Kings ownership documents reveal major potential stumbling blocks for Seattle

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CORRECTION:  February 8, 2013

An earlier version of this post incorrectly referred to a May 2003 document as an addendum to the Kings’ 1992 ownership agreement.  The May 2003 document is self-described as a proposal, which, if approved, would constitute a basis for an amendment of the Kings’ partnership agreement.  The version of the May 2003 document viewed by PBT was unsigned.

This item was co-written by Aaron Bruski and James Ham

The fight over the Sacramento Kings is building to a fever pitch.

In one corner, Seattle-based investors led by hedge fund manager Chris Hansen and Microsoft CEO Steve Ballmer have entered into an agreement to purchase the Kings from the Maloof family with the intention of moving to Seattle.

In the other corner, former NBA All-Star and Sacramento Mayor Kevin Johnson is moving comfortably toward an announcement of his equity partners, which will come at some time this week. Sources close to the situation have said that these owners will more than meet NBA criteria and be able to compete with or beat Seattle’s offer. Additionally, these owners will come to the table willing to pay their portion in an arena deal that was previously approved by the NBA, and sources say will be approved by the Sacramento City Council, as well.

USA Today and the Sacramento Bee reported that big money guys Ron Burkle and Mark Mastrov were in serious talks with the city, and USA Today reported that Burkle met with David Stern in New York on Thursday, January 24th. PBT can confirm each of those reports.

Since the Sacramento Bee’s report on the issue January 24, there has been speculation whether Kings minority owners have the “Right of First Opportunity” to purchase the team from the Maloofs.

They well may.

NBC ProBasketballTalk has acquired a copy of the Kings’ 1992 ownership agreement and an unsigned May 2003 proposal to amend the ownership agreement.

Article VII of the 1992 ownership agreement, “Transfer of Partnership Interests” starts off in Section 7.1 “Restrictions on Transfer” with the basic tenet that, “…no sale, assignment, transfer, encumbrance or hypothecation (herein referred to as a “Transfer”) shall be made by a Partner of the whole or any part of its or his Partnership interest (including, but not limited to, its or his interest in the capital or profits of the Partnership).” Section 7.2 permits certain specified sales to “Affiliates,” which in theory covers sales to essentially the same ownership (more on “Affiliates” below).

A little further down in Article VII, Section 7.3 spells out the right of first refusal in plain legalese.

“Section 7.3. Right of First Opportunity.

Notwithstanding the provisions of Section 7.1 hereof, if a Partner desires to assign all or part of his or its interest in the Partnership and such assignment is not specifically permitted under Sections 7.2A or 7.2B above, then the assignment shall be subject to the right of first opportunity hereinafter described in this Section 7.3. Before a Partner (the “Selling Partner”) actually concludes a sale of its interest in the Partnership subject to this Section 7.3, the Selling Partner shall give notice to (a) the General Partner and each other Limited Partner if he Selling Partner is a Limited Partner, and (b) to each Limited Partner if the Selling Partner is the General Partner (such Partner or Partners other than the Selling Partner being individually and collectively herein called “Non-Selling Partner”) setting forth the purchase price for which it will offer such Partnership interest for sale (which purchase price must be payable entirely in cash or part in cash and the balance pursuant to one or more promissory notes).

Section 7.3 further adds that a “non-selling partner” must step forward with its right to match within 30-days notice of the team’s sale. When that authority is exercised, the minority owner would have a 45-day window to complete a purchase.

The language is clear, but perhaps the Maloof family is counting on an earlier clause:

“Section 5.3. Limitations on Authority of the General Partner.

Notwithstanding the provisions of Sections 5.1 and 5.2 hereof:

A. The following decisions shall require the approval of Partners then holding Partnership Percentages aggregating at least 65%:

(1) The moving of the Team from the Sacramento area to another City prior to February 1, 2002;

(2) The sale of all or substantially all of the Partnership Property

Section 5.1 details the “Authority of the General Partner.” It includes language giving the majority owner “exclusive authority to manage the operations and affairs and to make all decisions regarding the Partnership and its business…”

Section 5.2 addresses the “Sale or Financing of Partnership Property.” It includes clear language stating “the General Partner shall have the sole and unrestricted right to and discretion to determine all matters in connection with any sale of the partnership Property or any part thereof…”

In layman’s terms, sections 5.1 through 5.3 establish the potential for a super-majority in the franchise’s decision-making authority. By reaching a 65-percent threshold of controlling interest, the Maloof family and partner Bob Hernreich have accomplished that by purchasing minority shares during the last decade.

While this all seems alarming for the Kings’ minority owners, it is not the end of the story. Nowhere in Sections 7.1 through 7.3 is an exception carved out protecting Section 5.3 and the Maloofs super-majority clause from the right of first opportunity. This means that while the Maloofs’ have the right to sell and/or relocate without minority approval, it doesn’t appear they have the right to sell any portion of their interest in the club without first giving the limited partners a chance to match.

As attorneys do, how an attorney may interpret the document may depend on who is paying their bills. And a judge may get to make the final call.

A May 2003 proposal to amend the ownership agreement proposed to strip the “Affiliate” language that sources tell PBT may have provided a small loophole for a transfer of the team’s majority share while circumventing the rights of the minority owners. The proposal included the following language:

“2. Partners Right of First Refusal

To clarify the issue of First Right of Refusal on purchase of partnership shares, the following is a proposed amendment to the Partnership Agreements:

A. Partner’s Proposal to Transfer. If a Partner proposes to sell, assign, or otherwise dispose of all or any part of the Partner’s Interest, however it is held, i.e. whether or not the interest is owned directly by it, or through another entity, individual, etc. (Hereafter “Such Interest”), then the Partner (“Selling Partner”) shall first make a written offer to sell such Interest to the remaining Partners, pro rata (as not all of the other Partners are required to participate in the purchase) based on their then ownership positions in the Partnership. The price, terms and conditions shall be as mutually agreed by the parties.

The following section goes on to propose that in the case of a third-party offer, the minority owners retain their right of first refusal for 60 days after receiving the selling Partner’s written notice and it finishes with this definitive statement:

“No Partner shall sell, transfer or otherwise dispose of their Interest, even if owned through a different entity and it is the purported different entity selling all or a portion of itself within the holder of the Interest, except in accordance with the provisions of this Article.”

There is one more note of interest in Section 3 of the proposal titled “Sale of an Interest in the General Partner”:

“Any offer received by the General Partners to purchase a portion, or all, of their interest, which was not purchased by the Limited Partners pursuant to their Right of First Refusal, would be considered an offer to purchase that percentage of the total entity.”

Meaning, that if the Maloofs sell their interest to the Hansen-Ballmer group for the reported $525 million and the minority owners do not take up the Right of First Refusal, Hansen and Ballmer would be required to purchase a proportional stake of the minority share as well.

We aren’t looking at $341 million (the Maloof and Hernreich 65-percent share), we would be looking at the entire $525 million. Although whether that sum would make the Seattle group even blink is up for debate.

The proposal language states that if the proposal is approved by the partners, it will constitute a basis for an amendment of the ownership agreement to be drafted and executed by all partners.  The version of the May 2003 proposal viewed by PBT was unsigned but according to a source with intimate knowledge of the situation, the proposal was signed in May of 2003.  PBT is not aware of an amendment to the ownership agreement that was later drafted and executed by all partners.

So the question now becomes, is there a Right of First Opportunity/Refusal and if so, is there a minority owner who is willing to step up and invoke that right? If so, can that owner come up with the financial backing to match the deal from the Hansen-Ballmer group?  What is the backstory of the May 2003 proposal and what became of it?  And lastly, will the NBA continue to back a Seattle deal that may have ignored the rights of minority owners?

It would be surprising if the NBA didn’t have some serious questions for the Maloofs and the Seattle group.

Spencer Dinwiddie hits game-winner for Nets over former team (VIDEO)

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Spencer Dinwiddie was once a member of the Detroit Pistons. They traded him to the Chicago Bulls back in 2016 for Cameron Bairstow, and the Bulls promptly waived him less than a month later. That same day, Bairstow was waived by the Pistons.

On Sunday, Dinwiddie got his revenge on Detroit by ending their matinee matchup with a step-through jumper that two Pistons failed to defend.

The play came with 4.7 seconds left and the Brooklyn Nets trailing, 100-99. Dinwiddie ran across the far side of the floor to receive the ball from the sideline, then to the near elbow before putting on a series of moves to get his shot off.

The play gave Detroit just 0.09 seconds left, and they couldn’t get an attempt off.

Brooklyn beat the Pistons, 101-100.

Meanwhile, Dinwiddie continues to have the best season of his career. He’s averaging 13.2 points, 6.5 assists, and 3.3 rebounds per-game, all career-highs. He’s also boosted his VORP to 1.1, another personal best.

Enes Kanter’s teammate told him “You’re about to get 50 dropped on you” after LeBron troll

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Enes Kanter likes to inject himself in situations he doesn’t belong in.

The New York Knicks forward likes to take aim at the biggest star in the game, LeBron James, and has said in the past that he would fight LeBron if he had to.

Some previous comments from LeBron riled up members of the Knicks organization, and there’s been animosity between the two sides ever since.

So it wasn’t too much of a surprise when Kanter had something to say on Twitter about his former team, the Oklahoma City Thunder, dropping 148 points during a win over the Cleveland Cavaliers on Saturday. Heck, even former Cavaliers coach David Blatt jumped in on that one, albeit immediately before his own team got 151 scored on them.

Kanter took to Twitter, using LeBron’s own catchphrase against him:

Of course, that’s probably not the best idea. Kanter is a role player and LeBron is one of the best who ever played. Even if the Cavaliers are stinking it up lately, you can’t go after the King like that. You just might miss.

Via ESPN:

“One texted [teammate] me just to say — I’m not going to say who — but he texted me ‘You’re about to get 50 dropped on you, boy.'” Kanter said before Sunday’s matinee against the Los Angeles Lakers. “I responded something back, but I’m not going to say what it is.”

Kanter added that he’s just “having fun” and wanting to put “a smile on people’s face” with his constant prodding.

We’ll see if he ends up smiling the next time Cleveland and New York meet on April 9 at MSG.

David Blatt’s troll on the Cavaliers backfires when opponent scores 151 (VIDEO)

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David Blatt, perhaps sensing his time to pounce as rumors swirl around Tyronn Lue’s departure, decided to troll the Cleveland Cavaliers on Sunday. It did not go so well.

Blatt, who was fired from the head coaching spot in Cleveland in 2015, now heads Darüşşafaka S.K. in the Turkish Super League.

Blatt was also coaching Team Europe vs. Team Asia in the Turkish BSL All-Star Game on Sunday. During the game Blatt joked during a TV interview that he was just hoping his team didn’t give up as many points as the Cavaliers did to the Oklahoma City Thunder on Saturday. That game ended with a score of 148-124.

Via Twitter:

So what happened to Blatt’s Team Europe in the All-Star Game?

According to Erik Gundersen over at LeBron Wire, Team Europe promptly got rolled on with a tally of … 151 points.

The final total in the Turkish All-Star matchup was 151-142 in favor of Team Asia.

Oops.

Salah Mejri threatened to come to Blazers locker room after Jusuf Nurkic tussle

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The Portland Trail Blazers and Dallas Mavericks had a game of many emotions on Saturday night at Moda Center. Of course, the game wasn’t that close — Portland led by 17 at the half and finished the game by beating Dallas, 117-108.

But as we’ve seen in the NBA recently, the propensity for NBA players to get into physical spats is high. So it was no surprise that we saw yet another scrum between NBA players on the east side of the Willamette on Saturday as Dallas’ Salah Mejri got tangled up with Jusuf Nurkic and Evan Turner.

The play began with Nurkic getting a clean block on Mejri. Because of the position of the two players, Nurkic’s arm was angled as such that after the block it came clean through to rest on Mejri’s shoulder. Mejri turned, and the whole thing became a tangle of arms and elbows.

Neither Mejri or Nurkic took kindly to that, so the two squared off. Nurkic gave Mejri an ineffectual little push, while Portland’s Evan Turner jumped in to hold Mejri back. The Mavericks center promptly flopped all the way to the ground, inexplicably grabbing his face. It was Premier League-level flopping from Mejri, just top notch stuff.

Via NBC Sports Northwest:

After the game, Turner told media that Mejri threatened to come get the Blazers.

“He’s like ‘I’ll come to the locker room!'” said Turner. “Out of a 225 lb. dude [Turner] a 275 lb. dude [Nurkic] and a 7-footer [Mejri] who hit the ground?”

Portland’s CJ McCollum didn’t seem too impressed with the threat.

“If they really want to fight, they know where to find people,” said McCollum.

Much like any arena, the visiting locker room is just down the hall from the home squad at Moda Center, so it would have been easy for Mejri to get to. Nothing happened, so it turned out as an empty threat.

Meanwhile, Turner was assessed a technical foul for the tussle — presumably for “pushing” Mejri. There was notable tension the rest of the game between Mejri, Nurkic, and the crowd at Moda Center, but nothing else of consequence happened.