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.

Knicks reportedly near deal to waive, stretch Joakim Noah, making him free agent

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The Joakim Noah era with the Knicks is finally, mercifully coming to an end.

Back in the summer of 2016 — the summer when NBA GMs spent like a drunk sailor on shore leave — the Knicks’ Phil Jackson looked at Joakim Noah, who had played 29 games the season before due to injury and was showing the wear and tear of Tom Thibodeau miles on him, and thought “I should give him four years, $72.6 million because he will totally bounce back to Defensive Player of the Year form.” In the two year’s since Noah has played in 53 games total, and while he can still grab some boards when he gets on the court, he is not near the defensive force he once was, and he was never a great offensive player.

The Knicks are finally moving on and doing so in the next 48 hours, reports Shams Charania of The Vertical at The Athletic.

Much like the Luol Deng move by the Lakers, this is about freeing up cap space for next summer for the Knicks. New York will pay his full $18.5 million salary for this season, then stretch his final season of $19.3 million over three seasons, which works out to about $6.43 million a season on the books. That is without any discount in the buyout Noah may give New York.

For the Knicks, that frees up about $12.9 million in extra cap space next summer, when they want to go big game hunting for free agents. (The Knicks reportedly have Kyrie Irving at the top of their list, although most sources I talk to around the league don’t expect Irving to leave Boston next summer.) It does mean the Knicks will have some of that Noah money on the books through the summer of 2023. The risk for New York is if they strike out in free agency then they still have that Noah money on the books, rather than just taking their medicine and paying the full price, although having him in the locker room and wanting minutes would be a distraction, one the Knicks would like to move past.

As for other teams having interest in Noah, maybe if he can prove he’s healthy some team might consider him for a backup center, or third center on the roster spot. Maybe. But most teams would rather have a young player they can get cheaply and develop in that spot rather than a 33-year-old veteran with an injury history. It’s something to watch, but I doubt the market is very deep. That said, it just takes one.

76ers set to turn promising season into must-see TV

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CAMDEN, N.J. (AP) — Ben Simmons is set to turn the 76ers into must-see TV.

But he hopes to have another smash hit off the court. NBC has given a script commitment to “Brotherly Love,” loosely based on the life of the Aussie-born NBA rookie of the year.

Deadline described the pitch like this:

“Brotherly Love is inspired by the life of Ben Simmons and centers on a unique sibling relationship within a multi-ethnic family. Together, they pursue their dreams while navigating life in the spotlight in Philadelphia, a passionate city where sports is in your blood, and your blood is always boiling.”

Don’t touch that dial – well, unless the 76ers are on.

“It’s just funny because a lot of people probably pitch their lives and think everything should be a TV show,” Simmons said Friday. “We brought it to life. (My brother) wrote something up, pitched it to a few different people. NBC loved it and went with it. It’s really going to be about our relationship and how things just happen. It’s more of a comedy-sitcom type of show. It will be pretty funny. Hopefully, that goes through and works out.”

Oh, and LeBron James (through SpringHill Entertainment) is listed as an executive producer.

The 76ers were shooting for Ben & Bron.

The Sixers met with James’ representatives just hours before the free-agent signed with the Los Angeles Lakers, the brief flirtation enough to make the organization think they might have a shot at the NBA great.

“I feel like he could have been a great piece to add to get us where we need to be,” All-Star center Joel Embiid said.

So the 76ers will try to win their first NBA title since 1983 without The King.

But with Embiid, Simmons and 2017 No. 1 NBA draft pick Markelle Fultz aboard, the Sixers believe they can top the 52 wins and a playoff series win from a year ago as they chase a championship.

Embiid, speaking at 76ers’ media day, said a successful season would be “an appearance in the NBA finals.”

That’s a pretty lofty goal for a franchise that made no meaningful offseason additions and just this week named 39-year-old Elton Brand, who retired only two years ago, as general manager.

“I just remember dunking on him really bad,” Embiid said. “That’s crazy it was two years ago.”

Coach Brett Brown expected a dominant season out of Embiid (22.9 points, 11 rebounds) and Simmons, whose friendship with Kendall Jenner made TMZ headlines this summer. He spent the offseason working on his jumper.

“I’ve never been on a team where I have to take shots,” Simmons said.

But the player who can make the most impact as a pseudo-newcomer is Fultz. Bordering on bust territory after just one season, Fultz had his rookie year derailed by a mysterious shoulder injury, a broken shot and confidence issues. He played the first four games, missed 68 games because of the injury and was benched in the playoffs against the Celtics.

Fultz struggled with his mechanics when he played, and his shooting form was widely mocked around the NBA.

Even his personal trainer, shooting coach Drew Hanlen, said Fultz suffered from the “yips” and “completely forgot how to shoot.”

The 20-year-old Fultz said Hanlen used a “misterm in words.”

“What happened last year was the injury, let me get that straight,” Fultz said. “It was the injury that happened that didn’t allow me to go through a certain path that I need to shoot the ball. Just like any normal person, when you’re used to doing something the same way each and every day and something happens, of course you’re going to start thinking about it. It’s just normal.”

Fultz took about 150,000 shots this summer and reworked his form to prove he’s ready join Embiid and Simmons on the Big Three.

“This summer was really just me working to get my mechanics back, my confidence back, my swagger back,” Fultz said.

The Sixers need it all – the swagger, the shots, the early success that can propel them toward Eastern Conference contention. The franchise that won just 10 games three seasons ago is now on the cusp of becoming an elite team.

“It’s going to be a great year,” Embiid said.

 

Minnesota reportedly moving to trade Jimmy Butler after ownership demands it

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Jimmy Butler met with Tom Thibodeau Tuesday and asked for a tradespecifically to the Clippers/Nets/Knicks. Thibodeau wanted no part of that, and he along with GM Scott Layden have shot down any other team that called, and not in a “we’re not doing that.. but what would you offer?” way, but in an “I’m hanging up now” way. Part of that may be smart negotiation tactics, but the more significant factors are that right now offers the trade offers are lowball, plus Thibodeau realizes his job on the line and this team is not as good without Butler.

So owner Glen Taylor has stepped in and laid down the law — he told Thibodeau and Layden to get on with a trade, ideally done by next Tuesday before the first day of training camp, according to multiple reports. From Adrian Wojnarowski of ESPN:

Against the displeasure of Minnesota Timberwolves president of basketball operations and coach Tom Thibodeau, owner Glen Taylor has mandated that a deal needs to be negotiated to trade disgruntled All-Star forward Jimmy Butler in the next several days, league sources told ESPN….

Thibodeau has been willing to coach the Timberwolves through the dysfunction that has surrounded his star players, but Taylor has sided with Butler and agreed that the four-time All-Star should be away from the Wolves for the foreseeable future, sources said.

So far, few franchises, if any, are engaged in serious conversations with the Timberwolves on Butler, sources said. The list of organizations interested in talking further with Minnesota is significant, league sources said: Brooklyn, Detroit, Houston, the LA Clippers, Miami and Philadelphia are among the teams interested in probing for deals.

The problem is those initial offers will be lowball ones, in part because there are real concerns about Butler’s durability, while he is just 29 he has a lot of Thibodeau miles on him. The Timberwolves can put the offers they get in front of and his agent, see which teams he would consider re-signing with as a free agent next summer, then using that to get a better deal out of them. But to get all that done by Tuesday seems rushed and like it would lead to even a worse deal.

Even so, within a week Butler could be somewhere else in the league, once again

76ers invite Emeka Okafor to training camp (on non-guaranteed deal)

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Emeka Okafor was back in the NBA last season at age 35, after having been out of the league for four years trying to recover from a neck injury. He earned that chance going through the G-League, averaging 6.8 points on 61.2 percent shooting, plus pulling down 8 rebounds a game in 20 minutes a night, with a PER of 18.6, for the Delaware 76ers.

That was enough for the New Orleans Pelicans to call him up when DeMarcus Cousins went down, and Okafor got into 26 games. He played solid defense, and while he wasn’t putting up counting stats (4.4 points and 4.6 rebounds a game) he was a steadying presence, and he had a PER of 18.6.

Then this summer, no team offered him a new contract.

Until now, the 76ers — and new GM Elton Brand — are going to bring him in on a training camp deal.

It’s a longshot Okafor makes the roster, the Sixers have 14 guaranteed contract and that does not include T.J. McConnell. Which means the roster is pretty much set. They also have Joel Embiid as the starting center and Amir Johnson behind him, plus some small ball lineups they will roll out.

However, have a good camp and another team looking for a backup center may notice.