Kings ownership documents reveal major potential stumbling blocks for Seattle

47 Comments

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.

Manu Ginobili’s uncertain future has Spurs fans feeling anxious

Getty Images
Leave a comment

SAN ANTONIO (AP) — Manu Ginobili was swept away by the emotions of a sold-out home crowd serenading him with chants of “Manu, Manu” and rising as one for a standing ovation in the closing minutes of the Western Conference Finals.

Spurs fans were saying goodbye, but did not want to let go of the star who helped San Antonio win four of its five NBA Championships with his dynamic play.

“It was kind of emotional and overwhelming,” Ginobili said. “Yea, I don’t have a lot of words to describe it, but of course it makes you feel really well. Feeling that type of appreciation, love, respect. … When it happens in a situation like that and you receive all of that without expecting it, it shakes your world a little bit.”

The emotional outpouring led Ginobili to make a startling revelation to friend and teammate Patty Mills as they sat on the bench.

He had no idea what all the fuss was about.

“It felt like they wanted me to retire,” Ginobili said with a smile. “Like they were giving me sort of a celebration night. And of course, I’m getting closer and closer. There is no secret, for sure. It’s getting harder and harder, but I always said that I wanted to let it sink in for three weeks, four weeks, and then I will sit with my wife and see how it feels.”

San Antonio’s highly passionate fan base does not want Ginobili to retire. The fans simply wanted to show their appreciation because they are unsure if their beloved star will return next season. The Spurs also aren’t sure.

“If he decides he’s going to play again, that’s up to him,” coach Gregg Popovich said. “I won’t try to convince him one way or the other. I don’t think he needs that.”

Ginobili’s uncertain future is one of many questions the Spurs are awaiting answers on this offseason.

San Antonio’s season came to an abrupt end when they were swept by Golden State in the conference finals. The Warriors became the first team in league history to start the playoffs 12-0 after defeating the Spurs 122-108 on Monday night in Game 4.

Still, San Antonio’s first season in 20 years without franchise cornerstone Tim Duncan was a success. The Spurs captured their second straight Southwest Division title and earned their 20th straight playoff appearance.

“If you have half a brain, you put things in perspective,” Popovich said. “For the first year without Timmy’s leadership and a lot of new players, these guys got it together to win 61 games and just got better and better as the playoffs proceeded and we were basically on a pretty good roll starting Game 1 at Golden State. Some bad fortune which happens to all of us at some point in our lives and we don’t get to be the last team standing. But when I think about what they accomplished, they deserve a lot of credit.”

The Warriors outscored the Spurs by 85 points in the series after Kawhi Leonard suffered a sprained ankle in Game 1 with 7:52 remaining in the third quarter and San Antonio leading 78-55.

Leonard will be fine after some rest and rehabilitation. Forward David Lee is also expected to return after suffering a torn patellar tendon in Game 3 against the Warriors. Tony Parker is expected to be out at least eight months after suffering a ruptured left quadriceps tendon against Houston in Game 2 of the West semifinals.

Healing LaMarcus Aldridge‘s psyche could be trickier. The 6-foot-11 forward struggled in the postseason, especially against Golden State. Aldridge was twice held to eight points in the conference finals, including a 7-for-17 effort in Game 4.

Popovich isn’t worried.

“Not having Tony and Kawhi, it takes away our two best creators,” Popovich said. “They create a lot for our team. If one of the other scorers is left on his own like L.A. and he gets doubled and the playoffs get more physical, then you have to find scoring elsewhere and we had a problem doing that.”

The Spurs do not have any existing cap space to add players, but do have eight potential free agents that could impact that.

Lee, Pau Gasol and Dewayne Dedmon all have player options while Patty Mills and Jonathon Simmons are unrestricted free agents. Keeping Simmons may be difficult after his star turn in the playoffs, especially once Leonard went down.

“We value all the guys that are going to be free agents,” Popovich said. “R.C. and I will sit down and put together a plan and priorities and that sort of thing, it’s no different than any other year.”

Ginobili is a free agent, but is expected to return to the Spurs if he does not retire.

The question is, does he want to.

The 39-year-old rebounded from four straight scoreless games against Memphis in the opening round to provide San Antonio with a needed boost. He finished with 15 points in a frenzied 32 minutes in Game 4 against Golden State.

“I do feel like I can still play, but that’s not way is going to make me retire or not,” Ginobili said. “It’s about how I feel.”

Unsure of what that decision is, Popovich made sure Ginobili understood what he has meant to the Spurs and their fans. Ginobili started and was taken out of the game with two minutes remaining to huge applause.

“I’m really happy we did what we did last night for him,” Popovich said. “I think he really was moved by it. He deserved it and it worked out wonderfully.”

 

Report: Knicks would like to revisit Ricky Rubio trade talks, eyeing free agents such as P.J. Tucker

1 Comment

The Knicks need a whole lot of things this summer — starting with someone who would give them anything of value for Carmelo Anthony (they may well strike out there) — but at the top of the list should be getting players who can defend. That’s the end of the floor where they had the biggest issues last season (they were 25th in the league).

One way to do that, revisit the Ricky Rubio trade discussions they had near the trade deadline. Ian Begley of ESPN said some in the Knicks camp hope to do that.

Some in the organization were hopeful after the trade deadline that they could revisit their attempts to acquire Rubio from the Minnesota Timberwolves in the offseason, per sources. It’s unclear if that interest remains, but Rubio would fit the mold of a two-way contributor.

Rubio found his shot after the All-Star break and played some of the best basketball of his career during that stretch. Combine that with the fact Kris Dunn struggled mightily as a rookie, and it’s hard to see why Tom Thibodeau and the Timberwolves would want to move the only quality point guard on their roster. If they do, the price will be too steep for the Knicks to afford.

On the free agent side, they reportedly have an interest in physical defender P.J. Tucker, among others.

The club has preliminary interest in veteran free agent P.J. Tucker, per league sources. Jeff Hornacek coached Tucker in Phoenix and praised him last season as a strong locker-room leader and intense defender. Tucker shot 35.7 percent from beyond the arc last season, including a 40 percent clip after being traded to the Toronto Raptors.

New York has also shown preliminary interest in New Orleans Pelicans forward and free-agent-to-be Dante Cunningham, per sources.

Tucker is an interesting fit, but he’s going to have other suitors as well.

Whatever Phil Jackson and the front office do this summer, they need to do it better than the Derrick Rose/Joakim Noah signings of last summer. There is some pressure on Jackson to get things right this time around.

As part of diversion agreement, Josh Jackson admits to damaging Kansas women’s basketball player’s car with her in it

AP Photo/Reed Hoffmann
5 Comments

LAWRENCE, Kan. (AP) – Former Kansas basketball player Josh Jackson must attend anger management classes, write a letter of apology and refrain from using alcohol or recreational drugs for a year as part of a diversion agreement arising from his confrontation with a Jayhawks women’s basketball player last year.

Jackson, who is leaving Kansas after one season and is expected to be a top pick in next month’s NBA draft, had pleaded not guilty to a misdemeanor count of criminal property damage after he argued with McKenzie Calvert on Dec. 9 outside a bar in Lawrence.

Jackson signed the diversion agreement on April 26, according to Douglas County Court records obtained by The Kansas City Star. If he successfully completes the program, the case against him will be dismissed.

He is required to complete the anger management class and community service by Oct. 31 and write the apology letter and obtain a substance abuse evaluation by June 30. If the evaluation doesn’t make any treatment recommendations, Jackson must complete alcohol information classes by Oct. 31.

Jackson also signed a “stipulation of facts” that said he followed Calvert out of the bar after she threw a drink at fellow Kansas player Lagerald Vick. He said he yelled at Calvert and called her names before she got into her car and locked the doors.

“I kicked her vehicle, breaking the left rear taillight and denting the driver’s door,” Jackson said in the document.

A damage estimate of Calvert’s car for $2,991 was given to police in December, according to a Douglas County District Court affidavit. The total repair bill was $3,150, which included $1,127 for the driver’s door and left tail lamp. Jackson was not charged with felony criminal damage in excess of $1,000 because prosecutors couldn’t prove that he caused all the damage to the car “due other unidentifiable individuals damaging the vehicle,” according to county District Attorney Charles Branson.

He was ordered to pay $158 in court costs, $150 in a diversion fee and $250 in restitution to Timothy Calvert, McKenzie’s father. If Jackson violates his 12-month diversion, he would pay restitution of $3,150 to Calvert.

The 6-foot-8 swingman was the nation’s No. 1 recruit when he signed with the Jayhawks out of Prolific Prep Academy in California. He immediately earned a spot in the starting lineup, teaming with national player of the year Frank Mason III and Devonte Graham to form one of the nation’s top backcourts.

Jackson was the Big 12 newcomer of the year after averaging 16.3 points and 7.4 rebounds. He helped the Jayhawks to a 31-5 record and a 13th straight regular-season Big 12 title before a loss to Oregon in the Elite Eight of the NCAA Tournament. He has signed with former NBA player B.J. Armstrong of Wasserman Media Group.

Reports: Miami Heat, Chris Bosh have (or near) agreement removing him from roster, allowing comeback

1 Comment

Chris Bosh is never going to suit up for the Miami Heat again. A blood clotting issue that sidelined him a couple of seasons back never fully went away and Miami doctors would not clear him last season.

He may never play in the NBA again, but his max contract is an anchor on the Heat’s effort to rebuild. Miami can waive him and apply for an injury hardship to get his salary taken off its cap (Bosh would still get paid, the contract is guaranteed, but it just wouldn’t count against the cap). The concern for Miami was a comeback — under the current NBA rules, if Bosh played 25 games for any other team, his full salary would come back onto their books.

Miami officials and Bosh’s representatives have repaired their relationship, and the two sides — working with the NBA and the players’ union — have an agreement on a deal, reports Barry Jackson of the Miami Herald.

Chris Bosh has told family members that an agreement has been struck among the NBA, the Heat, the union and himself for Bosh to part ways with the Heat at some point in the coming weeks, with the Heat receiving maximum cap relief, an NBA-employed source said in early May and reiterated Tuesday.

There are still details to be worked out so nothing is final, reports Ira Winderman of the Sun-Sentinel. He also does a good job explaining the deal.

Under the CBA in place until June 30, a return to the league by Bosh could have reinstated his salary-cap hit to the Heat’s ledger over the remaining term of his contract, which expires after the 2018-19 season. However, under the CBA that goes into place July 1, once a medical panel comes to an agreement that it no longer considered safe for Bosh to continue his career, there no longer is the risk of Bosh’s cap charge or luxury-tax hit returning to the Heat’s book.

The approach with Bosh, 33, from the league and union apparently is a one-time allocation, with Bosh in the midst of a preexisting condition amid the transition to the incoming work rules.

That seems fair. It lets Miami off the financial hook if he does return, and just as importantly for the team, it gives them financial flexibility going into the draft and free agency — if they want to chase Gordon Hayward or Paul Millsap or someone else, they have the room and no fear of a financial bombshell landing on them.

On the other side, it makes it possible for Bosh to return to the NBA if he wishes.  And if he can get cleared medically (which may be difficult, but the people around him say is not impossible).

The question for Bosh is how much he wants to come back at this age — it’s not about the money, he’s got a lot of that now. But it takes a lot of work to get back into NBA shape and prepare his aging body for another marathon of an NBA campaign. After time off, hanging out with his young family and pursuing his diverse other interests, does he want another go at the NBA or is he ready to move on? Only Bosh can answer that, and there isn’t a wrong answer.