Ind ividuaUCorporate Foundations/Grants Memberships/ Fundraising Events/ Other 10 16.6. 44.2 32.9 - - P 37.1 ❑ 1989 ® 1993 15.3 ® 1997 14.3 17.0 27.2 293 0 10 20 30 40 5o 10 0 0 Museum 33.9% Distribution of Contributed Income from All Government Grants Ire 4� 4.4% Qia 0.4% 0.7% T' --tre II 37.2% • 0 0 0 0 9 VII. Expenses Total expenses of the responding nonprofit arts organizations are comprised of two major expense categories: 1. Personnel Expenses: $45,451,283 These expenditures are for full and part time artistic, administrative, and technical services. See line 38, column D in Appendix B. 2. Operating Expenses: $32,521,941 These expenditures are for facilities, marketing, production, and other - related expenditures. See line 45, column D in Appendix B. Summing these expenditure categories gives total expenses. Total Personnel Expenses: $ 45,451,283 Total Operating Expenses: $ 32,521,941 Total Expenses: $ 77,973,224 The following pie chart shows a finer breakdown of expenses. The white area shows personnel expenses and the shaded area shows expenses related to operations. Total Expenses Administrative 18.2% Technical 123% Artistic 27.8% Travel & Other 73% 4.6% 12.7% Fundraising Production 12 8.1% Facility 9.0% 0 VIII. Expenses by Organization Category The following figures break down expenses by major organization category. Organization Number Personnel Operating Total Category Surveyed Expenses Expenses Expenses Museums 9 $ 4,480,9791 $ 4,440,9634 $ 8,921,9427 Performing Arts 26 $ 31,436,1572 $ 21,468,7605 $ 52,904,9178 Other 15 $ 9,534,1473 $ 6,612,2186 $ 16,146,3659 Total 50 $ 45,451,283 $ 32,521,941 $ 77,973,224 Percentage of Total 58.3 41.7 100.0 References: 5. See line 45, column A in Appendix B. 1.See line 38, column B in Appendix B. 6. See line 45, column C in Appendix B. 2.See line 38, column A in Appendix B. 7. See line 46, column Bin Appendix B. 3. See line 38, column C in Appendix B. S. See line 46, column A in Appendix B. 4. See line 45, column B in Appendix B. 9. See line 46, column C in Appendix B. 0 0 13 0 • 1 • IX. Economic Impact The total economic impact of the responding nonprofit arts organizations is comprised of the following spending categories: 1. Direct Spending: $77,973,224 This is the amount nonprofit arts organizations directly spend on all personnel and operating expenses. See line 46, column D in Appendix B. 2. Indirect Spending: $147,369,392 This is the amount of spending that occurs as personnel use their wages and as vendors use their receipts to purchase goods and services. In this study, the multiplier of 1.89 was used to estimate indirect spending. Hence, the indirect spending estimate was derived by multiplying direct spending of $77,973,224 (see above) by 1.89. 3. Indirect Audience Spending: $56,211,121 This is the amount of spending that occurs as audiences purchase restaurant meals, drinks, transportation, etc., over and above the cost of their tickets. Using the multiplier of 1.85, indirect audience spending is estimated by multiplying total admission revenues of $30,384,390 (see line 24, column D in Appendix B) by 1.85. Note that these multipliers are obtained from the U.S. Department of Commerce, Economic and Statistics Administration, Bureau of Economic Analysis, Regional Input -Output Mod- eling System. Summing these spending categories gives the total estimated economic impact. Total Direct Spending: Total Indirect Spending: Total Indirect Audience Spending: Total Economic Impact: 14 $ 77,973,224 $ 147,369,392 $ 56,211,121 $ 281,553,737 0 0 X. Economic Impact by Organization Category • The following figures break down the economic impact by major organization category. Reremnm: 1. See line 46, column B in Appendix B. 2. See line 46, column A in Appendix B. 3. See line 46, column C in Appendix B. 15.. 1] Indirect Total Organization Number Direct Indirect Audience Economic Category Surveyed Spending Spending Spending Impact Museums 9 $ 8,921,942' $ 16,862,470 $ 1,208,755 $ 26,993,167 Performing Arts 26 $52,904,9172 $99,990,293 $46,161,320 $199,056,530 Other 15 $16,146,3653 $ 30,516,629 $ 8,841,046 $ 55,504,040 Total 50 $ 77,973,224 $147,369,392 $ 56,211,121 $281,553,737 Percentage of Total 27.7 52.3 20.0 100.0 Reremnm: 1. See line 46, column B in Appendix B. 2. See line 46, column A in Appendix B. 3. See line 46, column C in Appendix B. 15.. 1] I* E • 0 X1. Comparison of the 1989, 1993, and 1997 Studies The economic impact of nonprofit arts organizations on Orange County as estimated in the earlier 1989 and 1993 economic impact studies are compared in this section to the 1997 economic impact as estimated in the current study. Paid Admissions Free Children's .Admissions Other Free Admissions Total Admissions Paid Admissions Free Children's Admissions Other Free Admissions Total Admissions Attendance Thousands I'I Attendance 11,677. r v. 11,619. M 236 Msm 727 El 1989 9 1993 424 10 1997 �' 7 I 3532 1,698 Rale of Change 'M,2,383 1993 1997 2,878 1993.97 1989.97 0 500 1,000 1,500.' 2,000 2,500 3,000 3,500 The effects of the recent recession in Orange County are clear as paid admission declined 3.4 percent since 1993. Free admission, however, increased sharply, particularly free admissions for children. As a result total Admissions increased 20.8 percent since 1993, roughly half the 40.4 percent increase that occurred between the 1989 and 1993. 16 Attendance Annual Compounded Percent Change Rale of Change 1989 1993 1997 1989.93 1993.97 1989.97 1,039,663 1,676,513 1,619,234 61.3 -3.4 5.7 233,781 236,373 727,029 1.1 208.0 15.2 424,309 470,486 531,853 10.9 13.0 28.6 1,697,753 2,383,372 2,878,116 40.4 20.8 6.8 The effects of the recent recession in Orange County are clear as paid admission declined 3.4 percent since 1993. Free admission, however, increased sharply, particularly free admissions for children. As a result total Admissions increased 20.8 percent since 1993, roughly half the 40.4 percent increase that occurred between the 1989 and 1993. 16 0 Ticket Revenues and Prices Reflecting the lower number of paid admission in 1997 as compared to 1993, admission revenues also dropped over that period by 1.8 percent. This compares to a 38.2 percent increase that occurred between the 1989 and 1993. Average ticket prices remained roughly the same in 1997 ($18.76) as compared to 1993 and, more surprisingly, are somewhat lower than ticket prices in 1989 ($21.55) Full-time Positions Part-time Positions Contracted Positions Total Paid Positions Employment Annual Compounded Percent Change Rate of Change 1989 1993 1997 1989-93 1993-97 1989-97 Admission Revenues $ 22,405,439 $ 30,955,405 $ 30,384,390 38.2 -1.8 3.9 Paid Admissions 1,039,663 1,676,513 1,619,234 61.3 -3.4 5.7 Average Ticket Price $ 21.55 $ 18.46 $ 18.76 -14.3 1.6 -1.7 Reflecting the lower number of paid admission in 1997 as compared to 1993, admission revenues also dropped over that period by 1.8 percent. This compares to a 38.2 percent increase that occurred between the 1989 and 1993. Average ticket prices remained roughly the same in 1997 ($18.76) as compared to 1993 and, more surprisingly, are somewhat lower than ticket prices in 1989 ($21.55) Full-time Positions Part-time Positions Contracted Positions Total Paid Positions The downward pressure in admission revenues has obviously had an impact on employment. Full-time positions increased from 458 positions in 1993, to 479 positions in 1997, an increase of only 4.6 percent. This compares to a 56.3 percent increase between 1989 and 1993. Part-time positions, however, have continued to increase rapidly, growing from 1,724 positions in 1993 to 2,404 positions in 1997 — an increase of about 40 percent. This growth in part-time positions was roughly equal to the growth that occurred during the earlier 1989 to 1993 period. 17 11 9 Employment Annual Compounded Percent Change Rate of Change 1989 1993 1997 1989-93 1993-97 1989-97 293 458 479 56.3 4.6 6.3 1,208 1,724 2,404 42.7 39.4 9.0 2,380 2,108 1,842 -11.4 -12.6 -3.2 3,881 4,290 4,725 10.5 10.1 2.5 The downward pressure in admission revenues has obviously had an impact on employment. Full-time positions increased from 458 positions in 1993, to 479 positions in 1997, an increase of only 4.6 percent. This compares to a 56.3 percent increase between 1989 and 1993. Part-time positions, however, have continued to increase rapidly, growing from 1,724 positions in 1993 to 2,404 positions in 1997 — an increase of about 40 percent. This growth in part-time positions was roughly equal to the growth that occurred during the earlier 1989 to 1993 period. 17 11 9 E Income Contributions increased from $28.3 million in 1993 to $35.1 million in 1997. This increase of 24 percent compares to an increase of 36.1 percent during the 1989 to 1993 period. Over the entire 1989 to 1997 period, the annual percentage increase in contributions was 6,8 percent. This compares over the same period to an average percentage increase in Orange County's personal income of 4.7 percent. The following figure shows a comparison of changes in the sources of contributed income for the 1989, 1993, and 1997 studies. Percentage Distribution of Contributed Income Government Grants IndividuaVCorparate Foundations/Grants Memberships/ Fundrafsine Events/ Other 0 10 30 30 40 50 The 10.1 percent increase in earned income between 1993 and 1997 as shown in the "Income" table, seems inconsistent with the decline in admissions revenue as reported above. This is explained by the fact that while earned income is generated mainly by admission revenues, Annual Compounded Percent Change Rate of Change 1989 1993 1997 1989-93 1993-97 1989-97 Contributed Income $ 20,772,444 $ 28,270,593 $ 35,051,090 36,1 24.0 6.8 Earned Income $ 31,088,179 $ 41,608,486 $ 45,798,732 33.8 10.1 5.0 Total Income S 51,860,623 $ 69,879,089 $ 80,962,215 34.7 15.9 5.7 Contributions increased from $28.3 million in 1993 to $35.1 million in 1997. This increase of 24 percent compares to an increase of 36.1 percent during the 1989 to 1993 period. Over the entire 1989 to 1997 period, the annual percentage increase in contributions was 6,8 percent. This compares over the same period to an average percentage increase in Orange County's personal income of 4.7 percent. The following figure shows a comparison of changes in the sources of contributed income for the 1989, 1993, and 1997 studies. Percentage Distribution of Contributed Income Government Grants IndividuaVCorparate Foundations/Grants Memberships/ Fundrafsine Events/ Other 0 10 30 30 40 50 The 10.1 percent increase in earned income between 1993 and 1997 as shown in the "Income" table, seems inconsistent with the decline in admissions revenue as reported above. This is explained by the fact that while earned income is generated mainly by admission revenues, i 0 other sources of earned income such as contracted services and interest income increased sharply since 1993. The "Income" table also shows that total income increased to $81.0 million in 1997, an increase of 15.9 percent from $70.0 million generated in 1993. This rate of increase is roughly half the rate of growth that occurred between 1989 and 1993. Expenses As in the case of total income, the growth rate in total expenditures between 1993 and 1997 was roughly half the rate of growth that occurred between 1989 and 1993. It should be noted however, that expenditure growth declined more sharply for operating as compared to personnel expenditures. The following table shows the economic impact of all organizations that responded to the 1989, 1993, and 1997 economic impact studies. Total Economic Impact 1989 1993 1997 Number Surveyed 37 Annual 50 Direct Spending $ 50,758,605 $ 67,470,675 $ 77,973,224 Indirect Spending Compounded $127,519,576 $147,369,392 Indirect Audience Spending $ 40,205,487 Percent Change Rate of Change $186,897,855 1989 1993 1997 1989-93 1993-97 1989-97 Personnel Expenses $ 27,212,796 $37,201,586 $ 45,451,283 36.7 22.2 6.6 Operating Expenses $ 23,545,809 $ 30,269,089 $ 32,521,941 28.6 7.4 4.1 Total Expenses $ 50,758,605 $67,470,675 $ 77,973,224 32.9 15.6 5.5 As in the case of total income, the growth rate in total expenditures between 1993 and 1997 was roughly half the rate of growth that occurred between 1989 and 1993. It should be noted however, that expenditure growth declined more sharply for operating as compared to personnel expenditures. The following table shows the economic impact of all organizations that responded to the 1989, 1993, and 1997 economic impact studies. Total Economic Impact 19 Annual Compounded Pereent Change RateofChange 1989-93 1993-97 1989-97 32.9 1989 1993 1997 Number Surveyed 37 49 50 Direct Spending $ 50,758,605 $ 67,470,675 $ 77,973,224 Indirect Spending $ 95,933,763 $127,519,576 $147,369,392 Indirect Audience Spending $ 40,205,487 $ 57,267,499 $ 56,211,121 Total Economic Impact $186,897,855 $252,257,750 $281,553,737 19 Annual Compounded Pereent Change RateofChange 1989-93 1993-97 1989-97 32.9 15.6 5.5 32.9 15.6 5.5 42A -1.8 4.3 35.0 11.6 5.3 11 11 1.1 E 11 11 Although indirect audience spending was negatively affected by the drop in admission revenues between 1993 and 1997, the total economic impact over this period increased 11.6 percent to $281.6 million. This rate of increase for the total economic impact was about a third of the 35.0 percent increase that occurred between 1989-1993. Over the entire 1989 to 1997 period, the average annual percentage rate of increase of 5.3 percent compares to a 4.7 percent increase in Orange County's personal income over the same period. Direct Spending Indirect Spending Indirect Audience Spending Total Economic Impact Total Economic Impact Millions of S 51 67 78 96 128 147 O 1989 01 0 ED 1993 10 1997 ����� 57 56 187 252 xe '. 282 50 100 150 200 250 300 350 The preceding analyses included comparisons of all organizations that responded to the survey in 1989, 1993, and 1997. In order to keep the comparison consistent, only those organizations that responded to all three surveys were included in the following comparative analysis. The following table presents the economic impact of 24 organizations that responded to the 1989, 1993, and 1997 economic impact studies. It should be noted, however, that these 24 organizations comprised 97 percent, 81 percent, and 77 percent of total income reported in the 1989, 1993, and 1997 studies, respectively. 20 0 E Total Economic Impact (Organizations that responded to all three surveys) The total economic impact of these organizations increased by 13.9 percent over the 1989-93 period and 5.0 percent over the 1993-97 period. The smaller increase in the total economic impact during the 1993-97 period is mostly the result of decreasing indirect audience spending. Over the longer period of 1989 to 1997, the total economic impact of these 23 organizations increased at an average annual rate of 2.3 percent, lower than the average annual percentage rate of increase in personal income of 4.7 percent. 9 21 1989 1993 1997 Direct Spending $ 48,682,553 $ 54,023,164 $ 58,890,742 Indirect Spending $ 92,010,025 $102,103,780 $111,303,502 Indirect Audience Spending $ 40,233,394 $ 49,952,440 $ 46,175,572 Total Economic Impact $180,925,972 $206,079,384 $216,369,816 The total economic impact of these organizations increased by 13.9 percent over the 1989-93 period and 5.0 percent over the 1993-97 period. The smaller increase in the total economic impact during the 1993-97 period is mostly the result of decreasing indirect audience spending. Over the longer period of 1989 to 1997, the total economic impact of these 23 organizations increased at an average annual rate of 2.3 percent, lower than the average annual percentage rate of increase in personal income of 4.7 percent. 9 21 Annual Compounded Percent Change Rate of Change 198943 1993-97 1999-97 11.0 9.0 2.4 11.0 9.0 2.4 24.2 -7.6 1.7 13.9 5.0 2.3 The total economic impact of these organizations increased by 13.9 percent over the 1989-93 period and 5.0 percent over the 1993-97 period. The smaller increase in the total economic impact during the 1993-97 period is mostly the result of decreasing indirect audience spending. Over the longer period of 1989 to 1997, the total economic impact of these 23 organizations increased at an average annual rate of 2.3 percent, lower than the average annual percentage rate of increase in personal income of 4.7 percent. 9 21 0 0 9 XII. Projected Economic Impact in 1998 0 In addition to being surveyed about their last fiscal year, arts organizations were also asked to supply income and expense projections for their next full fiscal period. Since the average last fiscal year ended in December 1997, the projections, on average, relate to calendar year, 1998. See lines 48-82 in Appendix B. Economic Impact of Non -Profit Arts Organizations Actual and Projected Actual Projected Percent 1997 1998 Change Contributed Income $ 35,051,090 $ 34,609,023 -1.3 Earned Income $ 45,798,732 $ 49,691,043 8.5 Total Income $ 80,962,215 $ 84,300,066 4.1 Personnel Expenses $ 45,451,283 $ 48,658,631 7.1 Operating Expenses $ 32,521,941 $ 34,554,248 6.2 Total Expenses $ 77,973,224 $ 83,212,879 6.7 Total Economic Impact $281,553,737 $302,314,308 7.4 Nonprofit arts organizations are decidedly negative about theirprospects for additional donor support, projecting a 1.3 percent decline in 1998. They expect earned income to increase a rapid 8.5 percent. When considering the anticipated decline in contributions, however, total income is projected to increase 4.1 percent. This increase is lower than the projected increase in expenses of 6.7 percent. On average, therefore, the nonprofit arts in Orange County are anticipating a narrowing margin or surplus in 1998. These projections point to a 7.4 percent increase in the total economic impact from $281.6 million in 1997 to $302.3 million in 1998. This projected increase of 7.4 percent compares to an average annual increase of 5.3 percent over the 1989 to 1997 period as estimated in this study and a 5.9 percent increase in personal income in 1998 as forecasted by the A. Gary Anderson Center for Economic Research at Chapman University. 22 XIII. Future Plans and Challenges 11 A series of questions on the survey form (see Appendix A) related to the future plans and challenges facing nonprofit arts organizations. The survey results regarding these questions are presented in tabular form on lines 83-95 in Appendix B. The following figures show the percentage of organizations that checked each of the individual responses listed after each question for the 1993 and 1997 survey. Influence of Private Donor Support on Presentations Significant Somewhat Little Not At All 0.1 0.2 0.3 0.4 M As shown in the above figure, 42 percent of respondents indicated that private donor support had a significant influence on presentations. This is not surprising given the fact that the organizations that perceive private donor support as significant in influencing presentations received $23.4 million or 80 percent of total private donor support. As compared to 1993, the respondents in 1997 perceived a slightly greater influence of private donor support in presentations. Influence of Government Support on Presentations Significant \ 20%. � 16% 14% Somewhat 22% ❑ 1997 ® 1993 Little 26% 31% Not At All 0.1, 0.2 0.3 0.4, 0.5 Twenty percent of organizations perceive government support as significant in influencing presentations. These organizations received about $3.0 million or 52 percent of total government support. O 23 E r L ® 0 Importance of Volunteerism Over Next Ten Years More Same Less Not At All 14 7 01993 ■ 0 0.2 0.4 0.6 0.8 1 The above figure suggests that volunteerism will become slightly more important in coming years. Growth of Orsanization Over Next Ten Years Larger Same Smaller Do Not Know 64% 20% 6% ❑ 1997 ® 1993 , 10% 12%i 25% 0 0.2 0.4 0.6 0.9 Not surprisingly, the figure above reflects the expectation on the part of the respondents that their organizations will grow larger over the next ten years. 24 s 0 Challenges Facing Orange County Nonprofit Arts Organizations Recruiting Employees Recruiting Board/Vol Balancing Budget Growing in Quality Building Audiences Private Support Government Support Expanding Facilities. 2.9 \ 2.2 3.7 iiM\�<;, 3.5 3.6 3.4 \ 3.2 111997 3.6 01993. \\ \ \\ \\ \\\ \\\\\ 3.8 3.6 \ \ \\ \ \ \ 3.7 2.5 \ \\\ \\\\\\\\ \\\\ 2.8 2.4 2.0 6 The average response on a scale of 0 to 4 with "0" being "not important' and "4" being "extremely important" regarding challenges facing their organizations in the future are shown above. In comparing the results, (see lines 83-95, columns A and B in Appendix B), it is interesting to note that there was little difference between the performing arts and museums in their perceived challenges. The only two differences related to the perception on the part of performing arts respondents that "recruiting employees" and "growing in quality" were significantly more important than that perceived by museums. It is also interesting to note that the only significant difference in the response relating to future challenges was in the "recruiting employees" category. The respondents were much more concerned about that challenge now than they were in the last survey. This heightened concern should not be surprising in light of the current tightness in the labor market. E 25 0 Appendix A: Sample Survey 0 26 Econo,01 Impact of the Nonprofit Arts Aange County Sponsored by the Orange County Business Committee for the Arts All financial information will be held in confidence. It will be used only to develop basic information on programs and activities of arts organizations and to collect detailed information on income and expenditures needed for an assessment of the impact of the arts on the Orange County economy. The information will be used only for the purpose stated in this survey and will be published in statistical aggregates that will not permit the identification of any individual organization without the consent of that organization. Organization: Organization Name: Address: Person Completing Survey - Name: Title: Phone: Which category best describes this organization? (Circle One) Museum Music Theatre Dance Service Presenter Special Event Other* * If "Other," please describe Period of your organization's last fiscal year NOTE: Unless specified otherwise, please answer all questions on the basis of your organization's last fiscal year. If question is not applicable to your organization, please write "NIA" in the space provided. 0 27 9 Attendance: 0 0 1. How many paid admissions did your organization record? 2. How many free children's admissions did your organization record? 3. How many other free admissions (not including children) did your organization record? 4. What is your average ticket price? Board, Staff and Artists: How many full-time paid positions did your organization employ? 6. How many part-time paid positions did your organization employ? 7. How many independent contracted positions did your organization employ (exclusive of the above)? 8. If you employed artists, what percentage were local (Orange County)? 9. What percentage of employed artists were hired from outside the Orange County area? 10. How many volunteer hours. did individuals contribute to your organization? (Ushers, clerical, tour guides, etc.) 11. Currently, how many Board of Trustee members or Directors does your organization have? M Income and Expenses -0 0 1996-97* (Actual) Income A. Contributed 1. Federal Government 2. State Government 3. Local/Municipal Government 4. Individual Contributions 5. Business/Corp. Contributions 6. Foundations 7, Grant Amount Received (not included above) 8. Memberships 9. Fundraising Events 10. Other 11. Subtotal Contributed (Sum Items 1 thorough 10) $ B. Earned 12. Admissions $ 13. Touring 14. Contracted Services 15. Product Sales 16. Interest and Other Investment Income 17. Other 18. Subtotal Earned (Sum Items 12 thorough 17) $ 19. Total Income (Item 11 plus Item 18) II. Expenses A. Personnel 20. Full-time Artistic Other Artistic (part-time and/or contracted) 21. Full-time Administration Other Administration (part-time and/or contract) 22. Full-time Technical Production Other Technical Production (part-time and/or contract) 23. Subtotal Personnel (Sum Items 20 thorough 22) B. Operating 24. Facility Expenses/Space Rental 25. Marketing 26. Production/Exhibition 27. Travel 28. Fund Raising Expenses 29. Other (if greater than 10% of budget attach separate schedule 30. Subtotal Operating (Sum Items 24 thorough 29) 31. Total Expenses (Item 23 plus Item 30) 1997-98* (Projected) 0 III. Surplus (Shortfall) at Year End Total Income [Item 191 minus Total Expenses [tem 31] * If fiscal year begins January 1, report 1997 results in 1996-97 column above and report 1998 projections in 1997-98 column above. 40 29 E U Future Plans and Challenges: 1. Over the next ten years, how will volunteerism change in its importance to the long -run viability of your organization? More Less Same Not Applicable 2. Ten years from now, how will your organization compare to its current size? Larger Smaller Same Do not Imow 3. How does external private donor support influence the content of your organization's presentations? Significantly Somewhat Little Not at all 4. How does external government support influence the content of your organization's presentations? Significantly Somewhat Little Not at all 5. How important are the following challenges facing Orange County arts organizations in the next ten years: Extremely Very Somewhat Not Important Important Important Important Important a. Recruiting employees b. Recruiting board/volunteer leadership c. Balancing budget d. Growing in quality e. Building audiences f. Attracting private donor support g. Attracting government support h. Expanding facilities i. Other: 30 • Appendix B: Statistical Results 31 11 • -J 0 • (A) Total (B) Tone (C) Total (D) GRAND Performing Museum Others, TOTAL 32 Attendance:_ I Paid Admission 924,762 299,550 394,922 1,619,234 2 Children's Admissions 410,380 59,399 257,25D 727,029 3 Free Admissions 94,854 255,293 181,706 531,553 4 Avenge Ticket Price $21.35 $1.82 S15.22 SI2.BD 5 Calculated Ticket Price $26.98 r $2.18 $12.10 $18.76 _ Beard, Staff, Artists: 6 Full-time Paid Position 251 100 128 479 7 Part-time Paid Position 1,662 97 645 2,404 8 Competed Positions 1,552 68 222 1,842 9 Percent Local 5625 84.17 85.63 - 75]5 ID Percent Non -local 42.11 17.50 736 2292 11 volunteer Hopi 391]71 120,714 80,000 592.485 12 BoardlDirectors 500 210 184' 894 Income and Expenses (Actual): Income Contributed: 13 Fed. Govt 126,610 63,789 852,708 1,143,107 14 State Govt. 638,185 5,000 718,110 1961,295 15 Local Govt. 919,480 1,898,269 588,454 3,406,203 16 Individuals 7,531,117 996,035 172,538 8,699,690 17 Business,Corporale 2,706,198 906,183 708,980 4,321,361 18 Foundations 1,768,369 641,918 883,736 3,294,023 19 Grants 2,258,390 277,025 115,857 2,651,272 20 Memberships 787,037 900,799 2,316,093 4,003,929 21 Fundraising Events 3,191,719 1,087,685 390,988 4,67D,392 22 Other, 1,259,579 290,434 49,805 1,599,818 23 Subtotal Contributed 21,186,684 7,067,137 6,797,269 35,051,090 Earned: 24 Admission - 24,952,065 653,381 4,778,944 30,384,390 25 Touting 204,933 41,361 246,294 - 26 Contracted Services 2936,268 52,003 1,755,673 4,143,944 27 Product Sakes - 763,030 608,749 509,736 101,515 28 Interest/Investments 965,055 440,796 2,107,005 3,512,856 29 Other 5,040,964 302,115 286,654 5,629,733 30 Subtotal Eemed 34262,315 2,098,405 9,438,012 45,798,732 31 Total Income 55,448,999 9,277,935 16,235,281 SD,962,215 Expenses: Personnel: 32, Full-time Artistic 1,220,204 333,801 3922,122 4,876,127 33 Other Artistic 15,801,010 77,100 931,899 16,810,009 34 Full-time Administration 7,482,223 1,979,407 2,185,506 11,647,136 35 Other Administration 049,999 241,114 926,295 2,517,408 36 Fu114hre, Technical 2,725,337 1,199,742 2,056,165 5,981,244 37 OtherTechnical 2,857,334 649,815 112,160 3,619,309 38 Subtotal Personnel 31,436,157 4,480,979 9,534,147 45,451,283 Operating:. 39 Facility Expemes 4,368,499 1.425,408 1,194,286 61988,193 40 Marketing 4,723,212 397,644 1,226,903 6,347,759 41 Production/Exhibition 6,873,570 1,223,461 1,784,396 9,881,427 42 Travel 354,082 37,880 34,441 426,403 43 Fundraising 1,924,073 422,497 1,245,124 3,591,694 44 Other 3,225,324 934,073 1,127,068 5,286,465 45 Subtotal Operating 21,468,760 4,440,963 6,612,218 32,521,941 46 Total Expenses 52,904,917 8,921,942 16,146,365 77,973,224 47 Surplus/(Shonfall) 2,544,082 355,993 88,916 2,9851991 32 0 Projected Income and Expenses: Income Contributed: 48 Fed Govt, 49 State GovL 50 Local GovL 51 Individuals 52 Business7Corpomte 53 Foundstiorn 54 Grants 55 Memberships 56 Fundraising Events 57 Other 58 Subtotal Contributed 59 Admissions 60 Touting 61 Contracted Services 62 Product Sales 63 InleresOnvestments 64 Other 65 Subtotal Earned 66 Total Income Expenses: Personnel 67 Full-time Artistic 68 Other Artistic 69 Full-time Administration 70 Other Administration 71 Full-time Technical 72 Other Technical 73 Subtotal Personnel Operating 74 Facility Expenses 75 Marketing 76 Production/Exhibition 77 Trawl 78 Fundraising 79 Other 80 Subtotal Operating 81 Total Expenses 82 Sutplusl(Shortfall) Future Plans and Challenges: 83 Volunteerism 84 Size 85 Private Donor Support 86 Government Support Challenges: 87 Recruiting Employees 88 Recruiting BoarM'oluntem 89 Balancing Budget 90 Growing in Quality 91 Building Audiences 92 Private Donor Support 93 Government Support 94 Expanding Facilities 95 Other (A) Total Performing (B) To Museum. (C) Total Others (D) GRAND TOTAL 108,560 119,063 805,384 1,033,007 307,000 85,000 753,921 1,145,821. 858,540 1,821,561. 668,789 3,348,890 7,911,108 883,600 311,050 9,105,758 2,912,257 340,650 871,170 4,124,077 2,003,300 799,900 1,185,000 3,988,200 656,260 8700 66,016 809,926 864.433 1,200,410 2,544,000 4,608,843. 2,674,642 1,643,725, 419,600 4,737,9G7 1,1(8,125 118,894 $9,400 1,296,419 19,824,340 7,100,453. 7,684,230 34,609,023 26,876,821 1,168,238, 5,376,070 33,421,129 192,025 60,000 252,025 1,683,325 74,647 1,802,838 3560,810 722,022 718,450 679,950 2,120,422 1,472,379 531,979 2,362,S00 4,366,858 5,329,199 379.500 261,100 5,969,799 36,275,771 2,932,814 10,482,458 49,691,043 56,100,111 10,033,267 18,166,688 84,300,066 0 1,323,700 373,377 3,707,287 5,404,364 15,988,105 12,000 959,S00 16,95905, 8,182,889 2,522.543, 2,446,901 13,152,333, 1,403,840 284,494 922,306 2,610,640 2,976,890 1,509,220 2,153,051 6,639,161, 3,017,793 740,968 133,767 3,892,528, 32,893,217 5,442,602, 10,322,812 48,658,631 4,705,898 1,576,432 1,170,872 7,453,202 4,802,013, 555,679 1,521.310 6,879,002 6,546,218 1,437,240 2,044,652 10,328,110 291,190 70,756 35,100 397,076 1,804,598 647,846 233,547 2,655,991, 3,474,214 1,0159938. 2,317,715 6,810,867 21,924,131 5,306,921. 7,323,196 34.554,248, 54,817.348 10,749,523, 17,646,008 53,212,879 1,282,763, (716,256) 520,680 1,087,187 1.48 1.14 123 1.28 1.74 2.21 [Ali 1.80 2.05 2.54 2.12 2.23 3.11 2.93 2.10 2.71 2.58 3.21 2.77 2.85 3.56 3.79 3.71 3.69 3.32 3.14 3.40 3.29 3.44 3.39 337 3.40 3.72 3.46 3.63 3.61 3.64 3.46 3.65 3.59 1.96 2.68 2.94 2.53 2.30 1.92 3.06 2.43 4.00 33 .4 - .. ,.per\ �e Frrf �4rncrfean F'inanc�al 'Garporatron. ;; , qs: 0 1 J 11 City of Newport Beach Study Session Minutes February 26, 2002 that this is why he tries to err on the side of conservatism 3. BALBOA THEATER REHABILITATION PROJECT. Assistant City Manager Wood reported that the City purchased the Balboa Theater in 1998 for $480,000, and the City entered into a lease with the Balboa Performing Arts Theater Foundation in 1999 to use it as a theater and to renovate it without paying rent to the City. She stated that the initial lease contained some provisions for protecting most of the historic aspects of the theater; however, through amendments to the lease, this was changed and now the requirement is for the improvements to return the exterior design and treatment of the front fagade as close as possible to its original appearance. She indicated that, in keeping with the lease requirement to retain this as a fust class community theater, the Foundation decided to provide stadium seating, dressing rooms, expand the lobby, provide concessions, and increase the number of restrooms. She reported that the two options to add these amenities included constructing a basement for $300,000 or purchasing the building next door at 111 Main Street for $1.6 million. She stated that the basement construction is the most difficult part of the construction project because of its location on the Peninsula and the high water table. Ms. Wood stated that, as the Foundation continued the design process with continual input from the Building Department, the basement construction cost has increased to about $1.7 million. She indicated that they spoke with the owner of 111 Main Street who has a $1.6 million appraisal for the property. She stated that the City's appraisal was $1.4 million. She indicated that the Foundation would need only the parcel closest to the theater, noting that the building sits on three parcels. She believed that it would be possible to cut the building in two, lease the part closest to the theater to the Foundation, and then sell the remainder of the building to recoup the cost of the project. Ms. Wood reported that the City's contribution so far has been $500,000 which includes the original purchase price, as well as the lease which provides that the City pay the building plan check fees from Community Development Block Grant (CDBG) funds. She stated that the current cost estimate with the basement is $5.5 million and the fund balance the Foundation has is $1.2 million. She indicated that the staff report outlines a number of options for Council consideration. Regarding Option 1, she stated that the Foundation spoke to staff about demolishing the side and rear walls, shoring the front fagade, and constructing the basement, but would not move forward until they complete more fundraising. She reported that, since the City is the property owner, staff was not interested in having the Foundation move forward without having a guarantee that they would finish the structure. In response to Council Member Heffernan's question as to who called this item up for Council consideration, Mayor Ridgeway noted that a negotiation item was discussed during closed session and it was agreed upon that this should be discussed in a public forum. Mayor Pro Tem Bromberg stated that the initial investment in November 1998 was with CDBG funds, but asked if the new project would not involve these funds. Ms. Wood reported that the CDBG funds are currently Volume 55 - Page 5 C-3248 Balboa Performing Arts Theater Foundation (38) City of Newport Beach • Study Session Minutes February 26, 2002 committed to the Balboa Village Public Improvement Project. She stated that, not only is this project using a bulk of the funds but the City has applied for a Section 108 loan which is an advance on future CDBG funds. She indicated that this means that, for the next 20 years, the City has a repayment of over $200,0001year on the loan. She added that this does not give much flexibility to do other large projects. Mayor Pro Tem Bromberg noted that there.is discussion about having the Balboa Theater contribute $200,000 to the project and then they would get the lease for the portion of the other building. He asked if the $200,000 would also give them ownership interest. Me. Wood stated that this is entirely up to how Council wants to structure the agreement. Mayor Ridgeway noted that the $200,000 could also be used toward construction. Dayna Pettit, President and Founder of the Balboa Performing Arts Theater Foundation, requested Councirs help with the project by purchasing the Orange Julius. building. She indicated that they would pay $200,000 for 1/8 of the building to take the place of the current basement, noting that this would save them over $1 million. She reported that their Board of Directors has grown to 18 members who are very serious about a revitalized Balboa with a vibrant performing arts center and cinema theater being the centerpiece for the current renovation. She added that it would also serve as a catalyst to change the current nature of the Village which now has decrepit shops, vacant buildings, and graffiti. Ms. Pettit reported that they were ready to begin construction upon the receipt of their permit last May, but the Building Department raised a red flag about the liability of constructing a basement in the theater. She stated that this came after they spent $250,000 on plans which already went through the plan check process for 1% years. She emphasized that the money used to purchase the theater was CDBG funds which is earmarked for only depressed areas. Ms. Pettit reported that they raised over $2.4 million; their 2000-2001 campaign has brought in over $180,000; and the Divas and Support Guild have raised over $100,000 since their inception two years ago. She stated that they have been off course the last 1% years, but have corrected this and are moving forward. She added that they hired a search team to find a business person with strong fundraising skills, they completed a sellout Israeli author event in concert with the Orange County Jewish Federation, and have been voted one of the top ten non-profit organizations in the Greater Newport Beach and Orange County communities by 714 Mogazine. She stated that they need an additional $3.9 million to help the City purchase the building neat door, build the theater, and endow them through their first year of operation. She emphasized that the purchase of the building next door is a major part of the solution and the City s support is critical to the success of Balboa. Council Member Heffernan noted that the City already has $500,000 invested in this, now it is supposed to spend three times that amount, and the Foundation has $1.2 million in the bank. He asked whether the City will have to fill the gaps in the budget until the project is completed if the theater comes up short with their fundraising. Ms. Pettit stated that she firmly believes that the funds will be raised and that everything the City is spending in Downtown Balboa is not going to do any good unless the nature of the area is changed. Council Member Heffernan noted that the new library in Westcliff needs $1 million and the City told them to raise funds in the neighborhood first rather than look to the City for funding. He Volume 55 - Page 6 0 4 City of Newport, Beach Study Session Minutes February 26,2002 expressed the opinion that a library is more in tune to the long term business of the City than a theater. He stated that, what the theater is asking the City to do, is a fraction of what it will take to get the job done. He indicated that, if the City purchases more real estate but does not have the money to complete the job, the citizens will look at Council strangely. Ms. Pettit assured Council that they are intent on getting this project done. Adele Mann agreed with Council Member Heffernan. She asked if the City has an extra $1.6 million to do this, noting that two weeks ago someone mentioned that there are budget shortfalls. She stated that this project has been going on since 1998 and asked what the timeline was for this. Vaughn Dyle, 310 Fernando, stated that he will be speaking as an arbitrator. He indicated that a number of years ago, an investment was made for $480,000 with the expectation that the investment would take off because other investors would come in and make money available. However, there was a change in the market, it did not take off, and there was a margin call for $1.6 million. He indicated that we have to assume that things might he a little slow and, in turn, there may be another margin call for $1 million in another year. Further, if things still did not work out and the investment did not bring in additional money, there might be another margin call for $1 million. He noted that the City will find itself with $3.6 million invested in a project that started out at $480,000. He suggested that Council look down the road and determine what they are willing to spend to have this happen. Bill Wren, Balboa Theater Director, stated that they are willing to put in $200,000 to help pay for the difference in the appraisal cost for the additional building. He indicated that having the property eliminates the need for a basement and would save them about $1.4 million. He stated that they found out from the Building Director that they can easily separate the building so the City can sell the remainder of it in order to recoup some money. He stated that he did not know there was any consideration of starting the project unless the building was self sustaining and, if something went wrong, the City would still have a marketable building. He believed that there is no value lost and there is no need to force the City into putting more money into the project. Council Member Adams stated that he met with Mr. Wren and Ms. Pettit last week to express the same concerns that Council Member Heffernan has. He indicated that he suggested that they generate a business plan to show how they plan to move forward. He stated that,.based on the information they have, he does not feel comfortable and would like to see an update to the plan, what their fundraising goals are, and the next steps. Mr. Wren stated that the business plan that Council has did not include income because they could not determine how fast they would receive donations. He indicated that the economic portion is what they think the costs would be to carry them through the building process. He stated that they would be happy to provide Council with more information, but they would have to second guess the donation amounts. He added that the timing for the construction and its cost are correct if Council acquires the Orange Julius building. Council Member Adams stated that he would be more comfortable about this investment if he had various scenarios about different fundraising successes and what they do if they reach certain levels. He indicated that he Volume 55 - Page 7 INDEX City of Newport Beach Study Session Minutes February 26, 2002 U w1 would be willing to support this if he sees better evidence that this will work. He suggested that Council receive quarterly reports from the Board. Mr. Wren stated that they could do that and that Council is welcome to attend the meetings. He indicated that the City can also have a City representative on the Board. Mayor Ridgeway added that, as part of the business plan, he would like an estimate on how much it will cost to bring the theater to a shell exhibit because once it is a shell exhibit, the City has something marketable if they do not perform. Mr. Wren reported that they would need to raise $1.2 million to get it to that stage, but he will get these numbers to the City Manager. Council Member Glover expressed the opinion that the Board is better off not having a Council Member on it. She stated that she was on the Board for the Laguna Art Museum for three years and for the Orange County Museum, and that raising money was really tough for them even though they are established entities. In response to Council Member Glovers questions, Mr. Wren indicated that their budget will be about $635,000/year once they are operational, but the net is less than that. He stated that they will still be in the negative about $150,000/year. Council Member Glover noted that, when the operating budget for an art institution is over $300,000/year, it gets more difficult to raise money. She indicated that she is interested in seeing how the new business person analyzes this since there is a direct correlation between the operating budget and donations. Mr. Wren stated that the job description for the business person is strong and that the theater realizes they are a business, not just a theater. He indicated that they will be bringing more people onboard at the correct stages of the theater. Mayor Pro Tem Bromberg encouraged Mr. Wren to provide a good business plan as soon as possible because this will need to come back as an action item. Further, he suggested that they meet with Council Members in the event they have concerns about the plan. Sue Cannon, Principal of Orange County Public Relation, stated that she has served as the publicist for the Balboa Theater for the past 5Y2 years when it was a mere thought. She reported that they specialize in non-profit organizations in Orange County and has been doing this for about 20 years. She indicated that she is proud to say that the theater has accomplished hallmark fundraising techniques within a short period of time. She stated that, 2% years ago, as Founding President of the Divas they have been able to triple their net proceeds and also brought in over 130 members to the Guild. She indicated that everyone is vying for volunteer time and money. She believed that this exists because of the leadership that has been evident with this Board and its mission to recreate one of the oldest theaters in Orange County. She stated that they did have a hiccup, but are moving full steam ahead knowing that they have a Iot of work to do. Ms. Cannon reported that part of their research when they started was to look at other theaters in Orange County, their plans, and how they started. She stated that all the theaters are asking for money, but no one thinks this can be done overnight or quickly. She indicated that she will do the research for the Board and will let Council know the statistics on how long it takes to actually open a theater. She believed that the theater is like the Laguna Playhouse because they are creating the theater from an old building. She Volume 55 - Page 6 0 • City of Newport Beach Study Session Minutes February 26, 2002 emphasized that the fundraising efforts are way ahead of schedule. Dick Ashoft, owner of Bubbles, stated that he lives in the Village and has a business there. He indicated that the City has the opportunity to buy a piece of land and if it does not purchase it, someone else will. He stated that he bought Bubbles for $740,000 three years and, at Christmas, Denny's offered him $1.5 million, but he turned it down. He expressed the opinion that the area is not doing well but thanked Council for cleaning it up because it will be beautiful when it is done. He indicated that urban developers told him that the only thing that will change the area is if there was a four hour venue. He believed that the City needs the theater and more things like it because it will attract people to the area for at least four hours. He emphasized that the price of the property will only increase, and stated that, if the theater is lost, at least the City can sell the property. Council Member Heffernan asked if this decision should be looked at relative to how the City is doing during the mid -budget year and projections for next year, and asked which fiscal year this will fall into. He noted that the City has some shortfalls that are pending. Mayor Ridgeway stated that some type of budget analysis should also be made part of the presentation if this goes to a closed session. Council Member Heffernan stated that the theater supporters should probably hear what the Administrative Services Director tells Council about the shortfalls so they understand that Council is not just being hard on them, but is facing a multi-million dollar shortfall. 4. CI'T'YWIDE WAYFINDING & DIRECTIONAL SIGNAGE PROGRAM: OVERVIEW OF PROPOSED PROJECT AND SCOPE OF PROFESSIONAL DESIGN SERVICES (contd. from 11/13/01). Assistant City Manager Wood reported that one of the recommendations from the Balboa Peninsula Planning Study in 1998 was to do a public signage program for the Peninsula. She stated that they brought a report to Council and staff was given the direction to try to implement a Citywide directional signage program. She added that this was backed by the Economic Development Committee (EDC) because their study on how to enhance the City's Transient Occupancy Tax recommended identifying ways to improve, coordinate, and simplify public and visitor signage throughout the City. She reported that this was brought to Council and, in 2000, Council identified $50,000 for the program. Ms. Wood stated that a Request for Proposals (RFP) was issued and five firms responded. She reported that Hunt Design and Associates is the firm that staff and the review committee (EDC members) felt would be best for the project. She indicated that this was presented to Council at the November 13, 2001, Council meeting. She stated that, following Council's concerns, Hunt Design removed using different icons for each district from the scope of services but still kept some type of identification for each district; removed the pedestrian mapping system in high tourist areas; included engineering services; and included requiring that the consultant have errors and omission insurance. She stated that, as a result of the revisions to the scope of work, the project cost is about $80,000, which is a reduction of $3,700 from the original project cost that was presented to Council. She indicated that Wayne Hunt, owner of Hunt Design, and John Temple, project manager, are present tonight. Volume 55 - Page 9 0-3495 Citywide Wayfinding and Directional Signage Program (38) • STUDY SESSION AGENDA ITEM z TO: Mayor and City Council FROM: Sharon Wood, Assistant City Manager SUBJECT: Balboa Theater Rehabilitation Project Back.oround f k d 12 2002 The Balboa Performing Arts Theater Foundation requested City assistance with acquisition ($550,000) and renovation ($500,000) of the Balboa Theater in February 1998. After an appraisal, much City Council discussion, and negotiation with the Foundation and the then owner of the Theater, the City purchased the Theater in October 1998, for the appraised value of S480,000, using Community Development Block Grant funds. The City entered into a lease with the Foundation in November 1998. The lease (attached) allows the Foundation to occupy the Theater with no rent payments to the City. The Foundation is required to make improvements to the Theater, including seismic retrofit and renovation, required of a "first class community Theater." Renovation plans were required to be prepared and submitted to the City in phases. Conceptual Design Plans and Design Development Plans were to be reviewed by the City Council Committee to Promote Revitalization of Our Peninsula (PROP), and Final Plans and Specifications were to be submitted along with applications for building permits within one year from the effective date of the lease. The Foundation is required to begin construction within 60 days of approval of building permits, and complete construction one`year later. The lease has been amended three times. The first amendment changed the amount of comprehensive general liability insurance required. The second amendment provided that the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior apply only to the exterior of the Theater. The third amendment removes reference to these Guidelines, and requires that the improvements return the exterior design and treatment of the front fagade as close as possible to its original appearance The latter two amendments were needed to accommodate the extensive rehabilitation proposed by the Foundation to satisfy the lease requirement that that the improvements be consistent with a first class community theater. In trying to meet this requirement, the Foundation decided to use stadium seating, provide dressing rooms, expand the size of the lobby and increase the number of restrooms. Because the existing Theater building has insufficient space for all these features, the Foundation explored two options: purchasing the building next door (111 Main Street), and expanding the Theater rehabilitation to include demolishing the side and rear walls, excavating for a basement, and rebuilding the side and rear walls and cladding them with original brick veneer. Initially, the Foundation believed that the owner of the adjacent property was not interested in selling. The City and the Foundation later learned that the property was listed for $1.6 million. At that time, the cost estimate for constructing the basement was $300,000, and the Foundation decided to proceed with that plan rather than spend the time:and money to redesign the project in a way that would make it more expensive PROP approved Conceptual Design Plans in November 1999 and Design Development Plans in April 2000. The City Council granted one extension of six months for the submission of building permit applications, changing that deadline from November 1999 to. May 2000. The Foundation did meet that deadline, and the plans are approximately 70% approved by the Building Department. Discussion The most difficult component of the Theater design for the Building Department to approve is the basement. Shoring and dewatering must be planned properly so that construction will not cause damage to adjacent buildings, the basement is kept dry and usable, and the water is discharged properly. Such work can be done safely if designed properly, but as owner of the Theater property, the City is being especially cautious about protecting the adjacent properties from damage. As the Foundation has done more detailed plans for the renovation and consulted with the Building Department on dewatering and shoring concerns, the cost estimate for this part of the project has increased to $1.7 million. This high cost, combated with concerns about the basement construction, made it reasonable to consider acquisition of the adjacent property. 111 Main Street The tproperty owner has an appraisal of $1.6 million, and that is her asking price. The City also had the property appraised, and our appraiser's opinion of value is $1.4 million. The building at 111 Main Street occupies three parcels of land (each 25 x 95 feet) shown on the attached map. The first floor has three retail tenants, Orange Julius, Toys in the Attic and J.J.'s Hair Cutting. The second floor has six apartments. There are eight parking spaces off the alley in the rear. 2 9 The Foundation needs only the parcel closest to the Theater for its dressing rooms, restrooms and offices. The building is constructed of reinforced concrete. It could be cut in two, and the two lots at the comer of Main and Balboa could be sold to another party to recoup some of the acquisition costs. Cutting the building likely would require relocating a stairway and some bathrooms, which could result in the loss of one apartment unit. The Building Director believes that the structure could be cut in two, but cannot estimate the cost without more extensive study. Financial Status of Theater Project The City's contribution to the project so far is approximately $500,000, including acquisition of the property and payment of plan check fees as provided in the lease. Community Development Block Grant (CDBG) has been the funding source for all expenditures. These funds are not available to purchase the adjacent property, because the City has committed them to the Balboa Village streetscape improvement project. Staff has not explored other funding sources. The current cost estimate for the Theater renovation is $5.5 million. The Foundation has received $2.2 million in donations, and has spent almost $500,000 on seismic retrofit, design and construction management. After these project costs and ongoing operational costs, their fund balance is $1.2 million. The Foundation Board believes that their fundraising would be more successful if the project were under construction. tions The City Council may wish to consider additional City participation in the Theater project. Staff has outlined some options to help the Council's discussion of this matter. 1. Make no additional City investment in the project, but amend the lease to provide additional time for construction to begin and to prohibit any demolition until the Foundation has sufficient funds to construct the basement and the new shell building. While this option would give the Foundation more time to raise the money needed to complete the project, it would continue their heavy reliance on donations. If fundraising is not successful, the City eventually would need to terminate the lease and make decisions about the Theater's future. i Direct staff to negotiate for purchase of the property at H] Main Street. If successful, amend the lease to (a) include the additional property, (b) provide for cost sharing and project management if the building is to be divided, and (c) add deadlines for specific milestones in the f ndraising, design, permitting and construction processes. . This option could serve as a catalyst for progress on renovation and increase fundraising potential. Expanding the Theater to the side instead of into a basement would be a less complicated construction project. However, cutting the adjacent building in two and selling the portion not used by the Theater has complexities of its own. Other concerns with this option include the investment of more City money, and potential City responsibilities in relocating existing tenants. 3. Direct the Foundation to negotiate with the owner of 111 Main Street to lease a tenant space. Staff recently learned from the listing real estate agent that the commercial tenant closest to the Theater, Toys in the Attic, is leaving, making that space (1,438 square feet) available. This might provide offices for the Foundation, but it could not satisfy their dressing room and restroom space needs. 4. Direct the Foundation to redesign the project within the existing Theater building. This option would reduce construction costs by at least $1.7 million, eliminate the potential for damage to adjacent properties, and preserve more of the historic Theater. On the other hand, this option would not allow for live performances, and the likelihood of success for a small film house may be limited (especially since Newport Beach also has the Lido and Port Theaters). 5. Terminate the Foundation's lease. 4 The lease requires the Foundation to "diligently process any corrections and changes to the submittals that are necessary to comply with State and local law..." If the City Council is not satisfied that the Foundation has complied with this provision of the lease, the City could invoke the default provisions, up to and including termination. This would have very serious consequences for the Foundation, which has raised over $2 million for the Theater project. Such an action would return the Theater to the City, which would need to make decisions about its future. 4 0 0 Plat Map or3y� � N —JAVAuf �n �T xN o: O y h x N Ave } J a BWVAW z Z£ N� at IS a s vivt e X141 34 O. a # 0 i i i M I } BAWOA W W W \ r O ' i f _ O i e o O O 3e i WOMAN I O a BWVAW z Z£ N� at IS a s vivt e X141 34 r� U Y L i%i--3., RE C.". y RECORDING REQUESTED AND WHEN R OE�@EQ R[rIQRN TO: City Clerk's Office City of vys4i# B aeir� 4 �l� 3300 N�wdort BtlureV8,rga% P.O. Box 1768 Newport Beach, CA 92658-8915 L7 Recorma in the county of orange, cailfornsa Ga L. Granville, /Reaallo Fee 19996066742 1:10pm 01/29/99 005 11011852 11 19 L02 43 6.00 126.00 0.00 0.00 0.00 129.00 Space above this line for Recorder's use only. Exempt Recording Request per Government Code 6103 Contract No. 3248 L EAS E BY AND BETWEEN THE CITY OF NEWPORT BEACH ►0 THE BALBOA PERFORMING ARTS THEATRE FOUNDATION !) Table of Contents • Page ARTICLE 1 SUBJECT OF LEASE............................................................................. 2 1.1 Purpose of the Lease............................................................................... 2 1.2 The Property............................................................................................. 2 1.3 Lessor...................................................................................................... 2 1.4 Lessor...................................................................................................... 2 ARTICLE 2 LEASE OF PROPERTY.......................................................................... 2 2.1 Lease of Proyertv..................................................................................... 3 2.2 Condition of Title...................................................................................... 3 ARTICLE 3 POSSESSION OF PROPERTY............................................................... 3 3.1 Quiet Employment.................................................................................... 3 3.2 Condition of Property............................................................................... 3 3.3 Ownership of Improvements.................................................................... 3 3.4 Surrender of Property............................................................................... 4 3.4.1......................................................................................................... 4 3.4.2......................................................................................................... 4 3.4.3......................................................................................................... 4 ARTICLE 4 TERMIOPTION TO PURCHASE............................................................. 4 4.1 Duration and Commencement 4 4.2 ................................................................. Option to Extend...................................................................................... 4 4.3 Option to Purchase.................................................................................. 4 4.3.1......................................................................................................... 5 4.3.2....................................................................................7*................- 5 4.3.3................................................................:........................................ 5 4.3.4.......:................................................................................................. 5 4.3.5 ................. .................................................... .................................... 5 4.4 Option - Purchase Price............................................................... :........... 5 4.5 Right of First Refusal................................................................................ 5 ARTICLE 5 RENTICONSIDERATION........................................................................ 5 5.1 No Money Payable by Lessee................................................................. 5 5.2 Other Consideration................................................................................. 6 5.2.1........................................................:................................................ 6 5.2.2......................................................................................................... 6 5.2.3......................................................................................................... 6 5.2.4......................................................................................................... 6 5.2.5......................................................................................................... 6 ARTICLE 6 CONTRIBUTIONS FUND........................................................................ 6 Page ARTICLE 7 ANNUAL BUDGET/OPERATION AND MARKETING PLAN . ............... 6 7.1 Budget/Timing .......................................................................................... 6 7.1.1 Initial Budget.................................................................................. 6 7.1.2 Proposed Revision........................................................................ 7 7.1:3 Year End Financial Statement....................................................... 7 7.1.3 Proposed Revision........................................................................ 7 7.1.4 Year End Financial Statement....................................................... 7 7.2 Contents of Budget.................................................................................. 7 7.3 Operations and Marketing Plan................................................................. 7 7.4 Records..................................................................................................:. 8 7.5 Audit.........................................:............................................................... 8 ARTICLE 8 USE OF PROPERTY................................................................................ 8 8.1 Permitted Use........................................................................................... 8 8.2 Performances/Frequency...........................................................................8. 8.2.1....................................................................................................... 9 8.2.2....................................................................................................... 9 8.2.3 ........................................ ...................................................... :........ 9 8.3 Program Standards................................................................................... 9 8.3.1....................................................................................................... 9 8.3.2....:.................................................................................................. 9 8.3.3....................................................................................................... 9 8.3.4....................................................................................................... 9 8.4 Cooperation.............................................................................................. 9 8.5 Change of Use........................................................................................ 10 8.6 Compliance with Laws............................................................................ 10 8.7. Zoning and Planning............................................................................... 10 8.8 Nondiscrimination.................................................................................... 10 8.8.1..................................................................................................... 10 8.8.2 ................................... 10 .................................................................. 8.8.3..................................................................................................... 11 ARTICLE 9 REQUIRED IMPROVEMENTS............................................................... 11 9.1 Lessee's Obligations............................................................................... 11 9.2 Seismic Retrofit/Remediation................................................ .................. 11 9.3 Conceptual Design Plans.: .................................................................... - 12 9.4 Design Development Plan....................................................................... 12 9.5 Final Plans and Specifications................................................................ 13 9.6 Building Permits...................................................................................... 13 9.7 Construction of Required Improvements .................:............................... 13 9.8 General Requirements............................................................................ 14 9.8.1 .................. ................................................................................. ..... 14 9.8.2........................................................................................................ 14 9.9 Extensions.......................................................................................:...... 14 • Page ARTICLE 10 REPAIRS AND MAINTENANCE ................................................. 14 ARTICLE 11 STATUS AND MANAGEMENT OF LESSEE..: ........................... 15 11.1 Nonprofit Status...................................................................................... 15 11.2 Executive Committee and Advisory Committee ...................................... 15 11.3 Employment of Staff................................................................................ 15 ARTICLE 12 ALTERATIONS............................................................................ 16 12.1 Written Consent...................................................................................... 16 12.2 Notice of Non-responsibility.................................................................... 16 ARTICLE 13 PAYMENT OF UTILITIES, TAXES, CHARGES AND FEES ....... 16 13.1 Public and Private Utility Services........................................................... 16 13.2 Taxes, Assessments. Fees and Charges ............................................... 16 13.3 Proof of Payment.................................................................................... 17 13.4 Payment by Lessor................................................................................. 17 13.5 Property Taxes not Valid.....................................................I.................... 17 13.6 Notice of Possessory Interest: Payment of Taxes and Assessments on Value of Entire Lease Premises......................................................... 17 ARTICLE 14 LIENS........................................................................................... 17 14.1 Indemnification...................................................... :................................. 17 14.2 Satisfaction of Liens................................................................................ 18 14.3 14.4 Notice to Lessor...................................................................................... Notice of Non-Responsibilitv................................................................... 18 18 ARTICLE 15 INDEMNIFICATION..................................................................... 18 15.1 Indemni................................................................................................18 15.2 CERCLA Liability..................................................................................... 19 15.3 Expense of Proceedings......................................................................... 19 15.4 Release...................................................................................................19 15.5 Waiver of California Civil Code Section 1542 .......................................... 19 15:6 Definition of Hazardous Materials........................................................... 20 ARTICLE 16 INSURANCE................................................................................ 20 16.1 Insurance to be Maintained..................................................................... 20 16.1.1...................................................................................................... 20 16.1.2 ....................................................... :.................................... .......... 20 16.1.3...................................................................................................... 20 16.1.4...................................................................................................... 21 16.2 Acceptable Terms of Coverage............................................................... 21 16.3 Index....................................................................................................... 21 16.4 Waiver of Subrogation............................................................................. 21 0 • Page ARTICLE 17 DAMAGE BY FIRE OR CASUALTY ............................................ 22 17.1 Lessee to give Notice. ............................................................................. 22 17.2 Restoration...............................................................:..............................22 17.3 Casualty Late in Term............................................................................. 22 17.4 Acceptable of Insurance Proceeds......................................................... 23 17.4.1...................................................................................................... 23 17.4.2...................................................................................................... 23 17.4.3 .................................................. :........................................ :........... 23 ARTICLE 18 . EMINENT DOMAIN..................................:................I.................: 23 18.1 Lease Governs........................................................................................ 23 18.2 Termination of Lease.............................................................................. 23 18.3 Partial Taking - Restoration..................................................................... 24 18.4 Distribution of Award............................................................................... 24 18:5 Allocation of Award - Partial Taking........................................................ 24 18.5.1...................................................................................................... 24 18.5.2...................................................................................................... 24 18.5.3...................................................................................................... 24 18.6 Allocation of Award - Temporary Taking ................................................. 24 18.7 Allocation of Award - Total Taking.......................................................... 24 18.7.1...................................................................................................... 25 18.7.2...................................................................................................... 25 18.8 Conduct of Proceedings.......................................................................... 25 18.9 Notices..........................:.........................................................................25 ARTICLE 19 ASSIGNMENT AND SUBLETTING ............................................. 25 ARTICLE 20 LEASEHOLD MORTGAGES ............................ :.......................... 25 ARTICLE 21 PERFORMANCE OF LESSEE'S COVENANTS .......................... 25 21.1 Right of Performance.............................................................................. 25 21.1.1...................................................................................................... 26 21.1.2...................................................................................................... 26 21.1.3...................................................................................................... 26 21.2 Reimbursement and Damages............................................................... 26 ARTICLE 22 REPRESENTATIONS...........................................................:...... 26 22.1 Lessor's Representations........................................................................ 26 22.1.1 ....................... .......................................................................... :.... 26 22.1.2 ....................................................... :....................... :...................... 26 22.2 Lessee's Representations....................................................................... 26 22.2.1...................................................................................................... 26 22.2.2...................................................................................................... 26 22.2.3 .................... -- ---------------- ---------------------------------------------------------- 27 22.2.4...................................................................................................... 27 1* -iv- 0 0 Page ARTICLE 23 DEFAULTS, REMEDIES AND TERMINATION ..........................: 27 23.1 Legal Actions ............... ............. .............................................................. 27 23.1.1 Institution of Legal Actions ................................................ 27 23.1.2 Applicable Law.................................................................. 27 23.2 Rights and Remedies are Cumulative.................................................... 27 23.3 Occurrence of Default .................................... :......... :.............................. 27 23.3.1........................................................................................... 27 23.3.2.......................................................................................... 28 23.3.3...........................................................................................28 23.3.4........................................................................................... 28 23.3.5..........................................................................................: 28 23.4 Remedies............................................................................................:..28 23.4.1........................................................................................... 28 23.4.2........................................................................................... 28 23.4.3........................................................................:..............:... 28 ARTICLE 24 PERMITTED CONTESTS............................................................ 29 ARTICLE 25 ENTRY BY LESSOR.................................................................... 29 ARTICLE 26 FORCE MAJEURE...................................................................... 29 ARTICLE 27 MISCELLANEOUS...................................................................... 29 27.1 Notices....................................................................................................:29 27.2 No Claims Against Lessor....................................................................... 30 27.3 Integration ................................................................................ :.............. : 30 27.4 No Waiver By Lessor.............................................................................. 30 27.5 Severability .............................................................................................31 27.6 Holding Over........................................................................7.................1 31 27.7 No Partnership........................................................................................ 31 27.8 Federal Funds Provisions....................................................................... 31 27.9 Time of the Essence................................................................................ 32 -v- • LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATRE FOUNDATION This Lease ("Lease"), entered into as of November 23, 1998 (Effective Date) by and between the City of Newport Beach, a Charter City and municipal corporation ("Lessor") and the Balboa Performing Arts Theatre 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 Theatre 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 Theatre 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. NOW, THEREFORE, in consideration of the terms, covenants and conditions in this Lease, Lessor and Lessee hereby agree as follows: 1 L 0) !) 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 consistent with its original design and architecture and, subsequent to renovation, require Lessee to operate a first class community Theatre. The renovation and operation of the Theatre is intended to serve the needs land interests of the residents and business owners in the area to be benefited- through enefitedthrough the use of the Federal Funds. 1.2 The Property 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 of the structure(s), improvements and fixtures located on the Property as a non-profit cultural and performing arts center. 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 Bouleviard, Newport Beach, California 92658-8915. For the purposes of this Lease, the term "Lessor" shall include all officers, employees, agents or representatives of Lessor.. 1.4 Lessee Lessee is the Balboa Performing Arts Theatre Foundation. Lessee is a California non-profit public benefit corporation organized for the purpose of renovating, operating and maintaining the Theatre 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. For the purposes of this Lease, the term "Lessee" shall include all officers, employees, agents or 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 conditions of this Lease. Lessor reserves all rights to substances below the 2 ■ 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 operation or aesthetics of the Theatre. 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, maintenance or use of the Theatre. 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 Theatre 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 Theatre, such as fixtures, machinery, rigging, lighting, staging, merchandise, trade fixtures (collectively, Equipment) that have been constructed or placed on the Property 3 0) U1 9 3.4 Surrender of Prope 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 TERMIOPTION 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 (251') 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 the following: 0 4 lvs:. 4.3.1 Lessee shall have completed the Required Improvements; and 4.3.2 Lessee shall have operated the Theatre in full compliance with the provisions of Article 8 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 date to the date of the Notice of Intent. For example, if Lessee exercises the option nine (9) years after the Effective date 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 RENTICONSIDERATION 5.1 No Money Payable by Lessee Lessee shall not pay money as rent to Lessor. 5� 5.2 Other Consideration In consideration for. this Lease, Lessee covenants that, during the Term, it will: 5.2.1 Operate and maintain a Theatre 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 9 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. 5.2.5 Use any excess revenue or funds for purposes related to the operation of the Theatre 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 Contributions 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). ARTICLE 6 , CONTRIBUTIONS FUND Lessee shall establish and maintain, at a financial institution in an account insured by FDIC, FSLIC or similar insurance, a separate fund (Contributions Fund) for the purpose of accepting contributions from any source. Lessee shall use the Contributions Fund to pay for the improvements required by this Lease and/or to support the operation and maintenance of the Theatre. Lessee shall establish and maintain an on-going fund raising program as part of its Operations and Marketing Operations Plan Article 7 and use its best efforts to ensure the success of the program. ARTICLE 7 ANNUAL BUDGETIOPERATION AND MARKETING PLAN 7.1 Budget/Timing 7.1.1 Initial Budget Lessee shall prepare, and submit to the Lessor, an annual budget for the renovation, maintenance and operation of the Theatre (Budget). The first Budget shall be adopted, and submitted to 6 7.2 7.3 Lessor, within sixty (60) days after the Effective Date. Subsequent annual Budgets shall be submitted to Lessor no later than fifteen (15) days after adoption by Lessee. 7.1.2 Proposed Revision Lessee shall provide Lessor with material modifications or revisions to the Budget within fifteen (15) days after adoption by Lessee. 7.1.3 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 itemizing all of its revenues and expend itu res.for that fiscal year. Contents of Budget The Budget shall specify in reasonable detail (as appropriate given the status of renovation), (t) the proposed rates and charges for the use of the Theatre, (ii) the balance in all funds and accounts maintained by Lessee, (iii) all projected revenues and sources of funds for the fiscal year, (iv) the expenditures proposed to be made by Lessee in fulfilling its obligations pursuant to this Lease, (v) marketing program and costs, (vi) all other proposed expenditures of Lessee, (vii) the principal balance of the Contributions Fund, (viii) income from the Contributions Fund, and (ix) cash reserves, if any. Operations and Marketing Plan Lessee shall prepare and adopt an Operations and Marketing Plan (Operations Plan) during the Term. The initial Operations Plan shall be adopted one hundred and eighty (180) days prior to anticipated completion of the Required Improvements. The Operations Plan shall be revised from time to time to reflect new performances/events, new fund-raising strategies and new or revised marketing programs. The Operations Plan shall comply with, and provide information relevant to, the provisions of Article 8 and specify in reasonable detail (as appropriate given the status of renovation), (r) performances, meetings, concerts and other events at the Theatre that have been, or are proposed to be, scheduled (ii) performers and events which Lessee is actively seeking to schedule at the Theatre, (iii) a marketing Plan for the Theatre including programs for attracting attendees and efforts to integrate the operation of the Theatre into efforts to revitalize the local economy, and (iv) fund raising efforts including a report on fund raising efforts for the prior year. The Operations Plan shall be submitted to Lessor within fifteen days after adoption or any material modification. 7 0 7.4 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 Contributions 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. 7.5 Audit 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. ARTICLE 8 USE OF PROPERTY 8.9 Permitted Use The Property shall be used primarily for the operation of a first class cultural and performing arts center (Theatre) open to the general public. Lessee shall operate the Theatre 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 civic, charitable, educational and community organizations to periodically use the Theatre for fund raising, education or community events 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 9.2 (Seismic Retrofit) and before completion of Required Improvements subject to issuance of a Special Events Permit by Lessor. 8.2 Performances/Frequency Lessee shall operate the Theatre in .a prudent and . businesslike manner reasonably calculated to assist in the efforts of Lessor and others to revitalize the 8 M W, local economy and in full compliance with the Operations Plan. 8.2.1 Lessee shall schedule and present performances or cultural events on at least one hundred (100) days of the twelve (12) month period commencing sixty (60) days after completion of Required Improvements. 8.2.2 Lessee shall, for each subsequent twelve (12) month period, schedule and present performances or cultural events on at least one hundred and fifty (150) days. 8.2.3 Operation of the Theatre is the fundamental consideration for this Lease and Lessee shall ensure and promote the maximum reasonable use of the Theatre by performers, artists, and entertainers likely to attract patrons. The Theatre shall be operated consistent with the standards, practices and procedures utilized by first class community Theatres in other jurisdictions. Program Standards Lessee shall operate the Theatre in a manner reasonably calculated to achieve the following objectives: 0 8.3.1 Provide frequent and high quality performances and cultural events to attract patrons to the Theatre and Central Balboa/Balboa Village. 8.3.2 To serve as a catalyst to the revitalization of the economy of the area to be benefited by use of the Federal Funds. 8.3.3 To make the Theatre 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; 8.3.4 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 community Theatre. 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 Theatre to use public parking at reduced rates. Lessor and Lessee shall also discuss ways to integrate operation of the Theatre 9 into programs for the economic revitalization of Central Balboa/Balboa Village. 8.5 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 be withheld at Lessor's sole discretion. 8.6 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 Theatre. 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 Theatre. 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. 8.7 Zoning and Planning Lessor acknowledges that the use of the Property as a Theatre 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, after, 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. 8.8 Nondiscrimination 8.8.1 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. 8.8.2 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. 10 0 4 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, 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. 8.8.3 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, 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 9 REQUIRED IMPROVEMENTS 9.1 Lessee's Obligations The Property requires substantial renovation and rehabilitation to be used as, or considered, a first class community Theatre. 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 9.2 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. 9.3 Conceptual Design Plans Lessee shall prepare, and submit to Lessor for approval, a proposed conceptual Plan for the design, construction, furnishing and equipping of the Property for use as a theatre (Conceptual Design Plan). The Conceptual Design Plan shall be prepared by a licensed architect. The Conceptual Design Plan shall generally describe those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theatre constructed in the 1920's. The Conceptual Design Plans shall include, without limitation, (1) seating layout and design; (2) stage and dressing room layout and design (3) lobby and concession area design; (4) structural modifications necessay to comply, with uniform codes, (5) interior design elements and treatment, (6) exterior design and treatment; (7) sound and projection systems; (8) lighting systems and design; (9) public area layout, design and treatment; and (10) stage, orchestra pit and roll -down backdrop design and treatment. Lessor's right to approve:the Conceptual Design Plan shall be limited to ensuring that the improvements contemplated by the Conceptual Design Plan are consistent with a first class community theatre and reasonably consistent with the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of Interior. The Conceptual Design Plan 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 Plan 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. 9.4 Design Development Plan 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 Plan. The Design Development Plans shall include, (1) specific interior and exterior lighting. Plans and design; (2) specific information regarding the color, material, treatment and design of all interior and exterior elements; and (3) schedules showing the principal stages, phases and timing of construction. Lessors 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 failsto give written notice of disapproval within thirty (30) days after 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 design Development Plans within sixty (60) 12 9.5 W. days after submittal. Final Plans and Specifications Subsequent to approval of Design Development Plans, Lessee shall submit Final Plans and Specifications. The Final Plans and Specifications shall be based on, and consistent with, the Design Development Plans. The Final Plans and Specifications shall be in sufficient detail to provide the information necessary to obtain building permits from Lessor. Lessor's right of approval pursuant to this Lease, (distinct from Lessor's rights and obligations as a Charter City and entity responsible for administration and enforcement of Uniform Building Codes), which shall not unreasonably be withheld, shall be limited to a determination that the Final Plans and Specifications are based on and consistent with the approved Design Development Plans. The Final Plans and Specifications shall be deemed approved (as to consistency with Design Development Plans) unless Lessor serves written notice of disapproval within thirty (30) days after submittal. Lessor shall specify, in detail, each element of the Final Plans and Specifications disapproved, the reason for disapproval, and alternative(s) that Lessor would approve. The Parties shall reach agreementon the Final Plans and Specifications within 60 days of submittal. Building Permits Lessee shall apply for all necessary building permits from Lessor within one (1) year after the Effective Date. 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 Final Plans and Specifications. Lessee shall have the option of submitting Final Plans and Specifications as the documents necessary to obtain building permits assuming suitability for that purpose. 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 Final Plans and Specifications, 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. 9.7 Construction of Required Improvements Lessee shall begin construction of Required Improvements within sixty (60) days after approval of all required building permits by Lessor and approval of any permit(s) required by other governmental agencies with jurisdiction over the Property. Lessee shall diligently pursue construction of the .Required 13 Oi Improvements to completion. Lessee shall complete construction of Required Improvements within one year and sixty (60) days after issuance of all necessary permits and approvals. The Required Improvements shall be constructed by a licensed contractor. 9.8 General Requirements 9.8.1 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 Lessors 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. 9.8.2 Lessor has designated the Committee to Promote Revitalization of the Peninsula (PROP), or its successor, to review, and approve or disapprove, the. Conceptual Design Plan, the Design Development Plans and the Final Plans and Specifications. Lessee shall provide PROP with bimonthly reports on the status of 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. 9.9 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 REPAIRS AND MAINTENANCE Lessee recognizes that the Theatre 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 Theatre 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 Theatre (including patching 14 and resurfacing the roof membrane and painting or other protective treatment of the exterior wall of the Theatre); (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 Theatre and the repair and replacement of components; (iv) maintenance of all pipes and plumbing systems serving the Theatre 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 Theatre. Lessee shall revise the schedule for maintenance from time to time during the Term as necessary to maintain the Theatre to the standards required by this Lease. Lessee shall have the benefit of all warranties available to Lessor with respect to the Theatre 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 Theatre would make continued operation of the Theatre economically infeasible. ARTICLE 11 STATUS AND MANAGEMENT OF LESSEE 11.1 Nonorofit Status 0) 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). 11.2 Executive Committee and Advisory Committee During the Term, Lessee shall appoint an Executive Committee consisting of no more than five (5) members. The Executive Committee shall be authorized by Lessee to interact with Lessor and promptly respond to problems or concerns expressed by Lessor or members of the general public relative to the operation of the Theatre. Lessee shall also appoint an Advisory Board or Advisory Committee that is responsible for f ind-raising. Lessee may appoint or establish other Boards or Committees to perform specific functions . relative to the renovation, maintenance or operation of the Property and Theatre. 11.3 Employment of Staff During the Term, Lessee shall use its best efforts to employ a professional 15� r Executive Director to manage the day to day renovation and/or operation of the Theatre and perform such other duties as Lessee may assign. The Executive Director shall be appointed at least ninety (90) days prior to anticipated completion of Required Improvements. ARTICLE 12 ALTERATIONS 12.1 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 Theatre's designation as a local landmark and shall be consistent with the original design and architecture of the Theatre as well as the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior. 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.. 12.2 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 13 PAYMENT OF UTILITIES, TAXES, CHARGES AND FEES 13.1 Public and Private Utility Services Lessee will pay all charges for all public or private utility services and all sprinkler 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. 13.2 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. 13.3 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. 13.4 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. 13.5 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. 13.6 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. ARTICLE 14 LIENS 14.1 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 Theatre free and clear of all 17 mechanic's liens and similar liens. 14.2 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. 14.3 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. 14.4 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 15 INDEMNIFICATION 15.1 Indemnity Lessee shall defend, indemnify and hold harmless Lessor from and against any and all legal or administrative proceedings, claims, reasonable attorneys' fees 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 15.7 on the Property or Theatre, ('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, detoxication 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. 18 15.2 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. 15.3 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. 15.4 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. 15.5 Waiver of California Civil Code Section 1542 Section 1542 of the California Civil Code states: 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. 19 0 0 11 9 15.6 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 anytime 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, M 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 16 INSURANCE 16.1 Insurance to be Maintained Lessee Effective shall take out and maintain, no later than thirty (30) days after, the Date and for the Term of this Lease. at Lessee's sole cost and expense, the following insurance. 16.1.1 Comprehensive General Liability in an amount not less than five million dollars ($5,000,000) 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-contributing with any insurance or self-insurance maintained by Lessor or Lessee. 16.1.2 Workers' Compensation Insurance as required by the Labor Code of the State of California. 16.1.3 "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 20 0 0 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. 16.1.4 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. 16.2. 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 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. 16.3 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. 16.4 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 21 6 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 DAMAGE BY FIRE OR CASUALTY 17.1 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. 17.2 Restoration Except as provided in Section 18.3, 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, Lesseeshall 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 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. 17.3 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. 22 17.4 Application of Insurance Proceeds In the event that Lessee is required to restore the Property pursuant to Section 17.2, proceeds from policies of insurance required by Article 16 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: 17.4.1 Lessee shall furnish to Lessor satisfactory evidence to Lessor of the total cost of Restoration pursuant to Section 17.2. 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. 17.4.2 Assuming satisfaction of the conditions of subsection [17.4.1] 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. 17.4.3 Upon completion of restoration and assuming Lessee is not in default, excess insurance proceeds shall first be paid to Lessor to the extent of its actual expenses incurred in the restoration, then to Lessee as working capital ARTICLE 18 EMINENT DOMAIN 18.1 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. 18.2 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. 23... 10) 18.3 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. 18.4 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. 18.5 Allocation of Award — Partial Taking Any Award in a Partial Taking shall be distributed by escrow in the following order of priority: 18.5.1 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; 18.5.2 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; 18.5.3 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. 18.6 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. 18.7 Allocation of Award — Total Taking Any Award .in a Total Taking shall be distributed by escrow in the following. priority: 24 18.7.1 First, to Lessor and Lessee to reimburse for all costs and expenses incurred by each in the collection of the Award; IW 18.7.2 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. . 18.8 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. 18.9 Notices Any Party receiving notice of or becoming aware of any condemnation proceedings shall promptly give written notice to the other party. ARTICLE 19 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 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 20 LEASEHOLD MORTGAGES Lessee shall have no right to encumber its interest in this Lease, the Property or the Theatre without Lessor's prior written consent, which consent may be withheld in Lessor's sole discretion. ARTICLE 21 PERFORMANCE OF LESSEE'S COVENANTS 21.1 - 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 17 within the time required, or to make any other payment or perform any other act within the time required by this 25� 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: 21.1.1 Pay the tax, assessment, fee or charge payable by Lessee pursuant to this Lease; or 21.1.2 Pay for and maintain any insurance policies required by this Lease; or 21.1.3 Make any other payment or perform any other act. that Lessee is required to pay or perform pursuant to this Lease. 21.2 Reimbursement and Damages Lessee shall reimburse Lessor for all costs and expenses incurred by Lessor in the exercise of its rights pursuant to Section 21.1. ARTICLE 22 REPRESENTATIONS 22.1 Lessor's Representations Lessor represents to Lessee that: 22.1.1 Lessor owns the Property in fee simple subject only to the Permitted Exceptions and other matters affecting title that do not inhibit, prevent or impair the operation, maintenance or use of the Theatre. 22.1.2 Lessor has the power and authority. to enter into this Lease and perform all the obligations of Lessor hereunder. 22.2 Lessee's Representations Lessee represents to Lessor that: 22.2.1 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. 22.2.2 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 Theatre consistent with this Lease and the Operations Plan. 26 22.2.3 Lessee has the right, power and authority to enter into this Lease and to perform all the obligations of Lessee. 22.2.4 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 at seq.), and is a tax exempt organization under 501(c)(3) of the Internal Revenue Code. ARTICLE 23 DEFAULTS, REMEDIES AND TERMINATION 23.1 Legal Actions 23.1.1 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. 23.1.2 Applicable Law The laws of the State of California shall govern the interpretation and enforcement of this Lease. 23.2 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. 23.3 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: 23.3.1. The failure of Lessee to comply with the provisions of Article 9 related to the design and construction of Required Improvements. 27� 23.3.2 The failure of Lessee to operate the Theatre in compliance with the provisions of Article 8 related to frequency and quality: of performances and events. 23.3.3 The failure of Lessee to maintain the Property as specified in Article 10. 23.3.4 The failure of Lessee to restore or repair the Property in the event of damage or destruction 23.3.5 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. 23.4 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 onthe 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: 23.4.1 Lessor shall have the immediate right to reenter the Property and/or the Theatre, take possession of the Property and/or Theatre, any and all Equipment, books and records, contracts and any other property. 23.4.2 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 Theatre, and all casts, including attorneys' and receiver's fees, incurred in connection with the appointment of and performance by a receiver to protect, the Property. 23.4.3 Lessor shall be entitled to recover all money payable ,to Lessee related to the operation and use of the Theatre, 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. • 28 ARTICLE 24 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 25 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, or for any other lawful purposes, including showing the Property to prospective purchasers or lessees. ARTICLE 26 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, riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Lessee. ARTICLE 27 MISCELLANEOUS 27.1 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. 29 31t r 0 Newport Bach, CA, 92658-8915 or at such other addresses as Lessor shall have furnished to Lessee; and To Lessee; Balboa Performing Arts Theatre Foundation P.O. Box 752 Balboa, CA 92661 With a copy to: Steve Bromberg Bromberg & Yeager 620 Newport Center Drive 11"' Floor Newport Beach, CA, 92660 or at such other addresses as Lessee shall have furnished Lessor in writing. 27.2 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 27.3 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 Theatre. Except as otherwise provided, no subsequent change or addition to this Lease shall be binding unless in writing and signed by the Parties. 27.4 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. 30 • � "8'2'1'. 27.5 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. 27.6 Holdina Over A tenancy for month to month shall result if Lessee remains in possession of the Property or the Theatre 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. 27.7 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 of the Theatre or otherwise. 27.8 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. r] Z7.9 Time of the Essence Time is of the essence relative to all of the terms, provisions, covenants and conditions of this Lease. FOR LESSOR CITY0 EWPORT BEACH Dennis O'Neil Mayor for City of Newport Beach FOR LESSEE BALBOA PERFORMING ARTS /THEATRE FOUNDATION . IL - 0% 72,� Dayna Pettit President of Balboa Performing Arts Theatre Foundation APPROVED AS TO FORM CIT,Y�OF NEWPORT BEACH: Robert H. Burnham City Attorney for City of Newport Beach ATTEST: CITY OF NEWPORT BEACH Dated i2 Dated�o2— r / Dated !�z J c� LaVonne Harkless City Clerk for City of Newport Beach Dated ' 0 F:\caNshared\da\Projects\BalboaTheatre\LeaseTina]LeaseI20398.doc 32 • s� CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT ( State of California > f ss. County of On 0 ` t before me, 9 Date Name 8a of officer (e.g.. -Jane Dae. Notary Public) �— r g personally appeared t^� i Motels) of SWAM) Y s % personally known to me proved to me on the basis of satisfactory s evidence w.o Cni�y=isuEe to be the person&f whose nameW isare 1 Commis'ont)�° subscribed to the wit ' instrument and h < Natary PUDIk:-Carifomia <. orange County acknowledged to me a h) he/they executed My Comm b;a emFeb21,2W2 the same inhis erltheir uthorized capacity(, and that by is erltheir signature(¢ on the instrument the person, or ythe entity upon behalf of which the personk 5 acted, executed the instrument. NESS my hand and fficial seal. 5 c n Place Notary Above Seel Abalu of Not Public a i 9 OPTIONAL r Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. •. r y Description of AttachedA)ocument h Title or Type of Document: t'lc i r� �� 5 'r `,. s Document Date: Number of Pages: 3 rs Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer r Signer's Name: t ty _ Individual Top of thumb here Corporate Officer — Title(s): r N. ElPartner — _ Limited ---General a h ❑ Attorney in Fact I T `1 = Trustee ' u Guardian or Conservator r±j E Other: N Signer Is Representing: C `�•�'CS.•C'c'�'C'��.tSCi.w`�`C�,•Cs<%:-�-�"�•w�.r•�•�i'�L9-:'Zi:��c. �:>�., _ .. •E: ®1997 National Notary Association - 9350 De Sola Ave.. P.O. Box 2402 • Chats"MIn. CA 91313-2402 Prod. No. 5107 Reorder: Call Tol-erre 1-800-876.6827 0 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California County of V c�-�- On 1 - , c i , before me, Dale personally appeared ^a ..ArnY °ISHER 1 Commission s 1174329 Z d NO1ory Public - California Orange County My Comm. BgDkm Feb21, 2002 Da I ss. a.9..\' aM�Doe. N�alary Publie') Names) M Signehs) personally known to me proved to me on the basis of satisfactory evidence to be the person) whose name(\4C- /are subscribed to the within strument and acknowledged to me that a he hey executed the same in his er heir authorized capacity(i and thaT by hisEifteir signature( on the instrument the person or the entity upon behalf of which the person) acted, executed the instrument. W ESS my hand and o cial seal. Place Notary Seal Abwe Sgn re of otary Mile OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attache Title or Type of Document: Document Date: ` - 3 —' - t �O Number of Pages: �✓� 1 . \ Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer Signer's Name: Individual Corporate Officer —Title(s): Partner —C Limited El General Attorney in Fact Trustee Guardian or Conservator Other: Signer Is Representing: 0 1997 National Notary Assacialion • 9350 De Solo Ave., P.O. Bos 2402 • Cyalswodh, CA 81313-2402 Prod. No. 5907 Reorder Call Toll.Free 1.880-87&8827 0 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT :+rrrcr.€r,�rzF,erec>eceM,crcrc c�.crc�r.ear.-�.rrmr�-.N.r�e.�*c�.M z��rc�em���rn 41 State of California ss. County of �ri(l t t�• d1 it I t S On ( lt'Y�^1�9Z?�l }4'jWefore me, �i UxV• ( s� Date I Name am Title of Officer (e.g.. 'Jam Doe. N ry Public-) personally appeared LEILANI V. INES _ Commission 0 1170960 Norory Puolic - Coffomio Orange County my Comm. Expires ion 25, 2002 Nama(a) of Signals) 1 personally known to me Y proved to me on the basis of satisfactory Yj evidence to be the person(s) whose names) is/ere subscribed to the within instrument and acknowledged to me that ke/she/tliey executed the same in his/her/their authorized ca acit p y(+es}, and that by hislher/their r signature(e) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS myhand �nd official seal. Place Notary Seal Above Signaawwre of Notary Public OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached Document Title or Type of Document: Document Date: Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer Signer's Name: C Individual C Corporate Officer—Title(s): _ Partner — r Limited = General Attorney in Fact n Trustee �1 Guardian or Conservator Other: Signer Is Representing: Number of Pages: • ®f99] National Notary Asseciaban - 9750 De Som Ave;. P O. box 2402 • Chatsronn. CA 9i313 "<602 Prdl. No. 5907 Reorder: Can T(91.Fre-10-M-6627e -10-M-66277 10 0 EXHLBIT A LEGAL DESCRIPTION All that real property situated in the City of Newport Beach, County of Oranee, State of California and more particularly described as follows: Lots 4 and 5, Block 10, Balboa Tract, in the City of Newport Beach, as shown on a map recorded in Book 4, Page(s) 11, of Miscellaneous Maps, in the office of the County Recorder of said County. 0 9 b 32 r� r vaw i' b ee " x ln'?+li NY37U ; f 1 I 1 O ytlO 1 h O O tit �I1. �4O (9), 4i OYI y dIS I+` 14 IS � Q O IN 101 4 f 1 I 1 O n h O O R 1 1 1 1 I f 1 I 1 n 1 1 101 i O O to S 1 1 1 1 I 0 dIS I+` 14 IS � Q x ' �o Y N 4 A 77V 4 S If A377Y N, 4 W 1 i 1 p I i � Q O IN 101 4 1 1 1 1 I 1 ! 1 1 1 t 1 1 ! 1 1 7 •1 1 W 1 i 1 p I i � I 1 1 7 •1 1 I I I I 1 W A. General and special taxes and assessments collected with taxes for the fiscal year 1998-1999. Total: $4,018.90. First Installment: 2,009.45 Open Second Installment: 2,009.45 Open Homeowners' Exemption: s0 Code: 07-001 Parcel: 048-135-02 B. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Section 75, et seq. of the Revenue and Taxation Code of the State of California. 1. Covenants, conditions and restrictions (deleting any restrictions indicating any preference, limitation or discrimination based on race, color, religion, sex, handicap, familial status or national origin) as set forth in the document Recorded: in book 153 page 225 of Deeds 2. Covenants, conditions and restrictions (deleting any restrictions indicating any preference, limitation or discrimination based on race, color, religion, sex, handicap, familial status or national origin) as set forth in the document Recorded: in book 3377 pa?e 501, Official Records Said covenants, conditions and restrictions provide that a violation thereof shall not defeat or render invalid the lien of any mortgage or deed of trust made in good faith and for value. 3. Rater rights, claims or title to water, whether or not shown by the public records. 4. Matters which may be disclosed by an ihspection or by a survey of said land that is satisfactory to this Company, or by inquiry of the parties in possession thereof. An inspection of said land has been ordered; upon its completion we will advise you of our findings. CLTA Preliminary Report Form (Rr.v rrrros% Paoe I of 2 2807239 5. Rights of the parties in possession of said land, under unrecorded leases. Please submit copies of said leases for our examination. 6. Before issuing its policy of title insurance, this Company will require evidence, satisfactory to the Company, that the vestee corporation named herein: (a) was duly incorporated on the date of acquisition of title hereinafter set forth and (b) is now of good standing in the state where it was formed: Date of Acquisition: October 17, 1995 7. This Company will require a corporate resolution of the board of directors from the corporation(s) vested herein, authorizing this transaction and the execution of the documents necessary to complete it in accordance with instructions given to the Company. Note No. 1: The only conveyances affecting said land recorded within six (6) months of the date of this report are as follows: None. Note No. 2: The premium for a policy of title insurance, if issued, will be based on 8096. JpIlmk cc: Land America Attn: Linda Hamilton 11 Page 2 of 2 �4 CLTA Prefiminazy Report Form (Rev. t1tM) RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: City Clerk City of Newport Beach P. O. Box 1768 Newport Beach, CA 92658-8915 TITLE OF DOCUMENT: RECEW ED 'O@ec8Vaea'n GVcIlA000rds, County of Orange Gary Granville, Clerk -Recorder OF'FIC'c�IINI�I�IN�IfNll�l No Fee CITY OF NEWPtAMMI 09:%M 04I101W 116 16 A17 4 0.00 0.00 0.00 0.00 9.00 0.00 0.00 0.00 TES SPACE FOR RECORDER'S USE ONLY.: Exempt Recording Request per Government Code 6103 First Amendment to Lease by and between the City of Newport Beach and the Balboa Performing Arts Theatre Foundation 0 FIRST AMENDMENT TO LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH F-rNE THE BALBOA PERFORMING ARTS THEATRE FOUNDATION This Amendment, entered into as of September a7 , 1999, (Effective Date) by between the City of Newport Beach, a Charter City and municipal corporation ("Lessor") and Balboa Performing Arts Theatre Foundation ("Lessee"), is made with reference to the following: RECITALS A. Lessor and Lessee entered into the subject lease as of November 23, 1998. (Recorded in the County of Orange, California; 19990066742; 01/29/99) B. The parties agree that the insurance requirements in the original Lease are greater than needed for protection of the public interest, and desire to amend those requirements so as to increase the Foundation's economic viability and abilityto meet the other requirements of the Lease. NOW, THEREFORE, Lessor and Lessee hereby agree as follows: ARTICLE 1 AMENDMENT TO ARTICLE 16, INSURANCE Paragraph 16.1.1 of the Lease is amended to read as follows: 16.1.1 Comprehensive General Liability in an amount not less than two million dollars ($2,000,000) 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-contributing with any insurance or self-insurance maintained byLessor or Lessee. Any third party permitted to use the Property pursuant to Paragraph 8.1 of this Lease shall provide the same insurance, unless this requirement is waived or modified, in writing, by Lessors City Manager. 0 ARTICLE 2 NO AMENDMENTS TO REMAINDER OF LEASE All other provisions of the Lease shall remain in force and effect in their original form. FOR LESSOR CITY OF NEWPORT BEACH r alazz Dennis O'Neil Mayor FOR LESSEE BALBOA PERFORMING ARTS THEATRE FOUNDATION Dayna Pettit President APPROVED AS TO FORM CITY OF NEWPORT BEACH ATTEST: CITY OF NEWPORT BEACH M. I 'J WC& -i LaVonne Harkless City Clerk Dated Dated Dated 0 ---IMI Dated 2 0 0 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California County of ss. On Rn x4t' beforeme, Date personally appeared ❑ proved evidence known to me me on the basis of satisfactory to be the perso (s) whose namQs isl� subscribed to th within Inst ent aifd' acknowledged to me that he/ hey xecuted the sa� in hi /h hei uino capacityQe( and that by hislhe err signat it s n the instrument the perso (s the entity upon behalf of which the perso (s acted, executed the instrument. I SS my hand and rcia� I. ..k,r Place Notary SNI Above "I" c del PUNIC OPTIONAL Though the intomrabon below is not requirod by law, it may prove valuable to persons ralying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached Title or Type of Document: _ Document Data: t — a r) - \ 0� Number of Pages: 91 Signer(s) Other Than Named Above: Capacity(les) Claimed by Signer Signer's Name: ❑ Individual i Corporate Officer — Tltle(s): _ Partner —D Limited ❑ General Attorney in Fact Trustee Guardian or Conservator Other. Signer Is Representing: NIGHT THUMBPNINI OF 31GNr.R O 1997 Hot" Nda7 Association • 9360 De Soto Ave., P.O. bot[ 2402 • chamwalh. CA amm402 Pad No. 6907 aeoe0er: C&A ToFPna 14100,876.8RI Ll LA .,La. !hi. kl RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: City Clerk City of Newport Beach P. O. Bos 1768 Newport Beach, CA 92658-8915 TITLE OF DOCUMENT: RECEIV =0 '00 RPR 14 119 :()3 Recorded in Official Records, County of Orange Gary Grenville, Clerk k WIR11 J0 I No Fee 20000181652 09:54am 041101W 116 16 AIT S 0.00 0.00 0.00 12.00 0.00 0.00 0.00 THIS SPACE FOR USE ONLY. Exempt Recording Request per Government Code 6103 Second Amendment to Lease by and between the City of Newport Beach and the Balboa Performing Arts Theatre Foundation M LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATRE FOUNDATION This Amendment, entered into as of December /3 , 1999, (Effective Date) by between the City of Newport Beach, a Charter City and municipal corporation ("Lessor") and Balboa Performing Arts Theatre Foundation ("Lessee"), is made with reference to the following: RECITALS A. Lessor and Lessee entered into the subject lease as of November 23, 1998. (Recorded in the County of Orange, California; 19990066742; 01/79/99) B. Lessor and Lessee approved the First Amendment to the subject lease on September 27, 1999, which amendment altered the insurance requirements of Lessee. C. The parties agree that the existing lease requirement for required improvements and other alterations to be consistent with the Guidelines for the Rehabilitation. of Historic Structures published by the Secretary of the Interior goes beyond the goals of the parties. NOW, THEREFORE, Lessor and Lessee hereby agree as follows: ARTICLE 1 AMENDMENT TO ARTICLE 9, REQUIRED IMPROVEMENTS Paragraph 9.3 of the Lease is amended to read as follows: Lessee shall prepare, and submit to Lessor for approval, a proposed conceptual plan for the design, construction, furnishing and equipping of the Property for use as a theatre (Conceptual Design Plan). The Conceptual Design Plan shall be . prepared by a licensed architect. The Conceptual Design Plan shall generally describe those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theatre constructed in the 1920's. The Conceptual Design Plan shall include, without limitation, (1) seating layout and design; (2) stage and dressing room layout and design; (3) lobby and concession area design; (4) structural modifications necessary to comply with uniform codes; (5) interior design elements and treatment; (6) exterior design and treatment; (7) sound and projection systems; (8) lighting systems and design; (9) public area layout, design and treatment; and (10) stage, orchestra) pit and roll -down backdrop design and treatment. Lessor's right to approve the Conceptual Design Plan shall be limited to ensuring that the improvements contemplated are consistent with a first class community theatre and that the exterior design and treatment are reasonably consistent with the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior. The Conceptual Design Plan 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 Plan 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. ARTICLE 2 AMENDMENT TO ARTICLE 12, ALTERATIONS Paragraph 12.1 is amended to read as follows: 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 exterior of the Property shall conform to the Theatre's designation as a local landmark and shall be consistent with the original design and architecture of the Theatre as well as the Guidelines for the Rehabilitation of. Historic Structures published by the Secretary of the Interior. 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. ARTICLE 3 NO AMENDMENTS TO REMAINDER OF LEASE All other provisions of the Lease shall remain in force and effect in their original form or as amended by agreement of the Parties. FOR LESSOR Dated 3 (l qI C o 53 FOR LESSEE BALBOA PERFORMING ARTS THEATRE FOUNDATION Dipa Pefttit President ,OVED AS TO FORM OF NEWPORT BEACH Robert H. Burnham City Attorney ATTEST: CITY OF NEWPORT BEACH "qC�, )'J. LaVonne Harkless City Clerk Dated 3 —IF _'eiv Dated ? 1 iL( Od Dated 9 3 Sa.. 0 0 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California County of Q: before me, personally appeared personally known to me proved to me on the basis of satisfactory evidence to be the perso (s whose nam (s isl� subscribed to th within In ext and acknowledged to me that he/ the executed the sa in his/he hei author' capacity ' and that by his/he ei signature�on the instrument the perso s or the entity upon behalf of which the perso s) acted, executed the instrument. ESS my hand and offs ial seal Place Notary Seel Above 509ru ream tarymum OPTIONAL Though the Information below is riot required by taw, it may prove valuable to persons retying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached D cp ument� Title or Type of Document: Y� Document Date: , rc> 3 —9 Number of Pages: Signer(s) Other Than Named Above: Capacity(les) Claimed by Signer Signer's Name: ❑ Individual i Corpors'aO"cer—Title(s): _ Partner—❑ Limited 11 General Attorney in Fact Trustee ❑ Guardian or Conservator ❑ Other. Signer Is Representing: RIGHT THUMBPRINT OF SIGNER O 1997 National NderyAnodalbn •9550 DB SotoAm., P.O. Boz 2402 • Chd*woM, CA 913134402 prod No. 5907 Reorder. Can TaOPrea 1-80"76-61127 RECORDING REQUE1V80I WHEN RECORDED RETURN TO: City Clerk FEB 26 A8:46 City of Newport ach P.O. Bos 1768 �C iYE S`CT,H,� Ci;y, GERK Newport Beach, C� 9�6 &�01MACfi TITLE OF DOCUMENT: 0 Recorded in Official Records, County of Orange Gary Granville, Clark-Reeorder 1M1110111131111111110NO FEE 201MB725912:35pm OW16101 114 27 A17 6 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 THIS SPACE FOR RECORDER'S USE Exempt Recording Request per Government Code 6103 Third Amendment to Lease By and Between the City of Newport Beach and the Balboa Performing Arts Theatre Foundation Recording Reference: Lease: 19990066742, 1/29/99 . First Amendment: 20000181651, 4/10/00 Second Amendment: 20000181652, 4/10/00 0 I] 5b THIRD AMENDMENT TO LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATRE FOUNDATION This Third Amendment to Lease, entered into as of December ta'k 2000, (Effective Date) by and between the City of Newport . Beach, a Charter City and municipal corporation ("Lessor") and Balboa Performing Arts Theatre Foundation ("Lessee"), is made with reference to the following: RECITALS A. Lessor and Lessee entered into a ground lease (Original Lease) on November 23, 1998. B. Lessor and Lessee approved the First Amendment to the Original Lease on September 27, 1999, modifying the insurance obligations of Lessee. C. Lessor and Lessee approved the Second Amendment to the Original Lease on December 13, 1999, deleting the requirement for interior improvements to be consistent with the Guidelines for the Rehabilitation of Historic Structures ("Guidelines") published by the Secretary of the Interior. D. Lessor and Lessee agree that further amendments to the Original Lease are necessary to modify provisions that require certain exterior improvements to be consistent with the Guidelines. E. Lessor and Lessee agree that the modifications to provisions related to exterior improvements: are. necessary. to. achieve the primary goal off the lease. -which is the reconstruction and use of the building as a venue for live theatre performances and other events that require dressing rooms and related facilities. NOW, THEREFORE, Lessor and Lessee hereby agree as follows: ARTICLE 1 AMENDMENT TO ARTICLE 9, REQUIRED IMPROVEMENTS Paragraph 9.3 of the Lease is amended to read as follows: Lessee shall prepare, and submit to Lessor for approval, a proposed conceptual plan for the design, construction, furnishing and equipping of the Property for use as a theatre (Conceptual Design Plan). The Conceptual Design Plan shall be prepared by a licensed architect. The Conceptual Design Plan shall generally describe those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theatre constructed in the 1920:s. The Conceptual Design Plan shall include, without limitation, (1) seating layout 0 1'.a: and design; (2) stage and dressing room layout and design; (3) lobby and concession area design; (4) structural modifications necessary to comply with uniform codes; (5) interior design elements and treatment; (6) exterior design and treatment; (7) sound and projection systems; (8) lighting systems and design; (9) public area layout, design and treatment; and (10) stage, orchestra pit and roll - down backdrop design and treatment. Lessor's right to approve the Conceptual Design Plan shall be limited to ensuring that the improvements contemplated are consistent with a first class community theatre and that the exterior design and treatment of the front fagade return it as close as possible to its original appearance. The Conceptual Design Plan shall be deemed approved N 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 Plan 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. ARTICLE 2 AMENDMENT TO ARTICLE 12, ALTERATIONS Paragraph 12.1 is amended to read as follows: 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 exterior of the Property, especially the front fagade, shall conform to the Theatre's designation as a local landmark and shall be consistent with the original design and architecture of the Theatre. 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. ARTICLE 3 NO AMENDMENTS TO REMAINDER OF LEASE All other provisions of the Lease shall remain in force and effect in their original form or as amended by agreement of the Parties. . - FOR LESSOR CITY OF NEWPORT BEACH -a Dated t"7— — 'A — 0' o Mayor 2 FOR LESSEE BALBOA PERFORMING ARTS THEATRE FOUNDATION President�r4ZX, AIL "TO F CITY JO NEWPORT BEACH ACity Attorney ATTEST: CITY OF NEWPORT BEACH �61h,A,A� LaVonne Harkless City Clerk 0 i 0 Ci ms!jorl a uA0199 uly Oran, ounry .31 MM :3 M 0 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California ss. County of On ; U"� before me.\ aL � � �',{ -,,A J personally appeared ------------- Ple Nmery Seal AE e &] personally known to me ❑ proved to me on the basis of satisfactory evidence to be the person(K whose namew Pis subscribed to the wi instrumen and acknowledged to mha h shetthey executed the same in hi her/their thorized capacity(. ), and that by ih91 their signature on the instrument the personj, or the entity upon behalf of which the person acted, executed the instrument. I SS m� hand and offs ial se I. 519 rt rloleryP ft OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of AttachedDgycumer�t / Title or Type of Document h : I d1 �iryl4x.�N�1 �ii 1. Z �t`�% t Document Date: ` d ) ci Number of Pages: v Signer(s) Other Than Named Above: k Capacity(les) Claimed.by Signer Y 0, } 0,r } etrj Signer's Name: 1! �� 1 J n Now ❑ Individual Top of 9prmb Here ❑ Corporate Officer — Title(s): ❑ Partner —❑ Limited ❑ General ❑ Attorney in Fact ❑ Trustee ❑ .Guardian or Conservator ❑ Other. Signer Is Representing: 01997 NvtkM1 Nmery Aemebtlen • 9359 De SHAW. P.O. amr 2112 • CMb-v9r, CA 91313-M Pmd. No. 5W Reareer cm lafm 11800E7"W 9 !I CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT' State of CaliforniaalI ss. J (o-w� cwt— County of IJ Onefore me, ✓1 C'•� �u! f (�� �7'+M +?�0� r L, ONe a ; mi TAH a QAker (e.y.'lwp Doe. Nota W personally appeared ------------- !AA ------- personally known to me ❑ proved to me on the basis of satisfactory evidence to be the person(f whose name(ois/ re subscribed to the within trument and acknowledged to me th sh hey executed the same in his their auth rized capacity( ), and that by his ie their: signatureon the instrument the person(W, or the entity upon behalf of which the person acted, executed the instrument. ESS y hand and Il seal. Place Notary Seel Above of No PUNIC OPTIONAL Though the information below is not required by law, IT may prove valuable to persons retying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached ment1 0 , ,,� Title or Type of Document: t fJt Document Date: r `� 0 Number of Pages: Signer(s) Other Than Named Above: Caner's (les) Claimed.by Signer Signers Name: ❑ Individual ❑ Corporate Officer —Trde(s): ❑ Partner — ❑Limited ❑General ❑ Attorney in Fact 0 Trustee ❑ Guardian or Conservator ❑ Other: _ Signer Is Representing: RIGHT THUM13PRI%Y OF SIGNER O 1987 Ne0"I NOHry Assocbtian • 9350 De Sob Ave.. P.O. Box 2102 • ChalswoAl%CA 9131}2{02 Prod. No. 5807 Remota: Call TWWM D( r Business Plan Executive Summary Balboa Performing Arts Theater Foundation 707 East Balboa Blvd- P.O. lvdP.O. Box 752 Newport Beach, CA 92661 C,3�, 1 • COUNCIL AGENDA �3g� NO. Ss9. _ FEB 2 B 2002 The Balboa Performing Arts Theater Foundation is a non-profit organization which operates the historic Balboa Theater. It is currently undergoing renovations, which, when complete, will allow it to operate as a performing arts theater offering performances in theater, musical theater, dance, music, children's productions and film. It will be available for rental by both non-profit and for-profit compardes. It will operate an arts education program for the enrichment of children and adults. The historic Balboa Theater is owned by the City of Newport Beach and is leased to the Balboa Performing Arts Theater Fowmdation for twenty -flim years with no annual fee. The current lease will expire in 2023. Time Balboa Performing Arts Theater Foundation is operated by a Board o; Directors of up to twenty-five volunteer members. The Board currently has thirteen members and is gtiuded by an Executive Committee including the President two Vice•Presidents. Secretary and Treasurer. All board members are recruited on the basis of their capacity to assist the foundation in firlfilling its mission. All are affiliated with successful businesses and bring a broad range of business skills and expertise to tt.e board. All are fully committed to the goals and mission of the Foundation. The Foundation has engaged the services of an Executive D;rector, a person with over twenty years of experience in all aspects of non-profit theater, from performance, direction, marketing, audience development, fund-raising, box office, volunteer coordination and programming. Her education includes a B.A. in speech/drama & English Literature, an M.A. in theater, and post -graduate stu ties in Theater History & Criticism, and non-profit management and ftwd raising. She oversees daily operations including construction, fund-raising, operations and public r:lations. Business Goals It is the goal of the Balboa Performing Arts Theater Foundation to renovate the 1927 building and reopen the theater as a presenting and producing venue. With a seating capacity of 350, its first year goal for audience is 100 performances at an average paid attendance of 60% or 21.000. Each year following the first, the goal will be to offer 150 performances with average paid attendance of 31,VO. • 0 Market Analysis The ticket -buying audiences - the market - for performances at the Balboa Theater will come predominantly from the greater Newport Beach area, including Costa Mesa, Huntington Beach, Laguna Beach and Irvine. Each of these communities is represented in our mailing list of 3500. Within each of these communities, there are specific constituents to which we will direct marketing efforts such as schools, senior groups, performing groups and tourists. We will tailor our marketing instruments to address and create an interest for the enjoyment of performances at a small venue_ We will also offer perforntavees not available elsewhere in the community. Orange County rightly boasts of its wealth of large and avid -size theaters with national reputations for excellence, complete with tremendously loyal audiences. We do not intend to compete with these institutians, but rather to complement their work by offering performances best -suited to a small venue. With the growing popufarity of alternative performance venues such as coffee houses, cabarets and store- front theaters in Orange County, there is a steadily -increasing interest in more personal arts experiences. Accordingly, we plan to market to audienecs who value the intimacy of a 350 -seat live performance theater. - The theater has also begun to foster strong connections with local schools and universities, in the planning and production of special projetz, festivals and performances. The students and faculties ofthese partner schools will certainly become a targeted Balboa Theater market for ticket sales and ars education activities. As Orange County grows in population and in cultural diversity, there is an increasing need for professional venues for young and blossoming pedbrining groups, as well as alternative spaces for mature companies to experiment with ;new or different art without the overhead required by a large hall. Only ten years ago, Irvine Barclay Theater was built, in part, to address this growing need. According to a Los Angeles Times report in January 2001, the Barclay is now solidly booked and unabieto accommodate all the requests it receives for rental dates. Estimates for the first year operating budget for the Balboa Theater are based on a schedule of 30 rental and 70 presented performances. Demographic information on the communities within the market range of the Balboa Theater indicate an increasing number of families with young children and seniors interested in participating in the performing arts. The Balboa Theater's programming and arts education activities will embrace both these groups with intriguing, high quality performances and affordable ticket prices. Marketing Tools Fund-raising for the capital campaign for renovations is comprised of both a direct-mail solicitation program and major gifts campaign guided by a professional consultant. Ticket sales will be marketed through a variety of techniques including: An annual season brochure outlining all major events Direct mail to specific markets for individual performances and festivals Media advertising in newspapers, cable televivion, and radic as appropriate Marketing through City of Newport Beach publications Theater rentals will be marketed primarily through mailings to local performing groups and meeting managers. Products and Services The primary product of the Balboa Theater will be tickets to live performances in theater, musical theater, dance, music, children's productions and in :31m. Tickets will be sold singly, or through a "Create -Your -Own Subscription" program to offer a discount to major buyers. Tickets will be sold for Balboa Theater sponsored events and productions, as MWH ag those by outside groups renting the theater. Rental revenue for an estimated 30 performances per year is estimated at $33,000. Balboa Theater services also include its arts education program, offering courses, workshops, and lectmWdemonserations both in the theater and in local schools and _ community centers. Fees will be charged for each of these activities. Pricing levels will be set by senior staff, with board approvaL, based upon current market trends, sponsorship contributions and expenses, with a constant goal of maintaining a balance between affordable ticket prices and overhead costs. Management Plan The Balboa Performing Arts Theater Foundation in a non-profit organization which actively solicits contributions and ticket sales to offset its construction, operating, programming and fund-raising expenses. Any annual surplus will be applied toward the .. following season's expenses. The organization is guided by a Board of Directors, whose volunteer members are representatives from many fields including business, education and the arts. Subcommittees of the board are responsible for overseeing specific areas of the organization including the finance committee, nominating committee, arts advisory council, and the Divas support guild. The Finance Committee — prepares annual budget for board approval. Approves monthly fineucial statements prepared by std'- The taff:The Nominating Committee - recruits and recommends new board members. Arts Advisory Council — prepares a season of performances with Executive Duector for approval by ball board. Also recommends rental policies and price structures. E Divas of the Balboa Theater — support guild, raises funds through special events and provides social occasions for their members to enbance their experiences at the Balboa Theater. 0 Current Board Membership and Affiliations Dayna Pettit, President agent, Cannery Village Realty community leader Steven Bromberg, V.P. & General Counsel partner, Bromberg & Yaeger Jo King, Secretary agent, Prudential California Realty Yaron Telem, Treasurer CPA, Alamitos Tax Service Bill Wren, V.P. & Chief Financial Officer Chevron Land & Development Co., retired Ronald L. Baers, Planning & Urban Design Resources Douglas Boyd community leader Art Grwrsky, oomm=ity leader Rush Hill, Hill Paraiership, Inc. Ken Honig, Honig investment Co. Stanley J. Kafka, City National Bank Terry Markowitz, Ala Carte Catering Britta Pulliam, Britta's Caf6 LI 0 • CAPITAL REQUIREMENTS What follows are two Cash Flow Projections which a.eliberately leave out "Contributions/Gifts/Grauts". In effect this meats that the cumulative Cash Flow of these projections depict the sum of funds neEded to be raised to pay for alt activities up to that point. For an practical purposes, this r$presents the budget for this period of time. The "Cash Flow Projection Before Opening" exhibit shows that if the construction schedule is as depicted and no contributions are received, BPATF will have a balance of $21,900 in the bank in September of 2001. This exhibit also points out that approximately $3,200,000 will be the total amount needed to pay for all Foundation overhead and construction costs daring the 9 month construction period. The "Cash Flow From Operations" exhibit shows wbat is typical of this type of a Performing Arts Theater, namely, it loses money. In this case $232,000 the first year and $144,400 per year thereafter_ It is arlmowiedged that there will be fundraising activities throughout the lifetime of the Foundation to support these operational deficits. Ultimately the surplus from these activities will create a fund with sufficient income on its own to support the Theater's activities. 'The current Capital Campaign's goal of raising an adk:litional $4,000,000 conservatively assumes no income in the first year from operations which means a $635,000 loss versus the $232,900 as shown :in the Cash flow projections. The components of the $4 million are $3,200,000 during the construction period, the $635,000 operating loss and a 41% contingency. Operational Expense Salaries & Wages Remaining Op. Expense Capital Campaign Expense Total Operational Expense Construction Costs Start-up Costs Total Expenditures Income Contributionslgiftslgrants .Fundraisers (net) Diva Contributions (net) Interest & Dividends (5%) Other Income (e) Total Income Cash Flow Existing Cash Cumulative Cash Flow 2121101 Balboa Performing Arts Theater Foundation Cash Flow Projections Before Opening Feb Mar Apr May Jun Jul Aug Sep Oct 7,400 7,400 10,400 " 10,400 10,400 10,400 10,400 10,400 10,400 8,800 8,800 8,800 8,800 8,800 8,800 8,800 8,800 8,800 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 15,000 15,000 18,000 18,000 18,000 18,000 18,000 18,000 18,000 400,000 500,000 500,000 500,000 500,000 15,000 15,000 18,000 18,000 418,000 518,000 518,000 518,000 518,000 1,500 1,500 1,500 7,000 7,000 23,000 6,000 6,000 6,000 5,200 5,200 5,200 19,700 19,700 35,700 4,700 4,700 17,700 1,400,000 1,404,700 1,409,400 1,427,100 1,500 1,500 1,500 1,500 1,500 7,000 7,000 7,000 7,000 7,000 6,000 4,000 2,000 5,200 5,200 5,200 5,200 5,200 19,700 17,700 15,700 13,700 13,700 1,700 -400,300 -502,300 -504,300 -504,300 1,428,800 1,028,500 526,200 21,900 482,400 (1) Business Manager (2) Technical Director (3) oox Office Manager[Volunteer Coordinator (4) Start up costs (see Exhibit A) (5) Fundraisers Net ($18,000) (6) Other Income: Board Contributions ($60,000) Artist Paint Sales ($2,500) 1,500 7,000 5,200 13,700 -504,300 986,700 0 • Balboa Performing Arts Theater Foundation Cash Flow Projections Before Opening Nov Dec Jan Feb Mar Apr 10,400 10,400 13,800 j2} 13,800 16,300 jai 16,300 8,800 8,800 8,800 8,800 8,800 8,800 3,000 3,000 3,000 3,000 3,000 3,000 18,000 18,000 21,400 21,400 23,900 23,900 500,000 500,000 500,000 500,000 74,500 20,300 518,000 518,000 521,400 521,400 126,500 72,300 1,500 1,500 1,500 1,500 1,500 1,500 7,000 7,000 7,000 7,000 7,000 7,000 5,200 5,200 5,200 5,200 13,700 13,700 13,700 13,700 8,500 8,500 -504,300 -504,300 -507,700 -507,700 -118,000 -63,800 -1,491,000 -1,995,300 -2,503,000 -3,010,700 -3,128,700 -3,192,500 2121101 • • 0 Balboa Performing Arts Theater Foundation Exhibit A To Cash Flow Projections Before Opening Theater Furnishings and Equipment Eudget Computers — hardware and software General Safe - $3,500 Phone System Box Office 0 2 terminals - $3,000 server - $5,000 (includes software & set-up) Ticketing & donor software (includes terminals & printers) - $40,000 Fax machine - $300 6 incoming lines for general office plus 6 incoming lines for box office - $15,000 Alarm System - $5,000 Concession Equipment - $2,500 Lobby furniture - $4,500 Office furniture (tech booth, box office, tech office) - $1,500 Appliances Washer & dryer - $1,200 Ice machine - $2,500 Microwave (green room) - $200 Coffee Maker (green room) - $100 Refrigerator (green room) - $1,500 All-purpose chairs (25) - $2,500 Music stands (30) - $3,000 Janitorial equipment - $500 Total - $94,600 2/21/01 Balboa Performing Arts Theater Foundation CASH FLOW * FROM OPERATIONS Income Fundraising: Conlributions/Gifts/Grants Fundraisers (net) Diva Contributions (net) Interest/Dividends Other Income Total Fundraising Income Operations Income Rental Income 5,400 7,000 8,300 12,400 12,400 12,400 12,400 12,400 Concessions (net income) 875 1,000 1,250 1,875 1,875 1,875 1,875 1,875 Ticket Sales 47,050 61,800 74,900 110,250 110,250 110,250 110,250 110,250 Sponsorships 10,000 15,000 20,000 25,000 26,250 26,250 26,250 26,250 Other Income Total Operations Income 53,325 84,800 104,450 149,525 150,775 150,775 150,775 150,775 Operations Expense Full Time Salaries & Wages 50,000 50,000 50,000 50,000 53,000 53,000 53,000 53,000 Part Time Salaries & Wages 11,250 11,250 11,250 11,250 16,875 16,875 16,875 16,875 Artists Fees 37,500 37,500 37,500 37,500 56,250 56,250 56,250 56,250 Operations 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 Total Operations Expenses 156,750 158,750 158,750 158,750 186,125 186,125 186,125 i86J25 Total Operations Profit or Loss (95,425) (73,950) (64,300) (9,225) (35,350) (35,350) (35,350) (35,350) • Cumulative Cash Flow (95,425) (169,375) (223,675) (232,900) (268,250) (303,600) (338,950) (374,300) ' See Exhibit I, II & III for notes and assumptions 2121101 Rental Income License Fees $500!4 -hour Performance (2 hr. min) x 30 $50/hr rehearsal (2 hr. min) x 30 Ticket printing charges (.25 per @70%) Labor recharges (sm@ $20/hr. average 6 hrs.) Materials Recharges (est. $100 x 50) Usher recharges ($100/event Box Office Percentage (5% on $10 Ticket Total Rental Income Presented Income Ticket Sales (350 seasts for 70 events with 60% attendance @ $20/ticket) Balboa Performing Arts Theater Foundation Operational Income (30% Rental 70% Presented) Exhibit II 1st Year 2nd Year 100 Performances 150 Performances 1,838 3,600 3,000 3,000 3,675 33,113 27,000 2,757 5,400 4,500 4,500 5,513 49,670 441,000 Underwriting Performance Sponsorships (7@ $10,000) 70,000 105,000 Total Presented Income 364,000 546,000 Other Income Concessions 8 Lobby Sales (net) 2/21/01 5,000 7.500 402,113 603,170 • • Salaries & Wages Full Time Part Time Executive Director, Business Manager, Technical Director, Box Office Managers, Secretary (Includes burden) House Manager, Stage/Projectionist, Box Office (includes burden) Artist Fees ($15,000 x 10 companies) Operations General Business Expenses Client Production Expenses Janitorial Advef using a Public Relations Professional Services Equipment Rentals Bank Charges Utilities Insurance Postage Printing Fund Raising Total Operations Expense Total Disbursements 2I21I01 7,000 4,500 6,000 01 i 8,500 5,000 1,000 50,000 8,000 10,000 15,000 30,000 Balboa Performing Arts Theater Foundation Operational Expense (30% Rental 70% Presented) Xb 1st Yaar 2nd Year 100 Performances 150 Performances 200,000 212,000 45,000 67,500 150,000 225,000 240,000 240,000 635,000 744,Soo 0 01415 ALY CONSTRUCTION, INC. DATE: August A 2001 .$38,851 $22,171 $1,064 $73,113 CITY BY: S.L. $7,71 BALBOA THEATRE RENOVATION Not Part of 099inal Budget PRICED BY FMA int FINsh Sca"oeling PRELIMINARY 13DDGET RECAP $0 $0 TOTAL AREA: 9,486 $22.000 Phase t - El". Service, Demo 10 weeks $2.32 FIRST FLOOR: 6,306 Phase 2 - Basemaid 20 weeks BASEMENT: 3,180 $28,593 Phase 3 -Building Shag 12 weeks $0 NO. OF SEATS: 340 $0 Phase4-Flushes ]4 weeks 01720 NO. OF SCREENS: 1 $6,090 Total Construction 56 weeks $0 $17,641 $21,880 $4,039 $1.86 Slakkolb A B C D E F G H $56,900 $D ($56,900) $5.00 DESCRIPTION Not Part of Original Budget Phage 1 Phase 2 Phase 3 Phase 4 at Cost Budget Variation Total Subcontractor Notes ($72390) $14,11 Foothill Add scope, discharge plpe,etc. Oamolltion Basement Building Finishes $16,500 8120100 $0 Cost $368,500 $280,550 ($87,950) $38.65 Cal Etc r DlBudget Budget- Redesign for City D2205 She" $0 in 02150 f➢less C) per Sq(t $0 $56,400 01415 Testing, inspection, &Monitoring $13,028 .$38,851 $22,171 $1,064 $73,113 $22,302 ($50,811) $7,71 TELA Not Part of 099inal Budget 01525 int FINsh Sca"oeling $0 $0 $0 $22,000 $22.000 $0 ($22,000) $2.32 Nol Speeikagy inc uded 01570 Project TrafBa Regulation I Control $26,648 $16,596 $28,593 $26,015 $95,851 $0 ($95.851) $10.10 $0 Not Part of Original Budget 01720 Surveying $6,090 -$10,051 $1,500 $0 $17,641 $21,880 $4,039 $1.86 Slakkolb . 02050 Building Demogfon $56,900 - $0 $0 $0 $56,900 $D ($56,900) $5.00 American Not Part of Original Budget 02140 Dewata9ng $0 ,$133,855 $0 $0 $133,855 $81,465 ($72390) $14,11 Foothill Add scope, discharge plpe,etc. 02150 Shoring is Underplming $16,500 $352,000 $0 $0 $368,500 $280,550 ($87,950) $38.65 Cal Etc r DlBudget Budget- Redesign for City D2205 Earthwork (Bldg. Only) $0 in 02150 $0 $0 $0 $56,400 $56,400 $0.00 kid 02150 02500 Asphatt $0 $0 $0 $0 $0 $3,000 $3,000 $0.00 02520 Site Concrete $0 $10,375 $0 $0 $10,375 $4,305 ($6,070) $1,09 Budget Add Alley Conc. 02500 Site Underground $14,300 $34,575 $0 $0 $48,875 $62,575 $3,700 $5.15 ML Elec/Kllbride Added Else. Service 02900 Landscape & Irrigation none now $0 $0 $0 now $0 $om Hone 03300 Concrete - Slabs, Footings, Decks $81,608 $546,409 $53,273 $0 $681,290 $397,213 ($284,077) $71.82 Piro I Budget Basement scope change 03361 Slot Crete $20,663 - $0 $0 $0 $20,663 Incl ($20,663) $2.18 Superior 1 Budget Not Part of Original Budget 03520 Insulating Cmorste none none none none $0 $0 $0 $0.00 $o 04200 Masonry 55,075 $81,490 $91,606 $0 $178,171 $76,290 ($99.881) $18.78 Pointe r Budget Ext Wag Not a Part of Original 04500 Brick Veneer $0 $0 $109,280 $27,250 $136,530 $0 ($136,530) $14,39 Pointe) Budget Not Part of Origins$ Budget 05100 Structural Steel $0 $5,000 $182,590 $196,685 $384,275 $393,021 $8,746 $40.51 Arwg l Budget 05110 Seat Installation (Labor Only) $0 in 10999 $0 $0 $D $0 $0 $0.00 In 10999 05210 Steel Mat now now none none $0 incl $0 $0.D0 In 05100 05300 Metal Decking $0 $0 $0 $0 $0 incl $0 $0.00 In 05100 05500 Miscellaneous Metals $0 $0 $0 $0 $0 $0 $0 $0.001n 05100 05700 Omarnemal Specialties $0 s0 $0 560.000 $60,noo $22,725 ($37,275) $5.33 Budget :aided Fenuy Railing 031 W Rough Carpentry $5,000 $0 $5,000 $5,000 $15.000 $31,747 $16,747 $1.68 Budget 06200 Finish Carpentry $0 $0 $0 $153,518 $153,516 $74,364 ($79,152) $16.18 Sierra( Budget Added int. woodwork finish 07100 Waterproofing $0 $33,900 $0 $0 $33,900 $57,556 $23,656 $3.57 Delta Pacific 07200 Insulation Bldg. Wall $0 $0 $0 $2,954 $2,954 $9,260 $6,306 $0.31 insulcom • 07205 Insulation Roofing $0 $0 $0 $0 $0 In 07500 $0 $0.00 in 07500 07250 Fkepmfing $0 $0 $0 $0 $0 $15,811 $15,811 $0.00 Not Raq'd 07420 Manufacturer Metal Panels $0 $0 $31000 $3,000 $0 ($3,000) $0,32 Budget 07500 Rooting $0 $o $42,205 $0 $42,205 $38,183 ($9,022) ;1.45 Bronco 07800 Sheet Metal $0 - $0 $17,877 $0 $17,877 $25,019 $7,142 $1.88 TN Sheet Metal 07800 Roof Hatch, Rod Accessories $0 $0 $0 $0 $0 $0 $0 $0.00 in 07600 07920 Moisture Conlroy Caulking $0 $500 $500 $3,083 $4,083 $3.083 ($1,00(1) $0.43 Budget 08005 Ooors i Frames I Hardware $o $3,750 $2,500 $26,507 $32,757 $26,095 ($4,662) $3.45 Budget 08310 Siding Awtisliml Door $0 $0 $0 $8500 $4,500 $0 (64,50D) $0.47 Budget 08330 Coiling Fire Curtain $0 $0 $0 $40,000 $40,000 $0 ($40,000) $4.22 Budget 78800 Glass & Glazing $0 $0 $0 $21,590 $21,590 $65,176 $43,586 $2.28 Breezway 08805 Protection f Vievports $D $0 $0 $0 $0 $0 $0 $0.00 in 06800 09200 Plaster $0 $0 $28,136 $0 $28,136 $28,136 $o $2.97 Orange Co. Plastering D9250 Drywall $0 $0 $15,800 $148,164 $163,964 $157,973 ($5,991) $17.28 Orange Co. Plastering D930D Ceramic Tile Floor Walls $0 $0 $0 $44,197 $44,197 $44,197 $0 $4.66 Budget 09510 Acoustical Ceilings $0 $0 $0 $3,747 $3,747 $27,403 $23,656 $0.40 Budget 09520 Acoustical Panels & Curtains $0 $0 $0 $24,656 $24,656 $0 ($24,656) $2.60 Budget 09650 Hardwood Floating $0 $0 $0 $20,020 $20,020 $20,020 $0 $2.11 Budget 09680 lResitiont Flooring to $0 $0 $1,641 $1,611 $37,021 $35,380 $0.17 Budget 8a * PNne 1.2.3.4 C rrix,.QU Page1d2 01/ua'2.62 ALY CONSTRUCTION, INC. DATE: August 22, 2001 CITY BY: S.L. BALBOA THEATRE RENOVATION PRICED BY: FHA PRELIMINARY BUDGET RECAP TOTAL AREA: 9,486 Phase t - Else. Service, Demo t0 weeks FIRST FLOOR : 6,306 Phase 2 -Basement 20 weeks BASEMENT: 3,180 Phase 3 - Building Shell 12 weeks NO. OF SEATS: 340 Phase 4 - Finishes 14 make NO. OF SCREENS: 1 Total Construction 56 weeks A B C D E F G H DESCRIPTION Phase 1 Phase 2 Phase 3 Phase 4 Total Cost Budget Variance Total Subcontractor Nates Demolition Basement Building Finishes 8120/00 Cost Shell (D less C) per Sqft D96W Carpet Floor $0 $0 $0 $30,570 $30.570 $0 ($30,570) $3.22 Budget 09695 Carpet Wall W $0 s0 $0 $0 $0 $0 $0.00 NIC 09900 Palming $0 $0 $7,500 $22,640 $30,140 $36,182 $6,042 $3,18 Great Scat 09950 Wall Covering $0 s0 $0 $8,250 $8,250 $0 ($8,250) $0.87 Budget 10410 Poster Cases $0 $0 $0 $0 $0 $0 s0 $0.00 In 08800 10500 Metal Lockers s0 $0 $0 $0 $0 $0 $0 $0.00 NIC 10525 Fire Extinguishers $0 $0 $300 $1,800 $2,100 $0 ($2,100) $0.22 Budget 10605 Wire Meeh Partitions $0 $0 $0 $0 $0 $0 $D $0.00 NIC 10800 Toilet Accessom s $0 $0 $0 $17,380 $17,360 $17,360 $0 $1.83 Budget 10810 Toilet Padgions $0 s0 $0 $0 % $0 $0 $0.00 N 10800 10999 misc. Specialties $0 $o s0 $707,870 $707,870 $667,620 ($20,250) $74.62 Allowance Increase Marquis Allowance 12680 Food Grills $0 $0 $250 $4,810 $5,060 $0 ($5,060) $0.53 Budget 14205 Elevator Liles $0 $0 $0 $47,310 $47,310 $74,000 $28,690 $4.99 McKinley 14580 Pneumatic Tube System s0 $0 $0 $0 $0 $0 $0 $0.00 NIC 15300 Fka Sprinklers $8,300 $13,750 $13,760 $2,450 $36,200 $19,170 ($17,030) $3.82 Underwriters Fire 15400 plumbing (Bldg, Only) $7,500 $46,000 $23,110 $31,080 $107,690 $95,859 ($11,831) $11.35 Mako Revised price, bond 15405 Plumbing (Labor FF&E) $0 $0 $0 $0 s0 $0 $0 $0.00 in 15400 15500 HVAC- Trade Contractor $15,800 $0 $0 $272,450 $288,250 $260,000 ($28,250) $30.39 DSG Revised price, bond 15505 HVAC Equip. $0 $0 $0 $0 $0 $0 s0 $0.00 In 15500 15515 HVAC Controls $0 $0 $0 s0 $0 $0 $0 $0.00 in 15500 16010 Electrical (Bldg. Only) $16,000 $107,500 $20,375 $303,575 $447,450 $392,068 ($55,382) $47.17 ML glee I Karlala Added design, scope, bond 16050 Electrical Equip. & Fbdures $0 $0 $0 $0 $0 $0 $0 $0.00 In 16010 16600 Exterior Neon & Signage $0 $0 $0 $0 $0 $0 $0 $0.00 In 16010 15700 Communication $0 $0 s0 $0 $0 $0 $0 $0.00 17 16010 16720 Alarm 6 Detection $ysiem s0 $0 $D $0 $0 $0 s0 $0.00 In 18010 $0 $0 $0 s0 $0 $0 $0 $DAD Not Included detail General Combions $115,434 $165,925 $99,555 $116,148 $497,062 $363,355 ($133,706) $52.40 ALY Phases added Time 17-230 Final B Progressive Cleaning $2,500 $5,000 $7,500 $6,741 $21,741 $27,741 $0 $2.29 ALY' 17.910 Permit & Frees so so $0 0 0 $0.00 By City of Newport Subtotal $409,346 $1,603,527 $771,320 $2,408.643 $5,182,836 $4,018,926 ($1,173,910) $547.42 18100 Contingency Contractoes 6.50% $26607 $104,229 $50,136 1 $156.562 $337534 $261,230 $78304 $35.56 SutHolet $435,953 $1,707,756 $821,456 $2,565,205 $5,530.370 $4.280,156 1$1,250,274) '$583.00 01 9G InsuranW 1.uu% $4,093 $16,035 $7,713 $24,066 $51.928 $40189 $11,739 85.47 Subtotal $440,046 $1,723,791 $829,169 1 $2,589.291 $5,582.299 $4,320,345 ($1,261,953)1 $58886 aal 0.00% $o so s0 $0 $0 $D $0 $0.00 t $440,046 $1,723,791 $829,169 $2,569,281 $5,582,299 1 $4,320,345 ($1,261,963)1 588.48 unn nil o a Note: Work Not earl of Original Budget (Among others the most obvious areas are: Testing, Traffic Control. Demo, Shotcmfe, Masonry. Brick Veneer, Stage Fire Curtain, Else Service, Elec Design, Dawster Discharge.) ($571,438) 45.26% Of the Variance esaua VrpsC 1,1,3.1 Condn.a,W12 Pape 2 N2 01N 2 t! • • 0 Balboa Perfonning Arts Theater Foundation Financial Overview January 2002 In Thousands Donations: Net Activity Prior to 99/00 Fiscal Year (includes building) 26.2 Donations and Interest Income - 99/00 fiscal year and after' 1,830 Divas donations 99/00 fiscal year and after 115 Total Donations 2,207 Expenses (99100 fiscal year and after) Renovation Expenses: Seismic Retrofitting and Engineering 173 Architecture and Theater Design 281 Construction Management 41 495 Programming Expenses :. 32 Fundraising: Capital Campaign Consultant 36 Printed Materials 45 Newsletters 26 Other (meetings, donor receptions, ground breaking, etc.) 13 120 General and Administrative: FT Salaries 155 PT Salaries 38 PR/Community Relations Consultant 44 Rent and Utilities 32 Taxes, Insurance, Fees and Permits 57 Computer Equipment and Office Supplies 12 Postage and Reprographics 13 Misc. (meetings, conferences, professional services) 3 359 Total Expenditures 1,006 Current Cash and Investment Balance 1,201 Includes net ad" from special events RECORDING REQUEgf�vw WHEN RECORDED RETURN TO: City Clerk FEB 26 A8 :46 City of Newport$each P.O. Bog 1768 F-FICE 0P TtfE C)Ty GIERn Newport Beach, CA CITY968��$BEACI{ TITLE OF DOCUMENT: 71 Recorded in official Records, County of Orange Gary Granville, Clerk -Recorder 111111011101111111111111111111111111111 NO FEE 2001008725912:35pm 02116/01 114 27 A17 6 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 THIS SPACE FOR RECORDER'S USE ONLY. Exempt Recording Request per Government Code 6103 Third Amendment to Lease By and Between the City of Newport Beach and the Balboa Performing Arts Theatre Foundation Recording Reference: Lease: 19990066742, 1/29/99 First Amendment: 20000181651, 4/10/00 Second Amendment: 20000181652, 4/10/00 h THIRD AMENDMENT TO LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATRE FOUNDATION This Third Amendment to Lease, entered into as of December wk 2000, (Effective Date) by and between the City of Newport Beach, a Charter City and municipal corporation ("Lessor') and Balboa Performing Arts Theatre Foundation ("Lessee"), is made with reference to the following: RECITALS A. Lessor and Lessee entered into a ground lease (Original Lease) on November 23, 1998. B. Lessor and Lessee approved the First Amendment to the Original Lease on September 27, 1999, modifying the insurance obligations of Lessee. C. Lessor and Lessee approved the Second Amendment to the Original Lease on December 13, 1999, deleting the requirement for interior improvements to be consistent with the Guidelines for the Rehabilitation of Historic Structures ("Guidelines") published by the Secretary of the Interior. D. Lessor and Lessee agree that further amendments to the Original Lease are necessary to modify provisions that require certain exterior improvements to be consistent with the Guidelines. E. Lessor. and Lessee agree that the modifications to provisions related to exterior improvements -are necessaryto..achieve.the primary—goal of. the lease which is the reconstruction and use of the building as a venue for live theatre performances and other events that require dressing rooms and related facilities. NOW, THEREFORE, Lessor and Lessee hereby agree as follows: ARTICLE 1 AMENDMENT TO ARTICLE 9, REQUIRED IMPROVEMENTS Paragraph 9.3 of the Lease is amended to read as follows: Lessee shall prepare, and submit to Lessor for approval, a proposed conceptual plan for the design, construction, furnishing and equipping of the Property for use as a theatre (Conceptual Design Plan). The Conceptual Design Plan shall be prepared by a licensed architect. The Conceptual Design Plan shall generally describe those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theatre constructed in the 1920's. The Conceptual Design Plan shall include, without limitation, (1) seating layout and design; (2) stage and dressing room layout and design; (3) lobby and concession area design; (4) structural modifications necessary to comply with uniform codes; (5) interior design elements and treatment; (6) exterior design and treatment; (7) sound and projection systems; (8) lighting systems and design; (9) public area layout, design and treatment; and (10) stage, orchestra pit and roll - down backdrop design and treatment. Lessor's right to approve the Conceptual Design Plan shall be limited to ensuring that the improvements contemplated are consistent with a first class community theatre and that the exterior design and treatment of the front facade return it as close as possible to its original appearance. The Conceptual Design Plan 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 Plan 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. ARTICLE 2 AMENDMENT TO ARTICLE 12, ALTERATIONS Paragraph 12.1 is amended to read as follows: 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 exterior of the Property, especially the front facade, shall conform to the Theatre's designation as a local landmark and shall be consistent with the original design and architecture of the Theatre. 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. ARTICLE 3 NO AMENDMENTS TO REMAINDER OF LEASE All other provisions of the Lease shall remain in force and effect in their original form or as amended by agreement of the Parties. FOR LESSOR CITY OF NEWPORT BEACH r Mayor Dated t2 — \0 — 0 0 2 ate. Iu, • FOR LESSEE ' BALBOA PERFORMING ARTS THEATRE FOUNDATION Dayna PeRtit President APPRC�/E TO FORM CITY C NEWPORT BEACH 66"obert H. Burnham (City Attorney ATTEST: CITY OF NEWPORT BEACH LaVonne Harkless City Clerk ry CJron;, ounry iqE T.✓ �.,:,:,..... M1�y�Canm.�..31,2(A Dated l �^ /Z�Z±A dD Dated vated �a ��/ �? 91 M CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California } ss. County of S rQ��✓���� J \,� On before me, Jin t t� Date Nam an Title of Officer (e.g.,'Jan Doe, Notary Public") personally appeared `& , t� Name(s) Igner(s) xJ personally known to me ❑ proved to me on the basis of satisfactory evidence • �+ iw .rr Place Notary Seal Above to be the person( whose nameI are subscribed to the wi instrumen and acknowledged to me tha h she/they executed the same in hi her/their thorized capacity('A), and that by hi her/their signature() on the instrument the person(, or the entity upon behalf of which the person acted, executed the instrument. I SS m hand and offi ial se 1. Sign re o Notary PAtblic OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached ecu r W Title or Type of Documenf ok t: '' � Y11�� � � '�L7 l� Document Date: I ' i r7 + Q63 Number of Pages: 3 Signer(s) Other Than Named Above: Wa,,�/ k t ` I- Capacity(les) Claimed by Signer t VJ 1 �3 Signer's Name ❑ Individual l' Top of thumb here ❑ Corporate Officer — Title(s): ❑ Partner —❑ Limited ❑ General ❑ Attomey in Fact ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer Is Representing: 01997 National Notary Association • 9350 De Sob Ave., P.O. Box 2402 • Chatsworth, CA 91313-2402 Prod. No. 5907 Reorder. Call Toll -Free 1-600-8768827 0 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California County of � On f ao R before me, personally appeared I ss. <i M personally known to me ❑ proved to me on the basis of satisfactory evidence PISHN I to be the person(, whose narlIs/ re OMCommission# 117432P subscribed to the within ' trument and Nokay Public - Coiifarnla Orange County acknowledged to me that s mmh hey executed Wh/Ca.EvV%Feb21,2rj02J the same in his their au,�t�-� ,razed capacity ), and that by histheir signature(g) on the instrument the person(?Ji1J, or the entity upon behalf of which the person acted, executed the instrument. ESS my hand and c icial seal. Place Notary Seal Above S gnaw of NotPublic OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached D ment1 t4/ ,� Title or Type of Document: C (T wlr'� Document Date: \ ��� 00 Number of Pages: Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer Signer's Name: ❑ Individual ❑ Corporate Officer — Title(s): ❑ Partner —❑ Limited ❑ General ❑ Attorney in Fact ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer Is Representing: ®1997 National Notary Association • 9350 De Soto Ave., P.O. Box 2402 • Chatsworth, CA 91313-2402 Prod. No. 5907 Reorder: Call Toll -Free 1-800-8766827 c-3�zy� • Cq) STUDY SESSION AGENDA ITEM z TO: Mayor and City Council FROM: Sharon Wood, Assistant City Manager SUBJECT: Balboa Theater Rehabilitation Project Background FEU i 2 2002 The Balboa Performing Arts Theater Foundation requested City assistance with acquisition (S550,000) and renovation ($500,000) of the Balboa Theater in February 1998. After an appraisal, much City Council discussion, and negotiation with the Foundation and the then owner of the Theater, the City purchased the Theater in October 1998, for the appraised value of S480,000, using Community Development Block Grant funds. The City entered into a lease with the Foundation in November 1998. The lease (attached) allows the Foundation to occupy the Theater with no rent payments to the City. The Foundation is required to make improvements to the Theater, including seismic retrofit and renovation, required of a "first class community Theater." Renovation plans were required to be prepared and submitted to the City in phases. Conceptual Design Plans and Design Development Plans were to be reviewed by the City Council Committee to Promote Revitalization of Our Peninsula (PROP), and Final Plans and Specifications were to be submitted along with applications for building permits within one year from the effective date of the lease. The Foundation is required to begin construction within 60 days of approval of building permits, and complete construction one�year later. The lease has been amended three times. The first amendment changed the amount of comprehensive general liability insurance required. The second amendment provided that the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior apply only to the exterior of the Theater. The third amendment removes reference to these Guidelines, and requires that the improvements return the exterior design and treatment of the front faFade as close as possible to its original appearance. The latter two amendments were needed to accommodate the extensive rehabilitation proposed by the Foundation to satisfy the lease requirement that that the improvements be consistent with a first class community theater. In trying to meet this requirement, the Foundation decided to use stadium seating, provide dressing rooms, expand the size of the lobby and increase the number of restrooms. Because the existing Theater building has insufficient space for all these features, the Foundation explored two options: purchasing the building next door (111 Main Street), and expanding the Theater rehabilitation to include demolishing the side and rear walls, excavating for a basement, and rebuilding the side and rear walls and cladding them with original brick veneer. Initially, the Foundation believed that the owner of the adjacent property was not interested in selling. The City and the Foundation later learned that the property was listed for $1.6 million. At that time, the cost estimate for constructing the basement was $300,000, and the Foundation decided to proceed with that plan rather than spend the timeand money to redesign the project in a way that would make it more expensive PROP approved Conceptual Design Plans in November 1999 and Design Development Plans in April 2000. The City Council granted one extension of six months for the submission of building permit applications, changing that deadline from November 1999 to. May 2000. The Foundation did meet that deadline, and the plans are approximately 70% approved by the Building Department. Discussion The most difficult component of the Theater design for the Building Department to approve is the basement. Shoring and dewatering must be planned properly so that construction will not cause damage to adjacent buildings, the basement is kept dry and usable, and the water is discharged properly. Such work can be done safely if designed properly, but as owner of the Theater property, the City is being especially cautious about protecting the adjacent properties from damage. As the Foundation has done more detailed plans for the renovation and consulted with the Building Department on dewatering and shoring concerns, the cost estimate for this part of the project has increased to $1.7 million. This high cost, combined with concerns about the basement construction, made it reasonable to consider acquisition of the adjacent property. 1 I 1 Main Street The property owner has an appraisal of $1.6 million, and that is her asking price. The City also had the property appraised, and our appraiser's opinion of value is $1.4 million. The building at 111 Main Street occupies three parcels of land (each 25 x 95 feet) shown on the attached map. The first floor has three retail tenants, Orange Julius, Toys in the Attic and J.J.'s Hair Cutting. The second floor has six apartments. There are eight parking spaces off the alley in the rear. The Foundation needs only the parcel closest to the Theater for its dressing rooms, restrooms and offices. The building is constructed of reinforced concrete. It could be cut in two, and the two lots at the comer of Main and Balboa could be sold to another party to recoup some of the acquisition costs. Cutting the building likely would require relocating a stairway and some bathrooms, which could result in the loss of one apartment unit. The Building Director believes that the structure could be cut in two, but cannot estimate the cost without more extensive study. Financial Status of Theater Project The City's contribution to the project so far is approximately $500,000, including acquisition of the property and payment of plan check fees as provided in the lease. Community Development Block Grant (CDBG) has been the funding source for all expenditures. These funds are not available to purchase the adjacent property, because the City has committed them to the Balboa Village streetscape improvement project. Staff has not explored other funding sources. The current cost estimate for the Theater renovation is $5.5 million. The Foundation has received $2.2 million in donations, and has spent almost $500,000 on seismic retrofit, design and construction management. After these project costs and ongoing operational costs, their fimd balance is $1.2 million. The Foundation Board believes that their fundraising would be more successful if the project were under construction. Options The City Council may wish to consider additional City participation in the Theater project. Staff has outlined some options to help the Council's discussion of this matter. 1. Make no additional City investment in the project, but amend the lease to provide additional time for construction to begin and to prohibit any demolition until the Foundation has suffclent funds to construct the basement and the new shell building. While this option would give the Foundation more time to raise the money needed to complete the project, it would continue their heavy reliance on donations. If fundraising is not successful, the City eventually would need to terminate the lease and make decisions about the Theater's future. �. Direct staff to negotiate for purchase of the property at 111 Main Street. If successful, amend the lease to (a) include the additional property, (b) provide for cost sharing and project management if the building is to be divided, and (c) add deadlines for specific milestones in the fundraising, design, permitting and construction processes. This option could serve as a catalyst for progress on renovation and increase fundraising potential. Expanding the Theater to the side instead of into a 3 basement would be a less complicated construction project. However, cutting the adjacent building in two and selling the portion not used by the Theater has complexities of its own. Other concerns with this option include the investment of more City money, and potential City responsibilities in relocating existing tenants. 3. Direct the Foundation to negotiate with the owner of 111 Main Street to lease a tenant space. Staff recently learned from the listing real estate agent that the commercial tenant closest to the Theater, Toys in the Attic, is leaving, making that space (1,438 square feet) available. This might provide offices for the Foundation, but it could not satisfy their dressing room and restroom space needs. 4. Direct the Foundation to redesign the project within the existing Theater building. This option would reduce construction costs by at least $1.7 million, eliminate the potential for damage to adjacent properties, and preserve more of the historic Theater. On the other hand, this option would not allow for live performances, and the likelihood of success for a small film house may be limited (especially since Newport Beach also has the Lido and Port Theaters). 5. Terminate the Foundation's lease. ti The lease requires the Foundation to "diligently process any corrections and changes to the submittals that are necessary to comply with State and local law..." If the City Council is not satisfied that the Foundation has complied with this provision of the lease, the City could invoke the default provisions, up to and including termination. This would have very serious consequences for the Foundation, which has raised over $2 million for the Theater project. Such an action would return the Theater to the City, which would need to make decisions about its future. 4 • Plat Map Ave # -• eou evArso W IP s 34 E RECORDING REQUESTED AND WHEN R�GOFi�ED RE�N TO: City Clerk's Office City_ `, . of"Ievi+pc}it E rae4: ;s+ 3300 N&W06 t 8ouievard-' P.O. Box 1768 Newport Beach, CA 92658-8915 Recoraeo in the county of orange, california Gary L. Granville, Clerk/Recorder IIIIIII�IIIIIIII�IIIIIIIIIIIIIIIIIII III No Fee 19990066742 1;10pm 01/29/99 005 11011852 11 19 L02 43 6.00 126.00 0.00 0.00 0.00 129.00 Space above this line for Recorder's use only. Exempt Recording Request per Government Code 6103 Contract No. 3248 LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATRE FOUNDATION • • • Table of Contents • Paae ARTICLE 2 LEASE OF PROPERTY.......................................................................... 2 2.1 Lease of Property................................:.......................I..... I .......... .....I...... 3 2.2 Condition of Title...................................................................................... 3 ARTICLE 3 POSSESSION OF PROPERTY............................................................... 3 3.1 Quiet Employment.................................................................................... 3 3.2 Condition of Property............................................................................... 3 3.3 Ownership of Improvements.................................................................... 3 3.4 Surrender of Property...............................................................................1 4 3.4.1......................................................................................................... 4 3.4.2......................................................................................................... 4 3.4.3......................................................................................................... 4 ARTICLE 4 TERMIOPTION TO PURCHASE............................................................. 4 4.1 Duration and Commencement 4 4.2 • ................................................................. Option to Extend...................................................................................... 4 4.3 Option to Purchase.................................................................................. 4 4.3.1......................................................................................................... 5 4.3.2......................................................................................................... 5 4.3.3................................................................:........................................ 5 4.3.4......................................................................................................... 5 4.3.5......................................................................................................... 5 4.4 Option - Purchase Price ................................................. ......:....... .......... 5 4.5 Right of First Refusal................................................................................ 5 ARTICLE 6 CONTRIBUTIONS FUND........................................................................ 6 • 3 & � Page ARTICLE,7 ANNUAL13UDGETIOPERAl[ION AND MARKETING PLAN . ............... 6 7.1 ~^-..........~.~.~~~—^^^^^—~~^^r~~~-^^—~^~- 6 7.1.1 ~~~~^^^--^^~^^^^^~^~^~~^~^^^^^^^----^^^ � 7.1.2 Proposed Revision .....—__—...~.....,._.....~....... 7 7.1.3 Year End Financial Statement .....................~...~ 7 7].3 Proposed Revision ............—......--..--.....,~. 7 71.4 Year End Financial Statement ....................................................... 7 7.2 .........................-..... 7 7.3 Operations and Marketing Plan .............................. ........... ................. 7 7.4 Records ...--.......,,__..^~............._.`.^,^.,,,,^,, 8 7.5 Audit ............................................. ...... ................... ..~....................... 8 ARTICLE 8 USE OF PROPERTY ................................................................................ 8 8.1 Permitted Use ..................^................................ 8 82 --.~.,......'...~,.-~.^~.—^~'-.....8 8.2,1 ......................... .......................................................... .................. 9 8.2.2 .....................................................~....... 9 8.2.3 .................................... ................................. ................................. 9 8.3 Program Standards ..~—.~.—~..'~...........~...............9 � 8.3.1 .~....._....~.............--...............~^.^~9 8.3.2 ................................. 9 8.3.3 ..............^............._..........................,........... 9 8.3.4 .^.~^......~~~..........~...~......^_._...........g 8.4 8.5 Cooperation ..........`^,_,^.—...........................g 1�—^^^--~~~^~^~~~~~--^^^^~^^~~~^^~~—~^'~^~ 8.6 Comoliance with Laws ........................`.........^—.. 10 8.7 Zoning and Planning .........................--..~....'... 10 8.8 Nondiscrimination .........,............^.. .....^..............~.~... 10 8.8.1 ..........—.....,.—'—.....,.....~............~.1 10 8.8,2 ....... .,..............~................................... 10 8.8.3 ...~._.._—...............~.,...—......,~....... 11 ARTICLE 9 REQUIREDIMPROVEMENTS ... ........................................................... 11 � 9.1 ........~..................—'...~....11 9.2 ..--...--.-....—............... 11 9.3 Conceptual Design Plans .................................... 12 9.4 Design Development Plan ..~,...~..............—.—..--.—'. 12 9.5 Final Plans and Specifications '-_..........--.,^............ 13 9.6 -.~...........................--^.~~...,. 13 9.7 Construction of Reguired Improvements ........—..,—.......... 13 9.8 General Requirements .........................—'—...,--.. 14 9.8.1,.......~........,—..—.-----..~............-- 14 g.8.2 ..~..^`.....^—....~~...~.....~..~`..' -......^`r. 14 9.9 Extensions .............,—,.........--..............-- 14 & � 0 Page ARTICLE 10 REPAIRS AND MAINTENANCE ................................................. 14 • ARTICLE 11 STATUS AND MANAGEMENT OF LESSEE .............................. 15 11.1 Nonprofit Status...................................................................................... 15 11.2 Executive Committee and Advisory Committee ...................................... 15 11.3 Employment of Staff................................................................................ 15 ARTICLE 12 ALTERATIONS............................................................................ 16 12.1 Written Consent...................................................................................... 16 12.2 Notice of Non -responsibility .................................................................... 16 ARTICLE 13 PAYMENT OF UTILITIES, TAXES, CHARGES AND FEES ....... 16 13.1 Public and Private Utility Seryices........................................................... 16 13.2 Taxes, Assessments. Fees and Charges ............................................... 16 13.3 Proof of Payment.................................................................................... 17 13.4 Payment by Lessor................................................................................. 17 13.5 Property Taxes not Valid......................................................................... 17 13.6 Notice of Possessory Interest: Payment of Taxes and Assessments on Value of Entire Lease Premises......................................................... 17 ARTICLE14 LIENS........................................................................................... 17 14.1 Indemnification......................................................:................................. 17 14.2 Satisfaction of Liens................................................................................ 18 • 14.3 14.4 Notice to Lessor...................................................................................... Notice Non 18 15.4 of -Responsibility . ............................. ................. ...I................ 18 ARTICLE 15 INDEMNIFICATION..................................................................... 18 15.1 Indemnity ................................................................................................18 15.2 CERCLA Liabilitv..................................................................................... 19 15.3 Expense of Proceedings......................................................................... 19 15.4 Release...................................................................................................19 15.5 Waiver of California Civil Code Section 1542 .......................................... 19 15.6 Definition of Hazardous Materials........................................................... 20 ARTICLE 16 INSURANCE................................................................................ 20 16.1 Insurance to be Maintained..................................................................... 20 16.1.1...................................................................................................... 20 16.1.2.......................................................:.............................................. 20 16.1.3...................................................................................................... 20 16.1.4...................................................................................................... 21 16.2 Acceptable Terms of Coverage. .............................................................. 21 16.3 Index ......... ......... :.............. ...................................................................... 21 16.4 Waiver of Subrogation............................................................................. 21 • 6 Paqe ARTICLE 17 17.1 DAMAGE BY FIRE OR CASUALTY ............................................ Lessee to give Notice.............................................................................. 22 22 • 17.2 Restoration..............................................................................................22 17.3 Casualty Late in Term............................................................... :............. 22 17.4 Acceptable of Insurance Proceeds......................................................... 23 17.4.1....................................................................................................... 23 17A.2...................................................................................................... 23 17.4.3...................................................................................................... 23 ARTICLE 18 EMINENT DOMAIN...................................................................... 23 18.1 Lease Governs........................................................................................ 23 18.2 Termination of Lease.............................................................................. 23 18.3 Partial Taking - Restoration..................................................................... 24 18.4 Distribution of Award...............................................................................24 18.5 Allocation of Award - Partial Taking........................................................ 24 18.5.1..............................................:....................................................... 24 18.5.2.............................................................................I........................ 24 18.5.3...................................................................................................... 24 18.6 Allocation of Award - Temporary Taking ................................................. 24 18.7 Allocation of Award - Total Taking.......................................................... 24 18.7.1...................................................................................................... 25 18.7.2...................................................................................................... 25 18.8 18.9 Conduct of Proceedings.......................................................................... Notices 25 25 • .................................................................................................... ARTICLE 19 ASSIGNMENT AND SUBLETTING ............................................. 25 ARTICLE 20 LEASEHOLD MORTGAGES................................:...................... 25 ARTICLE 21 PERFORMANCE OF LESSEE'S COVENANTS .......................... 25 21.1 Right of Performance.............................................................................. 25 21.1.1...................................................................................................... 26 21.1.2- ............................................................................ ....................... 26 21.1.3 ......................... ................... .......................................................... 26 21.2 Reimbursement and Damages............................................................... 26 ARTICLE 22 REPRESENTATIONS.....................................................:.....:......26 22.1 Lessor's Representations........................................................................ 26 22.1.1...................................................................................................... 26 22.1.2...............................................................................:...................... 26 22.2 Lessee's Representations....................................................................... 26 22.2.1...................................................................................................... 26 22.2.2...................................................................................................... 26 22.2.3- ............................................................ ...................................... 27 22.2.4...................................................................................................... 27 • -iv- • 2W I Page ARTICLE 23 DEFAULTS, REMEDIES AND TERMINATION....", ERMINATION...."...... 27 • 23.1 Legal Actions.......................................................................................... ..... 27 23.1.1 Institution of Legal Actions ................................................. 27 23.1.2 Applicable Law.................................................................. 27 23.2 Rights and Remedies are Cumulative..................................................... 27 23.3 Occurrence of Default............................................................................. 27 23.3.1........................................................................................... 27 23.3.2........................................................................................... 28 23.3.3..................................................................................:......... 28 23.3.4........................................................................................... 28 23.3.5........................................................................................... 28 23.4 Remedies............................................................................................:...28 23.4.1........................................................................................... 28 23.4.2 . ......................................... ........................................... ... ... 28 23.4.3........................................................................................... 28 ARTICLE 24 PERMITTED CONTESTS............................................................ 29 ARTICLE 25 ENTRY BY LESSOR.................................................................... 29 ARTICLE 26 FORCE MAJEURE................... :.................................................. 29 • ARTICLE 27 27.1 MISCELLANEOUS...................................................................... Notices.................................................................................................... 29 29 27.2 No Claims Against Lessor....................................................................... 30 27.3 Integration.........................:........................................... .........................1 30 27.4 No Waiver By Lessor.............................................................................. 30 27.5 Severability..............................................................................................31 27.6 Holding Over........................................................................................... 31 27.7 No Partnership........................................................................................ 31 27.8 Federal Funds Provisions....................................................................... 31 27.9 Time of the Essence. . ............................................................................. 32 • 2W I 0 LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATRE FOUNDATION • This Lease ("Lease"), entered into as of November 23, 1998 (Effective Date) by and between the City of Newport Beach, a Charter City and municipal corporation ("Lessor") and the Balboa Performing Arts Theatre 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 Theatre 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 Theatre 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. NOW, THEREFORE, in consideration of the terms, covenants and conditions in • this Lease, Lessor and Lessee hereby agree as follows: N • ARTICLE 1 SUBJECT OF LEASE 1.1 Pumose of the Lease The purpose of this Lease is to require Lessee to renovate and rehabilitate the Property consistent with its original design and architecture and, subsequent to renovation, require Lessee to operate a first class community Theatre. The renovation and operation of the Theatre 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 Property 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 of the structure(s), improvements and fixtures located on the Property as a non-profit cultural and performing arts center. 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.. 1.4 Lessee Lessee is the Balboa Performing Arts Theatre Foundation. Lessee is a California non-profit public benefit corporation organized for the purpose of renovating, operating and maintaining the Theatre 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. For the purposes of this Lease, the term "Lessee" shall include all officers, employees, agents or 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 conditions of this Lease. Lessor reserves all rights to substances below the • 2 I 2.2 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 operation or aesthetics of the Theatre. 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, maintenance or use of the Theatre. ARTICLE 3 POSSESSION OF PROPERTY 3.1 Quiet Eniovment 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 Theatre 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 Theatre, such as fixtures, machinery, rigging, lighting, staging, merchandise, trade fixtures (collectively, Equipment) that have been constructed or placed on the Property 3 • F U • 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 (251) 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 the following: • 4 0 0 4.3.1 Lessee shall have completed the Required Improvements; and • 4.3.2 Lessee shall have operated the Theatre in full compliance with the provisions of Article 8 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 date to the date of the Notice of Intent. For example, if Lessee exercises the option nine (9) years after the Effective Date 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 RENTICONSIDERATION 5.1 No Money Payable by Lessee Lessee shall not pay money as rent to Lessor. 5 • 12 0 • 0 • 5.2 Other Consideration In consideration for this Lease, Lessee covenants that, during the Term, it will: 5.2.1 Operate and maintain a Theatre 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 9 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. 5.2.5 Use any excess revenue or funds for purposes related to the operation of the Theatre 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 Contributions 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). ARTICLE 6 . CONTRIBUTIONS FUND Lessee shall establish and maintain, at a financial institution in an account insured by FDIC, FSLIC or similar insurance, a separate fund (Contributions Fund) for the purpose of accepting contributions from any source. Lessee shall use the Contributions Fund to pay for the improvements required by this Lease and/or to support the operation and maintenance of the Theatre. Lessee shall establish and maintain an on-going fund raising program as part of its Operations and Marketing Operations Plan Article 7 and use its best efforts to ensure the success of the program. ARTICLE 7 ANNUAL BUDGET/OPERATION AND MARKETING PLAN 7.1 BudgetTming 7.1.1 Initial Budget Lessee shall prepare, and submit to the Lessor, an annual budget for the renovation, maintenance and operation of the Theatre (Budget). The first Budget shall be adopted, and submitted to 6 13 7.2 7.3 Lessor, within sixty (60) days after the Effective Date. Subsequent • annual Budgets shall be submitted to Lessor no later than fifteen (15) days after adoption by Lessee. 7.1.2 Proposed Revision Lessee shall provide Lessor with material modifications or revisions to the Budget within fifteen (15) days after adoption by Lessee. 7.1.3 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 itemizing all of its revenues and expenditures. for that fiscal year. Contents of Budget The Budget shall specify in reasonable detail (as appropriate given the status of renovation), (i) the proposed rates and charges for the use of the Theatre, (ii) the balance in all funds and accounts maintained by Lessee, (iii) all projected revenues and sources of funds for the fiscal year, (iv) the expenditures proposed to be made by Lessee in fulfilling its obligations pursuant to this Lease, (v) • marketing program and costs, (vi) all other proposed expenditures of Lessee, (vii) the principal balance of the Contributions Fund, (viii) income from the Contributions Fund, and (ix) cash reserves, if any. Operations and Marketing Plan Lessee shall prepare and adopt an Operations and Marketing Plan (Operations Plan) during the Term. The initial Operations Plan shall be adopted one hundred and eighty (180) days prior to anticipated completion of the Required Improvements. The Operations Plan shall be revised from time to time to reflect new performances/events, new fund-raising strategies and new or revised marketing programs. The Operations Plan shall comply with, and provide information relevant to, the provisions of Article 8 and specify in reasonable detail (as appropriate given the status of renovation), (i) performances, meetings, concerts and other events at the Theatre that have been, or are proposed to be, scheduled (ii) performers and events which Lessee is actively seeking to schedule at the Theatre, (iii) a marketing Plan for the Theatre including programs for attracting attendees and efforts to integrate the operation of the Theatre into efforts to revitalize the local economy, and (iv) fund raising efforts including a report on fund raising efforts for the prior year. The Operations Plan shall be submitted to Lessor within fifteen days after adoption or any material modification. 7 • t`k • 7.4 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 Contributions 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. 7.5 Audit 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. ARTICLE 8 USE OF PROPERTY 8.1 Permitted Use • The Property shall be used primarily for the operation of a first class cultural and performing arts center (Theatre) open to the general public. Lessee shall operate the Theatre 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 civic, charitable, educational and community organizations to periodically use the Theatre for fund raising, education or community events 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 9.2 (Seismic Retrofit) and before completion of Required Improvements subject to issuance of a Special Events Permit by Lessor. 8.2 Performances/Frequency Lessee shall operate the Theatre in .a prudent and . businesslike manner reasonably calculated to assist in the efforts of Lessor and others to revitalize the 0 8 6 W M 0 E local economy and in full compliance with the Operations Plan. • 8.2.1 Lessee shall schedule and present performances or cultural events on at least one hundred (100) days of the twelve (12) month period commencing sixty (60) days after completion of Required Improvements. 8.2.2 Lessee shall, for each subsequent twelve (12) month period, schedule and present performances or cultural events on at least one hundred and fifty (150) days. 8.2.3 Operation of the Theatre is the fundamental consideration for this Lease and Lessee shall ensure and promote the maximum reasonable use of the Theatre by performers, artists, and entertainers likely to attract patrons. The Theatre shall be operated consistent with the standards, practices and procedures utilized by first class community Theatres in other jurisdictions. Program Standards Lessee shall operate the Theatre in a manner reasonably calculated to achieve the following objectives,. • 8.3.1 Provide frequent and high quality performances and cultural events to attract patrons to the Theatre and Central Balboa/Balboa Village. 8.3.2 To serve as a catalyst to the revitalization of the economy of the area to be benefited by use of the Federal Funds. 8.3.3 To make the Theatre 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; 8.3.4 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 community Theatre. 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 Theatre to use public parking at reduced rates. Lessor and Lessee shall also discuss ways to integrate operation of the Theatre • 9 1� 0 • • into programs for the economic revitalization of Central Balboa/Balboa Village. 8.5 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 be withheld at Lessor's sole discretion. 8.6 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 Theatre. 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 Theatre. 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. 8.7 Zoning and Planning Lessor acknowledges that the use of the Property as a Theatre 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. 8.8 Nondiscrimination 8.8.1 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. 8.8.2 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. • 10 n • 0 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, 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. 8.8.3 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, 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 9 REQUIRED IMPROVEMENTS 9.1 Lessee's Obligations The Property requires substantial renovation and rehabilitation to be used as, or • considered, a first class community Theatre. 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 9.2 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. 11 • 0 • 9.3 Conceptual Design Plans Lessee shall prepare, and submit to Lessor for approval, a proposed conceptual Plan for the design, construction, furnishing and equipping of the Property for use as a theatre (Conceptual Design Plan). The Conceptual Design Plan shall be prepared by a licensed architect. The Conceptual Design Plan shall generally describe those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theatre constructed in the 1920's. The Conceptual Design Plans shall include, without limitation, (1) seating layout and design; (2) stage and dressing room layout and design (3) lobby and concession area design; (4) structural modifications necessary to comply with uniform codes; (5) interior design elements and treatment, (6) exterior design and treatment; (7) sound and projection systems; (8) lighting systems and design; (9) public area layout, design and treatment; and (10) stage, orchestra pit and roll -down backdrop design and treatment. Lessor's right to approve the Conceptual Design Plan shall be limited to ensuring that the improvements contemplated by the Conceptual Design Plan are consistent with a first class community theatre and reasonably consistent with the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of Interior. The Conceptual Design Plan 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 Plan 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. 9.4 Design Development Plan 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 Plan. The Design Development Plans shall include, (1) specific interior and exterior lighting. Plans and design; (2) speck information regarding the color, material, treatment and design of all interior and exterior elements; and (3) schedules showing the principal stages, phases and timing of construction. Lessors 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 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 design Development Plans within sixty (60) • 12 W M 9.7 days after submittal. • Final Plans and Specifications Subsequent to approval of Design Development Plans, Lessee shall submit Final Plans and Specifications. The Final Plans and Specifications shall be based on, and consistent with, the Design Development Plans. The Final Plans and Specifications shall be in sufficient detail to provide the information necessary to obtain building permits from Lessor. Lessor's right of approval pursuant to this Lease, (distinct from Lessor's rights and obligations as a Charter City and entity responsible for administration and enforcement of Uniform Building Codes), which shall not unreasonably be withheld, shall be limited to a determination that the Final Plans and Specifications are based on and consistent with the approved Design Development Plans. The Final Plans and Specifications shall be deemed approved (as to consistency with Design Development Plans) unless Lessor serves written notice of disapproval within thirty (30) days after submittal. Lessor shall specify, in detail, each element of the Final Plans and Specifications disapproved, the reason for disapproval, and alternative(s) that Lessor would approve. The Parties shall reach agreementon the Final Plans and Specifications within 60 days of submittal. Building Permits • Lessee shall apply for all necessary building permits from Lessor within one (1) year after the Effective Date. 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 Final Plans and Specifications. Lessee shall have the option of submitting Final Plans and Specifications as the documents necessary to obtain building permits assuming suitability for that purpose. 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 Final Plans and Specifications, 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. Construction of Required Improvements Lessee shall begin construction of Required Improvements within sixty (60) days after approval of all required building permits by Lessor and approval of any permit(s) required by other governmental agencies with jurisdiction over the Property. Lessee shall diligently pursue construction of the .Required • 13 • Improvements to completion. Lessee shall complete construction of Required Improvements within one year and sixty (60) days after issuance of all necessary permits and approvals. The Required Improvements shall be constructed by a licensed contractor. 9.8 General Requirements 9.8.1 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. 9.8.2 Lessor has designated the Committee to Promote Revitalization of the Peninsula (PROP), or its successor, to review, and approve or disapprove, the Conceptual Design Plan, the Design Development . Plans and the Final Plans and Specifications. Lessee shall provide PROP with bimonthly reports on the status of 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. 9.9 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 REPAIRS AND MAINTENANCE Lessee recognizes that the Theatre 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 Theatre 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 Theatre (including patching 0 14 • and resurfacing the roof membrane and painting or other protective treatment of the • exterior wall of the Theatre); (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 Theatre and the repair and replacement of components; (iv) maintenance of all pipes and plumbing systems serving the Theatre 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 Theatre. Lessee shall revise the schedule for maintenance from time to time during the Term as necessary to maintain the Theatre to the standards required by this Lease. Lessee shall have the benefit of all warranties available to Lessor with respect to the Theatre 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 Theatre would make continued operation of the Theatre economically infeasible. ARTICLE 11 STATUS AND MANAGEMENT OF LESSEE 11.1 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). 11.2 Executive Committee and Advisory Committee During the Term, Lessee shall appoint an Executive Committee consisting of no more than five (5) members. The Executive Committee shall be authorized by Lessee to interact with Lessor and promptly respond to problems or concerns expressed by Lessor or members of the general public relative to the operation of the Theatre. Lessee shall also appoint an Advisory Board or Advisory Committee that is responsible for fund-raising. Lessee may appoint or establish other Boards or Committees to perform specific functions . relative to the renovation, maintenance or operation of the Property and Theatre. 11.3 Employment of Staff During the Term, Lessee shall use its best efforts to employ a professional • 15 0% • Executive Director to manage the day to day renovation and/or operation of the Theatre and perform such other duties as Lessee may assign. The Executive Director shall be appointed at least ninety (90) days prior to anticipated completion of Required Improvements. ARTICLE 12 ALTERATIONS 12.1 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 Theatre's designation as a local landmark and shall be consistent with the original design and architecture of the Theatre as well as the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior. 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. 12.2 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 13 PAYMENT OF UTILITIES, TAXES, CHARGES. AND FEES 13.1 Public and Private Utility Services Lessee will pay all charges for all public or private utility services and all sprinkler 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. 13.2 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. 16 s Ll 13.3 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. 13.4 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. 13.5 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. 13.6 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. ARTICLE 14 LIENS 14.1 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 Theatre free and clear of all • 17 ,�_q • mechanic's liens and similar liens. 14.2 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 attomeys' 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. 14.3 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. 14.4 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 15 INDEMNIFICATION 15.1 Indemnily Lessee shall defend, indemnify and hold harmless Lessor from and against any and all legal or administrative proceedings, claims, reasonable attorneys' fees 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 15.7 on the Property or Theatre, (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, detoxication 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. in 5< 0 0 15.2 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. 15.3 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. 15.4 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. 15.5 Waiver of California Civil Code Section 1542 Section 1542 of the California Civil Code states: 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. 19 is 9&/ • 15.6 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, (f) 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 16 INSURANCE 16.1 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. 16.1.1 Comprehensive General Liability in an amount not less than five million dollars ($5,000,000) 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-contributing with any insurance or self-insurance maintained by Lessor or Lessee. 16.1.2 Workers' Compensation Insurance as required by the Labor Code of the State of California. 16.1.3 "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 • 20 91 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. 16.1.4 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. 16.2. 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 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. 16.3 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. 16.4 Waiver of Subrogation Each policy of insurance procuredpursuant 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 • 21 �A 0 0 • shall not be invalidated should any insured waive, in writing prior to a loss, any or all right of recovery against any parry 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 DAMAGE BY FIRE OR CASUALTY 17.1 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. 17.2 Restoration Except as provided in Section 18.3, 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 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. 17.3 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. 22 • 0 17.4 Application of Insurance Proceeds • In the event that Lessee is required to restore the Property pursuant to Section 17.2, proceeds from policies of insurance required by Article 16 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: 17.4.1 Lessee shall furnish to Lessor satisfactory evidence to Lessor of the total cost of Restoration pursuant to Section 17.2. 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. 17.4.2 Assuming satisfaction of the conditions of subsection [17.4.1] 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. 17.4.3 Upon completion of restoration and assuming Lessee is not in default, excess insurance proceeds shall first be paid to Lessor to the extent of its actual expenses incurred in the restoration, then to Lessee as working capital ARTICLE 18 EMINENT DOMAIN 18.1 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. 18.2 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. 23 0 901 i • • 18.3 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. 18.4 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. 18.5 Allocation of Award — Partial Taking Any Award in a Partial Taking shall be distributed by escrow in the following order of priority: 18.5.1 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; • 18.5.2 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; • 18.5.3 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. 18.6 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. 18.7 Allocation of Award — Total Taking Any Award .in a Total Taking shall be distributed by escrow in the following. priority: 24 3( 0 18.7.1 First, to Lessor and Lessee to reimburse for all costs and expenses • incurred by each in the collection of the Award; 18.7.2 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. . 18.8 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. 18.9 Notices Any Party receiving notice of or becoming aware of any condemnation proceedings shall promptly give written notice to the other party. ARTICLE 19 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 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 20 LEASEHOLD MORTGAGES Lessee shall have no right to encumber its interest in this Lease, the Property or the Theatre without Lessor's prior written consent, which consent may be withheld in Lessor's sole discretion. ARTICLE 21 PERFORMANCE OF LESSEE'S COVENANTS 21.1 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 17 within the time required, or to make any other payment or perform any other act within the time required by this 25 • 32 • 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: 21.1.1 Pay the tax, assessment, fee or charge payable by Lessee pursuant to this Lease; or 21.1.2 Pay for and maintain any insurance policies required by this Lease; or 21.1.3 Make any other payment or perform any other act. that Lessee is required to pay or perform pursuant to this Lease. 21.2 Reimbursement and Damages Lessee shall reimburse Lessor for all costs and expenses incurred by Lessor in the exercise of its rights pursuant to Section 21.1. ARTICLE 22 REPRESENTATIONS 22.1 Lessor's Representations Lessor represents to Lessee that: • 22.1.1 Lessor owns the Property in fee simple subject only to the Permitted Exceptions and other matters affecting title that do not inhibit, prevent or impair the operation, maintenance or use of the Theatre. 22.1.2 Lessor has the power and authority. to enter into this Lease and perform all the obligations of Lessor hereunder. 22.2 Lessee's Representations Lessee represents to Lessor that: 22.2.1 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. 22.2.2 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 Theatre consistent with this Lease and the Operations Plan. . • 26 33 22.2.3 Lessee has the right, power and authority to enter into this Lease • and to perform all the obligations of Lessee. 22.2.4 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 23 DEFAULTS, REMEDIES AND TERMINATION 23.1 Legal Actions 23.1.1 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. . 23.1.2 Applicable Law The laws of the State of California shall govern the interpretation and enforcement of this Lease. 23.2 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. 23.3 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: 23.3.1 The failure of Lessee to comply with the provisions of Article 9 related to the design and construction of Required Improvements. 27 �a J r 0 • 23.3.2 The failure of Lessee to operate the Theatre in compliance with the provisions of Article 8 related to frequency and quality of performances and events. 23.3.3 The failure of Lessee to maintain the Property as specified in Article 10. 23.3.4 The failure of Lessee to restore or repair the Property in the event of damage or destruction 23.3.5 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. 23.4 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: 23.4.1 Lessor shall have the immediate right to reenter the Property • and/or the Theatre, take possession of the Property and/or Theatre, any and all Equipment, books and records, contracts and any other property. E 23.4.2 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 Theatre, 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. 23.4.3 Lessor shall be entitled to recover all money payable to Lessee related to the operation and use of the Theatre, 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. W -)IS • ARTICLE 24 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 25 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, or for any other lawful purposes, including showing the Property to prospective purchasers or lessees. ARTICLE 26 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, riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Lessee. ARTICLE 27 MISCELLANEOUS 27.1 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. 29 0 • • 9 • Newport Beach, CA, 92658-8915 or at such other addresses as Lessor shall have furnished to Lessee; and To Lessee; Balboa Performing Arts Theatre Foundation P.O. Box 752 Balboa, CA 92661 With a copy to: Steve Bromberg Bromberg & Yeager 620 Newport Center Drive 11" Floor Newport Beach, CA, 92660 or at such other addresses as Lessee shall have furnished Lessor in writing. 27.2 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 • 27.3 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 Theatre. Except as otherwise provided, no subsequent change or addition to this Lease shall be binding unless in writing and signed by the Parties. 27.4 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. 30 3'I 27.5 27.7 27.8 0 Ll 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. Holding Over A tenancy for month to month shall result if Lessee remains in possession of the Property or the Theatre 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. 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 of the Theatre or otherwise. 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. 31 • 3$ 0 • • 9 27.9 Time of the Essence 0 Time is of the essence relative to all of the terms, provisions, covenants and conditions of this Lease. FOR LESSOR CITY O PORTBEACH ennis O'Neil Mayor for City of Newport Beach FOR LESSEE BALBOA PERFORMING ARTS /THEATRE FOUNDATION % Dayna Pettit President of Balboa Performing Arts Theatre Foundation APPROVED AS TO FORM CIT7Y?OF NEWPORT BEACH: !i Robert H. Burnham City Attorney for City of Newport Beach ATTEST: CITY OF NEWPORT BEACH Dated �z - ! Dated'�� Dated LaVonne Harkless City Clerk for City of Newport Beach F:\cat\shared\dalProjects\BalboaTheatre\Lease\FinalLeasel20398. doc 32 lk 10 0 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California j a Jl( ss. County of On—�O _C� before me, r��e Date Name M Ile of Officer (e.g.,'Jaoe Dae. Wary Pub personally appeared Q z N2rne(s) of Sgnegst %personally known to me proved to me on the basis of satisfactory evidence CX -Y _tSHER Commission a 1174329 Notary Puolic - California_ z Orange County W Comm. 5ries ceb21, 2CA2 to be the person whose name(W is are subscribed to the wipQ Instrument and acknowledged to me tia he he/they executed the same inhis er/their puthorized capacity0w, and that by is er/their signature(Won the instrument the person, or the entity upon behalf of which the person()) acted, executed the instrument. ,WqNESS my hand and (ficial seal. Place Notary Seal Above nal of N.[Ary Public OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached Rocument n Title or Type of Document: v'�c.SL�:n-� ��r �`^• '�G� Document Date: `\—G' _) `1 -6 Number of Pages: 3` Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer Signer's Name: _ Individual Corporate Officer— Title(s): El Partner —FE E Limited �_ General Attorney in Fact Trustee Guardian or Conservator 77 Other: Signer Is Representing: o"A ® 1997 National Notary Association - 9350 M Solo Ave.. P.O, Box 2402 • Chaev,anh. CA 91313-7402 Prod. No. 5907 Reorder, Call Tall -Free 1-800-876-68227 • • LP • • • CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California u SS. (.1r'��ax� } County of J before me, Dale N. rq itUe of Officer (e.g..'Jar,e Dae. Nol personally appeared tea:. y : ESHER + Commission § 1174329 ..s NotaryPuoiic- California Orange County My comm. BVI es Feb21, 2 personally known to me proved to me on the basis of satisfactory evidence to be the person whose nameb�Clware subscribed to the within strument and acknowledged to me that a he hey executed the same in his er heir authorized capacity(i and tha by hi he !their signature(on the instrument the person or the entity upon behalf of which the person) acted, executed the instrument. W ESS my hand and o cial seal. Place Notary Seal Above Sign re or otary Pbbllc OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attache Title or Type of Document: Document Date: , ` ' 3 —� �O Number of Pages: J� Signer(s) Other Than Named Above: Capacity(les) Claimed by Signer Signer's Name: Individual Corporate Officer — Partner — =- Limited Attorney in Fact Trustee Title(s): General Guardian or Conservator Other: Signer Is Representing: ®1997 National Notary Association •9350 De Solo Ave.. P.O. Box 2402 • C`atsworfh. CA 913132602 RIGHTTHUMBPRINT OF SIGNER 5 T Rotl. No, 5907 Reorder: Call Toll -Free 1-900-876ro82? IAl 0 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT r r cM a� • State of California County of _�riss. On L( Vel ?�f� ��'i(beforeme. Dale ^ Name and Tile of officer (e.g., 'Jane one, N ry PuWic't personally appeared LEiLANI V. INES - Commission = 1170960 NO:ary PUDlic - Col. Orange Counry My C=M. Expires Jan 25, 2002 personally known to me proved to me on the basis of satisfactory evidence to be the person(s) whose names) is/are subscribed to the within instrument and acknowledged to me that He/she/9 ey executed the same in H4s/herlthe4, authorized capacity(iee}, and that by hts/her/their signature(5) on the instrument the person(&), or the entity upon behalf of which the person(s) acted, executed the instrument - WIT NESS nstrument. WITNESS my hand fnd offs -al seal. Place Notary Seal Above Signature of Notary Public OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached Document Title or Type of Document: Document Date: Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer Signer's Name: E Individual Corporate Officer — Title(s): Partner —= Limited _ General Attorney in Fact El Trustee Guardian or Conservator Other: Signer Is Representing: ®199] National Notary Association - 9350 De Soto Ave., P.O. Box 2402 - Clnals xonh. CA 91313-2402 Number of Pages: jRIGHTTHUMBFRINr OF SIGNER Y, E J ProO. No. 590'! Reorder Call Toll -Free 1-WO-916aE2' • L2 0 E LEGAL DESCRIPTION 0 All that real property situated in the City of Newport Beach, County of Orange, State of California and more particularly described as follows: Lots 4 and 5, Block 10, Balboa Tract, in the City of Newport Beach, as shown on a map recorded in Book 4, Page(s) 11, of Miscellaneous Maps, in the office of the County Recorder of said County. C J • 4.3 R$ �• 6 QO 1 I 1 I W 1 1 1 ! l O! I ! 3 t t R EXHIBIT 8 as O z Os000 ;o CC.) a e i v v =4 6.K Ic 4 �• A IG 1• 14 iV 1� QO I I I 1 I W 1 1 1 ! l O! I ! 3 t It 1 1 I 1 I I t t I t I I 1 i f lr f 1 i a N T N e 011YA3,i 709 a aa O W � t a i k a a° e y� y �Y4 4O,Aei� 1 B1Y i&AyAy COP, u 32 E d ---------- 0 NY" R • i 2 N Ir A377V F 01" Ia I• I I W i V i i d Q a e m KI w[ �l <r 1 I u aiSM` li (4 14 � 6 R • i 2 N Ir A377V F 01" Ia I• I I W •1 ! I I I 1 I KI w[ [[ e BAY a Q .1 yE•�, d 0 • 2807239 Exhibit C A. General and special taxes and assessments collected with taxes for the fiscal year 1998-1999. Total: First Installment: Second Installment: Homeowners' Exemption: Code: Parcel: $4,018.90 2,009.45 Open 2,009.45 Open $0 07-001 048-135-02 B. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Section 75, et seq. of the Revenue and Taxation Code of the State of California. 1. Covenants, conditions and restrictions (deleting any restrictions indicating any preference, limitation or discrimination based on race, color, religion, sex, handicap, familial status or national origin) as set forth in the document Recorded: in book 153 page 225 of Deeds 2. Covenants, conditions and restrictions (deleting any restrictions indicating any preference, limitation or discrimination based on race, color, religion, sex, handicap, familial status or national origin) as set forth in the document Recorded: in book 3377 page 501, Official Records Said covenants, conditions and restrictions provide that a violation thereof shall not defeat or render invalid the lien of any mortgage or deed of trust made in good faith and for value. 3. Water rights, claims or title to water, whether or not shown by the public records. 4. Matters which may be disclosed by an inspection or by a survey of said land that is satisfactory to this Company, or by inquiry of the parties in possession thereof. An inspection of said land has been ordered; upon its completion we will advise you of our findings. CLTA Preliminary Report Forth (R ry Paoe 1 of 2 • 2807239 5. Rights of the parties in possession of said Iand, under unrecorded leases. Please submit copies of said leases for our examination. 6. Before issuing its policy of title insurance, this Company will require evidence, satisfactory to the Company, that the vestee corporation named herein: (a) was duly incorporated on the date of acquisition of title hereinafter set forth and (b) is now of good standing in the state where it was formed: Date of Acquisition: October 17, 1995 7. This Company will require a corporate resolution of the board of directors from the corporation(s) vested herein, authorizing this transaction and the execution of the documents necessary to complete it in accordance with instructions given to the Company. Note No. 1: The only conveyances affecting said land recorded within six (6) months of the date of this report are as follows: None. Note No. 2: The premium for a policy of title insurance, if issued, will be based on 80 0. . Jp/� cc: Land America Attn: Linda Hamilton Page 2 of 2 CLTA Preliminary Report Fomt (Rev. 1111951 • • 0 0 • RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: City Clerk City of Newport Beach P. O. Bog 1768 Newport Beach, CA 92658-8915 TITLE OF DOCUMENT: i R E C E 1 V EC TftecMeA 4n Mci"ecords, County of Orange Gary Granville, Clerk -Recorder OFFIG_INIIMIIUflNNiIgIfl81(�II�I No Fee c`z c� 09.54am 04110100 116 16 A17 4 0.00 0.00 0.00 0.00 9.00 0.00 0.00 0.00 THIS SPACE FOR RECORDER'S USE ONLY. Exempt Recording Request per Government Code 6103 First Amendment to Lease by and between the City of Newport Beach and the Balboa Performing Arts Theatre Foundation LO • • P FIRST AMENDMENT TO • LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATRE FOUNDATION This Amendment, entered into as of September a7 , 1999, (Effective Date) by between the City of Newport Beach, a Charter City and municipal corporation ("Lessor") and Balboa Performing Arts Theatre Foundation ("Lessee"), is made with reference to the following: RECITALS A. Lessor and Lessee entered into the subject lease as of November 23, 1998. (Recorded in the County of Orange, California; 19990066742; 01/29/99) B. The parties agree that the insurance requirements in the original Lease are greater than needed for protection of the public interest, and desire to amend those requirements so as to increase the Foundation's economic viability and ability to meet the other requirements of the Lease. • NOW, THEREFORE, Lessor and Lessee hereby agree as follows: ARTICLE 1 AMENDMENT TO ARTICLE 16, INSURANCE Paragraph 16.1.1 of the Lease is amended to read as follows: 16.1.1 Comprehensive General Liability in an amount not less than two million dollars ($2,000,000) 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-contributing with any insurance or self-insurance maintained by Lessor or Lessee. Any third party permitted to use the Property pursuant to Paragraph 8.1 of this Lease shall provide the same insurance, unless this requirement is waived or modified, in writing, by Lessor's City Manager. • 0 • • • 0 0 ARTICLE 2 NO AMENDMENTS TO REMAINDER OF LEASE All other provisions of the Lease shall remain in force and effect in their original form. FOR LESSOR CITY OF NEWPORT BEACH XS� r l% Dennis O'Neil Mayor FOR LESSEE BALBOA PERFORMING ARTS THEATRE FOUNDATION Dayna Pettit President APPROVED AS TO FORM CITY OF NEWPORT BEACH ATTEST: CITY OF NEWPORT BEACH LaVonne Harkless City Clerk Dated Dated Dated I ' t I Dated XCllq A 2 kf 9 0 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California County of ss. t�(3i~,f'� C1�-� Onr,M CL NtL&16'efore me, personally appeared MIZO CATHY FISHER %Commission# 1174324 Notary Public - Caltfanlo Orange County My Comm. Eip1ea Feb21, 2= S\-� personally known to me ❑ proved to me on the basis of satisfactory evidence to be the erso s whose nacos is/ re p (} subscribed to th within Inst ent a acknowledged to me that he/ hey xecuted the sa in his/he hei uthorl capacity and that by his/he air signatur s n the instrument the perso (s the entity upon behalf of which the perso (s acted, executed the instrument. I U=A;L=C_ Place Nalary Scal Above Sig Zeas o ola ic Public OPTIONAL Though the information below is not required by law, it may prove valuable to persons retying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached Title or Type of Document: _ Document Date: 21— a 1) - 1 - \ Number of Pages: a Signer(s) Other Than Named Above: Capacity(les) Claimed by Signer Signer's Name: ❑ Individual Top of thumb here ❑ Corporate Officer —Tdle(s): ❑ Partner—Ci Limited ❑ General ❑ Attorney in Fad ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer is Representing: -N 'N 'y y p* N N N 'N H d N N Y 'd 'G' 'u* 'd -N • - .flit • • is • RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: City Clerk City of Newport Beach P. O. Bog 1768 Newport Beach, CA 92658-8915 TITLE OF DOCUMENT: Y i -t t 'Et T�f 6Y1 TO APR 14 A9 :03 Recorded in Official Records, County of Orange Gary Granville, Clerk k 9 I&� I No Fee 2=181652 W:54am 04110/00 116 16 A17 3 0.00 0.00 0.00 12.00 0.00 0.00 0.00 THIS SPACE FOR RECORDER'S USE ONLY. Exempt Recording Request per Government Code 6103 Second Amendment to Lease by and between the City of Newport Beach . and the Balboa Performing Arts Theatre Foundation 1� Sk 9 i SECOND AMENDMENT TO LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATRE FOUNDATION This Amendment, entered into as of December /3 , 1999, (Effective Date) by between the City of Newport Beach, a Charter City and municipal corporation ("Lessor") and Balboa Performing Arts Theatre Foundation ("Lessee"), is made with reference to the following: RECITALS A. Lessor and Lessee entered into the subject lease as of November 23, 1998. (Recorded in the County of Orange, California; 19990066742; 01/29/99) B. Lessor and Lessee approved the First Amendment to the subject lease on September 27, 1999, which amendment altered the insurance requirements of Lessee. C. The parties agree that the existing lease requirement for required improvements • and other alterations to be consistent with the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior goes beyond the goals of the parties. NOW, THEREFORE, Lessor and Lessee hereby agree as follows: ARTICLE 1 AMENDMENT TO ARTICLE 9, REQUIRED IMPROVEMENTS Paragraph 9.3 of the Lease is amended to read as follows: Lessee shall prepare, and submit to Lessor for approval, a proposed conceptual plan for the design, construction, furnishing and equipping of the Property for use as a theatre (Conceptual Design Plan). The Conceptual Design Plan shall be prepared by a licensed architect. The Conceptual Design Plan shall generally describe those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theatre constructed in the 1920's. The Conceptual Design Plan shall include, without limitation, (1) seating layout and design; (2) stage and dressing room layout and design; (3) lobby and concession area design; (4) structural modifications necessary to comply with uniform codes; (5) interior design elements and treatment; (6) exterior design and treatment; (7) sound and projection systems; (8) lighting systems and • design; (9) public area layout, design and treatment; and (10) stage, orchestra pit and roll -down backdrop design and treatment. Lessor's right to approve the Conceptual Design Plan shall be limited to ensuring that the improvements contemplated are consistent with a first class community theatre and that the exterior design and treatment are reasonably consistent with the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior. The Conceptual Design Plan 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 Plan 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. ARTICLE 2 AMENDMENT TO ARTICLE 12, ALTERATIONS Paragraph 12.1 is amended to read as follows: 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 exterior of the Property shall conform to the Theatre's designation as a local landmark and shall be consistent with the original design and architecture of the Theatre as well as • the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior. 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. ARTICLE 3 NO AMENDMENTS TO REMAINDER OF LEASE Ail other provisions of the Lease shall remain in force and effect in their original form or as amended by agreement of the Parties. FOR LESSOR CITY OF NEWPORT BEACH Dated 2 53 FOR LESSEE BALBOA PERFORMING ARTS THEATRE FOUNDATION &,:InC,pe,t7� Dayna P ttit President APPROVED AS TO FORM CITYOF NEWPORT BEACH Robert H. Burnham City Attorney ATTEST: CITY OF NEWPORT BEACH c( )�) -"a,? LaVonne Harkless City Clerk • • Dated ' r /?-142� Dated � I `F Od Dated ���G' /0 Cl • • 3 a S CJ • CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT t aState of California Sal aCounty .f before me, personally appeared CATHY FISHER Commission # 1174329 Notary Public - California Orange County My Comm. ries Feb 21.2002 LJ )k'V-r u9 personally known to me proved to me on the basis of satisfactory evidence to be the perso (s whose nam (s is/ re subscribed to th within in ent an acknowledged to me that he/ the executed the sa in his/he thei author capacity and that by his/he ei signature n the instrument the perso s or the entity upon behalf of which the perso s) acted, executed the instrument. WESS my hand and offs ial sea]. _ r .�1 MPlace Notary Seal Above Sigre re ol ota1 Lary P Dye OPTIONAL Though the information below is not required by low, 4 may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached D Title or Type of Document: cument ti/` K ,, Q h )G 0 �� r Document Date: , � - k r� .7 - Ck *1 Number of Pages: 3 Signer(s) Other Than Named Above: Capacity(les) Claimed by Signer Signer's Name: ❑ Individual B Corporate Offirer — Title(s): _ Partner — ❑ Li T Red ❑ General Attorney in Fact Trustee ❑ Guardian or Conservator ❑ Other: Signer Is Representing: RIGHTTHUMBPRINT GF SIGNER O 1997 Nadmad Notary Assoaabon • 9360 De Soto Ave.. P.O. Box 2402 • CnatewoM, CA 91313.2402 Prod. No. 597 Reorder Cap Toll -Free 1.800-876-8827 65 • µ l RECORDING REQUES-►aV WHEN RECORDED RETURN TO: City Clerk '01 FED 26 A8:46 City of Newport O each P.O. Bog 1768 CITY @E`tHE Cl,i Y•CLERK Newport Beach, CA 96�1b"BEACti • Recorded in Official Records, County of Orange Gary Granville, park -Recorder IN IN IZIN11111I1IN4 FEE 2001008725912:35pm 02(1 6101 114 27 A17 6 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 THIS SPACE FOR RECORDER'S USE ONLY. �� V Exempt Recording Request per Government Code 6103 TITLE OF DOCUMENT: �F Third Amendment to Lease By and Between the City of Newport Beach and the Balboa Performing Arts Theatre Foundation Recording Reference: Lease: 19990066742, 1/29/99 First Amendment: 20000181651, 4/10/00 Second Amendment: 20000181652, 4/10/00 E • 9 • • LJ 1J THIRD AMENDMENT TO LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATRE FOUNDATION This Third Amendment to Lease, entered into as of December 12' . 2000, (Effective Date) by and between the City of Newport Beach, a Charter City and municipal corporation ("Lessor") and Balboa Performing Arts Theatre Foundation ("Lessee"), is made with reference to the following: RECITALS A. Lessor and Lessee entered into a ground lease (Original Lease) on November 23, 1998. B. Lessor and Lessee approved the First Amendment.to the Original Lease on September 27, 1999, modifying the insurance obligations of Lessee. C. Lessor and Lessee approved the Second Amendment to the Original Lease on December 13, 1999, deleting the requirement for interior improvements to be consistent with the Guidelines for the Rehabilitation of Historic Structure ("Guidelines") published by the Secretary of the Interior. D. Lessor and Lessee agree that further amendments to the Original Lease are necessary to modify provisions that require certain exterior improvements to be consistent with the Guidelines. E. Lessor and Lessee agree that the modifications to provisions related to exterior improvements: are. necessary. to.. achieve the primary_ goal of the lease. which is the reconstruction and use of the building as a venue for live theatre performances and other events that require dressing rooms and related facilities. NOW, THEREFORE, Lessor and Lessee hereby agree as follows: ARTICLE 1 AMENDMENT TO ARTICLE 9, REQUIRED IMPROVEMENTS Paragraph 9.3 of the Lease is amended to read as follows: Lessee shall prepare, and submit to Lessor for approval, a proposed conceptual plan for the design, construction, furnishing and equipping of the Property for use as a theatre (Conceptual Design Plan). The Conceptual Design Plan shall be prepared by a licensed architect. The Conceptual Design Plan shall generally describe those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theatre constructed in the 1920's. The Conceptual Design Plan shall include, without limitation, (1) seating layout • 0 and design; (2) stage and dressing room layout and design; (3) lobby and • concession area design; (4) structural modifications necessary to comply with uniform codes; (5) interior design elements and treatment; (6) exterior design and treatment; (7) sound and projection systems; (8) lighting systems and design; (9) public area layout, design and treatment; and (10) stage, orchestra pit and roll - down backdrop design and treatment. Lessor's right to approve the Conceptual Design Plan shall be limited to ensuring that the improvements contemplated are consistent with a first class community theatre and that the exterior design and treatment of the front fagade return it as close as possible to its original appearance. The Conceptual Design Plan 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 Plan 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. ARTICLE 2 AMENDMENT TO ARTICLE 12, ALTERATIONS Paragraph 12.1 is amended to read as follows: 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 nonstructuralalterations to the exterior of the Property, especially the front fagade, shall conform to the Theatre's designation • as a local landmark and shall be consistent with the original design and architecture of the Theatre. 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. ARTICLE 3 NO AMENDMENTS TO REMAINDER OF LEASE All other provisions of the Lease shall remain in force and effect in their original form or as amended by agreement of the Parties. FOR LESSOR CITY OF NEWPORT BEACH d - _ Dated 0 0 Mayor • 2 $ 5 • FOR LESSEE BALBOA PERFORMING ARTS THEATRE FOUNDATION Dayna Ptlttit President APPR E TO F CITY NEWPORT BEACH (City Attomey ATTEST: CITY OF NEWPORT BEACH 67 �jr7 L LaVonne Harkless City Clerk 0 0! 'K mi5skm !240199 Oxon • cunry Dated Dated Liated /0 A, / CC) 3 5� • 0 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California County of �) .S a.'� I ss. On U" , before me..a personally appeared F I La. - r A "i '�,Mhtfi �_... Place Notary Swi Abo Vpersonally known to me O proved to me on the basis of satisfactory evidence to be the person(w whose nameK l are subscribed to the wi instrumen and acknowledged to m� h she/they executed the same in hi her/their thorized capacity('A), an that by k&her/their signaturex on the instrument the person] or the entity upon behalf of which the person acted, executed the instrument. I SS m� hand and offs ial se I. Sign re o mM P blic OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached Title or Type of Document: _ Document Date: Signer(s) Other Than Named Above: oro Number of JA- 3 Capacity(les) Claimed. by Signer Signer's Name: ❑ Individual Top of thumb Here ❑ Corporate Officer—Title(s): ❑ Partner —❑ Limited ❑ General O Attorney in Fact O Trustee O Guardian or Conservator O Other. Signer Is Representing: \l 0 bD • • w • • CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT"" State of California ` 0'— v� �� ss. County of i /1 l On 0 personally appeared M personally known to me ❑ proved to me on the basis of satisfactory evidence CKIV FISHBt to be the person(, whose namewis/ re Commission S 1174329 subscribed to the within trument and Notary PuW -California acknowledged to me tha he hey executed Orange County IRyComm.gtpteiFeb21,2M2 the same in his heir auth rized capacity(), and that by hisDee their signature on the instrument the person(W, or the entity upon behalf of which the person acted, executed the instrument. ESS my hand and q Icial seal. Place Noiary Seal Above mtu of Noullry Public OPTIONAL Though the information below is not required bylaw, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached D ment11 �^'_ � Title or Type of Document C D� 1\V�lwy`S� 1t Document Date: \ r�a Number of Pages:_ Signer(s) Other Than Named Above: Capacity(les) Claimed.by Signer Signer's Name: ❑ Individual WEEM Top of thumb here ❑ Corporate Officer—Title(s): ❑ Partner —❑ Limited ❑ General ❑ Attorney in Fact ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer Is Representing: O 1997 Natiorul Notary Associalian • 9360 De Sao Ave., P.O. Boz 2002 • Chab worth, CA 91313.2402 Pro E. NO. 5907 Reorder. Call Tdl-Free 141011Ull-OW • a. CITY OF NEWPORT BEACH Hearing Date: COMMUNITY AND ECONOMIC Agenda Item DEVELOPMENT NO.: PLANNING DEPARTMENT Staff Person: 3300 NEWPORT BOULEVARD NEWPORT BEACH, CA 92658 (714) 6443200; FAX (714) 644-3250 REPORT TO THE MAYOR AND CITY COUNCIL December 12, 2000 25 Sharon Z. Wood (949) 644-3222 G APPROVED SUBJECT: Amendment to Exterior Design Requirements of Balboa Theater Lease SUGGESTED ACTION: Approve amendment Background The City acquired the Balboa Theater and leased it to the Balboa Performing Arts Theatre Foundation in December 1998. Among other things, the lease agreement requires the Foundation to rehabilitate the theater, and to obtain the City's consent prior to making any structural or non-structural alterations to the theater. The lease designates the City Council Promote Revitalization of our Peninsula (PROP) Committee as the body to review and approve plans for the theater's rehabilitation. Pursuant to lease requirements, the Foundation submitted Conceptual Design and Design Development Plans for PROP's review, and both have been approved. In reviewing the Conceptual Design Plan, members of PROP found that the plan for the interior of the theater did not meet the lease criterion of consistency with the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior. The plan did meet the lease criterion of consistency with a first class community theater, because the removal of the balcony to provide "raked" seating will improve views and the basement construction will provide dressing rooms and restrooms that will help ensure the economic vitality of the theater. Therefore, the City Council amended the lease to require consistency with the Guidelines for the exterior only. Discussion The Foundation has proceeded with construction drawings, which are in the City's plan check process. Both the Foundation's design team and the City's Building Director have concerns with the method of constructing the basement, due to the potential to damage the theater itself or neighboring properties. Because the City is the theater property owner, staff is especially concerned about protecting the City's property value, and avoiding liability for damage to neighboring properties. The design team has proposed an alternate design to address these issues, described in the attached letter to PROP. The alternate design involves demolishing the existing walls, except the front fnade, and replacing them with steel framing and reinforced masonry that would be clad (both interior and exterior) with the original brick. In addition, the existing bowstring truss roof would be replaced with a flat roof that can support a greater load, 9 0 simplifying the support for stage equipment. These changes are not consistent with the Guidelines and therefore with the lease. Staffs foremost concern is safety. The Building Director and the Foundation's design team believe that the alternative design will provide greater protection for the theater and neighboring properties. Staff does not think the proposed changes will have a significant effect on the exterior appearance of the theater, due to the use of the original brick. Retention of the front fagade, including the parapet wall, will maintain the current appearance of the front fagade, even with the proposed change in the roof. Finally, staff recalls that the City's primary goal in purchasing and leasing the theater was to preserve the theater for the vitality that it could bring to Balboa Village. While preserving and rehabilitating the historic structure was also a goal, this did not include complete historic accuracy. In fact, the Guidelines were chosen as part of the review criteria because they were an existing set of standards and the City had no historic preservation standards of our own. Recommendation Staff is recommending approval of the changes, and an amendment to the lease. The proposed amendment deletes reference to the Guidelines, and instead requires that the front fagade of the theater be restored substantially to its original appearance. PROP is reviewing the proposed changes on December 8, 2000, and staff will provide their recommendations at the Council meeting. SHARON Z. WOOD Assistant City Manager w� Page 2 Holmes & Narver November 29, 2000 PROP Committee City of Newport Beach 3300 Newport Boulevard Newport Beach, CA 92658-8915 RE: The Balboa Theater Dear Committee Members: As the plans have been developed for the creation of a new performing arts theater within the existing structure of the former Balboa Theater, a number of difficult technical issues have been faced, and with the assistance of City staff, addressed. We have received first plan -check comments from the various City departments. At this juncture we felt it advisable to take a step back and look at the project from a wider perspective. The primary technical difficulties presented by the adaptive reuse of the existing structure include: Supporting unreinforced masonry walls while excavating and shoring for a new basement below the proposed stage and auditorium. • Protecting the adjacent properties during the construction of the new basement. Carrying new gravity loads imposed on the structure by the new use down to the soil without loading the existing bowstring truss roof structure or the unreinforced masonry walls. This required the insertion of a separate steel structure within the existing envelope. Performing a seismic upgrade upon the existing structure, which had been partially completed before the proposed design had been finalized, but which as designed did not take into account the removal of the former balcony. While the technical means exist to resolve these difficulties; we felt it prudent to look at the financial feasibility and constructability of the design as proposed. Accordingly, we recently held a brainstorming session with the principle parties involved in the design. One option came out of the meeting that seems to have merit. Looking at the cost of the foundation work and the difficulty of seismically upgrading the existing brick walls, we realized that there may be a way to achieve the goals of cost reduction and improved life safety while still keeping the essentials of the present design, which makes optimal use of the existing building envelope for the multi -faceted program proposed for the performing arts facility. This option would be to demolish the entire structure except for the street fagade, to install a basement more or less as indicated in the current proposal. and to design and construct exterior walls, steel framing and new roof to house the spatial configuration of the present design. Support for the existing fagade would be a part of this work. Post Office Box 6240, Orange, CA 92863-6240 999 Town & Country Road, Orange, CA 92868-4786 Fax (714) 543-0955 (714) 567-2400 L PROP Committee November 29, 2000 Page 2 of 2 The result of this effort would be a building designed to current seismic codes. (While the previous proposal would have upgraded the existing structure, because of the brittleness of the old unreinforced masonry the completed design could not have met current codes, and would be subject to increased risk of property damage in the event of a major earthquake.) In addition, while there would still need to be shoring and dewatering, these would be far simpler without the need to underpin existing unreinforced masonry walls. Some of the advantages of this approach would be: Simpler construction methods for new basement. Reduced impact on adjacent structures. Simpler and more reliable waterproofing. New walls and roof meeting current seismic codes. Simplified framing using side walls for bearing. • Ability to use walls and roof for gravity loads, thus simplifying mechanical and stagecraft equipment supports. • Increased usable volume within the same overall building height. • Reduced height of mechanical equipment enclosure. • Reduced project cost. Holmes & Narver would be happy to answer any questions you have about this approach. Very truly yours, Tom Horan, AIA Principal Architect Cc: Bill Wren, Balboa Performing Arts Theater Foundation Craig Smith, President, DMJM+H&N E THIRD AMENDMENT TO 0 LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATRE FOUNDATION This Third Amendment to Lease, entered into as of December _, 2000, (Effective Date) by and between the City of Newport Beach, a Charter City and municipal corporation ("Lessor") and Balboa Performing Arts Theatre Foundation ("Lessee"), is made with reference to the following: RECITALS A. Lessor and Lessee entered into a ground lease (Original Lease) on November 23, 1998. B. Lessor and Lessee approved the First Amendment to the Original Lease on September 27, 1999, modifying the insurance obligations of Lessee. C. Lessor and Lessee approved the Second Amendment to the Original Lease on December 13, 1999, deleting the requirement for interior improvements to be consistent with the Guidelines for the Rehabilitation of Historic Structures ('Guidelines") published by the Secretary of the Interior. D. Lessor and Lessee agree that further amendments to the Original Lease are necessary to modify provisions that require certain exterior improvements to be consistent with the Guidelines. E. Lessor and Lessee agree that the modifications to provisions related to exterior improvements are necessary to achieve the primary goal of the lease which is the reconstruction and use of the building as a venue for live theatre performances and other events that require dressing rooms and related facilities. NOW, THEREFORE, Lessor and Lessee hereby agree as follows: ARTICLE 1 AMENDMENT TO ARTICLE 9, REQUIRED IMPROVEMENTS Paragraph 9.3 of the Lease is amended to read as follows: Lessee shall prepare, and submit to Lessor for approval, a proposed conceptual plan for the design, construction, furnishing and equipping of the Property for use as a theatre (Conceptual Design Plan). The Conceptual Design Plan shall be prepared by a licensed architect. The Conceptual Design Plan shall generally describe those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theatre constructed in the 1920's. The Conceptual Design Plan shall include, without limitation, (1) seating layout 0 0 and design; (2) stage and dressing room layout and design; (3) lobby and concession area design; (4) structural modifications necessary to comply with uniform codes; (5) interior design elements and treatment; (6) exterior design and treatment; (7) sound and projection systems; (8) lighting systems and design; (9) public area layout, design and treatment; and (10) stage, orchestra pit and roll - down backdrop design and treatment. Lessor's right to approve the Conceptual Design Plan shall be limited to ensuring that the improvements contemplated are consistent with a first class community theatre and that the exterior design and treatment of the front facade return it as close as possible to its original appearance. The Conceptual Design Plan 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 Plan 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. ARTICLE 2 AMENDMENT TO ARTICLE 12, ALTERATIONS Paragraph 12.1 is amended to read as follows: 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 exterior of the Property, especially the front fagade, shall conform to the Theatre's designation as a local landmark and shall be consistent with the original design and architecture of the Theatre. 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. ARTICLE 3 NO AMENDMENTS TO REMAINDER OF LEASE All other provisions of the Lease shall remain in force and effect in their original form or as amended by agreement of the Parties. FOR LESSOR CITY OF NEWPORT BEACH Dated Mayor FOR LESSEE BALBOA PERFORMING ARTS THEATRE FOUNDATION Dated Dayna Pettit President APPROVED AS TO FORM CITY OF NEWPORT BEACH Dated Robert H. Burnham City Attorney ATTEST: CITY OF NEWPORT BEACH Dated LaVonne Harkless City Clerk 0 a (38)C-,30yF o4aeW?o�,@ CITY OF NEWPORT BEACH Hearing Date: April 25, 2000 e COMMUNITY AND ECONOMIC Agenda Item = DEVELOPMENT No.: 15 PLANNING DEPARTMENT Staff Person: Sharon Z. Wood 3300 NEWPORT BOULEVARD (949) 644-3222 NEWPORT BEACH, CA 92658 -- ... - ... (714) 644-3200: FAX (714) 644-3250 CITY OF N E r:,, : I t' 5 REPORT TO THE MAYOR AND CITY COUNCIL LF -n s SUBJECT: Extension of Time for Balboa Theater Building Permit App7icai1on" SUGGESTED ACTION: Approve extension to May 15, 2000 The lease between the Cityand the Balboa Performing Arts Theatre Foundation requires the Foundation to apply for building permits within one year of the effective date of the lease. The effective date was November 23, 1998, making the deadline for building permit applications November 23, 1999. The lease also provides that the Foundation may request extensions of any deadlines for required improvements. The City Manager may approve extensions of up to sixty days, and the City Council may grant longer extensions. The Foundation has retained professional architectural, engineering, and construction management firms, who are planning renovation of the Theater as required in the lease. These parties and the Foundation Executive Director have been working closely with staff in both the Planning and Building Departments t4 design the renovations, and plans have been reviewed by the City Council Committee to Promote Revitalization of our Peninsula (PROP). As provided in the lease, PROP approved Conceptual Design Plans on November 16, 1999, and approved Design Development Plans on April 14, 2000. It was in preparing for review of the Design Development Plans that the deadline for building permit applications was noted. In staff's view, the Foundation has worked diligently and professionally on renovation of the Theater, which was the intent of the lease's deadline for building permit applications. . They also have respected the lease requirement that the improvements be consistent with a first class community theater. In trying to meet this requirement, the Foundation has decided to use stadium seating, expand the size of the lobby, and increase the number of restrooms, all of which have led to a design that includes excavating under a portion of the building to create a basement. This complex design issue has extended the time needed to complete plans, which staff considers good cause for an extension .of time to apply for building permits. The Foundation Executive Director consulted with the design team and the Building Director in submitting the attached request for an extension to May 15, 2000. All parties feel that this is a realistic deadline that can be met. SHARON Z. WOOD �. NIA r-'�P'Auoz� a yj THE BALBOA PERFORMING ARTS THEATER FOUNDATION April 14, 2000 Ms. Sharon Wood Assistant City Manager City of Newport Beach P.O. Box 1768 Newport Beach, CA 92658 Dear Sharon: On behalf of the Board of Directors of the Balboa Performing Arts Theater Foundation, I am writing to request the City Council's consideration of an extension of the deadline to apply for building permits on our renovation of the Balboa Theater. According to the terms of our lease, we are remiss in not having applied for building permits before November 1999. However, as you know, the scope of work has been enlarged greatly since the lease was written and our architectural team has been working diligently to incorporate the evolving changes. After discussions with our Holmes & Narver team, we would like to request an extension to apply for building permits to May 15, 2000. Again, thank you for all your efforts on our behalf. Sincerely yours, qy( jt4A dzt-o� Michele Roberge Executive Director �.u�1i 1NUC t'KUI'I 1'KCV IUUb THUG GGl THE BALBOA PERFORMING ARTS THEATER FOUNDATION April 14, 2000 Ms. Sharon Wood Assistant City Manager City of Newport Beach P.O. Box 1768 Newport Beach, CA 92658 Dear Sharon: On behalf of the Board of Directors of the Balboa Performing Arts Theater Foundation, I am writing to request the City Council's consideration of an extension of the deadline to apply for building permits on our renovation of the Balboa Theater. According to the terms of our lease, we are remiss in not having applied for building permits before November 1999. However, as you know, the scope of work has been enlarged greatly since the lease was written and our architectural team has been working diligently to incorporate the evolving changes. After discussions with our Holmes & Narver team, we would like to request an extension to apply for building permits to May 15, 2000. Again, thank you for all your efforts on our behalf. Sincerely yours, qy( jt4A dzt-o� Michele Roberge Executive Director 0 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: City Clerk City of Newport Beach P. O. Box 1768 Newport Beach, CA 92658-8915 TITLE OF DOCUMENT: 'p0 APR 14 N9 :us Recorded in Official Records, County of Orange Gary Granville, Clerk-f{�r r No Fee 20000181652 09:54am 04110100 116 16 A17 5 0.00 0.00 0.00 12.00 0.00 0.00 0.00 THIS SPACE FOR RECORDER'S USE ONLY. Exempt Recording Request per Government Code 6103 Second Amendment to Lease by and between the City of Newport Beach and the Balboa Performing Arts Theatre Foundation 16 • 0 SECOND AMENDMENT TO LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH M.3: THE BALBOA PERFORMING ARTS THEATRE FOUNDATION This Amendment, entered into as of December /3 , 1999, (Effective Date) by between the City of Newport Beach, a Charter City and municipal corporation ("Lessor") and Balboa Performing Arts Theatre Foundation ("Lessee"), is made with reference to the following: RECITALS A. Lessor and Lessee entered into the subject lease as of November 23, 1998. (Recorded in the County of Orange, California; 19990066742; 01/29/9.9) B. Lessor and Lessee approved the First Amendment to the subject lease on September 27, 1999, which amendment altered the insurance requirements of Lessee. C. The parties agree that the existing lease requirement for required improvements and other alterations to be consistent with the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior goes beyond the goals of the parties. NOW, THEREFORE, Lessor and Lessee hereby agree as follows: ARTICLE 1 AMENDMENT TO ARTICLE 9, REQUIRED IMPROVEMENTS Paragraph 9.3 of the Lease is amended to read as follows: Lessee shall prepare, and submit to Lessor for approval, a proposed conceptual plan for the design, construction, furnishing and equipping of the Property for use as a theatre (Conceptual Design Plan). The Conceptual Design Plan shall be prepared by a licensed architect. The Conceptual Design Plan shall generally describe those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theatre constructed in the 1920's. The Conceptual Design Plan shall include, without limitation, (1) seating layout and design; (2) stage and dressing room layout and design; (3) lobby and concession area design; (4) structural modifications necessary to comply with uniform codes; (5) interior design elements and treatment; (6) exterior design and treatment; (7) sound and projection systems; (8) lighting systems and design; (9) public area layout, design and treatment; and (10) stage, orchestra 0 0 pit and roll -down backdrop design and treatment. Lessor's right to approve the Conceptual Design Plan shall be limited to ensuring that the improvements contemplated are consistent with a first class community theatre and that the exterior design and treatment are reasonably consistent with the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior. The Conceptual Design Plan 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 Plan 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. ARTICLE 2 AMENDMENT TO ARTICLE 12, ALTERATIONS Paragraph 12.1 is amended to read as follows: 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 exterior of the Property shall conform to the Theatre's designation as a local landmark and shall be consistent with the original design and architecture of the Theatre as well as the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior. 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. ARTICLE 3 NO AMENDMENTS TO REMAINDER OF LEASE All other provisions of the Lease shall remain in force and effect in their original form or as amended by agreement of the Parties. FOR LESSOR CITY OF NEWPORT BEACH Dated 5 1 � ql c 2 11 FOR LESSEE BALBOA PERFORMING ARTS THEATRE FOUNDATION Da na Pefftit President LOVED AS TO FORM OF NEWPORT BEACH Robert H. Burnham City Attorney ATTEST: CITY OF NEWPORT BEACH LaVonne Harkless City Clerk Dated — R —22� Dated � / Li Od Dated 3 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California County of� �, n ss. before me, Dale personally appeared AT FISHER Commission tb 1174329 Notary Public - all 10 Orange %County t+N Comm. Bmims Feb 21,2W2 personally known to me proved to me on the basis of satisfactory evidence to be the perso (s whose nam (s is/ re subscribed to th within In ant an acknowledged to me that he/ the executed the sa in his/he thei author' capacity and that by hi /he ei signature n the instrument the persons or the entity upon behalf of which the perso s) acted, executed the instrument. W ESS my hand and offi ial seal. Place Notary Seal Above Signe re of I Lary nblic OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached D current t +` Title or Type of Document: tQ� O�, h A v� 7 Document Date: ` -0-)- ` j Number of Pages: 3 Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer Signer's Name: ❑ Individual ❑ Corporate Officer—Title(s): ❑ Partner — ❑ Limited ❑ General ❑ Attorney in Fact ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer Is Representing: ftIGHTTHUMSPRINT OF SIGNER 01997 National Notary Aesodalion , 9350 De Soto Ave., P.O. Box 2402 • Chals ortn, CA 91313-2402 Prod. No. 5907 Reonlec Call Toll -Free 1.800.878-8827 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: City Clerk City of Newport Beach P. O. Box 1768 Newport Beach, CA 92658-8915 TITLE OF DOCUMENT: C 4, OPficIPRecords, County of Orange - Gary Granville, Clerk -Recorder eF ��IIIP�'��1�!UII�IP��b6�11111illllfllll�l! No Fee c_0bofflf�tl R54am 04110100 116 16 A17 4 0.00 0.00 0.00 OM 9.00 0.00 0.00 0.00 THIS SPACE FOR RECORDER'S USE ONLY. Exempt Recording Request per Government Code 6103 First Amendment to Lease by and between the City of Newport Beach and the Balboa Performing Arts Theatre Foundation FIRST AMENDMENT TO 0 LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATRE FOUNDATION This Amendment, entered into as of September 'd7 , 1999, (Effective Date) by between the City of Newport Beach, a Charter City and municipal corporation ("Lessor') and Balboa Performing Arts Theatre Foundation ("Lessee"), is made with reference to the following: RECITALS A. Lessor and Lessee entered into the subject lease as of November 23, 1998. (Recorded in the County of Orange, California; 19990066742; 01/29/99) B. The parties agree that the insurance requirements in the original Lease are greater than needed for protection of the public interest, and desire to amend those requirements so as to increase the Foundation's economic viability and ability to meet the other requirements of the Lease. NOW, THEREFORE, Lessor and Lessee hereby agree as follows: ARTICLE 1 AMENDMENT TO ARTICLE 16, INSURANCE Paragraph 16.1.1 of the Lease is amended to read as follows: 16.1.1 Comprehensive General Liability in an amount not less than two million dollars ($2,000,000) 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-contributing with any insurance or self-insurance maintained by Lessor or Lessee. Any third party permitted to use the Property pursuant to Paragraph 8.1 of this Lease shall provide the same insurance, unless this requirement is waived or modified, in writing, by Lessor's City Manager. ARTICLE 2 P E NO AMENDMENTS TO REMAINDER OF LEASE All other provisions of the Lease shall remain in force and effect in their original form. FOR LESSOR CITY OF NEWPORT BEACH Dennis Mayor FOR LESSEE BALBOA PERFORMING ARTS THEATRE FOUNDATION "�La Dayna Pettit President APPROVED AS TO FORM CITY OF NEWPORT BEACH art H. Burnham Attorney ATTEST: CITY OF NEWPORT BEACH LaVonne Harkless City Clerk Dated /6 -/y -g7 Dated Dated 17' `l Dated lc%q/ q7 2 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California County of ` j� J S-1(3�� ss. On li ()l, NP , o before me, f �\, r r , Date Na Ttle�of.Officer (e. -Jane Doe, Notary Pu c ) personally appeared A ` 3f Name(s) of Signer(s) personally known to me ❑ proved to me on the basis of satisfactory evidence CATHY FISHER to be the perso (s) whose nam s� is/ re I Commtatwf fa t t7431! subscribed to th within instant a Notay Public - Collfomlp acknowledged to me that he/ hey xecuted CronpeCounty the sa in his/he thei authori MyComm. Fi¢YcEreb21,2002 capacity and that by his/he elr signatur s n the instrument the perso (s the entity upon behalf of which the perso((s acted, executed the instrument. �KrTNJESS my hand andfcia� I. Place Notary Seal Above Sig store o otary Public OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached Title or Type of Document: _ Document Date: 9�' 01) -0\0\ Number of Pages: Signer(s) Other Than Named Above: _ Capaciity(ies) Claimed by Signer Signer's Name: _ ❑ Individual WORTop of thumb here ❑ Corporate Officer — Title(s): ❑ Partner — ❑ Limited ❑ General ❑ Attorney in Fact ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer Is Representing: ®1997 National Notary Assooation • 9350 De Soto Ave., P.O. hoz 2402 - Chab.Min, CA 91313-2402 Prod. No. 5907 Reortler. Call Tull -Free 1-800.8768827 BY Ti;t 'T'( CI-J,G CITY OF M1!i^i'O'T REPORT TO THE MAYOR AND CITY COUNCIL F 18 1 3- APPROVE[ SUBJECT: Amendment to Design Requirements of Balboa Theater Lease ` SUGGESTED ACTION: Approve amendment applying historic guidelines only to exterior improvements. The City Council approved a lease agreement with the Balboa Performing Arts Theatre Foundation on November 23, 1998, and amended the lease with regard to insurance requirements on September 27, 1999. Pursuant to the lease requirements, the Foundation recently submitted a Conceptual Design Plan for approval by the Committee to Promote Revitalization of our Peninsula (PROP). The Committee reviewed the plan on November 19, 1999, and found that it meets the required criterion of consistency with a first class community theater. The second criterion is consistency with the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior. PROP found the proposed exterior design and treatment to meet this criterion, but not the proposed interior design. The proposed interior treatment involves removing the balcony and installing "raked" seating. This change will improve views of the stage, satisfy modem customer preferences and help ensure the economic viability of the Theater. PROP felt that these advantages of the proposed interior design help satisfy the first criterion of a first class community theater, and that historic accuracy is more important on the exterior design, which is visible from the public right-of-way. Therefore, PROP approved the design as submitted, and asked that the lease be amended to apply the historic guidelines only to the exterior improvements, which the Committee found consistent with the Guidelines. SHARONOOD �EW'Oa, CITY OF NEWPORT BEACH Hearing Date: December 13, 1999 COMMUNITY AND ECONOMIC Agenda Item ^" DEVELOPMENT PLANNING DEPARTMENT No.: Staff Person: 9 Sharon Z. Wood 3300 NEWPORT BOULEVARD (949) 644-3222 NEWPORT BEACH, CA 92658 (714) 644-3200; FAX (714) 644-3250 BY Ti;t 'T'( CI-J,G CITY OF M1!i^i'O'T REPORT TO THE MAYOR AND CITY COUNCIL F 18 1 3- APPROVE[ SUBJECT: Amendment to Design Requirements of Balboa Theater Lease ` SUGGESTED ACTION: Approve amendment applying historic guidelines only to exterior improvements. The City Council approved a lease agreement with the Balboa Performing Arts Theatre Foundation on November 23, 1998, and amended the lease with regard to insurance requirements on September 27, 1999. Pursuant to the lease requirements, the Foundation recently submitted a Conceptual Design Plan for approval by the Committee to Promote Revitalization of our Peninsula (PROP). The Committee reviewed the plan on November 19, 1999, and found that it meets the required criterion of consistency with a first class community theater. The second criterion is consistency with the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior. PROP found the proposed exterior design and treatment to meet this criterion, but not the proposed interior design. The proposed interior treatment involves removing the balcony and installing "raked" seating. This change will improve views of the stage, satisfy modem customer preferences and help ensure the economic viability of the Theater. PROP felt that these advantages of the proposed interior design help satisfy the first criterion of a first class community theater, and that historic accuracy is more important on the exterior design, which is visible from the public right-of-way. Therefore, PROP approved the design as submitted, and asked that the lease be amended to apply the historic guidelines only to the exterior improvements, which the Committee found consistent with the Guidelines. SHARONOOD SECOND AMENDMENT TO 0 LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH ERRS THE BALBOA PERFORMING ARTS THEATRE FOUNDATION This Amendment, entered into as of December , 1999, (Effective Date) by between the City of Newport Beach, a Charter City and municipal corporation ("Lessor") and Balboa Performing Arts Theatre Foundation ("Lessee"), is made with reference to the following: RECITALS A. Lessor and Lessee entered into the subject lease as of November 23, 1998. B. Lessor and Lessee approved the First Amendment to the subject lease on September 27, 1999, which amendment altered the insurance requirements of Lessee. C. The parties agree that the existing lease requirement for required improvements and other alterations to be consistent with the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior goes beyond the goals of the parties. NOW, THEREFORE, Lessor and Lessee hereby agree as follows: ARTICLE 1 AMENDMENT TO ARTICLE 9, REQUIRED IMPROVEMENTS Paragraph 9.3 of the Lease is amended to read as follows: Lessee shall prepare, and submit to Lessor for approval, a proposed conceptual plan for the design, construction, furnishing and equipping of the Property for use as a theatre (Conceptual Design Plan). The Conceptual Design Plan shall be prepared by a licensed architect. The Conceptual Design Plan shall generally describe those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theatre constructed in the 1920's. The Conceptual Design Plan shall include, without limitation, (1) seating layout and design; (2) stage and dressing room layout and design; (3) lobby and concession area design; (4) structural modifications necessary to comply with uniform codes; (5) interior design elements and treatment; (6) exterior design and treatment; (7) sound and projection systems; (8) lighting systems and design; (9) public area layout, design and treatment; and (10) stage, orchestra pit and roll -down backdrop design and treatment. Lessor's right to approve the Conceptual Design Plan shall be limited to ensuring that the improvements contemplated are consistent with a first class community theatre and that the exterior design and treatment are reasonably consistent with the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior. The Conceptual Design Plan 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 Plan 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. ARTICLE 2 AMENDMENT TO ARTICLE 12, ALTERATIONS Paragraph 12.1 is amended to read as follows: 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 exterior of the Property shall conform to the Theatre's designation as a local landmark and shall be consistent with the original design and architecture of the Theatre as well as the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior. 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. ARTICLE 3 NO AMENDMENTS TO REMAINDER OF LEASE All other provisions of the Lease shall remain in force and effect in their original form or as amended by agreement of the Parties. FOR LESSOR CITY OF NEWPORT BEACH John Noyes Mayor 0 Dated 2 FOR LESSEE BALBOA PERFORMING ARTS THEATRE FOUNDATION Dated Dayna Pettit President APPROVED AS TO FORM CITY OF NEWPORT BEACH Dated Robert H. Burnham City Attorney ATTEST: CITY OF NEWPORT BEACH LaVonne Harkless Dated City Clerk ?� PEw�gr CITY OF NEVART BEACH Hearing. te: - September 27, 1999 d ° COMMUNITY AND ECONOMIC p Agenda Item DEVELOPMENT No.: 16 PLANNING DEPARTMENT Staff Person: Sharon Z. Wood 3300 NEWPORT BOULEVARD (949) 644-3222 NEWPORT BEACH, CA 92658 (714) 644-3200; FAX (714) 644-3250 SUBJECT: SUGGESTED ACTION: BY THE CIif Gi CITY OF NE:Yj?CP REPORT TO THE MAYOR AND CITY COUNCIL X27 Amendment to Insurance Requirements of Balboa Approve amendment reducing comprehensive general liability insurance to $2,000,000. The City Council approved a lease agreement with the Balboa Performing Arts Theatre Foundation on November 23, 1998. The lease requires the lessee to maintain comprehensive general liability insurance in an amount not less than $5,000,000. The Foundation has requested that the insurance amount be reduced to $2,000,000, so that the cost of premiums can be reduced from $6,000 to $2,500. The City's Risk Manager recommends that $2,000,000 is sufficient because the lease limits use of the property to performances, events and fund-raising activities. The only third parties that the Foundation may allow to use the theater are nonprofit civic, charitable, educational and community organizations for fund-raising, education or community events. The proposed lease amendment requires that such third parties provide the same comprehensive general liability insurance as the Foundation. SHARON Z. WOOD Assistant City Manager Attachment First Amendment to Lease By and Between the City of Newport Beach and the Balboa Performing Arts Theatre Foundation 0 FIRST AMENDMENT TO LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATRE FOUNDATION This Amendment, entered into as of September _, 1999, (Effective Date) by between the City of Newport Beach, a Charter City and municipal corporation CLessor") and Balboa Performing Arts Theatre Foundation ("Lessee"), is made with reference to the following: RECITALS A. Lessor and Lessee entered into the subject lease as of November 23, 1998. B. The parties agree that the insurance requirements in the original Lease are greater than needed for protection of the public interest, and desire to amend those requirements so as to increase the Foundation's economic viability and ability to meet the other requirements of the Lease. NOW, THEREFORE, Lessor and Lessee hereby agree as follows: ARTICLE 1 AMENDMENT TO ARTICLE 16, INSURANCE Paragraph 16.1.1 of the Lease is amended to read as follows: 16.1.1 Comprehensive General Liability in an amount not less than two million dollars ($2,000,000) 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-contributing with any insurance or self-insurance maintained by Lessor or Lessee. Any third party permitted to use the Property pursuant to Paragraph 8.1 of this Lease shall provide the same insurance, unless this requirement is waived or modified, in writing, by Lessor's City Manager. 0 0 ARTICLE 2 NO AMENDMENTS TO REMAINDER OF LEASE All other provisions of the Lease shall remain in force and effect in their original form. FOR LESSOR CITY OF NEWPORT BEACH Dated Dennis O'Neil Mayor FOR LESSEE BALBOA PERFORMING ARTS THEATRE FOUNDATION Dated Dayna Pettit President APPROVED AS TO FORM CITY OF NEWPORT BEACH Dated Robert H. Burnham City Attorney ATTEST: CITY OF NEWPORT BEACH Dated LaVonne Harkless City Clerk L J x3 RECEIVED RECORDING REQUESTED AND WHEN RWOFVRER RgNtMN TO: City Clerk's Office City of" s�,TY CLERK 3300 N�jio cu v Ir JE"' P.O. Box 1768 Newport Beach, CA 92658-8915 Recorded in the county of orange, california Gary L. Granville, Clerk/Recorder IIIII�IIIIIIIIII1IIIIIIIIJill IIIIIIIIIIIIIIIIIIIIHIIIIIII1II No Fee 19990066742 1:10pm 01/29/99 005 11011852 11 19 L02 43 6.00 126.00 0.00 0.00 0.00 129.00 Space above this line for Recorder's use only. Exempt Recording Request per Government Code 6103 Contract No. 3248 Z ar �5 LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH THE BALBOA PERFORMING ARTS THEATRE FOUNDATION • Table of Contents Page ARTICLE 1 SUBJECT OF LEASE............................................................................. 2 1.1 Purpose of the Lease............................................................................... 2 1.2 The Property ............................................................................................ 2 1.3 Lessor...................................................................................................... 2 1.4 Lessor...................................................................................................... 2 ARTICLE 2 LEASE OF PROPERTY.......................................................................... 2 2.1 Lease of Property..................................................................................... 3 2.2 Condition of Title...................................................................................... 3 ARTICLE 3 POSSESSION OF PROPERTY............................................................... 3 3.1 Quiet Employment.................................................................................... 3 3.2 Condition of Property............................................................................... 3 3.3 Ownership of Improvements.................................................................... 3 3.4 Surrender of Propetv............................................................................... 4 3.4.1......................................................................................................... 4 3.4.2......................................................................................................... 4 3.4.3......................................................................................................... 4 ARTICLE 4 TERM/OPTION TO PURCHASE............................................................. 4 4.1 Duration and Commencement................................................................. 4 4.2 Option to Extend...................................................................................... 4 4.3 Option to Purchase.................................................................................. 4 4.3.1......................................................................................................... 5 4.3.2......................................................................................................... 5 4.3.3......................................................................................................... 5 4.3.4......................................................................................................... 5 4.3.5......................................................................................................... 5 4.4 Option - Purchase Price........................................................................... 5 4.5 Right of First Refusal................................................................................ 5 ARTICLE 5 RENT/CONSIDERATION........................................................................ 5 5.1 No Money Payable by Lessee................................................................. 5 5.2 Other Consideration................................................................................. 6 5.2.1......................................................................................................... 6 5.2.2......................................................................................................... 6 5.2.3......................................................................................................... 6 5.2.4......................................................................................................... 6 5.2.5......................................................................................................... 6 ARTICLE 6 CONTRIBUTIONS FUND........................................................................ 6 • 0 Page ARTICLE 7 ANNUAL BUDGET/OPERATION AND MARKETING PLAN . ............... 6 7.1 Budget/Timing.......................................................................................... 6 7.1.1 Initial Budget.................................................................................. 6 7.1.2 Proposed Revision........................................................................ 7 7.1.3 Year End Financial Statement....................................................... 7 7.1.3 Proposed Revision........................................................................ 7 7.1.4 Year End Financial Statement....................................................... 7 7.2 Contents of Budget.................................................................................. 7 7.3 Operations and Marketing Plan................................................................ 7 7.4 Records.................................................................................................... 8 7.5 Audit......................................................................................................... 8 ARTICLE 8 USE OF PROPERTY................................................................................ 8 8.1 Permitted Use........................................................................................... 8 8.2 Performances/Frequency...........................................................................8 8.2.1....................................................................................................... 9 8.2.2....................................................................................................... 9 8.2.3....................................................................................................... 9 8.3 Program Standards................................................................................... 9 8.3.1....................................................................................................... 9 8.3.2....................................................................................................... 9 8.3.3....................................................................................................... 9 8.3.4....................................................................................................... 9 8.4 Cooperation.............................................................................................. 9 8.5 Change of Use........................................................................................ 10 8.6 Compliance with Laws............................................................................ 10 8.7 Zoning and Planning............................................................................... 10 8.8 Nondiscrimination....................................................................................10 8.8.1..................................................................................................... 10 8.8.2..................................................................................................... 10 8.8.3..................................................................................................... 11 ARTICLE 9 REQUIRED IMPROVEMENTS............................................................... 11 9.1 Lessee's Obligations............................................................................... 11 9.2 Seismic Retrofit/Remediation.................................................................. 11 9.3 Conceptual Design Plans........................................................................ 12 9.4 Design Development Plan....................................................................... 12 9.5 Final Plans and Specifications................................................................ 13 9.6 Building Permits...................................................................................... 13 9.7 Construction of Required Improvements ................................................. 13 9.8 General Requirements............................................................................ 14 9.8.1........................................................................................................ 14 9.8.2........................................................................................................ 14 9.9 Extensions.............................................................................................. 14 • • Pa e ARTICLE 10 REPAIRS AND MAINTENANCE ................................................. 14 ARTICLE 11 STATUS AND MANAGEMENT OF LESSEE .............................. 15 11.1 Nonprofit Status...................................................................................... 15 11.2 Executive Committee and Advisory Committee ...................................... 15 11.3 Employment of Staff................................................................................ 15 ARTICLE 12 ALTERATIONS............................................................................ 16 12.1 Written Consent...................................................................................... 16 12.2 Notice of Non-responsibility.................................................................... 16 ARTICLE 13 PAYMENT OF UTILITIES, TAXES, CHARGES AND FEES ....... 16 13.1 Public and Private Utility Services........................................................... 16 13.2 Taxes, Assessments. Fees and Charges ............................................... 16 13.3 Proof of Payment.................................................................................... 17 13.4 Payment by Lessor................................................................................. 17 13.5 Property Taxes not Valid......................................................................... 17 13.6 Notice of Possessory Interest; Payment of Taxes and Assessments on Value of Entire Lease Premises......................................................... 17 ARTICLE14 LIENS........................................................................................... 17 14.1 Indemnification........................................................................................ 17 14.2 Satisfaction of Liens................................................................................ 18 14.3 Notice to Lessor...................................................................................... 18 14.4 Notice of Non-Responsibility................................................................... 18 ARTICLE 15 INDEMNIFICATION..................................................................... 18 15.1 Indemni................................................................................................ 18 15.2 CERCLA Liability..................................................................................... 19 15.3 Expense of Proceedings......................................................................... 19 15.4 Release................................................................................................... 19 15.5 Waiver of California Civil Code Section 1542 .......................................... 19 15.6 Definition of Hazardous Materials........................................................... 20 ARTICLE 16 INSURANCE................................................................................ 20 16.1 Insurance to be Maintained..................................................................... 20 16.1.1...................................................................................................... 20 16.1.2...................................................................................................... 20 16.1.3...................................................................................................... 20 16.1.4...................................................................................................... 21 16.2 Acceptable Terms of Coverage............................................................... 21 16.3 Index....................................................................................................... 21 16.4 Waiver of Subrogation............................................................................. 21 Page ARTICLE 17 DAMAGE BY FIRE OR CASUALTY ............................................ 22 17.1 Lessee to give Notice.............................................................................. 22 17.2 Restoration..............................................................................................22 17.3 Casualty Late in Term............................................................................. 22 17.4 Acceptable of Insurance Proceeds......................................................... 23 17.4.1...................................................................................................... 23 17.4.2...................................................................................................... 23 17.4.3...................................................................................................... 23 ARTICLE 18 18.1 18.2 18.3 18.4 18.5 EMINENT DOMAIN...................................................................... 23 LeaseGoverns........................................................................................ 23 Termination of Lease.............................................................................. Partial Taking - Restoration..................................................................... Distribution of Award............................................................................... Allocation of Award - Partial Taking........................................................ 18.5.1...................................................................................................... 18.5.2...................................................................................................... 18.5.3...................................................................................................... 18.6 Allocation of Award - Temporary Taking ................................................. 18.7 Allocation of Award - Total Taking.......................................................... 23 24 24 24 24 24 24 24 24 18.7.1....................................................................................................... 25 18.7.2...................................................................................................... 25 18.8 Conduct of Proceedings ......................................... ............................... 25 18.9 Notices.................................................................................................... 25 ARTICLE 19 ASSIGNMENT AND SUBLETTING ............................................. 25 ARTICLE 20 LEASEHOLD MORTGAGES....................................................... 25 ARTICLE 21 PERFORMANCE OF LESSEE'S COVENANTS .......................... 25 21.1 Right of Performance.............................................................................. 25 21.1.1...................................................................................................... 26 21.1.2...................................................................................................... 26 21.1.3...................................................................................................... 26 21.2 Reimbursement and Damages............................................................... 26 ARTICLE 22 REPRESENTATIONS.................................................................. 26 22.1 Lessor's Representations........................................................................ 26 22.1.1...................................................................................................... 26 22.1.2...................................................................................................... 26 22.2 Lessee's Representations....................................................................... 26 22.2.1...................................................................................................... 26 22.2.2...................................................................................................... 26 22.2.3...................................................................................................... 27 22.2.4...................................................................................................... 27 -iv- • i Page ARTICLE 23 DEFAULTS, REMEDIES AND TERMINATION ........................... 27 23.1 Legal Actions.......................................................................................... 27 23.1.1 Institution of Legal Actions ................................................. 27 23.1.2 Applicable Law.................................................................. 27 23.2 Rights and Remedies are Cumulative..................................................... 27 23.3 Occurrence of Default............................................................................. 27 23.3.1........................................................................................... 27 23.3.2........................................................................................... 28 23.3.3........................................................................................... 28 23.3.4........................................................................................... 28 23.3.5........................................................................................... 28 23.4 Remedies................................................................................................28 23.4.1........................................................................................... 28 23.4.2........................................................................................... 28 23.4.3........................................................................................... 28 ARTICLE 24 PERMITTED CONTESTS............................................................ 29 ARTICLE 25 ENTRY BY LESSOR.................................................................... 29 ARTICLE 26 FORCE MAJEURE...................................................................... 29 ARTICLE 27 MISCELLANEOUS...................................................................... 29 27.1 Notices.................................................................................................... 29 27.2 No Claims Against Lessor....................................................................... 30 27.3 Integration............................................................................................... 30 27.4 No Waiver By Lessor.............................................................................. 30 27.5 Severability ..............................................................................................31 27.6 Holding Over........................................................................................... 31 27.7 No Partnership........................................................................................ 31 27.8 Federal Funds Provisions....................................................................... 31 27.9 Time of the Essence............................................................................... 32 -v- 0 LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATRE FOUNDATION This Lease ("Lease"), entered into as of November 23, 1998 (Effective Date) by and between the City of Newport Beach, a Charter City and municipal corporation ("Lessor") and the Balboa Performing Arts Theatre 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 Theatre 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 Theatre 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. NOW, THEREFORE, in consideration of the terms, covenants and conditions in this Lease, Lessor and Lessee hereby agree as follows: ARTICLE 1 SUBJECT OF LEASE 1.1 Puroose of the Lease The purpose of this Lease is to require Lessee to renovate and rehabilitate the Property consistent with its original design and architecture and, subsequent to renovation, require Lessee to operate a first class community Theatre. The renovation and operation of the Theatre 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 Property 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 of the structure(s), improvements and fixtures located on the Property as a non-profit cultural.and performing arts center. 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. 1.4 Lessee Lessee is the Balboa Performing Arts Theatre Foundation. Lessee is a California non-profit public benefit corporation organized for the purpose of renovating, operating and maintaining the Theatre 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. For the purposes of this Lease, the term "Lessee" shall include all officers, employees, agents or 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 conditions of this Lease. Lessor reserves all rights to substances below the 2 2.2 4 • 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 operation or aesthetics of the Theatre. 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, maintenance or use of the Theatre. 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 Theatre 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 Theatre, such as fixtures, machinery, rigging, lighting, staging, trade fixtures (collectively, the Property Equipment) that have been constructed merchandise, or placed on 3 9 0 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 (25`h) 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 the following: 12 n u E 4.3.1 Lessee shall have completed the Required Improvements; and 4.3.2 Lessee shall have operated the Theatre in full compliance with the provisions of Article 8 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 date to the date of the Notice of Intent. For example, if Lessee exercises the option nine (9) years after the Effective Date 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 5.2 Other Consideration In consideration for this Lease, Lessee covenants that, during the Term, it will: 5.2.1 Operate and maintain a Theatre 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 9 and maintain the Property in accordance with this Lease at no cost to Lessor. 5.2A Defend, indemnify and hold Lessor harmless with respect to the renovation, use, maintenance and operation of the Property. 5.2.5 Use any excess revenue or funds for purposes related to the operation of the Theatre 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 Contributions 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).. ARTICLE 6 CONTRIBUTIONS FUND Lessee shall establish and maintain, at a financial institution in an account insured by FDIC, FSLIC or similar insurance, a separate fund (Contributions Fund) for the purpose of accepting contributions from any source. Lessee shall use the Contributions Fund to pay for the improvements required by this Lease and/or to support the operation and maintenance of the Theatre. Lessee shall establish and maintain an on-going fund raising program as part of its Operations and Marketing Operations Plan Article 7 and use its best efforts to ensure the success of the program. ARTICLE 7 ANNUAL BUDGETIOPERATION AND MARKETING PLAN 7.1 Budget/Timing 7.1.1 Initial Budget Lessee shall prepare, and submit to the Lessor, an annual budget for the renovation, maintenance and operation of the Theatre (Budget). The first Budget shall be adopted, and submitted to 6 n u C Lessor, within sixty (60) days after the Effective Date. Subsequent annual Budgets shall be submitted to Lessor no later than fifteen (15) days after adoption by Lessee. 7.1.2 Proposed Revision Lessee shall provide Lessor with material modifications or revisions to the Budget within fifteen (15) days after adoption by Lessee. 7.1.3 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 itemizing all of its revenues and expenditures for that fiscal year. 7.2 Contents of Budget The Budget shall specify in reasonable detail (as appropriate given the status of renovation), (i) the proposed rates and charges for the use of the Theatre, (ii) the balance in all funds and accounts maintained by Lessee, (iii) all projected revenues and sources of funds for the fiscal year, (iv) the expenditures proposed to be made by Lessee in fulfilling its obligations pursuant to this Lease, (v) marketing program and costs, (vi) all other proposed expenditures of Lessee, (vii) the principal balance of the Contributions Fund, (viii) income from the Contributions Fund, and (ix) cash reserves, if any. 7.3 Operations and Marketing Plan Lessee shall prepare and adopt an Operations and Marketing Plan (Operations Plan) during the Term. The initial Operations Plan shall be adopted one hundred and eighty (180) days prior to anticipated completion of the Required Improvements. The Operations Plan shall be revised from time to time to reflect new performances/events, new fund-raising strategies and new or revised marketing programs. The Operations Plan shall comply with, and provide information relevant to, the provisions of Article 8 and specify in reasonable detail (as appropriate given the status of renovation), (i) performances, meetings, concerts and other events at the Theatre that have been, or are proposed to be, scheduled (ii) performers and events which Lessee is actively seeking to schedule at the Theatre, (iii) a marketing Plan for the Theatre including programs for attracting attendees and efforts to integrate the operation of the Theatre into efforts to revitalize the local economy, and (iv) fund raising efforts including a report on fund raising efforts for the prior year. The Operations Plan shall be submitted to Lessor within fifteen days after adoption or any material modification. 7 0 0 7.4 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 Contributions 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. 7.5 Audit 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. ARTICLE 8 USE OF PROPERTY 8.1 Permitted Use The Property shall be used primarily for the operation of a first class cultural and performing arts center (Theatre) open to the general public. Lessee shall operate the Theatre 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 civic, charitable, educational and community organizations to periodically use the Theatre for fund raising, education or community events 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 9.2 (Seismic Retrofit) and before completion of Required Improvements subject to issuance of a Special Events Permit by Lessor. 8.2 Performances/Frequency Lessee shall operate the Theatre in a prudent and businesslike manner reasonably calculated to assist in the efforts of Lessor and others to revitalize the 8 M I] 0 local economy and in full compliance with the Operations Plan. 8.2.1 Lessee shall schedule and present performances or cultural events on at least one hundred (100) days of the twelve (12) month period commencing sixty (60) days after completion of Required Improvements. 8.2.2 Lessee shall, for each subsequent twelve (12) month period, schedule and present performances or cultural events on at least one hundred and fifty (150) days. 8.2.3 Operation of the Theatre is the fundamental consideration for this Lease and Lessee shall ensure and promote the maximum reasonable use of the Theatre by performers, artists, and entertainers likely to attract patrons. The Theatre shall be operated consistent with the standards, practices and procedures utilized by first class community Theatres in other jurisdictions. Program Standards Lessee shall operate the Theatre in a manner reasonably calculated to achieve the following objectives: 8.3.1 Provide frequent and high quality performances and cultural events to attract patrons to the Theatre and Central Balboa/Balboa Village. 8.3.2 To serve as a catalyst to the revitalization of the economy of the area to be benefited by use of the Federal Funds. 8.3.3 To make the Theatre 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; 8.3.4 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 community Theatre. 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 Theatre to use public parking at reduced rates. Lessor and Lessee shall also discuss ways to integrate operation of the Theatre EJ 0 ! into programs for the economic revitalization of Central Balboa/Balboa Village. 8.5 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 be withheld at Lessor's sole discretion. 8.6 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 Theatre. 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 Theatre. 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. 8.7 Zoning and Planning Lessor acknowledges that the use of the Property as a Theatre 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. 8.8 Nondiscrimination 8.8.1 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. 8.8.2 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. 10 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, 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. 8.8.3 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, 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 9 REQUIRED IMPROVEMENTS 9.1 Lessee's Obligations The Property requires substantial renovation and rehabilitation to be used as, or considered, a first class community Theatre: 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 9.2 Seismic Retrofit/Remediation. The primary structure on the Property is an unreinforoed 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. 11 0 • 9.3 Conceptual Design Plans Lessee shall prepare, and submit to Lessor for approval, a proposed conceptual Plan for the design, construction, furnishing and equipping of the Property for use as a theatre (Conceptual Design Plan). The Conceptual Design Plan shall be prepared by a licensed architect. The Conceptual Design Plan shall generally describe those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theatre constructed in the 1920's. The Conceptual Design Plans shall include, without limitation, (1) seating layout and design; (2) stage and dressing room layout and design (3) lobby and concession area design; (4) structural modifications necessary to comply with uniform codes; (5) interior design elements and treatment; (6) exterior design and treatment; (7) sound and projection systems; (8) lighting systems and design; (9) public area layout, design and treatment; and (10) stage, orchestra pit and roll -down backdrop design and treatment. Lessor's right to approve the Conceptual Design Plan shall be limited to ensuring that the improvements contemplated by the Conceptual Design Plan are consistent with a first class community theatre and reasonably consistent with the Guidelines for.. the Rehabilitation of Historic Structures published by the Secretary of Interior. The Conceptual Design Plan 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 Plan 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. 9.4 Design Development Plan 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 Plan. The Design Development Plans shall include, (1) specific interior and exterior lighting Plans and design; (2) specific information regarding the color, material, treatment and design of all interior and exterior elements; and (3) 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 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 design Development Plans within sixty (60) 12 days after submittal. 9.5 Final Plans and Specifications Subsequent to approval of Design Development Plans, Lessee shall submit Final Plans and Specifications. The Final Plans and Specifications shall be based on, and consistent with, the Design Development Plans. The Final Plans and Specifications shall be in sufficient detail to provide the information necessary to obtain building permits from Lessor. Lessor's right of approval pursuant to this Lease, (distinct from Lessor's rights and obligations as a Charter City and entity responsible for administration and enforcement of Uniform Building Codes), which shall not unreasonably be withheld, shall be limited to a determination that the Final Plans and Specifications are based on and consistent with the approved Design Development Plans. The Final Plans and Specifications shall be deemed approved (as to consistency with Design Development Plans) unless Lessor serves written notice of disapproval within thirty (30) days after submittal. Lessor shall specify, in detail, each element of the Final Plans and Specifications disapproved, the reason for disapproval, and alternatives) that Lessor would approve. The Parties shall reach agreement on the Final Plans and Specifications within 60 days of submittal. 9.6 Building Permits Lessee shall apply for all necessary building permits from Lessor within one (1) year after the Effective Date. 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 Final Plans and Specifications. Lessee shall have the option of submitting Final Plans and Specifications as the documents necessary to obtain building permits assuming suitability for that purpose. 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 Final Plans and Specifications, 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. 9.7 Construction of Required Improvements Lessee shall begin construction of Required Improvements within sixty (60) days after approval of all required building permits by Lessor and approval of any permit(s) required by other governmental agencies with jurisdiction over the Property. Lessee shall diligently pursue construction of the Required 13 i 11 Improvements to completion. Lessee shall complete construction of Required Improvements within one year and sixty (60) days after issuance of all necessary permits and approvals. The Required Improvements shall be constructed by a licensed contractor. 9.8 General Requirements 9.8.1 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. 9.8.2 Lessor has designated the Committee to Promote Revitalization of the Peninsula (PROP), or its successor, to review, and approve or disapprove, the Conceptual Design Plan, the Design Development Plans and the Final Plans and Specifications. Lessee shall provide PROP with bimonthly reports on the status of 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. 9.9 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 REPAIRS AND MAINTENANCE Lessee recognizes that the Theatre 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 Theatre 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 Theatre (including patching 14 and resurfacing the roof membrane and painting or other protective treatment of the exterior wall of the Theatre); (H) 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 Theatre and the repair and replacement of components; (iv) maintenance of all pipes and plumbing systems serving the Theatre 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 Theatre. Lessee shall revise the schedule for maintenance from time to time during the Term as necessary to maintain the Theatre to the standards required by this Lease. Lessee shall have the benefit of all warranties available to Lessor with respect to the Theatre 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 Theatre would make continued operation of the Theatre economically infeasible. ARTICLE 11 STATUS AND MANAGEMENT OF LESSEE 11.1 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). 11.2 Executive Committee and Advisory Committee During the Term, Lessee shall appoint an Executive Committee consisting of no more than five (5) members. The Executive Committee shall be authorized by Lessee to interact with Lessor and promptly respond to problems or concerns expressed by Lessor or members of the general public relative to the operation of the Theatre. Lessee shall also appoint an Advisory Board or Advisory Committee that is responsible for fund-raising. Lessee may appoint or establish other Boards or Committees to perform specific functions relative to the renovation, maintenance or operation of the Property and Theatre. 11.3 Emplovment of Staff During the Term, Lessee shall use its best efforts to employ a professional 15 Executive Director to manage the day to day renovation and/or operation of the Theatre and perform such other duties as Lessee may assign. The Executive Director shall be appointed at least ninety (90) days prior to anticipated completion of Required Improvements. ARTICLE 12 ALTERATIONS 12.1 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 Theatre's designation as a local landmark and shall be consistent with the original design and architecture of the Theatre as well as the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of the Interior. 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. 12.2 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 13 PAYMENT OF UTILITIES, TAXES, CHARGES AND FEES 13.1 Public and Private Utility Services Lessee will pay all charges for all public or private utility services and all sprinkler 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. 13.2 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. 13.3 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. 13.4 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. 13.5 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. 13.6 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. ARTICLE 14 LIENS 14.1 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 Properly and Theatre free and clear of ail 17 mechanic's liens and similar liens. 14.2 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. 14.3 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. 14.4 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 15 INDEMNIFICATION 15.1 Indemnity Lessee shall defend, indemnify and hold harmless Lessor from and against any and all legal or administrative proceedings, claims, reasonable attorneys' fees 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 15.7 on the Property or Theatre, (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. fl • 15.2 CERCLA Liability 0 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. 15.3 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. 15.4 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. 15.5 Waiver of California Civil Code Section 1542 Section 1542 of the California Civil Code states: 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. 19 9 0 15.6 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 16 INSURANCE 16.1 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. 16.1.1 Comprehensive General Liability in an amount not less than five million dollars ($5,000,000) 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-contributing with any insurance or self-insurance maintained by Lessor or Lessee. 16.1.2 Workers' Compensation Insurance as required by the Labor Code of the State of California. 16.1.3 "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 20 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. 16.1.4 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. 16.2. 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 speck 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 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. 16.3 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. 16.4 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 21 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 DAMAGE BY FIRE OR CASUALTY 17.1 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. 17.2 Restoration Except as provided in Section 18.3, 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 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. 17.3 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. 22 • 0 17.4 Application of Insurance Proceeds In the event that Lessee is required to restore the Property pursuant to Section 17.2, proceeds from policies of insurance required by Article 16 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: 17.4.1 Lessee shall furnish to Lessor satisfactory evidence to Lessor of the total cost of Restoration pursuant to Section 17.2. 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. 17.4.2 Assuming satisfaction of the conditions of subsection [17.4.1] 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. 17.4.3 Upon completion of restoration and assuming Lessee is not in default, excess insurance proceeds shall first be paid to Lessor to the extent of its actual expenses incurred in the restoration, then to Lessee as working capital ARTICLE 18 EMINENT DOMAIN 18.1 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. 18.2 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. 23 0 0 18.3 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. 18.4 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. 18.5 Allocation of Award — Partial Taking Any Award in a Partial Taking shall be distributed by escrow in the following order of priority: 18.5.1 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; 18.5.2 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; 18.5.3 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. 18.6 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. 18.7 Allocation of Award —Total Taking Any Award in a Total Taking shall be distributed by escrow in the following priority: 24 0 0 18.7.1 First; to Lessor and Lessee to reimburse for all costs and expenses incurred by each in the collection of the Award; 18.7.2 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. 18.8 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. 18.9 Notices Any Party receiving notice of or becoming aware of any condemnation proceedings shall promptly give written notice to the other party. ARTICLE 19 ASSIGNMENT AND SUBLETTING Lessee may not assign or sublet this Lease or any portion of the Property, without Lessors prior written consent which consent may be withheld in Lessor's sole 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 20 LEASEHOLD MORTGAGES Lessee shall have no right to encumber its interest in this Lease, the Property or the Theatre without Lessor's prior written consent, which consent may be withheld in Lessor's sole discretion. ARTICLE 21 PERFORMANCE OF LESSEE'S COVENANTS 21.1 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 17 within the time required, or to make any other payment or perform any other act within the time required by this 25 0 • 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: 21.1.1 Pay the tax, assessment, fee or charge payable by Lessee pursuant to this Lease; or 21.1.2 Pay for and maintain any insurance policies required by this Lease; or 21.1.3 Make any other payment or perform any other act that Lessee is required to pay or perform pursuant to this Lease. 21.2 Reimbursement and Damages Lessee shall reimburse Lessor for all costs and expenses incurred by Lessor in the exercise of its rights pursuant to Section 21.1. ARTICLE 22 REPRESENTATIONS 22.1 Lessor's Representations Lessor represents to Lessee that: 22.1.1 Lessor owns the Property in fee simple subject only to the Permitted Exceptions and other matters affecting title that do not inhibit, prevent or impair the operation, maintenance or use of the Theatre. 22.1.2 Lessor has the power and authority to enter into this Lease and perform all the obligations of Lessor hereunder. 22.2 Lessee's Representations Lessee represents to Lessor that: 22.2.1 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. 22.2.2 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 Theatre consistent with this Lease and the Operations Plan. 26 0 0 22.2.3 Lessee has the right, power and authority to enter into this Lease and to perform all the obligations of Lessee. 22.2.4 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 23 DEFAULTS, REMEDIES AND TERMINATION 23.1 Legal Actions 23.1.1 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. 23.1.2 Applicable Law The laws of the State of California shall govern the interpretation and enforcement of this Lease. 23.2 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. 23.3 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: 23.3.1 The failure of Lessee to comply with the provisions of Article 9 related to the design and construction of Required Improvements. 27 0 0 23.3.2 The failure of Lessee to operate the Theatre in compliance with the provisions of Article 8 related to frequency and quality of performances and events. 23.3.3 The failure of Lessee to maintain the Property as specified in Article 10. 23.3.4 The failure of Lessee to restore or repair the Properly in the event of damage or destruction 23.3.5 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. 23.4 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: 23.4.1 Lessor shall have the immediate right to reenter the Property and/or the Theatre, take possession of the Property and/or Theatre, any and all Equipment, books and records, contracts and any other property. 23.4.2 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 Theatre, 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. 23.4.3 Lessor shall be entitled to recover all money payable to Lessee related to the operation and use of the Theatre, 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. M3 ARTICLE 24 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 25 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, or for any other lawful purposes, including showing the Property to prospective purchasers or lessees. ARTICLE 26 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, riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Lessee. ARTICLE 27 MISCELLANEOUS 27.1 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; Balboa Performing Arts Theatre Foundation P.O. Box 752 Balboa, CA 92661 With a copy to: Steve Bromberg Bromberg & Yeager 620 Newport Center Drive 11' Floor Newport Beach, CA, 92660 or at such other addresses as Lessee shall have furnished Lessor in writing. 27.2 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 27.3 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 Theatre. Except as otherwise provided, no subsequent change or addition to this Lease shall be binding unless in writing and signed by the Parties. 27.4 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. 30 27.5 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. 27.6 Holding Over A tenancy for month to month shall result if Lessee remains in possession of the Property or the Theatre 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. 27.7 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 of the Theatre or otherwise. 27.8 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. 31 0 0 27.9 Time of the Essence Time is of the essence relative to all of the terms, provisions, covenants and conditions of this Lease. FOR LESSOR CITYO� NEWPORT BEACH 40 . mss` /l Dennis O'Neil _ ' Mayor for City of Newport Beach FOR LESSEE BALBOA PERFORMING ARTS /THEATRE FOUNDATION Dayna Pettit President of Balboa Performing Arts Theatre Foundation APPROVED AS TO FORM NEWPORT BEACH: H. Burnham City Attorney for City of Newport Beach Dated Dated�� r / Dated—/, -7- 57 - - LaVonne Harkless City Clerk for City of Newport Beach )ated !, .. /� -' j' F:\cat\shared\da\Projects%BalboaTheatre\Lease\Final Leasel 20398.doe 32 0 0 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California County of C)s� I ss. •� _ � _ Dn —kO pl before me, Date Name nd itle of Officer (e.g., "Jane Doe, Notary Pub, personally appeared Names) of Signers) personally known to me ❑ proved to me on the basis of satisfactory evidence to be the person whose namet,W( is are subscribed to the wiPiz instrument and acknowledged to me ha he he/they executed the same in his er/their uthorized capacity(, an that by is er/their signature(Von the instrument the personplo, or the entity upon behalf of which the personNI acted, executed the instrument. NESS my hand and fficial seal. Place Notary Seal Above ftnaW) of Nodry Public OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attache Title or Type of Document: Document Date: 1 q Number of Pages:, ] a Signer(s) Other Then Named Above: (-`"^�1 � ""e-- Capacity(ies) Claimed by Signer Signer's Name: ❑ Individual El Corporate Officer—Title(s): I Partner —❑ Limited ❑ General Attorney in Fad Trustee ❑ Guardian or Conservator ❑ Other: Signer Is Representing: RIGHT THUMBPRINT OF SIGNER 01997 National Notary Associefion • 9350 De Soto Ave.. P.O. Box 2402 • Chatsworth, CA 913132402 Prod. No. 5907 Reorder. Call Toll -Free 1.800.978$827 1 41 0 • CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California l County of JJ On O' - `\ ^ �i , before me, Date personally appeared Xpersonally known to me ❑ proved to me on the basis of satisfactory evidence to be the person) whose name(bjclyare subscribed to the withinlstrument and acknowledged to me tha h they executed the same in his er heir authorized capacity(t and thaf by hiseNtheir signature(on the instrument the person, or the entity upon behalf of which the person))) acted, executed the instrument. W ESS my hand and ocl seal. Place Notary Seal Above Sign u of otary P blic OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attache Title or Type of Document: 0 4 Sr V 0�',v. e Document Date: 11 - is 3 -OI O Number of Pages: 3a Signer(s) Other Than Named Above: C) V � I Capacity(les) Claimed by Signer Signer's Name: ❑ Individual ❑ Corporate Officer—Title(s): ❑ Partner —0 Limited ❑ General ❑ Attorney in Fact ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer Is Representing: RIGHT THUMBPRINT OF SIGNER kt ®1997 National Notary Assoclatton • 9350 De Soto Ave., P.O. Box 2402 • Cl CA 91313-2402 Prod. W. 5907 Reorder: Call Toll -Free 1.800-876-8827 9 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT 0 State of California l �f�tn�� } County of ss. J On 1%efore me, n6i Oale MlName and Title of Oficer (e.g., "Jane Doe, N ry Public') personally appeared D`y V)A I 1 1 1 1 , LLANI V. INF$ 111Oemycornrn Commission# 1171160zNoiary Public - COlifarnia Orange County . bpires Jan z XM ❑ personally known to me aproved to me on the basis of satisfactory de dence to be the persons) whose name(&) isiel% subscribed to the within instrument and acknowledged to me that helshe/they executed the same in 4is/her/the4r authorized capacity(.ie , and that by his/herltheir signature* on the instrument the person(&), or the entity upon behalf of which the personal acted, executed the instrument. WITNESA my hand and official'seal. Place Notary Seal Above Signature of Notary Publlc OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached Document Title or Type of Document: Document Date: Signer(s) Other Than Named Above: Capacity(les) Claimed by Signer Signer's Name: ❑ Individual ❑ Corporate Officer — Title(s): ❑ Partner —❑ Limited ❑ General ❑ Attorney in Fact ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer Is Representing: Number of Pages: RIGHT THUMBPRINT OF SIGNER 01997 National Notary Association • 9350 De Soto Ave., P.O. Box 2402 • Chatsworth, CA 91313-2402 P d. No. 5907 ReoMBr: Call Toll -Free 1-800-876-6827 0 LEGAL DESCRIPTION a All that real property situated in the City of Newport Beach, County of Orange, State of California and more particularly described as follows: Lots 4 and 5, Block 10, Balboa Tract, in the City of Newport Beach, as shown on a map recorded in Book 41 Page(s) 11, of Miscellaneous Maps, in the office of the County Recorder of said County. ,. 9 2807239 Exhibit C IR A. General and special taxes and assessments collected with taxes for the fiscal year 1998-1999. Total: $4,018.90 First Installment: 2,009.45 Open Second Installment: 2,009.45 Open Homeowners' Fxemption: $0 Code: 07-001 Parcel: 048-135-02 13. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Section 75, et seq. of the Revenue and Taxation Code of the State of California. 1. Covenants, conditions and restrictions (deleting any restrictions indicating any preference, limitation or discrimination based on race, color, religion, sex, handicap, familial status or national origin) as set forth in the document Recorded: in book 153 page 225 of Deeds 2. Covenants, conditions and restrictions (deleting any restrictions indicating any preference, limitation or discrimination based on race, color, religion, sex, handicap, familial status or national origin) as set forth in the document Recorded: in book 3377 page 501, Official Records Said covenants, conditions and restrictions provide that a violation thereof shall not defeat or render invalid the lien of any mortgage or deed of trust made in good faith and for value. 3. Water rights, claims or title to water, whether or not shown by the public records. 4. Matters which may be disclosed by an inspection or by a survey of said land that is satisfactory to this Company, or by inquiry of the parties in possession thereof. An inspection of said land has been ordered; upon its completion we will advise you of our findings. CLTA PmUminary Report Forth (Rev. 1/1/95) Page 1 of 2 2807239 S. Rights of the parties in possession of said land, under unrecorded leases. Please submit copies of said leases for our examination. 6. Before issuing its policy of title insurance, this Company will require evidence, satisfactory to the Company, that the vestee corporation named herein: (a) was duly incorporated on the date of acquisition of title hereinafter set forth and (b) is now of good standing in the state where it was formed: Date of Acquisition: October 17, 1995 7. This Company will require a corporate resolution of the board of directors from the corporation(s) vested herein, authorizing this transaction and the execution of the documents necessary to complete it in accordance with instructions given to the Company. Note No. is The only conveyances affecting said land recorded within six (6) months of the date of this report are as follows: None. Note No. 2: The premium for a policy of title insurance, if issued, will be based on 80%. Jp/hnk cc: Land America Attn: Linda Hamilton Page 2 of 2 CLIA Preliminary Report Form (Rev. 111!95) • OUNCIL MEETING: November 23, 191. AGENDA ITEM NO.: 23 r ' ����COUtiCIL • UP? OF �!'VIPCRT 3EACH CITY OF NEWPORT BEACH Nov 2.3 .. OFFICE OF THE CITY ATTORNEY i A I .n.r ,. p L i O W4 November 20, 1998 TO: Mayor & Members of the City Council FROM: Robert H. Burnham, City Attorney RE: Balboa Theatre Lease I have attached a proposed lease of the Balboa Theater to the Balboa Performing Arts Theatre Foundation (Foundation). The key provisions of the proposed lease can be summarized as follows: • 1. TERM 25 years (Page 10); 2. OPTION TO PURCHASE/RIGHT OF FIRST REFUSAL The Foundation has an option to purchase contingent on completion of major improvements and successful operation of a theater for five years. Purchase price is our cost ($480,000) increased to reflect changes in CPI (page 10). The Foundation also has a right of first refusal. 3. CONSIDERATION Foundation is required to make major improvements (including seismic retrofit) and operate a first-class community theatre with a minimum number of performances. 4. CONTRIBUTION FUND/BUDGET/PLAN Foundation must establish a contribution fund and prepare a budget and operations & marketing. plan. 5. USE OF PROPERTY Foundation must operate a first class community theatre with concessions, food service and retail incidental to performances. Foundation may allow community and fundraising events. 6. REQUIRED IMPROVEMENTS Foundation is required to • do seismic retrofit and renovate structure for use as a first class community theatre 0 0 • at no cost to City. Improvements are to be competed within two (2) years. Improvements are to be consistent with architecture 7. FOUNDATION STATUS Foundation must keep non-profit status and create executive and advisory committees. 8. INSURANCE Foundation required to maintain $5,000,000 in general liability coverage and "all risk' insurance (full replacement cost) if available at commercially reasonable rates. The Committee to Promote Revitalization of Our Peninsula (Jan Debay, John Noyes and John Hedges) has reviewed the proposed lease and recommends Council approval. 3:f7 F:\cat\Shared\Burn ham\Balboatheater\cmemo112098 • ROBERT H. BURNHAM City Attorney 0 LEASE 0 BY AND BETWEEN THE CITY OF NEWPORT BEACH e THE BALBOA PERFORMING ARTS THEATRE FOUNDATION 0 0 9 This Lease ("Lease"), entered into as of 199_(Effective Date) by and between the City of Newport Beach, a Charter City and municipal corporation • ("Lessor") and the Balboa Performing Arts Theatre Foundation ("Lessee"), is made with reference to the following: I;a Mpg Ir_\1V A. Lessor is the owner of the property, structures and improvements, commonly known as the Balboa Theater located at 707 E. Balboa Blvd in the City of Newport Beach ("Property"). B. City 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 Theater 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. NOW, THEREFORE, in consideration of the terms, covenants and conditions contained in this Lease, Lessor and Lessee hereby agree as follows: ARTICLE 1 SUBJECT OF LEASE • 1.1 Purpose of the Lease -1- 0 10 The purpose of this Lease is to renovate and rehabilitate the Property consistent with its original design and architecture for use by Lessee as a (Theater) 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 Property The term 'Property" includes the land described in Exhibit A as well as the structure(s) and any improvements and personal property. The term 'Theater" generally refers to the use of the structure(s), improvements and fixtures located on the land as a non profit cultural and performing arts center. 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 Complex, 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. 1.4 Lessee Lessee is the Balboa Performing Arts Theatre Foundation. Lessee is a California nonprofit public benefit corporation organized for the purpose of • renovating, operating and maintaining the Theater and engaging in activities that will, among other things, serve the interests of, and benefit, area commonly known as Central Balboa or Balboa Village. For the purposes of this Lease, the term "Lessee" shall include all officers, employees, agents or 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 provisions, covenants and 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 operation or aesthetics of the Theatre. 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, maintenance or use of the Theater. -2- 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 or officers, agents or employees. 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, will be necessary before the Property can be operated as a first-class community Theatre as required by this Lease. • 3.3 Ownership of Improvements During the Term of this Lease, Lessor shall hold title to the improvements and personal property necessary or convenient to the operation or maintenance of the Theater, such as fixtures, machinery, rigging, lighting, staging, merchandise, trade fixtures (collectively, the "Equipment") that have been constructed or placed on the Property 3.5 Surrender of Property 3.5.1 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. 3.5.2 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 to be reflected of record -3- • • • (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. 3.5.3 All documents and instruments to be delivered pursuant to this Subsection shall be in a form satisfactory to Lessor. ARTICLE 4 TERMIOPTION 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 (25`h) 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 to 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 the following: 4.3.1 Lessee shall have completed the Required Improvements; 4.3.2 Lessee shall have operated the Theater in full compliance with the provisions of Article 8 for a period of five (5) years; 4.3.3 Lessee has given Lessor thirty (30) days written notice of its intention (notice of intent) to exercise the option to purchase; 4.3.4 Lessee is not in default when the notice of intent is served or at close of escrow; 4.3.5 Lessee, concurrently with the 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 13 • • • 0 0 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 date to the date of the notice of intent. For example, if Lessee exercises the option nine (9) years after the Effective Date 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 the option period 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. 5.2 Other Consideration In consideration for this Lease, Lessee covenants that, during the Term, it will: 5.2.1 Operate and maintain a Theatre 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 9 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. 5.2.5 Use any excess revenue or funds for purposes related to the operation of the Theater 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 Contributions Fund) in excess of the amount projected in Lessee's then current Budget and which, in Lessees reasonable determination, are not needed for Lessee's reserve account(s). ARTICLE 6 CONTRIBUTIONS FUND -5- V, LJ n • Lessee shall establish and maintain, at a financial institution in an account insured by FDIC, FSLIC or similar insurance, a separate fund (the "Contributions Fund") for the purpose of accepting contributions from any source. Lessee shall use the Contributions Fund to pay for the improvements required by this Lease and/or to support the operation and maintenance of the Theater. Lessee shall establish and maintain an on- going fund raising program as part of its Operations and Marketing Operations Plan (Article 7) and use its best efforts to ensure the success of the program. ARTICLE 7 ANNUAL BUDGET/OPERATION AND MARKETING PLAN. 7.1 Budget/Timina 7.1.1 Initial Budget. Lessee shall prepare, and submit to the Lessor, an annual budget for the renovation, maintenance and operation of the Theater (the "Budget"), The first Budget shall be adopted, and submitted to Lessor, within sixty (60) days after the Effective Date. Subsequent annual Budgets shall be submitted to Lessor fifteen days after adoption by Lessee. • 7.1.2 Proposed Revision. Lessee shall provide Lessor with material modifications or revisions to the Budget within fifteen days after adoption by Lessee. 7.1.3 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 itemizing all of its revenues and expenditures for that fiscal year. 7.2 Contents of Budget. The Budget shall specify in reasonable detail (as appropriate given the status of renovation), (i) the proposed rates and charges for the use of the Theater, (ii) the balance in all funds and accounts maintained by Lessee (iii) all projected revenues and sources of funds for the fiscal year, (iv) the expenditures proposed to be made by Lessee in fulfilling its obligations pursuant to this Lease, (v) marketing program and costs, (vi) all other proposed expenditures of Lessee, (vii) the principal balance of the Contributions Fund, (viii) income from the Contributions Fund, and (ix) cash reserves, if any. • 7.3 Operations and Marketing Plan. 19 0 0 Lessee shall prepare and adopt an Operations and Marketing Plan (Operations Plan) during the Term. The initial Operations Plan shall be adopted one hundred • and eighty (180) days prior to anticipated completion of the Required Improvements. The Operations Plan shall be revised from time to time to reflect new performances/events, new fund-raising strategies and new or revised marketing programs. The Operations Plan shall comply with, and provide information relevant to, the provisions of Article 8 and specify in reasonable detail (as appropriate given the status of renovation), (i) performances, meetings, concerts and other events at the Theater that have been, or are proposed to be, scheduled (ii) performers and events which Lessee is actively seeking to schedule at the Theater, (iii) a 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, and (iv) fund raising efforts including a report on fund raising efforts for the prior year. The Operations Plan shall be submitted to Lessor within fifteen days after adoption or any material modification. 7.4 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 Contributions 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 said 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. 7.5 Audit. Lessor shall, once per fiscal year, be entitled to conduct an audit of all records and books of account that Lessee is required to maintain. ARTICLE 8 USE OF PROPERTY 8.1 Permitted Use. The Property shall be used primarily for the operation of a first class cultural and performing arts center (Theater) open to the general public. Lessee shall operate the Theater 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. -7- ("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 civic, charitable, educational and community organizations to periodically use the Theater for fund raising, education or community events 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 9.2 (Seismic Retrofit) and before completion of Required Improvements subject to issuance of a Special Events Permit by Lessor. 8.2 Performances/Frequency. Lessee shall operate the Theater 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. 8.2.1 Lessee shall schedule and present performances or cultural events on at least one hundred (100) days of the twelve (12) month period commencing sixty (60) days after completion of Required Improvements. 8.2.2 Lessee shall, for each subsequent twelve month period, schedule and present performances or cultural events on at least one hundred and fifty days. • 8.2.3 Operation of the Theatre is the fundamental consideration for this Lease and Lessee shall ensure and promote the maximum reasonable use of the Theater by performers, artists, and entertainers likely to attract patrons. The Theater shall be operated consistent with the standards, practices and procedures utilized by first class community theaters in other jurisdictions. 8.3 Program Standards. Lessee shall operate the Theater in a manner reasonably calculated to achieve the following objectives: 8.3.1 Provide frequent and high quality performances and cultural events to attract patrons to the Theater and Central Balboa/Balboa Village; 8.3.2 To serve as a catalyst to the revitalization of the economy of the area to be benefited by use of the Federal Funds. 8.3.3 To make the Theater 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; • 8.3.4 To utilize the skill, ability and energy of members of the community in combination with a capable, experienced professional staff to 1 • 0 fund the renovation, operation and maintain a first class community Theater. • 8.4 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 Theatre to use public parking at reduced rates. Lessor and Lessee shall also discuss ways to integrate operation of the Theater into programs for the economic revitalization of Central Balboa/Balboa Village. 8.5 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 be withheld at Lessor's sole discretion. 8.6 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 Theater. 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 Theater. Lessee shall obtain a use • permit from the City and approval from the Department of Alcohol Beverage Control prior to any sale of alcoholic beverages from the Property. 8.7 Zoning and Planning. Lessor acknowledges that the use of the Property as a theatre 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. 8.8 Nondiscrimination. 8.8.1 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 8.8.2 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, W • • • 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, 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. 8.8.3 Lessee agrees not 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, contract related to the renovation, operation, use or occupancy of the Property. All such contracts, licenses, agreement shall contain non-discrimination provisions substantially similar to this Lease. ARTICLE 9 REQUIRED IMPROVEMENTS 9.1 Lessee's Obligations. The Property requires substantial renovation and rehabilitation to be used as, or considered, a first class community Theater (First Phase Improvements). 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 9.2 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 required improvements 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. 9.3 Conceptual Design Plans. -10- 0 0 Lessee shall prepare, and submit to Lessor for approval, a proposed conceptual . Plan for the design, construction, furnishing and equipping of the Property for use as a theatre (Conceptual Design Plan). The Conceptual Design Plan shall be prepared by a licensed architect. The Conceptual Design Plan shall generally describe those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theatre constructed in the 1920's. The Conceptual Design Plans shall include, without limitation, (1) seating layout and design; (2) stage and dressing room layout and design (3) lobby and concession area design; (4) structural modifications necessary to comply with uniform codes; (5) interior design elements and treatment; (6) exterior design and treatment; (7) sound and projection systems; (8) lighting systems and design; (9) public area layout, design and treatment; and (10) stage, orchestra pit and roll -down backdrop design and treatment. Lessor's right to approve the Conceptual Design Plan shall be limited to ensuring that the improvements contemplated by the Conceptual Design Plan are consistent with a first class community theatre and reasonably consistent with the Guidelines for the Rehabilitation of Historic Structures published by the Secretary of Interior. The Conceptual Design Plan shall be deemed approved if Lessor 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 Plan 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. • 9.4 Design Development. 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 Plan. The Design Development Plans shall include, (1) specific interior and exterior lighting Plans and design; (2) specific information regarding the color, material, treatment and design of all interior and exterior elements; and (3) 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 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 design Development Plans within sixty (60) days after submittal. 9.5 Final Plans and Specifications. • Subsequent to approval of Design Development Plans, Lessee shall submit Final Plans and Specifications. The Final Plans and Specifications shall be based on, . and consistent with, the Design Development Plans. The Final Plans and -11- 0 0 Specifications shall be in sufficient detail to provide the information necessary to obtain building permits from Lessor. Lessor's right of approval, which shall not • unreasonably be withheld, shall be limited to a determination that the Final Plans and Specifications are based on and consistent with the approved Design Development Plans. The Final Plans shall be deemed approved unless Lessor serves written notice of disapproval within thirty (30) days of submittal. Lessor shall specify, in detail, each element of the Final Plans and Specifications disapproved, the reason for disapproval, and alternative(s) that Lessor would approve. The Parties shall reach agreement on the Final Plans and Specifications within 60 days of submittal. 9.6 Building Permits. Lessee shall apply for all necessary building permits from Lessor within one year after the Effective Date. Lessee shall diligently process corrections and changes to submittals that are necessary to comply with state and local law and to ensure consistency with approved Final Plans and Specifications. 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 Final Plans and Specifications, the modifications shall be submitted to Lessor for review and approval. Lessor shall not be unreasonably withhold or delay the approval plans and specifications submitted by Lessee. Lessor shall pay all building permit fees, planning fees and other fees and • charges normally imposed on similar projects 9.7 Construction of Required Improvements. Lessee shall begin construction of Required Improvements within sixty (60) days after approval of all required building permits by Lessor and approval of any permit(s) required by other governmental agencies with jurisdiction over the Property. Lessee shall diligently pursue construction of the Required Improvements to completion. Lessee shall complete construction of Required Improvements within one year and sixty (60) days after issuance of all necessary permits and approvals. 9.8 General Requirements. 9.8.1 The First Phase Improvements shall be constructed in compliance with the other 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 City in its municipal capacity. Lessee also acknowledges that any approval given pursuant to this Section, except the issuance of building permits, does not bind the -12- • • • 0 City when acting in its governmental capacity. 9.8.2 Lessor has designated the Committee to Promote Revitalization of the Peninsula (PROP), or its successor, to review, and approve or disapprove, the Conceptual Design Plan, the Design Development Plans and the Final Plans and Specifications. Lessee shall provide PROP with bimonthly reports on the status of the renovation of the Property and operation of the Theater. 9.9 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 REPAIRS AND MAINTENANCE Lessee recognizes that the Theater 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 Theater 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 Theater (including patching and resurfacing the roof membrane and painting or other protective treatment of the exterior wall of the Theater); (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 Theater and the repair and replacement of components; (iv) maintenance of all pipes and plumbing systems serving the Theater 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 Theater. Lessee shall revise the schedule for maintenance from time to time during the Term as necessary to maintain the Theater to the standards required by this Lease. Lessee shall have the benefit of all warranties available to Lessor with respect to the Theater 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 Theater would make continued operation of the Theater economically infeasible. -13- ARTICLE 11 STATUS AND MANAGEMENT OF LESSEE 11.1 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). 11.2 Executive Board and Advisory Board During the Term, Lessee shall appoint an Executive -Committee consisting of no more than five (5) members. The Executive Committee shall be authorized by Lessee to interact with Lessor and promptly respond to problems or concerns expressed by Lessor or members of the general public relative to the operation of the Theatre. Lessee shall also appoint an Advisory Board or Advisory Committee that is responsible for fund-raising. Lessee may appoint or establish other Boards or Committees to perform specific functions relative to the renovation, maintenance or operation of the Property and Theater. 11.3 Employment of Staff During the term, Lessee shall use its best efforts to employ a professional executive director to manage the day to day renovation and/or operation of the Theater and perform such other duties as Lessee may assign. The executive director shall be appointed at least ninety (90) days prior to anticipated completion of Required Improvements. ARTICLE 12 ALTERATIONS 12.1 Written Consent. Except as otherwise provided in this Article 12, Lessee obtain the written consent of Lessor prior to making any structural or nonstructural alterations to the Property. All structural and nonstructural alterations shall conform to the Theater's designation as a local landmark and shall be consistent with the original design and architecture of the Theatre. 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. 12.2 Notice of Non -responsibility. Structural and non structural alterations shall not be commenced until ten (10) days after Lessor has received written notice from Lessee stating the date work -14- • • • 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 13 PAYMENT OF UTILITIES, TAXES, CHARGES AND FEES 13.1 Public and Private Utility Services. Lessee will pay all charges for all public or private utility services and all sprinkler 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. 13.2 Taxes. Assessments 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. 13.3 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. 13.4 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. 13.5 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. 13.6 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 -15- • 0 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. ARTICLE 14 LIENS 14.1 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 Theater free and clear of all mechanic's liens and similar liens. 14.2 Satisfaction of Liens. Lessee shall fully pay and discharge a judgment or lien affective 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. 14.3 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. 14.4 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 15 15.1 Indemnity. -16- • 0 Lessee shall defend, indemnify and hold harmless Lessor from and against any • and all legal or administrative proceedings, claims, reasonable attorneys' fees 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 15.7] on the Property or Theater, (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 15.2 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. 15.3 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. 15.4 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 15.5 Waiver of California Civil Code & 1542 40 Section 1542 of the California Civil Code states: -17- 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 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. 15.7 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, (f) 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 16 INSURANCE 16.1 Insurance to be Maintained. Lessee shall take out and maintain, from the Effective Date and for the Term of this Lease, at Lessee's sole cost and expense, the following insurance 16.1.1 Comprehensive General Liability in an amount not less than one million dollars ($5,000,000) 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-contributing with any insurance or self-insurance maintained by City or Lessor. 16.1.2 Workers' Compensation as required by the Labor Code of the State of California. • 16.1.3 "All Risk" Property Insurance (Operations) including coverage against the perils of earthquake, fire, explosion of machinery or -18- 0 0 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. 16.1.4 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. 16.2. 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 30 days prior written notice to Lessor. Lessee shall furnish City and Lessor with certificates of insurance and with original 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. 16.3 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 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. 16.4 Waiver of Subrogation. Each policy of insurance procured pursuant to this Article [17] shall contain, if feasible, either (i) a waiver by the insurer of the right of subrogation against -19- 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 DAMAGE BY FIRE OR CASUALTY 17.1 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. 17.2 Restoration Except as provided in Section 18.3, 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 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. 17.3 Casualty Late in Term Lessee or Lessor shall have the right to terminate this Lease on ninety (90) days written notice If (1) 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. 17.4 Application of Insurance Proceeds. • In the event that Lessee is required to restore the Property pursuant to Section 17.2, proceeds from policies of insurance required by Article 16 and which are -20- 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: • 17.4.1 Lessee shall furnish to Lessor evidence satisfactory to Lessor of the total cost of Restoration pursuant to Section [17.2]. 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. • 17.4.2 Assuming satisfaction of the conditions of subsection [17.4.1] 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. 17.4.3 Upon completion of restoration and assuming Lessee is not in default, excess insurance proceeds shall first be paid to Lessor to the extent of its actual expenses incurred in the restoration, then to Lessee as working capital ARTICLE 18 EMINENT DOMAIN 18.1 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. 18.2 Termination of Lease. This Lease shall terminate effective on the date of surrender of possession of the Premises 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. 18.3 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. 18.4 Distribution of Award. -21- 0 0 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. 18.5 Allocation of Award — Partial Taking. Any Award in a Partial Taking shall be distributed by escrow in the following order of priority: 18.5.1 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; 18.5.2 Second, to Lessee, as reimbursement for the costs and expenses of restoration of the Property and as costs and expenses are incurred by Lessee; 18.5.3 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. • 18.6 Allocation of Award — Temporary Takin 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. 18.7 Allocation of Award — Total Taking. Any Award in a Total Taking shall be distributed by escrow in the following priority: 18.7.1 First, to Lessor and Lessee to reimburse for all costs and expenses incurred by each in the collection of the Award; 18.7.2 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. 18.8 Conduct of Proceedinas. -22- 0 • Lessee and Lessor shall jointly participate in and prosecuteldefend 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. 18.9 Notices. Any party receiving notice of or becoming aware of any condemnation proceedings shall promptly give written notice to the other party. ARTICLE 19 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 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 21 LEASEHOLD MORTGAGES • Lessee shall have no right to encumber its interest in this Lease, the Property or the Theater without Lessor's prior written consent, which consent may be withheld in Lessor's sole discretion. ARTICLE 22 PERFORMANCE OF LESSEE'S COVENANTS 21.1 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 [17] 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: 21.1 Pay the tax, fee or charge payable by Lessee pursuant to the this Lease;or 21.1.2 Pay for and maintain any insurance policies required by this Lease; or • 21.1.3 Make the payment or perform the act which Lessee's is required to pay or perform pursuant to this Lease. -23- E r 21.2 Reimbursement and Damages. • Lessee shall reimburse Lessor for all costs and expenses incurred by Lessor in the exercise of its rights pursuant to Section 21.1. ARTICLE 22 REPRESENTATIONS 22.1 Lessor's Representations. Lessor represents to Lessee that: 22.1.1 Lessor owns the Property in fee simple subject only to the Permitted Exceptions and other matters affecting title which do not inhibit, prevent or impair the operation, maintenance or use of the Theater. 22.1.2 Lessor has the power and authority to enter into this Lease and perform all the obligations of Lessor hereunder. 22.2 Lessee's Representations. Lessee represents to Lessor that: • 22.2.1 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. 22.2.2 Lessor has not made any representations or warranties regarding the condition of the Property or the Theater, or its suitability for the construction of Required Improvements or the operation and maintenance of a Theater consistent with this Lease and the Operations Plan. 22.2.3 Lessee has the right, power and authority to enter into this Lease and to perform all the obligations of Lessee. 22.2.4 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 23 DEFAULTS, REMEDIES AND TERMINATION 23.1 Legal Actions. -24- 0 0 23.1.1 Institution of Leaal 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. 23.1.2 Applicable Law. The laws of the State of California shall govern the interpretation and enforcement of this Lease. 23.2 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. 23.3 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 proceed to complete the cure: 23.3.1 The failure of Lessee to comply with the provisions of Article 9 related to the design and construction of Required Improvements. 23.3.2 The failure of Lessee to operate the Theatre in compliance with the provisions of Article 8 related to frequency and quality of performances and events. 23.3.3 The failure of Lessee to maintain the Property as specified in Article 10. 23.3.4 The failure of Lessee to restore or repair the Property in the event of damage or destruction 23.3.5 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. 23.4 Remedies. • If Lessee has materially breached this Lease then a Default shall be deemed to have occurred, and Lessor, may give written termination notice to Lessee, and on the date specified in the notice this Lease shall terminate. In addition to the -25- right of termination, Lessor shall have the following additional rights and remedies: • 23.4.1 Lessor shall have the immediate right to reenter the Property and/or the Theater, take possession of the Theater, any and all Equipment, books and records, contracts and any other property. 23.4.2 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 Theater, 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. 23.4.3 Lessor shall be entitled to recover all money payable to Lessee related to the operation and use of the Theatre, 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 24 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 25 ENTRY BY LESSOR Lessor may enter the Property at reasonable times for the purpose of inspecting, servicing or posting notices, protecting the Property or the Theater, or for any other lawful purposes, including showing the Property to prospective purchasers or lessees. ARTICLE 26 FORCE MAJEURE Any prevention, delay, nonperformance 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, • riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Lessee. -26- ARTICLE 27 MISCELLANEOUS • 27.1 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; Balboa Performing Arts Theatre Foundation P.O. Box 752 Balboa, CA 92661 With a copy to: Steve Bromberg Bromberg & Yeager_ 620 Newport Center Drive 11`" Floor Newport Beach, CA 92660 or at such other addresses as Lessee shall have furnished Lessor in writing. 27.2 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 _27_ 27.3 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 or the Theater. Except as otherwise provided, no subsequent change or addition to this Lease shall be binding unless in writing and signed by the parties. 27.4 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. 27.5 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. • 27.6 Holdinq Over. A tenancy for month to month shall result if Lessee remains in possession of the Property or the Theater 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. 27.7 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 of the Theatre or otherwise. 28.8 Federal Funds Provisions. No Federal appropriated funds shall be paid, by or on behalf of Lessee to any person for 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 &ik-a 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. 1 J Lessee shall require that the language of this certification be included in the award documents for all contracts, subcontracts, and agreements 28.9 Time of the Essence. Time is of the essence relative to all of the terms, provisions, covenants and conditions of this Lease. Dated For Lessor Thomas Cole Edwards Mayor of City of Newport Beach Dated Lessee For Lessee President of Balboa Performing Arts Theatre Foundation F:\cafishared\dalProjects\BalboaTheater\Lease1112098.doc -29- PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS THE CITY OF NEWPORT BEACH, A CHARTERED CITY AND MUNICIPAL CORPORATION ("BUYER") AND C.J.W., INC., A CALIFORNIA CORPORATION ("SELLER") October 49, 1998 TABLE OF CONTENTS Page 1. Agreement to Purchase/Sell........:...................................................................................... 1 2. Purchase Price.................................................................................................................... 1 3. Escrow................................................................................................................................1 (a) Escrow Holder....................................................................................................... 1 (b) Opening of Escrow................................................................................................ 1 (c) Escrow Instructions................................................................................................ 1 (d) Initial Deposit......................................................................................................... 2 (e) Seller Deposits into Escrow................................................................................... 2 (f) Buyer Deposits into Escrow................................................................................... 2 (g) Close of Escrow..................................................................................................... 2 (h) Authorization to Close Escrow.............................................................................. 2 (i) Interpleader............................................................................................................ 2 0) U.S. Treasury Regulations..................................................................................... 3 4. Due Diligence Period......................................................................................................... 3 5. Title Matters....................................................................................................................... 4 6. Representations and Warranties......................................................................................... 5 7. Buyer's Closing Conditions............................................................................................... 5 8. Closing Costs..................................................................................................................... 6 9. Default of Buyer................................................................................................................ 6 10. Broker's Commission........................................................................................................ 6 11. Notices............................................................................................................................... 7 12. Miscellaneous Provisions................................................................................................... 7 (a) Incorporation of Prior Agreements........................................................................ 7 (b) Right to Assign...................................................................................................... 7 (c) Attorneys' Fees...................................................................................................... 7 (d) Time is of the Essence........................................................................................... 8 (e) Successors and Assigns.......................................................................................... 8 (f) California Law....................................................................................................... 8 (g) Counterparts........................................................................................................... 8 (h) Interpretation..........................................................................................................8 (i) Construction...........................................................................................................8 0) Recitals and Exhibits.............................................................................................. 8 EXHIBITS EXHIBIT A LEGAL DESCRIPTION EXHIBIT B FORM OF GRANT DEED EXHIBIT C FORM OF SELLER'S NON -FOREIGN AFFIDAVIT NB I :386863.4 10/7/98 PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS ("Agreement") is dated as of October lc� , 1998, by and between THE CITY OF NEWPORT BEACH, a charter city and municipal corporation ("Buyer"), and C.J.W., INC., a California corporation ("Seller"). RECITALS A. Seller is the owner of certain real property located in the City of Newport Beach, County of Orange (the "County"), State of California, as more particularly described in ExhibitA attached hereto (the "Land"). B. The Property is improved with a theater building commonly known as The Balboa Theater, located at 707 East Balboa Boulevard, Balboa, California 92661, and related on-site improvements (the "Theater"). C. Pursuant to the terms of this Agreement, Seller desires to sell to the Buyer, and Buyer desired to buy from the Seller, the Property. AGREEMENT NOW, THEREFORE, taking into account the foregoing Recitals and in consideration of the mutual covenants, agreements and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows: 1. Agreement to Purchase/Sell. Seller hereby agrees to sell, convey and assign to Buyer, and Buyer agrees to buy and accept from Seller, under the terms and conditions and for the purchase price hereinafter set forth: (a) the Land and the Theater; (b) all of Seller's interest in the land lying in the bed of any street or highway adjoining the Land and all other appurtenances to the Property (the "Appurtenances"); and (c) all of Seller's interest in all rights, warranties, guaranties, business names, logos, agreements, utility contracts, approvals (governmental or otherwise), licenses, permits, authorizations, entitlements, surveys, plans and specifications and other rights relating to the construction, ownership, operation, use and management of the Land and the Theater (the "Intangible Property"). The Land, the Appurtenances and the Improvements are referred to collectively herein as the "Real Property". The Real Property and the Intangible Property are referred to collectively herein as the "Property". 2. Purchase Price. The purchase price to be paid by Buyer at the Close of Escrow (as defined in Section 3) for the Property and repayment of the Loan (the "Purchase Price") is Four Hundred Eighty Thousand Dollars ($480,000). 3. Escrow. (a) Escrow Holder. Escrow No. 18929 -LH for the purchase and sale of the Property (the "Escrow") has been established at Commonwealth Land Title Insurance Company (the "Escrow Holder"). (b) Opening of Escrow. The Escrow shall be deemed open (the "Opening of Escrow") upon the date of this Agreement. (c) Escrow Instructions. This Agreement shall constitute the escrow instructions of Buyer and Seller to the Escrow Holder. NB 1:386863.4 10/7/98 1 (d) Initial Deposit.. Within five (5) business days following the execution of this Agreement by both Buyer and Seller, Buyer shall deposit with Escrow Holder an earnest money deposit in the amount of Twenty -Four Thousand Dollars ($24,000) (the "Deposit"). The Deposit shall be held by Escrow Holder in one or more federally insured interest bearing investments approved by Buyer and, if the transaction contemplated by this Agreement is consummated, the Deposit and all interest earned thereon shall be credited on Buyer's account against the Purchase Price. In the event this Agreement is terminated for any reason other than Buyer's default hereunder, the Deposit, together with all interest earned thereon but after deduction of Buyer's share of any escrow cancellation fees, shall be released by Escrow Holder to Buyer upon demand by Buyer. In the event the purchase of the Property is not consummated because of a default under this Agreement by Buyer, the Deposit and all interest earned thereon shall be delivered to Seller and shall constitute liquidated damages of Seller pursuant to Section 9. (e) Seller Deposits into Escrow. Seller shall deliver or cause to be delivered to Escrow Holder in a timely manner to permit the closing of the transaction contemplated hereby by the Close of Escrow, the following: (i) A duly executed and acknowledged Grant Deed in the form attached hereto as Exhibit D (the "Grant Deed"); (ii) A duly executed Assignment of Intangibles in a form mutually acceptable to Buyer and Seller (the "Assignment of Intangibles"); (iii) A duly executed Non -Foreign Affidavit in the form of Exhibit E attached hereto (the "Non -Foreign Affidavit"); and (iv) Any other executed or other documents reasonably required by the Title Company to consummate this transaction. (f) Buyer Deposits into Escrow. Buyer shall deliver or cause to be delivered to Escrow Holder in a timely manner to permit the closing of the transaction contemplated hereby by the Close of Escrow, the following: (i) The Purchase Price (after taking the Deposit into account), together with such other funds required for costs to be paid by Buyer pursuant to the terms of this Agreement; (ii) Executed preliminary change of ownership statement (the "PCO Statement"); and (iii) Any other executed or other documents reasonably required by the Title Company for the issuance of the Title Policy and the Closing of Escrow. (g) Close of Escrow. Escrow shall close on or before thirty (30) days following the date hereof (the "Close of Escrow"). Escrow shall be deemed to have closed at the time the Grant Deed is filed for record in the Official Records of the County. (h) Authorization to Close Escrow. Provided that Buyer and Seller have deposited into the Escrow the items required by this Agreement, all Buyer's Closing Conditions have been satisfied, and the Title Company can and will issue the Title Policy (as defined in Section 5), concurrently with the Close of Escrow, Escrow Holder shall: (i) Deliver to Buyer the Grant Deed by causing it to be recorded in the Official Records of the County and requesting that it be mailed to Buyer after it has been recorded; (ii) Deliver to Seller or to Seller's order the cash portion of the Purchase Price; (iii) Deliver to Buyer the Non -Foreign Affidavit; (iv) Cause the Title Policy to be issued to Buyer by Title Company; and (v) Cause the PCO Statement to be delivered to the Tax Assessor for the County or with any other governmental official or agency as required by applicable law. (i) Interpleader. The parties hereto expressly agree that if the parties give the Escrow Holder contradictory instructions, the Escrow Holder shall have the right at its election to file an action in interpleader requiring the parties to answer and litigate their several claims and rights NB 1:386863.4 10/7/98 2 between themselves and the Escrow Holder is authorized to deposit with the clerk of the court all documents and funds held in the Escrow. In the event such action is filed, the parties each agree to pay one-half (1/2) of the total of Escrow Holder's cancellation charges and costs, expenses and reasonable attorney's fees which Escrow Holder is required to expend or incur in the interpleader action, the amount thereof to be fixed and judgment therefor to be rendered by the court; provided, however, if the court determines that the instructions given to Escrow Holder by one of the parties were improper, then such party shall bear all of such costs and expenses. Upon the filing of such an action, Escrow Holder shall thereupon be fully released and discharged from all obligations to perform further any duties or obligations otherwise imposed by the terms of the Escrow. 0) U.S. Treasury Regulations. The purchase and sale of the Property is the sale of "reportable real estate" within the meaning of U.S. Treasury Regulations Section 1.6045-4 (the "Regulation"). Escrow Holder is the "real estate reporting person" within the meaning of the Regulation and shall make all reports to the federal government as required by the Regulation. 4. Due Diligence Period. (a) Seller will deliver true and complete copies of the following to Buyer within five days of this Agreement: (i) All surveys of the Real Property in Seller's possession; (ii) To the extent in Seller's possession or reasonably available to Seller, as -built plans, soils reports, grading plans, topographical maps, environmental studies, including any soils, toxic and hazardous waste reports, engineering studies, maps, warranties, guaranties, drawings, specifications, licenses, engineering and architectural studies, building, grading and other permits, the certificate of occupancy or equivalent document, and all other permits, approvals and licenses for any portion of the Property; (iii) Information regarding all pending or, to Seller's knowledge, threatened litigation matters and insurance claims currently affecting the Property or Seller's ownership thereof, including, without limitation, a loss run from all liability insurance carrier(s) covering operations at the Theater for all years for which such loss runs are in Seller's possession, but in no event less than the past five (5) years, indicating all general liability claims. (iv) Seller shall promptly provide to Buyer any supplement, addition or new information received or discovered by Seller relating to any of the items delivered in this Section 4(a) or such other documents or information regarding the Property as Buyer shall reasonably request. (b) Buyer shall have until twenty (20) days from the date this Agreement is executed by both Buyer and Seller (the "Due Diligence Period") to review the materials provided by Seller pursuant to Section 4(a) above and to conduct such other due diligence, studies, tests, and inspections of the Property (collectively, "Due Diligence Matters") as Buyer deems appropriate under the circumstances. Prior to the expiration of the Due Diligence Period, Buyer shall, except as provided in Section 5 hereof, notify Seller of its disapproval of any Due Diligence Matters. During the Due Diligence Period, Buyer and its agents and contractors shall have the right, at Buyer's sole cost and expense, to enter onto the Real Property at reasonable times and in a reasonable manner for the purpose of making such tests and inspections as Buyer deems necessary or desirable in connection with this Agreement. After making any such tests and inspections, Buyer shall restore the Real Property to its condition prior to such tests and inspections. Buyer hereby agrees to indemnify, defend and hold Seller harmless from any loss, damage, cost or expense incurred by Seller by reason of any physical damage to the Real Property or injury to persons caused by Buyer or its agents or contractors in exercising its rights under this Section 4(b). If Buyer fails to notify Seller of its disapproval of any Due Diligence Matters prior to the expiration of the Due Diligence Period, all such Due Diligence Matters shall be deemed approved by Buyer, and Buyer shall be deemed to have waived any and all contingencies with respect to such Due Diligence Matters, express or implied, to its obligation to purchase the Property. (c) During the Due Diligence Period, Buyer and its agents, consultants and contractors will be afforded access to all documents and information relating to the Property and in Seller's possession or control. Seller has not made, and does not make, any representations or warranties as to the accuracy or completeness of such information except as expressly set forth in this Agreement, and Seller shall have no liability if any such information is inaccurate, misleading or incomplete. Buyer shall conduct its own investigation of the Property, make all inquiries, NB 1:386863.4 10/7/98 3 inspections, tests, audits, studies and analyses that it deems necessary or desirable in connection with purchasing the Property (subject to the provisions of this Agreement), and approve or disapprove in its sole discretion the results of its investigations regarding the Property (including engineering, structural and other tests with respect to the physical condition of the Property, economic feasibility studies, soils and geological reports, zoning, entitlement and other land use matters, the status of title to the Property, survey matters, parking rights, reviews of books, records and financial statements, and documents obtained or prepared by or for Buyer in connection with its review). In determining whether to purchase the Property, Buyer is relying solely on the express representations and warranties of Seller set forth in Section 6(a), and on its own inspections, tests, audits, studies and investigations of the Property, and on Buyer's own judgment with respect thereto. (d) EXCEPT AS EXPRESSLY SET FORTH IN SECTION 6(a), BUYER IS BUYING THE PROPERTY WITHOUT ANY REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, OF ANY KIND WHATSOEVER, BY SELLER, ITS AGENTS, BROKERS, ADVISORS, CONSULTANTS, COUNSEL, EMPLOYEES, OFFICERS, DIRECTORS, SHAREHOLDERS, OR AFFILIATES. AS A MATERIAL INDUCEMENT TO SELLER IN AGREEING TO SELL THE PROPERTY TO BUYER, BUYER IS PURCHASING THE PROPERTY IN ITS "AS -IS" CONDITION, WITH ALL FAULTS, AND SELLER WOULD NOT HAVE AGREED TO SELL THE PROPERTY TO BUYER WITHOUT BUYER'S EXPRESS AGREEMENT TO THE FOREGOING. 5. Title Matters. (a) As soon as possible following the execution of this Agreement, but in no event later than the date which is five (5) business days following the execution of this Agreement by both Buyer and Seller, Buyer shall order and obtain from Commonwealth Land Title Insurance Company ("Title Company") a standard coverage preliminary title report or commitment on the Property (the "PTR"), together with legible copies of all documents relating to the title exceptions referred to in such PTR. (b) As soon as possible following the execution of this Agreement, but in no event later than the date which is five (5) business days following the execution of this Agreement by both Buyer and Seller, Seller shall deliver to Buyer and to Title Company a copy of any surveys of the Real Property in Seller's possession or control. (c) Within ten (10) business days after receiving the PTR and Survey, respectively, Buyer shall notify Seller of any disapproved title exceptions or survey matters ("Disapproved Matters"). All other title exceptions set forth in the PTR shall constitute the "Permitted Encumbrances". In addition, Seller shall be obligated to remove or cure, prior to Closing, any title or survey matters affecting the Property which are caused or created by Seller after the date hereof, unless otherwise approved by Buyer, which approval shall not be unreasonably withheld, delayed or conditioned. As a condition precedent to the Closing, Seller shall use commercially reasonable efforts, without requiring any material expenditure by Seller, to remove, or cause to be removed, all other Disapproved Matters or, in the alternative, obtain title insurance in a form reasonably satisfactory to Buyer insuring against the effect of such Disapproved Matters (and any Disapproved Matter which is so insured against also shall be deemed to be a Permitted Encumbrance). Seller agrees to pay and discharge on or before the Closing Date, or obtain an endorsement to the Title Policy from the Title Company in form and substance acceptable to Buyer removing the exception for any monetary lien on the Property. Not less than ten (10) days prior to the Closing, Seller shall notify Buyer in writing of any Disapproved Matters which Seller is unable or unwilling to cause to be removed or satisfactorily insured against and Buyer shall then, within five (5) days thereafter, elect, by giving written notice to Seller and Escrow Holder, (i) to terminate this Agreement, or (ii) to waive its disapproval of such exceptions or survey matters (such exceptions or survey matters shall then be deemed to be Permitted Encumbrances). Buyer's failure to give such notice in a timely manner shall be deemed a disapproval of such exceptions or survey matters. In the event Buyer disapproves or is deemed to have disapproved the PTR or the survey, and Seller shall have used commercially reasonable efforts, without requiring any material expenditure by Seller, to remove, or cause to be removed, all Disapproved Matters or, in the alternative, to obtain title insurance in a form reasonably satisfactory to Buyer insuring against the effect of such Disapproved Matters, this Agreement shall be deemed terminated and shall thereafter be null and void with no further obligation on the part of either party except that (i) any money or documents in escrow shall be returned to the party depositing the same, including the Deposit, and any interest earned thereon, which shall be returned to Buyer, and (ii) Buyer and Seller each shall be responsible for one-half of any title or escrow cancellation fee. NB 1:386863.4 10/7/98 4 (d) Upon the Closing, Buyer's title to the Fee Land and Improvements shall be insured by an ALTA extended coverage owner's policy of title insurance, showing title vested in Buyer as of the Closing Date, subject only to the Permitted Exceptions, and issued by the Title Company with aggregate liability in the amount of the Purchase Price, with such endorsements as Buyer may require (collectively, the "Title Policy"). 6. Representations and Warranties. (a) Seller hereby represents, warrants and covenants to Buyer that the following matters are true and correct as of the execution of this Agreement and will also be true and correct as of the Close of Escrow: (i) This Agreement and all the documents and items to be executed and delivered by Seller to Buyer pursuant to the terms of this Agreement, (i) have been or will be duly authorized, executed and delivered by Seller, (ii) are or will be legal, valid and binding obligations of Seller as of the date of their respective executions, (iii) are or will be enforceable in accordance with their respective terms (except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, moratorium and other principles relating to or limiting the rights of contracting parties generally); (iv) do not and will not, at the Close of Escrow, violate any provisions of any agreement to which Seller is a party. (ii) This Agreement in no way interfered with or directly or indirectly materially affected the terms or provisions of that certain Purchase Agreement and Joint Escrow Instructions for the Property between Seller and The Balboa Performing Arts Theatre Foundation. (iii) Seller has no interest in any and all tangible personal property, furniture and equipment owned or leased by Seller and located on or used in connection with the ownership, operation and management of the Theater. (iv) Seller has not entered into any contracts, agreements or other documents affecting the Property which will survive the Closing, including any service contracts, equipment leases, maintenance contracts, management contracts, employment contracts, union contracts and warranties which would be binding upon the Property or Buyer after the Closing or under which goods, services or equipment are sold, rendered or leased to the Theater. (v) Seller has not entered into any rental agreements, leases and subleases affecting the Property which will survive the Closing, including any contracts, operating leases, rental agreements, licenses or similar instruments creating a possessory interest in the Real Property. (b) Buyer hereby represents, warrants and covenants to Seller that the following is true and correct as of the execution of this Agreement and will also be true and correct as of the Close of Escrow: (i) This Agreement and all the documents and items to be executed and delivered by Buyer to Seller pursuant to the terms of this Agreement, (i) have been or will be duly authorized, executed and delivered by Seller, (ii) are or will be legal, valid and binding obligations of Seller as of the date of their respective executions, (iii) are or will be enforceable in accordance with their respective terms (except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, moratorium and other principles relating to or limiting the rights of contracting parties generally); (iv) do not and will not, at the Close of Escrow, violate any provisions of any agreement to which Buyer is a party. 7. Buyer's Closing Conditions. Buyer shall have no obligation to acquire the Property unless the following additional conditions ("Buyer's Closing Conditions") have been satisfied or waived in writing by Buyer at or prior to the Closing: (a) Seller shall have timely performed, in all material respects, all of the obligations required to be performed by Seller by the terms of this Agreement; (b) Buyer shall have received all necessary consents and approvals in connection with the purchase of the Property from the City Council of the City of Newport Beach; NB 1:386863.4 10/7/98 (c) The representations and warranties of Seller, as set forth in Section 6(a), shall be true and correct, in all material respects, as of the date made, and as of the Closing Date; (d) The Title Company shall issue the Title Policy insuring Buyer's title to the Real Property subject only to the Permitted Exceptions; (e) There shall be no material damage to, or adverse change in, the physical condition of the Improvements and the Personal Property from the condition as on the date of this Agreement, reasonable wear and tear excepted; (f) All instruments and documents required on the part of Seller to be executed and delivered to effect the Closing shall be in form and substance reasonably satisfactory to Buyer; and (k) Seller shall have executed and delivered, or caused to be executed and delivered, the Seller's closing documents (as described in Section 3(e) above). 8. Closing Costs. Seller shall pay any documentary transfer tax, bulk sales tax, revenue tax or excise tax (and any surtax thereon) due in connection with the consummation of this transaction, the premium for the Title Policy up to the amount of the premium for a CLTA standard coverage owner's policy of title insurance, the cost of title endorsements which are used for title curative purposes under Section 5 above if customarily part of a standard coverage title policy or which can be obtained at no additional cost, and fifty percent (50%) of all other escrow and closing costs. Buyer shall pay any fees for recording the Deed, the cost differential of the premium for the CLTA standard owner's policy of title insurance and any coverage or endorsements included in any title policy purchased by Buyer, the cost of any title endorsements other than endorsements for title curative purposes under Section 5 above except those customarily part of a standard coverage title policy or which can be obtained at no additional cost, and fifty percent (50%) of all other escrow and closing costs. Each party shall bear the expense of its own counsel and other consultants. The parties acknowledge that this allocation of closing costs is in accordance with standard custom and practice in Orange County, California. 9. Default of Buyer. PRIOR TO ENTERING INTO THIS TRANSACTION, BUYER AND SELLER HAVE BEEN CONCERNED WITH THE FACT THAT SUBSTANTIAL DAMAGES WILL BE SUFFERED BY SELLER IN THE EVENT OF BUYER'S DEFAULT UNDER THIS AGREEMENT. WITH THE FLUCTUATION IN LAND VALUES, THE UNPREDICTABLE STATE OF THE ECONOMY AND OF GOVERNMENTAL REGULATIONS, THE FLUCTUATING MONEY MARKT FOR REAL ESTATE LOANS OF ALL TYPES, AND OTHER FACTORS WHICH DIRECTLY AFFECT THE VALUE AND MARKETABILITY OF THE PROPERTY, IT IS REALIZED BY THE PARTIES THAT IT WOULD BE EXTREMELY DIFFICULT AND IMPRACTICABLE, IF NOT IMPOSSIBLE, TO ASCERTAIN WITH ANY DEGREE OF CERTAINTY THE AMOUNT OF DAMAGES WHICH WOULD BE SUFFERED BY SELLER IN THE EVENT OF BUYER'S DEFAULT UNDER THIS AGREEMENT. THEREFORE, IN THE EVENT BUYER DEFAULTS IN ITS OBLIGATION TO CLOSE THE PURCHASE OF THE PROPERTY FOR ANY REASON OTHER THAN SELLER'S DEFAULT, THE DEPOSIT, IN ADDITION TO ANY ACCRUED INTEREST ON THE DEPOSIT, SHALL BE PAID OR DELIVERED TO AND RETAINED BY SELLER AS LIQUIDATED DAMAGES WHICH SHALL BE SELLER'S SOLE REMEDY HEREUNDER BY REASON OF SUCH DEFAULT. THE PARTIES HERETO EXPRESSLY AGREE AND ACKNOWLEDGE THAT THE AMOUNT OF SUCH DEPOSIT REPRESENTS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES IN THE EVENT OF SUCH DEFAULT. SELLER'S INITIALS: BUYER'S INITIALS: 10. Broker's Commission. Buyer and Seller each represent to the other that they have not entered into any agreement or incurred any obligation which might result in the obligation to pay a sales or brokerage commission or finder's fee with respect to this transaction. Buyer and Seller each agree to indemnify, defend, protect and hold the other harmless from and against any and all losses, claims, damages, costs or expenses (including attorneys' fees) which the other may incur as a result of any claim made by any person to a right to a sales or brokerage commission or finder's fee in connection with this transaction to the extent such claim is based, or purportedly based, on the acts or omissions of Seller or Buyer, as the case may be. The obligations of Buyer and Seller under this Section 10 shall survive the Close of Escrow. NB 1:386863.4 10/7/98 6 11. Notices. All notices, requests and demands to be made hereunder to the parties hereto shall be made in writing to the addresses set forth below and shall be given by any of the following means: (a) personal service; (b) certified or registered mail, postage prepaid, return receipt requested; or (c) courier or delivery service. Such addresses may be changed by notice to the other parties given in the same manner as provided above. Any notice, demand or request sent pursuant to either subsection 11(a) or (c) hereof shall be deemed received upon the actual delivery thereof, and, if sent pursuant to subsection II(b) shall be deemed received five (5) days following deposit in the mail. Refusal to accept delivery of any notice, request or demand shall be deemed to be delivery thereof. If any party hereto is not an individual, notice may be made on any officer, general partner or principal thereof. Notice to any one co -party shall be deemed notice to all co -parties. To Seller: C.J.W., Inc. c/o John Wortmann 104 Via Yella Newport Beach, California 92668 Facsimile No: (714) 673-6868 To Buyer: The City of Newport Beach Office of the City Attorney P.O. Box 1768 330 Newport Boulevard Newport Beach, California 92658-8915 Attention: Robert Burnham, Esq. Facsimile No: (949) 644-3139 With a O'Melveny & Myers LLP copy to: 610 Newport Center Drive, Suite 1700 Newport Beach, California 92660 Attention: Lowell C. Martindale, Jr. Facsimile No: (949) 823-6994 To Escrow Commonwealth Land Title Insurance Company Holder: 888 West Sixth Street, 4th Floor Los Angeles, CA 90017 Attention: Donald A. Boynton Facsimile No: (213) 627-8722 12. Miscellaneous Provisions. (a) Incorporation of Prior Agreements. This Agreement contains the entire understanding of Buyer and Seller with respect to the subject matter hereof, and supersedes all prior or contemporaneous written or oral agreements and understandings between the parties hereto pertaining to any such matter. No provision of this Agreement may be amended, modified or supplemented or added to except by an agreement in writing, expressly stating that such agreement is an amendment of this Agreement, signed by the parties to this Agreement or their respective successors in interest. (b) Right to Assign. Neither party shall have the right to assign or transfer any of its or their respective rights or responsibilities hereunder to any person or entity without the other party's prior written consent. (c) Attorneys' Fees. If either party commences an action against the other to interpret or enforce any of the terms of this Agreement or because of the breach by the other party of any of the terms hereof, the losing party shall pay to the prevailing party reasonable attorneys' fees, costs and expenses incurred in connection with the prosecution or defense of such action, whether or not the action is prosecuted to a final judgment. For the purpose of this Agreement, the terms "attorneys' fees" or "attorneys' fees and costs" shall mean the fees and expenses of counsel to the parties hereto, which may include printing, photostating, duplicating and other expenses, air freight charges, and fees billed for law clerks, paralegals, librarians and others not admitted to the bar but performing services under the supervision of an attorney. The terms "attorneys' fees" or "attorneys' fees and costs" shall also include, without limitation, all such fees and expenses incurred with respect to appeals, arbitrations and bankruptcy proceedings, and whether or not any action or proceeding is brought with respect to the matter for which said fees and expenses were incurred. The term "attorney" shall have the same meaning as the term "counsel." NB 1:386863.4 10/7/98 7 (d) Time is of the Essence. Time is of the essence of this Agreement. (e) Successors and Assigns. This Agreement shall be binding upon and enure to the benefit of each of the parties hereto and to their respective transferees, successors, and assigns. (f) California Law. This Agreement shall be construed in accordance with and governed by the internal laws of the State of California, without giving effect to any "conflict of law" rules of such state. (g) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which, when taken together, shall constitute one and the same instrument. (h) Interpretation. Wherever possible, each provision of this Agreement shall be interpreted in such a manner as to be valid under applicable law, but, if any provision of this Agreement shall be invalid or prohibited thereunder, such invalidity or prohibition shall be construed as if such invalid or prohibited provision had not been inserted herein and shall not affect the remainder of such provision or the remaining provisions of this Agreement. Section headings of this Agreement are solely for convenience of reference and shall not govern the interpretation of any of the provisions of this Agreement. (i) Construction. The language in all parts of this Agreement shall be in all cases construed simply according to its fair meaning and not strictly against the party who drafted such language. 0) Recitals and Exhibits. The Recitals to this Agreement and all Exhibits attached hereto are incorporated herein by reference and made a part hereof for all purposes. IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement as of the day and year first above written. as to form: Robert H. Burnham City Attorney NB 1:386863.4 10/7/98 "SELLER" C.J.W., INC., a California corporation "BUYER" THE CITY OF NEWPORT BEACH, a mi C Mayor EXHWff A LEGAL DESCRIPTION All that real property situated in the City of Newport Beach, County of Orange, State of California and more particularly described as follows: Lots 4 and 5, Block 10, Balboa Tract, in the City of Newport Beach, as shown on a map recorded in Book 4, Page(s) 11, of Miscellaneous Maps, in the office of the County Recorder of said County. NB 1:386863.4 1017/98 A-1 W% EXHIBIT B FORM OF GRANT DEED WHEN RECORDED MAIL TO: AND MAIL TAX STATEMENTS TO: City of Newport Beach Office of the City Attorney 3300 Newport Boulevard Newport Beach, California 92658 Attention: Robert Burnham, Esq. s Use In accordance with Section 11932 of the California Revenue and Taxation Code, Grantor has declared the amount of transfer tax which is due by a separate statement which is not being recorded with this Grant Deed. GRANT DEED FOR VALUE RECEIVED, the receipt and sufficiency of which are hereby acknowledged, C.J.W., INC., a California corporation, hereby grants to THE CITY OF NEWPORT BEACH, a charter city and municipal corporation, all of that certain real property more particularly described in Schedule 1 attached hereto and incorporated herein by this reference. Dated: November , 1998 By: C.J.W., INC., a California corporation John Wortmann, President NB 1:386863.4 10/7/98 ACKNOWLEDGEMENT STATE OF CALIFORNIA COUNTY OF ORANGE On November_, 1998, before me, personally appeared 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 signatures(s) on the instrument the persons(s), or the entity upon behalf of which the person(s) acted, executed the instrument. NB 1:386863.4 10/7/98 Witness my hand and official seal. i Signature of Notary 2�' SCHEDULE 1 Grant Deed Legal Description All that real property situated in the City of Newport Beach, County of Orange, State of California and more particularly described as follows: NB 1:386863.4 10/7/98 S-1 I -A EXHIBIT C SELLER'S NON -FOREIGN AFFIDAVIT To inform THE CITY OF NEWPORT BEACH, a chartered city and municipal corporation (the "Transferee"), that withholding of tax under Section 1445 of the Internal Revenue Code of 1986, as amended (the "Code") will not be required upon the transfer of certain real property to the Transferee by C.J.W., INC., an individual (the "Transferor"), the undersigned hereby certifies the following on behalf of Transferor: 1. Transferor is not a foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Code and Income Tax Regulations promulgated thereunder); 2. Transferor's U.S. employer identification number is ; and 3. Transferor's office address is Transferor understands that this Certification may be disclosed to the Internal Revenue Service by Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both. Under penalty of perjury, I declare that I have examined this Certification and that, to the best of my knowledge and belief, it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of the Transferor. Dated: , 1998 N131:386863.4 10/7/98 By: C.J.W., INC., a California corporation C-1 John Wortmann, President C7-;) CITY OF NEWr._ -.T BEACH Hearing L _ -e: October 12, 1998 COMMUNITY AND ECONOMIC Agenda Item �� w= DEVELOPMENT No.: 15 PLANNING DEPARTMENT Staff Person: Sharon Z. Wood 3300 NEWPORT BOULEVARD 644-3222 NEWPORT BEACH, CA 92658 (714) 644-3200; FAX (714) 644-3250 7,�nIsY7r C";, ..;L REPORT TO THE MAYOR AND CITY COUNCIL, CITY OF NEWPORT BELCH KOCT .� PROJECT: Agreement to Purchase Balboa Theatre APPROVED 707 East Balboa Boulevard SUGGESTED ACTION: Approve and Authorize Mayor to Execute Agreement BACKGROUND The City has had a long-standing interest in revitalizing the Balboa Village area, and has taken actions including adoption of the Central Balboa Specific Plan, improvements to Main Street, and completion of the Balboa Peninsula Planning Study to facilitate revitalization. Likewise, the Balboa merchants have worked to strengthen the area through formation of the Business Improvement District and its activities. All of these efforts could be assisted by a major project in the area, such as rehabilitation and reuse of the Balboa Theatre. Therefore, the City Council gave staff direction to negotiate the City's acquisition of the Theatre. DISCUSSION Agreement Terms The City Attorney and I have discussed terms of the City's purchase of the Theatre with John Wortmann, President of C.J.W., Inc., the Theatre owner. Mr. Wortmann indicated that he and his partners are supportive of the City purchasing the property because they believe this action will facilitate rehabilitation of the Theatre as a cultural and community center, which was their goal in purchasing the property. We have reached the attached agreement, which we believe is consistent with the City Council's direction to us. The purchase price is $480,000, which is the value established in an appraisal done by Richard Fuller, MAI in July 1998. The City is to deposit $24,000 within five days of executing the agreement, and this amount is applicable to the purchase price. Escrow is to close within thirty days of the agreement's execution. The City has a due diligence period of twenty days to review all the seller's information on the property, to conduct additional investigations, and to notify the seller of disapproval of any due diligence matters. The City already has a significant amount of information on the property as a result of our review of seismic retrofit plans for the building and inspection of the work done to date. Staff intends to obtain a Phase 1 environmental review of the building to help the City understand the extent of any issues relative to asbestos or other conditions. The agreement provides that the City is acquiring the property in its "as is" condition. The City also has ten days after receiving the preliminary title report and survey from the seller to notify them of any disapproved exceptions. The seller is required to remove disapproved exceptions or obtain title insurance against their effects on the City. The seller is to pay the title insurance premium, the City is to pay any fees for recording the deed, and the seller and City will share the remaining escrow and closing costs (estimated to be $2,500). This is standard practice for real estate transactions. Funding City acquisition of the Balboa Theatre is an eligible activity for the use of Community Development Block Grant (CDBG) funds. Because the City Council elected not to give further consideration to changes to Via Lido and 32nd Street, and because of the Council's recent transfer of unexpended CDBG funds from previous years to the Balboa Peninsula Revitalization account, sufficient funds are available to purchase the Theatre without affecting other projects to be funded with CDBG funds. Impacts of City Acquisition of the Theatre The Balboa Theatre is a key building in Balboa Village. If operated successfully, it could draw foot traffic from off the Peninsula with significant disposable income, and could bring evening activity that could support restaurants and other quality commercial uses in the area. Eliminating the Theatre vacancy and improving the fagade of a building at such a visible location would create a more positive, vibrant image in the Village. The City's financial participation in this project would demonstrate the City's stated commitment to revitalize the Peninsula. All of this could stimulate other owners to upgrade their businesses or properties, and new businesses to invest in the area. Although City acquisition of the Theatre could be a significant first step in revitalization, it is not likely that the City itself would undertake the rehabilitation or operation of the Theatre. Rather, the City is likely to seek another organization to follow up with these activities. The Balboa Performing Arts Theatre Foundation, for example, is organized for this purpose and has begun significant fund-raising efforts. With the City's acquisition of the property, private fund-raising should be more successful, and all the proceeds would be available for rehabilitation and reopening of the Theatre. It should be recognized that no City funds have been identified for rehabilitation or operation of the facility. If private efforts to accomplish this are not successful, the City still would control the property and have the option to rehabilitate the building as a theater or use the property in other ways that would benefit Balboa Village. SHARON Z. WOOD Assistant City Manage Page 2 PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS THE CITY OF NEWPORT BEACH, A CHARTERED CITY AND (MUNICIPAL CORPORATION ("BUYER") AN D C.J.W., INC., A CALIFORNIA CORPORATION ("SELLER") October , 1998 K TABLE OF CONTENTS Page I . Agreement to Purchase/Sell............................................................................................... 1 2. Purchase Price.................................................................................................................... 1 3. Escrow................................................................................................................................1 (a) Escrow Holder....................................................................................................... 1 (b) Opening of Escrow................................................................................................ 1 (c) Escrow Instructions................................................................................................ 1 (d) Initial Deposit......................................................................................................... 2 (e) Seller Deposits into Escrow................................................................................... 2 (f) Buyer Deposits into Escrow................................................................................... 2 (g) Close of Escrow..................................................................................................... 2 (h) Authorization to Close Escrow.............................................................................. 2 (i) Interpleader............................................................................................................2 0) U.S. Treasury Regulations.....................................................................................3 4. Due Diligence Period......................................................................................................... 3 5. Title Matters.......................................................................................................................4 6. Representations and Warranties......................................................................................... 5 7. Buyer's Closing Conditions............................................................................................... 5 S. Closing Costs..................................................................................................................... 6 9. Default of Buyer................................................................................................................ 6 10. Broker's Commission......................................................................................................... 6 11. Notices............................................................................................................................... 7 12. Miscellaneous Provisions................................................................................................... 7 (a) Incorporation of Prior Agreements........................................................................ 7 (b) Right to Assign...................................................................................................... 7 (c) Attorneys' Fees...................................................................................................... 7 (d) Time is of the Essence........................................................................................... 8 (e) Successors and Assigns.......................................................................................... 8 (f) California Law....................................................................................................... 8 (g) Counterparts...........................................................................................................8 (h) Interpretation..........................................................................................................8 (i) Construction...........................................................................................................8 0) Recitals and Exhibits.............................................................................................. 8 EXHIBITS EXHIBIT A LEGAL DESCRIPTION EXHIBIT B FORM OF GRANT DEED EXHIBIT C FORM OF SELLER'S NON -FOREIGN AFFIDAVIT NB1:386863.4 10/7/98 PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS 1-1IIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS ('Agreement") is dated as of October _, 1998, by and between THE CITY OF NEWPORT BEACH, a charter city and municipal corporation ("Buyer"), and C.J.W., INC., a California corporation ("Seller"). RECITALS A. Seller is the owner of certain real property located in the City of Newport Beach, County of Orange (the "County"), State of California, as more particularly described in E.rhibif A attached hereto (the "Land"). B. The Property is improved with a theater building commonly known as The Balboa Theater, located at 707 East Balboa Boulevard, Balboa, California 92661, and related on-site improvements (the "Theater"). C. Pursuant to the terms of this Agreement, Seller desires to sell to the Buyer, and Buyer desired to buy from the Seller, the Property. AGREEMENT NOW, THEREFORE, taking into account the foregoing Recitals and in consideration of the mutual covenants, agreements and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows: Agreement to Purchase/Sell. Seller hereby agrees to sell, convey and assign to Buyer, and Buyer agrees to buy and accept from Seller. under the terms and conditions and for the purchase price hereinafter set forth: (a) the Land and the Theater; (b) all of Seller's interest in the land lying in the bed of any street or highway adjoining the Land and all other appurtenances to the Property (the "Appurtenances"); and (c) all of Seller's interest in all rights, warranties, guaranties, business names, logos, agreements, utility contracts, approvals (governmental or otherwise), licenses, permits. authorizations, entitlements, surveys, plans and specifications and other rights relating to the construction, ownership, operation, use and management of the Land and the Theater (the "Intangible Property"). The Land, the Appurtenances and the Improvements are referred to collectively herein as the "Real Property". The Real Property and the Intangible Property are referred to collectively herein as the "Property". 2. Purchase Price. The purchase price to be paid by Buyer at the Close of Escrow (as defined in Section 3) for the Property and repayment of the Loan (the "Purchase Price") is Four hundred Eighty Thousand Dollars ($480,000). Escrow. (a) Escrow Holder. Escrow No. 18929 -LH for the purchase and sale of the Property (the "Escrow") has been established at Commonwealth Land Title Insurance Company (the "Escrow Holder"). (b) Opening of Escrow. The Escrow shall be deemed open (the "Opening of Escrow") upon the date of this Agreement. (c) Escrow Instructions. This Agreement shall constitute the escrow instructions of Buyer and Seller to the Escrow Holder. Nn I :386863.4 1017/98 )CAD (d) Initial Deposit.. Within five (5) business days following the execution of this Agreement by both Buyer and Seller, Buyer shall deposit with Escrow Holder an earnest money deposit in the amount of Twenty -Four Thousand Dollars ($24.000) (the "Deposit"). The Deposit shall be held by Escrow Holder in one or more federally insured interest bearing investments approved by Buyer and, if the transaction contemplated by this Agreement is consummated, the Deposit and all interest earned thereon shall be credited on Buyer's account against the Purchase Price. In the event this Agreement is terminated for any reason other than Buyer's default hereunder, the Deposit, together with all interest earned thereon but after deduction of Buyer's share of any escrow cancellation fees, shall be released by Escrow Holder to Buyer upon demand by Buyer. In the event the purchase of the Property is not consummated because of a default under this Agreement by Buyer, the Deposit and all interest earned thereon shall be delivered to Seller and shall constitute liquidated damages of Seller pursuant to Section 9. (e) Seller Deposits into Escrow. Seller shall deliver or cause to be delivered to Escrow Holder in a timely manner to permit the closing of the transaction contemplated hereby by the Close of Escrow, the following: (i) A duly executed arid acknowledged Grant Deed in the form attached hereto as Exhibit D (the "Grant Deed"); (ii) A duly executed Assignment of Intangibles in a form mutually acceptable to Buyer and Seller (the "Assignment of Intangibles"): (iii) A duly executed Non -Foreign Affidavit in the form of Exhihit E attached hereto (the "Non -Foreign Affidavit"); and (iv) Any other executed or other documents reasonably required by the Title Company to consummate this transaction. (f) Buyer Deposits into Escrow. Buyer shall deliver or cause to be delivered to Escrow Ifolder in a timely manner to permit the closing of the transaction contemplated hereby by the Close of Escrow, the following: (i) The Purchase Price (after taking the Deposit into account). together with such other funds required for costs to be paid by Buyer pursuant to the terms of this Agreement: (ii) Executed preliminary change of ownership statement (the "PCO Statement"); and (iii) Any other executed or other documents reasonably required by the Title Company for the issuance of the Title Policy and the Closing of Escrow. (g) Close of Escrow. Escrow shall close on or before thirty (30) days following the date hereof (the "Close of Escrow"). Escrow shall be deemed to have closed at the time the Grant Deed is filed for record in the Official Records of the County. (h) Authorization to Close Escrow. Provided that Buyer and Seller have deposited into the Escrow the items required by this Agreement, all Buyer's Closing Conditions have been satisfied, and the Title Company can and will issue the Title Policy (as defined in Section 5), concurrently with the Close of Escrow, Escrow Bolder shall: (i) Deliver to Buyer the Grant Deed by causing it to be recorded in the Official Records of the County and requesting that it be mailed to Buyer after it has been recorded; (ii) Deliver to Seller or to Seller's order the cash portion of the Purchase Price; (iii) Deliver to Buyer the Non -Foreign Affidavit; (iv) Cause the Title Policy to be issued to Buyer by Title Company; and (v) Cause the PCO Statement to be delivered to the Tax Assessor for the County or with any other governmental official or agency as required by applicable law. (i) Interpleader. The parties hereto expressly agree that if the parties give the Escrow Holder contradictor), instructions, the Escrow Holder shall have the right at its election to file an action in interpleader requiring the parties to answer and litigate their several claims and rights NB I :386863.4 10/7/98 2 AO I between themselves and the Escrow Holder is authorized to deposit with the clerk of the court all documents and funds held in the Escrow. In the event such action is filed, the parties each agree to pay one-half (1/2) of the total of Escrow Holder's cancellation charges and costs, expenses and reasonable attorney's fees which Escrow Holder is required to expend or incur in the interpleader action, the amount thereof to be fixed and judgment therefor to be rendered by the court; provided, however, if the court determines that the instructions given to Escrow Holder by one of the parties were improper, then such party shall bear all of such costs and expenses. Upon the filing of such an action, Escrow Holder shall thereupon be fully released and discharged from all obligations to perform further any duties or obligations otherwise imposed by the terns of the Escrow. (j) U.S. Treasury Regulations. The purchase and sale of the Property is the sale of "reportable real estate" within the meaning of U.S. Treasury Regulations Section 1.6045-4 (the "Regulation"). Escrow Holder is the "real estate reporting person" within the meaning of the Regulation and shall make all reports to the federal government as required by the Regulation. Due Diligence Period. (a) Seller will deliver true and complete copies of the following to Buyer within five days of this Agreement: (i) All surveys of the Real Property in Seller's possession; (ii) To the extent in Seller's possession or reasonably available to Seller, as -built plans, soils reports, grading plans, topographical maps, environmental studies, including any soils, toxic and hazardous waste reports, engineering studies, maps, warranties, guaranties, drawings, specifications, licenses, engineering and architectural studies, building, grading and other permits, the certificate of occupancy or equivalent document, and all other permits, approvals and licenses for any portion of the Property; (iii) Information regarding all pending or, to Seller's knowledge, threatened litigation matters and insurance claims currently affecting the Property or Seller's ownership thereof, including, without limitation, a loss run from all liability insurance carrier(s) covering operations at the Theater for all years for which such loss runs are in Seller's possession, but in no event less than the past five (5) years. indicating all general liability claims. (iv) Seller shall promptly provide to Buyer any supplement, addition or new information received or discovered by Seller relating to any of the items delivered in this Section 4(a) or such other documents or information regarding the Property as Buyer shall reasonably request. (b) Buyer shall have until twenty (20) days from the date this Agreement is executed by both Buyer and Seller (the "Due Diligence Period") to review the materials provided by Seller pursuant to Section 4(a) above and to conduct such other due diligence, studies, tests, and inspections of the Property (collectively, "Due Diligence Matters") as Buyer deems appropriate under the circumstances. Prior to the expiration of the Due Diligence Period, Buyer shall, except as provided in Section 5 hereof, notify Seller of its disapproval of any Due Diligence Matters. During the Due Diligence Period, Buyer and its agents and contractors shall have the right, at Buyer's sole cost and expense, to enter onto the Real Property at reasonable times and in a reasonable manner for the purpose of making such tests and inspections as Buyer deetns necessary or desirable in connection with this Agreement. After making any such tests and inspections, Buyer shall restore the Real Property to its condition prior to such tests and inspections. Buyer hereby agrees to indemnify, defend and hold Seller harmless from any loss, damage, cost or expense incurred by Seller by reason of any physical damage to the Real Property or injury to persons caused by Buyer or its agents or contractors in exercising its rights tender this Section 4(b). If Buyer fails to notify Seller of its disapproval of any Due Diligence Matters prior to the expiration of the Due Diligence Period, all such Due Diligence Matters shall be deemed approved by Buyer, and Buyer shall be deemed to have waived any and all contingencies with respect to such Due Diligence Matters, express or implied, to its obligation to purchase the Property. (c) During the Due Diligence Period, Buyer and its agents, consultants and contractors will be afforded access to all documents and information relating to the Property and in Seller's possession or control. Seller has not made, and does not make, any representations or warranties as to the accuracy or completeness of such information except as expressly set forth in this Agreement, and Seller shall have no liability if any such information is inaccurate, misleading or incomplete. Buyer shall conduct its own investigation of the Property, make all inquiries, NB 1:386863A 10/7/98 3 inspections, tests, audits, studies and analyses that it deems necessary or desirable in connection with purchasing the Property (subject to the provisions of this Agreement), and approve or disapprove in its sole discretion the results of its investigations regarding the Property (including engineering, structural and other tests with respect to the physical condition of the Property, economic feasibility studies, soils and geological reports, zoning, entitlement and other land use matters, the status of title to the Property, survey matters, parking rights, reviews of books, records and financial statements, and documents obtained or prepared by or for Buyer in connection with its review). In determining whether to purchase the Property, Buyer is relying solely on the express representations and warranties of Seller set forth in Section 6(a), and on its own inspections, tests, audits. studies and investigations of the Property, and on Buyer's own judgment with respect thereto. (d) EXCEPT AS EXPRESSLY SET FORTH IN SECTION 6(a), BUYER IS BUYING THE PROPERTY WITHOUT ANY REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, OF ANY KIND WHATSOEVER, BY SELLER, ITS AGENTS, BROKERS, ADVISORS, CONSULTANTS, COUNSEL, EMPLOYEES, OFFICERS, DIRECTORS, SHAREHOLDERS. OR AFFILIATES. AS A MATERIAL INDUCEMENT TO SELLER IN AGREEING TO SELL THE PROPERTY TO BUYER, BUYER IS PURCHASING THE PROPERTY IN ITS "AS -IS" CONDITION, WITH ALL FAULTS, AND SELLER WOULD NOT HAVE AGREED TO SELL THE PROPERTY TO BUYER WITHOUT BUYER'S EXPRESS AGREEMENT TO THE FOREGOING. Title Matters. (a) As soon as possible following the execution of this Agreement, but in no event later than the date which is five (5) business days following the execution of this Agreement by both Buyer and Seller, Buyer shall order and obtain from Commonwealth Land Title Insurance Company ("Title Company") a standard coverage preliminary title report or commitment on the Property (the "PTR"), together with legible copies of all documents relating to the title exceptions referred to in such PTR. (b) As soon as possible following the execution of this Agreement, but in no event later than the date which is five (5) business days following the execution of this Agreement by both Buyer and Seller, Seller shall deliver to Buyer and to Title Company a copy of any surveys of the Real Property in Seller's possession or control. (c) Within ten (10) business days after receiving the PTR and Survey, respectively, Buyer shall notify Seller of any disapproved title exceptions or survey matters ("Disapproved Matters"). All other title exceptions set forth in the PTR shall constitute the "Permitted Encumbrances". In addition, Seller shall be obligated to remove or cure, prior to Closing, any title or survey matters affecting the Property which are caused or created by Seller after the date hereof, unless otherwise approved by Buyer, which approval shall not be unreasonably withheld, delayed or conditioned. As a condition precedent to the Closing, Seller shall use commercially reasonable efforts, without requiring any material expenditure by Seller, to remove, or cause to be removed, all other Disapproved Matters or, in the alternative, obtain title insurance in a form reasonably satisfactory to Buyer insuring against the effect of such Disapproved Matters (and any Disapproved Matter which is so insured against also shall be deemed to be a Permitted Encumbrance). Seller agrees to pay and discharge on or before the Closing Date, or obtain an endorsement to the Title Policy from the Title Company in form and substance acceptable to Buyer removing the exception for any monetary lien on the Property. Not less than ten (10) days prior to the Closing, Seller shall notify Buyer in writing of any Disapproved Matters which Seller is unable or unwilling to cause to be removed or satisfactorily insured against and Buyer shall then, within five (5) days thereafter, elect, by giving written notice to Seller and Escrow Holder, (i) to terminate this Agreement, or (ii) to waive its disapproval of such exceptions or survey matters (such exceptions or survey matters shall then be deemed to be Permitted Encumbrances). Buyer's failure to give such notice in a timely manner shall be deemed a disapproval of such exceptions or survey matters. In the event Buyer disapproves or is deemed to have disapproved the PTR or the survey, and Seller shall have used commercially reasonable efforts, without requiring any material expenditure by Seller, to remove, or cause to be removed, all Disapproved Matters or, in the alternative, to obtain title insurance in a form reasonably satisfactory to Buyer insuring against the effect of such Disapproved Matters, this Agreement shall be deemed terminated and shall thereafter be null and void with no further obligation on the part of either party except that (i) any money or documents in escrow shall be returned to the party depositing the same, including the Deposit, and any interest earned thereon, which shall be returned to Buyer, and (ii) Buyer and Seller each shall be responsible for one-half of any title or escrow cancellation fee. NB I :386863.4 10/7/98 4 C (d) Upon the Closing, Buyer's title to the Fee Land and Improvements shall be insured by an ALTA extended coverage owner's policy of title insurance, showing title vested in Buyer as of the Closing Date, subject only to the Permitted Exceptions, and issued by the Title Company with aggregate liability in the amount of the Purchase Price, with such endorsements as Buyer may require (collectively, the "Title Policy"). 6. Representations and Warranties. (a) Seller hereby represents, warrants and covenants to Buyer that the following matters are true and correct as of the execution of this Agreement and will also be true and correct as of the Close of Escrow: (i) This Agreement and all the documents and items to be executed and delivered by Seller to Buyer pursuant to the terms of this Agreement. (i) have been or will be duly authorized, executed and delivered by Seller, (ii) are or %will be legal, valid and binding obligations of Seller as of the date of their respective executions, (iii) are or will be enforceable in accordance with their respective terms (except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency. moratorium and other principles relating to or limiting the rights of contracting parties generally); (iv) do not and will not, at the Close of Escrow, violate any provisions of any agreement to which Seller is a party. (ii) This Agreement in no way interfered with or directly or indirectly materially affected the terms or provisions of that certain Purchase Agreement and Joint Escrow Instructions for the Property between Seller and The Balboa Performing Arts Theatre Foundation. (iii) Seller has no interest in any and all tangible personal property, furniture and equipment owned or leased by Seller and located on or used in connection with the ownership, operation and management of the Theater. (iv) Seller has not entered into any contracts, agreements or other documents affecting the Property which will survive the Closing, including any service contracts, equipment leases, maintenance contracts, management contracts, employment contracts, union contracts and warranties which would be binding upon the Property or Buyer after the Closing or under which goods, services or equipment are sold, rendered or leased to the Theater. (v) Seller has not entered into any rental agreements, leases and subleases affecting the Property which will survive the Closing, including any contracts, operating leases, rental agreements, licenses or similar instruments creating a possessory interest in the Real Property. (b) Buyer hereby represents, warrants and covenants to Seller that the following is true and correct as of the execution of this Agreement and will also be true and correct as of the Close of Escrow: (i) This Agreement and all the documents and items to be executed and delivered by Buyer to Seller pursuant to the terms of this Agreement, (i) have been or will be duly authorized, executed and delivered by Seller, (ii) are or will be legal, valid and binding obligations of Seller as of the date of their respective executions, (iii) are or will be enforceable in accordance with their respective terms (except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, moratorium and other principles relating to or limiting the rights of contracting parties generally); (iv) do not and will not, at the Close of Escrow, violate any provisions of any agreement to which Buyer is a party. Bier's Closine Conditions. Buyer shall have no obligation to acquire the Property unless the following additional conditions ("Buyer's Closing Conditions") have been satisfied or waived in writing by Buyer at or prior to the Closing: (a) Seller shall have timely performed, in all material respects, all of the obligations required to be performed by Seller by the terms of this Agreement; (b) Buyer shall have received all necessary consents and approvals in connection with the purchase of the Property from the City Council of the City of Newport Beach; uBI:386863.4 tonros 5 Ali (c) The representations and warranties of Seller, as set forth in Section 6(a), shall be true and correct, in all material respects, as of the date made, and as of the Closing Date; (d) The Title Company shall issue the Title Policy insuring Buyer's title to the Real Property subject only to the Permitted Exceptions; (e) There shall be no material damage to, or adverse change in, the physical condition of the Improvements and the Personal Property from the condition as on the date of this Agreement, reasonable wear and tear excepted; (f) All instruments and documents required on the part of Seller to be executed and delivered to effect the Closing shall be in form and substance reasonably satisfactory to Buyer; and (k) Seller shall have executed and delivered, or caused to be executed and delivered, the Seller's closing documents (as described in Section 3(e) above). 8. Closine Costs. Seller shall pay any documentary transfer tax, bulk sales tax, revenue tax or excise tax (and any surtax thereon) due in connection with the consummation of this transaction, the premium for the Title Policy up to the amount of the premium for a CLTA standard coverage owner's policy of title insurance, the cost of title endorsements which are used for title curative purposes under Section 5 above if customarily part of a standard coverage title policy or which can be obtained at no additional cost, and fifty percent (50%) of all other escrow and closing costs. Buyer shall pay any fees for recording the Deed, the cost differential of the premium for the CLTA standard owner's policy of title insurance and any coverage or endorsements included in any title policy purchased by Buyer, the cost of any title endorsements other than endorsements for title curative purposes under Section 5 above except those customarily part of a standard coverage title policy or which can be obtained at no additional cost, and fifty percent (50%) of all other escrow and closing costs. Each party shall bear the expense of its own counsel and other consultants. Tile parties acknowledge that this allocation of closing costs is in accordance with standard custom and practice in Orange County, California. Default of Buyer. PRIOR TO ENTERING INTO THIS TRANSACTION, BUYER AND SELLER HAVE BEEN CONCERNED WITH THE FACT THAT SUBSTANTIAL DAMAGES WILL BE SUFFERED BY SELLER IN THE EVENT OF BUYER'S DEFAULT UNDER TIIIS AGREEMENT. WITH THE FLUCTUATION IN LAND VALUES, THE UNPREDICTABLE STATE OF THE ECON011Y AND OF GOVERNMENTAL REGULATIONS, THE FLUCTUATING MONEY MARKET FOR REAL ESTATE LOANS OF ALL TYPES, AND OTHER FACTORS WHICH DIRECTLY AFFECT THE VALUE AND MARKETABILITY OF THE PROPERTY, IT IS REALIZED BY THE PARTIES THAT IT WOULD BE EXTREMELY DIFFICULT AND IMPRACTICABLE, IF NOT IMPOSSIBLE, TO ASCERTAIN WITH ANY DEGREE OF CERTAINTY THE AMOUNT OF DAMAGES WHICH WOULD BE SUFFERED BY SELLER IN THE EVENT OF BUYER'S DEFAULT UNDER THIS AGREEMENT. THEREFORE, IN THE EVENT BUYER DEFAULTS IN ITS OBLIGATION TO CLOSE THE PURCHASE OF THE PROPERTY FOR ANY REASON OTHER THAN SELLER'S DEFAULT, THE DEPOSIT, IN ADDITION TO ANY ACCRUED INTEREST ON THE DEPOSIT, SHALL BE PAID OR DELIVERED TO AND RETAINED BY SELLER AS LIQUIDATED DAMAGES WHICH SHALL BE SELLER'S SOLE REMEDY HEREUNDER BY REASON OF SUCH DEFAULT. THE PARTIES HERETO EXPRESSLY AGREE AND ACKNOWLEDGE THAT THE AMOUNT OF SUCH DEPOSIT REPRESENTS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES IN THE EVENT OF SUCH DEFAULT. SELLER'S INITIALS: BUYER'S INITIALS: 10. Broker's Commission. Buver and Seller each represent to the other that they have not entered into any agreement or incurred any obligation which might result in the obligation to pay a sales or brokerage commission or finder's fee with respect to this transaction. Buyer and Seller each agree to indemnify, defend, protect and hold the other harmless from and against any and all losses, claims, damages, costs or expenses (including attorneys' fees) which the other may incur as a result of any claim made by any person to a right to a sales or brokerage commission or finder's fee in connection with this transaction to the extent such claim is based, or purportedly based, oil the acts or omissions of Seller or Buyer, as the case may be. The obligations of Buyer and Seller under this Section 10 shall survive the Close of Escrow. Nn 1:386863.4 10!7/98 6 11 Il. Notices. All notices, requests and demands to be made hereunder to the parties hereto shall be made in writing to the addresses set forth below and shall be given by any of the following means: (a) personal service; (b) certified or registered mail, postage prepaid, return receipt requested. or (c) courier or delivery service. Such addresses may be changed by notice to the other parties given in the same manner as provided above. Any notice, demand or request sent pursuant to either subsection 1 1(a) or (c) hereof shall be deemed received upon the actual delivery thereof, and, if sent pursuant to subsection l I(b) shall be deemed received five (5) days following deposit in the mail. Refusal to accept delivery of any notice, request or demand shall be deemed to be delivery thereof. If any party hereto is not an individual, notice may be made on any officer, general partner or principal thereof. Notice to any one co -party shall be deemed notice to all co -parties - To Seller: C.J.W.. Inc. c/o John Wortmann 104 Via Yella Newport Beach. California 9''668 Facsimile No: (714) 673-6868 To Buyer: The City of Newport Beach Office of the City Attorney P.O. Box 1768 330 Newport Boulevard Newport Beach, California 92658-8915 Attention: Robert Burnham, Esq. Facsimile No: (949) 6.1-1-3139 With a O'Melveny & Myers LLP copy to: 610 Newport Center Drive, Suite 1700 Newport Beach, California 92660 Attention: Lowell C. Martindale. Jr. Facsimile No: (949) 823-6994 To Escrow Commonwealth Land Title Insurance Company Holder: 888 West Sixth Street, 4th Floor Los Angeles, CA 90017 Attention: Donald A. Boynton Facsimile No: (213)6227-8722 12. Miscellaneous Provisions. (a) Incorporation of Prior Agreements. This Agreement contains the entire understanding of Buyer and Seller with respect to the subject matter hereof, and supersedes all prior or contemporaneous written or oral agreements and understandings between the parties hereto pertaining to any such matter. No provision of this Agreement may be amended, modified or supplemented or added to except by an agreement in N%riting, expressly stating that such agreement is an amendment of this Agreement, signed by the parties to this agreement or their respective successors in interest. (b) Right to Assign. Neither party shall have the right to assign or transfer any of its or their respective rights or responsibilities hereunder to any person or entity without the other party's prior written consent. (c) Attorneys' Fees. If either party commences an action against the other to interpret or enforce an}' of the terms of this Agreement or because of the breach by the other party of any of the terns hereof, the losing party shall pay to the prevailing party reasonable attorneys' fees, costs and expenses incurred in connection with the prosecution or defense of such action, whether or not the action is prosecuted to a final judgment. For the purpose of this Agreement, the terms "attorneys' fees" or "attorneys' fees and costs" shall mean the fees and expenses of counsel to the parties hereto, which may include printing, photostating, duplicating and other expenses, air freight charges, and fees billed for law clerks, paralegals, librarians and others not admitted to the bar but performing services under the supervision of an attorney. The terms `attorneys' fees" or "attorneys' fees and costs" shall also include, without limitation, all such fees and expenses incurred with respect to appeals, arbitrations and bankruptcy proceedings, and whether or not any action or proceeding is brought with respect to the matter for which said fees and expenses were incurred. The term "attorney" shall have the same meaning as the term "counsel.— Nn I :386863.4 10/7/98 7 (d) Time is of the Essence. Time is of the essence of this Agreement. (e) Successors and Assigns. This Agreement shall be binding upon and enure to the benefit of each of the parties hereto and to their respective transferees, successors, and assigns. (f) California Law. This Agreement shall be construed in accordance with and governed by the internal laws of the State of California, without giving effect to any "conflict of law" rules of such state. (g) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which, when taken together, shall constitute one and the same instrument. (h) Interpretation. Wherever possible, each provision of this .agreement shall be interpreted in such a manner as to be valid under applicable law, but, if any provision of this Agreement shall be invalid or prohibited thereunder, such invalidity or prohibition shall be construed as if such invalid or prohibited provision had not been inserted herein and shall not affect the remainder of such provision or the remaining provisions of this Agreement. Section headings of this Agreement are solely for convenience of reference and shall not govern the interpretation of any of the provisions of this Agreement. (i) Construction. The language in all parts of this Agreement shall be in all cases construed simply according to its fair meaning and not strictly against the party who drafted such language. 0) Recitals and Exhibits. The Recitals to this Agreement and all Exhibits attached hereto are incorporated herein by reference and made a part hereof for all purposes. IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement as of the day and year first above written. "SELLER" C.J.W., INC., a California corporation "BUYER" THE CITY OF NEWPORT BEACH, ApproN ed as to form: a municipal corporation By: Robert H. Burnham City Attorney Mayor N131:396863.4 10/7198 17. EXHIBIT A LEGAL DESCRIPTION All that real property situated in the City of Newport Beach, County of Orange, State of California and more particularly described as follows: NB I :386863.4 1 onl98 A-] EXHIBIT B FORM OF GRANT DEED WHEN RECORDED MAIL TO: AND MAIL TAX STATEMENTS TO: City of Newport Beach Office of the City Attorney 3300 Newport Boulevard Newport Beach, California 92658 Attention: Robert Burnham, Esq. Unty) In accordance with Section 11932 of the California Revenue and Taxation Code, Grantor has declared the amount of transfer tax which is due by a separate statement which is not bcing recorded with this Grant Deed. GRANT DEED FOR VALUE RECEIVED, the receipt and sufficiency of which are hereby acknowledged. C.J.W., INC., a California corporation, hereby grants to THE CITY OF NEWPORT BEACH, a charter city and municipal corporation, all of that certain real property more particularly described in Schedule I attached hereto and incorporated herein by this reference. Dated: November , 1998 By: C.J.W., INC., a California corporation By: NB [:386863.4 I o1N98 B-1 John Wortmann, President ACKNOWLEDGEMENT STATE OF CALIFORNIA COUNTY OF ORANGE On November , 1998, before me, personally appeared 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/shc/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signatures(s) on the instrument the persons(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. Signature of Notary NB 1:386863A 10/7198 B -i SCHEDULEI Grant Deed Leval Description All that real property situated in the City of Newport Beach. County of Orange, State of California and more particularly described as follows: NB 1:386863.4 10/7/98 S-1 J W EXHIBIT C SELLER'S NON -FOREIGN AFFIDAVIT To inform THE CITY OF NEWPORT BEACH, a chartered city and municipal corporation (the "Transferee"), that «ithholding of tax under Section 1445 of the Internal Revenue Code of 1986, as amended (the "Code") will not be required upon the transfer of certain real property to the Transferee by C.J.W., INC., an individual (tile "Transferor"), the undersigned hereby certifies the following on behalf of Transferor: 1. Transferor is not a foreign corporation, foreign partnership, foreign trust or foreign estate (as those terns are defined in the Code and Income Tax Regulations promulgated thereunder); 2. Transferors C.S. employer identification number is ; and 3. Transferors office address is Transferor understands that this Certification may be disclosed to the Internal Revenue Service by Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both. Under penalty of perjure. I declare that I have examined this Certification and that, to the best of my kno,.%9edge and belief. it is true, correct and complete, and I further declare that I have authority- to sign this document oil behalf of the Transferor. Dated: . 1998 By: C.J.R'., INC., a California corporation By: NB I :386863A 10/7/98 C-1 John Wortntann, President