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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.

Warriors know Game 7 back home for Finals trip won’t be easy

OKLAHOMA CITY, OK - MAY 22:  Stephen Curry #30 and Klay Thompson #11 of the Golden State Warriors react in the second quarter against the Oklahoma City Thunder in game three of the Western Conference Finals during the 2016 NBA Playoffs at Chesapeake Energy Arena on May 22, 2016 in Oklahoma City, Oklahoma. NOTE TO USER: User expressly acknowledges and agrees that, by downloading and or using this photograph, User is consenting to the terms and conditions of the Getty Images License Agreement.  (Photo by Ronald Martinez/Getty Images)
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OAKLAND, Calif. (AP) After a record 73 wins and a memorable Game 6 comeback on the road, the Golden State Warriors’ goal of getting back to the NBA Finals and defending their title comes down to Game 7 at home against the powerful Oklahoma City Thunder.

All along, the Warriors have said the numerous team milestones and personal accomplishments they set during this special season won’t matter a bit unless they repeat as champions.

They need one more victory to become the 10th team to rally from a 3-1 postseason deficit.

“I’ve learned that our players are tough, they’re mentally tough,” Coach of the Year Steve Kerr said Sunday, when his team took a day off from film and practice. “I don’t know if I really learned that. I already knew that. But they’ve firmly confirmed that. It’s been a great comeback. Now we still have to play. We still have another game.”

Kerr just wanted his Warriors to grab back some momentum from Kevin Durant and the Thunder. Now, they have it, all right, heading into the decisive game of the Western Conference finals Monday night after winning two straight.

When his team won Game 5 on Thursday night, MVP Stephen Curry hollered “We ain’t going home!” – and Golden State wants no part of the Thunder having the last say in the Warriors’ summer plans.

“We got a big one last night to stay alive, and now we’ve got some momentum. But it can work in reverse,” Kerr said. “One game changes everything, and we’ve got to come out and play our game and play well to finish the series out.”

Golden State hardly considers this a gimmee just because the team is playing at deafening Oracle Arena, where the Warriors have lost just three times this season. They have had their problems against Durant, Russell Westbrook and the towering Thunder.

Oklahoma City is fueled by trying to reach its first NBA Finals since losing to LeBron James and the Miami Heat in 2012. James and Cleveland are waiting on Monday’s winner.

“It’s going to be a hard game. If we thought tonight was hard, Game 7’s going to be even tougher,” Curry said. “Everybody on both sides of the ball is going to leave it all out on the floor. It’s win or go home. So we can’t expect just because we’re at home that we can just show up and win.”

As has been the case all playoffs with Curry ailing, Golden State got a huge performance from Klay Thompson. He made a playoff-record 11 3-pointers and scored 41 points in a 108-101 win at Oklahoma City on Saturday night, and will need an encore Monday.

“Lot of people probably counted us out,” Thompson said.

Kerr said last week that his group might be different than the all the other teams that have tried to come back from 3-1 down: because the Warriors won it all last year.

The Thunder certainly would have preferred to close out the series at home over traveling back across the country to the Bay Area for the deciding game.

Yet they never expected it to be easy against the 2015 champs.

“This is what you dream about, getting this opportunity. We’ve got to take advantage of it,” Durant said Sunday. “Go up into their building, and it’s going to be great atmosphere. … No matter where you play, you’ve still got to play. That’s how we look at it.”

That’s partly because first-year Thunder coach Billy Donovan has talked to his team about the mentality it takes to win in a hostile venue like raucous, sold-out Oracle Arena, and Oklahoma City came in and did it in Game 1.

“We lost Game 6, and it was a tough, hard-fought game,” Donovan said. “We’re disappointed about not having a different outcome. But we haven’t lost the series, and we have an opportunity again. I think just being around these guys, they’re a resilient group.”

Curry and the Warriors expect another entertaining, great game.

From an ankle injury that sidelined him in the first round against Houston to a sprained right knee and puffy elbow, Curry has dealt with his share of pain this postseason. He has to push that aside for what he hopes is one more game this series and then a second straight trip to the Finals and another championship.

“I actually kind of like it, because you understand the moment of the playoffs and just kind of gets you going,” he said. “I’ll be ready to go and give it everything I’ve got for Game 7.”

Adam Silver on integrity of NBA: ‘It’s the most sensitive issue for me’

LOS ANGELES, CA - MARCH 22:  Adam Silver, commissioner of the National Basketball Association announces that the 2018 NBA All-Star game will be held in Los Angeles at Staples Center during a press conference at Staples Center on March 22, 2016 in Los Angeles, California.  (Photo by Sean M. Haffey/Getty Images)
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The NBA’s decision not to suspend Draymond Green for his kick to the groin of Steven Adams in Game 3 of the Western Conference Finals was a controversial one. The league reviewed video evidence and interviewed people involved and determined the kick was not intentional, but upgraded it from a Flagrant 1 to a Flagrant 2, giving Green enough flagrant foul points that his next flagrant foul of any kind will result in a suspension.

The lack of a suspension in this case, though, led to questioning from fans about the NBA’s motivations, something commissioner Adam Silver acknowledged on Sunday in an ESPN radio interview. Silver took exception to the idea lobbed at the league by some fans that they would prefer the Warriors to advance to the Finals over the Thunder, and reiterated (rightly) that that isn’t a motivation for the NBA.

Here’s a transcription of Silver’s comments, via the Bay Area News Group:

Silver acknowledged he has heard the conspiracy theory that the league prefers Golden State reach the Finals instead of Oklahoma City.

“I hear it, and it’s the most sensitive issue for me, and it goes to the core integrity of the league and frankly to my integrity,” Silver said.

“Even from a business standpoint, it would be impossible to predict which Finals would have a greater following. It depends on how many games, how close the games are. I can only thus sort of swear to the world that we do the best we can and that we don’t prefer one market or one team over another.”

The truth is, as popular as the Warriors are, there’s no bad matchup here for the league in terms of ratings. If the Warriors win on Monday, the Finals will be a rematch of last year as Golden State tries to cap off their record-setting regular season with a second straight title against a version of the Cavs with Kevin Love and Kyrie Irving healthy, unlike last season. If the Thunder win, the league gets a second Finals duel between LeBron James and Kevin Durant, which hasn’t happened since 2012, when James was in Miami. The Warriors play in a bigger market than the Thunder, but market size doesn’t matter nearly as much as it used to. James and Durant do just fine, popularity-wise, playing in the 18th and 43rd largest media markets in the United States, respectively. A lot of people are going to watch the Finals no matter which team wins the Western Conference Finals. And Silver knows that.

Pelicans’ Dejean-Jones killed after going to wrong apartment

NEW ORLEANS, LA - FEBRUARY 04:  Bryce Dejean-Jones #31 of the New Orleans Pelicans drives to the basket during the first half of a game against the Los Angeles Lakers at the Smoothie King Center on February 4, 2016 in New Orleans, Louisiana. NOTE TO USER: User expressly acknowledges and agrees that, by downloading and or using this photograph, User is consenting to the terms and conditions of the Getty Images License Agreement.  (Photo by Stacy Revere/Getty Images)
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DALLAS (AP) New Orleans Pelicans guard Bryce Dejean-Jones was fatally shot on his daughter’s first birthday after kicking down the door of what he mistakenly thought was his girlfriend’s apartment in Dallas, a death that rattled the NBA over Memorial Day weekend.

“We are devastated at the loss of this young man’s life,” the Pelicans said Saturday in a statement.

Dallas police said Sunday they would not have more information about the shooting until after the holiday and did not answer The Associated Press’ question regarding whether the man who shot the 23-year-old Dejean-Jones would face charges. It is legal in Texas for people to use deadly force to protect themselves from intruders.

Dejean-Jones was visiting his girlfriend for his daughter’s first birthday and had gone for a walk early Saturday, according to his agent, Scott W. Nichols. His girlfriend lives on the fourth floor, and Dejean-Jones, who was visiting the complex for the first time, went to the third.

A man living at the apartment was sleeping when he heard his front door kicked open, police Senior Cpl. DeMarquis Black said Saturday in a statement. When Dejean-Jones began kicking at the bedroom door, the man retrieved a handgun and fired. Dejean-Jones collapsed in an outdoor passageway, and he died at a hospital.

Dejean-Jones’s father told KCAL-TV that his son was “tenacious.”

“He has had so many things that have happened to him along his path,” K.C. Jones told the station. “He made up his mind that he wanted to do what he was doing – play pro ball. And whatever it took, he was going to get there. He was going to do it.”

In Dejean-Jones’ only NBA season, which ended in February because of a broken right wrist, the 6-foot-6 guard started 11 of 14 games and averaged 5.6 points and 3.4 rebounds.

Nichols said Dejean-Jones had nearly completed his rehab and was set to begin shooting with his right hand again next week.

“It’s shocking this happened,” Nichols said. “Wrong place, wrong time, I think.”

NBA Commissioner Adam Silver called it a “tragic loss” and said Dejean-Jones “had a bright future in our league.”

Dejean-Jones was signed by the Pelicans last summer after not being selected in the 2015 draft.

“I just lost my best friend/cousin last night enjoy life because you never know if tomorrow is guaranteed,” Shabazz Muhammad of the Minnesota Timberwolves wrote on Twitter.

Dejean-Jones was part of the 2014-15 Iowa State team that went 25-9, captured a Big 12 title and made a fourth consecutive trip to the NCAA Tournament. He also played at Southern California and UNLV; he was suspended late in the 2013-14 season from UNLV for conduct detrimental to the team, and announced that he was leaving USC midway through the 2010-11 season.

Former Cyclones coach Fred Hoiberg, now the coach of the NBA’s Chicago Bulls, added in a statement that Dejean-Jones was a “passionate and talented player that lived out his dream of playing in the NBA through hard work and perseverance.”

Julie Keel, a spokeswoman for Camden Property Trust, the real estate company that owns the apartment complex in Dallas, confirmed that the complex’s apartment manager had sent out an email to residents saying that the person who had been shot had been trying to break into “the apartment of an estranged acquaintance” and that this person had “inadvertently” broken into the wrong apartment.

Black said he could not confirm that Dejean-Jones was trying to access an acquaintance’s apartment.

Grizzlies officially name David Fizdale as their next head coach

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Earlier this week, reports surfaced that the Memphis Grizzlies had reached an agreement with longtime Miami Heat assistant David Fizdale to be their next head coach, replacing Dave Joerger. On Sunday, the Grizzlies made it official, announcing the move in a press release.

Here’s the official statement from Grizzlies GM Chris Wallace:

“We are pleased to welcome David to Memphis. After a comprehensive search process, and talking with a number of very bright basketball minds, we focused in on David and we are confident that he is the right person for the job. David’s achievements throughout his career, his reputation as a strong tactician, his leadership with player development, and his ability to communicate and build strong relationships with his players make him the clear choice to guide the Grizzlies on and off the court, as we move forward and collectively build on the consistent success we have attained over the last several years.”

Fizdale offered his own comments as part of the announcement:

“I am extremely excited to be in Memphis and really looking forward to building a legacy with this talented group of players. In my career, I have been fortunate to have worked with some of the greatest coaches and players in the NBA and am ready for this challenge. I am not only here to contribute to an organization that has built a history of winning, I am here to win it all and bring the wonderful people of Memphis their first Championship Parade down Beale Street. I am truly honored that Robert Pera, Chris Wallace and the organization felt that I am the right man to lead us forward and I would like to thank them for their confidence and this great opportunity.”

Fizdale had served as an assistant on Erik Spoelstra’s bench in Miami since 2008, and his now-former team offered their congratulations via Twitter: