AC34 Host and Venue Agreement (cont...)

November 10, 2010

7. Long Term Development Rights.

7.1 In consideration for the Authority undertaking the Infrastructure Work under Sections 6.2(a) and 6.2(b) above, and subject to the conditions precedent set forth in this Agreement, the City shall enter into the DDAs with the Authority and/or its nominee(s) under which the City, acting by and through the Port, shall ground lease to the Authority or its nominee(s) all of Piers 30-32, Pier 50 and Seawall Lot 330 under long-term leases (the “Legacy Leases”) and, when the conditions for conveyance are satisfied, fee title to Seawall Lot 330 under the applicable DDA or a separate purchase and sale agreement (the “Transfer Agreement”) as follows:

(a) The Legacy Leases of Piers 30-32 and Pier 50 shall be for a term expiring sixty-six years after the expiration of the applicable Venue Lease, and the Legacy Lease of Seawall Lot 330 shall be for a term of seventy-five years expiring after expiration of the Venue Lease, consistent with California Senate Bill 815 (subject to earlier termination upon transfer of fee title as required by Section 6.2(g)). The Legacy Leases shall commence only after expiration of the Venue Leases of Piers 30-32, Pier 50 and Seawall Lot 330, respectively, and the satisfaction of customary contingencies, including the Authority’s receipt of all necessary approvals for, and evidence of adequate financing for, the proposed development and clearance for such development following environmental review under CEQA. The Legacy Leases shall, to the extent required by law, require a determination of consistency with the Public Trust by the State Lands Commission or the California Legislature.

(b) Following the expiration of the Venue Leases, the Authority or its nominee shall have the right to use Piers 30-32, Pier 50 and Seawall Lot 330 subject to the conditions set forth in the DDAs for the Legacy Leases and the Transfer Agreement. The parties do not yet have any particular plans for development of any of Piers 30-32, Pier 50 and Seawall Lot 330. Under the DDAs, the Authority shall have the right to exclusive use of the Long Term Development Sites for interim uses until all conditions to the closing of the applicable Legacy Lease are satisfied. Allowed interim uses shall include any existing use, prior use (such as parking), and any other use that is consistent with applicable law, including CEQA and the Public Trust. Interim uses that are non-trust uses will be allowed for a limited period not to exceed ten years.

(c) The leasehold title conveyed under the Legacy Leases shall be subject only to the effect of the Public Trust, any exceptions caused by the Authority or Authority Affiliates, and such other matters as the Authority may approve in writing in the exercise of its sole discretion. The City shall be required to remove all other matters affecting title under the Legacy Leases from the title insurance policy issued to the tenant at closing (i.e., upon delivery of the Legacy Lease to the Authority or its nominee).

(d) The DDAs and the Legacy Leases shall be free of base rent or option consideration. No percentage rent or other additional rent shall be due under the DDAs or the Legacy Leases for the entire term.

(e) The Legacy Leases may be assigned or subleased by the Authority to any of the Authority Affiliates upon prior written notice to the Port without requirement of the Port’s consent. Any other assignment of a Legacy Lease shall require the Port’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed, and there shall be no limitation on the remedies available for the Port’s wrongful withholding of such consent. The Legacy Leases shall permit the premises to be sublet to any person or entity without notice to or consent of the Port. The Port shall have no rights of recapture or participation in assignment consideration or sublease rents. The Legacy Leases shall obligate the Port to grant non-disturbance protection to subtenants on commercially reasonable terms and condition.

(f) The Legacy Leases shall include reasonable and customary provisions for the protection of institutional lenders who may secure construction or permanent financing secured by one or more deeds of trust on the leasehold estates created thereby, including a requirement to engage in good faith negotiations regarding modifications to such lender protection provisions where the same are customarily required by institutional lenders at the time in question in order to obtain leasehold secured financing.

(g) The Legacy Leases shall obligate the City with the cooperation of the Authority, to make available to the Authority or its nominee(s) available tax increment from an infrastructure financing district (“IFD”) comprising the properties subject to the Legacy Leases (including Seawall Lot 330) for the public infrastructure repairs and improvements required in connection with development of those properties. The IFD will issue bonds, the proceeds of which will be made available to reimburse the Authority (or its nominee(s)) for infrastructure improvements as authorized under applicable laws governing IFDs. The Authority acknowledges that the City will be required to meet specific debt service coverage requirements to issue the IFD bonds and agrees that the City may reserve the tax increment funds required to meet IFD bond debt service coverage requirements for its own use, and that the City may require appropriate financial assurances to protect against the risk that any voluntary downward reassessment of the property within an IFD causes a shortfall in tax revenues pledged to service the bonds or satisfy the debt service coverage requirements.

(h) The DDA shall unconditionally obligate the City to remove in its entirety the common law public trust for commerce, navigation, and fisheries as interpreted by the State of California and the statutory trust imposed by the Burton Act, Chapter 1333 of the Statutes of 1968, as amended, by which the State of California conveyed to the City, in trust and subject to certain terms, conditions and reservations, the State’s interest in certain tidelands (collectively, the “Public Trust”) from Seawall Lot 330, either through an exchange under California Public Resources Code Section 6307 whereby the Public Trust will be transferred to other City owned property or removed by agreement with the State Lands Commission or State legislative action. When the Public Trust has been removed from Seawall Lot 330, and provided that the Authority is not in Breach of this Agreement, the City, through its Port, shall convey fee simple title to Seawall Lot 330 to the Authority, or its nominee, under the Transfer Agreement, at an agreed upon closing date that promptly follows the expiration of the Venue Lease for Seawall Lot 330. Such conveyance shall be by quitclaim deed, and the City shall provide the Authority or its nominee a policy of owner’s title insurance in an amount satisfactory to the Authority or its nominee, free of all liens or encumbrances other than any exceptions caused by the Authority or Authority Affiliates, or as approved in writing by the Authority (or its nominee) in the Authority’s sole discretion, and without the payment of any further consideration. If for any reason the City has not removed the Public Trust from Seawall Lot 330 by the expiration of the applicable Venue Lease, leasehold title to Seawall Lot 330 shall be transferred to the Authority under a Legacy Lease for a term of seventy-five years as authorized under California Senate Bill 815, subject to the other terms and conditions for the other Legacy Leases under the DDAs. However, the City shall use its best efforts to remove the Public Trust and convey fee title to Seawall Lot 330 as soon as reasonably possible after expiration of the Venue Lease applicable to Seawall Lot 330.

7.2 Upon execution of this Agreement and before the completion of environmental review under CEQA consistent with Section 2.1, the Authority and the City shall promptly commence and diligently continue good faith negotiations to establish the remaining terms and conditions to be included in the DDAs for the Legacy Leases and Transfer Agreement, consistent with this Agreement. The City shall offer remaining lease terms that are commercially reasonable compared to other long-term leases entered into by the Port within the previous ten years.

7.3 The Authority acknowledges that it will be responsible for undertaking and completing environmental review as required under CEQA for any future developments plans and uses to be allowed under the Legacy Leases. To the maximum extent permitted by law, (a) the City as the lead agency under CEQA will use best efforts to complete environmental review in order to assure prompt review of projects for long term development of Piers 30-32, Pier 50 and Seawall Lot 330, and (b) once environmental review is complete, the City shall cooperate fully with each lessee under the Legacy Leases in obtaining necessary permits and approvals required for long term development of Piers 30-32, Pier 50 and Seawall Lot 330 from other Governmental Authorities, including without limitation the Bay Conservation and Development Commission, the State Lands Commission and the United States Army Corps of Engineers. The Authority (or its nominee as lessee under any Legacy Lease) shall be responsible for all costs of CEQA compliance and shall pay all governmental fees and charges payable in connection with the work to be performed (including, for plan checks, permits, variances and inspections associated with such work, regardless of the governmental agency or authority imposing such fees or charges) and all fees of consultants retained as part of the CEQA process pertaining to the long term development of Piers 30-32, Pier 50 and Seawall Lot 330.

7.4 This Agreement is predicated on the concept of ensuring that the Authority will receive long-term development opportunities in consideration of the infrastructure improvements necessary to provide the America's Cup Village facilities on San Francisco's public waterfront.

(a) The Authority has estimated that the projected costs for the Authority's Infrastructure Work (the "Infrastructure Value") is $150 million, and the City has offered long-term development rights on Piers 30-32, Pier 50, and Seawall Lot 330, and tax increment financing ("Legacy Value") for some of the Authority's Infrastructure Work. To maintain the benefit of the bargain for both Parties, they have agreed to the following procedure should the Infrastructure Value be reduced: (i) by a decision of the Authority in its sole discretion; (ii) as a consequence of revisions that mitigate environmental impacts of the Event; or (iii) by the determination under Section 7.4(b).

(b) No later than October 1, 2011, the Authority will provide the City with engineer's cost estimates for the Infrastructure Value, based on 60% construction drawings prepared by a California-licensed structural or civil engineer. The Port's engineer will verify the Authority's cost estimates, subject to "baseball" arbitration, if necessary, by a third-party engineer, to establish the agreed Infrastructure Value. Once determined, the Infrastructure Value will not be altered so long as the Authority satisfactorily completes the Authority's Infrastructure Work; Infrastructure Value will be reduced only by the amount costs that the Port must incur to correct or complete any portions of the Authority's Infrastructure Work that do not comply with the approved specifications or do not meet code requirements. If the Infrastructure Value is less than $150 million, the Authority will have the option of either: (i) constructing additional infrastructure on Port property reasonably approved by the City to bring the Infrastructure Value back to $150 million; or (ii) reducing the Legacy Value or changing the financial terms of the Legacy Leases in an amount equal to the reduction in the Infrastructure Value.

(c) No later than three months after any change in the Infrastructure Value under Section 7.4(a) or (b), but in no event later than the date the Parties enter into the Venue Leases, the Authority will provide to the City a proposal to rebalance the adjusted Infrastructure Value and the Legacy Value, and the City will accept the Authority's proposal or provide a counterproposal within 30 days. If the Parties do not resolve any differences after good-faith negotiations, the proposals will be submitted to a member of the Appraisal Institute with at least ten years' experience valuing industrial commercial properties in San Francisco, acceptable to both Parties, who will decide which proposal more accurately reflects the reduction in Infrastructure Value, based on the highest and best use of the parcels included in each Parties' proposal, and the financial terms of the Legacy Leases. The decision of the appraiser will be binding.

8. Traffic and Transportation.

8.1 Consistent with the Event Plan and in consultation with the Authority, the City shall coordinate with members of the Intergovernmental Task Force and/or other Governmental Authorities having relevant jurisdiction to prepare a plan describing a safe, reliable and efficient traffic and transportation scheme to facilitate the movement of up to an estimated 200,000 visitors on any one day to and from the Event (the “People Plan”). The People Plan shall be submitted for approval by the Authority no later than March 31, 2011. Once so approved, no change shall be made to the approved People Plan except with the Authority’s and the City’s consent. The City shall implement the People Plan at no cost to the Authority, except with respect to those Venue areas which are under the Authority’s exclusive control and not accessible to members of the public.

8.2 The People Plan shall provide:

(a) Guaranteed access to the Venues in accordance with the Space Plan before, during and after the Event for the Authority, the Authority Affiliates, Competitors, Event Sponsors, the media and others together with their equipment. In the event the People Plan includes traffic restrictions, driving permits permitting access to the restricted areas shall be issued as necessary upon the Authority’s request;

(b) An effective public transportation service to the public areas including the on-shore Venue and the on-the-water Spectator Areas during the Event, such service to be commensurate with the expected numbers of visitors;

(c) Parking spaces in and around the Venue as provided in the Space Plan for the Authority, the Authority Affiliates, Competitors, the media, the Event Sponsors and hospitality guests;

(d) Public parking lots and facilities as provided in the Space Plan which may also include, if public transportation alternatives are deemed inadequate to transport spectators from the parking facilities to the on shore spectator areas, the additional operation of a shuttle service; and

(e) An appropriate information and sign-posting system in and around the City and, in particular, on main accesses from highways, main entrance roads, airports and public transit stations, which shall be part of the mutually agreed upon Advertising Program under Section 10.2.

9. Event Sponsorship, Bond and General Liability of the Committee

9.1 With the assistance of the City and the Authority, the Committee shall procure Event Sponsors who, pursuant to sponsorship agreements between the Authority and the Event Sponsors, will provide sponsorship revenue to the Authority of not less than $270,000,000, all as provided below:

(a) The Authority owns all of the sponsorship rights associated with the Event and shall enter into all sponsorship agreements with Event Sponsors. The City and the Committee agree to use best efforts to introduce the Authority to potential Event Sponsors, to take any reasonable actions necessary to procure such persons as Event Sponsors for the Event and to otherwise assist the Authority as reasonably required by the Authority to procure Event Sponsors.

(b) The identity of all Event Sponsors, and the terms and conditions of the sponsorship arrangement, must be approved by the Authority in its sole discretion prior to the finalization of any sponsorship agreement(s) and all such agreements shall provide for the Authority to receive the full proceeds thereof after deduction of any broker, finder and any other costs reasonably incurred by the Authority in securing such sponsorship packages.

(c) The Authority shall create sponsorship packages with Event Sponsors in an aggregate amount of not less than $270,000,000 in accordance with a sponsorship program (“Sponsorship Program”) developed by the Authority and approved by the Committee no later than January 31, 2011. The Committee shall be given credit for procuring an Event Sponsor where the Committee is primarily responsible for introducing such Event Sponsor to the Authority, provided such Event Sponsor and the Authority thereafter conclude a sponsorship agreement in accordance with the Sponsorship Program. The Authority may, in its sole discretion, reject as an Event Sponsor any person the Authority believes would violate exclusive sponsorship arrangements with other Event Sponsors or whose association with the Event could be harmful to the image or prestige of the Event.

(d) The Sponsorship Program shall establish specific milestones for measuring the Committee’s sponsorship funding efforts to gauge the Committee’s success in attracting Event Sponsors. To the extent the Sponsorship Program produces less than $270,000,000, the Authority may scale back the Event and/or call upon the Bond to compensate for increased costs or reduced economic benefits resulting therefrom.

(e) For the purpose of determining the amount of sponsorship revenue for which the Committee is credited under this Section 9 in transactions where the Event Sponsor provides value-in-kind, any goods and services provided by such Event Sponsor must be acceptable to the Authority and shall be valued at the lowest price that the Authority would pay to purchase the good or service in an arm’s length, cash transaction. The number and aggregate amount of value-in-kind sponsorships shall be governed by the Sponsorship Program.

9.2 The Authority shall enter into sponsorship agreements procured by the Committee for sponsorship revenue over and above that required under Section 9.1. The proceeds of such sponsorship agreements shall be shared between the Authority and the Committee under the Sponsorship Program. The Committee shall solicit local and regional event sponsors and donors acceptable to the Authority in its sole discretion and shall permit such sponsors and donors to promote and market themselves as official sponsors or supporters of the Committee on terms and conditions in the Sponsorship Program. 9.3 Within seven working days of completion of the environmental review pursuant to CEQA, the Committee shall provide the Authority with an irrevocable letter of credit in such form and by such issuer as may be acceptable to the Authority in its discretion (the “Bond”), which Bond shall be in the amount of $32,000,000 to provide compensation to the Authority in the event the City or Committee fails to perform their respective obligations owed to the Authority under this Agreement.. The costs of procuring and delivering the Bond, and maintaining the Bond in effect, shall be borne by the Committee.