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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.

Charles Barkley hung out with King Cake Baby to celebrate his birthday (VIDEO)

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One of the New Orleans Pelicans mascots is a Pelican. His name is Pierre, and after a makeover he’s looking pretty normal these days. But the Pelicans also have a second mascot of sorts. His name is King Cake Baby — named after the Mardi Gras pastry — and he’s horrifying.

So when you have an NBA All-Star Game in town, what do you do? Trot out a giant baby mascot to mix in with the league’s elite, of course.

Or at least have him bother Charles Barkley on his birthday:

Ok it’s actually weirder that Kenny Smith wanted to see what was under King Cake Baby’s bib. I can never unsee that.

Vlade Divac on DeMarcus Cousins trade: “I had a better deal two days ago”

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The DeMarcus Cousins trade to the New Orleans Pelicans just gets weirder and weirder.

Speaking to reporters on Monday, Sacramento Kings GM Vlade Divac said that he had a more appetizing deal on the table for the All-Star center. Why didn’t they take it?

Divac would not say:

Perhaps even more confusing is that Divac said that owner Vivek Ranadive did not have input on the trade process. That seems highly unlikely, given how hands-on Ranadive has been in the past regarding keeping Cousins.

“[Ranadive] didn’t have any idea,” Divac said of the trade. “I just told him what I was going to do.”

Let’s cut right to the chase here: this makes no sense.

First, because ownership in the NBA always has some kind of contact on trades, if only as a heads up. When it comes to franchise players, I’m hard-pressed to believe Ranadive wasn’t involved.

Meanwhile, what explanation could possibly be given for not pulling the trigger on a deal Divac admits was better than the one he got from New Orleans? That would appear to imply outside pressure not to take the better of the two trades, which again would point to Ranadive.

The offer from the Pelicans was one that Ranadive has reportedly been a big fan of, particularly because he feels that Buddy Hield is has the potential to be in the range of Stephen Curry.

That’s a lot to unpack.

Then we have to get to the Kings and their press release, which takes an unsubtle potshot at Cousins with regard to his character:

“It was time for a change and I decided this was the best direction for the organization, said Divac. “Winning begins with culture and character matters. With the upcoming draft class set to be one of the strongest in a decade, this trade will allow us to build the depth needed for a talented and developing roster moving forward.”

Ah, ok. Couple that with Kings play-by-play announcer Grant Napear going nuclear on Cousins moments after he was traded and you’ve got an extremely confusing, bad looking coming out of Northern California.

The Kings are a mess.

Rumor: Kings owner sees Buddy Hield having Stephen Curry potential

World guard Buddy Hield (24) of the New Orleans Pelicans (24) goes to the basket against U.S. guard Devin Booker of the Phoenix Suns during the Rising Stars Challenge, part of the NBA All-Star events in New Orleans, Friday, Feb. 17, 2017. (AP Photo/Gerald Herbert)
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The Sacramento Kings made one of the more disastrous trades we’ve seen in recent years involving a superstar player. They traded DeMarcus Cousins — franchise center who sometimes torpedoes his own team with his temper — for a sharp-shooting rookie, a first round pick that sits outside the top 3, and a player they already traded away and are apparently unlikely to keep long term. Gross.

This is not going over well with Kings fans, but it is said to be sitting well with Sacramento owner Vivek Ranadive.

Via Twitter:

Ah, what?

Hield was an excellent scorer in college, and has the kind of range that makes him a prime candidate for the type of offenses being developed in the modern NBA. But that’s where the reasonable comparisons end for him and Curry. Come on.

For one, Hield is a true shooting guard. No part of his game is crafted to be the primary ball handler at an NBA level. He’s not the passer Stephen Curry is, nor was he even as good at that as Klay Thompson was in college.

It’s OK that the Kings like Hield in a vacuum. Within context it appears they’ve sold themselves on something patently ridiculous. We’ve never seen a player in Curry’s mold before. Hoping an incomparable player somehow matches up with his talent and skill set — and trading away Cousins because of it — is wild.

Sacramento is going to be bad. Call a Kings fan today, tell them you love them. They need you now more than ever.

Stephen Curry tries to pass off backboard to himself (VIDEO)

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NEW ORLEANS — LeBron James can do it.

Stephen Curry? Not so much.

The Golden State Warriors PG tried to pull the Trady McGrady in Sunday’s All-Star Game but found himself coming up just a little short.