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.

LeBron James passes Magic Johnson for sixth all-time in assists

Los Angeles Lakers v Milwaukee Bucks
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Magic Johnson is one of the greatest, most creative passers the game has ever seen.

Friday night, LeBron James passed Magic for sixth all-time in assists in the NBA. For LeBron, doing that in a Lakers’ jersey like Magic wore was special.

It happened with 8:41 remaining left in the game, LeBron found Anthony Davis for a 3-pointer on the right wing.

LeBron finished the night with 11 assists and 28 points, which along with a monster 44-point night from Anthony Davis led the Lakers to an impressive win over the Bucks in Milwaukee.

 

 

 

Jimmy Butler returns, hits clutch shots to lift Heat past Celtics

Miami Heat v Boston Celtics
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BOSTON (AP) — Bam Adebayo scored 28 points, Tyler Herro had 26 and the Miami Heat completed a split of two games in Boston, beating the Celtics 120-116 on Friday night after Jaylen Brown banked in a long 3-pointer to force overtime.

Heat leading scorer Jimmy Butler returned to the lineup and had 25 points in 36 minutes after missing the previous seven games with a sore right knee. He added 15 rebounds.

“Obviously having JB back is big time for us,” Herro said. “He helps us in so many different ways.”

Kyle Lowry chipped in with 20 points before fouling out in OT for the Heat, who sent Boston to just its second loss in 16 games.

“My team welcomed me back and let me do what I do,” Butler said. “It was a big `W’ for the team.”

Brown sent the game to overtime by banking in his long 3 with 1.7 seconds to play in regulation. He finished with 37 points.

“It felt good coming off my hand,” Brown said. “I know we wanted to get a shot up off the rim as fast as possible, just in case we missed we could get a rebound, a tip out.”

The Celtics had won 10 straight at TD Garden.

Boston star Jayson Tatum scored just 14 points on a cold shooting night, going 5 of 18 from the floor, including 0 of 7 on 3-point attempts. He had 49 points in the Celtics’ 134-121 victory on Wednesday night.

“That’s the biggest thing about the league; you’re not going to stop anybody from just scoring,” Adebayo said. “I feel like (we’re) making him take tough shots every time we play him and living with the result.”

Butler hit a clutch jumper over Al Horford, making it 110-107 with 5.1 seconds left in regulation before Brown took a pass near midcourt, dribbled to his right and nailed his shot.

In OT, the teams were tied twice before Butler nailed a foul-line jumper over Horford with 1:45 left, but Brown hit two free throws to tie it.

Adebayo nailed two free throws and, after Tatum misfired on a 3, Butler hit a jumper to seal it.

“Jimmy made two tough, tough baskets,” Brown said. “That’s just a credit to his work and his skill and his development. He gets going in games like this; on the road in a hostile environment. … Tonight, two shots that in our defensive scheme we could live with, but Jimmy a big-time player made both of them.”

Unlike Wednesday, when shots were open more and both teams were making them effectively (each shot over 50%), defense was tighter and it resembled more of the postseason matchup last season between the pair that went seven games before Boston captured the Eastern Conference title.

Anthony Davis scores 44, outduels Antetokounmpo (40) leading Lakers past Bucks

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MILWAUKEE (AP) — Anthony Davis and LeBron James tore apart the NBA’s top-rated defense and gave Los Angeles Lakers coach Darvin Ham a triumphant return to Milwaukee.

Davis scored a season-high 44 points and James passed Magic Johnson on the NBA’s career assists list Friday night in the Lakers’ thrilling 133-129 victory over the Bucks.

It marked Ham’s first game in Milwaukee since taking over as Lakers coach after working as an assistant on Bucks coach Mike Budenholzer’s staff from 2018-22.

Ham and Budenholzer shared a big hug before the game.

“It was a beautiful night,” said Ham, who also played for the Bucks from 1999-2002.

It also was quite a night for Davis, a Green Bay Packers fan who delivered his big performance with Aaron Rodgers in the stands. Davis spoke with the Packers’ four-time MVP quarterback before and after the game.

“I saw him before the game and he said, `I need 30 tonight,”‘ Davis said. “I just saw him and he said, `I only said 30, not 40.’ It’s always good for him to come out and watch the Lakers play.”

James made a tiebreaking 3-pointer with 3:22 left and finished with 28 points, 11 assists and eight rebounds. He upped his career assist total to 10,144 and moved into sixth place, ahead of Johnson’s 10,133.

“It means a lot, obviously,” James said. “The way Magic approached the game, it was very infectious. His teammates loved playing with him because of the joy he played with and the ability to pass the ball and get other guys involved. He was always excited about seeing his teammates be great. I always admired that in him. What’s even more humbling and super duper cool is the fact that I’m doing it in a Laker uniform and knowing how much Magic means to the Laker franchise.”

The Lakers had the highest point total and field-goal percentage (.536) the Bucks had allowed all season. Milwaukee entered Friday with the NBA’s top defensive rating.

“It was too easy, too easy, too easy,” Milwaukee’s Giannis Antetokounmpo said. “They were living in the paint. That’s not who we are.”

Los Angeles withstood a 40-point performance from Antetokounmpo, who also had seven rebounds and five assists.

The Lakers also spoiled the 2022-23 debut of Milwaukee’s Khris Middleton, who had 17 points and seven assists in his return from offseason wrist surgery.

Milwaukee missed two potential tying 3-pointers in the final 20 seconds.

After Davis missed a fadeaway jumper, the Bucks called a timeout with 21.4 seconds left and then found an open Grayson Allen, whose 3-point attempt went off the side of the rim.

The Lakers’ Russell Westbrook missed two free throws with 13.3 seconds remaining, but Jrue Holiday couldn’t connect on a 3-pointer with just over five seconds left. Davis made a clinching free throw with 4.5 seconds left.

“Grayson got a good look,” Budenholzer said. “Good execution. Good screening. We’ll live with that shot all the time. And Jrue, similar. We got the kick ahead, playing against a defense that’s not set. Jrue, kind of a good rhythm shot for him. It was contested, but Jrue was 6 of 12 tonight (from 3-point range). He was feeling it.”

Holiday had 28 points for the Bucks, and Bobby Portis added 15 points and 10 rebounds. Westbrook had 15 points, 11 assists and seven rebounds for the Lakers.

Hawks’ Collins out weeks with sprained ankle, Hunter also at least a week

Atlanta Hawks v Philadelphia 76ers
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ATLANTA (AP) — The Atlanta Hawks will be without both of their starting forwards for at least the next three games.

John Collins will miss at least the next two weeks with a sprained left ankle and De'Andre Hunter will be sidelined for at least one week with a right hip flexor strain, the Hawks said Thursday.

Both departed with injuries during Wednesday night’s win over Orlando. Hunter played only seven minutes and Collins was hurt after a dunk that didn’t count at the halftime buzzer.

Hunter is third on the Hawks in scoring at 14.9 points per game, and Collins is fourth at 12.3 points.

Hunter, a fourth-year player out of Virginia, has yet to play a full season because of various injuries.