ARTICLE 7.
STADIUM CONSTRUCTION FINANCING.

Section 7.1 Financing Overview. Based on current projections, Stadium development costs will be in the range of Nine Hundred Million Dollars ($900,000,000) assuming construction starts in 2012, and is completed in 2014. This cost projection will change as the Stadium design process moves forward. As further described in the succeeding Sections of this Article 7, funding for the development of the Stadium will be provided by the Agency, the CFD, the Stadium Authority and 49ers Stadium Company. The Agency investment will not exceed a total of Forty Million Dollars ($40,000,000) (exclusive of debt service and other financing costs). The CFD investment will not exceed a total of Thirty-Five Million Dollars ($35,000,000) (exclusive of debt service and other financing costs). No CFD funds will be used to pay debt service on the Tax Allocation Bonds or to repay the 49ers Agency Advance, as such terms are defined below. No Agency funds will be used to pay debt service on the Mello Roos Bonds or to repay the 49ers CFD Advance, as such terms are defined below. The Stadium Authority will raise funds through such methods as upfront payments and financings relating to the sale of naming rights contracts, vendor contracts and Stadium Builders Licenses. The Stadium Authority also intends to raise funds through a surcharge on NFL Game tickets. If all Conditions to Closing are satisfied, 49ers Stadium Company will be responsible to invest all the funds necessary to pay the costs to complete the Stadium which are not paid by the other sources.

Section 7.2 Finance Plan. The Parties understand and acknowledge that the actual amounts of the potential revenue streams that are planned to be used to finance the development of the Stadium, as generally described in this Article 7, and the specific requirements of the various bond underwriters and lenders that will provide financing in the future, are uncertain at this point in time and that no Party has committed to any specific amount to be raised from these funding sources nor has any Party made any representation that it will be financially feasible to capitalize these funding sources. In recognition of these facts, the Parties acknowledge that it is critical to maintain flexibility in the approach to financing of the Stadium construction, subject in all events to the limitations on the investment of the City, Agency and CFD as set forth herein. As provided in Section 3.1 above, it will be a Condition to Closing that the City, Agency and Stadium Authority approve a detailed plan for the financing of the Stadium, specifically including the maximum investment of the Agency and CFD and protection of the City's general and enterprise funds (the "Finance Plan"). The Finance Plan will set out in reasonable detail the amount and timing of the Stadium Authority Construction Sources, the Agency Upfront Investment, the Mello Roos Bonds, and the 49ers Stadium Company Investment, and will demonstrate, to the reasonable satisfaction of the City, Agency and Stadium Authority, that 49ers Stadium Company will have sufficient assets, credit and revenue streams to timely fund the 49ers Stadium Company Investment.

Section 7.3 Stadium Authority Investment. The Stadium Authority will provide funds for construction of the Stadium from the funding sources described below. The Stadium Authority will use good faith efforts, in cooperation with 49ers Stadium Company, to maximize the amount available for construction of the Stadium from these sources subject to fiscal prudence and consistent with the City's financial policies. Where used to secure debt of the Stadium Authority, the Stadium Authority Construction Sources may be pledged to separate financings or may be combined as collateral for a single financing or series of financings. Except as otherwise set forth in this Agreement, the recourse of any bondholder or lender of any Stadium Authority financing will be limited such that no City or Agency general funds or operating revenues or City enterprise funds will be used as collateral. The Stadium Authority will be liable for development costs of the Stadium only to the extent of Stadium Authority Construction Sources actually available. The Stadium Authority Construction Sources will be the sole property of the Stadium Authority. The funding sources to be used by the Stadium Authority to provide for the construction of the Stadium (the "Stadium Authority Construction Sources") may include:

1. Stadium Builders Licenses. The Stadium Authority, in consultation with 49ers Stadium Company, will market and sell "Stadium Builders Licenses" ("SBLs"). The Stadium Authority, in consultation with 49ers Stadium Company, will identify and select an entity experienced in the marketing and sales of SBLs, provided that the Team or an affiliate of the Team may act as the Stadium Authority's marketing agent in the sale of SBLs, including in marketing to the Team's current season ticket holders. SBLs will provide buyers with the right to purchase season tickets for as long as the Team plays its home games at the Stadium and a preferential right to purchase tickets for Non-NFL Events.
2. Naming Rights. The Stadium Authority, in consultation with 49ers Stadium Company, will market and sell the naming rights to the Stadium. The Stadium Authority will receive all net revenues from the sale of naming rights to the Stadium itself pursuant to a naming rights contract ("Naming Rights Revenue"). The Stadium Authority will make a good faith effort to issue bonds or enter into other financing arrangements secured by and paid from Naming Rights Revenue. The timing of the actual issuance of the bonds will be determined by mutual agreement of the Parties. The Stadium Authority will continue to receive Naming Rights Revenue even after any financing secured by Naming Rights Revenues is repaid. The Parties acknowledge that the naming rights sponsor may also enter into a separate sponsorship contract with the Team or any Second Team, and revenue under such separate sponsorship contract will be Team Revenue (as defined in Article 11 below). Unless otherwise agreed by 49ers Stadium Company, Naming Rights Revenue will not include revenue from rights to name or sponsor components of the Stadium, or from advertising or promotional activities, all of which are included in the Team Revenue.
3. Ticket Surcharge. The Stadium Authority will impose, and will require 49ers Stadium Company to collect on the Stadium Authority's behalf, a surcharge ("NFL Ticket Surcharge") on the price of admission to all NFL Games occurring at the Stadium. The Stadium Authority will also impose, and will require any event promoter to collect on the Stadium Authority's behalf, a ticket surcharge on the price of admission to all Non-NFL Events occurring at the Stadium, as described in Section 13.5 below. The NFL Ticket Surcharge is intended to be a percentage of the price of all tickets sold in that year (excluding the amount of suite, club and other premiums attached to the tickets). The Stadium Authority will make a good faith effort to issue bonds or enter into other financing arrangements secured by and paid from the annual revenue derived from the NFL Ticket Surcharge. The timing of the actual issuance of the bonds will be determined by mutual agreement of the Parties. The proceeds of the NFL Ticket Surcharge financing will be used by the Stadium Authority to fund the construction of the Stadium. The rate of the NFL Ticket Surcharge will initially be set by the Stadium Authority and 49ers Stadium Company such that the proceeds generated by the NFL Ticket Surcharge will not be less than the debt service and coverage amounts required by the NFL Ticket Surcharge financing, and such rate may be adjusted from time to time in accordance with the requirements of such financing. The NFL Ticket Surcharge will terminate upon repayment of the NFL Ticket Surcharge financing.
4. Upfront Vendor Payments. The Stadium Authority, subject to the approval of 49ers Stadium Company, may use for Stadium construction any upfront payment(s) made by the concessionaire and/or other vendors for the Stadium.

Section 7.4 Agency Investment in Stadium Construction. The Agency will invest an amount not to exceed a total of Forty Million Dollars ($40,000,000) (exclusive of debt service and other financing costs and exclusive of payments to the City for development fees pursuant to Section 6.4 above) toward the construction of the Stadium which investment will be derived from the following sources:

1. Available Funds. The Agency will invest cash on hand from existing unallocated Agency funds not otherwise needed to make any State mandated payments to offset State budget shortfalls, currently estimated to be approximately Seven Million Dollars ($7,000,000).
2. Tax Allocation Bonds. The Agency will invest the proceeds from one or more new tax allocation bond issuances (the "Tax Allocation Bonds"). The Agency tax increment available for payment on these bonds will be from "Net Tax Increment." For purposes of this subsection 7.4(b), Net Tax Increment will mean tax increment received by the Agency from the Redevelopment Project Area net of the following amounts (i) legally required set asides, (ii) existing debt service payments on bonds and City loans, (iii) pass-through payments, and other State mandated payments, (iv) debt service on a new tax allocation bond issuance with net proceeds of Twenty-Five Million Dollars ($25,000,000) for future Agency projects other than the Stadium; and (v) Agency administrative costs at the fiscal year 2008/2009 level escalated by four percent (4%) annually. The Agency will endeavor to generate the maximum proceeds, subject to fiscal prudence and consistent with the City's financial policies, from the issuance of new Tax Allocation Bonds. Under current economic conditions, the Agency estimates that the Tax Allocation Bonds could yield upfront proceeds of approximately Twenty-One Million Dollars ($21,000,000), however, the Parties recognize that the proceeds from the Tax Allocation Bonds could be substantially less depending on the market conditions and the amount of Net Tax Increment available to the Agency and the Parties have not set a minimum amount of proceeds to be derived from the Tax Allocation Bonds.
3. 49ers Agency Advance. The total amount of the Agency investment contained in subsection 7.4(funds on hand) and subsection 7.4(proceeds of the Tax Allocation Bonds) will be referred to as the "Agency Upfront Investment." 49ers Stadium Company will advance the difference between the maximum Agency investment of Forty Million Dollars ($40,000,000) and the Agency Upfront Investment (the difference referred to herein as the "49ers Agency Advance"). Under current economic conditions, the Agency estimates that a 49ers Agency Advance of approximately Twelve Million Dollars ($12,000,000) would be required. The 49ers Agency Advance, including annual compound interest at an annual fixed rate equal to the lower of the rate on 30-year BB-rated corporate bonds (as determined by an appropriate index to be determined) or eight and one-half percent (8½%), calculated as of the date of the first funding by 49ers Stadium Company of the 49ers Agency Advance, will be repayable only from the Net Tax Increment remaining after payment of debt service on the Tax Allocation Bonds. In addition, prior to making a payment on the 49ers Agency Advance, the Agency will make, based on an annual election by the Agency, an additional deposit into the Agency Housing Fund of up to ten percent (10%) of gross tax increment (after excluding tax increment generated from the Stadium), with such additional deposit ceasing on December 2016 with the termination of the Redevelopment Plan for the Redevelopment Project Area. Upon the expiration of the Agency's ability to collect tax increment, any amount of the 49ers Agency Advance that is outstanding will be forgiven by 49ers Stadium Company.

Section 7.5 CFD Investment in Stadium Construction. If approved by the hotel owners, the CFD will be formed to collect special taxes in an amount projected to raise Thirty- Five Million Dollars ($35,000,000) (exclusive of debt service and other financing costs) in Mello Roos Bonds. The rate imposed on the hotel owners through the CFD may not exceed a rate equal to a two percentage point increase in the City's transient occupancy tax ("TOT"). The term of the CFD will not exceed forty (40) years.

1. Mello Roos Bonds. The CFD will endeavor to generate maximum proceeds up to Thirty-Five Million Dollars ($35,000,000) in net proceeds, subject to fiscal prudence and consistent with the City's financial policies, including the repayment of CFD formation costs, for the construction of the Stadium from the issuance of bonds secured by and paid from a special tax on hotels within the CFD (the "Mello Roos Bonds").
   1. Under current economic conditions, the Agency estimates that the Mello Roos Bonds would yield upfront proceeds of approximately Fifteen Million Dollars ($15,000,000).
   2. 49ers Stadium Company will advance the difference between the maximum CFD investment to construction of Thirty-Five Million Dollars ($35,000,000) and the total proceeds of the Mello Roos Bonds (the "49ers CFD Advance"). Under current economic conditions, the Agency estimates that a 49ers CFD Advance of approximately Twenty Million Dollars ($20,000,000) would be required. The 49ers CFD Advance, including annual compound interest at an annual fixed rate equal to the lower of the rate on 30-year BB-rated corporate bonds (as determined by an appropriate index to be determined) or eight and one-half percent (8½%), calculated as of the date of the first funding by 49ers Stadium Company of the 49ers CFD Advance, would be repayable only from the CFD's special tax revenue received from the hotels in the CFD (as reduced by CFD administrative expenses), and only to the extent such revenues exceed debt service on the Mello Roos Bonds. The actual tax rate and the funds to be raised will be determined at the time the CFD would be created.
2. Remaining Mello Roos Proceeds. If the CFD has repaid the Mello Roos Bonds and the 49ers CFD Advance prior to the expiration of the forty (40) year term of the CFD, the Stadium Authority may use any remaining CFD proceeds for CFD eligible expenditures.
3. TOT Credit. If the CFD has repaid the Mello Roos Bonds and the 49ers CFD Advance prior to the expiration of the forty (40) year term of the CFD and the City has increased the TOT from its current rate of nine and one-half percent (9½%) at any time during the term of the CFD, then, for the remaining term of the CFD, each hotel in the CFD will receive a credit against its CFD payment in the amount by which the City TOT paid by such hotel exceeds the current rate of nine and one-half percent (9½%). Nothing in this paragraph is intended to restrict the City's ability to increase the TOT from time to time.

Section 7.6 49ers Stadium Company Investment.

1. Determination of 49ers Investment. The amount of the investment from 49ers Stadium Company required in order for construction to proceed ("49ers Stadium Company Investment") will be determined at such time as the following have been accomplished:
   1. The Stadium Authority and 49ers Stadium Company have each approved a guaranteed maximum price Construction Contract and a development budget (the "Development Budget") which includes the guaranteed maximum price as well as provision for other project costs not covered by the Construction Contract; and
   2. The Stadium Authority and 49ers Stadium Company have approved the Finance Plan identifying the amount of proceeds expected to be available from the Stadium Authority Construction Sources, the Agency Upfront Investment and the amount of the Mello Roos Bonds.
2. Payment of 49ers Stadium Company Investment, Including Cost Overruns. In addition to the 49ers Agency Advance and the 49ers CFD Advance, 49ers Stadium Company will pay when due any actual costs of construction of the Stadium that exceed Stadium Authority Sources, the Agency Upfront Investment and the amount of the Mello Roos Bonds, including any actual costs of construction of the Stadium in excess of the Development Budget.
3. Investments Separate. 49ers Stadium Company will fund its investment from its own funds and in no event will any Stadium Authority Construction Sources, including, without limitation, proceeds from the sale of SBLs or Naming Rights, be used to fund any obligations of 49ers Stadium Company.

Section 7.7 Agency and CFD Investment. The Parties recognize that, by the time the Tax Allocation Bonds and the Mello Roos Bonds are issued, the bonds may generate greater net proceeds than currently projected and thus would potentially reduce the amount of the 49ers Agency Advance and/or the 49ers CFD Advance required from 49ers Stadium Company. Furthermore, 49ers Stadium Company acknowledges that the ability of the Agency to repay the 49ers Agency Advance is limited to actual receipt of Net Tax Increment and will depend on a number of factors beyond the control of the Agency, including future growth in tax increment in the Redevelopment Project Area and future changes in law affecting the Agency's receipt or use of tax increment revenue. 49ers Stadium Company also acknowledges that the ability of the CFD to repay the 49ers CFD Advance is limited to actual receipt of special taxes paid by the hotels in the CFD and will depend on a number of factors beyond the control of the CFD, including occupancy and room rates in area hotels. In no way will the City's general fund or enterprise funds be responsible for any shortfall in repayment of the 49ers Agency Advance or the 49ers CFD Advance.

Section 7.8 Disbursement of Construction Financing. There will be an equitable schedule, to be agreed upon in the DDA, for Agency, CFD, Stadium Authority and 49ers Stadium Company funding Stadium construction costs. 49ers Stadium Company, City and Agency will be reimbursed from construction draws for reasonable documented Stadium predevelopment costs.