UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File Number: 1-36900
MADISON SQUARE GARDEN SPORTS CORP.
(Exact name of registrant as specified in its charter)
Delaware
47-3373056
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
Two Penn Plaza , New York , NY
(Address of principal executive offices)
10121
(Zip Code)
Registrant’s telephone number, including area code: (212) 465-1111
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Class A Common Stock
Trading Symbol(s)
MSGS
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ☑
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant has been required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐
Indicate by check mark whether each Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☑
☐ (Do not check if a smaller reporting company)
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of internal control over financial reporting under Section 404(b) of the
Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Aggregate market value of the voting and non-voting common equity held by non-affiliates of Madison Square Garden Sports Corp. as of June 30, 2020 computed by reference to the price at which the
common equity was last sold on New York Stock Exchange as of December 31, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $5.5 billion
Number of shares of common stock outstanding as of July 31, 2020:
Class A Common Stock par value $0.01 per share
Class B Common Stock par value $0.01 per share
—
—
19,468,921
4,529,517
Documents incorporated by reference — Certain information required for Part III of this report is incorporated herein by reference to the proxy statement for the 2020 annual meeting of the Company’s
shareholders, expected to be filed within 120 days after the close of our fiscal year.
TABLE OF CONTENTS
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
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Item 1. Business
PART I
Madison Square Garden Sports Corp., formerly The Madison Square Garden Company, is a Delaware corporation with our principal executive offices at Two Pennsylvania
Plaza, New York, NY, 10121. Unless the context otherwise requires, all references to “we,” “us,” “our,” “MSG Sports” or the “Company” refer collectively to Madison Square
Garden Sports Corp., a holding company, and its direct and indirect subsidiaries. We conduct substantially all of our business activities discussed in this Annual Report on
Form 10-K through MSG Sports, LLC and its direct and indirect subsidiaries. Our telephone number is 212-465-1111, our website is http://www.msgsports.com and the
investor relations section of our website is http://investor.msgsports.com. Through the investor relations section of our website, we make available, free of charge, the
Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements, as well as any amendments to those reports and
other statements filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. These materials become available as soon as reasonably
practicable after we electronically file such materials with, or furnish them to, the Securities and Exchange Commission (“SEC”). References to our website in this report are
provided as a convenience and the information contained on, or available through, our website is not part of this or any other report we file with or furnish to the SEC.
The Company was incorporated on March 4, 2015 as an indirect, wholly-owned subsidiary of MSG Networks Inc. (“MSG Networks”). All of the outstanding common stock of
the Company was distributed to MSG Networks shareholders (the “MSGS Distribution”) on September 30, 2015 (the “MSGS Distribution Date”).
On April 17, 2020 (the “MSGE Distribution Date”), the Company distributed all of the outstanding common stock of Madison Square Garden Entertainment Corp. (formerly
MSG Entertainment Spinco, Inc., and referred to herein as “MSG Entertainment”) to its stockholders (the “MSGE Distribution”). MSG Entertainment owns, directly or
indirectly, the entertainment businesses previously owned and operated by the Company through its MSG Entertainment business segment and the sports booking business
previously owned and operated by the Company through its MSG Sports business segment. In the MSGE Distribution, (a) each holder of the Company’s Class A common
stock received one share of MSG Entertainment Class A common stock, par value $0.01 per share, for every share of the Company’s Class A common stock held of record as
of the close of business, New York City time, on April 13, 2020 (the “Record Date”), and (b) each holder of the Company’s Class B common stock received one share of MSG
Entertainment Class B common stock, par value $0.01 per share, for every share of the Registrant’s Class B common stock held of record as of the close of business, New
York City time, on the Record Date.
Overview
The Company owns and operates a portfolio of assets featuring some of the most recognized teams in all of sports, including the New York Knickerbockers (the “Knicks”) of
the National Basketball Association (the “NBA”) and the New York Rangers (the “Rangers”) of the National Hockey League (the “NHL”). Both the Knicks and the Rangers
play their home games in Madison Square Garden Arena (“The Garden”), also known as The World’s Most Famous Arena. The Company’s other professional franchises
include two development league teams — the Hartford Wolf Pack of the American Hockey League (the “AHL”) and the Westchester Knicks of the NBA G League (the
“NBAGL”). In addition, the Company owns Knicks Gaming, an esports franchise that competes in the NBA 2K League, as well as a controlling interest in Counter Logic
Gaming (“CLG”), a North American esports organization. The Company also operates two professional sports team performance centers — the Madison Square Garden
Training Center in Greenburgh, NY and the CLG Performance Center in Los Angeles, CA.
Our Strengths
•
•
•
Iconic sports franchises with renowned brands;
Enduring and meaningful presence in the New York metropolitan area, one of the nation’s largest media markets;
Deep connections with large and passionate fan bases that span a wide demographic mix;
• Multi-year sponsorship and suite agreements through a strategic partnership with MSG Entertainment;
•
•
•
Long-term local media rights agreements with MSG Networks;
National media rights agreements through the NBA and NHL;
Long-term arena license agreements with MSG Entertainment under which the Knicks and the Rangers play their home games at The Garden;
• World-class organization with expertise in team operations, event presentation and ticketing; and
•
Seasoned management team and committed ownership.
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Our Strategy
Our strategy is to leverage the strength and popularity of our professional sports franchises and our unique position in one of the nation’s largest media markets to grow our
business and increase the long-term value of our sports assets. Key components of our strategy include:
•
•
Developing championship-caliber teams. Our core goal is to develop and maintain teams that consistently compete for championships. Competitive teams help
support and drive revenue streams across the Company during the regular season and, when our teams qualify for the postseason, the Company benefits from
incremental home playoff games. The ownership and operation of NBA and NHL development teams — the Westchester Knicks and the Hartford Wolf Pack — as
well as the operation of our two state-of-the-art performance centers, are part of our strategy to develop championship-caliber teams.
Employ a ticketing policy that gives the Company a direct relationship with a broader fanbase. Our large and loyal fan bases have placed us among the league leaders
in ticket sales receipts as our teams consistently play to at-or-near capacity crowds at The Garden. For the 2016-17 Knicks and Rangers seasons, we introduced a new
ticketing policy that significantly reduced our reliance on third party brokers. Through this ticketing policy, we decreased the number of full season tickets sold and
increased the number of partial plans and individual and group tickets sold. This shift in our ticket mix delivered a positive impact on revenue and provided fans with
more opportunities to purchase tickets to home games giving us a direct relationship with a broader fanbase. In addition, this ticketing policy provided us with more
inventory that we could dynamically price to better align with fan demand. We have continued to utilize this ticketing approach, and plan to build on it further in the
seasons ahead by thoughtfully increasing the number of partial plans and individual and group tickets we sell.
• Maximize the value of our exclusive live sports content. With today’s rapidly evolving media landscape, live sports telecasts have become increasingly valuable to
distributors and advertisers. In October 2015, the Knicks and Rangers entered into 20-year local media rights agreements with MSG Networks, creating a significant
recurring and growing revenue stream for the Company. These agreements provide MSG Networks with exclusive local linear and digital rights to home and away
games of the Knicks and Rangers, as well as other team-related programming. MSG Networks makes this content available to our fans on its regional sports networks,
MSG Network and MSG+, and through its live streaming and on-demand platform, MSG GO. In addition, our Company also receives a pro-rata share of fees related
to the NBA’s and NHL’s national media rights agreements. The NHL’s agreements with NBC Sports and Rogers Communications (Canada) expire following the
2020-21 and 2025-26 regular seasons, respectively, while the NBA’s agreements with Disney and WarnerMedia expire after the 2024-25 regular season.
•
Utilize our unique assets and an integrated approach to drive sponsorship and suite sales. Our Company possesses powerful and attractive assets that also benefit
from being part of a broader sports, entertainment and media offering as a result of our Company’s various agreements with MSG Entertainment. These agreements
enable us to partner with MSG Entertainment and MSG Networks on an integrated approach to marketing partnerships and corporate hospitality solutions to drive
sponsorship, signage and suite sales. For example:
◦
◦
Our assets are highly sought after by companies that value the popularity of our sports franchises, the demographic makeup of our fans, and our unique
position in the New York market. The attractiveness of our assets is further strengthened by the Sponsorship Sales and Service Representation Agreements
and Arena License Agreements with MSG Entertainment which create compelling, broad-based marketing platforms by combining our professional sports
brands and MSG Entertainment’s live entertainment assets, as well as MSG Networks’ media inventory. This integrated approach to marketing partnerships
— which delivers unrivaled sports, entertainment and media exposure in the New York market — has already attracted world-class partners such as
JPMorgan Chase, Anheuser-Busch, Charter Communications, Delta Air Lines, DraftKings, Kia, Lexus, PepsiCo, and Squarespace. In addition, our presence
in esports with CLG and Knicks Gaming provides us with the opportunity to introduce both our existing marketing partners and new brands to esports’
global fan base, primarily comprised of millennials and Generation Z — attractive, yet hard-to reach, demographics for advertisers.
Our Arena License Agreements with MSG Entertainment enable MSG Entertainment to offer corporate hospitality solutions that bring together our live
sporting events with MSG Entertainment’s live entertainment offerings and provide for the sharing of revenues from such offerings. For example, The
Garden offers a variety of suite and club products, including 21 Event Level suites, 58 Lexus Madison Level suites, 18 Signature Level suites, the Madison
Club, Suite Sixteen and the Loft Club. These suites and clubs — which provide exclusive private spaces, first-class amenities and some of the best seats in
The Garden — are primarily licensed to corporate customers with the majority being multi-year agreements, most of which have
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annual escalators. We believe the unique combination of our live sporting events and MSG Entertainment’s live entertainment offerings, along with the
continued importance of corporate hospitality to our guests, positions us well to continue to grow this area of the business.
•
Continue to invest in the fan experience. The strong loyalty of our fans has been driven in part by our commitment to the fan experience, which we will continue to
build on through our relationship with MSG Entertainment, owner and operator of The Garden. Working with MSG Entertainment, we offer first-class operations,
innovative event presentation, premium food and beverage offerings, and unique and exclusive merchandise, as well as venue and team apps designed to create a
seamless experience for our fans. Our goal is to deliver the best in-venue experience in the industry — whether our guests are first-time visitors, repeat customers,
season ticket holders, suite holders or club members.
Our Business
Our Sports Franchises
New York Knicks
As an original franchise of the NBA, the Knicks have a rich history that includes eight trips to the NBA Finals and two NBA Championships, as well as some of the greatest
athletes to ever play the game. With President Leon Rose at the helm and new Head Coach, Tom Thibodeau, the Knicks head into the 2020-21 season fielding a young and
exciting team that includes center Mitchell Robinson and guard RJ Barrett. The team will also have the opportunity to add talented young players through its two first-round
picks in the 2020 NBA Draft. The Knicks, which have a large and passionate fan base that spans a wide demographic mix, ranked in the top three in the NBA for ticket sales
receipts for the 2019-20 regular season.
New York Rangers
The Rangers hockey club is one of the NHL’s “Original Six” franchises. Heading into its 93rd season, the Rangers are a storied franchise and one of the league’s marquee
teams, with four Stanley Cup Championships. Under the leadership of President, John Davidson, the Rangers are seeking to continue building the foundation for its next
championship-caliber team, which for the 2020-21 season includes elite forward Artemi Panarin, as well as dynamic center Mika Zibanejad. In addition, the Rangers will have
the first overall pick in the 2020 NHL Entry Draft. The Rangers, which have one of the most passionate, loyal and enthusiastic fan bases in all of sports, ranked in the top three
in the NHL for ticket sales receipts for the 2019-20 regular season.
Westchester Knicks
In March 2014, the Company acquired the right to own and operate an NBAGL team, the Westchester Knicks. The team serves as the exclusive NBAGL affiliate of the Knicks
and plays its home games at the Westchester County Center in White Plains, NY.
Hartford Wolf Pack
The Hartford Wolf Pack, a minor-league hockey team, is the player development team for the Rangers and is also competitive in its own right in the AHL. The Rangers send
draft picks and other players to the Hartford Wolf Pack for skill development and injury rehabilitation, and can call up players for the Rangers roster to enhance the team’s
competitiveness and further develop its players.
Counter Logic Gaming
Founded in 2010, CLG is a North American esports organization respected for its championship legacy and passionate fanbase. CLG fields teams across leading esports titles:
“League of Legends,” “Fortnite,” “Counter-Strike: Global Offensive,” “Apex Legends,” and “Super Smash Bros.” CLG has won multiple championships throughout its history
— most notably the League of Legends LCS North American Championship in Summer 2015 and Spring 2016, and has represented North America in the League of Legends
World Championships four times.
Knicks Gaming
Knicks Gaming, our esports franchise that competes in the NBA 2K League, was one of the inaugural teams when the league debuted in 2018. Knicks Gaming also won the
first-ever NBA 2K League Championship title in August 2018.
Arena License Agreements
Madison Square Garden, the World’s Most Famous Arena (“The Garden”), is the home for the Knicks and Rangers pursuant to Arena License Agreements with MSG
Entertainment. The Arena License Agreements provide revenue opportunities through the sharing of certain suite, sponsorship, food and beverage, merchandise and sales
arrangements with MSG Entertainment. The
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Arena License Agreements have a term of 35 years. See Note 9 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for more
information.
Our Performance Centers
The Company owns the state-of-the-art Madison Square Garden Training Center in Greenburgh, NY. The approximately 114,000 square-foot facility features two basketball
courts and one NHL regulation-sized hockey rink, and is equipped with well-appointed private areas and office space and exercise and training rooms with dedicated
equipment for each team as well as the latest technology and other first-class amenities.
In addition, the Company operates the CLG Performance Center in Los Angeles, CA, which includes unique competition spaces tailored to the Company’s esports game
franchises, as well as a studio and editing bay for video productions and outdoor areas that can be used to hold fan events.
Impact of COVID-19
On March 11 and 12, 2020, the NBA and NHL, respectively, suspended their 2019-20 seasons due to COVID-19. At the time the seasons were suspended, the Knicks had 16
games remaining, including eight home games, and the Rangers had 12 games remaining, including five home games. On May 26, 2020, the NHL announced return-to-play
plans for 24 teams which began August 1, 2020. The Rangers were among the teams that returned to play in a 24-team tournament. On June 4, 2020, the NBA announced plans
to resume play on July 30, 2020 with 22 teams. The Knicks were not among the teams that returned to competition.
As a result of government-mandated assembly limitations and closures due to the COVID-19 pandemic, no events are currently permitted to be held at The Garden where the
Knicks and Rangers play their home games, and some or all of these mandated restrictions may remain in effect even after the NBA and/or NHL resume for the 2020-21
seasons. No assurances can be made that games will be played at The Garden or will be played with any in-arena audiences or without limited-capacity in-arena audiences.
COVID-19 disruptions have materially impacted the Company’s revenues and we are recognizing materially less revenues across a number of areas. Those areas include: ticket
sales; media rights fees; our share of suite licenses; sponsorships; signage and in-venue advertising at The Garden; and food, beverage and merchandise sales.
With the ongoing uncertainty due to COVID-19, earlier this month, the Company implemented cost-reduction measures. These measures included workforce reductions, limits
on third-party vendor use and additional cuts to discretionary spending. As of June 30, 2020, we had approximately 450 full-time union and non-union employees and 430 part-
time union and non-union employees. As of August 21, 2020, due to layoffs as a result of the COVID-19 pandemic, we had approximately 420 full-time union and non-union
employees and 430 part-time union and non-union employees.
At this time, we are unable to predict when we will be able to resume normal business operations and if there will be any longer-term effects, due to these COVID-related
disruptions. See “Item 1A. Risk Factors — Our Operations and Operating Results Have Been, and Continue to be, Materially Impacted by the COVID-19 Pandemic and
Government and League Actions Taken in Response” and “Item 7. Management’s Discussion and Analysis — Introduction — Factors Affecting Results of Operations —
Impact of COVID-19 on Our Business.”
The Role of the Leagues in Our Operations
As franchises in professional sports leagues, our teams are members of their respective leagues and, as such, are subject to certain rules, regulations and limitations on the
control and management of their affairs. The respective league constitutions of our sports teams, under which each league is operated, together with the collective bargaining
agreements (each a “CBA”) that each of the NBA and NHL has signed with its players’ association, contain numerous provisions that, as a practical matter, could impact the
manner in which we operate our businesses. In addition, under the respective league constitutions of our sports teams, the commissioner of each league, either acting alone or
with the consent of a majority (or, in some cases, a supermajority) of the other sports teams in the league, may be empowered in certain circumstances to take certain actions
believed to be in the best interests of the league, whether or not such actions would benefit our sports teams and whether or not we consent or object to those actions.
While the precise rights and obligations of member teams vary from league to league, the leagues have varying degrees of control exercisable under certain circumstances over
the length and format of the playing season, including, for example, preseason and playoff schedules; the number of games in a playing season; the operating territories of the
member teams; local, national and international media and other licensing rights; admission of new members and changes in ownership; franchise relocations; indebtedness
affecting the franchises and their affiliates; and labor relations with the players’ associations, including collective bargaining, free agency, and rules applicable to player
transactions, luxury taxes and revenue sharing. See “Part II — Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business
Overview — Expenses.” Additionally, CLG operates multiple teams that participate in several different esports leagues. The
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rights and obligations of each CLG team (and member teams generally) vary from league to league. The leagues are generally empowered to and have implemented rules with
respect to our league participation, as well as operation, and monetization of the CLG teams and brand. From time to time, we may disagree with or challenge actions the
leagues take or the power and authority they assert, although the leagues’ governing documents and our agreements with the leagues purport to limit the manner in which we
may challenge decisions and actions by a league commissioner or the league itself.
Media Rights
We generally license the local media rights for our sports teams’ home and away games. Subsidiaries of the Company have entered into media rights agreements with MSG
Networks covering the local telecast and radio rights for the Knicks and Rangers. Each agreement has a remaining term of approximately 15 years.
Our Community
The Company is committed to leveraging the power of its brands to benefit communities across the tri-state area. The Knicks and Rangers both run grassroots programs -
Junior Knicks and Junior Rangers - dedicated to creating opportunities for the next generation of athletes to enjoy basketball and hockey. This commitment includes a wide-
ranging series of free clinics, skills development programs, recreational leagues, and an initiative focused on empowering girls of all ages through the sport of hockey. Both
teams also celebrate home-grown heroes throughout the year, recognizing them through awards which pay tribute to individuals who have made a difference in the lives of
others and honor the brave men and women who have served or are currently serving in the United States Armed Forces.
Our Company also has a close association with The Garden of Dreams Foundation (the “Foundation”), a non-profit organization that assists young people in need. In
partnership with the Company, MSG Entertainment, and MSG Networks, the Foundation provides young people in our communities with access to educational and skills
opportunities; mentoring programs and memorable experiences that enhance their lives, help shape their futures and create lasting joy. The Foundation focuses on young
people facing illness or financial challenges, as well as children of uniformed personnel who have been lost or injured while serving our communities. Since it was established
in 2006, the Foundation has impacted more than 375,000 children and their families.
Regulation
Our sports and entertainment businesses are subject to legislation governing the sale and resale of tickets and consumer protection statutes generally.
In addition, The Garden, like all public spaces, is subject to building and health codes and fire regulations imposed by the state and local governments. The Garden is subject to
zoning and outdoor advertising regulations and requires a number of licenses in order to operate, including occupancy permits, exhibit licenses, food and beverage permits,
liquor licenses and other authorizations and a zoning special permit granted by the New York City Planning Commission. See “Item 1A. Risk Factors — We Do Not Own The
Garden and Our Failure to Renew the Arena License Agreements or MSG Entertainment’s Failure to Operate The Garden in Compliance with the Arena License Agreements
or Extensive Governmental Regulations May Have a Material Negative Effect on Our Business and Results of Operations.”
The professional sports leagues in which we operate, primarily the NBA and NHL, have the right under certain circumstances to regulate important aspects of our business,
including, without limitation, our team-related online and mobile businesses. See “Item 1A. Risk Factors — The Actions of the NBA, NHL and Esports Leagues May Have a
Material Negative Effect on Our Business and Results of Operations.”
Our business is also subject to certain regulations applicable to our Internet websites and mobile applications, including data privacy laws in various jurisdictions. These
include, but are not limited to, the California Consumer Privacy Act (the “CCPA”). These laws obligate us to comply with certain consumer and employee rights concerning
data we may collect about these individuals. We maintain various websites and mobile applications that provide information and content regarding our business, offer
merchandise and tickets for sale, make available sweepstakes and/or contests and offer hospitality services. The operation of these websites and applications may be subject to
a range of other federal, state and local laws such as accessibility for persons with disabilities and consumer protection regulations. In addition, to the extent any of our
websites collect information from children under 13 years of age or are intended primarily for children under 13 years of age, we must comply with additional federal
regulations designed to protect children’s privacy and safety online, including restrictions on marketing. Our business is also subject to a variety of laws and regulations,
including working conditions, labor, immigration and employment laws and health, safety and sanitation requirements. See “Item 1A. Risk Factors “— We Are Subject to
Governmental Regulation, Which Can Change and Any Failure to Comply With These Regulations May Have a Material Negative Effect on Our Business and Results of
Operations.”
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Competition
Our business operates in a market in which numerous sports and entertainment opportunities are available. In addition to the NBA, NHL, AHL and NBAGL teams that we own
and operate, the New York City metropolitan area is home to two Major League Baseball teams (the New York Yankees (the “Yankees”) and the New York Mets (the
“Mets”)), two National Football League teams (the New York Giants (the “Giants”) and the New York Jets (the “Jets”)), two additional NHL teams (the New York Islanders
(the “Islanders”) and the New Jersey Devils (the “Devils”)), a second NBA team (the Brooklyn Nets (the “Nets”)) and two Major League Soccer franchises (the New York Red
Bulls and the New York City Football Club). In addition, there are a number of other amateur and professional teams that compete in other sports, including at the collegiate
and minor league levels. New York is also home to the U.S. Open tennis event each summer, as well as many other non-sports related entertainment options.
As a result of the large number of options available, we face strong competition for the New York area sports fan. We must compete with these other sporting events in varying
respects and degrees, including on the basis of the quality of the teams we field, their success in the leagues in which they compete, our ability to provide an entertaining
environment at our games and the prices we charge for our tickets. In addition, for fans who prefer the unique experience of NHL hockey, we must compete with the Islanders
and Devils as well as, in varying respects and degrees, with other NHL hockey teams and the NHL itself. Similarly, for those fans attracted to the equally unique experience of
NBA basketball, we must compete with the Nets as well as, in varying respects and degrees, with other NBA teams and the NBA itself. In addition, we also compete to varying
degrees with other productions and live entertainment events for advertising and sponsorship dollars.
The amount of revenue we earn is influenced by many factors, including the impacts of COVID-19, the popularity and on-court or on-ice performance of our sports teams and
general economic conditions. In particular, when our sports teams have strong on-court and on-ice performance, we benefit from increased demand for tickets, potentially
greater food and merchandise sales from increased attendance and increased sponsorship opportunities. When our sports teams qualify for the playoffs, we also benefit from
the attendance and in-game spending at the playoff games. The year-to-year impact of team performance is somewhat moderated by the fact that a significant portion of our
revenue derives from media rights fees, suite rental fees and sponsorship and signage revenue, all of which are generally contracted on a multi-year basis. Nevertheless, the
long-term performance of our business is tied to the success and popularity of our sports teams. In addition, due to the NBA and NHL playing seasons, revenues from our
business are typically concentrated in the second and third quarters of each fiscal year. The concentration of our revenues and expenses, however, may be different due to the
effects of the COVID-19 pandemic.
We own a controlling interest in CLG, a North American esports organization. Due to the nature of esports, CLG competes with other teams across North America and
globally. CLG competes for sponsorship, merchandise rights, media rights, and event prize winnings. Esports teams vary in their amount of funding, size of existing business,
and amount of social following, among other factors, which can impact our ability to compete effectively.
See “Item 1A. Risk Factors — Our Business Faces Intense and Wide-Ranging Competition, Which May Have a Material Negative Effect on Our Business and Results of
Operations” and “— Our Business Is Substantially Dependent on the Continued Popularity and/or Competitive Success of the Knicks and Rangers, Which Cannot Be
Assured.”
Employees
As of June 30, 2020, we had approximately 450 full-time union and non-union employees and 430 part-time union and non-union employees. Approximately 11% of our
employees were represented by unions as of June 30, 2020, all of whom are our players. With the ongoing uncertainty due to COVID-19, earlier this month, the Company
implemented cost-reduction measures. These measures included workforce reductions, limits on third-party vendor use and additional cuts to discretionary spending. As of
August 21, 2020, due to layoffs as a result of the COVID-19 pandemic, we had approximately 420 full-time union and non-union employees and 430 part-time union and non-
union employees.
There are no union employees subject to CBAs that expired as of June 30, 2020 and no union employees subject to CBAs that will expire by June 30, 2021 if they are not
extended prior thereto (although the NBA and the National Basketball Players Association (“NBPA”) currently have the right to terminate the CBA through October 15, 2020
(unless extended)). See Note 21 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for summary of the principal aspects of the
new NHL CBA and revenue sharing plan.
Labor relations in general and in the sports industry in particular can be volatile, though our current relationships with our unions taken as a whole are positive. The NBA
players and the NHL players are covered by CBAs between the NBPA and the NBA and between the NHL Players’ Association (“NHLPA”) and the NHL, respectively. Both
the NBA and the NHL have experienced labor difficulties in the past and may have labor issues in the future. On June 30, 2011 the prior CBA between the NBA and NBPA
expired and there was a work stoppage for approximately five months until a new CBA was entered into in December 2011. The NBA CBA expires after the 2023-24 season
(although each of the NBA and the NBPA has the right to
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terminate the CBA effective following the 2022-23 season). In addition, the NBA and the NBPA currently have the right to terminate the CBA through October 15, 2020
(unless extended). On September 15, 2012 the prior CBA between the NHL and NHLPA expired and there was a work stoppage for approximately four months until a new
CBA was entered into in January 2013.The current NHL CBA was set to expire on September 15, 2022, but the NHL and NHLPA have recently agreed on terms by which the
CBA will be extended through and including September 15, 2026 (with the possibility of an additional one year extension in certain circumstances). The NBA and NHL
playoff games for the 2019-20 seasons have experienced postponements due to player, team and/or league protests and decisions.
See “Item 1A. Risk Factors — Organized Labor Matters May Have a Material Negative Effect on Our Business and Results of Operations.”
Financial Information about Geographic Areas
Substantially all of the Company’s revenues and assets are attributed to or located in the United States and are primarily concentrated in the New York City metropolitan area.
Item 1A. Risk Factors
Our Operations and Operating Results Have Been, and Continue to be, Materially Impacted by the COVID-19 Pandemic and Government and League Actions Taken in
Response.
As described under “Part I - Item 1. Business,” our business depends on the activities of the Knicks and the Rangers. Due to the global COVID-19 pandemic, the NBA and
NHL suspended their 2019-20 seasons on March 11 and 12, 2020, respectively, and as a result, virtually all of our business operations have been suspended. It is not clear
when normal operations will resume. We cannot predict the time period over which our business will be impacted by the COVID-19 pandemic.
On May 26, 2020, the NHL announced that the 2019-20 regular season was complete and that the league would move directly into a 24-team tournament in which the Rangers
participated. The NHL tournament, which is being held in Toronto, Ontario, Canada and Edmonton, Alberta, Canada, began on August 1, 2020. On June 4, 2020, the NBA
announced that the 2019-20 season would conclude with a 22-team tournament starting on July 30 in Orlando, Florida, and that the Knicks would not be participating in that
tournament. The 2019-20 NBA and NHL season suspensions resulted in 16 and 12 fewer regular season games in the 2019-20 seasons being played by the Knicks and
Rangers, respectively, of which 8 and 5, respectively, were home games. Due to the evolving nature of the COVID-19 pandemic, there can be no assurances as to whether these
tournaments will be completed as planned.
Due to the delayed conclusion of the NBA and NHL seasons, the start of the 2020-21 seasons will be delayed and the Knicks and the Rangers will likely play a reduced number
of games. No assurances can be made as to whether and when the 2020-21 seasons will occur, the number of games played for the 2020-21 seasons, that the games will be
played at The Garden or will be played with any in-arena audiences or without limited-capacity in-arena audiences.
In addition, as a result of government-mandated assembly limitations and closures, no events are currently permitted to be held at The Garden, where the Knicks and Rangers
play their home games, and some, if not all, of these mandated restrictions are expected to remain in effect for at least a portion of the 2020-21 seasons. It is possible that
continuing concerns related to COVID-19 could cause governments and professional sports leagues in the United States, including the NBA and NHL, to suspend or cancel
certain games or the entire 2020-21 season or mandate that teams play games without or to limited in-arena audiences during the 2020-21 seasons and other seasons in the
future. Even after the Knicks and the Rangers are able to resume playing games at The Garden with audiences, it is unclear whether and to what extent COVID-19 and related
concerns will impact the demand for attending these games and for our sponsorship, tickets and other premium inventory or whether the leagues or government will restrict
audience sizes.
Further, a significant portion of the Company’s revenue is earned from media rights fees from the local broadcast of Knicks and Rangers games and our share of fees paid for
league-wide media rights, which will not be recognized if those games are not played. As a result of the shortened NBA season: (i) the Company’s revenues earned from local
media rights fees were reduced by approximately $10 million; and (ii) the Company collected but, did not recognize, approximately $31.8 million in revenue from league-wide
media rights fees, which, we anticipate, will be credited against league-wide media rights fees payments due for the 2020-21 NBA season, if the 2019-20 season is not
completed. As a result of the shortened NHL season (i) the Company’s revenues earned from local media rights fees were reduced by approximately $3 million; and (ii) the
Company collected but, did not recognize, approximately $10 million revenue from league-wide media rights fees, which, we anticipate, will be credited against league-wide
media rights fee payments due for the 2020-21 NHL season, if the 2019-20 season is not completed.
If the 2020-21 seasons are canceled or shortened due to COVID-19 and the NBA and the NHL do not play a minimum number of games required under the league-wide media
rights agreements or the Knicks or the Rangers do not play the number of
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games during the season required under the local media rights agreements, the amounts of revenues we earn would be substantially reduced depending upon the number of
games not played and an event of default may occur under the Knicks and Rangers credit agreements. See “— Certain of Our Subsidiaries Have Incurred Substantial
Indebtedness, and the Occurrence of an Event of Default Under Our Subsidiaries’ Credit Facilities or Our Inability to Repay Such Indebtedness When Due Could Substantially
Impair the Assets of Those Subsidiaries and Have a Negative Effect on Our Business.”
The impact of the suspensions of the NBA and NHL 2019-20 seasons have, and the delay, shortening or cancellation of the 2020-21 seasons and any other continuing effects of
COVID-19 on our business operations will, substantially decrease our revenues and this decrease is expected to continue for so long as live sports games of the Knicks and the
Rangers are not played in their usual manner. Although we have some ability to reduce our expenses based on the needs of our business operations, many of our expenses are
fixed over the near- to-medium-term, and therefore cannot be reduced to the same degree as our decline in revenues, which will adversely affect our results of operations and
cash flow to a greater extent. For example, the Knicks and Rangers are not currently required to pay license fees to MSG Entertainment under the Arena License Agreements
while The Garden is closed due to the government mandated suspension of events as a result of COVID-19. If The Garden reopens without capacity limitations, future monthly
rent payments due under the Arena License Agreements will be payable by the Knicks and the Rangers, even if the NBA or NHL seasons do not resume simultaneously or at
all. If the Knicks or Rangers play games at The Garden subject to government mandated capacity constraints due to COVID-19, the applicable rent for such periods will be
reduced by up to 80% depending on the size of the capacity constraint.
Our business is also particularly sensitive to discretionary business and consumer spending. COVID-19 could impede economic activity in impacted regions or globally over
the long-term, causing a global recession and leading to a further decline in discretionary spending on sporting events and other leisure activities, including declines in
domestic and international tourism, which could result in long-term effects on our business.
As a result of COVID-19, our business could be subject to additional governmental regulations and/or league determinations, which could have a material impact on our
business. See “— We Are Subject to Governmental Regulation, Which Can Change and Any Failure to Comply With These Regulations May Have a Material Negative Effect
on Our Business and Results of Operations.”
Even with additional protective measures to provide for the health and safety of all of those in attendance, there can be no assurances that players, fans attending games or
vendors and employees will not contract COVID-19. Any such occurrence could result in litigation, legal and other costs and reputational risk that could materially impact our
business and results of operations. In addition, such additional measures will increase operating expenses.
For the reasons set forth above and other reasons that may come to light as the COVID-19 pandemic and protective measures expand, we cannot reasonably estimate the
impact on our future revenues, results of operations, cash flows or financial condition, but such impacts have had and will continue to have a significant impact on our
business, revenues, results of operations, cash flows and financial condition.
Certain of Our Subsidiaries Have Incurred Substantial Indebtedness, and the Occurrence of an Event of Default Under Our Subsidiaries’ Credit Facilities or Our
Inability to Repay Such Indebtedness When Due Could Substantially Impair the Assets of Those Subsidiaries and Have a Negative Effect on Our Business.
Certain of our subsidiaries have incurred substantial indebtedness. New York Knicks, LLC and New York Rangers, LLC, which own the assets of the Knicks and Rangers
franchises, respectively, have entered into revolving credit facilities, both of which were fully drawn as of June 30, 2020. During March 2020, New York Knicks, LLC
borrowed all $200 million available under the Knicks Revolving Credit Facility and New York Rangers, LLC borrowed all $150 million available under the Rangers Revolving
Credit Facility. The Knicks Revolving Credit Facility expires in September 2021 and the Rangers Revolving Credit Facility expires in January 2022.
In addition, MSG NYK Holdings, LLC and MSG NYR Holdings, LLC, which are the holding companies that own New York Knicks, LLC and New York Rangers, LLC,
respectively, have entered into delayed draw term loan facilities with aggregate availability of $200 million with MSG Entertainment that expire in October 2021, both of
which remained undrawn as of June 30, 2020.
Our ability to make payments on, or repay or refinance, such indebtedness, and to fund our operations, depends largely upon our future operating performance. Our future
operating performance is subject to the impacts of the COVID-19 pandemic and general economic, financial, competitive, regulatory and other factors that are beyond our
control. Further, even if we were to draw down on our delayed draw term loans with MSG Entertainment, due to the impact of the COVID-19 pandemic, we may not be able to
repay such indebtedness by its maturity date. See “— We May Require Financing to Fund Our Ongoing Operations, the Availability of Which is Highly Uncertain.”
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Furthermore, our interest expense is substantial relative to our current revenues (as impacted by the COVID-19 pandemic) and cash outflows and could increase if interest rates
increase as our indebtedness bears interest at floating rates (or to the extent we have to refinance existing debt with higher cost debt).
The Knicks Revolving Credit Facility includes covenants and events of default that may be implicated by a shortfall in the amount of national media rights revenue received by
the New York Knicks. The Rangers Revolving Credit Facility includes covenants and events of default that may be implicated by a shortfall in the amount of national and local
media rights revenue received by the New York Rangers. If, due to the impact of the COVID-19 pandemic, protests or otherwise, the NBA and/or NHL 2020-21 seasons are
suspended or cancelled, the New York Knicks or the New York Rangers may be required, absent a cure or waiver, to repay certain amounts borrowed under the revolving
credit facilities. If we are unable to repay such amounts due to liquidity constraints, we may need to pursue other sources of financing, including through issuances of equity
and/or asset sales.
Our Business Faces Intense and Wide-Ranging Competition, Which May Have a Material Negative Effect on Our Business and Results of Operations.
The success of a sports business, like ours, is dependent upon the performance and/or popularity of its franchises. Our Knicks and Rangers and other sports franchises compete,
in varying respects and degrees, with other live sporting events, and with sporting events delivered over television networks, radio, the Internet and online services, mobile
applications and other alternative sources. For example, our sports teams compete for attendance, viewership and advertising with a wide range of alternatives available in the
New York City metropolitan area. During some or all of the basketball and hockey seasons, our sports teams face competition, in varying respects and degrees, from
professional baseball (including the Yankees and the Mets), professional football (including the Giants and the Jets), professional soccer (including the New York Red Bulls
and the New York City Football Club), collegiate sporting events, such as the National Collegiate Athletic Association basketball tournament, other sporting events, including
those held by MSG Entertainment, and each other. For fans who prefer the unique experience of NHL hockey, we must compete with two other NHL hockey teams located in
the New York City metropolitan area (the Islanders and the Devils) as well as, in varying respects and degrees, with other NHL hockey teams and the NHL itself. Similarly, for
those fans attracted to the equally unique experience of NBA basketball, we must compete with another NBA team located in the New York City metropolitan area (the Nets)
as well as, in varying respects and degrees, with other NBA teams and the NBA itself.
As a result of the large number of options available, we face strong competition for the New York City metropolitan area sports fan. We must compete with these other sports
teams and sporting events, in varying respects and degrees, including on the basis of the quality of the teams we field, their success in the leagues in which they compete, our
ability to provide an entertaining environment at our games, prices we charge for tickets and the viewing availability of our teams on multiple media alternatives. Given the
nature of sports, there can be no assurance that we will be able to compete effectively, including with companies that may have greater resources than us, and as a consequence,
our business and results of operations may be materially negatively affected.
The success of our business is largely dependent on our ability to attract strong attendance to our professional sports franchises’ home games at The Garden. Our business also
competes, in certain respects and to varying degrees, with other leisure-time activities and entertainment options in the New York City metropolitan area, such as television,
motion pictures, concerts and other live performances, restaurants and nightlife venues, the Internet, social media and social networking platforms and online and mobile
services, including sites for online content distribution, video on demand and other alternative sources of entertainment.
Our sports teams also compete with other teams in their leagues to attract players. For example, players who are free agents are generally permitted to sign with the team of
their choice. These players may make their decision based upon a number of factors, including the compensation they are offered, the makeup and competitiveness of the team
bidding for their services, geographic preferences and other non-economic factors. There can be no assurance that we will be able to retain players upon expiration of their
contracts or sign and develop talented players to replace those who leave for other reams, retire or are injured, traded or released.
Our Business Is Substantially Dependent on the Continued Popularity and/or Competitive Success of the Knicks and Rangers, Which Cannot Be Assured.
Our financial results have historically been dependent on, and are expected to continue to depend in large part on, the Knicks and Rangers remaining popular with our fan bases
and, in varying degrees, on the teams achieving on-court and on-ice success, which can generate fan enthusiasm, resulting in sustained ticket, premium seating, suite,
sponsorship, food and beverage and merchandise sales during the season. In addition, the popularity of our sports teams can impact television ratings, which could affect the
long-term value of the media rights for the Knicks and/or Rangers. Furthermore, success in the regular season may
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qualify one or both of our sports teams for participation in post-season playoffs, which provides us with additional revenue by increasing the number of games played by our
sports teams and, more importantly, by generating increased excitement and interest in our sports teams, which can help drive a number of our revenue streams, including by
improving attendance and television ratings, in subsequent seasons. The Knicks last qualified for the post-season during the 2012-13 NBA season and the Rangers last
qualified for the post-season during the 2016-17 NHL season. In addition, league, team and/or player actions or inactions, including protests, may impact the popularity of the
Knicks, the Rangers or the leagues in which they play. There can be no assurance that any of our sports teams, including the Knicks and Rangers, will maintain continued
popularity or compete in post-season play in the future.
Our Basketball and Hockey Decisions, Especially Those Concerning Player Selection and Salaries, May Have a Material Negative Effect on Our Business and Results of
Operations.
Creating and maintaining our sports teams’ popularity and/or on-court and on-ice competitiveness is key to the success of our business. Accordingly, efforts to improve our
revenues and earnings from operations from period -to -period may be secondary to actions that management believes will generate long-term growth and asset value creation.
The competitive positions of our sports teams depend primarily on our ability to develop, obtain and retain talented players, coaches and team executives, for whom we
compete with other professional sports teams. Our efforts in this regard may include, among other things, trading for highly compensated players, signing draft picks, free
agents or current players to new contracts, engaging in salary arbitration or contract renegotiation with existing players, terminating and waiving players and replacing coaches
and team executives. Any of these actions could increase expenses for a particular period, subject to any salary cap restrictions contained in the respective leagues’ CBAs.
There can be no assurance that any actions taken by management to generate and increase our long-term growth and asset value creation will be successful.
A significant factor in our ability to attract and retain talented players is player compensation. NBA and NHL player salaries have generally increased significantly and may
continue to increase. Although CBAs between the NBA and the NBPA and the NHL and the NHLPA generally cap league-wide player salaries at a prescribed percentage of
league-wide revenues, we may pay our players different aggregate salaries and a different proportion of our revenues than other NBA or NHL franchises. In addition, both of
the NBA and NHL CBAs include salary floors, which limit our ability to decrease costs below a certain amount. Future CBAs may increase the percentage of league-wide
revenues to which NBA or NHL players are entitled or impose other conditions, which may further increase our costs. In addition, we have paid the NBA a luxury tax in the
past and we may also be obligated to pay the NBA a luxury tax in future years, the calculation of which is determined by a formula based on the aggregate salaries paid to our
NBA players. See “Part II — Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Expenses — Player Salaries, Escrow
System/Revenue Sharing and NBA Luxury Tax.”
We have incurred, and may in the future incur, significant charges for costs associated with transactions relating to players on our sports teams for season-ending and career-
ending injuries and for trades, waivers and contract terminations of players and other team personnel, including team executives. See “— Injuries to Players on Our Sports
Teams Could Hinder Our Success.” These transactions can result in significant charges as the Company recognizes the estimated ultimate costs of these events in the period in
which they occur, although amounts due to these individuals may be paid over their remaining contract terms. These expenses add to the volatility of our results.
The Actions of the NBA, NHL and Esports Leagues May Have a Material Negative Effect on Our Business and Results of Operations.
The governing bodies of the NBA (including the NBAGL) and the NHL (including the AHL) have certain rights under certain circumstances to take actions that they deem to
be in the best interests of their respective leagues, which may not necessarily be consistent with maximizing our results of operations and which could affect our sports teams in
ways that are different than the impact on other sports teams. Certain of these decisions by the NBA or the NHL could have a material negative effect on our business and
results of operations.
From time to time, we may disagree with or challenge actions the leagues take or the power and authority they assert. The following discussion highlights examples of areas in
which decisions of the NBA and the NHL could materially affect our business.
The NBA and the NHL may assert control over certain matters, under certain circumstances, that may affect our revenues such as the local, national and international rights to
telecast the games of league members, including the Knicks and Rangers, licensing of the rights to produce and sell merchandise bearing the logos and/or other intellectual
property of our sports teams and the leagues, and the Internet and mobile-based activities of our sports teams. The NBA and NHL have each entered into agreements regarding
the national and international telecasts of NBA and NHL games. We receive a share of the income the NBA and the NHL generate from these contracts, which expire from
time to time. There can be no assurance that the NBA or
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the NHL will be able to renew or replace these contracts following their expiration on terms as favorable to us as those in the current agreements or that we will continue to
receive the same level of revenues in the future. We receive significant revenues from MSG Networks for the right to telecast games of the Knicks and Rangers. Changes to
league rules, regulations and/or agreements, including national and international media rights, could impact the availability of games covered by our local media rights and
could negatively affect the rights fees we receive from MSG Networks and our business and results of operations. The sports leagues have asserted control over other important
decisions, under certain circumstances, such as the length and format of, and the number of games in, the playing season, preseason and playoff schedules, the operating
territories of the member teams, admission of new members, franchise relocations, labor relations with the players associations, collective bargaining, free agency, luxury taxes
and revenue sharing. For example, we are subject to the leagues’ decisions with respect to the 2019-20 and 2020-21 seasons as a result of the COVID-19 pandemic and player,
team and/or league protests and actions. See “— Our Operations and Operating Results Have Been, and Continue to be, Materially Impacted by the COVID-19 Pandemic and
Government and League Actions Taken in Response” and “— Organized Labor Matters May Have a Material Negative Effect on Our Business and Results of Operations.” In
addition, the NBA imposes a luxury tax and escrow system with respect to player salaries and a revenue sharing plan, and the NHL imposes an escrow system with respect to
player salaries and a revenue sharing plan. For fiscal year 2020, the Knicks and Rangers recorded approximately $6.7 million in estimated revenue sharing expenses, net of
escrow receipts. The actual amounts for the 2019-20 season may vary significantly from the estimate based on actual operating results for the respective leagues and all teams
for the season and other factors, particularly due to the impact of the COVID-19 pandemic on the season. For a discussion of the NBA luxury tax impacts, see “— Our
Basketball and Hockey Decisions, Especially Those Concerning Player Selection and Salaries, May Have a Material Negative Effect on Our Business and Results of
Operations.”
The esports leagues may also assert control over certain matters, under certain circumstances, that may affect our revenues. For example, they have adopted a number of rules
and regulations governing the length and format of the playing season, how teams may generate revenue and player rosters. Decisions on these matters may materially
negatively affect our business and results of operations.
The NBA and the NHL impose certain restrictions on the ability of owners to undertake certain types of transactions in respect of teams, including a change in ownership and
team relocation. The NBA and NHL have also imposed significant restrictions on amounts of financing and/or certain types of financings and the rights of those financing
providers. See “Part II — Management’s Discussion and Analysis of Financial Condition and Results of Operation — Liquidity and Capital Resources — Financing
Agreements and Stock Repurchases” and Note 13 to the consolidated financial statements. In certain instances, these restrictions could impair our ability to proceed with a
transaction that is in the best interest of the Company and its stockholders if we were unable to obtain any required league approvals in a timely manner or at all.
The NBA and NHL impose certain rules that define, under certain circumstances, the territories in which our sports teams operate, including the markets in which our games
may be telecast. Changes to these rules could have a material negative effect on our business and results of operations.
Each league’s governing body has imposed a number of rules, regulations, guidelines, bulletins, directives, policies and agreements upon its teams. Changes to these provisions
may apply to our teams and their personnel, and/or the Company as a whole, regardless of whether we agree or disagree with such changes, have voted against such changes or
have challenged them through other means. It is possible that any such changes could materially negatively affect our business and results of operations to the extent they are
ultimately determined to bind our teams. The commissioners of each of the NBA and NHL assert significant authority to take certain actions on behalf of their respective
leagues under certain circumstances. Decisions by the commissioners of the NBA and the NHL, including on the matters described above, may materially negatively affect our
business and results of operations. The leagues’ governing documents and our agreements with the leagues purport to limit the manner in which we may challenge decisions
and actions by a league commissioner or the league itself. See “— Organized Labor Matters May Have a Material Negative Effect on Our Business and Results of
Operations.”
Injuries to, and Illness of, Players on Our Sports Teams Could Hinder Our Success.
To the degree that our financial results are dependent on our sports teams’ popularity and/or on-court and on-ice success, the likelihood of achieving such popularity or
competitive success may be substantially impacted by serious and/or untimely injuries to or illness of key players. In addition, even with team and league-wide precautions in
place, our players may nevertheless contract COVID-19 and, as a result, our ability to participate in games may be substantially impacted. Nearly all of our Knicks and Rangers
players, including those with multi-year contracts, have partially or fully guaranteed contracts, meaning that in some cases (subject to the terms of the applicable player
contract and CBA), a player or his estate may be entitled to receive his salary even if the player dies or is unable to play as a result of injury. These salaries represent significant
financial commitments for our sports teams. We maintain insurance to mitigate some of the risk of paying certain player salaries in the event of a player’s death or disability. In
the event of injuries sustained resulting in lost services (as defined in the applicable insurance policies), generally the insurance policies provide for payment to us of a portion
of the player’s salary for
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the remaining term of the contract or until the player can resume play, in each case following a deductible number of missed games. Such insurance may not be available in
every circumstance or on terms that are commercially feasible and such insurance may contain significant dollar limits and/or exclusions from coverage for pre-existing
medical conditions. We may choose not to obtain (or may not be able to obtain) such insurance in some cases and we may change coverage levels (or be unable to change
coverage levels) in the future.
In the absence of disability insurance, we may be obligated to pay all of an injured player’s salary. In addition, player disability insurance policies do not cover any NBA
luxury tax that we may be required to pay under the NBA CBA. For purposes of determining NBA luxury tax under the NBA CBA, salary payable to an injured player is
included in team salary for at least one year and until other conditions are satisfied. Replacement of an injured player may result in an increase in our salary and NBA luxury
tax expenses.
Our Business Has Been Adversely Impacted and May, in the Future, Be Materially Adversely Impacted by an Economic Downturn and Financial Instability.
Our business depends upon the ability and willingness of consumers and businesses to purchase tickets (including season tickets) to our games, license suites at The Garden,
spend on food and beverages and merchandise and drive continued advertising and sponsorship revenues, and these revenues are sensitive to general economic conditions and
consumer buying patterns.
As a result, instability and weakness of the U.S. and global economies, including as a result of the effects caused by the COVID-19 pandemic, disruptions to financial markets,
inflation, recession, high unemployment, reduced tourism and other geopolitical events and the resulting negative effects on consumers’ and businesses’ discretionary spending
may materially negatively affect our business and results of operations. See “— Our Operations and Operating Results Have Been, and Continue to be, Materially Impacted by
the COVID-19 Pandemic and Government and League Actions Taken in Response.”
We Have Incurred Substantial Operating Losses, Negative Adjusted Operating Income and Negative Cash Flow and There is No Assurance We Will Have Operating
Income, Positive Adjusted Operating Income or Positive Cash Flow in the Future.
We incurred operating losses of $94 million, $58 million and $18 million in fiscal years 2020, 2019 and 2018, respectively. In addition, we have, in prior periods, incurred
operating losses and negative cash flow and there is no assurance that we will have operating income or positive cash flow in the future. If we are unable to resume games at
The Garden at or near full capacity, our fiscal year 2021 operating results will also be materially impacted by the effects of COVID-19. Significant operating losses may limit
our ability to raise necessary financing, or to do so on favorable terms, as such losses will likely be considered by potential investors, lenders and the organizations that issue
investment ratings on indebtedness. See “Part II — Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors Affecting
Operating Results.”
Our Business is Subject to Seasonal Fluctuations and our Operating Results and Cash Flow Can Vary Substantially from Period to Period.
Our revenues and expenses have been seasonal and we expect they will continue to be seasonal. Due to the NBA and NHL playing seasons, revenues from our business are
typically concentrated in the second and third quarters of each fiscal year. The concentration of our revenues and expenses, however, may be different due to the effects of the
COVID-19 pandemic. See “— Our Operations and Operating Results Have Been, and Continue to be, Materially Impacted by the COVID-19 Pandemic and Government and
League Actions Taken in Response.”
As a result, our operating results and cash flow reflect significant variation from period to period and will continue to do so in the future. Therefore, period-to-period
comparisons of our operating results may not necessarily be meaningful and the operating results of one period are not indicative of our financial performance during a full
fiscal year. This variability may adversely affect our business, results of operations and financial condition.
Weather or Other Conditions May Impact Our Games, Which May Have a Material Negative Effect on Our Business and Results of Operations.
Weather or other conditions, including natural disasters and similar events, in the New York metropolitan area may affect patron attendance as well as sales of food and
beverages and merchandise, among other things. Weather conditions may also require us to cancel or postpone games. Any of these events may have a material negative effect
on our business and results of operations.
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Our Business Could Be Adversely Affected by Terrorist Activity or the Threat of Terrorist Activity and Other Developments That Discourage Congregation at Prominent
Places of Public Assembly.
The success of our business is dependent upon the willingness and ability of patrons to attend our games. The Garden, like all prominent places of public assembly, could be
the target of terrorist activities, including acts of domestic terrorism or other actions that discourage attendance. Any such activity or threatened activity at or near The Garden
or other similar venues in other locations could result in reduced attendance at our games and, more generally, have a material negative effect on our business and results of
operations. Similarly, a major epidemic or pandemic, or the threat of such an event, could adversely affect attendance at our games or, depending on its severity, halt our
operations entirely. See “— Our Operations and Operating Results Have Been, and Continue to be, Materially Impacted by the COVID-19 Pandemic and Government and
League Actions Taken in Response.” Moreover, the costs of protecting against such incidents, including any costs of protecting against the spread of COVID-19, reduce the
profitability of our operations. In addition, such events or the threat of such events may harm our ability to obtain or renew insurance coverage on favorable terms or at all.
We May Pursue Acquisitions and Other Strategic Transactions to Complement or Expand Our Business that May Not Be Successful.
We may explore opportunities to purchase or invest in other businesses or assets that we believe will complement, enhance or expand our current business or that might
otherwise offer us growth opportunities. Any transactions that we are able to identify and complete may involve risks, including the commitment of significant capital, the
incurrence of indebtedness, the payment of advances, the diversion of management’s attention and resources, litigation or other claims in connection with acquisitions or
against companies we invest in or acquire, our lack of control over certain joint venture companies and other minority investments, the inability to successfully integrate such
business into our operations or even if successfully integrated, the risk of not achieving the intended results and the exposure to losses if the underlying transactions or ventures
are not successful.
We Do Not Own The Garden and Our Failure to Renew the Arena License Agreements or MSG Entertainment’s Failure to Operate The Garden in Compliance with the
Arena License Agreements or Extensive Governmental Regulations May Have a Material Negative Effect on Our Business and Results of Operations.
The Knicks and the Rangers play their home games at The Garden pursuant to the Arena License Agreements with MSG Entertainment, which owns and operates The Garden.
Our Arena License Agreements for The Garden expire in 2055. If we are unable to renew the Arena License Agreements on economically attractive terms, our business could
be materially negatively affected. See “— We Rely on MSG Entertainment’s Performance Under Various Agreements.”
The Arena License Agreements require that MSG Entertainment must operate The Garden in a first-class manner. If MSG Entertainment were to breach or become unable to
satisfy this obligation under the Arena License Agreements, we could suffer operational difficulties and/or significant losses. See “— We Rely on MSG Entertainment’s
Performance Under Various Agreements.”
In addition, MSG Entertainment is subject to federal, state and local regulation relating to the operation of The Garden. For example, The Garden holds a liquor license to sell
alcoholic beverages at concession stands in The Garden. Failure by MSG Entertainment to retain, or the suspension of, the liquor license could interrupt or terminate the ability
to serve alcoholic beverages at The Garden and may have a negative effect on our business and our results of operations.
The Garden is subject to zoning and building regulations, including a special zoning permit. The original permit was granted by the New York City Planning Commission in
1963 and renewed in July 2013 for 10 years. In connection with the renewal, certain government officials and special interest groups sought to use the renewal process to
pressure MSG Entertainment to improve Penn Station or to relocate The Garden. There can be no assurance regarding the future renewal of the permit or the terms thereof.
In addition, The Garden is, and may in the future be, subject to a variety of other laws and regulations, including environmental, working conditions, labor, immigration and
employment laws, and health, safety and sanitation requirements. For example, future governmental regulations adopted in the wake of the COVID-19 pandemic may impact
the permitted occupancy of The Garden for games of the Knicks and the Rangers or the manner in which we use or maintain The Garden on game days, which may impact the
revenue we derive from games or the expenses that we incur on game days.
MSG Entertainment’s failure to comply with governmental laws and regulations applicable to the operation of The Garden, or to maintain necessary permits or licenses, could
have a material negative effect on our business and results of operations.
We Are Subject to Governmental Regulation, Which Can Change and Any Failure to Comply With These Regulations May Have a Material Negative Effect on Our
Business and Results of Operations.
We are subject to various data privacy laws in the jurisdictions we operate. These include, but are not limited to, the CCPA. These laws obligate us to comply with certain
consumer and employee rights concerning data we may collect about
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these individuals. In addition, some of these laws have only recently become effective and new laws or regulations may create additional obligations in the future. Actions
required to comply with these rights are complex and violations could expose us to fines and other penalties that may be significant.
Our business is, and may in the future be, subject to a variety of other laws and regulations, including working conditions, labor, immigration and employment laws; and
health, safety and sanitation requirements. We are unable to predict the outcome or effects of any potential legislative or regulatory proposals on our businesses. Any changes
to the legal and regulatory framework applicable to our businesses could have an adverse impact on our business and results of operations.
Our failure to comply with applicable governmental laws and regulations, or to maintain necessary permits or licenses, could result in liability that could have a material
negative effect on our business and results of operations.
Our business has also been materially impacted by government actions taken in response to the COVID-19 pandemic. See “— Our Operations and Operating Results Have
Been, and Continue to be, Materially Impacted by the COVID-19 Pandemic and Government and League Actions Taken in Response.”
We Face Continually Evolving Cybersecurity and Similar Risks, Which Could Result in Loss, Disclosure, Theft, Destruction or Misappropriation of, or Access to, Our
Confidential Information and Cause Disruption to Our Business, Damage to Our Brands and Reputation, Legal Exposure and Financial Losses.
We may collect and store, including by electronic means, certain personal and other sensitive information, including payment card information, that is provided to us through
purchases, registration on our websites, or otherwise in communication or interaction with us. These activities require the use of centralized data storage, including through
third -party service providers. Data maintained in electronic form is subject to the risk of security incidents, including breach, compromise, intrusion, tampering, theft,
misappropriation or other malicious activity. Further, hardware and operating system software and applications that we produce or procure from third parties may contain
defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of such systems. Our ability to safeguard such
personal and other sensitive information, including information regarding the Company and our customers, sponsors, partners and employees, is important to our business. We
take these matters seriously and take significant steps to protect our stored information, including the implementation of systems and processes to thwart malicious activity.
These protections are costly and require ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. In
addition, in the event of a security incident, changes in legislation may increase the risk of potential litigation. For example, the CCPA, which provides a private right of action
(in addition to statutory damages) for California residents whose sensitive personal information is breached as a result of a business’ violation of its duty to reasonably secure
such information, took effect on January 1, 2020.
Despite our efforts, the risks of a security incident cannot be entirely eliminated and our information technology and other systems that maintain and transmit customer,
sponsor, partner, Company, employee and other confidential information may be compromised due to employee error or other action, computer malware or ransomware,
viruses, hacking and phishing attacks, or otherwise. Such compromise could affect the security of information on our network, or that of a third-party service provider,
including MSG Entertainment to which we outsource information technology services, including technology relating to season ticket holders and purchases of individual game
tickets, and certain payment processing. For example, in November 2016, a payment card issue that affected cards used at merchandise and food and beverage locations at
several of the Company’s pre-MSGE Distribution venues, including its New York venues and The Chicago Theatre, was identified and addressed with the assistance of
security firms. The issue was promptly fixed and enhanced security measures were implemented. Additionally, outside parties may attempt to fraudulently induce employees,
vendors or users to disclose sensitive or confidential information in order to gain access to data and systems. As a result of any of these actions, such sensitive and/or
confidential information may be lost, disclosed, accessed or taken without authorization. See “— We Rely on MSG Entertainment’s Performance Under Various Agreements”
for a discussion of services MSG Entertainment performs on our behalf. The Company also continues to review and enhance our security measures in light of the constantly
evolving techniques used to gain unauthorized access to networks, data, software and systems. The Company may be required to incur significant expenses in order to address
any actual or potential security incidents that arise, and we may not have insurance coverage for all such expenses.
If we experience a security incident, our ability to conduct business may be interrupted or impaired, we may incur damage to our systems, we may lose profitable opportunities
or the value of those opportunities may be diminished and we may lose revenue as a result of unlicensed use of our intellectual property. Further, an actual or perceived
security incident, such as penetration of our or our third-party vendors’ networks, affecting personal or other sensitive information could subject us to business and litigation
risk and damage our reputation, including with customers, sponsors and partners, which could have a material negative effect on our business and results of operations.
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A Change to or Withdrawal of a New York City Real Estate Tax Exemption May Have a Material Negative Effect on Our Business and Results of Operations.
Many arenas, ballparks and stadiums nationally and in New York City have received significant public support, such as tax exempt financing, other tax benefits, direct
subsidies and other contributions, including for public infrastructure critical to the facilities such as parking lots and transit improvements. The Madison Square Garden
Complex benefits from a more limited real estate tax exemption pursuant to an agreement with the City of New York, subject to certain conditions, and legislation enacted by
the State of New York in 1982. For fiscal year 2020, the tax exemption was $43.3 million. From time to time there have been calls to repeal or amend the tax exemption.
Repeal or amendment would require legislative action by New York State.
We have entered into Arena License Agreements with subsidiaries of MSG Entertainment, pursuant to which the Knicks and Rangers play their home games at The Garden.
Under the Arena License Agreements, which each have a term of 35 years (unless extended), the Knicks and the Rangers pay an annual license fee in connection with their use
of The Garden. Under the Arena License Agreements, the teams are responsible for 100% of any real property or similar taxes applicable to The Garden.
If the tax exemption is repealed or a team is otherwise subject to the property tax due to no fault of that team, certain revenue allocations that we receive under the applicable
Arena License Agreement would be increased as set forth in the applicable Arena License Agreement. Although the value of any such revenue increase could be material, it is
not expected to offset the property tax that would be payable by the applicable team.
There can be no assurance that the tax exemption will not be amended in a manner adverse to us or repealed in its entirety, either of which could have a material negative effect
on our business and results of operations.
We May Require Financing to Fund Our Ongoing Operations, the Availability of Which is Highly Uncertain.
The public and private capital and credit markets can experience volatility and disruption. Such markets can exert extreme downward pressure on stock prices and upward
pressure on the cost of new debt capital and can severely restrict credit availability for most issuers.
We may require financing to fund our ongoing operations, particularly in light of the impact of the COVID-19 pandemic on our business. See “— Our Operations and
Operating Results Have Been, and Continue to be, Materially Impacted by the COVID-19 Pandemic and Government and League Actions Taken in Response.” In the future we
may also engage in transactions that depend on our ability to obtain financing.
Depending upon conditions in the financial markets and/or the Company’s financial performance, we may not be able to raise additional capital on favorable terms, or at all. In
addition, as described above, the leagues in which our sports teams compete may have, under certain circumstances, approval rights over certain financing transactions, and in
connection with those rights, could affect our ability to obtain such financing.
Organized Labor Matters May Have a Material Negative Effect on Our Business and Results of Operations.
Our business is dependent upon the efforts of unionized workers. NBA players are covered by a CBA between the NBPA and the NBA. NHL players are covered by a CBA
between the NHLPA and the NHL. Both the NBA and the NHL have experienced labor difficulties in the past and may have labor issues in the future. Labor difficulties may
include players’ strikes or protests or management lockouts. For example, the NHL has experienced labor difficulties, including a lockout during the 1994-95 NHL season,
which resulted in a regular season that was shortened from 84 to 48 games, a lockout beginning in September 2004, which resulted in the cancellation of the entire 2004-05
NHL season, and a lockout during the 2012-13 NHL season, which resulted in a regular season that was shortened from 82 to 48 games. The current NHL CBA expires on
September 15, 2022, but the NHL and NHLPA have recently agreed on terms by which the CBA will be extended through and including September 15, 2026 (with the
possibility of an additional one year extension in certain circumstances). See Note 21 to the consolidated financial statements included in Item 8 of this Annual Report on Form
10-K for summary of the principal aspects of the new NHL CBA and revenue sharing plan. The NBA has also experienced labor difficulties, including a lockout during the
1998-99 season, which resulted in a regular season that was shortened from 82 to 50 games, and a lockout during the 2011-12 season, which resulted in a regular season that
was shortened from 82 games to 66 games. The current NBA CBA expires after the 2023-24 season, but each of the NBA and NBPA has the right to terminate the CBA
effective following the 2022-23 season. In addition, the NBA and the NBPA currently have the right to terminate the CBA through October 15, 2020 (unless extended). The
NBA and NHL playoff games for the 2019-20 seasons have experienced postponements due to player, team and/or league protests and decisions. If those protests or decision
to postpone playoff games were to resume, it could lead to the suspension or cancellation of the remainder of the 2019-20 season and could adversely affect future seasons.
Any labor disputes, such as players’ strikes, protests or lockouts, with the unions with which we have CBAs could have a material negative effect on our business and results of
operations.
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The Unavailability of Systems Upon Which We Rely May Have a Material Negative Effect on Our Business and Results of Operations.
We rely upon various internal and third-party software or systems in the operation of our business, including, with respect to ticket sales, credit card processing, email
marketing, point of sale transactions, database, inventory, human resource management and financial systems. From time to time, certain of the arrangements for these systems
may not be covered by long-term agreements. The failure or unavailability of these internal or third-party services or systems, depending upon its severity and duration, could
have a material negative effect on our business and results of operations. See also “— We Rely on MSG Entertainment’s Performance Under Various Agreements” for a
discussion of services MSG Entertainment performs on our behalf.
We May Become Subject to Infringement or Other Claims Relating to Our Content or Technology.
From time to time, third parties may assert against us alleged intellectual property (e.g., copyright, trademark and patent) or other claims relating to our technologies or other
material, some of which may be material to our business. Any such claims, regardless of their merit, could cause us to incur significant costs that could harm our results of
operations. These claims may not be covered by insurance or could involve exposures that exceed the limits of any applicable insurance policy. In addition, if we are unable to
continue use of certain intellectual property rights, our business and results of operations could be materially negatively impacted.
There Is a Risk of Personal Injuries and Accidents at The Garden, Which Could Subject Us to Personal Injury or Other Claims; We are Subject to the Risk of Adverse
Outcomes in Other Types of Litigation.
There are inherent risks associated with having customers attend our teams’ games. As a result, personal injuries, accidents and other incidents have occurred and may occur
from time to time, which could subject us to claims and liabilities.
These risks may not be covered by insurance or could involve exposures that exceed the limits of any applicable insurance policy. Incidents in connection with one of our
games or an event hosted by MSG Entertainment at The Garden could also reduce attendance at our other games, and may have a negative impact on our revenue and results of
operations. Under the Arena License Agreements, MSG Entertainment and the Company have reciprocal indemnity obligations to each other in connection with their
respective acts or omissions in or about The Garden during the home games of the Knicks and the Rangers. We, the NBA and the NHL maintain insurance policies that provide
coverage for incidents in the ordinary course of business, but there can be no assurance that such indemnities or insurance will be adequate at all times and in all circumstances.
From time to time, the Company and its subsidiaries are involved in various legal proceedings, including proceedings or lawsuits brought by governmental agencies,
stockholders, customers, employees, other private parties and other stakeholders. The outcome of litigation is inherently unpredictable and, regardless of the merits of the
claims, litigation may be expensive, time-consuming, disruptive to our operations, harmful to our reputation and distracting to management. As a result, we may incur liability
from litigation (including in connection with settling such litigation) which could be material and for which we may not have available or adequate insurance coverage or be
subject to other forms of non-monetary relief which may adversely affect the Company. The liabilities we incur in connection with any such litigation could have an adverse
effect on our business and results of operations.
We Could Have Significant Tax Liability as a Result of the MSGE Distribution.
We have obtained an opinion from Sullivan & Cromwell LLP substantially to the effect that, among other things, the MSGE Distribution qualifies as a tax-free distribution
under the Internal Revenue Code (the “Code”). The opinion is not binding on the Internal Revenue Service (the “IRS”) or the courts. The opinion relies on factual
representations and reasonable assumptions, which if incorrect or inaccurate may jeopardize the ability to rely on such opinion.
If the MSGE Distribution does not qualify for tax-free treatment for U.S. federal income tax purposes, then, in general, we would be subject to tax as if we had sold the MSG
Entertainment common stock in a taxable sale for its fair value. MSG Entertainment stockholders would be subject to tax as if they had received a distribution equal to the fair
value of MSG Entertainment common stock that was distributed to them, which generally would be treated first as a taxable dividend to the extent of our earnings and profits,
then as a non-taxable return of capital to the extent of each holder’s tax basis in its MSG Entertainment common stock, and thereafter as capital gain with respect to any
remaining value. It is expected that the amount of any such taxes to MSG Entertainment stockholders and us would be substantial.
We May Have a Significant Indemnity Obligation to MSG Entertainment if the MSGE Distribution Is Treated as a Taxable Transaction.
We have entered into a Tax Disaffiliation Agreement with MSG Entertainment, which sets out each party’s rights and obligations with respect to deficiencies and refunds, if
any, of federal, state, local or foreign taxes for periods before and after
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the MSGE Distribution and related matters such as the filing of tax returns and the conduct of IRS and other audits. Pursuant to the Tax Disaffiliation Agreement, we are
required to indemnify MSG Entertainment for losses and taxes of MSG Entertainment resulting from our breach of certain covenants and for certain taxable gain recognized by
MSG Entertainment, including as a result of certain acquisitions of our stock or assets. If we are required to indemnify MSG Entertainment under the circumstances set forth in
the Tax Disaffiliation Agreement, we may be subject to substantial liabilities, which could adversely affect our financial position.
The MSGS Distribution Could Result in Significant Tax Liability.
We have received an opinion from Sullivan & Cromwell LLP substantially to the effect that, among other things, the MSGS Distribution qualified as a tax-free distribution
under the Code. The opinion is not binding on the IRS or the courts. Additionally, MSG Networks received a private letter ruling from the IRS concluding that certain limited
aspects of the MSGS Distribution do not prevent the MSGS Distribution from satisfying certain requirements for tax-free treatment under the Code. The opinion and the
private letter ruling relied on factual representations and reasonable assumptions, which if incorrect or inaccurate may jeopardize the ability to rely on such opinion and letter
ruling.
If the MSGS Distribution does not qualify for tax-free treatment for U.S. federal income tax purposes, then, in general, MSG Networks would recognize taxable gain in an
amount equal to the excess of the fair market value of the common stock of our Company over MSG Networks’ tax basis therein (i.e., as if it had sold the common stock of our
Company in a taxable sale for its fair market value). In addition, the receipt by MSG Networks’ stockholders of common stock of our Company would be a taxable distribution,
and each U.S. holder that participated in the MSGS Distribution would recognize a taxable distribution as if the U.S. holder had received a distribution equal to the fair market
value of our common stock that was distributed to it, which generally would be treated first as a taxable dividend to the extent of MSG Networks’ earnings and profits, then as
a non-taxable return of capital to the extent of each U.S. holder’s tax basis in its MSG Networks common stock, and thereafter as capital gain with respect to any remaining
value. It is expected that the amount of any such taxes to MSG Networks’ stockholders and MSG Networks would be substantial. See “— We May Have a Significant
Indemnity Obligation to MSG Entertainment if the MSGE Distribution Is Treated as a Taxable Transaction.”
We May Have a Significant Indemnity Obligation to MSG Networks if the MSGS Distribution Is Treated as a Taxable Transaction.
We have entered into a Tax Disaffiliation Agreement with MSG Networks, which sets out each party’s rights and obligations with respect to deficiencies and refunds, if any, of
federal, state, local or foreign taxes for periods before and after the MSGS Distribution and related matters such as the filing of tax returns and the conduct of IRS and other
audits. Pursuant to the Tax Disaffiliation Agreement, we are required to indemnify MSG Networks for losses and taxes of MSG Networks resulting from the breach of certain
covenants and for certain taxable gain recognized by MSG Networks, including as a result of certain acquisitions of our stock or assets. If we are required to indemnify MSG
Networks under the circumstances set forth in the Tax Disaffiliation Agreement, we may be subject to substantial liabilities, which could materially adversely affect our
financial position.
We are Controlled by the Dolan Family. As a Result of Their Control, the Dolan Family Has the Ability to Prevent or Cause a Change in Control or Approve, Prevent or
Influence Certain Actions by the Company.
We have two classes of common stock:
•
•
Class A Common Stock, par value $0.01 per share (“Class A Common Stock”), which is entitled to one vote per share and is entitled collectively to elect 25% of our
Board of Directors; and
Class B Common Stock, par value $0.01 per share (“Class B Common Stock”), which is entitled to ten votes per share and is entitled collectively to elect the
remaining 75% of our Board of Directors.
As of July 31, 2020, the Dolan family, including trusts for the benefit of members of the Dolan family (collectively, the “Dolan Family Group”), collectively own all of our
Class B Common Stock, approximately 4.1% of our outstanding Class A Common Stock (inclusive of options exercisable and RSUs vesting within 60 days) and
approximately 70.9% of the total voting power of all our outstanding common stock. The members of the Dolan Family Group holding Class B Common Stock have executed
a stockholders agreement (the “Stockholders Agreement”) that has the effect of causing the voting power of the holders of our Class B Common Stock to be cast as a block
with respect to all matters to be voted on by holders of Class B Common Stock. Under the Stockholders Agreement, the shares of Class B Common Stock owned by members
of the Dolan Family Group (representing all of the outstanding Class B Common Stock) are to be voted on all matters in accordance with the determination of the Dolan
Family Committee, except that the decisions of the Dolan Family Committee are non-binding with respect to the Class B Common Stock owned by certain Dolan family trusts
that collectively own 40.5% of the outstanding Class B Common Stock (“Excluded Trust”). The “Dolan Family Committee” consists of Charles F. Dolan and his six children,
James L. Dolan,
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Thomas C. Dolan, Patrick F. Dolan, Kathleen M. Dolan, Marianne Dolan Weber and Deborah A. Dolan-Sweeney. The Dolan Family Committee generally acts by majority
vote, except that approval of a going-private transaction must be approved by a two-thirds vote and approval of a change-in-control transaction must be approved by not less
than all but one vote. The voting members of the Dolan Family Committee are James L. Dolan, Thomas C. Dolan, Kathleen M. Dolan, Deborah A. Dolan-Sweeney and
Marianne Dolan Weber, with each member having one vote other than James L. Dolan, who has two votes. Because James L. Dolan has two votes, he has the ability to block
Dolan Family Committee approval of any Company change in control transaction. Shares of Class B Common Stock owned by Excluded Trusts are to be voted on all matters
in accordance with the determination of the Excluded Trusts holding a majority of the Class B Common Stock held by all Excluded Trusts, except in the case of a vote on a
going-private transaction or a change in control transaction, in which case a vote of trusts holding two-thirds of the Class B Common Stock owned by Excluded Trusts is
required.
The Dolan Family Group is able to prevent a change in control of our Company and no person interested in acquiring us would be able to do so without obtaining the consent
of the Dolan Family Group. The Dolan Family Group, by virtue of their stock ownership, have the power to elect all of our directors subject to election by holders of Class B
Common Stock and are able collectively to control stockholder decisions on matters on which holders of all classes of our common stock vote together as a single class. These
matters could include the amendment of some provisions of our certificate of incorporation and the approval of fundamental corporate transactions.
In addition, the affirmative vote or consent of the holders of at least 66 2⁄3% of the outstanding shares of the Class B Common Stock, voting separately as a class, is required to
approve:
•
•
the authorization or issuance of any additional shares of Class B Common Stock; and
any amendment, alteration or repeal of any of the provisions of our certificate of incorporation that adversely affects the powers, preferences or rights of the Class B
Common Stock.
As a result, the Dolan Family Group also has the power to prevent such issuance or amendment.
The Dolan Family Group also controls MSG Entertainment, MSG Networks and AMC Networks Inc. (“AMC Networks”).
We Have Elected to Be a “Controlled Company” for NYSE Purposes Which Allows Us Not to Comply with Certain of the Corporate Governance Rules of NYSE.
Members of the Dolan Family Group have entered into a Stockholders Agreement relating, among other things, to the voting of their shares of our Class B Common Stock. As
a result, we are a “controlled company” under the corporate governance rules of NYSE. As a controlled company, we have the right to elect not to comply with the corporate
governance rules of NYSE requiring: (i) a majority of independent directors on our Board, (ii) an independent corporate governance and nominating committee and (iii) an
independent compensation committee. Our Board of Directors has elected for the Company to be treated as a “controlled company” under NYSE corporate governance rules
and not to comply with the NYSE requirement for a majority independent board of directors and for an independent corporate governance and nominating committee because
of our status as a controlled company. Nevertheless, our Board of Directors has elected to comply with the NYSE requirement for an independent compensation committee.
Future Stock Sales, Including as a Result of the Exercise of Registration Rights by Certain of Our Stockholders, Could Adversely Affect the Trading Price of Our Class A
Common Stock.
Certain parties have registration rights covering a portion of our shares. We have entered into registration rights agreements with Charles F. Dolan, members of his family,
certain Dolan family interests, and the Dolan Family Foundation that provide them with “demand” and “piggyback” registration rights with respect to approximately 5.2
million shares of Class A Common Stock, including shares issuable upon conversion of shares of Class B Common Stock. Sales of a substantial number of shares of Class A
Common Stock, including sales pursuant to these registration rights, could adversely affect the market price of the Class A Common Stock and could impair our future ability
to raise capital through an offering of our equity securities.
Transfers and Ownership of Our Common Stock Are Subject to Restrictions Under Rules of the NBA and NHL and Our Certificate of Incorporation Provides Us with
Remedies Against Holders Who Do Not Comply with Those Restrictions.
The Company is the owner of professional sports franchises in the NBA and NHL. As a result, transfers and ownership of our common stock are subject to certain restrictions
under the governing documents of the NBA and NHL as well as the Company’s consent and other agreements with the NBA and NHL in connection with their approval of the
MSGS Distribution and the MSGE Distribution. These restrictions are described under “Description of Capital Stock — Class A Common Stock and Class B Common
Stock — Transfer Restrictions” in Exhibit 4.5 to this annual report on Form 10-K. In order to protect the Company and its NBA and NHL franchises from sanctions that might
be imposed by the NBA or NHL as a result of violations
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of these restrictions, our amended and restated certificate of incorporation provides that, if a transfer of shares of our common stock to a person or the ownership of shares of
our common stock by a person requires approval or other action by a league and such approval or other action was not obtained or taken as required, the Company shall have
the right by written notice to the holder to require the holder to dispose of the shares of common stock which triggered the need for such approval. If a holder fails to comply
with such a notice, in addition to any other remedies that may be available, the Company may redeem the shares at 85% of the fair market value of those shares.
We Share Certain Key Executives and Directors with MSG Entertainment, MSG Networks and/or AMC Networks, Which Means Those Executives Do Not Devote Their
Full Time and Attention to Our Affairs and the Overlap May Give Rise to Conflicts; Certain Directors Are Also Directors and/or Executives of AMC Networks.
Our Executive Chairman , James L. Dolan, also serves as the Executive Chairman and Chief Executive Officer of MSG Entertainment and Executive Chairman of MSG
Networks, our President and Chief Executive Officer, Andrew Lustgarten, also serves as the President of MSG Entertainment and our Executive Vice President and General
Counsel, Lawrence J. Burian, also serves as the Executive Vice President and General Counsel of MSG Networks. As a result, not all of our executive officers devote their full
time and attention to the Company’s affairs. Our Vice Chairman, Gregg G. Seibert, also serves as the Vice Chairman of MSG Entertainment, MSG Networks and AMC
Networks, and our Senior Vice President, Associate General Counsel and Secretary, Mark C. Cresitello, also serves as Secretary of MSG Networks. In addition, one of our
directors, Charles F. Dolan, is the Executive Chairman of AMC Networks. Furthermore, ten members of our Board of Directors (including James L. Dolan) are also directors
of MSG Entertainment, seven members of our Board of Directors (including James L. Dolan) are also directors of MSG Networks, and seven members of our Board of
Directors (including James L. Dolan) are also directors of AMC Networks. The overlapping officers and directors may have actual or apparent conflicts of interest with respect
to matters involving or affecting each company. For example, the potential for a conflict of interest exists when we on the one hand, and MSG Entertainment, MSG Networks
and/or AMC Networks on the other hand, look at certain acquisitions and other corporate opportunities that may be suitable for more than one of the companies. Also, conflicts
may arise if there are issues or disputes under the commercial arrangements that exist between MSG Entertainment, MSG Networks or AMC Networks and us. In addition,
certain of our directors and officers hold MSG Entertainment, MSG Networks and/or AMC Networks stock, stock options and/or restricted stock units. These ownership
interests could create actual, apparent or potential conflicts of interest when these individuals are faced with decisions that could have different implications for our Company
and MSG Entertainment, MSG Networks or AMC Networks. See “Certain Relationships and Potential Conflicts of Interest” in our Proxy Statement filed with the SEC on
October 25, 2019 and “Certain Relationships and Potential Conflicts of Interest” in MSG Entertainment’s Information Statement filed as Exhibit 99.1 to its Current Report on
Form 8-K filed on April 7, 2020 for a discussion of certain procedures we instituted to help ameliorate such potential conflicts with MSG Entertainment, MSG Networks
and/or AMC Networks that may arise.
Our Overlapping Directors and Executive Officers with MSG Entertainment, MSG Networks and/or AMC Networks May Result in the Diversion of Corporate
Opportunities to MSG Entertainment, MSG Networks and/or AMC Networks and Other Conflicts and Provisions in Our Amended and Restated Certificate of
Incorporation May Provide Us No Remedy in That Circumstance.
The Company acknowledges that directors and officers of the Company may also be serving as directors, officers, employees, consultants or agents of MSG Entertainment,
MSG Networks and/or AMC Networks and their respective subsidiaries and that the Company may engage in material business transactions with such entities. The Company’s
Board of Directors has adopted resolutions putting in place policies and arrangements whereby the Company has renounced its rights to certain business opportunities and no
director or officer of the Company who is also serving as a director, officer, employee, consultant or agent of MSG Entertainment, MSG Networks and/or AMC Networks and
their subsidiaries will be liable to the Company or its stockholders for breach of any fiduciary duty that would otherwise occur by reason of the fact that any such individual
directs a corporate opportunity (other than certain limited types of opportunities set forth in such policies) to MSG Entertainment, MSG Networks and/or AMC Networks or
any of their subsidiaries instead of the Company, or does not refer or communicate information regarding such corporate opportunities to the Company.
We Rely on MSG Entertainment’s Performance Under Various Agreements.
We have various agreements with MSG Entertainment, including a distribution agreement, a tax disaffiliation agreement, a transition services agreement, an employee matters
agreement, arena license agreements, sponsorship sales and service representation agreements, a team sponsorship allocation agreement, a group ticket sales agreement, a
single night rental commission agreement and service representation agreement, delayed draw term loan agreements as well as certain other arrangements with MSG
Entertainment. These agreements include the allocation of employee benefits, taxes and certain other liabilities and obligations attributable to periods prior to the MSGE
Distribution. In connection with the MSGE Distribution, we agreed to provide MSG Entertainment with indemnities with respect to liabilities arising out of our businesses and
MSG Entertainment agreed to provide us with indemnities with respect to liabilities arising out of the businesses we transferred to
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MSG Entertainment. These agreements also include arrangements with respect to support services and a number of ongoing commercial relationships, including our use of The
Garden and the allocation of certain revenues and expenses from games played by our sports teams at The Garden.
MSG Entertainment provides certain business services that were performed by internal resources prior to the MSGE Distribution, such as information technology, accounts
payable, payroll, tax, certain legal functions, human resources, insurance and risk management, investor relations, corporate communications, benefit plan administration and
reporting and internal audit functions. These services include the collection and storage of certain personal information regarding employees and/or customers as well as
information regarding the Company and our Distributors and advertisers. See “— We Face Continually Evolving Cybersecurity and Similar Risks, Which Could Result in Loss,
Disclosure, Theft, Destruction or Misappropriation of, or Access to, Our Confidential Information and Cause Disruption to Our Business, Damage to Our Brands and
Reputation, Legal Exposure and Financial Losses.” The transition services agreement and certain of the commercial arrangements are subject to potential termination by MSG
Entertainment in the event MSG Entertainment and the Company are no longer affiliates.
In connection with the MSGE Distribution, MSG NYK Holdings, LLC and MSG NYR Holdings, LLC, subsidiaries of the Company, each entered into a delayed draw term
loan agreement with a subsidiary of MSG Entertainment. The loan agreements provide for: (i) a $110 million senior unsecured delayed draw term loan facility for the Knicks
and (ii) a $90 million senior unsecured delayed draw term loan facility for the Rangers. The facilities mature in October 2021. The ability to draw down on the delayed draw
term loan facilities depends on the liquidity of MSG Entertainment, which may be materially impacted by the COVID-19 pandemic. See “— Certain of Our Subsidiaries Have
Incurred Substantial Indebtedness, and the Occurrence of an Event of Default Under Our Subsidiaries’ Credit Facilities or Our Inability to Repay Such Indebtedness When
Due Could Substantially Impair the Assets of Those Subsidiaries and Have a Negative Effect on Our Business.”
The Company relies on MSG Entertainment to perform its obligations under these agreements. If MSG Entertainment were to breach, become unable to satisfy its material
obligations under these agreements, including a failure to satisfy its indemnification or other financial obligations, or these agreements otherwise terminate or expire and we do
not enter into replacement agreements, we could suffer operational difficulties and/or significant losses.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We license The Garden, which has a maximum capacity of approximately 19,800 seats for New York Knicks games and approximately 18,000 seats for New York Rangers
games, from MSG Entertainment in New York City pursuant to the Arena License Agreements.
We own the Madison Square Garden Training Center in Greenburgh, NY with approximately 114,000 square feet of space. In addition, we lease the CLG Performance Center
in Los Angeles, CA with approximately 8,000 square feet.
In connection with the MSGE Distribution, the Company entered into a Sublease Agreement with MSG Entertainment for office space of approximately 7,000 square feet
housing the Company’s administrative and executive offices at Two Pennsylvania Plaza in New York City.
Item 3. Legal Proceedings
On March 29, 2019, a purported stockholder of the Company filed a complaint in the Court of Chancery of the State of Delaware (the “Court”), derivatively on behalf of the
Company (the “Action”), against certain directors of the Company who are members of the Dolan family group and against the directors of the Company who are members of
the Compensation Committee (collectively, the “Director Defendants”). The Company is also named as a nominal defendant in the complaint. The complaint alleges that the
Director Defendants breached their fiduciary duties to the Company’s stockholders in approving the 2016 and 2018 compensation packages for James L. Dolan in his capacity
as the Executive Chairman and Chief Executive Officer of the Company. The complaint seeks monetary damages in an unspecified amount from the Director Defendants in
favor of the Company; rescission of Mr. Dolan’s employment agreements; restitution and disgorgement by Mr. Dolan in respect of his compensation; and costs and
disbursements for the plaintiff. On June 5, 2019, the Board formed a Special Litigation Committee (the “SLC”) to investigate the claims made by the plaintiff and to determine
the Company’s response thereto. On June 18, 2020, as a result of arm’s-length negotiations among the SLC, the plaintiff, and the Director Defendants, and their respective
counsel, such parties and the Company and MSG Entertainment entered into an agreement to settle the Action (the “Settlement”) and filed the Settlement with the Court. The
SLC believes that the Settlement is in the best interests of the Company and its stockholders, including by eliminating the distraction, burden, delay and expense of litigation.
Upon the Settlement becoming effective, Mr. Dolan has agreed to voluntarily relinquish certain one-time equity awards granted to Mr.
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Dolan by the Company and MSG Entertainment pursuant to his 2018 employment agreement, and the related award agreements will be canceled. The Settlement also provides
that (i) no future decision by the Company or MSG Entertainment, as applicable, concerning Mr. Dolan’s compensation will reinstate or recompense Mr. Dolan for the
canceled awards or the exclusion from Mr. Dolan’s employment agreements of the terms set forth in Annex B to his 2018 employment agreement (which had provided Mr.
Dolan with certain rights in the event of his termination of employment with MSG Networks Inc.), and (ii) as applicable, in connection with any negotiations with Mr. Dolan
regarding his compensation, the Board of Directors or the Compensation Committee of each of the Company and MSG Entertainment will retain independent legal counsel and
will continue to retain an independent compensation consultant. As part of the Settlement, the plaintiff will withdraw all of the allegations made in the Action upon the
Settlement becoming effective. The parties agreed that the Settlement is not a presumption, concession, or admission by any of the parties of any fault, liability, or wrongdoing,
or of any infirmity or weakness of any claim or defense. If the Court approves the Settlement, it will issue a Final Judgment and Order of Dismissal that will dismiss the Action
with prejudice and release claims relating to the Action. The Settlement will become effective on the date on which the Final Judgment and Order of Dismissal becomes final.
The Company is a defendant in various lawsuits. Although the outcome of these lawsuits cannot be predicted with certainty (including the extent of available insurance, if any),
management does not believe that resolution of these lawsuits will have a material adverse effect on the Company.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our Class A Common Stock, par value $0.01 per share (“Class A Common Stock”), is listed on the New York Stock Exchange (“NYSE”) under the symbol “MSGS.” The
Company’s Class A Common Stock began “regular way” trading on the NYSE on October 1, 2015.
Performance Graph
The following graph compares the relative performance of our Class A Common Stock, the Russell 3000 Index and the Bloomberg Americas Entertainment Index. This graph
covers the period from October 1, 2015 through June 30, 2020. The comparison assumes an investment of $100 on October 1, 2015 and reinvestment of dividends. The MSGE
Distribution is treated as a reinvestment of a special dividend pursuant to SEC rules. The stock price performance included in this graph is not necessarily indicative of future
stock performance.
Base Period
10/1/15
6/30/16
6/30/17
6/30/18
6/30/19
6/30/20
Madison Square Garden Company Sports Corp.
$
100.00 $
108.16 $
123.46 $
194.49 $
175.52 $
Russell 3000 Index
Bloomberg Americas Entertainment Index
100.00
100.00
109.96
106.98
130.31
118.88
149.56
156.68
163.00
172.89
129.16
173.64
140.51
This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or incorporated by
reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
As of June 30, 2020, there were 648 holders of record of our Class A Common Stock. There is no public trading market for our Class B Common Stock, par value $.01 per
share (“Class B Common Stock”). As of June 30, 2020, there were 17 holders of record of our Class B Common Stock.
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We did not pay any cash dividend on our common stock during fiscal year 2020 and do not have any current plans to pay a cash dividend on our common stock for the
foreseeable future.
Issuer Purchases of Equity Securities
As of June 30, 2020, the Company had approximately $260 million remaining under the $525 million Class A Common Stock share repurchase program authorized by the
Company’s Board of Directors on September 11, 2015. Under the authorization, shares of Class A Common Stock may be purchased from time to time in accordance with
applicable insider trading and other securities laws and regulations, with the timing and amount of purchases depending on market conditions and other factors. The Company
has been funding and expects to continue to fund stock repurchases through a combination of cash on hand and cash generated by operations. During the fiscal year ended
June 30, 2020, the Company did not engage in any share repurchase activity under its share repurchase program.
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Item 6. Selected Financial Data
The operating and balance sheet data included in the following selected financial data table have been derived from the consolidated and combined financial statements of
Madison Square Garden Sports Corp. and its subsidiaries, and they have been revised for the four periods ended June 30, 2020, 2019, 2018 and 2017 to reflect our discontinued
operations. See Note 3 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for more information. The balance sheet data as of June
30, 2020, 2019, 2018, and 2017 and the operating data for the four years ended June 30, 2020, 2019, 2018 and 2017 are presented on a consolidated basis.
The Company became a standalone public company on September 30, 2015 (the “MSGS Distribution Date”), and the June 30, 2016 results were prepared on a standalone basis
derived from the consolidated financial statements and accounting records of MSG Networks Inc. (“MSG Networks”) and were presented as carve-out financial statements as
the Company was not a standalone public company prior to the MSGS Distribution Date (“carve-out and combined basis”). For balance sheet data as of June 30, 2016 and
operating data for the year ended June 30, 2016, the period covered by the MSGS Distribution Date, it would have been impracticable to retrospectively revise the period for
discontinued operations. The selected financial data presented below should be read in conjunction with the consolidated financial statements included in Item 8 of this Annual
Report on Form 10-K and with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Operating Data (a), (b), (c):
Revenues
Operating loss
Loss from continuing operations before income taxes
Income tax benefit (expense)
Income (loss) from continuing operations
Income from discontinued operations, net of taxes
Net income (loss)
Less: Net loss attributable to nonredeemable noncontrolling interests from
continuing operations
Less: Net loss attributable to redeemable noncontrolling interests from
discontinued operations
Less: Net loss attributable to nonredeemable noncontrolling interests from
discontinued operations
Net income (loss) attributable to Madison Square Garden Sports Corp.’s
stockholders
Basic
Income (loss) from continuing operations
Income (loss) from discontinued operations
Diluted
Income (loss) from continuing operations
Income (loss) from discontinued operations
Weighted-average number of common shares outstanding:
Basic
Diluted
Balance Sheet Data (a), (b), (c):
Total assets
Long-term debt
Total Madison Square Garden Sports Corp. stockholders’ equity
Years Ended June 30,
2020
2019
2018
2017
(in thousands, except per share data)
$
603,319 $
729,404 $
712,415 $
(93,866)
(98,048)
(20,593)
(118,641)
(90,222)
(208,863)
(58,195)
(60,641)
12,619
(48,022)
44,905
(3,117)
(18,179)
(21,288)
59,392
38,104
96,344
134,448
735,846
(23,198)
(25,684)
6,638
(19,046)
(57,743)
(76,789)
(2,342)
(2,300)
(2,136)
—
(24,013)
(7,299)
(628)
(4,370)
(120)
(4,945)
(4,382)
304
(182,388) $
11,427 $
141,594 $
(72,723)
(4.86) $
(2.76) $
(4.86) $
(2.76) $
(1.92) $
2.40 $
(1.91) $
2.39 $
1.70 $
4.29 $
1.69 $
4.25 $
23,942
23,942
23,767
23,900
23,639
23,846
(0.80)
(2.25)
(0.80)
(2.25)
23,853
23,853
$
$
$
$
$
$
1,233,798 $
3,763,790 $
3,736,173 $
3,712,753
350,000
(206,986)
—
—
—
2,620,500
2,536,483
2,408,163
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(a) The Company’s operating results for fiscal year 2020 were impacted by COVID-19 pandemic. See “Part II — Item 8. Financial Statements and Supplementary Data —
Consolidated Financial Statements — Notes to Consolidated Financial Statements — Note 1. Description of Business and Basis of Presentation” and “Item
7.Management’s Discussion and Analysis of Financial Condition and Results of Operations — Introduction — Factors Affecting Results of Operations — Impact of
COVID-19 on Our Business” for more information. In addition, the Company’s operating results for the year ended June 30, 2020 and balance sheet data as of June 30,
2020 were impacted by the adoption of Accounting Standards Codification (“ASC”) Topic 842. The Company used the modified-retrospective transition approach. Upon
adoption of this standard, the Company recorded initial (i) operating lease right-of-use assets of $1,270 (ii) current operating lease liabilities of $393, and (iii) long-term
operating lease liabilities of $1,007. The Company did not record any adjustment to retained earnings. See “Part II — Item 8. Financial Statements and Supplementary
Data — Consolidated Financial Statements — Notes to Consolidated Financial Statements — Note 9. Leases” for more information.
(b) The Company’s operating results for the year ended June 30, 2019 were impacted by the adoption of ASC Topic 606. The Company used the modified retrospective
method of adoption. Results for reporting periods beginning after July 1, 2018 are presented under ASC Topic 606, while prior period amounts are not adjusted and
continue to be reported in accordance with the historic accounting guidance under ASC Topic 605. See “Part II — Item 8. Financial Statements and Supplementary Data
— Consolidated Financial Statements — Notes to Consolidated Financial Statements — Note 4. Revenue Recognition” for more information.
(c) Operating and balance sheet data beginning in fiscal year 2018 includes results from the acquisition of Counter Logic Gaming since the acquisition date of July 28, 2017.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. In this MD&A, there are statements concerning the future operating and future financial performance of Madison Square
Garden Sports Corp. (formerly The Madison Square Garden Company) and its direct and indirect subsidiaries (collectively, “we,” “us,” “our,” or the “Company”) including,
the completion of the National Basketball Association (the “NBA”) and National Hockey League (the “NHL”) 2019-20 and 2020-21 seasons, and the impact of COVID-19 on
our future operations. See “Part I — Item 1. Business” for further discussion of the MSGE Distribution (defined below). Words such as “expects,” “anticipates,” “believes,”
“estimates,” “may,” “will,” “should,” “could,” “potential,” “continue,” “intends,” “plans,” and similar words and terms used in the discussion of future operating and
future financial performance identify forward-looking statements. Investors are cautioned that such forward-looking statements are not guarantees of future performance,
results or events and involve risks and uncertainties and that actual results or developments may differ materially from the forward-looking statements as a result of various
factors. Factors that may cause such differences to occur include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the duration and severity of the coronavirus pandemic and our ability to effectively manage the impacts, including the unavailability of the Madison Square Garden
Arena (“The Garden”) and league decisions regarding the resumption of play;
the impact of the suspension or cancellation of the 2019-20 or 2020-21 NBA and NHL seasons on our ability to recognize revenue from national media rights fees;
the level of our revenues, which depends in part on the popularity and competitiveness of our sports teams;
costs associated with player injuries, waivers or contract terminations of players and other team personnel;
changes in professional sports teams’ compensation, including the impact of signing free agents and trades, subject to league salary caps and the impact of luxury tax;
the level of our capital expenditures and other investments;
general economic conditions, especially in the New York City;
the demand for sponsorship arrangements and for advertising;
competition, for example, from other teams, and other sports and entertainment options;
changes in laws, NBA or NHL rules, regulations, guidelines, bulletins, directives, policies and agreements, including the leagues’ respective collective bargaining
agreements (each a “CBA”) with their players’ associations, salary caps, escrow requirements, revenue sharing, NBA luxury tax thresholds and media rights, or other
regulations under which we operate;
any NBA, NHL or other work stoppage in addition to those related to COVID-19 impacts;
any economic, political or other actions, such as boycotts, protests, work stoppages or campaigns by labor organizations;
seasonal fluctuations and other variation in our operating results and cash flow from period to period;
the level of our expenses, including our corporate expenses;
business, reputational and litigation risk if there is a security incident resulting in loss, disclosure or misappropriation of stored personal information or other breaches
of our information security;
activities or other developments that discourage or may discourage congregation at prominent places of public assembly, including The Garden where the home
games of the New York Knickerbockers (the “Knicks”) and the New York Rangers (the “Rangers”) are played;
the evolution of the esports industry and its potential impact on our esports businesses;
the acquisition or disposition of assets or businesses and/or the impact of, and our ability to successfully pursue, acquisitions or other strategic transactions;
our ability to successfully integrate acquisitions or new businesses into our operations;
the operating and financial performance of our strategic acquisitions and investments, including those we may not control;
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•
•
•
•
•
•
•
•
•
the impact of governmental regulations or laws, including changes in how those regulations and laws are interpreted and the continued benefit of certain tax
exemptions (including for The Garden) and the ability for us and Madison Square Garden Entertainment Corp. (“MSG Entertainment”) to maintain necessary permits
or licenses;
the impact of any government plans to redesign New York City’s Pennsylvania Station;
a default by our subsidiaries under their respective credit facilities;
business, economic, reputational and other risks associated with, and the outcome of, litigation and other proceedings;
financial community and rating agency perceptions of our business, operations, financial condition and the industry in which we operate;
our ownership of professional sports franchises in the NBA and NHL and certain related transfer restrictions on our common stock;
the tax free treatment of the distribution of the outstanding common stock of the Company to the shareholders of MSG Networks Inc. in fiscal year 2016 and the
MSGE Distribution;
the performance by MSG Entertainment of its obligations under various agreements with the Company related to the MSGE Distribution and ongoing commercial
arrangements; and
the factors described under “Part I — Item 1A. Risk Factors” included in this Annual Report on Form 10-K.
We disclaim any obligation to update or revise the forward-looking statements contained herein, except as otherwise required by applicable federal securities laws.
All dollar amounts included in the following MD&A are presented in thousands, except as otherwise noted.
MSGE Distribution
On April 17, 2020 (the “MSGE Distribution Date”), the Company distributed all of the outstanding common stock of MSG Entertainment to its stockholders (the “MSGE
Distribution”). MSG Entertainment owns, directly or indirectly, the entertainment business previously owned and operated by the Company through its MSG Entertainment
business segment and the sports booking business previously owned and operated by the Company through its MSG Sports business segment. In the MSGE Distribution,
(a) each holder of the Company’s Class A common stock, received one share of MSG Entertainment Class A common stock, par value $0.01 per share, for every share of the
Company’s Class A common stock held of record as of the close of business, New York City time, on April 13, 2020 (the “Record Date”), and (b) each holder of the
Company’s Class B common stock, received one share of MSG Entertainment Class B common stock, par value $0.01 per share, for every share of the Registrant’s Class B
common stock held of record as of the close of business, New York City time, on the Record Date. Subsequent to the MSGE Distribution, the Company no longer consolidates
the financial results of MSG Entertainment for purposes of its own financial reporting and the historical financial results of MSG Entertainment have been reflected in the
Company’s consolidated financial statements as discontinued operations for all periods presented through the MSGE Distribution Date.
After giving effect to the MSGE Distribution, the Company operates and reports financial information in one segment.
Introduction
MD&A is provided as a supplement to, and should be read in conjunction with, the audited consolidated financial statements and footnotes thereto included in Item 8 of this
Annual Report on Form 10-K to help provide an understanding of our financial condition, changes in financial condition and results of operations.
Our MD&A is organized as follows:
Business Overview. This section provides a general description of our business, as well as other matters that we believe are important in understanding our results of operations
and financial condition and in anticipating future trends.
Results of Operations. This section provides an analysis of our results of operations for the years ended June 30, 2020, 2019 and 2018.
Liquidity and Capital Resources. This section provides a discussion of our financial condition, as well as an analysis of our cash flows for the years ended June 30, 2020 and
2019. The discussion of our financial condition and liquidity includes summaries of (i) our primary sources of liquidity and (ii) our contractual obligations and off balance
sheet arrangements that existed at June 30, 2020.
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Seasonality of Our Business. This section discusses the seasonal performance of our Company.
Recently Issued Accounting Pronouncements and Critical Accounting Policies. This section includes a discussion of accounting policies considered to be important to our
financial condition and results of operations and which require significant judgment and estimates on the part of management in their application. In addition, all of our
significant accounting policies, including our critical accounting policies, are discussed in the notes to our consolidated financial statements included in Item 8 of this Annual
Report on Form 10-K.
Business Overview
The Company owns and operates a portfolio of assets featuring some of the most recognized teams in all of sports, including the Knicks of the NBA and the Rangers of the
NHL. Both the Knicks and the Rangers play their home games at The Garden. The Company’s other professional franchises include two development league teams - the
Hartford Wolf Pack of the American Hockey League (“AHL”) and the Westchester Knicks of the NBA G League (“NBAGL”). Our professional sports franchises are
collectively referred to herein as “our sports teams.” During the periods prior to fiscal year 2020, MSG Sports also included the New York Liberty (the “Liberty”) of the
Women’s National Basketball Association (the “WNBA”), which was sold in January 2019. In addition, the Company owns Knicks Gaming, an esports franchise that
competes in the NBA 2K League, as well as a controlling interest in Counter Logic Gaming (“CLG”), a North American esports organization. The Company also operates two
professional sports team performance centers - the Madison Square Garden Training Center in Greenburgh, NY and the CLG Performance Center in Los Angeles, CA. CLG
and Knicks Gaming are collectively referred to herein as “our esports teams,” and together with the sports teams, the “teams.”
Revenue Sources
We earn revenue from several primary sources: ticket sales and a portion of suite rental fees at The Garden, our share of distributions from NHL and NBA league-wide national
and international television contracts and other league-wide revenue sources, venue signage and other sponsorships, food and beverage sales at The Garden and merchandising.
We also earn substantial fees from MSG Networks for the local media rights to telecast the games of our sports teams. The amount of revenue we earn is influenced by many
factors, including the impacts of COVID-19, the popularity and on-court or on-ice performance of our sports teams and general economic conditions. In particular, when our
sports teams have strong on-court and on-ice performance, we benefit from increased demand for tickets, potentially greater food and merchandise sales from increased
attendance and increased sponsorship opportunities. When our sports teams qualify for the playoffs, we also benefit from the attendance and in-game spending at the playoff
games. The year-to-year impact of team performance is somewhat moderated by the fact that a significant portion of our revenue derives from media rights fees, suite rental
fees and sponsorship and signage revenue, all of which are generally contracted on a multi-year basis. Nevertheless, the long-term performance of our business is tied to the
success and popularity of our sports teams. In addition, due to the NBA and NHL playing seasons, revenues from our business are typically concentrated in the second and
third quarters of each fiscal year. The concentration of our revenues and expenses, however, may be different due to the effects of the COVID-19 pandemic.
Ticket Sales and Facility and Ticketing Fees
Ticket sales have historically constituted our largest single source of revenue. Tickets to our sports teams’ home games are sold through season tickets (full and partial plans),
which are typically held by long-term season subscribers, through group sales, and through single-game tickets, which are purchased by fans either individually or in multi-
game packages. We generally review and set the price of our tickets before the start of each team’s season. However, we dynamically price our individual tickets based on
opponent, seat location, day of the week and other factors. We do not earn revenue from ticket sales for games played by our teams at their opponents’ arenas.
We also earn revenues in the form of certain fees added to ticket prices, which currently include a facility fee the Company charges on tickets it sells to our sports teams’
games, except for season tickets.
Media Rights
We earn revenue from the licensing of media rights for our sports teams’ home and away games and also through the receipt of our share of fees paid for league-wide media
rights, which are awarded under contracts negotiated and administered by each league.
The Company and MSG Networks are parties to media rights agreements covering the local telecast rights for the Knicks and Rangers. The financial success of the Company is
significantly dependent on the rights fees we receive from MSG Networks in connection with the telecast of our Knicks and Rangers games.
National and international telecast arrangements differ by league. Fees paid by telecasters under these arrangements are pooled by each league and then generally shared
equally among all teams.
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Suites and Clubs
We earn revenue through the sale of suite and premium club licenses at The Garden, which are generally sold by MSG Entertainment to corporate customers pursuant to multi-
year licenses. Under standard licenses, the licensees pay an annual license fee, which varies depending on the location and type of the suite or club. The license fee includes,
for each seat in the suite or club, tickets for our home games and other events at The Garden that are presented by MSG Entertainment for which tickets are sold to the general
public, subject to certain exceptions. In addition, suite holders separately pay for food and beverage service in their suites at The Garden. Food and non-alcoholic beverage
service is included in the annual license fee paid by club members.
Because suite and club licenses cover both our games and events that MSG Entertainment presents at The Garden, suite and club rental revenue is shared between us and MSG
Entertainment under the arena license agreements (the “Arena License Agreements”) we entered into in connection with the MSGE Distribution. Pursuant to the Arena
Licenses Agreements, the Knicks and the Rangers are entitled to 35% and 32.5%, respectively, of the revenues received by MSG Entertainment in connection with suite and
club licenses.
Venue Signage and Sponsorships
We earn revenues through the sale of sponsorships and signage specific to the teams. Sales of team specific signage generally involve the sale of advertising space within The
Garden during our sports teams’ home games and include the sale of signage on the ice and on the boards of the hockey rink during Rangers games, courtside during Knicks
games, and/or on the various scoreboards and display panels at The Garden. We offer both television camera-visible and non-camera-visible signage space. We also earn a
portion of revenues through MSG Entertainment’s sale of venue indoor signage space and sponsorship rights at The Garden that are not specific to our teams pursuant to the
Arena License Agreements.
Sponsorship rights generally require the use of the name, logos and other trademarks of a sponsor in the advertising and in promotions for The Garden in general or our teams
specifically during our sports events. Sponsorship arrangements may be exclusive within a particular sponsorship category or non-exclusive and generally permit a sponsor to
use the name, logos and other trademarks of our teams and, in the case of sponsorship arrangements shared with MSG Entertainment, MSG Entertainment’s venues and brands
in connection with their own advertising and in promotions in The Garden or in the community.
Food, Beverage and Merchandise Sales
We earn revenues from the sale of food and beverages during our sports teams’ games at The Garden. In addition to concession-style sales of food and beverages, which
represent the majority of food and beverage revenues, The Garden also provides higher-end dining at full service restaurants and premium clubs as well as catering for suites.
Pursuant to the Arena License Agreements, the Knicks and the Rangers receive 50% of net profits from the sales of food and beverages during their games at The Garden.
We also earn revenues from the sale of our sports teams’ merchandise both through the in-venue (and in some cases, online) sale of items bearing the logos or other marks of
our teams and through our share of sports league distributions of royalties and other revenues from the sports leagues’ licensing of team and sports league trademarks, which
revenues are generally shared equally among the teams in the sports leagues. Pursuant to the Arena License Agreements, the Knicks and the Rangers pay MSG Entertainment a
commission equal to 30% of revenues from the sales of their merchandise at The Garden.
By agreement among the teams, each of the sports leagues in which we operate acts as an agent for the sports teams to license their logos and other marks, as well as the marks
of the leagues, subject to certain rights retained by the teams to license these marks within their arenas and the geographic areas in which they operate.
Other
Amounts collected for ticket sales, sponsorships, venue signage and suite licenses and clubs in advance of an event are recorded as deferred revenue and are recognized as
revenues when earned for both accounting and tax purposes.
Expenses
The most significant expenses are player and other team personnel salaries and charges for transactions relating to players for career-ending and season-ending injuries, trades,
and waivers and contract termination costs of players and other team personnel, including team executives. We also incur costs for travel, player insurance, league operating
assessments (including a 6% NBA assessment on regular season ticket sales), NHL and NBA revenue sharing and, when applicable, NBA luxury tax.
In addition, in connection with the MSGE Distribution, the Company entered into the Arena License Agreements with MSG Entertainment which require the Company to pay
arena license fees to MSG Entertainment in exchange for the right to use The Garden for home games of the Knicks and the Rangers for a 35-year term. Under the Arena
License Agreements, the Knicks
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and the Rangers will pay an annual license fee in connection with their respective use of The Garden. The license fee for the first full contract year ending June 30, 2021 will
be approximately $22,500 for the Knicks and approximately $16,700 for the Rangers, and then for each subsequent year, the license fees will be 103% of the license fees for
the immediately preceding contract year.
The teams are not, however, required to pay the license fee during a period in which The Garden is unavailable for home games due to a force majeure event (including the
government mandated suspension of events at The Garden as a result of the disruptions caused by COVID-19). As a result, we have not been required to make any rent
payments under the Arena License Agreements since the MSGE Distribution Date and will continue not to be required to make any rent payments during the government
mandated suspension of events at The Garden as a result of the disruptions caused by COVID-19. If The Garden reopens without capacity limitations, future monthly rent
payments due under the Arena License Agreements will be payable by the Knicks and the Rangers, even if the NBA or NHL seasons do not resume simultaneously or at all. If
the Knicks or Rangers play games at the Garden subject to government mandated capacity constraints due to COVID-19, the applicable rent for such periods will be reduced
by up to 80% depending on the size of the capacity constraint. See “— Factors Affecting Results of Operations — Impact of COVID-19 on Our Business” for more
information.
Player Salaries, Escrow System/Revenue Sharing and NBA Luxury Tax
The amount we pay an individual player is typically determined by negotiation between the player (typically represented by an agent) and us, and is generally influenced by the
player’s past performance, the amounts paid to players with comparable past performance by other sports teams and restrictions in the CBAs, including the salary floors and
caps and NBA luxury tax. The leagues’ CBAs typically contain restrictions on when players may move between league clubs following expiration of their contracts and what
rights their current and former clubs have.
NBA CBA. The NBA CBA expires after the 2023-24 season (although each of the NBA and the National Basketball Players Association (“NBPA”) has the right to terminate
the CBA effective following the 2022-23 season). In addition, the NBA and the NBPA currently have the right to terminate the CBA through October 15, 2020 (unless
extended). The NBA CBA contains a salary floor (i.e., a floor on each team’s aggregate player salaries with a requirement that the team pay any deficiency to the players on its
roster) and a “soft” salary cap (i.e., a cap on each team’s aggregate player salaries but with certain exceptions that enable teams to pay players more, sometimes substantially
more, than the cap).
NBA Luxury Tax. Amounts in this paragraph are in thousands, except for luxury tax rates. The NBA CBA generally provides for a luxury tax that is applicable to all teams with
aggregate player salaries exceeding a threshold that is set prior to each season based upon projected league-wide revenues (as defined under the NBA CBA). The luxury tax
rates for teams with aggregate player salaries above such threshold start at $1.50 for each $1.00 of team salary above the threshold up to $5,000 and scale up to $3.25 for each
$1.00 of team salary that is from $15,000 to $20,000 over the threshold, and an additional tax rate increment of $0.50 applies for each additional $5,000 (or part thereof) of
team salary in excess of $20,000 over the threshold. In addition, for teams that are taxpayers in at least three of four previous seasons, the above tax rates are increased by
$1.00 for each increment. Fifty percent of the aggregate luxury tax payments is a funding source for the revenue sharing plan (described below) and the remaining 50% of such
payments is distributed in equal shares to non-taxpaying teams. For the 2019-20, 2018-19, and 2017-18 seasons, the Knicks were not a luxury tax payer and we recorded
approximately $230, $3,100, and $2,200, respectively, of luxury tax proceeds from tax-paying teams. Tax obligations for years beyond the 2019-20 season will be subject to
contractual player payroll obligations and corresponding NBA luxury tax thresholds. The Company recognizes the estimated amount associated with luxury tax expense or the
amount it expects to receive as a non-tax paying team, if applicable, on a straight-line basis over the NBA regular season as a component of direct operating expenses.
NBA Escrow System/Revenue Sharing. The NBA CBA also provides that players collectively receive a designated percentage of league-wide revenues (net of certain direct
expenses) as compensation (approximately 51%), and the teams retain the remainder. The percentage of league-wide revenues paid as compensation and retained by the teams
does not apply evenly across all teams and, accordingly, the Company may pay its players a higher or lower percentage of the Knicks’ revenues than other NBA teams.
Throughout each season, NBA teams withhold 10% of each player’s salary and contribute the withheld amounts to an escrow account. If the league’s aggregate player
compensation exceeds the designated percentage of league-wide revenues, some or all of such escrowed amounts are distributed equally to all NBA teams. In the event that the
league’s aggregate player compensation is below the designated percentage of league-wide revenues, the teams with the shortfall will remit the shortfall in equal shares to the
NBPA for distribution to the players.
The NBA also has a revenue sharing plan that generally requires the distribution of a pool of funds to teams with below-average net revenues (as defined in the plan), subject to
reduction or elimination based on individual team market size and profitability. The plan is funded by a combination of disproportionate contributions from teams with above-
average net revenues, subject to certain profit-based limits (each as defined in the plan); 50% of aggregate league-wide luxury tax proceeds (see above); and collective league
sources, if necessary. Additional amounts may also be distributed on a discretionary basis, funded by
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assessments on playoff ticket revenues and through collective league sources.
We record our revenue sharing expense net of the amount we expect to receive from the escrow. Our net provision for these items for the year ended June 30, 2020 was
approximately $6,529. The actual amounts for the 2019-20 season may vary significantly from the recorded provision based on actual operating results for the league and all
NBA teams for the season and other factors, including the NBA’s return-to-play plans to complete the 2019-20 season.
NHL CBA. The current NHL CBA was set to expire on September 15, 2022, but the NHL and NHL Players’ Association (“NHLPA”) have recently agreed on terms by which
the CBA will be extended through and including September 15, 2026 (with the possibility of an additional one year extension in certain circumstances). The NHL CBA
provides for a salary floor (i.e., a floor on each team’s aggregate player salaries) and a “hard” salary cap (i.e., teams may not exceed a stated maximum, which has been
adjusted each season thereafter based upon league-wide revenues). See Note 21 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K
for summary of the principal aspects of the new NHL CBA and revenue sharing plan.
NHL Escrow System/Revenue Sharing. The NHL CBA provides that each season the players receive as player compensation 50% of that season’s league-wide revenues.
Because the aggregate amount to be paid to the players is based upon league-wide revenues and not on a team-by-team basis, the Company may pay its players a higher or
lower percentage of the Rangers’ revenues than other NHL teams pay of their own revenues. In order to implement the salary cap system, NHL teams withhold a portion of
each player’s salary and contribute the withheld amounts to an escrow account. If the league’s aggregate player compensation for a season exceeds the designated percentage
(50%) of that season’s league-wide revenues, the excess is retained by the league. Any such excess funds are distributed to all teams in equal shares. As of July 2020, the NHL
CBA limits the amount of deductions to be withheld from player salaries each year. If annual excess deductions from player salaries are insufficient to limit league-wide player
salaries to 50% of that season’s league-wide revenues, any shortfall will be carried forward to future seasons and remain due from the players to the league.
The NHL CBA also provides for a revenue sharing plan. The plan generally requires the distribution of a pool of funds approximating 6.055% of league-wide revenues to
certain qualifying lower-revenue teams and is funded as follows: (a) 50% from contributions by the top ten revenue earning teams (based on preseason and regular season
revenues, net of arena costs) in accordance with a formula; (b) then from payments by teams participating in the playoffs, with each team contributing 35% of its gate receipts
for each home playoff game; and (c) the remainder from centrally-generated NHL sources. We record our revenue sharing expense net of the amount we expect to receive from
the escrow. Our net provisions for these items for the year ended June 30, 2020 was approximately $133. The actual amounts for the 2019-20 season may vary significantly
from the recorded provision based on actual operating results for the league and all NHL teams for the season and other factors, including the NHL’s return-to-play plans to
complete the 2019-20 season.
Other Team Operating Expenses
Our teams also pay expenses associated with day-to-day operations, including for travel, equipment maintenance and player insurance. Direct variable day-of-event costs
incurred at The Garden, such as the costs of front-of-house and back-of-house staff, including electricians, laborers, box office staff, ushers, security, and event production are
charged to the Company.
In addition, our team operating expenses include operating costs of the Company’s training center in Greenburgh, NY. The operation of the Hartford Wolf Pack is reported as a
net Rangers player development expense.
As members of the NBA and NHL, the Knicks and Rangers, respectively, are also subject to league assessments. The governing bodies of each league determine the amount of
each season’s league assessments that are required from each member team. The NBA imposed on each team a 6% assessment on regular season ticket revenue.
We also incur costs associated with VIP amenities provided to certain ticket holders.
Other Expenses
Selling, general and administrative (“SG&A”) expenses primarily consist of administrative costs, including compensation, professional fees, as well as sales and marketing
costs, including non-event related advertising expenses.
SG&A expenses for periods prior to the MSGE Distribution include certain corporate overhead expenses that do not meet the criteria for inclusion in discontinued operations.
Factors Affecting Operating Results
Our operating results are largely dependent on the continued popularity and/or on-ice or on-court competitiveness of our Rangers and Knicks teams, which have a direct effect
on ticket sales for the teams’ home games and are each team’s largest single source of revenue. As with other sports teams, the competitive positions of our sports teams
depend primarily on our ability to develop, obtain and retain talented players, for which we compete with other professional sports teams. A significant
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factor in our ability to attract and retain talented players is player compensation. The Company’s operating results reflect the impact of high costs for player salaries (including
NBA luxury tax, if any) and salaries of non-player team personnel. In addition, we have incurred significant charges for costs associated with transactions relating to players on
our sports teams for season-ending and career-ending injuries and for trades, waivers and contract terminations of players and other team personnel, including team executives.
Waiver and termination costs reflect our efforts to improve the competitiveness of our sports teams. These transactions can result in significant charges as the Company
recognizes the estimated ultimate costs of these events in the period in which they occur, although amounts due to these individuals are generally paid over their remaining
contract terms. For example, the expense for these items was $33,690, $53,134 and $27,514 for fiscal years 2020, 2019 and 2018, respectively. These expenses add to the
volatility of our operating results. We expect to continue to pursue opportunities to improve the overall quality of our sports teams and our efforts may result in continued
significant expenses and charges. Such expenses and charges may result in future operating losses although it is not possible to predict their timing or amount. Our performance
has been, and may in the future be, impacted by work stoppages. See “Part I — Item 1A. Risk Factors — Organized Labor Matters May Have a Material Negative Effect on
Our Business and Results of Operations.”
In addition to our future performance being dependent upon the continued popularity and/or on-ice or on-court competitiveness of our Rangers and Knicks teams, it is also
dependent on general economic conditions, in particular those in the New York City metropolitan area, and the effect of these conditions on our customers. An economic
downturn could adversely affect our business and results of operations as it may lead to lower demand for suite licenses and tickets to the games of our sports teams, which
would also negatively affect merchandise and concession sales, as well as decrease levels of sponsorship and venue signage revenues.
Factors Affecting Results of Operations
Impact of COVID-19 on Our Business
On March 11 and 12, 2020, the NBA and NHL, respectively, suspended their 2019-20 seasons due to COVID-19. At the time the seasons were suspended, the Knicks had 16
games remaining, including eight home games, and the Rangers had 12 games remaining, including five home games. On May 26, 2020, the NHL announced return-to-play
plans for 24 teams which began August 1, 2020. The Rangers were among the teams that returned to play in a 24-team tournament. On June 4, 2020, the NBA announced plans
to resume play on July 30, 2020 with 22 teams. The Knicks were not among the teams that returned to competition.
As a result of government-mandated assembly limitations and closures due to the COVID-19 pandemic, no events are currently permitted to be held at The Garden where the
Knicks and Rangers play their home games, and some or all of these mandated restrictions may remain in effect even after the NBA and/or NHL resume for the 2020-21
seasons. No assurances can be made that games will be played at The Garden or will be played with any in-arena audiences or without limited-capacity in-arena audiences.
COVID-19 disruptions have materially impacted the Company’s revenues and we are recognizing materially less revenues across a number of areas. Those areas include: ticket
sales; media rights fees; our share of suite licenses; sponsorships; signage and in-venue advertising at The Garden; and food, beverage and merchandise sales.
While we currently have the ability to reduce certain operating expenses as a result of the disruptions caused by COVID-19, including (i) rent payments to MSG Entertainment
under the Arena License Agreements while The Garden remains closed, (ii) NBA league assessments and day-of-game expenses for the Knicks and Rangers games and (iii)
certain other selling, general and administrative and discretionary expenses, those expense reduction opportunities will not fully offset revenue losses.
Subsidiaries of the Company are parties to the Arena License Agreements with a subsidiary of MSG Entertainment that requires the Knicks and the Rangers to play their home
games at The Garden. Under the Arena License Agreements, the Knicks and the Rangers will pay an annual license fee in connection with their respective use of The Garden.
The license fee for the first full contract year ending June 30, 2021 will be approximately $22,500 for the Knicks and approximately $16,700 for the Rangers, and then for each
subsequent year, the license fees will be 103% of the license fees for the immediately preceding contract year. The Garden, however, is currently closed due to the COVID-19
pandemic and monthly rent is not required to be paid by the Knicks or Rangers. If The Garden reopens without capacity limitations, future monthly rent payments due under
the Arena License Agreements will be payable by the Knicks and the Rangers, even if the NBA or NHL seasons do not resume simultaneously or at all. If the Knicks or
Rangers play games at the Garden subject to government mandated capacity constraints due to COVID-19, the applicable rent for such periods will be reduced by up to 80%
depending on the size of the capacity constraint.
For more information about the risks to the Company as a result of the COVID-19 pandemic and its impact on our operating results, see “Part I — Item 1A. Risk Factors —
Our Operations and Operating Results Have Been, and Continue to be, Materially Impacted by the COVID-19 Pandemic and Government and League Actions Taken in
Response.”
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New York Liberty
The Company’s operating results for fiscal year 2019 also included the Liberty of the Women’s National Basketball Association, which was sold in January 2019.
Renewal of a Ticketing Agreement
The Company’s operating results for the year ended June 30, 2019 were impacted by the recognition of revenue for events that took place during the prior year due to the
renewal of the agreement with the Company’s ticketing platform provider during fiscal year 2019. The impact on the Company’s consolidated revenues, operating income and
adjusted operating income for the year ended June 30, 2019 from games played in the prior year as a result of the ticketing agreement renewal was $2,753.
Results of Operations
Comparison of the Year Ended June 30, 2020 versus the Year Ended June 30, 2019
The table below sets forth, for the periods presented, certain historical financial information.
Years Ended June 30,
Change (a)
2020
2019
Amount
Percentage
Revenues
$
603,319 $
729,404 $
(126,085)
Direct operating expenses
Selling, general and administrative expenses
Depreciation and amortization
Operating loss
Other income (expense):
Interest expense, net
Miscellaneous income (expense), net
Loss from continuing operations before income taxes
Income tax benefit (expense)
Loss from continuing operations
Income (loss) from discontinued operations, net of taxes
Net loss
Less: Net loss attributable to nonredeemable noncontrolling interests from
continuing operations
Less: Net loss attributable to redeemable noncontrolling interests from
discontinued operations
Less: Net loss attributable to nonredeemable noncontrolling interests from
discontinued operations
Net income (loss) attributable to Madison Square Garden Sports Corp.’s
359,970
319,675
17,540
(93,866)
(3,761)
(421)
(98,048)
(20,593)
(118,641)
(90,222)
(208,863)
440,081
327,441
20,077
(58,195)
(3,779)
1,333
(60,641)
12,619
(48,022)
44,905
(3,117)
(80,111)
(7,766)
(2,537)
(35,671)
18
(1,754)
(37,407)
(33,212)
(70,619)
(135,127)
(205,746)
(2,342)
(2,300)
(42)
(24,013)
(7,299)
(16,714)
NM
(120)
(4,945)
4,825
(17)%
(18)%
(2)%
(13)%
(61)%
— %
NM
(62)%
NM
(147)%
NM
NM
(2)%
98 %
NM
stockholders
$
(182,388) $
11,427 $
(193,815)
NM — Percentage is not meaningful
(a) Operating results were materially impacted by the coronavirus pandemic. Please see “— Factors Affecting Results of Operations — Impact of COVID-19 on Our Business”
for more information.
For all periods through the MSGE Distribution, the reported financial results of the Company reflect the results of the MSG Entertainment business segment and the sports
booking business, previously owned and operated by the Company through its MSG Sports business segment, as discontinued operations. In addition, results from continuing
operations for these periods include certain corporate overhead expenses that the Company did not incur in the period after the completion of the MSGE Distribution and does
not expect to incur in future periods, but which do not meet the criteria for inclusion in discontinued operations. The reported financial results of the Company for the periods
after the MSGE Distribution reflect the Company’s results on a standalone basis, including the Company’s actual corporate overhead.
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Revenues
Revenues for the year ended June 30, 2020 decreased $126,085, or 17%, to $603,319 as compared to the prior year. The net decrease is attributable to the following:
Decrease in pre/regular season ticket-related revenues
Decrease in revenues from league distributions
Decrease in suite license fee revenues primarily due to the impact of the suspensions of the 2019-20 NBA and NHL regular seasons
Decrease in sponsorship and signage revenues
Decrease in local media rights fees from MSG Networks
Decrease in pre/regular season food, beverage and merchandise sales
Other net increases, including revenues that do not meet the criteria for inclusion in discontinued operations
$
(43,815)
(34,529)
(18,722)
(18,011)
(9,280)
(4,805)
3,077
$
(126,085)
The decrease in pre/regular season ticket-related revenues was primarily due to fewer Knicks and Rangers home games as compared to the prior year due to the suspensions of
the 2019-20 NBA and NHL regular seasons. The Knicks and Rangers played 36 and 39 home games, respectively, at The Garden during the 2019-20 seasons as compared to
44 home games each during the 2018-19 seasons. To a lesser extent, the decrease also reflects the impact of the recognition of additional revenue during the prior year as a
result of the ticketing agreement renewal during the third quarter of fiscal year 2019. We will not receive professional sports teams’ pre/regular season ticket revenues until the
Knicks and the Rangers again play home games at The Garden with fans in attendance.
The decrease in revenues from league distributions was primarily due to lower recognition of national media rights fees in fiscal year 2020 as compared to the prior year. This
was primarily due to the suspensions of the 2019-20 NBA and NHL regular seasons. Based on the completion of the 2019-20 NBA and NHL seasons, the Company would
recognize the remainder of national media rights fees related to those seasons that otherwise would have been recognized during the third and fourth quarters of fiscal year
2020 in the first quarter of fiscal year 2021.
The decrease in sponsorship and signage revenues was primarily due to fewer Knicks and Rangers home games at The Garden in fiscal year 2020 as compared to the prior year
due to the suspensions of the 2019-20 NBA and NHL regular seasons. We will continue earning significantly lower sponsorship and signage revenues until the Knicks and
Rangers resume playing home games at The Garden with fans in attendance. To a lesser extent, the decrease also reflects lower sales of existing sponsorship and signage
inventory.
The decrease in local media rights fees from MSG Networks was due to the impact of the Knicks and Rangers not achieving the contractually obligated minimum threshold of
games delivered for broadcast to MSG Networks for the 2019-20 seasons. This decrease was partially offset by contractual rate increases. Based on the leagues’ return-to-play
plans, MSG Networks broadcasted play-in games of the Rangers and, as a result, a portion of local media rights fees associated with the Rangers will be recognized during the
first quarter of fiscal year 2021.
The decrease in pre/regular season food, beverage and merchandise sales was due to fewer Knicks and Rangers home games at The Garden in fiscal year 2020 as compared to
the prior year due to the suspensions of the 2019-20 NBA and NHL regular seasons. This decrease was slightly offset by higher average per-game revenue. We will not receive
revenues from professional sports teams’ pre/regular season food, beverage and merchandise sales until the Knicks and Rangers again play home games at The Garden with
fans in attendance.
Direct operating expenses
Direct operating expenses primarily include:
•
•
•
•
compensation expense for our sports teams’ players and certain other team personnel;
cost of team personnel transactions for season-ending player injuries (net of anticipated insurance recoveries), trades, and waivers/contract termination costs of players
and other team personnel;
NBA luxury tax, NBA and NHL revenue sharing and league assessments; and
the cost of merchandise and food and beverage sales.
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Direct operating expenses for the year ended June 30, 2020 decreased $80,111, or 18%, to $359,970 as compared to the prior year. The net decrease is attributable to the
following:
Decrease in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax
$
Decrease in net provisions for certain team personnel transactions
Decrease in other team operating expenses not discussed elsewhere in this table
Decrease in pre/regular season expense associated with food, beverage and merchandise sales
Increase in team personnel compensation
Other net increases, including expenses that do not meet the criteria for inclusion in discontinued operations
Net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax were as follows:
$
(49,750)
(24,277)
(8,743)
(2,356)
3,508
1,507
(80,111)
Years Ended June 30,
2020
2019
Decrease
Net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA
luxury tax
$
6,433 $
56,183 $
(49,750)
The decrease in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax reflect lower provisions for league revenue
sharing expense of $52,654 offset by a lower estimated NBA luxury tax credit in the current year as compared to the prior year of $2,903. Lower provisions for league revenue
sharing expense primarily reflects lower estimated NBA and NHL revenue sharing expense for the 2019-20 season and higher estimated net player escrow recoveries due to the
impact of the suspensions of the 2019-20 NBA and NHL regular seasons, as well as the format and timing of the leagues’ return-to-play. Based on the completion of the 2019-
20 NBA and NHL seasons, the Company would recognize a portion of revenue sharing expense (net of escrow) related to those seasons that otherwise would have been
recognized during the third and fourth quarters of fiscal year 2020 in the first quarter of fiscal year 2021. We expect that our revenue sharing expense will be lower in the 2020-
21 season if the NBA and NHL play their games without fans in attendance and/or if the NBA and NHL either shorten their seasons or if the 2020-21 season extends beyond
the end of our 2021 fiscal year.
The Knicks were not a luxury tax payer for the 2018-19 season and, therefore, received an equal share of the portion of luxury tax receipts that were distributed to non-tax
paying teams. The Knicks’ roster as of June 30, 2020 would not result in the team being a luxury tax payer for the 2019-20 season and the estimated luxury tax receipt is
currently anticipated to be lower than the luxury tax receipt for the 2018-19 season. The actual amounts for the 2019-20 season may vary significantly from the recorded
provisions based on actual operating results for each league and all teams within each league for the season and other factors.
Net provisions for certain team personnel transactions were as follows:
Net provisions for certain team personnel transactions
Years Ended June 30,
2020
2019
Decrease
$
28,857 $
53,134 $
(24,277)
Team personnel transactions for the year ended June 30, 2020 reflect provisions for waivers/contract terminations of $27,055, which are net of credits due to the recoveries
associated with previously recorded waivers/contract termination costs and player trades of $1,802. Team personnel transactions for the year ended June 30, 2019 reflect (i)
waivers/contract terminations of $46,950, which are net of credits due to the recoveries associated with previously recorded waivers/contract termination costs, (ii) player
trades of $5,642, and (iii) season-ending player injuries of $542.
The decrease in other team operating expenses was due to the impact of the suspensions of the 2019-20 NBA and NHL regular seasons partially offset by an increase in league
assessments. We expect that our team operating expenses during the 2020-21 season will be proportionally lower (relative to the number of games played) if the NBA and
NHL either shorten their seasons or if the 2020-21 season extends beyond the end of our 2021 fiscal year.
The decrease in pre/regular season expense associated with food, beverage and merchandise sales was primarily due to the Knicks and Rangers playing fewer home games at
The Garden in fiscal year 2020 as compared to the prior year, a result of the suspensions of the 2019-20 NBA and NHL regular seasons. This decrease was slightly offset by
higher average per-game expenses. We will not incur professional sports teams’ pre/regular season expense associated with food, beverage and merchandise sales until the
Knicks and Rangers again play home games at The Garden with fans in attendance.
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The increase in team personnel compensation was primarily due to roster changes at the Company’s sports teams and other team personnel compensation partially offset by the
impact of the suspensions of the 2019-20 NBA and NHL regular seasons, as well as the format and timing of the leagues’ return-to-play. Based on the completion of the 2019-
20 NBA and NHL seasons, the Company would recognize a portion of the expense that otherwise would have been recognized during the third and fourth quarters of fiscal
year 2020 in the first quarter of fiscal year 2021. We expect that our team personnel compensation during the 2020-21 season will be proportionally lower (relative to the
number of games played) if the NBA and NHL either shorten their seasons or if the 2020-21 season extends beyond the end of our 2021 fiscal year.
Selling, general and administrative expenses
Selling, general and administrative expenses primarily consist of administrative costs, including compensation, professional fees, and sales and marketing costs.
Selling, general and administrative expenses for the year ended June 30, 2020 decreased $7,766, or 2%, to $319,675 as compared to the prior year primarily due to lower
corporate overhead costs. The results for the periods prior to the MSGE Distribution include certain corporate expenses that the Company does not expect to incur in future
periods. Partially offsetting this decrease are corporate costs incurred during the period following the MSGE Distribution (April 18, 2020 through June 30, 2020), as well as an
increase in employee compensation and related benefits, including severance-related costs attributable to a separation agreement with a team executive and higher professional
fees.
Depreciation and amortization
Depreciation and amortization for the year ended June 30, 2020 decreased $2,537, or 13%, to $17,540 as compared to the prior year primarily due to certain assets being fully
depreciated and amortized.
Operating loss
Operating loss for the year ended June 30, 2020 increased $35,671, or 61%, to $93,866 as compared to the prior year. The increase was primarily due to lower revenue slightly
offset by lower direct operating expenses and, to a lesser extent, lower selling, general and administrative expenses and depreciation and amortization as discussed above.
Miscellaneous income (expense), net
The decrease of $1,754 in miscellaneous income, net for the year ended June 30, 2020 to miscellaneous expense, net of $421 primarily reflects changes in miscellaneous
income (expense) that the Company did not earn or incur, and does not expect to earn or incur in future periods, but which do not meet the criteria for inclusion in discontinued
operations.
Income taxes
Income tax expense for the year ended June 30, 2020 of $20,593 differs from the income tax benefit derived from applying the statutory federal rate of 21% to pretax loss
primarily due to an increase in valuation allowance of $46,310 tax expense of $492 relating to noncontrolling interests, and tax expense of $762 relating to nondeductible
expenses, partially offset by state and local tax benefit of $7,332. See Note 18 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K
for further details on the components of income tax and a reconciliation of the statutory federal rate to the effective tax rate.
Income tax benefit for the year ended June 30, 2019 of $12,619 differs from the income tax benefit derived from applying the statutory federal rate of 21% to pretax loss
primarily due to state income tax benefit of $2,873, excess tax benefit on share-based payment awards of $4,555, partially offset by tax expense of $8,521 relating to
nondeductible officers’ compensation.
Adjusted operating income (loss)
The Company evaluates performance based on several factors, of which the key financial measure is operating income (loss) excluding (i) deferred rent expense under the
arena license agreements with MSG Entertainment, (ii) depreciation, amortization and impairments of property and equipment, goodwill and other intangible assets, (iii) share-
based compensation expense or benefit, (iv) restructuring charges or credits, (v) gains or losses on sales or dispositions of businesses, and (vi) the impact of purchase
accounting adjustments related to business acquisitions, which is referred to as adjusted operating income (loss), a non-GAAP measure.
Management believes that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the Company’s business without
regard to the settlement of an obligation that is not expected to be made in cash. In addition, management believes that given the length of the arena license agreements and
resulting magnitude of the difference in deferred rent expense and the cash rent payments, the exclusion of deferred rent expense provides investors with a clearer picture of the
Company's operating performance.
The Company believes adjusted operating income (loss) is an appropriate measure for evaluating the operating performance of the Company. Adjusted operating income (loss)
and similar measures with similar titles are common performance measures used by
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investors and analysts to analyze the Company’s performance. The Company uses revenues and adjusted operating income (loss) measures as the most important indicators of
its business performance and evaluates management’s effectiveness with specific reference to these indicators.
Adjusted operating income (loss) should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities,
and other measures of performance and/or liquidity presented in accordance with GAAP. Since adjusted operating income (loss) is not a measure of performance calculated in
accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies. The Company has presented the components that
reconcile operating income (loss), the most directly comparable GAAP financial measure, to adjusted operating income (loss).
The following is a reconciliation of operating loss to adjusted operating income (loss):
Operating loss
Share-based compensation (a)
Depreciation and amortization (a) (b)
Other purchase accounting adjustments
Adjusted operating income (loss)
________________
NM — Percentage is not meaningful
Years Ended June 30,
Change
2020
2019
Amount
Percentage
$
(93,866) $
(58,195) $
(35,671)
(61)%
48,693
17,540
167
$
(27,466) $
49,113
20,077
200
11,195 $
(38,661)
NM
(a) For periods through the MSGE Distribution, share-based compensation includes expenses that the Company does not expect to incur in future periods, but which do not
meet the criteria for inclusion in discontinued operations.
(b) Depreciation and amortization included purchase accounting adjustments of $1,070 and $1,630 for the years ended June 30, 2020 and 2019, respectively.
Adjusted operating income for the year ended June 30, 2020 decreased $38,661 to an adjusted operating loss of $27,466 as compared to the prior year. The decrease was higher
than the increase in operating loss primarily due to lower depreciation and amortization and share-based compensation.
Net loss attributable to nonredeemable noncontrolling interests from continuing operations
For the year ended June 30, 2020, the Company recorded a net loss attributable to nonredeemable noncontrolling interests from continuing operations of $2,342 as compared to
$2,300 of net loss attributable to nonredeemable noncontrolling interests from continuing operations for the year ended June 30, 2019. These amounts represent the share of net
loss of CLG that are not attributable to the Company. In addition, the net loss attributable to nonredeemable noncontrolling interests from continuing operations includes a
proportional share of expenses related to purchase accounting adjustments.
37
Table of Contents
Comparison of the Year Ended June 30, 2019 versus the Year Ended June 30, 2018
Factors Affecting Operating Results from Acquisitions
CLG’s Operating Results
The results of operations of the Company for the year ended June 30, 2018 include CLG’s results of operations from the date of acquisition, which was July 28, 2017. The
Company’s results for the year ended June 30, 2017 do not include any of CLG’s operating results.
The table below sets forth, for the periods presented, certain historical financial information.
Revenues
$
729,404 $
712,415 $
16,989
2 %
Years Ended June 30,
Change
2019
2018
Amount
Percentage
Direct operating expenses
Selling, general and administrative expenses
Depreciation and amortization
Operating loss
Other income (expense):
Interest expense, net
Miscellaneous income (expense), net
Loss from operations before income taxes
Income tax benefit
Income (loss) from continuing operations
Income from discontinued operations, net of taxes
Net income (loss)
Less: Net loss attributable to nonredeemable noncontrolling interests from
continuing operations
Less: Net loss attributable to redeemable noncontrolling interests from
discontinued operations
Less: Net loss attributable to nonredeemable noncontrolling interests from
discontinued operations
Net income attributable to Madison Square Garden Sports Corp.’s
440,081
327,441
20,077
(58,195)
(3,779)
1,333
(60,641)
12,619
(48,022)
44,905
(3,117)
419,069
290,718
20,807
(18,179)
(2,591)
(518)
(21,288)
59,392
38,104
96,344
134,448
21,012
36,723
(730)
(40,016)
(1,188)
1,851
(39,353)
(46,773)
(86,126)
(51,439)
(137,565)
(2,300)
(2,136)
(164)
(7,299)
(628)
(6,671)
(4,945)
(4,382)
(563)
stockholders
$
11,427 $
141,594 $
(130,167)
NM — Percentage is not meaningful
Revenues
Revenues for the year ended June 30, 2019 increased $16,989, or 2%, to $729,404 as compared to the prior year. The net increase is attributable to the following:
Increase in revenues from league distributions
Increase in local media rights fees from MSG Networks
Increase in suite license fee revenues
Decrease in pre/regular season ticket-related revenues
Decrease in pre/regular season food, beverage and merchandise sales
Decrease in sponsorship and signage revenues
Other net increases, including revenues that do not meet the criteria for inclusion in discontinued operations
38
$
$
5 %
13 %
(4)%
NM
(46)%
NM
NM
(79)%
NM
(53)%
NM
(8)%
NM
(13)%
(92)%
13,883
5,750
3,594
(6,174)
(1,670)
(419)
2,025
16,989
Table of Contents
The increase in revenues from league distributions included the impact of timing.
The increase in local media rights fees from MSG Networks was primarily due to contractual rate increases.
The increase in suite license fee revenue was primarily due to rate increases, partially offset by lower sales of suite products.
The decrease in sponsorship and signage revenues was primarily due to the impact of the new revenue recognition standard in fiscal year 2019, partially offset by decreased
sales of existing sponsorship and signage inventory.
The decrease in pre/regular season ticket-related revenues was primarily due to lower average Rangers, Knicks and Liberty per-game revenue, partially offset by the impact of
the recognition of $2,753 during fiscal year 2019 associated with games played in the prior year as a result of the ticketing agreement renewal.
The decrease in pre/regular season food, beverage and merchandise sales was primarily due to lower average per-game revenue during fiscal year 2019 as compared to the
prior year and the Liberty playing fewer games at The Garden during fiscal year 2019 as compared to the prior year. The Liberty played ten fewer regular season games at The
Garden during fiscal year 2019 year as compared to the prior year, as the Liberty played the majority of their home games at the Westchester County Center, located in White
Plains, NY, during fiscal year 2019. Additionally, the Liberty was sold in January 2019.
Direct operating expenses
Direct operating expenses for the year ended June 30, 2019 increased $21,012, or 5%, to $440,081 as compared to the prior year. The net increase is attributable to the
following:
Increase in net provisions for certain team personnel transactions
Increase in other team operating expenses not discussed elsewhere in this table
Increase in net provisions for league revenue sharing expense (excluding playoffs) and NBA luxury tax
Decrease in team personnel compensation primarily due to roster changes
Other net increases, including expenses that do not meet the criteria for inclusion in discontinued operations
$
$
25,620
3,846
733
(11,513)
2,326
21,012
The increase in other team operating expenses was primarily due to an increase in league assessments and other net increases, partially offset by lower player insurance costs
and lower day-of-event costs, primarily driven by the Liberty playing fewer games at The Garden during the fiscal year 2019 as compared to the prior year. During fiscal year
2019, the majority of the Liberty’s home games were played at the Westchester County Center, located in White Plains, NY. Additionally, the Liberty was sold in January
2019.
Net provisions for certain team personnel transactions were as follows:
Net provisions for certain team personnel transactions
Years Ended June 30,
2019
2018
Increase
$
53,134 $
27,514 $
25,620
Team personnel transactions for the year ended June 30, 2019 reflect provisions, net of recoveries recorded in fiscal year 2019 associated with prior year team personnel
provisions, recorded for (i) waivers/contract terminations of $46,950, (ii) player trades of $5,642, and (iii) season-ending player injuries of $542. Team personnel transactions
for the year ended June 30, 2018 reflect provisions recorded for (i) waivers/contract terminations of $21,559, (ii) season-ending player injuries of $4,273, which is net of
insurance recoveries of $468 and (iii) player trades of $1,682.
Net provisions for league revenue sharing expense (excluding playoffs) and NBA luxury tax were as follows:
Net provisions for league revenue sharing expense (excluding playoffs) and NBA luxury tax
$
56,183 $
55,450 $
733
The increase in net provisions for league revenue sharing expense (excluding playoffs) and NBA luxury tax reflects higher provisions for league revenue sharing expense of
$1,647, partially offset by higher estimated NBA luxury tax credit of $914. Higher league revenue sharing expense primarily reflected higher estimated NHL and NBA revenue
sharing expense for the 2018-19 season, partially offset by higher estimated net player escrow recoveries and, to a lesser extent, net adjustments to prior
Years Ended June 30,
2019
2018
Increase
39
Table of Contents
seasons’ revenue sharing expense. The actual amounts for the 2018-19 season may vary significantly from the recorded provisions based on actual operating results for each
league and all teams within each league for the season and other factors. The Knicks were not a luxury tax payer for the 2018-19 and 2017-18 seasons and, therefore, received
equal share of the portion of luxury tax receipts that were distributed to non-tax paying teams.
Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended June 30, 2019 increased $36,723, or 13%, to $327,441 as compared to prior year. The increase was primarily
due to (i) higher corporate overhead costs for the periods prior to the MSGE Distribution that the Company does not expect to incur in future periods and, to a lesser extent, (ii)
higher employee compensation and related benefits, and (iii) an increase in marketing costs.
Depreciation and amortization
Depreciation and amortization for the year ended June 30, 2019 decreased $730, or 4%, to $20,077 as compared to the prior year.
Operating loss
Operating loss for the year ended June 30, 2019 increased $40,016 to $58,195 as compared to the prior year. The increase was primarily due to higher selling, general and
administrative expenses and direct operating expenses, slightly offset by higher revenue as discussed above.
Interest expense, net
Net interest expense for the year ended June 30, 2019 increased $1,188, or 46%, to $3,779 as compared to the prior year.
Miscellaneous expense, net
The decrease of $1,851 in miscellaneous expense, net for the year ended June 30, 2019 to miscellaneous income, net of $1,333 primarily reflects lower net periodic benefit
costs associated pension plans and postretirement benefit plan.
Income taxes
Income tax benefit for the year ended June 30, 2019 was $12,619 and income tax benefit for the year ended June 30, 2018 was $59,392.
Income tax benefit for the year ended June 30, 2019 of $12,619 differs from the income tax benefit derived from applying the statutory federal rate of 21% to pretax loss
primarily due to state income tax benefit of $2,873, excess tax benefit on share-based payment awards of $4,555, partially offset by tax expense of $8,521 relating to
nondeductible officers’ compensation.
For the fiscal year ended June 30, 2018, the Company used a blended statutory federal income rate of 28% based upon the number of days that it would be taxed at the former
rate of 35% and the number of days it would be taxed at the new rate of 21%, effective January 1, 2018.
Income tax benefit for the year ended June 30, 2018 of $59,392 differs from the income tax benefit derived from applying the blended statutory Federal rate of 28% to pretax
loss primarily as a result of a deferred income tax benefit of $50,169 related to the reduction of net deferred tax liabilities in connection with the lower Federal income tax rate
of 21% and state and local income tax expense of $1,909.
Adjusted operating income
The following is a reconciliation of operating loss to adjusted operating income:
Operating loss
Share-based compensation (a)
Depreciation and amortization (a) (b)
Other purchase accounting adjustments
Adjusted operating income
________________
NM — Percentage is not meaningful
Years Ended June 30,
Change
2019
2018
Amount
Percentage
$
(58,195) $
(18,179) $
(40,016)
NM
49,113
20,077
200
40,594
20,807
90
$
11,195 $
43,312 $
(32,117)
(74)%
40
Table of Contents
(a) For periods through the MSGE Distribution, includes expenses that the Company did not incur and does not expect to incur in future periods, but which do not meet the
criteria for inclusion in discontinued operations.
(b) Depreciation and amortization included purchase accounting adjustments of $1,630 and $2,946 for the years ended June 30, 2019 and 2018, respectively.
Adjusted operating income for the year ended June 30, 2019 decreased $32,117, or 74%, to $11,195 as compared to the prior year. The decrease was lower than the increase in
operating loss primarily due to higher share-based compensation.
Net loss attributable to nonredeemable noncontrolling interests from continuing operations
For the year ended June 30, 2019, the Company recorded a net loss attributable to nonredeemable noncontrolling interests from continuing operations of $2,300 as compared to
$2,136 of net loss attributable to nonredeemable noncontrolling interests from continuing operations for the year ended June 30, 2018. These amounts represent the share of net
loss of CLG that are not attributable to the Company. In addition, the net loss attributable to nonredeemable noncontrolling interests from continuing operations includes a
proportional share of expenses related to purchase accounting adjustments.
Liquidity and Capital Resources
Overview
Our operations and operating results have been, and continue to be, materially impacted by the COVID-19 pandemic and government and league actions taken in response. The
NBA and NHL suspended their 2019-20 seasons on March 11 and 12, 2020, respectively. On May 26, 2020, the NHL announced return-to-play plans for 24 teams which
began August 1, 2020. The Rangers were among the teams that returned to play in a 24-team tournament. On June 4, 2020, the NBA announced plans to resume play on July
30, 2020 with 22 teams. The Knicks were not among the teams that returned to competition. For more information about the impacts and risks to the Company as a result of
COVID-19, see “— Impact of COVID-19 on Our Business” and “Item 1A. Risk Factors – Our Operations and Operating Results Have Been, and Continue to be, Materially
Impacted by the COVID-19 Pandemic and Government and League Actions Taken in Response”
Prior to the suspension of the NBA and NHL seasons and the MSGE Distribution, our primary sources of liquidity had been cash and cash equivalents, cash flows from the
operations of our businesses and maximum borrowing capacity under our $365,000 revolving credit facilities which are described below.
In connection with the MSGE Distribution, we (i) borrowed the full $350,000 available under the Knicks Revolving Credit Facility and the Rangers Revolving Credit Facility
(each as defined below) and (ii) entered into the $200,000 DDTL Facilities” (as defined below).
As a result, until the 2020-21 NBA and NHL seasons commence, our primary sources of liquidity are cash and cash equivalents, $15,000 of borrowing capacity under the
Knicks Unsecured Credit Facility (which expires on September 24, 2021) and $200,000 of borrowing capacity under the DDTL Facilities (which expire on October 17, 2021).
The ability to draw down on the delayed draw term loan facilities depends on the liquidity of MSG Entertainment, which may be materially impacted by the COVID-19
pandemic. Once the 2020-21 NBA and NHL seasons commence, we also expect to have access to cash flow from our operations as a source of liquidity.
Our principal uses of cash include the operation of our businesses, working capital-related items, the repayment of outstanding debt, and potential repurchases of shares of the
Company’s Class A Common Stock.
As of June 30, 2020, we had $78,000 in unrestricted cash and cash equivalents. As of June 30, 2020, the Company had approximately $126,000 in current deferred revenue
obligations. Of this amount, approximately $61,000 is related to the 2019-20 NBA and NHL seasons, including approximately $42,000 associated with national media rights
fees. Based on the completion of the 2019-20 NBA and NHL seasons, the Company would recognize national media rights fees in the first quarter of fiscal year 2021. The
balance of deferred revenue obligations related to the 2019-20 seasons is comprised of obligations in connection with suites and sponsorships, which will be addressed, to the
extent necessary, through credits, make-goods and/or refunds, as applicable.
We regularly monitor and assess our ability to meet our net funding and investment requirements. The decisions of the Company as to the use of its available liquidity will be
based upon the ongoing review of the funding needs of the business, management’s view of a favorable allocation of cash resources, and the timing of cash flow generation. To
the extent the Company desires to access alternative sources of funding through the capital and credit markets, restrictions imposed by the NBA and NHL and challenging U.S.
and global economic and market conditions could adversely impact its ability to do so at that time.
We believe we have sufficient liquidity, including approximately $78,000 in unrestricted cash and cash equivalents as of June 30, 2020, along with available borrowing
capacity under $15,000 Knicks Unsecured Credit Facility and $200,000 DDTL Facilities, to fund our operations and repay any outstanding debt that becomes due over the next
12 months. We plan to refinance the Knicks
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Revolving Credit Facility (which is currently due on September 30, 2021) and the Rangers Revolving Credit Facility (which is currently due on January 25, 2022) prior to the
maturities thereof. If we were not able to do so, $350,000 of indebtedness outstanding as of June 30, 2020 (plus any amount borrowed under the DDTL Facilities) will be due
during fiscal 2022.
Financing Agreements and Stock Repurchases
Knicks Revolving Credit Facility
On September 30, 2016, New York Knicks, LLC (“Knicks LLC”), a wholly owned subsidiary of the Company, entered into a credit agreement with a syndicate of lenders
providing for a senior secured revolving credit facility of up to $200,000 with a term of five years (the “Knicks Revolving Credit Facility”) to fund working capital needs and
for general corporate purposes. Amounts borrowed may be distributed to the Company except during an event of default.
The Knicks Revolving Credit Facility requires Knicks LLC to comply with a debt service ratio of 1.5:1.0 over a trailing four quarter period. As of June 30, 2020, Knicks LLC
was in compliance with this financial covenant.
The Knicks Revolving Credit Facility will mature and any unused commitments thereunder will expire on September 30, 2021. All borrowings under the Knicks Revolving
Credit Facility are subject to the satisfaction of certain customary conditions. Borrowings bear interest at a floating rate, which at the option of Knicks LLC may be either (i) a
base rate plus a margin ranging from 0.00% to 0.125% per annum or (ii) the London Inter-Bank Offered Rate (“LIBOR”) plus a margin ranging from 1.00% to 1.125% per
annum. Knicks LLC is required to pay a commitment fee ranging from 0.20% to 0.25% per annum in respect of the average daily unused commitments under the Knicks
Revolving Credit Facility. The outstanding balance under the Knicks Revolving Credit Facility was $200,000 as of June 30, 2020.
All obligations under the Knicks Revolving Credit Facility are secured by a first lien security interest in certain of Knicks LLC’s assets, including, but not limited to, (i) the
Knicks LLC’s membership rights in the NBA and (ii) revenues to be paid to the Knicks LLC by the NBA pursuant to certain U.S. national broadcast agreements.
Subject to customary notice and minimum amount conditions, Knicks LLC may voluntarily prepay outstanding loans under the Knicks Revolving Credit Facility at any time,
in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans). Knicks LLC is required to make mandatory
prepayments in certain circumstances, including without limitation if the maximum available amount under the Knicks Revolving Credit Facility is greater than 350% of
qualified revenues.
In addition to the financial covenant described above, the Knicks Credit Agreement and related security agreements contain certain customary representations and warranties,
affirmative covenants and events of default. The Knicks Revolving Credit Facility contains certain restrictions on the ability of Knicks LLC to take certain actions as provided
in (and subject to various exceptions and baskets set forth in) the Knicks Revolving Credit Facility, including the following: (i) incurring additional indebtedness and
contingent liabilities; (ii) creating liens on certain assets; (iii) making restricted payments during the continuance of an event of default under the Knicks Revolving Credit
Facility; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; and (vi) taking certain actions that would invalidate the secured lenders’ liens on any
Knicks LLC’s collateral.
Knicks Unsecured Credit Facility
On September 30, 2016, Knicks LLC entered into an unsecured revolving credit facility with a lender for an initial maximum credit amount of $15,000 and a 364-day term (the
“Knicks Unsecured Credit Facility”). Knicks LLC renewed this facility with the lender on the same terms in successive years and the facility has been renewed for a new term
effective as of September 25, 2020. There was no borrowing under the Knicks Unsecured Credit Facility as of June 30, 2020. This facility does not have financial covenants.
Rangers Revolving Credit Facility
On January 25, 2017, New York Rangers, LLC (“Rangers LLC”), a wholly owned subsidiary of the Company, entered into a credit agreement (the “Rangers Credit
Agreement”) with a syndicate of lenders providing for a senior secured revolving credit facility of up to $150,000 with a term of five years (the “Rangers Revolving Credit
Facility”) to fund working capital needs and for general corporate purposes. Amounts borrowed may be distributed to the Company except during an event of default.
The Rangers Revolving Credit Facility requires Rangers LLC to comply with a debt service ratio of 1.5:1.0 over a trailing four quarter period. As of June 30, 2020, Rangers
LLC was in compliance with this financial covenant.
The Rangers Revolving Credit Facility will mature and any unused commitments thereunder will expire on January 25, 2022. All borrowings under the Rangers Revolving
Credit Facility are subject to the satisfaction of certain customary conditions.
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Borrowings bear interest at a floating rate, which at the option of Rangers LLC may be either (i) a base rate plus a margin ranging from 0.125% to 0.50% per annum or (ii)
LIBOR plus a margin ranging from 1.125% to 1.50% per annum. Rangers LLC is required to pay a commitment fee ranging from 0.375% to 0.625% per annum in respect of
the average daily unused commitments under the Rangers Revolving Credit Facility. The outstanding balance under the Rangers Revolving Credit Facility was $150,000 as of
June 30, 2020.
All obligations under the Rangers Revolving Credit Facility are secured by a first lien security interest in certain of Rangers LLC’s assets, including, but not limited to, (i)
Rangers LLC’s membership rights in the NHL, (ii) revenues to be paid to Rangers LLC by the NHL pursuant to certain U.S. and Canadian national broadcast agreements, and
(iii) revenues to be paid to Rangers LLC pursuant to local media contracts.
Subject to customary notice and minimum amount conditions, Rangers LLC may voluntarily prepay outstanding loans under the Rangers Revolving Credit Facility at any time,
in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans). Rangers LLC is required to make mandatory
prepayments in certain circumstances, including without limitation if qualified revenues are less than 17% of the maximum available amount under the Rangers Revolving
Credit Facility.
In addition to the financial covenant described above, the Rangers Credit Agreement and related security agreements contain certain customary representations and warranties,
affirmative covenants and events of default. The Rangers Revolving Credit Facility contains certain restrictions on the ability of Rangers LLC to take certain actions as
provided in (and subject to various exceptions and baskets set forth in) the Rangers Revolving Credit Facility, including the following: (i) incurring additional indebtedness and
contingent liabilities; (ii) creating liens on certain assets; (iii) making restricted payments during the continuance of an event of default under the Rangers Revolving Credit
Facility; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; and (vi) taking certain actions that would invalidate the secured lenders’ liens on any of
Rangers LLC’s assets securing the obligations under the Rangers Revolving Credit Facility.
Delayed Draw Term Loan Credit Facilities
As an additional source of liquidity for the Company in response to the COVID-19 pandemic, on April 17, 2020, MSG NYR Holdings, LLC and MSG NYK Holdings, LLC,
two indirect wholly-owned subsidiaries of the Company, each entered into a separate delayed draw term loan credit agreement with MSG Entertainment Group, LLC, a
wholly-owned subsidiary of MSG Entertainment, as lender (the “DDTL Lender”). The credit agreement for MSG NYK Holdings, LLC (the “Knicks DDTL Facility
Borrower”) provides for a $110,000 senior unsecured delayed draw term loan facility (the “Knicks DDTL Facility”) and the credit agreement for MSG NYR Holdings, LLC
(the “Rangers DDTL Facility Borrower”) provides for a $90,000 senior unsecured delayed draw term loan facility (the “Rangers DDTL Facility” and, together with the Knicks
DDTL Facility, the “DDTL Facilities”).
The DDTL Facilities will mature and any unused commitments thereunder will expire on October 17, 2021. Borrowings under the DDTL Facilities will bear interest at a
variable rate equal to either, at the election of the applicable borrower, (i) LIBOR plus 2.00% per annum or (ii) a base rate plus 1.00% per annum. Subject to the borrowing
conditions, each of the DDTL Facilities may be drawn in up to four separate borrowings of $10,000 or more. Proceeds of borrowings under the DDTL Facilities will be used
for general corporate purposes.
The availability of each of the DDTL Facilities to the respective borrowers is subject to certain conditions, including (a) the liquidity, including cash on hand and availability
under revolving credit commitments, of the Company, MSG Sports, LLC, the Knicks DDTL Facility Borrower and its subsidiaries and the Rangers DDTL Facility Borrower
and its subsidiaries (other than any liquidity that is restricted by law or contractual obligation from being transferred to the relevant DDTL Facility Borrower or its subsidiaries)
must be (i) less than $50,000 immediately prior to giving effect to any borrowing, and (ii) less than $75,000 immediately after giving effect to any borrowing, and (b) with
respect to the Knicks DDTL Facility, the Knicks DDTL Facility Borrower and its subsidiaries must have used commercially reasonable efforts to raise additional financing
(“New Third-Party Debt”), including additional commitments under existing revolving facilities, prior to drawing on the Knicks DDTL Facility to the extent permitted by the
debt policies of the NBA. In addition, the commitments of the DDTL Lender to make advances under the Knicks DDTL Facility will be permanently reduced and the Knicks
DDTL Facility will be subject to mandatory prepayments in an amount equal to the net cash proceeds received by the Company, MSG Sports, LLC, the Knicks DDTL Facility
Borrower, or the subsidiaries of the Knicks DDTL Facility Borrower from any New Third-Party Debt.
Pursuant to the NBA debt policies, the NBA has consented (the “NBA Consent Letter”) to the incurrence of the indebtedness under the Knicks DDTL Facility. The NBA
Consent Letter provides that the Knicks DDTL Facility Borrower and its subsidiaries (including the Knicks basketball team) will, among other matters, (i) operate the team in a
first class manner, consistent with the manner in which NBA teams generally are operated, as determined by the NBA Commissioner in his sole discretion, and (ii) maintain
sufficient net working capital and cash reserves to pay expenses, liabilities and obligations of the team in the ordinary
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course and in a timely fashion. In addition, the Knicks DDTL Facility Borrower and its subsidiaries (including the Knicks) have agreed with the NBA to not transfer certain
basketball-related assets and to not make distributions to the Company without first providing the NBA with advance notice and not receiving the objection of the NBA
Commissioner.
There was no borrowing under the DDTL Facilities as of June 30, 2020.
Financing Agreements and Stock Repurchases
See Note 13 and Note 16 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for discussions of the Company’s debt obligations
and various financing agreements, and the Company’s stock repurchases, respectively.
Cash Flow Discussion
The following table summarizes the Company’s cash flow activities for the years ended June 30, 2020, 2019 and 2018:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Subtotal
Changes in working capital assets and liabilities
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Effect of exchange rates on cash, cash equivalents and restricted cash
Net decrease in cash, cash equivalents and restricted cash
Operating Activities
$
$
$
Years Ended June 30,
2020
2019
2018
(208,863) $
(3,117) $
264,259
184,322
55,396 $
181,205 $
(51,828)
(19,952)
3,568 $
161,253 $
(514,863)
(520,588)
4,655
(232,895)
(71,746)
4,669
134,448
65,097
199,545
18,084
217,629
(182,357)
(51,097)
331
$
(1,027,228) $
(138,719) $
(15,494)
Net cash provided by operating activities for the year ended June 30, 2020 decreased by $157,685 to $3,568 as compared to the prior year primarily due to the decrease in net
income, both from continued and discontinued operations, adjusted for non-cash items. The decrease was driven by the impact of the COVID-19 pandemic and the MSGE
Distribution. As a result of government-mandated assembly limitations and closures due to the COVID-19 pandemic, no events have been held since mid-March at The Garden
where the Knicks and Rangers play their home games and the Company had recognized materially less revenues across a number of areas. In addition, the temporary closure of
The Garden and other MSG Entertainment venues had a material impact on the results from discontinued operations.
Net cash provided by operating activities for the year ended June 30, 2019 decreased by $56,376 to $161,253 as compared to the prior year primarily due to changes in certain
assets and liabilities, as well as a decrease in net income to a net loss in fiscal year 2019 adjusted for non-cash items. The changes in certain assets and liabilities are driven by
decreases in collections due to promoters and prepaid expenses and other assets, partially offset by higher accrued and other liabilities, all due to timing. The decrease in net
income adjusted for non-cash items was impacted by earnings in equity method investments in fiscal year 2019 as compared to a loss in the prior year and lower depreciation
and amortization in fiscal year 2019.
Investing Activities
Net cash used in investing activities for the year ended June 30, 2020 increased by $281,968 to $514,863 as compared to the prior year, principally driven by investing
activities in discontinued operations. The changes in investing activities included in discontinued operations primarily consisted of (i) an increase in purchase of short-term
investments in fiscal year 2020 as compared to the prior year, (ii) higher capital expenditures in fiscal year 2020 as compared to the prior year, of which substantially all are
related to the MSG Entertainment planned MSG Spheres in Las Vegas and London, and (iii) lower proceeds received from the sale of interest in a nonconsolidated affiliate in
the prior year compared to the sale of interest in a nonconsolidated affiliate in the current year. This increase was partially offset by (i) proceeds from the maturity of short-term
investments, (ii) a loan repayment received from a subordinated note, (iii) lower investments made in nonconsolidated affiliates in the current year as compared to the prior
year, and (iv) acquisition of notes receivable during the prior year as compared to none during the current year.
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Net cash used in investing activities for the year ended June 30, 2019 increased by $50,538 to $232,895 as compared to the prior year primarily principally driven by investing
activities in discontinued operations. The changes in investing activities included in discontinued operations primarily consisted of the investment in a British pound-
denominated time deposit and an investment in a nonconsolidated affiliate, partially offset by proceeds received from the sale of interest in another nonconsolidated affiliate.
Financing Activities
Net cash used in financing activities for the year ended June 30, 2020 increased by $448,842 to $520,588 as compared to the prior year. This increase in cash used in financing
activities primarily consisted of the distribution of cash to MSG Entertainment, partially offset by the proceeds received from the borrowings under the Knicks Revolving
Credit Facility and Rangers Revolving Credit Facility and other net financing activities included in discontinued operations.
Net cash used in financing activities for the year ended June 30, 2019 increased by $20,649 to $71,746 as compared to the prior year. The increase is driven primarily by
financing activities included in discontinued operations partially offset by (i) lower taxes paid in lieu of shares issued for equity-based compensation in fiscal year 2019 as
compared to the prior year and (ii) repurchases of shares of the Company’s Class A Common Stock in the prior year as compared to no repurchases in fiscal year 2019, and
other net financing activities.
Contractual Obligations and Off Balance Sheet Arrangements
Future cash payments required under contracts entered into by the Company in the normal course of business as of June 30, 2020 are summarized in the following table:
Off balance sheet arrangements: (a)
$
395,600 $
150,672 $
142,664 $
75,073 $
27,191
Contractual obligations reflected on the balance sheet
Total
Year
1
Years
2-3
Years
4-5
More Than
5 Years
Payments Due by Period
Leases (b)
Long-term debt (c)
Contractual obligations (d)
Total (e)
_________________
2,376,994
350,000
91,740
2,818,734
41,865
—
53,139
95,004
87,503
350,000
20,539
458,042
88,940
—
6,350
95,290
$
3,214,334 $
245,676 $
600,706 $
170,363 $
2,158,686
—
11,712
2,170,398
2,197,589
(a) Contractual obligations not reflected on the balance sheet consist principally of the Company’s obligations under employment agreements that the Company has with
certain of its professional sports teams’ personnel that are to be performed in future periods and that are generally guaranteed regardless of employee injury or
termination.
(b)
Includes contractually obligated minimum lease payments for operating leases having an initial noncancelable term in excess of one year. These commitments are
presented exclusive of the imputed interest used to reflect the payment’s present value. See Note 9 to the consolidated financial statements included in Item 8 of this
Annual Report on Form 10-K for information on the contractual obligations related to future lease payments, which are reflected on the consolidated balance sheet as
lease liabilities as of June 30, 2020.
(c) Consists of amounts drawn under the Knicks Revolving Credit Facility and Rangers Revolving Credit Facility. See Note 13 to the consolidated financial statements
included in Item 8 of this Annual Report on Form 10-K for further details.
(d) Contractual obligations reflected on the balance sheet consist principally of the Company’s obligations under employment agreements that the Company has with certain
of its professional sports teams’ personnel that have been fully performed and that are being paid on a deferred basis.
(e) Pension obligations have been excluded from the table above as the timing of the future cash payments is uncertain. See Note 14 to the consolidated financial statements
included in Item 8 of this Annual Report on Form 10-K for more information on the future funding requirements under our pension obligations.
See Note 11 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details of the amount reflected on the balance sheet as
of June 30, 2020.
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Seasonality of Our Business
The Company’s dependence on revenues from its NBA and NHL sports teams generally means that we earn a disproportionate share of its revenues in the second and third
quarters of the Company’s fiscal year. On March 11 and 12, 2020, respectively, the NBA and NHL suspended their 2019-20 seasons due to COVID-19. In July 2020, the NBA
and NHL restarted their seasons. As a result, based on the completion of the 2019-20 NBA and NHL seasons, the Company would recognize certain revenues that otherwise
would have been recognized during the third and fourth quarter of fiscal year 2020 during the first quarter of fiscal year 2021.
Recently Issued Accounting Pronouncements and Critical Accounting Policies
Recently Issued Accounting Pronouncements
See Note 2 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for discussion of recently issued accounting pronouncements.
Critical Accounting Policies
The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions about future events.
These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of
revenues and expenses. Management believes its use of estimates in the consolidated financial statements to be reasonable. The significant accounting policies which we
believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:
Arrangements with Multiple Performance Obligations
See Note 4 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for discussion of the Company’s arrangements with multiple
performance obligations, primarily multi-year sponsorship agreements.
Impairment of Long-Lived and Indefinite-Lived Assets
The Company’s long-lived and indefinite-lived assets accounted for approximately 31% of the Company’s consolidated total assets as of June 30, 2020 and consisted of the
following:
Goodwill
Indefinite-lived intangible assets
Amortizable intangible assets, net of accumulated amortization
Property and equipment, net
$
$
226,955
112,144
2,754
39,597
381,450
In assessing the recoverability of the Company’s long-lived and indefinite-lived assets, the Company must make estimates and assumptions regarding future cash flows and
other factors to determine the fair value of the respective assets. These estimates and assumptions could have a significant impact on whether an impairment charge is
recognized and also the magnitude of any such charge. Fair value estimates are made at a specific point in time, based on relevant information. These estimates are subjective
in nature and involve significant uncertainties and judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the
estimates. If these estimates or material related assumptions change in the future, the Company may be required to record impairment charges related to its long-lived and/or
indefinite-lived assets.
Goodwill
Goodwill is tested annually for impairment as of August 31st and at any time upon the occurrence of certain events or changes in circumstances. The Company performs its
goodwill impairment test at the reporting unit level, which is the same as or one level below the operating segment level. Excluding discontinued operations, the Company has
one operating and reportable segment, and for the year ended June 30, 2020, the Company had one reporting unit for goodwill impairment testing purposes.
The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If the Company can support the
conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company would not need to perform a quantitative
impairment test for that reporting unit. If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, the first step of
the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The
estimates of the fair value of the Company’s reporting units are primarily determined using discounted cash flows and comparable market transactions. These valuations are
based on estimates and assumptions including projected future cash flows, discount rates, determination of appropriate market comparables and the determination of
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whether a premium or discount should be applied to comparables. Significant judgments inherent in a discounted cash flow analysis include the selection of the appropriate
discount rate, the estimate of the amount and timing of projected future cash flows and identification of appropriate continuing growth rate assumptions. The discount rates
used in the analysis are intended to reflect the risk inherent in the projected future cash flows. Subsequent to the adoption of ASU No. 2017-04 in the third quarter of fiscal year
2020, the amount of an impairment loss is measured as the amount by which a reporting unit’s carrying value exceeds its fair value determined in step one, not to exceed the
carrying amount of goodwill. Prior to the adoption of ASU No. 2017-04, if the carrying amount of a reporting unit exceeded its fair value, the second step of the goodwill
impairment test was performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compared the implied fair value of the
reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeded the implied fair value of that goodwill, an
impairment loss was recognized in an amount equal to that excess. The implied fair value of goodwill was determined in the same manner as the amount of goodwill that
would be recognized in a business combination.
The Company elected to perform the qualitative assessment of impairment for the Company’s reporting unit for the fiscal year 2020 impairment test. These assessments
considered factors such as:
• macroeconomic conditions;
•
industry and market considerations;
• market capitalization;
•
•
•
•
cost factors;
overall financial performance of the reporting unit;
other relevant company-specific factors such as changes in management, strategy or customers; and
relevant reporting unit specific events such as changes in the carrying amount of net assets.
The Company performed its most recent annual impairment test of goodwill during the first quarter of fiscal year 2020, and there was no impairment of goodwill. Based on this
impairment test, the Company’s reporting unit had sufficient safety margins, defined as the excess of the amount by which the estimated fair value of the reporting unit
exceeded the carrying value of the reporting unit, including goodwill. The most recent quantitative assessments were used in making this determination. The Company believes
that if the fair value of a reporting unit exceeds its carrying value by greater than 10%, a sufficient safety margin has been realized.
As a result of operating disruptions due to COVID-19, the Company’s projected cash flows were directly impacted. This disruption along with the macroeconomic industry and
market conditions, resulted in the evaluation of whether there was a “triggering event”, which required the Company to assess the carrying value of its goodwill and intangible
assets for impairment. Based on the assessment, management determined that it was not more likely than not that an impairment exists and there was no goodwill or intangible
asset balance that was impaired as of June 30, 2020. However, the duration and impact of the COVID-19 pandemic may result in future impairment charges that management
will evaluate as facts and circumstances evolve through time.
Identifiable Indefinite-Lived Intangible Assets
Identifiable indefinite-lived intangible assets are tested annually for impairment as of August 31st and at any time upon the occurrence of certain events or substantive changes
in circumstances. The following table sets forth the amount of identifiable indefinite-lived intangible assets reported in the Company’s consolidated balance sheet as of
June 30, 2020 by reportable segment:
Sports franchises
Photographic related rights
$
$
111,064
1,080
112,144
The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. In the qualitative assessment, the
Company must evaluate the totality of qualitative factors, including any recent fair value measurements, that impact whether an indefinite-lived intangible asset other than
goodwill has a carrying amount that more likely than not exceeds its fair value. The Company must proceed to conducting a quantitative analysis, if the Company
(i) determines that such an impairment is more likely than not to exist, or (ii) forgoes the qualitative assessment entirely. Under the quantitative assessment, the impairment test
for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the
intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. For all periods presented, the Company elected to perform a
qualitative assessment of impairment for the indefinite-lived intangible assets. These assessments considered the events
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and circumstances that could affect the significant inputs used to determine the fair value of the intangible asset. Examples of such events and circumstances include:
•
•
•
•
•
cost factors;
financial performance;
legal, regulatory, contractual, business or other factors;
other relevant company-specific factors such as changes in management, strategy or customers;
industry and market considerations; and
• macroeconomic conditions.
The Company performed its most recent annual impairment test of identifiable indefinite-lived intangible assets during the first quarter of fiscal year 2020, and there were no
impairments identified. Based on this impairment test, the Company’s indefinite-lived intangible assets had sufficient safety margins, representing the excess of each
identifiable indefinite-lived intangible asset’s estimated fair value over its respective carrying value. The Company believes that if the fair value of an indefinite-lived
intangible asset exceeds its carrying value by greater than 10%, a sufficient safety margin has been realized.
Lease Accounting
The Company’s leases primarily consist of the lease of the Company’s corporate offices under the Sublease Agreement with MSG Entertainment (the “Sublease Agreement”)
for our principal executive offices at Two Pennsylvania Plaza in New York and the lease of CLG Performance Center. In, addition, the Company accounts for the rights of use
of The Garden pursuant to the Arena License Agreements as leases under the Accounting Standards Codification Topic 842, Leases. The Company determines whether an
arrangement contains a lease at the inception of the arrangement. If a lease is determined to exist, the lease term is assessed based on the date when the underlying asset is made
available for the Company’s use by the lessor. The Company’s assessment of the lease term reflects the non-cancelable term of the lease, inclusive of any rent-free periods
and/or periods covered by early-termination options which the Company is reasonably certain not to exercise, as well as periods covered by renewal options which the
Company is reasonably certain of exercising. The Company also determines lease classification as either operating or finance at lease commencement, which governs the
pattern of expense recognition and the presentation reflected in the consolidated statements of operations over the lease term.
For leases with a term exceeding 12 months, a lease liability is recorded on the Company’s consolidated balance sheet at lease commencement reflecting the present value of
the fixed minimum payment obligations over the lease term. A corresponding ROU asset equal to the initial lease liability is also recorded, adjusted for any prepaid rent and/or
initial direct costs incurred in connection with execution of the lease and reduced by any lease incentives received.
The Company includes fixed payment obligations related to non-lease components in the measurement of ROU assets and lease liabilities, as the Company has elected to
account for lease and non-lease components together as a single lease component. ROU assets associated with finance leases are presented separate from operating leases ROU
assets and are included within Property and equipment, net on the Company’s consolidated balance sheet. For purposes of measuring the present value of the Company’s fixed
payment obligations for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease commencement, as rates implicit in
the underlying leasing arrangements are typically not readily determinable. The Company’s incremental borrowing rate reflects the rate it would pay to borrow on a secured
basis and incorporates the term and economic environment surrounding the associated lease.
On April 17, 2020, in connection with the MSGE Distribution, we entered into a sublease agreement with MSG Entertainment (the “Sublease Agreement”) for our principal
executive offices at Two Pennsylvania Plaza in New York. The Sublease Agreement right of use assets and liabilities are recorded on the balance sheet at lease commencement
based on the present value of minimum base rent and other fixed payments over the reasonably certain lease term, which ends April 30, 2024.
In addition, in connection with the MSGE Distribution we entered into a long term lease with MSG Entertainment that ends June 30, 2055 and will allow the Knicks and the
Rangers to continue to play their home games at The Garden. The Arena License Agreements provide for fixed payments to be made from inception through June 30, 2055 in
12 equal installments during each year of the contractual term. The Garden was not available for use on April 17, 2020 due to the COVID-19 pandemic and local government
restrictions on gatherings; however, the licenses were viewed as a continuation of an existing pre-spin relationship where the Knicks and Rangers used The Garden through an
inter-company cost-sharing arrangement and therefore the licenses were viewed to have commenced on April 17, 2020. However, due to the force majeure clause, MSG Sports
is not required to make payments until The Garden is available for use, and at June 30, 2020 the asset and liability were remeasured utilizing the same discount rate as of April
17, 2020.
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The Knicks and Rangers are entitled to use The Garden on home game days, which are usually nonconsecutive, for a pre-defined period of time from before and after the
game. In evaluating the Company’s lease cost, the Company considered the timing of payments throughout the lease terms and the nonconsecutive periods of use, provided for
within each license. While payments are made throughout the contract year in twelve equal installments under each arrangement, the periods of use only span each of the
individual team event days. As such, the Company concluded that the related straight-line rent expense should be recorded by each team equally over the home game days as
each takes place. In the event a team were to qualify for the playoffs in a given season, a prospective adjustment may be recorded to adjust for the additional use days within
that season, while the total expense for the team’s season would remain the same. There were no events and thus no rent expense was recorded during the period from lease
inception as of April 17, 2020 to June 30, 2020.
As part of Arena License Agreements, we recognized operating lease liabilities and a right of use assets. We measured the lease liabilities at the present value of the future
lease payments as of April 17, 2020. We use our incremental borrowing rates based on the remaining lease term to determine the present value of future lease payments. Our
incremental borrowing rate for a lease is the rate of interest we would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar
terms. This rate is also used for the Sublease Agreement.
Our incremental borrowing rate is calculated as the weighted average risk-free rate plus a spread to reflect our current unsecured credit rating. We subsequently measure the
lease liability at the present value of the future lease payments as of the reporting date with a corresponding adjustment to the right-to-use asset. Absent a lease modification we
will continue to utilize the April 17, 2020 incremental borrowing rate. The Company’s accounting during the period of force majeure applies FASB Staff Q&A, issued on April
10, 2020, providing guidance on accounting for COVID-19 related rent concessions.
Estimation of the incremental borrowing rate requires judgment by management and reflects an assessment of credit standing to derive an implied secured credit rating and
corresponding yield curve. Changes in management’s estimates of discount rate assumptions could result in a significant overstatement or understatement of right of use assets
or lease liabilities, resulting in an adverse impact to MSG Sports’ financial position. See Note 9 to the consolidated financial statements included in Item 8 of this Annual
Report on Form 10-K for more information on our leases.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We have potential interest rate risk exposure related to outstanding borrowings incurred under our Knicks Revolving Credit Facility and Rangers Revolving Credit Facility,
collectively, the “MSG Sports Credit Facilities”. Changes in interest rates may increase interest expense payments with respect to any borrowings incurred under the MSG
Sports Credit Facilities.
Borrowings under our MSG Sports Credit Facilities incur interest, depending on our election, at a floating rate based upon LIBOR, the U.S. Federal Funds Rate or the U.S.
Prime Rate, plus, in each case, a fixed spread. If appropriate, we may seek to reduce such exposure through the use of interest rate swaps or similar instruments. See Note 13 to
the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for more information on our MSG Sports Credit Facilities. As of June 30, 2020,
we had a total of $350 million in debt outstanding under our MSG Sports Credit Facilities. The effect of a hypothetical 100 basis point increase in floating interest rates
prevailing as of June 30, 2020 and continuing for a full year would increase interest expense approximately $3.5 million.
In addition, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors Affecting Results of Operations — Impact of
COVID-19 on Our Business” for discussions of disruptions caused by COVID-19.
Item 8. Financial Statements and Supplementary Data
The Financial Statements required by this Item 8 appear beginning on page F-1 of this Annual Report on Form 10-K, and are incorporated by reference herein.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation was carried out under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of
the end of the period covered by this report. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2020
the Company’s disclosure controls and procedures were effective.
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Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange
Act. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only
in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
prepared for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of
the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on the results of this evaluation, our management concluded that our internal control over financial reporting
was effective as of June 30, 2020.
The effectiveness of our internal control over financial reporting as of June 30, 2020 has been audited by KPMG LLP, an independent registered public accounting firm, as
stated in their report which is included herein.
Changes in Internal Control over Financial Reporting
Following the MSGE Distribution, we entered into a transition services agreement and other agreements with MSG Entertainment which provide certain business and
administrative functions to the Company that were previously performed by internal resources. Such services include support with respect to information technology,
accounting, accounts payable, payroll, tax, human resources, treasury, insurance and risk management, investor relations, corporate communications, benefit plan
administration and reporting, and internal audit. The Company continues to review and document its internal controls over financial reporting, and may, from time to time,
make changes aimed at enhancing their effectiveness.
There were no changes in the Company’s internal control over financial reporting during the fiscal quarter ended June 30, 2020 that have materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information
None.
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Item 10. Directors, Executive Officers and Corporate Governance
PART III
Information relating to our directors, executive officers and corporate governance will be included in the proxy statement for the 2020 annual meeting of the Company’s
stockholders, which is expected to be filed within 120 days of our fiscal year end, and is incorporated herein by reference.
Item 11. Executive Compensation
Information relating to executive compensation will be included in the proxy statement for the 2020 annual meeting of the Company’s stockholders, which is expected to be
filed within 120 days of our fiscal year end, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information relating to the beneficial ownership of our common stock will be included in the proxy statement for the 2020 annual meeting of the Company’s stockholders,
which is expected to be filed within 120 days of our fiscal year end, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information relating to certain relationships and related transactions and director independence will be included in the proxy statement for the 2020 annual meeting of the
Company’s stockholders, which is expected to be filed within 120 days of our fiscal year end, and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
Information relating to principal accountant fees and services will be included in the proxy statement for the 2020 annual meeting of the Company’s stockholders, which is
expected to be filed within 120 days of our fiscal year end, and is incorporated herein by reference.
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Item 15. Exhibits and Financial Statement Schedules
PART IV
The following documents are filed as part of this report:
1. The financial statements as indicated in the index set forth on page
2. Financial statement schedule:
Schedule supporting consolidated financial statements:
Schedule II — Valuation and Qualifying Accounts
Page
No.
F- 1
58
Schedules other than that listed above have been omitted, since they are either not applicable, not required or the information is included
elsewhere herein.
3. Exhibits:
EXHIBIT NO.
DESCRIPTION
2.1
2.2
2.3
3.1
3.2
3.3
4.1
4.2
4.3
4.4
4.5
10.1
Distribution Agreement, dated September 11, 2015, between MSG Networks Inc. and Madison Square Garden Sports Corp. (formerly, The Madison
Square Garden Company) (incorporated by reference to Exhibit 2.1 to Amendment No. 6 to the Company’s Registration Statement on Form 10 filed
on September 11, 2015).
Contribution Agreement, dated September 11, 2015, among MSG Networks Inc., MSGN Holdings, L.P. and Madison Square Garden Sports Corp.
(formerly, The Madison Square Garden Company) (incorporated by reference to Exhibit 2.2 to Amendment No. 6 to the Company’s Registration
Statement on Form 10 filed on September 11, 2015).
Distribution Agreement, dated as of March 31, 2020, between Madison Square Garden Sports Corp. and Madison Square Garden Entertainment
Corp. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on March 31, 2020).
Amended and Restated Certificate of Incorporation of Madison Square Garden Sports Corp. (formerly, The Madison Square Garden Company)
(incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 1, 2015).
Amendment to the Amended and Restated Certificate of Incorporation of Madison Square Garden Sports Corp., dated April 17, 2020 (incorporated
by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 23, 2020).
Amended By-Laws of Madison Square Garden Sports Corp. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-
K filed on June 26, 2020).
Transfer Consent Agreement, dated September 28, 2015 with the NBA (incorporated by reference to Exhibit 4.1 to the Company’s Form 10-K for
the fiscal year ended June 30, 2016 filed on August 19, 2016).
Transfer Consent Agreement, dated September 28, 2015 with the NHL (incorporated by reference to Exhibit 4.2 to the Company’s Form 10-K for
the fiscal year ended June 30, 2016 filed on August 19, 2016).
Registration Rights Agreement, dated as of September 15, 2015, by and among Madison Square Garden Sports Corp. (formerly, The Madison
Square Garden Company) and The Charles F. Dolan Children Trusts (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on
Form 8-K filed on October 1, 2015).
Registration Rights Agreement, dated as of September 15, 2015, by and among Madison Square Garden Sports Corp. (formerly, The Madison
Square Garden Company) and The Dolan Family Affiliates (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K
filed on October 1, 2015).
Description of Capital Stock (incorporated by reference to Exhibit 4.5 to the Company’s Form 10-K for the fiscal year ended June 30, 2019 filed on
August 20, 2019).
Tax Disaffiliation Agreement, dated September 11, 2015, between MSG Networks Inc. and Madison Square Garden Sports Corp. (formerly, The
Madison Square Garden Company) (incorporated by reference to Exhibit 10.2 to Amendment No. 6 to the Company’s Registration Statement on
Form 10 filed on September 11, 2015).
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EXHIBIT NO.
DESCRIPTION
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
Employee Matters Agreement, dated September 11, 2015, by and between MSG Networks Inc. and Madison Square Garden Sports Corp. (formerly,
The Madison Square Garden Company) (incorporated by reference to Exhibit 10.3 to Amendment No. 6 to the Company’s Registration Statement
on Form 10 filed on September 11, 2015).
Madison Square Garden Sports Corp. (formerly, The Madison Square Garden Company) 2015 Employee Stock Plan (incorporated by reference to
Exhibit 10.4 to the Company’s Form 10-K for the fiscal year ended June 30, 2016 filed on August 19, 2016). †
Madison Square Garden Sports Corp. (formerly, The Madison Square Garden Company) 2015 Cash Incentive Plan (incorporated by reference to
Exhibit 10.5 to the Company’s Form 10-K for the fiscal year ended June 30, 2016 filed on August 19, 2016). †
Madison Square Garden Sports Corp. (formerly, The Madison Square Garden Company) 2015 Stock Plan for Non-Employee Directors
(incorporated by reference to Exhibit 10.6 to the Company’s Form 10-K for the fiscal year ended June 30, 2016 filed on August 19, 2016). †
Form of Indemnification Agreement between Madison Square Garden Sports Corp. (formerly, The Madison Square Garden Company) and its
Directors and Executive Officers (incorporated by reference to Exhibit 10.8 to Amendment No. 3 to the Company’s Registration Statement on Form
10 filed on July 24, 2015).
Form of Madison Square Garden Sports Corp. (formerly, The Madison Square Garden Company) Non-Employee Director Award Agreement
(incorporated by reference to Exhibit 10.9 to Amendment No. 3 to the Company’s Registration Statement on Form 10 filed on July 24, 2015). †
Form of Madison Square Garden Sports Corp. (formerly, The Madison Square Garden Company) Restricted Stock Units Agreement (incorporated
by reference to Exhibit 10.10 to Amendment No. 3 to the Company’s Registration Statement on Form 10 filed on July 24, 2015). †
Form of Madison Square Garden Sports Corp. (formerly, The Madison Square Garden Company) Performance Restricted Stock Units Agreement
(incorporated by reference to Exhibit 10.11 to Amendment No. 3 to the Company’s Registration Statement on Form 10 filed on July 24, 2015). †
Form of Madison Square Garden Sports Corp. (formerly, The Madison Square Garden Company) Restricted Stock Units Agreement (2018)
(incorporated by reference to Exhibit 10.12 to the Company’s Form 10-K for the fiscal year ended June 30, 2018 filed on August 17, 2018). †
Form of Madison Square Garden Sports Corp. (formerly, The Madison Square Garden Company) Performance Restricted Stock Units Agreement
(2018) (incorporated by reference to Exhibit 10.13 to the Company’s Form 10-K for the fiscal year ended June 30, 2018 filed on August 17, 2018).
†
Form of Madison Square Garden Sports Corp. (formerly, The Madison Square Garden Company) Restricted Stock Units Agreement (2019)
(incorporated by reference to Exhibit 10.14 to the Company’s Form 10-K for the fiscal year ended June 30, 2019 filed on August 20, 2019). †
Form of Madison Square Garden Sports Corp. (formerly, The Madison Square Garden Company) Performance Restricted Stock Units Agreement
(2019) (incorporated by reference to Exhibit 10.15 to the Company’s Form 10-K for the fiscal year ended June 30, 2019 filed on August 20, 2019).
†
Form of Madison Square Garden Sports Corp. (formerly, The Madison Square Garden Company) Option Agreement (incorporated by reference to
Exhibit 10.4 to the Company’s Form 10-Q for the quarter ended December 31, 2017 filed on February 8, 2018). †
Lease Agreement, dated December 4, 1997, between RCPI Trust and Radio City Productions LLC, relating to Radio City Music Hall, (incorporated
by reference to Exhibit 10.14 to Amendment No. 3 to the Company’s Registration Statement on Form 10 filed on July 24, 2015). +
First Amendment to Lease Agreement, dated December 4, 1997, between RCPI Trust and Radio City Productions LLC, dated February 19, 1999
(incorporated by reference to Exhibit 10.15 to Amendment No. 3 to the Company’s Registration Statement on Form 10 filed on July 24, 2015).
Second Amendment to Lease Agreement, dated December 4, 1997, between RCPI Landmark Properties, L.L.C. and Radio City Productions LLC,
dated November 6, 2002 (incorporated by reference to Exhibit 10.16 to Amendment No. 3 to the Company’s Registration Statement on Form 10
filed on July 24, 2015). +
Third Amendment to Lease Agreement, dated December 4, 1997, between RCPI Landmark Properties, L.L.C. and Radio City Productions LLC,
dated August 14, 2008 (incorporated by reference to Exhibit 10.17 to Amendment No. 3 to the Company’s Registration Statement on Form 10 filed
on July 24, 2015). +
Fourth Amendment to Lease Agreement, dated December 4, 1997, between RCPI Landmark Properties, L.L.C. and Radio City Productions LLC,
dated January 24, 2011 (incorporated by reference to Exhibit 10.18 to Amendment No. 3 to the Company’s Registration Statement on Form 10 filed
on July 24, 2015). +
Guaranty of Lease, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) and RCPI Landmark Properties,
L.L.C. (incorporated by reference to Exhibit 10.19 to Amendment No. 3 to the Company’s Registration Statement on Form 10 filed on July 24,
2015). +
53
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EXHIBIT NO.
DESCRIPTION
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
Employment Agreement dated as of March 31, 2020 between Madison Square Garden Sports Corp. and James L. Dolan (incorporated by reference
to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on March 31, 2020). †
Employment Agreement dated as of April 17, 2020 between Madison Square Garden Sports Corp. (formerly, The Madison Square Garden
Company) and Alexander Shvartsman. †
Employment Agreement dated as of December 6, 2018, between Madison Square Garden Sports Corp. (formerly, The Madison Square Garden
Company) and Victoria M. Mink (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 10,
2018). †
Employment Agreement, dated October 25, 2018, between Madison Square Garden Sports Corp. (formerly, The Madison Square Garden Company)
and Philip D’Ambrosio (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended December 31, 2018 filed on
February 1, 2019). †
Employment Agreement, dated September 6, 2018, between Madison Square Garden Sports Corp. (formerly, The Madison Square Garden
Company) and Lawrence J. Burian (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 7,
2018). †
Letter Agreement, dated June 19, 2020, between Madison Square Garden Sports Corp. and Lawrence J. Burian (incorporated by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K filed on June 19, 2020). †
Employment Agreement dated as of March 31, 2020 between Madison Square Garden Sports Corp. and Andrew Lustgarten (incorporated by
reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on March 31, 2020). †
Option Agreement, dated December 15, 2017, between Madison Square Garden Sports Corp. (formerly, The Madison Square Garden Company)
and Andrew Lustgarten (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 18, 2017). †
Employment Agreement dated as of January 23, 2020 between Madison Square Garden Sports Corp. and Joseph Yospe. †
Dry Lease Agreement, dated January 11, 2017, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) and Quart
2C, LLC for the G550 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 13, 2017).
Dry Lease Agreement, dated January 11, 2017 between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) and Quart
2C, LLC for the G450 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 13, 2017).
Credit Agreement, dated as of September 30, 2016, by and among New York Knicks, LLC, JPMorgan Chase Bank, N.A. as administrative agent
and collateral agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
October 6, 2016).
Security Agreement, dated as of September 30, 2016, between New York Knicks, LLC and JPMorgan Chase Bank, N.A., as collateral agent
(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 6, 2016).
Credit Agreement, dated as of January 25, 2017, by and among New York Rangers, LLC, JPMorgan Chase Bank, N.A. as administrative agent and
collateral agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
January 27, 2017).
Security Agreement, dated as of January 25, 2017, between New York Rangers, LLC and JPMorgan Chase Bank, N.A., as collateral agent
(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 27, 2017).
Transaction Agreement, dated as of January 31, 2017, between MSG TG, LLC, TG Merger Sub, LLC, TG Rollover Holdco LLC, TAO Group
Holdings LLC, TAO Group Intermediate Holdings LLC, TAO Group Operating LLC, TAO Group Management LLC, TG Member Representative
LLC, certain other parties thereto, and solely with respect to specific provisions MSG Entertainment Holdings, LLC and Madison Square Garden
Sports Corp. (formerly, The Madison Square Garden Company) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on February 1, 2017).
Credit and Guaranty Agreement, dated as of January 31, 2017, among TAO Group Operating LLC, TAO Group Intermediate Holdings LLC, certain
subsidiaries of TAO Group Operating LLC, the various lenders thereto, and Goldman Sachs Specialty Lending Group, L.P. (incorporated by
reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 1, 2017).
Second Amended and Restated Limited Liability Company Agreement of TAO Group Holdings LLC, dated as of January 31, 2017 (incorporated by
reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on February 1, 2017).
54
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EXHIBIT NO.
DESCRIPTION
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
10.50
10.51
10.52
10.53
10.54
Amendment No. 1 to Second Amended and Restated Limited Liability Company Agreement of TAO Group Holdings LLC, dated as of May 23,
2019.(incorporated by reference to Exhibit 10.39 to the Company’s Form 10-K for the fiscal year ended June 30, 2019 filed on August 20, 2019).
First Amendment to the Credit and Guaranty Agreement, dated as of January 31, 2017, among TAO Group Operating LLC, TAO Group
Intermediate Holdings LLC, certain subsidiaries of TAO Group Operating LLC, the various lenders thereto, and Goldman Sachs Specialty Lending
Group, L.P., entered into as of May 19, 2017 (incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q for the quarter ended
December 31, 2017 filed on February 8, 2018).
Second Amendment to the Credit and Guaranty Agreement, dated as of January 31, 2017, among TAO Group Operating LLC, TAO Group
Intermediate Holdings LLC, certain subsidiaries of TAO Group Operating LLC, the various lenders thereto, and Goldman Sachs Specialty Lending
Group, L.P., entered into as of January 22, 2018 (incorporated by reference to Exhibit 10.6 to the Company’s Form 10-Q for the quarter ended
December 31, 2017 filed on February 8, 2018).
Summary of Office Space Arrangement, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) and the
Knickerbocker Group LLC (incorporated by reference to Exhibit 10.30 to the Company’s Form 10-K for the fiscal year ended June 30, 2016 filed
on August 19, 2016).
Time Sharing Agreement, dated December 15, 2017, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) and
Andrew Lustgarten (for the G450) (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended December 31,
2017 filed on February 8, 2018).
Time Sharing Agreement, dated December 15, 2017, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) and
Andrew Lustgarten (for the G550) (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended December 31,
2017 filed on February 8, 2018).
Time Sharing Agreement, dated December 15, 2017, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) and
Andrew Lustgarten (for the GV) (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q for the quarter ended December 31, 2017
filed on February 8, 2018).
Aircraft Support Services Agreement, effective July 1, 2018, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment,
LLC), Sterling Aviation, LLC and Charles F. Dolan (for the GV) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on June 29, 2018).
Aircraft Support Services Agreement, effective July 1, 2018, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment,
LLC)and JDSS (for the G450) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 29, 2018).
Time Sharing Agreement, effective July 1, 2018, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) and
Charles F. Dolan (for the G550) (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on June 29, 2018).
Time Sharing Agreement, effective July 1, 2018, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC)and
QUART 2C, LLC (for the G550) (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on June 29, 2018).
Dry Lease Agreement, effective July 1,2018, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC)C and
Sterling Aviation, LLC (for the GV) (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on June 29,
2018).
Dry Lease Agreement, effective July 1, 2018, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) and
QUART 2C, LLC (for the G450) (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on June 29, 2018).
Ground Lease Agreement, dated July 16, 2018, by and among Sands Arena Landlord LLC, Venetian Casino Resort, LLC, MSG Las Vegas, LLC,
and MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) (incorporated by reference to Exhibit 10.60 to the Company’s
Form 10-K for the fiscal year ended June 30, 2018 filed on August 17, 2018). +
First Amendment to Ground Lease, dated July 16, 2018, by and among Sands Arena Landlord LLC, Venetian Casino Resort, LLC, MSG Las Vegas,
LC, and MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC), dated November 24, 2018 (incorporated by reference to
Exhibit 10.56 to the Company’s Form 10-K for the fiscal year ended June 30, 2019 filed on August 20, 2019).
Aircraft Support Services Agreement, dated December 17, 2018, between MSG Entertainment Group, LLC (formerly, MSG Sports &
Entertainment, LLC) and the Dolan Family Members (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on December 21, 2018).
55
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EXHIBIT NO.
DESCRIPTION
10.55
10.56
10.57
10.58
10.59
10.60
10.61
10.62
10.63
10.64
10.65
10.66
10.67
10.68
10.69
10.70
10.71
10.72
10.73
10.74
Dry Lease Agreement, dated December 17, 2018, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) and
Sterling2k LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 21, 2018).
Time Sharing Agreement, dated December 17, 2018, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) and
Andrew Lustgarten (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on December 21, 2018).
Dry Lease Agreement, dated May 6, 2019, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) and Brighid
Air, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2019 filed on May 8, 2019).
Flight Crew Services Agreement, dated May 6, 2019, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) and
Dolan Family Office, LLC (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended March 31, 2019 filed on
May 8, 2019).
Time Sharing Agreement, dated May 6, 2019, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) and
Andrew Lustgarten (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q for the quarter ended March 31, 2019 filed on May 8,
2019).
Credit Agreement, dated as of May 23, 2019, among TAO Group Operating LLC, TAO Group Intermediate Holdings LLC, the various lenders
thereto, and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on May 23, 2019).
Security Agreement, dated as of May 23, 2019, TAO Group Operating LLC, TAO Group Intermediate Holdings LLC, certain subsidiaries of TAO
Group Intermediate Holdings LLC and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (incorporated by reference to
Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 23, 2019).
Construction Agreement, dated as of May 31, 2019, by and between MSG Las Vegas, LLC and Hunt Construction Group Inc. (incorporated by
reference to Exhibit 10.65 to the Company’s Form 10-K for the fiscal year ended June 30, 2019 filed on August 20, 2019). **
Contribution Agreement, dated as of March 31, 2020, between Madison Square Garden Sports Corp., MSG Entertainment Group, LLC and Madison
Square Garden Entertainment Corp. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 31,
2020).
Transition Services Agreement, dated as of March 31, 2020, between MSG Sports, LLC and MSG Entertainment Group, LLC (formerly, MSG
Sports & Entertainment, LLC) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 31, 2020).
Tax Disaffiliation Agreement, dated as of March 31, 2020, between Madison Square Garden Sports Corp. (formerly, The Madison Square Garden
Company) and Madison Square Garden Entertainment Corp. (formerly, MSG Entertainment Spinco, Inc.) (incorporated by reference to Exhibit 10.3
to the Company’s Current Report on Form 8-K filed on March 31, 2020).
Employee Matters Agreement, dated March 31, 2020, between Madison Square Garden Sports Corp. (formerly, The Madison Square Garden
Company) and Madison Square Garden Entertainment Corp. (formerly, MSG Entertainment Spinco, Inc.) (incorporated by reference to Exhibit 10.4
to the Company’s Current Report on Form 8-K filed on March 31, 2020).
Delayed Draw Term Loan Credit Agreement, dated April 17, 2020, between MSG NYK Holdings, LLC and MSG Entertainment Group, LLC
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 23, 2020).
Delayed Draw Term Loan Credit Agreement, dated April 17, 2020, between MSG NYR Holdings, LLC and MSG Entertainment Group, LLC
(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 23, 2020).
Arena License Agreement, dated April 15, 2020, between MSG Arena, LLC and New York Knicks, LLC.**
Arena License Agreement, dated April 15, 2020, between MSG Arena, LLC and New York Rangers, LLC.**
NBA Transaction Agreement, dated April 15, 2020, with the NBA and Madison Square Garden Entertainment Corp. (formerly, MSG Entertainment
Spinco, Inc.).
NHL Transaction Agreement, dated April 15, 2020, with the NHL and Madison Square Garden Entertainment Corp. (formerly, MSG Entertainment
Spinco, Inc.).
Time Sharing Agreement, dated April 15, 2020, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) and
MSG Sports, LLC (for the G450).
Time Sharing Agreement, dated April 15, 2020, between MSG Entertainment Group, LLC (formerly, MSG Sports & Entertainment, LLC) and
MSG Sports, LLC (for the G550).
56
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EXHIBIT NO.
DESCRIPTION
10.75
10.76
10.77
10.78
21.1
23.1
24.1
31.1
31.2
32.1
32.2
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Madison Square Garden Sports Corp. Policy Concerning Certain Matters Relating to Madison Square Garden Entertainment Corp., MSG Networks
Inc. and AMC Networks Inc., including Responsibilities of Overlapping Directors and Officers.
Sponsorship Sales and Service Representation Agreement, dated April 15, 2020, between Knicks Holdings, LLC and MSG Entertainment Group,
LLC. **
Sponsorship Sales and Service Representation Agreement, dated April 15, 2020, between New York Rangers, LLC and MSG Entertainment Group,
LLC. **
Letter Agreement, dated August 21, 2020, between Madison Square Garden Sports Corp. and Lawrence J. Burian. †
Subsidiaries of the Registrant.
Consent of KPMG LLP.
Powers of Attorney (included on the signature page to this Annual Report on Form 10-K).
Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification by the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
XBRL Instance Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the
Inline XBRL document.
XBRL Taxonomy Extension Schema.
XBRL Taxonomy Extension Calculation Linkbase.
XBRL Taxonomy Extension Definition Linkbase.
XBRL Taxonomy Extension Label Linkbase.
XBRL Taxonomy Extension Presentation Linkbase.
The cover page form the Company’s Annual Report on Form 10-K for the year ended June 30, 2020 formatted in Inline XBRL and contained in
Exhibit 101.
_________________
+
**
†
Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange
Commission.
Certain confidential information, identified by bracketed asterisks “[*****]” has been omitted from this exhibit pursuant to Item 601(b)(10) of Regulation S-K
because it is both (i) not material and (ii) would be competitively harmful to the Company if publicly disclosed.
This exhibit is a management contract or a compensatory plan or arrangement.
Item 16. Form 10-K Summary
The Company has elected not to provide summary information.
57
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
(Additions) / Deductions
Year ended June 30, 2020
Allowance for doubtful accounts (a)
Deferred tax valuation allowance (a)
Year ended June 30, 2019
Allowance for doubtful accounts
Deferred tax valuation allowance
Year ended June 30, 2018
Allowance for doubtful accounts
Deferred tax valuation allowance
_________________
$
$
$
$
$
$
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Charged to Other
Accounts
Deductions
Balance at
End of
Period
(1,814)
$
(7,170)
$
(75,701)
(46,514)
(77,515)
$
(53,684)
$
—
—
—
$
$
8,804 (b)
74,082 (c)
82,886
$
$
(180)
(48,133)
(48,313)
(777)
$
(1,426)
$
—
$
389
$
(88,246)
8,708
3,837
—
(89,023)
$
7,282
$
3,837
$
389
$
(1,814)
(75,701)
(77,515)
(601)
$
(218,639)
(219,240)
$
(647)
130,393 (d)
129,746
$
$
—
—
—
$
$
471
$
—
471
$
(777)
(88,246)
(89,023)
(a)
(b)
Includes amounts classified as discontinued operations on the consolidated balance sheet.
Includes amounts reflected in discontinued operations of $8,769.
(c) The Company completely offset the taxable income of discontinued operations, including taxable income resulting from the acceleration of deferred revenue with NOLs.
The deferred tax assets for such NOLs had a full valuation allowance. Therefore, both the deferred tax asset and valuation allowance were reduced with no residual tax
expense. The valuation allowance reduction relating to the NOL utilization was $68,000.
(d) Net decrease in valuation allowance reflects $51,015 of reduction to net deferred tax liabilities in connection with the lower federal income tax rate of 21% and other of
$2,453.
58
Table of Contents
Pursuant to the requirements of the Section 13 or 15(d) the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on the 28th day of August 2020.
SIGNATURES
Madison Square Garden Sports Corp.
By: /s/ VICTORIA M. MINK
Name: Victoria M. Mink
Title: Executive Vice President and Chief
Financial Officer and Treasurer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Andrew Lustgarten, Victoria M. Mink and Lawrence J.
Burian, and each of them, as such person’s true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for such person in such person’s
name, place and stead, in any and all capacities, to sign this report, and file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to
be done as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons in the capacities and on the dates
indicated.
Name
/s/ ANDREW LUSTGARTEN
Andrew Lustgarten
/s/ VICTORIA M. MINK
Victoria M. Mink
/s/ ALEXANDER SHVARTSMAN
Alexander Shvartsman
/s/ JAMES L. DOLAN
James L. Dolan
/s/ CHARLES F. DOLAN
Charles F. Dolan
/s/ CHARLES P. DOLAN
Charles P. Dolan
/s/ KRISTIN A. DOLAN
Kristin A. Dolan
Title
President and Chief Executive Officer
(Principal Executive Officer)
Date
August 28, 2020
Executive Vice President and
Chief Financial Officer (Principal Financial Officer) and Treasurer
August 28, 2020
Senior Vice President, Controller and
Principal Accounting Officer
August 28, 2020
Executive Chairman (Director)
August 28, 2020
Director
Director
Director
59
August 28, 2020
August 28, 2020
August 28, 2020
Table of Contents
Name
/s/ MARIANNE DOLAN WEBER
Marianne Dolan Weber
/s/ PAUL J. DOLAN
Paul J. Dolan
/s/ RYAN T. DOLAN
Ryan T. Dolan
/s/ THOMAS C. DOLAN
Thomas C. Dolan
/s/ JOSEPH M. COHEN
Joseph M. Cohen
/s/ STEPHEN C. MILLS
Stephen C. Mills
/s/ RICHARD D. PARSONS
Richard D. Parsons
/s/ NELSON PELTZ
Nelson Peltz
/s/ ALAN D. SCHWARTZ
Alan D. Schwartz
/s/ IVAN SEIDENBERG
Ivan Seidenberg
/s/ BRIAN G. SWEENEY
Brian G. Sweeney
/s/ VINCENT TESE
Vincent Tese
/s/ ANTHONY J. VINCIQUERRA
Anthony J. Vinciquerra
Title
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
60
Date
August 28, 2020
August 28, 2020
August 28, 2020
August 28, 2020
August 28, 2020
August 28, 2020
August 28, 2020
August 28, 2020
August 28, 2020
August 28, 2020
August 28, 2020
August 28, 2020
August 28, 2020
Table of Contents
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
Consolidated Balance Sheets as of June 30, 2020 and 2019
Consolidated Statements of Operations for the years ended June 30, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income (Loss) for the years ended June 30, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the years ended June 30, 2020, 2019 and 2018
Consolidated Statements of Equity and Redeemable Noncontrolling Interests for the years ended June 30, 2020, 2019 and 2018
Notes to Consolidated Financial Statements
Page
F- 2
F- 4
F- 5
F- 7
F- 8
F- 9
F- 11
F- 14
F- 1
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Madison Square Garden Sports Corp.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Madison Square Garden Sports Corp. and subsidiaries (the “Company”) as of June 30, 2020 and 2019, the
related consolidated statements of operations, comprehensive income (loss), cash flows, and equity and redeemable noncontrolling interests for each of the years in the three-
year period ended June 30, 2020, and the related notes and financial statement schedule II (collectively, the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and 2019, and the results of its operations
and its cash flows for each of the years in the three-year period ended June 30, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over
financial reporting as of June 30, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission, and our report dated August 28, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial
reporting.
Changes in Accounting Principle
As described in Note 2 to the consolidated financial statements, effective July 1, 2019, the Company changed its method of accounting for leases due to the adoption of ASC
Topic 842, Leases, and effective July 1, 2018, the Company changed its method of accounting for revenue due to the adoption of ASC Topic 606, Revenue from Contracts with
Customers.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to
be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements,
taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures
to which they relate.
Evaluation of the identification of related parties and related party transactions
As discussed in Note 17 to the consolidated financial statements, the Dolan family, including trusts for the benefit of members of the Dolan family (collectively, the Dolan
Family Group) is the majority beneficial owner of the Company, MSG Networks Inc. (MSG Networks), Madison Square Garden Entertainment Corp. (MSG Entertainment),
and AMC Networks Inc. (AMC Networks). In addition, there are certain overlapping directors and executive officers between the companies. Each of these entities is a related
party. Following the distribution of MSG Entertainment, the Company has entered into a number of transactions with MSG Entertainment, including agreements for use of the
Madison Square Garden Arena, sales and service representation agreements, sponsorship allocation, transition services and delayed draw term loans, as well as certain shared
executive support costs for the Company’s Executive Chairman and Vice Chairman. The Company has entered into agreements for media rights and other transactions with
MSG Networks and the Company has also entered into transactions with AMC
F- 2
Networks. Further, the Company has entered into several arrangements with members of the Dolan Family Group for shared office space and aircraft services and timesharing.
We identified the evaluation of the identification of related parties and related party transactions as a critical audit matter. Auditor judgment was involved in assessing the
sufficiency of the procedures performed to identify related parties and related party transactions of the Company.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal
controls over the Company’s related party process, including controls over the identification of the Company’s related party relationships and transactions. We performed the
following procedures to evaluate the identification of related parties and related party transactions by the Company:
•
•
•
•
•
•
•
•
•
Read new agreements and contracts between the Company and related parties
Queried the accounts payable system for transactions with related parties;
Inspected director and officer questionnaires from the Company’s directors and officers;
Evaluated the Company’s reconciliation of its applicable accounts to the related parties’ records of transactions and balances;
Read the Company’s minutes from meetings of the Board of Directors and related committees;
Inquired with executive officers, key members of management, and the Audit Committee of the Board of Directors regarding related party transactions.
Received confirmations from related parties and compared responses to the Company’s records;
Read public filings, external news, and research sources for information related to transactions between the Company and related parties; and
Listened to the Company’s quarterly investor relations calls.
Assessment of the results from discontinued operations
As discussed in Notes 1 and 3 to the consolidated financial statements, on April 17, 2020, the Company distributed all the outstanding common stock of MSG Entertainment to
its stockholders. MSG Entertainment owns, directly or indirectly, the entertainment and sports booking businesses previously owned and operated by the Company through its
Entertainment and Sports business segments, respectively. Management determined that the allocable shared revenue and expenses of MSG Entertainment should be presented
as discontinued operations in the consolidated statements of operations for all periods presented.
We identified the assessment of the results from discontinued operations as a critical audit matter. Given the nature of the transactions and the degree of integration of MSG
Entertainment with the Company’s continuing operations in the periods before the distribution, there was a high degree of subjective auditor judgment required to assess
management’s identification, segregation, and recording of the allocable shared revenue and expenses for the discontinued businesses.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal
controls over the Company’s discontinued operations assessment process, including controls related to the identification, segregation, and recording of allocable shared revenue
and expenses, and the resulting entries made to the income statement account balances. Specifically, we read the distribution agreements and evaluated the Company’s
discontinued operations accounting memorandums that document management’s accounting conclusions. We tested the recognition and classification of amounts included in
discontinued operations by recalculating revenue and expenses using the Company’s historical accounting records. We read the Company’s disclosure and assessed whether
the disclosure appropriately described the determination of discontinued operations.
/s/ KPMG LLP
We have served as the Company’s auditor since 2015.
New York, New York
August 28, 2020
F- 3
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Madison Square Garden Sports Corp.:
Opinion on Internal Control Over Financial Reporting
We have audited Madison Square Garden Sports Corp. and subsidiaries’ (the “Company”) internal control over financial reporting as of June 30, 2020, based on criteria
established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control —
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the
Company as of June 30, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), cash flows, and equity and redeemable noncontrolling
interests for each of the years in the three-year period ended June 30, 2020, and the related notes and financial statement schedule II (collectively, the “consolidated financial
statements”), and our report dated August 28, 2020 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
/s/ KPMG LLP
New York, New York
August 28, 2020
F- 4
Table of Contents
ASSETS
Current Assets:
Cash and cash equivalents
Restricted cash
Accounts receivable, net
Net related party receivables
Prepaid expenses
Other current assets
Current assets of discontinued operations
Total current assets
Property and equipment, net
Right-of-use lease assets
Amortizable intangible assets, net
Indefinite-lived intangible assets
Goodwill
Other assets
Non-current assets of discontinued operations
Total assets
MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
See accompanying notes to consolidated financial statements.
F- 5
June 30,
2020
2019
$
77,852 $
12,821
7,403
135
20,634
9,433
—
128,278
39,597
718,051
2,754
112,144
226,955
6,019
—
$
1,233,798 $
4,317
21,519
15,542
—
21,409
6,371
1,344,190
1,413,348
31,270
—
6,315
112,144
226,955
5,891
1,967,867
3,763,790
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands, except per share data)
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current Liabilities:
Accounts payable
Net related party payables
Accrued liabilities:
Employee related costs
Other accrued liabilities
Operating lease liabilities, current
Deferred revenue
Current liabilities of discontinued operations
Total current liabilities
Related party payables, noncurrent
Long-term debt
Operating lease liabilities, noncurrent
Defined benefit obligations
Other employee related costs
Deferred tax liabilities, net
Other liabilities
Non-current liabilities of discontinued operations
Total liabilities
Commitments and contingencies (see Note 12)
Redeemable noncontrolling interests of discontinued operations
Madison Square Garden Sports Corp. Stockholders’ Equity:
June 30,
2020
2019
$
2,301 $
17,952
71,451
33,071
39,131
126,348
—
290,254
—
350,000
679,053
7,014
50,027
57,721
3,164
—
1,437,233
1,035
209
77,514
123,688
—
110,264
447,313
760,023
172
—
—
7,049
48,274
36,449
6,696
198,740
1,057,403
—
67,627
Class A Common stock, par value $0.01, 120,000 shares authorized; 19,466 and 19,229 shares outstanding as of June 30, 2020
and 2019, respectively
Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares outstanding as of June 30, 2020 and 2019
Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of June 30, 2020 and 2019
Additional paid-in capital
Treasury stock, at cost, 982 and 1,219 shares as of June 30, 2020 and 2019, respectively
Retained earnings (accumulated deficit)
Accumulated other comprehensive income (loss)
Total Madison Square Garden Sports Corp. stockholders’ equity
Nonredeemable noncontrolling interests
Total equity
204
45
—
5,940
(167,431)
(43,605)
(2,139)
(206,986)
3,551
(203,435)
Total liabilities, redeemable noncontrolling interests and equity
$
1,233,798 $
204
45
—
2,845,961
(207,790)
29,003
(46,923)
2,620,500
18,260
2,638,760
3,763,790
See accompanying notes to consolidated financial statements.
F- 6
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Revenues (a)
Operating expenses:
Direct operating expenses (b)
Selling, general and administrative expenses (c)
Depreciation and amortization
Operating loss
Other income (expense):
Interest income
Interest expense
Miscellaneous income (expense), net
Loss from continuing operations before income taxes
Income tax benefit (expense)
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income (loss)
Less: Net loss attributable to nonredeemable noncontrolling interests from continuing operations
Less: Net loss attributable to redeemable noncontrolling interests from discontinued operations
Less: Net loss attributable to nonredeemable noncontrolling interests from discontinued operations
Years Ended June 30,
2020
2019
2018
$
603,319 $
729,404 $
712,415
359,970
319,675
17,540
(93,866)
700
(4,461)
(421)
(4,182)
(98,048)
(20,593)
(118,641)
(90,222)
(208,863)
(2,342)
(24,013)
(120)
440,081
327,441
20,077
(58,195)
1,191
(4,970)
1,333
(2,446)
(60,641)
12,619
(48,022)
44,905
(3,117)
(2,300)
(7,299)
(4,945)
419,069
290,718
20,807
(18,179)
901
(3,492)
(518)
(3,109)
(21,288)
59,392
38,104
96,344
134,448
(2,136)
(628)
(4,382)
Net income (loss) attributable to Madison Square Garden Sports Corp.’s stockholders
$
(182,388) $
11,427 $
141,594
Basic
Continuing operations
Discontinued operations
Basic earnings (loss) per common share attributable to Madison Square Garden Sports Corp.’s stockholders
Diluted
Continuing operations
$
$
$
Discontinued operations
Diluted earnings (loss) per common share attributable to Madison Square Garden Sports Corp.’s stockholders $
Weighted-average number of common shares outstanding:
Basic
Diluted
(4.86) $
(2.76)
(7.62) $
(4.86) $
(2.76)
(7.62) $
(1.92) $
2.40
0.48 $
(1.91) $
2.39
0.48 $
1.70
4.29
5.99
1.69
4.25
5.94
23,942
23,942
23,767
23,900
23,639
23,846
(a) Include revenues from related parties of $138,881, $148,207 and $142,319 for the years ended June 30, 2020, 2019 and 2018, respectively.
(b) Include net charges to related parties of $77, $311 and $310 for the years ended June 30, 2020, 2019 and 2018, respectively.
(c) Include net charges from (to) related parties of $3,380, $(10,744) and $(9,884) for the years ended June 30, 2020, 2019 and 2018, respectively.
_________________
See accompanying notes to consolidated financial statements.
F- 7
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
Net income (loss)
Other comprehensive loss, before income taxes:
Pension plans and postretirement plan:
Years Ended June 30,
2020
2019
2018
$ (208,863)
$ (3,117)
$ 134,448
Net unamortized gains (losses) arising during the period
$
(321)
$ (2,565)
$ (3,415)
Amounts reclassified from accumulated other comprehensive loss:
Amortization of net actuarial loss included in net periodic benefit cost
Amortization of net prior service credit included in net periodic benefit cost
Settlement loss
Cumulative translation adjustments
Net changes related to available-for-sale securities
Other comprehensive loss, before income taxes
Income tax benefit (expense) related to items of other comprehensive loss
Other comprehensive loss, net of income taxes
Comprehensive income (loss)
Less: Comprehensive loss attributable to nonredeemable noncontrolling interests from
continuing operations
Less: Comprehensive loss attributable to redeemable noncontrolling interests from
discontinued operations
Less: Comprehensive loss attributable to nonredeemable noncontrolling interests from
discontinued operations
Comprehensive income (loss) attributable to Madison Square Garden Sports Corp.’s
stockholders
1,319
(37)
87
1,286
(7)
52
935
—
67
681
(4,809)
—
(4,128)
—
(4,128)
(212,991)
(1,234)
(4,341)
—
(5,575)
—
(5,575)
(8,692)
(2,342)
(2,300)
(24,013)
(7,299)
(120)
(4,945)
(2,046)
(502)
(12,095)
(14,643)
—
(14,643)
119,805
(2,136)
(628)
(4,382)
$ (186,516)
$
5,852
$ 126,951
See accompanying notes to consolidated financial statements.
F- 8
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
Impairment of intangibles, long-lived assets and goodwill
Share-based compensation expense
(Earnings) loss in equity method investments, net of income distributions
Provision for (benefit from) deferred income taxes
Purchase accounting adjustments associated with rent-related intangibles and deferred rent
Unrealized loss on equity investment with readily determinable fair value
Provision for doubtful accounts
Loss on extinguishment of debt including deferred financing costs
Other non-cash adjustments
Change in assets and liabilities, net of acquisitions:
Accounts receivable, net
Net related party receivables
Prepaid expenses and other assets
Accounts payable
Net related party payables
Accrued and other liabilities
Collections due to promoters
Deferred revenue
Operating lease right-of-use assets and lease liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Capital expenditures, net of acquisitions
Proceeds from insurance recoveries
Payments for acquisition of assets
Purchase of short-term investments
Proceeds from maturity of short-term investments
Payments for acquisition of businesses, net of cash acquired
Payments for acquisition of assets
Investments and loans to nonconsolidated affiliates
Proceeds from sales of nonconsolidated affiliates
Loan repayments received from nonconsolidated affiliates
Loan repayment received from subordinated debt
Cash received / (paid) for notes receivable
Net cash used in investing activities
Years Ended June 30,
2020
2019
2018
$
(208,863) $
(3,117) $
134,448
93,362
102,211
56,996
3,901
(8,033)
4,621
3,562
7,170
—
469
(36,758)
(1,611)
(60,774)
(5,656)
22,589
(42,974)
15,924
60,584
(3,152)
3,568
119,193
—
59,474
(6,312)
150
4,240
3,496
1,426
3,977
(1,322)
2,734
(916)
(26,080)
(3,930)
5,545
23,716
(22,301)
1,280
—
161,253
122,486
—
47,563
7,770
(117,311)
4,628
—
647
—
(686)
2,435
2,147
16,371
5,067
(3,901)
(28,424)
17,113
7,276
—
217,629
(362,475)
(188,834)
(191,914)
476
(1,000)
(405,935)
176,661
—
—
(75)
18,000
—
58,735
750
—
—
(112,693)
—
—
—
(52,707)
125,750
—
4,765
(9,176)
—
—
—
—
(8,288)
(6,000)
(11,255)
—
36,600
—
(1,500)
(514,863)
(232,895)
(182,357)
See accompanying notes to consolidated financial statements.
F- 9
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
Years Ended June 30,
2020
2019
2018
Cash flows from financing activities:
Repurchases of common stock
Cash distributed with MSG Entertainment
Taxes paid in lieu of shares issued for equity-based compensation
Noncontrolling interest capital contributions
Distributions to noncontrolling interest holders
Loans from noncontrolling interest holders
Payment of contingent consideration
Proceeds from revolving credit facilities
Proceeds from loan facility
Proceeds from revolving credit facility
Repayment of revolving credit facility
Repayment on long-term debt
Payments for extinguishment of debt
Payments for financing costs
Net cash used in financing activities
Effect of exchange rates on cash, cash equivalents and restricted cash
Net decrease in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash from continuing operations, beginning of period
Cash, cash equivalents and restricted cash from discontinued operations, beginning of period
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash from continuing operations, end of period
Cash, cash equivalents and restricted cash from discontinued operations, end of period
—
(827,076)
(26,777)
4,000
(535)
—
(200)
350,000
—
—
(15,000)
(5,000)
—
—
(520,588)
4,655
(1,027,228)
25,836
1,092,065
1,117,901
90,673
—
—
—
(19,525)
6,310
(2,186)
606
—
—
40,000
15,000
—
(109,312)
(1,151)
(1,488)
(71,746)
4,669
(138,719)
25,366
1,231,254
1,256,620
25,836
1,092,065
Cash, cash equivalents and restricted cash at end of period
$
90,673 $
1,117,901 $
Non-cash investing and financing activities:
Investments and loans to nonconsolidated affiliates
Non-cash acquisition of additional redeemable noncontrolling interests
Capital expenditures incurred but not yet paid
Tenant improvement paid by landlord
Share-based compensation capitalized in property and equipment
Accrued earn-out liability and other contingencies
Acquisition of assets not yet paid
$
— $
37,715
104,154
195
4,011
—
—
— $
—
35,026
14,528
3,946
—
500
See accompanying notes to consolidated financial statements.
F- 10
(11,830)
—
(34,393)
4,000
(4,124)
—
(4,000)
—
—
—
—
(688)
—
(62)
(51,097)
331
(15,494)
30,206
1,241,908
1,272,114
25,366
1,231,254
1,256,620
16
—
9,688
—
—
4,573
3,000
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED STATEMENTS OF EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS
(in thousands)
Common
Stock
Issued
Additional
Paid-In
Capital
Treasury
Stock
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total Madison
Square Garden
Sports Corp.
Stockholders’ Equity
Nonredeemable
Noncontrolling
Interests
Total
Equity
Redeemable
Noncontrolling
Interests
Balance as of
June 30, 2017 $
249 $ 2,832,516 $(242,077) $
(148,410) $
(34,115)
$
2,408,163
$
11,698
$2,419,861 $
80,630
—
2,403
—
(2,403)
—
(1,840)
141,594
1,840
—
—
—
—
—
—
—
—
—
141,594
(6,518)
135,076
(628)
—
(14,643)
(14,643)
—
(14,643)
—
—
—
—
—
126,951
(6,518)
120,433
(628)
47,592
—
47,592
—
—
—
—
—
—
—
—
—
—
—
—
—
—
compensation
—
47,592
Adoption of ASU
No. 2016-09
Adoption of ASU
No. 2018-02
Net income (loss)
Other
comprehensive
loss
Comprehensive
income (loss)
Share-based
Tax withholding
associated with
shares issued
for equity-
based
compensation
Common stock
issued under
stock incentive
plans
Repurchases of
—
(34,393)
—
—
—
(34,393)
—
(34,393)
—
(30,245)
30,245
common stock
—
—
(11,830)
—
—
—
—
—
—
—
(11,830)
—
(11,830)
Distributions to
noncontrolling
interest holders
Noncontrolling
interests from
acquisitions
Contribution of
joint venture
interests
Balance as of
—
—
—
—
—
—
(806)
(806)
(3,318)
—
—
—
—
—
—
8,182
8,182
—
—
—
—
—
—
4,996
4,996
—
—
June 30, 2018 $
249 $ 2,817,873 $(223,662) $
(11,059) $
(46,918)
$
2,536,483
$
17,552
$2,554,035 $
76,684
See accompanying notes to consolidated financial statements.
F- 11
—
—
—
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED STATEMENTS OF EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(in thousands)
Common
Stock
Issued
Additional
Paid-In
Capital
Treasury
Stock
Retained
Earnings
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
Loss
Total Madison
Square Garden
Sports Corp.
Stockholders’ Equity
Nonredeemable
Noncontrolling
Interests
Total
Equity
Redeemable
Noncontrolling
Interests
Balance as of
June 30, 2018 $
249 $ 2,817,873 $(223,662) $
(11,059)
$
(46,918)
$
2,536,483
$
17,552
$2,554,035 $
76,684
Adoption of
ASU No.
2016-01
Adoption of ASC
Topic 606
Net income
(loss)
Other
comprehensive
loss
Comprehensive
income (loss)
Share-based
—
—
—
—
—
—
—
—
—
—
compensation
—
63,420
—
(5,570)
5,570
—
—
—
—
34,205
—
11,427
—
—
34,205
11,427
—
34,205
(7,245)
4,182
(7,299)
—
—
—
—
—
—
(5,575)
(5,575)
—
(5,575)
—
—
—
—
—
5,852
(7,245)
(1,393)
(7,299)
63,420
—
63,420
—
Tax withholding
associated with
shares issued
for equity-
based
compensation
Common stock
issued under
stock incentive
plans
Distributions to
noncontrolling
interest holders
Noncontrolling
interests from
acquisition
Contribution of
joint venture
interests
Balance as of
—
(19,525)
—
—
—
(19,525)
—
(19,525)
—
(15,872)
15,872
—
—
—
—
—
—
—
—
—
—
—
—
—
(428)
(428)
(1,758)
—
—
—
—
—
—
8,446
8,446
—
65
—
—
—
65
(65)
—
—
—
June 30, 2019 $
249 $ 2,845,961 $(207,790) $
29,003
$
(46,923)
$
2,620,500
$
18,260
$2,638,760 $
67,627
See accompanying notes to consolidated financial statements.
F- 12
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED STATEMENTS OF EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(in thousands)
Common
Stock
Issued
Additional
Paid-In
Capital
Treasury
Stock
Retained
Earnings
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
Loss
Total Madison
Square Garden
Sports Corp.
Stockholders’ Equity
Nonredeemable
Noncontrolling
Interests
Total
Equity
Redeemable
Noncontrolling
Interests
Balance as of
June 30, 2019 $
249 $ 2,845,961 $(207,790) $
29,003
$
(46,923)
$
2,620,500
$
18,260
$2,638,760 $
—
—
—
(182,388)
—
(182,388)
(2,462)
(184,850)
67,627
(24,013)
Net loss
Other
comprehensive
loss
Comprehensive
loss
Share-based
compensation
Tax withholding
associated with
shares issued
for equity-
based
compensation
Common stock
issued under
stock incentive
plans
Noncontrolling
interest non-
cash
acquisition
Distributions to
noncontrolling
interest holders
Noncontrolling
interests from
acquisition
Contribution of
joint venture
interests
Redeemable
noncontrolling
interest
adjustment to
redemption
fair value
Distribution of
Madison
Square Garden
Entertainment
Corp.
Balance as of
June 30, 2020
—
—
—
—
—
61,007
—
—
—
—
(4,128)
(4,128)
—
(4,128)
—
—
—
—
—
(186,516)
(2,462)
(188,978)
(24,013)
61,007
—
61,007
—
—
(26,777)
—
—
—
(26,777)
—
(26,777)
—
(22,906)
22,906
—
—
—
—
—
—
—
—
20,262
17,453
—
—
37,715
—
37,715
(37,715)
—
—
—
—
—
—
(535)
(535)
—
(1,424)
—
—
—
(1,424)
1,424
—
—
—
—
—
—
—
3,709
3,709
—
—
—
—
(16,939)
—
—
—
(16,939)
—
(16,939)
16,939
—
(2,853,244)
—
109,780
48,912
(2,694,552)
(16,845)
(2,711,397)
(22,838)
$
249 $
5,940 $(167,431) $
(43,605)
$
(2,139)
$
(206,986)
$
3,551
$ (203,435) $
—
See accompanying notes to consolidated financial statements.
F- 13
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
All amounts included in the following Notes to Consolidated Financial Statements are presented in thousands, except per share data or as otherwise noted.
Note 1. Description of Business and Basis of Presentation
Description of Business
Madison Square Garden Sports Corp., formerly The Madison Square Garden Company (together with its subsidiaries, the “Company” or “MSG Sports”) owns and operates a
portfolio assets featuring some of the most recognized teams in all of sports, including the New York Knickerbockers (“Knicks”) of the National Basketball Association
(“NBA”) and the New York Rangers (“Rangers”) of the National Hockey League (“NHL”). Both the Knicks and the Rangers play their home games in Madison Square
Garden Arena (“The Garden”). The Company’s other professional franchises include two development league teams — the Hartford Wolf Pack of the American Hockey
League (“AHL”) and the Westchester Knicks of the NBA G League (“NBAGL”). These professional sports franchises are collectively referred to herein as the “sports teams.”
During the periods prior to fiscal year 2020, MSG Sports also included the New York Liberty (the “Liberty”) of the Women’s National Basketball Association (the “WNBA”),
which was sold in January 2019. In addition, the Company owns Knicks Gaming, an esports franchise that competes in the NBA 2K League, as well as a controlling interest in
Counter Logic Gaming (“CLG”), a North American esports organization. The Company also operates two professional sports team performance centers — the Madison Square
Garden Training Center in Greenburgh, NY and the CLG Performance Center in Los Angeles, CA. CLG and Knicks Gaming are collectively referred to herein as the “esports
teams,” and together with the sports teams, the “teams.”
The Company operates and reports financial information in one segment. The Company’s decision to report in one segment is based upon its internal organizational structure;
the manner in which its operations are managed; the criteria used by the Company’s Executive Chairman, its Chief Operating Decision Maker (“CODM”), to evaluate segment
performance. The Company’s CODM reviews total company operating results to assess overall performance and allocate resources.
The Company was incorporated on March 4, 2015 as an indirect, wholly-owned subsidiary of MSG Networks Inc. (“MSG Networks”). All the outstanding common stock of
the Company was distributed to MSG Networks shareholders (the “MSGS Distribution”) on September 30, 2015 (the “MSGS Distribution Date”).
On April 17, 2020 (the “MSGE Distribution Date”), the Company distributed all of the outstanding common stock of Madison Square Garden Entertainment Corp. (formerly
MSG Entertainment Spinco, Inc., and referred to herein as “MSG Entertainment”) to its stockholders (the “MSGE Distribution”). MSG Entertainment owns, directly or
indirectly, the entertainment business previously owned and operated by the Company through its MSG Entertainment business segment and the sports booking business
previously owned and operated by the Company through its MSG Sports business segment. In the MSGE Distribution, (a) each holder of the Company’s Class A common
stock received one share of MSG Entertainment Class A common stock, par value $0.01 per share, for every share of the Company’s Class A common stock held of record as
of the close of business, New York City time, on April 13, 2020 (the “Record Date”), and (b) each holder of the Company’s Class B common stock received one share of MSG
Entertainment Class B common stock, par value $0.01 per share, for every share of the Registrant’s Class B common stock held of record as of the close of business, New
York City time, on the Record Date.
Reclassifications
Assets and liabilities related to the MSGE Distribution on the Company’s consolidated balance sheet as of June 30, 2019 have been reclassified as assets and liabilities of
discontinued operations (see Note 3). All assets and liabilities related to discontinued operations are excluded from the footnotes unless otherwise noted. In addition, the
historical results of Madison Square Garden Entertainment Corp. have been reflected in the accompanying statements of operations for the years ended June 30, 2020, 2019
and 2018 as discontinued operations.
Impact of COVID-19
On March 11 and 12, 2020, the NBA and NHL, respectively, suspended their 2019-20 seasons due to COVID-19. At the time the seasons were suspended, the Knicks had 16
games remaining, including eight home games, and the Rangers had 12 games remaining, including five home games. On May 26, 2020, the NHL announced return-to-play
plans for 24 teams which began August 1, 2020. The Rangers were among the teams that returned to play in a 24-team tournament. On June 4, 2020, the NBA announced plans
to resume play on July 30, 2020 with 22 teams. The Knicks were not among the teams that returned to competition. These disruptions have materially impacted the Company’s
revenues and the Company is recognizing materially less revenues across a number of areas. Those areas include: ticket sales; media rights fees; the Company’s share of suite
licenses; sponsorships; signage and in-venue advertising at The Garden; and food, beverage and merchandise sales for home games played at The Garden. The Company will
not earn certain of these revenues until the Knicks and the Rangers again play
F- 14
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
home games at The Garden with fans in attendance. In addition, as a result of government-mandated assembly limitations and closures, no events are currently permitted to be
held at The Garden where the Knicks and Rangers play their home games, and some or all of these mandated restrictions may remain in effect even after the NBA and/or NHL
resume their games.
While the Company currently has the ability to reduce certain operating expenses as a result of the disruptions caused by COVID-19, including (i) rent payments to MSG
Entertainment under the Arena License Agreements while The Garden remains closed, (ii) NBA league assessments and day-of-game expenses for the Knicks and Rangers
games, (iii) reduction in headcount and a companywide hiring freeze and (iv) certain other selling, general and administrative and discretionary expenses, those expense
reduction opportunities will not fully offset revenue losses.
The Knicks and Rangers are not currently required to pay license fees to MSG Entertainment under the Arena License Agreements while The Garden is closed due to the
government mandated suspension of events as a result of COVID-19. If The Garden reopens without capacity limitations, future monthly rent payments due under the Arena
License Agreements will be payable by the Knicks and the Rangers, even if the NBA or NHL seasons do not resume simultaneously or at all. If the Knicks or Rangers play
games at The Garden subject to government mandated capacity constraints due to COVID-19, the applicable rent for such periods will be reduced by up to 80% depending on
the size of the capacity constraint.
The Company believes, however, that it has sufficient liquidity, including approximately $78,000 in unrestricted cash and cash equivalents as of June 30, 2020, along with
available borrowing capacity under existing credit facilities, to fund its operations and repay its outstanding debt that becomes due over the next 12 months. The Company
expects to refinance the Knicks Revolving Credit Facility, as defined in Note 13, (which is currently due on September 30, 2021) and the Rangers Revolving Credit Facility, as
defined in Note 13 (which is currently due on January 25, 2022) prior to the maturity thereof. If we were not able to do so, $350,000 of indebtedness outstanding as of June 30,
2020 (plus any amount borrowed under the DDTL Facilities, as define in Note 13) will be due during fiscal year 2022.
Additionally, as a result of operating disruptions due to COVID-19, the Company’s projected cash flows were directly impacted. As a result of this disruption along with the
macroeconomic industry and market conditions, the Company performed impairment test of goodwill identifiable indefinite-lived intangible assets and determined that there
were no impairments identified. However, the duration and impact of the COVID-19 pandemic may result in future impairment charges that management will evaluate as facts
and circumstances evolve through time.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation
The Company reports on a fiscal year basis ending on June 30th. In these consolidated financial statements, the years ended on June 30, 2020, 2019, and 2018 are referred to as
“fiscal year 2020”, “fiscal year 2019”, and “fiscal year 2018”, respectively. The consolidated financial statements of the Company include the accounts of Madison Square
Garden Sports Corp. and its subsidiaries. For consolidated subsidiaries where the Company’s ownership is less than 100%, the relevant amounts attributable to investors other
than the Company are reflected under “Nonredeemable noncontrolling interests,” “Net income (loss) attributable to nonredeemable noncontrolling interests” and
“Comprehensive income (loss) attributable to nonredeemable noncontrolling interests” on the accompanying consolidated balance sheets, consolidated statements of operations
and consolidated statements of comprehensive income (loss), respectively. All significant intracompany transactions and accounts within the Company’s consolidated financial
statements have been eliminated.
Use of Estimates
The preparation of the accompanying financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and
assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and
liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable, goodwill, intangible assets, other long-lived assets,
deferred tax valuation allowance, tax accruals and other liabilities. In addition, estimates are used in revenue recognition, revenue sharing expense (net of escrow), luxury tax
expense, income tax expense, performance and share-based compensation, depreciation and amortization, litigation matters and other matters, as well as in the valuation of
contingent consideration and noncontrolling interests resulting from business combination transactions. Management believes its use of estimates in the financial statements to
be reasonable.
F- 15
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the general economic environment and actions it may take in
the future. The Company adjusts such estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and
cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time and as such these estimates may ultimately differ
from actual results. Changes in estimates resulting from weakness in the economic environment or other factors beyond the Company’s control could be material and would be
reflected in the Company’s financial statements in future periods.
Revenue Recognition
See Note 4 for details of accounting policies related to revenue recognition and other disclosures required under Accounting Standards Codification (“ASC”) Topic 606. The
Company adopted ASC Topic 606 on July 1, 2018, using the modified retrospective method for all contracts not completed as of the date of adoption.
Direct Operating Expenses
After the MSGE Distribution Date, Direct operating expenses include compensation expense for the Company’s professional sports teams’ players and certain other team
personnel, as well as NBA luxury tax, if applicable, NBA and NHL revenue sharing (net of escrow) and league assessments for the Company, event costs related to the
presentation and production of the Company’s sporting events and other operating expenses, including expenses related to the Arena License Agreements which require the
Company to pay arena license fees to MSG Entertainment in exchange for the right to use The Garden for games of the Knicks and Rangers for a 35-year term.
Player Costs and Other Team Personnel Transactions, NBA Luxury Tax, NBA and NHL Escrow System/Revenue Sharing, League Assessments, and Arena License Expenses
Player Costs and Other Team Personnel Transactions
Costs incurred to acquire player contracts, including signing bonuses, are deferred and amortized over the applicable NBA or NHL regular season on a straight-line basis over
the fixed contract period of the respective player. The NBA and NHL seasons are typically from mid-October through mid-April and October through mid-April, respectively.
Annual contractual player salaries are expensed over the applicable NBA, NHL or WNBA regular season typically on a straight-line basis. In certain player contracts the
annual contractual salary amounts (including any applicable signing bonuses) may fluctuate such that expensing the salary for the entire fixed contract period on a straight-line
basis over each regular season more appropriately reflects the economic benefit of the services provided.
In instances where a player sustains what is deemed to be a season-ending or career-ending injury, a provision is recorded, when that determination can be reasonably made,
for the remainder of the player’s seasonal or contractual salary and related costs, together with any associated NBA luxury tax, net of any anticipated insurance recoveries.
When players are traded, waived or contracts are terminated, any remaining unamortized signing bonuses and prepaid salaries are expensed to current operations. Amounts due
to these individuals are generally paid over their remaining contract terms. Team personnel contract termination costs are recognized in the period in which those events occur.
See Note 6 for further discussion of significant team personnel transactions.
The NBA and NHL each have collective bargaining agreements (each a “CBA”) with the respective league’s players association, to which the Company is subject. The NBA
CBA expires after the 2023-24 season (although the NBA and the National Basketball Players Association (“NBPA”) each have the right to terminate the CBA following the
2022-23 season). In addition, the NBA and the NBPA currently have the right to terminate the CBA through October 15, 2020 (unless extended). The current NHL CBA was
set to expire on September 15, 2022, but the NHL and NHL Players’ Association (“NHLPA”) have recently agreed on terms by which the CBA will be extended through and
including September 15, 2026 (with the possibility of an additional one year extension in certain circumstances). See Note 21 for summary of the principal aspects of the new
NHL CBA and revenue sharing plan.
The NBA CBA contains a salary floor (i.e., a floor on each team’s aggregate player salaries with a requirement that the team pay any deficiency to the players on its roster) and
a “soft” salary cap (i.e., a cap on each team’s aggregate player salaries but with certain exceptions that enable teams to pay more, sometimes substantially more, than the cap).
The NHL CBA provides for a salary floor (i.e., a floor on each team’s aggregate player salaries) and a “hard” salary cap (i.e., teams may not exceed a stated maximum, which
has been adjusted each season thereafter based upon league-wide revenues).
F- 16
Table of Contents
NBA Luxury Tax
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Amounts in this paragraph are in thousands, except for luxury tax rates.
The NBA CBA generally provides for a luxury tax that is applicable to all teams with aggregate player salaries exceeding a threshold that is set prior to each season based upon
projected league-wide revenues (as defined under the CBA). The luxury tax rates for teams with aggregate player salaries above such threshold start at $1.50 for each $1.00 of
team salary above the threshold up to $5,000 and scale up to $3.25 for each $1.00 of team salary that is from $15,000 to $20,000 over the threshold, and an additional tax rate
increment of $0.50 applies for each additional $5,000 (or part thereof) of team salary in excess of $20,000 over the threshold. In addition, for teams that are taxpayers in at least
three of four previous seasons, the above tax rates are increased by $1.00 for each increment. Fifty percent of the aggregate luxury tax payments is a funding source for the
revenue sharing plan and the remaining 50% of such payments is distributed in equal shares to non-taxpaying teams. The Company recognizes the estimated amount associated
with luxury tax expense or the amount it expects to receive as a non-tax paying team, if applicable, on a straight-line basis over the NBA regular season as a component of
direct operating expenses.
NBA and NHL Escrow System/Revenue Sharing
The NBA CBA also provides that players collectively receive a designated percentage of league-wide revenues (net of certain direct expenses) as compensation (approximately
51%), and the teams retain the remainder. The percentage of league-wide revenues paid as compensation and retained by the teams does not apply evenly across all teams and
accordingly the Company may pay its players a higher or lower percentage of the Knicks’ revenues than other NBA teams. Throughout each season, NBA teams withhold 10%
of each player’s salary and contribute the withheld amounts to an escrow account. If the league’s aggregate player compensation exceeds the designated percentage of league-
wide revenues, some or all of such escrowed amounts are distributed equally to all NBA teams. In the event that the league’s aggregate player compensation is below the
designated percentage of league-wide revenues, the teams will remit the shortfall to the NBPA for distribution to the players.
The NBA also has a revenue sharing plan that generally requires the distribution of a pool of funds to teams with below-average net revenues (as defined in the plan), subject to
reduction or elimination based on individual team market size and profitability. The plan is funded by a combination of disproportionate contributions from teams with above-
average net revenues, subject to certain profit-based limits (each as defined in the plan); 50% of aggregate league-wide luxury tax proceeds; and collective league sources, if
necessary. Additional amounts may also be distributed on a discretionary basis, funded by assessments on playoff ticket revenues and through collective league sources.
The NHL CBA provides that each season the players receive as player compensation 50% of that season’s league-wide revenues. Because the aggregate amount to be paid to
the players is based upon league-wide revenues and not on a team-by-team basis, the Company may pay its players a higher or lower percentage of the Rangers’ revenues than
other NHL teams pay of their own revenues. In order to implement the salary cap system, NHL teams withhold a portion of each player’s salary and contribute the withheld
amounts to an escrow account. If the league’s aggregate player compensation for a season exceeds the designated percentage (50%) of that season’s league-wide revenues, the
excess is retained by the league. Any such excess funds are distributed to all teams in equal shares. As of July 2020, the NHL CBA limits the amount of deductions to be
withheld from player salaries each year. If annual excess deductions from player salaries are insufficient to limit league-wide player salaries to 50% of that season’s league-
wide revenues, any shortfall will be carried forward to future seasons and remain due from the players to the league.
The NHL CBA provides for a revenue sharing plan which generally requires the distribution of a pool of funds approximating 6.055% of league-wide revenues to certain
qualifying lower-revenue teams. Under the NHL CBA, the pool is funded as follows: (a) 50% from contributions by the top ten revenue earning teams (based on preseason and
regular season revenues) in accordance with a formula; (b) then from payments by teams participating in the playoffs, with each team contributing 35% of its gate receipts for
each home playoff game; and (c) the remainder from centrally-generated NHL sources. The Rangers are consistently among the top ten revenue teams and, accordingly, have
consistently contributed to the top ten revenue teams component of the plan.
The Company recognizes the amount of its estimated revenue sharing expense associated with the preseason and regular season, net of the amount the Company expects to
receive from the escrow, on a straight-line basis over the applicable NBA and NHL seasons as a component of direct operating expenses. In years when the Knicks or Rangers
participate in the playoffs, the Company recognizes its estimate of the playoff revenue sharing contribution in the periods when the playoffs occur.
F- 17
Table of Contents
League Assessments
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
As members of the NBA and NHL, the Knicks and Rangers, respectively, are also subject to annual league assessments. The governing bodies of each league determine the
amount of each season’s league assessments that are required from each member team. The Company recognizes its teams’ estimated league assessments on a straight-line
basis over the applicable NBA or NHL season.
Arena License Expenses
The Knicks and the Rangers play their home games at The Garden pursuant to the Arena License Agreements with MSG Entertainment, which owns and operates The Garden.
The Arena License Agreements are viewed as a continuation of an existing pre-spin relationship where the Knicks and Rangers used The Garden through an inter-company
cost-sharing arrangement. Prior to the MSGE Distribution, the Company allocated certain costs to the MSG Sports business segment, and attributed direct costs (See Note 3).
Generally, the financial statements reflect the monthly payments made for the Arena License Agreements throughout the contract year in equal installments, and straight-line
rent expense recorded by each team equally over the home game days as each takes place. In the event a team were to qualify for the playoffs in a given season, a prospective
adjustment may be recorded to adjust for the additional use days within that season, while the total expense for the team’s season would remain the same. However, the teams
are not required to pay the license fee during the period in which The Garden is unavailable for home games due to a force majeure event, and the teams have not made any
payments or incurred any arena license expense for the year ended June 30, 2020. See Note 9 for more information on the accounting for leases.
Advertising Expenses
Advertising costs are typically charged to expense when incurred, Total advertising costs classified in direct operating and selling, general and administrative expenses were
$3,064, $4,381 and $1,516 for the years ended June 30, 2020, 2019 and 2018, respectively.
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC Topic 740”). The Company’s provision for income taxes is based on
current period income, changes in deferred tax assets and liabilities and changes in estimates with regard to uncertain tax positions. Deferred tax assets are subject to an
ongoing assessment of realizability. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the
deferred tax asset will not be realized. The Company’s ability to realize its deferred tax assets depends upon the generation of sufficient future taxable income to allow for the
realization of its deductible temporary differences. If such estimates and related assumptions change in the future, the Company may be required to record valuation allowances
against its deferred tax assets, resulting in additional income tax expense in the Company’s consolidated statements of operations.
Interest and penalties, if any, associated with uncertain tax positions are included in income tax expense.
Share-based Compensation
The Company measures the cost of employee services received in exchange for an award of equity-based instruments based on the grant date fair value of the award. Share-
based compensation cost is recognized in earnings over the period during which an employee is required to provide service in exchange for the award, except for restricted
stock units granted to non-employee directors which, unless otherwise provided under the applicable award agreement, are fully vested, and are expensed at the grant date. The
Company accounts for forfeitures as they occur.
In addition, for the Company’s stock option awards, the Company applies the fair value recognition provisions of ASC Topic 718 “Compensation — Stock Compensation”.
ASC Topic 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The Company determines the
fair value as of the grant date. For awards with graded vesting conditions, the values of the awards are determined by valuing all vesting tranches in the aggregate as one award
using an average expected term.
The Company determines its assumptions for option-pricing models in accordance with ASC Topic 718 and SEC Staff Accounting Bulletin (“SAB”) No. 107, “Share-Based
Payment” based on the following:
•
The expected term of stock options is estimated using the simplified method.
F- 18
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
•
•
The expected risk-free interest rate is based on the U.S. Treasury interest rate which term is consistent with the expected term of the stock options.
The expected volatility is based on the historical volatility of the Company’s stock price.
In December 2007, the SEC staff issued SAB No. 110, “Certain Assumptions Used In Valuation Methods — Expected Term”. SAB No. 110 allows companies to continue to
use the simplified method, as defined in SAB No. 107, to estimate the expected term of stock options under certain circumstances. The simplified method for estimating
expected term uses the mid-point between the vesting term and the contractual term of the stock option. The Company has analyzed the circumstances in which the use of the
simplified method is allowed. The Company has opted to use the simplified method for stock options the Company granted in fiscal years 2019 and 2018 because management
believes that the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. See Note 15 for more
information regarding the Company’s application of the simplified method for stock options the Company granted in fiscal year 2019.
Earnings (Loss) Per Common Share
Basic earnings (loss) per common share (“EPS”) attributable to the Company’s common stockholders is based upon net income (loss) attributable to the Company’s common
stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the effect of the assumed vesting of restricted
stock units and exercise of stock options (see Note 15) only in the periods in which such effect would have been dilutive. For the periods when a net loss is reported, the
computation of diluted EPS equals the basic EPS calculation since common stock equivalents were antidilutive due to losses from continuing operations. Holders of Class A
Common Stock and Class B Common Stock are entitled to receive dividends equally on a per-share basis if and when such dividends are declared.
Cash and Cash Equivalents
The Company considers the balance of its investment in funds that substantially hold highly liquid securities that mature within three months or less from the date the fund
purchases these securities to be cash equivalents. The carrying amount of cash and cash equivalents either approximates fair value due to the short-term maturity of these
instruments or is at fair value. Checks outstanding in excess of related book balances are included in accounts payable in the accompanying consolidated balance sheets. The
Company presents the change in these book cash overdrafts as cash flows from operating activities.
Restricted Cash
The Company’s restricted cash includes cash deposited in escrow accounts. Cash is required to be withheld from player salaries and deposited in an escrow account which is in
the name of the Company pursuant to the NHL CBA. That escrow account will be distributed subsequent to the end of the season to the players and NHL teams based on the
provisions of the NHL CBA. The carrying amount of restricted cash approximates fair value due to the short-term maturity of these instruments. Changes in restricted cash are
reflected on the accompanying combined statement of cash flows in accordance with ASU No. 2016-18, Statement of Cash Flows (Topic 230), which is included with cash and
cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the Company’s consolidated and combined statements of cash flows.
Accounts Receivable
Accounts receivable is recorded at net realizable value. The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables. The
allowance for doubtful accounts is estimated based on the Company’s analysis of receivables aging, specific identification of certain receivables that are at risk of not being
paid, past collection experience and other factors. The Company’s allowance for doubtful accounts was $180 and $0 as of June 30, 2020 and 2019, respectively.
Long-Lived and Indefinite-Lived Assets
The Company’s long-lived and indefinite-lived assets consist of property and equipment, right-of-use assets, goodwill, indefinite-lived intangible assets and amortizable
intangible assets.
Property and equipment is stated at cost. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets or, with respect to leasehold
improvements, amortized over the shorter of the lease term or the asset’s estimated useful life. The useful lives of the Company’s long-lived assets are based on estimates of
the period over which the Company expects the assets to be of economic benefit to the Company. In estimating the useful lives, the Company considers factors such as, but
F- 19
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
not limited to, risk of obsolescence, anticipated use, plans of the Company, and applicable laws and permit requirements.
Identifiable intangible assets with finite useful lives are amortized on a straight-line basis over their respective estimated useful lives. Goodwill and identifiable intangible
assets that have indefinite useful lives are not amortized.
Impairment of Long-Lived and Indefinite-Lived Assets
In assessing the recoverability of the Company’s long-lived and indefinite-lived assets, the Company must make estimates and assumptions regarding future cash flows and
other factors to determine the fair value of the respective assets. These estimates and assumptions could have a significant impact on whether an impairment charge is
recognized as well as the magnitude of any such charge. Fair value estimates are made at a specific point in time, based on relevant information. These estimates are subjective
in nature and involve significant uncertainties and judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the
estimates. If these estimates or material related assumptions change in the future, the Company may be required to record impairment charges related to its long-lived and/or
indefinite-lived assets.
Goodwill is tested annually for impairment as of August 31st and at any time upon the occurrence of certain events or changes in circumstances. The Company has the option to
perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If the Company can support the conclusion that it is not more likely
than not that the fair value of a reporting unit is less than its carrying amount, the Company would not need to perform a quantitative impairment test for that reporting unit. If
the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, the first step of the goodwill impairment test is used to
identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company generally determines the fair value of
a reporting unit using an income approach, such as the discounted cash flow method, in instances when it does not perform the qualitative assessment of goodwill. Subsequent
to the adoption of ASU No. 2017-04 in the third quarter of fiscal year 2020, the amount of an impairment loss is measured as the amount by which a reporting unit’s carrying
value exceeds its fair value determined in step one, not to exceed the carrying amount of goodwill. Prior to the adoption of ASU No. 2017-04, if the carrying amount of a
reporting unit exceeded its fair value, the second step of the goodwill impairment test was performed to measure the amount of impairment loss, if any. The second step of the
goodwill impairment test compared the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting
unit’s goodwill exceeded the implied fair value of that goodwill, an impairment loss was recognized in an amount equal to that excess. The implied fair value of goodwill was
determined in the same manner as the amount of goodwill that would be recognized in a business combination.
The Company performs its goodwill impairment test at the reporting unit level, which is the same as or one level below the operating segment level. Subsequent to the MSGE
Distribution Date, the Company has one operating and reportable segment and one reporting unit for goodwill impairment testing purposes.
Identifiable indefinite-lived intangible assets are tested annually for impairment as of August 31st and at any time upon the occurrence of certain events or substantive changes
in circumstances. The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. In the qualitative
assessment, the Company must evaluate the totality of qualitative factors, including any recent fair value measurements, that impact whether an indefinite-lived intangible asset
other than goodwill has a carrying amount that more likely than not exceeds its fair value. The Company must proceed to conducting a quantitative analysis if the Company (i)
determines that such an impairment is more likely than not to exist, or (ii) foregoes the qualitative assessment entirely. Under the quantitative assessment, the impairment test
for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the
intangible asset exceeds its fair value, then an impairment loss is recognized in an amount equal to that excess. The Company generally determines the fair value of an
indefinite-lived intangible asset using an income approach, such as the relief from royalty method, in instances when it does not perform the qualitative assessment of the
intangible asset.
For other long-lived assets, including right-of-use lease assets and intangible assets that are amortized, the Company evaluates assets for recoverability when there is an
indication of potential impairment. If the undiscounted cash flows from a group of assets being evaluated is less than the carrying value of that group of assets, the fair value of
the asset group is determined and the carrying value of the asset group is written down to fair value. The Company generally determines the fair value of a finite-lived
intangible asset using an income approach, such as the discounted cash flow method.
As a result of operating disruptions due to COVID-19, the Company’s projected cash flows were directly impacted. This disruption along with the macroeconomic industry and
market conditions, resulted in the evaluation of whether there was a “triggering event” as of June 30, 2020. Based on the assessment, management determined that it was not
more likely than not
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MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
that an impairment exists and there was no goodwill or intangible asset balance that was impaired as of June 30, 2020. However, the duration and impact of the COVID-19
pandemic may result in additional future impairment charges that management will evaluate as facts and circumstances evolve through time.
Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been
incurred and the amount of the assessment can be reasonably estimated.
Contingent Consideration
The Company’s acquisition agreement for CLG included a contingent earn-out arrangement, which is based on the achievement of future operating targets.
The fair values of these earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. For each transaction,
the Company estimates the fair value of contingent earn-out payments as part of the initial purchase price and records the estimated fair value of contingent consideration that
the Company expects to pay to the former owners as a liability in “Other accrued liabilities” and “Other liabilities” on the consolidated balance sheets.
The Company measures its contingent earn-out liabilities at fair value on a recurring basis using significant unobservable inputs classified within Level III of the fair value
hierarchy, which can result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingent earn-out obligation.
Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will be recorded in earnings as operating
expense.
See Note 11 for more information regarding the fair value of the Company’s contingent consideration liabilities related to the acquisitions.
Defined Benefit Pension Plans and Other Postretirement Benefit Plan
As more fully described in Note 14, prior to the MSGE Distribution the Company had both funded and unfunded defined benefit plans, as well as a contributory postretirement
benefit plan, covering certain full-time employees and retirees. Currently, the Company has unfunded defined benefit plans, as well as a contributory postretirement benefit
plan, covering certain full-time employees and retirees. The expense recognized by the Company is determined using certain assumptions, including the expected long-term
rate of return and discount rates, among others. The Company recognizes the funded status of its defined benefit pension and other postretirement plans (other than
multiemployer plans) as an asset or liability in the consolidated balance sheets and recognizes changes in the funded status in the year in which the changes occur through other
comprehensive income (loss).
Fair Value Measurements
The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect
assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting
entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels:
•
•
•
Level I — Quoted prices for identical instruments in active markets.
Level II — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived
valuations whose inputs are observable or whose significant value drivers are observable.
Level III — Instruments whose significant value drivers are unobservable.
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which supersedes
existing guidance on accounting for leases in ASC Topic 840, Leases. ASU No. 2016-02, among other things, requires (i) lessees to account for leases as either finance leases
or operating leases and generally requires all leases to be recorded on the balance sheet, including those leases classified as operating leases under previous accounting
guidance, through the recognition of right-of-use assets and corresponding lease liabilities and (ii) extensive
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MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
qualitative and quantitative disclosures about leasing activities. The accounting applied by a lessor is largely unchanged from that applied under previous accounting guidance.
In January 2018, the FASB issued ASU No. 2018-01, Leases (Topic 842) - Land Easement Practical Expedient for Transition to Topic 842, which provides a lessee or lessor
the option to not assess at transition whether existing land easements, not currently accounted for as leases under the current lease guidance, should be treated as leases under
the new standard. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842) Targeted
improvements, which provides an additional (and optional) transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to
retained earnings. In December 2018, the FASB issued ASU No. 2018-20, Leases (Topic 842) (“ASU 2018-20”), Narrow-Scope Improvements for Lessors, which provided
clarification for lessors on how to apply the new leases standard when accounting for sales taxes, certain lessor costs, and certain requirements related to variable payments in
contracts. In March 2019, the FASB issued ASU No. 2019-01, Leases (Topic 842) (“ASU 2019-01”), Codification Improvements, which aligned the new leases guidance with
existing guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers. It also clarified an exemption for lessors and lessees from a certain
interim disclosure requirement associated with adopting the board’s new lease accounting standard.
The Company adopted ASU No. 2016-02 on July 1, 2019 and elected to apply the standard as of the beginning of the first quarter of fiscal year 2020 under the modified-
retrospective transition approach. In connection with the adoption of this standard, the Company applied the package of practical expedients intended to ease transition for
existing leases by not requiring the Company to reassess (i) its initial lease classification conclusions for existing or expired leases, (ii) whether an existing or expired contract
is a lease or contains an embedded lease, and (iii) the capitalization of initial direct costs for existing or expired leases. In addition, the Company elected not to use “hindsight”
in accordance with ASC Subtopic 842-10-65-1 (g) in assessing lease terms and impairment of right-of-use (“ROU”) assets for existing or expired leases under the new
standard.
Upon adoption of this standard, the Company recorded initial (i) operating lease ROU assets of $1,270 (ii) current operating lease liabilities of $393, and (iii) long-term
operating lease liabilities of $1,007. The Company did not record any adjustment to retained earnings. As of July 1, 2019, there were no material finance leases for which the
Company was a lessee.
See Note 9 for further details on disclosure required under ASC Topic 842.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment. ASU No. 2017-04
removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting
unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The Company adopted this standard in the third quarter of fiscal year 2020 and
applied it prospectively, beginning with the interim goodwill impairment test performed during the quarter ended March 31, 2020. See Note 10 for further details.
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses. ASU No. 2016-13 replaces the incurred loss impairment methodology in current U.S.
GAAP with a methodology that will require the reflection of expected credit losses and will also require consideration of a broader range of reasonable and supportable
information to determine credit loss estimates. In May 2019, the FASB issued ASU No. 2019-05, Targeted Transition Relief, which amends ASC Topic 326 to provide an
option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. In November 2019, FASB issued ASU No. 2019-11 to provide
clarification guidance in a number of areas, including: (i) expected recoveries for purchased financial assets with credit deterioration, (ii) transition relief for troubled debt
restructuring, (iii) disclosures related to accrued interest receivables, and (iv) financial assets secured by collateral maintenance provisions. For most financial instruments, the
standard will require the use of a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which will generally result in the
earlier recognition of credit losses on financial instruments. In February 2020, the FASB issued ASU No. 2020-02, Financial Instruments - Credit Losses and Leases, which
includes amendments pursuant to SEC Staff Accounting Bulletin No. 119. This standard will be effective for the Company beginning in the first quarter of fiscal year 2021.
The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value
Measurement as part of the FASB’s broader disclosure framework project. ASU No. 2018-13 removes, modifies and adds certain disclosures providing greater focus on
requirements that clearly communicate the most important information to the users of the financial statements with respect to fair value measurements. The standard is
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MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
effective for the Company beginning in the first quarter of fiscal year 2021, with early adoption permitted. Most of the disclosure requirements in ASU No. 2018-13 would
need to be applied on a retrospective basis except for the guidance related to (i) unrealized gains and loss included in other comprehensive income, (ii) disclosure related to
range and weighted average Level 3 unobservable inputs, and (iii) narrative disclosure requirements on measurement uncertainty, which are required to be applied on a
prospective basis. The adoption of this standard, which relates to disclosure, is not expected to have a material impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework-Changes
to the Disclosure Requirements for Defined Benefit Plans. ASU No. 2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required
disclosures and adds additional disclosures. The standard will be effective for the Company in the fourth quarter of fiscal year 2021, with early adoption permitted. The
amendments in ASU No. 2018-14 are required to be applied retrospectively. The adoption of this standard, which relates to disclosure, is not expected to have a material
impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation
Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a
hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance
also specifies that the balance sheet, income statement, and statement of cash flows presentation of capitalized implementation costs and the related amortization should align
with the presentation of the hosting (service) element of the arrangement. The standard is effective for the Company in the first quarter of fiscal year 2021. Entities have the
option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively. The adoption of this standard is not expected to
have a material impact on the Company’s consolidated financial statements. However, to the extent future costs incurred in a cloud computing arrangement are capitalizable,
the corresponding amortization will be included in “Direct Operating expenses” or “Selling, General and administrative expenses” in the consolidated statements of operations,
rather than “Depreciation and amortization.”
In November 2018, the FASB issued ASU No. 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities. ASU No. 2018-17 amends the
variable interest entities (“VIE”) guidance to align the evaluation of a decision maker’s or service provider’s fee in assessing a variable interest with the guidance in the
primary beneficiary test. Specifically, indirect interests held by a related party that is under common control will now be considered on a proportionate basis, rather than in
their entirety, when assessing whether the fee qualifies as a variable interest. The proportionate basis approach is consistent with the treatment of indirect interests held by a
related party under common control when evaluating the primary beneficiary of a VIE. This effectively means that when a decision maker or service provider has an interest in
a related party, regardless of whether they are under common control, it will consider that related party’s interest in a VIE on a proportionate basis throughout the VIE model
for both the assessment of a variable interest and the determination of a primary beneficiary. The standard will be effective for the Company in the first quarter of fiscal year
2021. The amendments in ASU No. 2018-17 are required to be applied retrospectively. The adoption of this standard is not expected to have a material impact on the
Company’s consolidated financial statements.
In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and
Topic 825 - Financial Instruments. This ASU provides narrow-scope amendments to help apply these recent standards. The transition requirements and effective date of this
ASU will be effective for the Company in the first quarter of fiscal year 2021. The Company is currently evaluating the impact this standard will have on its consolidated
financial statements.
In November 2019, the FASB issued ASU No. 2019-08, Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606):
Codification Improvements - Share-Based Consideration Payable to a Customer. This ASU requires that share-based payment awards issued to a customer in connection with
a revenue arrangement be recorded as a reduction of the transaction price in revenue. The amount recorded as a reduction of the transaction price is measured using the grant-
date fair value of the award and is classified in accordance with ASC Topic 718. Changes in the measurement of the share-based payments after the grant date that are due to
the form of the consideration are not included in the transaction price and are recorded elsewhere in the statement of operations. The award is measured and classified under
ASC Topic 718 for its entire life, unless the award is modified after it vests and the grantee is no longer a customer. The new guidance is effective for the Company in the first
quarter of fiscal year 2021. The adoption of this standard is not expected to have an impact on the Company’s consolidated financial statements.
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MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU eliminates certain exceptions to
the general approach in ASC Topic 740 and includes methods of simplification to the existing guidance. The new guidance is effective for the Company in the first quarter of
fiscal year 2022, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives
and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The amendments in this ASU clarify that an entity should consider
observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance
with Topic 321 immediately before applying or upon discontinuing the equity method. In addition, the amendments clarify the accounting for certain forward contracts and
purchased options accounted for under Topic 815. The new guidance is effective for the Company in the first quarter of fiscal year 2021. The adoption of this standard is not
expected to have an impact on the Company’s consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU
provides temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected
market transition from the London Interbank Offered Rate and other interbank offered rates to alternative reference rates. The new guidance was effective upon issuance, and
the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact this standard will have on its
consolidated financial statements.
Note 3. Discontinued Operations
In accordance with ASC 205-20, the Company analyzed the quantitative and qualitative factors relevant to the MSGE Distribution and determined that those held for sale
conditions for discontinued operations presentation were met during the fourth quarter of fiscal year 2020.
As a result of the MSGE Distribution, the results of the entertainment business previously owned and operated by the Company through its MSG Entertainment business
segment and the sports booking business previously owned and operated by the Company through its MSG Sports business segment through the MSGE Distribution Date, as
well as transaction costs related to the MSGE Distribution, have been classified in the accompanying consolidated financial statements as discontinued operations for all
periods presented. No gain or loss was recognized in connection with the MSGE Distribution.
After the MSGE Distribution, the Company and MSG Entertainment have continuing involvement through their common ownership and related party arrangements, including
sharing of certain revenues and expenses. See Note 17 for additional information on the related party arrangements. Prior to the MSGE Distribution, the Company’s results
from discontinued operations reflect a number of inter-company arrangements that dictate the allocable amounts of shared revenue and operating expenses.
The Company’s continuing revenues include event related revenues for ticket sales and a portion of shared suite license fees generated in connection with the games played at
The Garden. Pursuant to the Arena License Agreements, effective as of the MSGE Distribution Date, the Company’s aggregate share of the suite license fees is 67.5%. Thus,
for the periods prior to the MSGE Distribution, the allocated percentage of suite license fees of 32.5% is reported within results of discontinued operations. In addition, the
Company’s multi-year sponsorship agreements may include performance obligations of the Company’s continuing and discontinued operations (see Note 4). Sponsorship
revenues reported within discontinued operations are based on the relative value of performance obligations wholly satisfied by the MSG Entertainment businesses.
Sponsorship agreements also include shared performance obligations that are from indoor venue signage and other shared sponsorship performance obligations. For historically
allocated shared signage and other shared sponsorship revenue, the Company calculated MSG Entertainment’s share to be presented within discontinued operations based on a
combined revenue driver.
The Company’s continuing expenses include event costs related to the presentation and production of the Company’s sporting events and other operating expenses, including
expenses related to the Arena License Agreements which require the Company to pay arena license fees to MSG Entertainment in exchange for the right to use The Garden for
games of the Knicks and the Rangers.
Expenses related to the direct operations of MSG Entertainment, such as The Garden operating expenses related to the presentation and production of events and non-event
related costs of operating the venue, are included in discontinued operations on the basis of an allocation of the direct usage of The Garden by the Company’s continuing and
discontinued
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MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
businesses. Unallocated costs of operational support functions that were provided on a centralized basis and not historically recorded at the business unit level by the Company,
are also included in discontinued operations, based on a measure of direct usage. Direct usage was determined based event specific variable expenses for MSG Entertainment
events and otherwise on the basis of the proportion of combined revenues, headcount or other objective measures for expenses.
Indirect corporate and administrative costs, including amounts that were historically allocated to the MSG Entertainment business segment, do not qualify for discontinued
operations presentation, and these costs are included in continuing operations for the periods prior to the Distribution. Various types of indirect corporate and administrative
expenses that continue after the MSGE Distribution Date and are covered under the Transitions Services Agreement, are included in continuing operations for the period after
the MSGE Distribution. In addition, results from continuing operations, prior to the MSGE Distribution Date, include certain corporate overhead expenses that the Company
did not incur in the period after the completion of the MSGE Distribution, and the Company does not expect to incur such expenses in future periods. Discontinued operations
include all depreciation expense for MSG Entertainment’s venues and other operating assets. Depreciation expense on certain corporate property and equipment that was
transferred to MSG Entertainment in connection with the MSGE Distribution, remained in continuing operations as it did not qualify for discontinued operations reporting.
The table below sets forth, for the periods presented, operating results of discontinued operations. Amounts presented below differ from historically reported results for the
MSG Entertainment business segment due to reclassifications and adjustments made for purposes of discontinued operations.
Revenues
Direct operating expenses
Selling, general and administrative expenses
Depreciation and amortization
Impairment of intangibles, long-lived assets and goodwill
Operating income (loss)
Other income (expense):
Earnings (loss) in equity method investments
Interest income
Interest expense
Miscellaneous expense, net
Income (loss) from discontinued operations before income taxes
Income tax benefit (expense)
Net income (loss) from discontinued operations
Less: Net loss attributable to redeemable noncontrolling interests
Less: Net loss attributable to nonredeemable noncontrolling interests
Years Ended June 30,
2020
2019
2018
$
669,096 $
903,196 $
408,413
206,524
75,822
102,211
(123,874)
(3,901)
16,754
(3,570)
(3,863)
(118,454)
28,232
(90,222)
(24,013)
(120)
557,680
202,079
99,116
—
44,321
7,062
29,014
(15,440)
(6,084)
58,873
(13,968)
44,905
(7,299)
(4,945)
846,680
525,207
178,558
101,679
—
41,236
(7,770)
20,681
(11,923)
(3,360)
38,864
57,480
96,344
(628)
(4,382)
Net income (loss) from discontinued operations attributable to Madison Square Garden Sports
Corp.’s stockholders
$
(66,089) $
57,149 $
101,354
The Company’s collections for ticket sales, sponsorships and suite rentals in advance were recorded as deferred revenue and were recognized for tax purposes upon
consummation of the MSGE Distribution. See Note 18 for further information on the tax impact of accelerating deferred revenue for tax purposes.
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MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The assets and liabilities of MSG Entertainment reflect the agreements between the Company and MSG Entertainment concerning the allocation of shared revenue and expense
activity prior to the MSGE Distribution. The assets and liabilities of MSG Entertainment have been classified in the consolidated balance sheet as of June 30, 2019 as assets
and liabilities of discontinued operations and consist of the following, by major class:
Cash and cash equivalents
Restricted cash
Short-term investments
Accounts receivable, net
Net related party receivables
Prepaid expenses
Other current assets
Total current assets of discontinued operations
Net related party receivables, noncurrent
Property and equipment, net
Amortizable intangible assets, net
Indefinite-lived intangible assets
Goodwill
Other assets
Total assets of discontinued operations
Accounts payable
Net related party payables, current
Current portion of long-term debt, net of deferred financing costs
Accrued liabilities:
Employee related costs
Other accrued liabilities
Collections due to promoters
Deferred revenue
Total current liabilities of discontinued operations
Long-term debt, net of deferred financing costs
Defined benefit and other postretirement obligations
Other employee related costs
Deferred tax liabilities, net
Other liabilities
Total liabilities of discontinued operations
Redeemable noncontrolling interests
Net assets of discontinued operations
June 30,
2019
$
$
$
$
1,082,055
10,010
108,416
81,314
1,722
23,741
36,932
1,344,190
84,560
1,349,122
214,391
64,341
165,558
89,895
3,312,057
23,974
19,078
6,042
60,146
87,714
67,212
183,147
447,313
48,556
34,269
13,741
42,649
59,525
646,053
67,627
2,666,004
The amount of cash and restricted cash distributed as of the MSGE Distribution Date to MSG Entertainment is $816,896 and $10,180, respectively.
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MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
As permitted under ASU 2014-08, the Company has elected not to adjust the consolidated statements of cash flows for the years ended June 30, 2020, 2019 and 2018 to
exclude cash flows attributable to discontinued operations. The table below sets forth, for the periods presented, significant selected financial information related to MSG
Entertainment included in the accompanied consolidated statements of cash flows:
Non-cash items included in net income (loss):
Depreciation and amortization
Impairment of intangibles, long-lived assets and goodwill
Share-based compensation expense
Cash flows from investing activities:
Capital expenditures
Non-cash investing activities:
Non-cash acquisition of additional redeemable noncontrolling interests
Capital expenditures incurred but not yet paid
Note 4. Revenue Recognition
Contracts with Customers
Years Ended June 30,
2020
2019
2018
75,822 $
102,211
8,303
99,116 $
—
10,361
101,679
—
6,969
346,488 $
184,002 $
187,362
37,715 $
104,137
— $
31,928
—
9,376
$
$
$
All revenue recognized in the consolidated statements of operations is considered to be revenue from contracts with customers in accordance with ASC Topic 606. For the year
ended June 30, 2020, the Company did not have any impairment losses on receivables or contract assets arising from contracts with customers.
The Company recognizes revenue when, or as, performance obligations under the terms of a contract are satisfied, which generally occurs when, or as, control of promised
goods or services are transferred to customers. Revenue is measured as the amount that reflects the consideration the Company expects to be entitled to in exchange for those
goods or services (“transaction price”). To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that
should be included in the transaction price utilizing the most likely amount to which the Company expects to be entitled. Variable consideration is included in the transaction
price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration
and the determination of whether to include such estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and
all information that is reasonably available. The Company accounts for taxes collected from customers and remitted to governmental authorities on a net basis and excludes
these amounts from revenues.
In addition, the Company defers certain costs to fulfill the Company’s contracts with customers to the extent such costs relate directly to the contracts, are expected to generate
resources that will be used to satisfy the Company’s performance obligations under the contracts and are expected to be recovered through revenue generated under the
contracts. Contract fulfillment costs are expensed as the Company satisfies the related performance obligations.
Arrangements with Multiple Performance Obligations
The Company has arrangements with multiple performance obligations, such as multi-year sponsorship agreements which may derive revenues within a single arrangement.
Payment terms for such arrangements can vary by contract, but payments are generally due in installments throughout the contractual term. The performance obligations
included in each sponsorship agreement vary and may include various advertising benefits such as, but not limited to, signage, digital advertising, event or property specific
advertising, as well as non-advertising benefits such as suite licenses and event tickets. To the extent the Company’s multi-year arrangements provide for performance
obligations that are consistent over the multi-year contractual term, such performance obligations generally meet the definition of a series as provided for under the accounting
guidance. If performance obligations are concluded to meet the definition of a series, the contractual fees for all years during the contract
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MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
term are aggregated and the related revenue is recognized proportionately as the underlying performance obligations are satisfied.
The timing of revenue recognition for each performance obligation is dependent upon the facts and circumstances surrounding the Company’s satisfaction of its respective
performance obligation. The Company allocates the transaction price for such arrangements to each performance obligation within the arrangement based on the estimated
relative standalone selling price of the performance obligation. The Company’s process for determining its estimated standalone selling prices involves management’s
judgment and considers multiple factors including company specific and market specific factors that may vary depending upon the unique facts and circumstances related to
each performance obligation. Key factors considered by the Company in developing an estimated standalone selling price for its performance obligations include, but are not
limited to, prices charged for similar performance obligations, the Company’s ongoing pricing strategy and policies, and consideration of pricing of similar performance
obligations sold in other arrangements with multiple performance obligations.
The Company may incur costs such as commissions to obtain its multi-year sponsorship agreements. The Company assesses such costs for capitalization on a contract by
contract basis. To the extent costs are capitalized, the Company estimates the useful life of the related contract asset which may be the underlying contract term or the estimated
customer life depending on the facts and circumstances surrounding the contract. The contract asset is amortized over the estimated useful life.
Principal versus Agent Revenue Recognition
The Company reports revenue on a gross or net basis based on management’s assessment of whether the Company acts as a principal or agent in the transaction. The
determination of whether the Company acts as a principal or an agent in a transaction is based on an evaluation of whether the Company controls the good or service before
transfer to the customer. When the Company concludes that it controls the good or service before transfer to the customer, the Company is considered a principal in the
transaction and records revenue on a gross basis. When the Company concludes that it does not control the good or service before transfer to the customer but arranges for
another entity to provide the good or service, the Company acts as an agent and records revenue on a net basis in the amount it earns for its agency service.
The Company’s revenue recognition policies that summarize the nature, amount, timing and uncertainty associated with each of the Company’s revenue sources are discussed
further in discussion below.
The Company’s professional sports teams derive event-related revenues principally from ticket sales which are recognized as the related games occur. The Company’s
revenues also include revenue from the license of The Garden’s suites. Suite license arrangements are generally multi-year fixed fee arrangements that include annual fee
increases. Payment terms for suite license arrangements can vary by contract, but payments are generally due in installments prior to each license year. The Company’s
performance obligation under such arrangements is to provide the licensee with access to the suite when events occur at The Garden. Because suite and club licenses cover
both the Knicks and the Rangers games and events that MSG Entertainment presents at The Garden, suite and club rental revenue is shared between us and MSG Entertainment
under Arena License Agreements the Company entered into in connection with the MSGE Distribution. Pursuant to the Arena Licenses Agreements, the Knicks and the
Rangers are entitled to 35% and 32.5%, respectively, of the revenues received by MSG Entertainment in connection with suite and club licenses. The Company accounts for
the performance obligation under these types of arrangements as a series and, as a result, the related suite license fees for all years during the license term are aggregated and
revenue is recognized proportionately over the license period as the Company satisfies the related performance obligation. Progress toward satisfaction of the Company’s suite
license performance obligations is measured as access to the suite is provided to the licensee for each event throughout the contractual term of the license. Due to the NBA and
NHL suspending their season on March 11, and 12, 2020, respectively, suite license holders did not have access to their suites and therefore revenue recognition ceased at this
time.
Event-related revenue also includes food, beverage and merchandise sales which are recognized at the point goods are provided to customers. Subsequent to the MSGE
Distribution Date, pursuant to the Arena License Agreements, the Knicks and the Rangers receive 50% of net profits from the sales of food and beverages during their games at
The Garden. Payment is received at the point of sale and sales tax collected from customers is excluded from revenue.
In addition to event-related revenue, MSG Sports maintains local media rights arrangements which provide for the licensing of team-related programming to MSG Networks.
MSG Sports, pursuant to the terms of the agreements, receives such rights fees in equal monthly installments throughout each license year. The transaction price under these
arrangements is variable in nature as certain credit provisions exist to the extent that the teams’ games are unavailable for broadcast during an individual league season. The
Company estimates the transaction price at the beginning of each fiscal year, which coincides with the annual
F- 28
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
contractual term. In estimating the transaction price, the Company considers the contractually agreed upon license fees as well as qualitative considerations with respect to the
number of games expected to be available for broadcast by MSG Networks over the upcoming year. The resulting transaction price is allocated entirely to the rights provided
for the related contract year and revenue is recognized using an output measure of progress toward satisfaction of the Company’s performance obligations within the contract
year, as the underlying benefits are conveyed to the licensee.
The Company’s professional sports teams also derive revenue from the distribution of league-wide national and international television contracts and other league-wide
revenue sources. The transaction price for each of these revenues is based upon the expected distribution values as communicated by the applicable league. The timing of
revenue recognition is dependent on the nature of the underlying performance obligation, which is generally over time. Receipt of league-wide revenues generally occurs at the
time of communication or according to a specified timeline. On March 11 and 12, 2020, the NBA and NHL, respectively, suspended their 2019-20 seasons due to COVID-19.
At the time the seasons were suspended, the Knicks had 16 games remaining, including eight home games, and the Rangers had 12 games remaining, including five home
games. On May 26, 2020, the NHL announced return-to-play plans for 24 teams which began August 1, 2020. The Rangers were among the teams that returned to play in a 24-
team tournament. On June 4, 2020, the NBA announced plans to resume play on July 30, 2020 with 22 teams. The Knicks were not among the teams that returned to
competition. At this time, league-wide revenues from the 2019-2020 season have not been finalized. As a result, approximately $42,000 of national media rights fees revenues
have not been recognized and are deferred revenue obligations pending the completion of the NBA and NHL seasons.
MSG Sports also earns revenues from the sale of advertising in the form of venue signage and sponsorships, which are not related to any specific event. The Company’s
performance obligations with respect to this advertising are satisfied as the related benefits are delivered over the term of the respective agreements.
Amounts collected in advance of the Company’s satisfaction of its contractual performance obligations are recorded as a contract liability within deferred revenue and are
recognized as the Company satisfies the related performance obligations. Amounts collected in advance of events for which the Company is not the promoter or co-promoter
do not represent contract liabilities and are recorded as collections due to promoters on the balance sheet.
The following table disaggregates the Company’s revenues by type of goods or services in accordance with the required entity-wide disclosure requirements per FASB ASC
Subtopic 280-10-50-38 to 40 and the disaggregation of revenue required disclosures in accordance with ASC Subtopic 606-10-50-5 for the years ended June 30, 2020, 2019
and 2018:
Event-related (a)
Media rights (b)
Sponsorship, signage and suite licenses
League distributions and other
Total revenues from contracts with customers
_________________
Years Ended June 30,
2020
2019
2018
$
235,605 $
283,206 $
190,824
139,414
37,476
239,140
174,405
32,653
$
603,319 $
729,404 $
290,937
229,646
170,749
21,083
712,415
(a) Consists of (i) ticket sales and other ticket-related revenues, and (ii) food, beverage and merchandise sales.
(b) Consists of (i) local media rights fees from MSG Networks, (ii) revenue from the distribution through league-wide national and international television contracts, and (iii)
other local radio rights fees.
F- 29
Table of Contents
Contract Balances
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The timing of revenue recognition, billings and cash collections results in billed receivables, contract assets and contract liabilities on the consolidated balance sheet. The
following table provides information about contract balances from the Company’s contracts with customers as of June 30, 2020 and 2019.
Receivables from contracts with customers, net (a)
Contract assets, current (b)
Deferred revenue, including non-current portion (c)
_________________
June 30,
2020
June 30,
2019
$
7,403 $
4,112
128,362
15,550
441
112,511
(a) Receivables from contracts with customers, which are reported in Accounts receivable, net and Net related party receivables in the Company’s consolidated balance
sheets, represent the Company’s unconditional rights to consideration under its contracts with customers. As of June 30, 2020 and 2019, the Company’s receivables from
contracts with customers above included $0 and $8, respectively, related to various related parties. See Note 17 for further details on these related party arrangements.
(b) Contract assets, which are reported as Other current assets in the Company’s consolidated balance sheets, primarily relate to the Company’s rights to consideration for
goods or services transferred to the customer, for which the Company does not have an unconditional right to bill as of the reporting date. Contract assets are transferred
to accounts receivable once the Company’s right to consideration becomes unconditional.
(c) Deferred revenue primarily relates to the Company’s receipt of consideration from a customer in advance of the Company’s transfer of goods or services to that customer.
Deferred revenue is reduced and the related revenue is recognized once the underlying goods or services are transferred to the customer. Revenue recognized for the year
ended June 30, 2020 relating to the deferred revenue balance as of July 1, 2019 was $101,981.
Transaction Price Allocated to the Remaining Performance Obligations
The following table depicts the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of
June 30, 2020. In developing the estimated revenue, the Company applies the allowable practical expedient and does not disclose information about remaining performance
obligations that have original expected durations of one year or less. Additionally, the Company has elected to exclude variable consideration from its disclosure related to the
remaining performance obligations under its local media rights arrangements with MSG Networks.
Fiscal year ending June 30, 2021
Fiscal year ending June 30, 2022
Fiscal year ending June 30, 2023
Fiscal year ending June 30, 2024
Fiscal year ending June 30, 2025
Thereafter
F- 30
$
$
28,803
65,637
27,044
8,051
7,025
17,554
154,114
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 5. Computation of Earnings (Loss) per Common Share
The following table presents a reconciliation of weighted-average shares used in the calculations of basic and diluted earnings (loss) per common share attributable to the
Company’s stockholders (“EPS”).
Weighted-average shares (denominator):
Weighted-average shares for basic EPS
Dilutive effect of shares issuable under share-based compensation plans
Weighted-average shares for diluted EPS
Weighted-average anti-dilutive shares
Note 6. Team Personnel Transactions
Years Ended June 30,
2020
2019
2018
23,942
—
23,942
—
23,767
133
23,900
368
23,639
207
23,846
28
Direct operating and selling, general and administrative expenses in the accompanying consolidated statements of operations include net provisions for transactions relating to
the Company’s sports teams for (i) waivers/contract termination costs, (ii) player trades and (iii) season-ending injuries (“Team Personnel Transactions”). Team Personnel
Transactions amounted to $33,690, $53,134 and $27,514 for the years ended June 30, 2020, 2019 and 2018, respectively. Team personnel transactions for the year ended
June 30, 2018 are reported net of insurance recoveries of $468.
Note 7. Cash, Cash Equivalent and Restricted Cash
The following table provides a summary of the amounts recorded as cash, cash equivalents and restricted cash.
Captions on the consolidated balance sheets:
Cash and cash equivalents
Restricted cash (a)
Cash, cash equivalents and restricted cash on the consolidated statements of cash
flows
_________________
June 30,
2020
June 30,
2019
June 30,
2018
June 30,
2017
As of
$
77,852 $
12,821
4,317 $
21,519
1,095 $
24,271
931
29,275
$
90,673 $
25,836 $
25,366 $
30,206
(a) See Note 2 for more information regarding the nature of restricted cash.
Note 8. Property and Equipment
As of June 30, 2020 and 2019, property and equipment consisted of the following assets:
Land
Buildings
Equipment
Furniture and fixtures
Leasehold improvements
Construction in progress
Less accumulated depreciation and amortization
June 30,
2020
June 30,
2019
$
5,153 $
5,153
Estimated Useful Lives
53,623
18,086
377
653
66
77,958
(38,361)
$
39,597 $
F- 31
34,770 Up to
45 years
17,631 1 year
329 4 years
to
to
20 years
10 years
646 Shorter of term of lease or life of improvement
6,538
65,067
(33,797)
31,270
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Depreciation and amortization expense on property and equipment for continuing operations was $13,979, $15,112 and $14,526 for the years ended June 30, 2020, 2019 and
2018, respectively, which includes depreciation expense on certain corporate property and equipment that was transferred to MSG Entertainment in connection with the MSGE
Distribution, but which did not qualify for discontinued operations reporting.
Note 9. Leases
The Company’s leases primarily consist of the lease of the Company’s corporate offices under the Sublease Agreement with MSG Entertainment (the “Sublease Agreement”)
for the Company’s principal executive offices at Two Pennsylvania Plaza in New York and the lease of CLG Performance Center. In, addition, the Company accounts for the
rights of use of The Garden pursuant to the Arena License Agreements as leases under the Accounting Standards Codification Topic 842, Leases. The Company determines
whether an arrangement contains a lease at the inception of the arrangement. If a lease is determined to exist, the lease term is assessed based on the date when the underlying
asset is made available for the Company’s use by the lessor. The Company’s assessment of the lease term reflects the non-cancelable term of the lease, inclusive of any rent-
free periods and/or periods covered by early-termination options which the Company is reasonably certain not to exercise, as well as periods covered by renewal options which
the Company is reasonably certain of exercising. The Company also determines lease classification as either operating or finance at lease commencement, which governs the
pattern of expense recognition and the presentation reflected in the consolidated statements of operations over the lease term.
For leases with a term exceeding 12 months, a lease liability is recorded on the Company’s consolidated balance sheet at lease commencement reflecting the present value of
the fixed minimum payment obligations over the lease term. A corresponding ROU asset equal to the initial lease liability is also recorded, adjusted for any prepaid rent and/or
initial direct costs incurred in connection with execution of the lease and reduced by any lease incentives received.
The Company includes fixed payment obligations related to non-lease components in the measurement of ROU assets and lease liabilities, as the Company has elected to
account for lease and non-lease components together as a single lease component. ROU assets associated with finance leases are presented separate from operating leases ROU
assets and are included within Property and equipment, net on the Company’s consolidated balance sheet. For purposes of measuring the present value of the Company’s fixed
payment obligations for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease commencement, as rates implicit in
the underlying leasing arrangements are typically not readily determinable. The Company’s incremental borrowing rate reflects the rate it would pay to borrow on a secured
basis and incorporates the term and economic environment surrounding the associated lease.
For operating leases, fixed lease payments are recognized as lease expense on a straight-line basis over the lease term. For finance leases, the initial ROU asset is depreciated
on a straight-line basis over the lease term, along with recognition of interest expense associated with accretion of the lease liability, which is ultimately reduced by the related
fixed payments. For leases with a term of 12 months or less (“short-term leases”), any fixed lease payments are recognized on a straight-line basis over the lease term and are
not recognized on the consolidated balance sheet. Variable lease costs for both operating and finance leases, if any, are recognized as incurred and such costs are excluded from
lease balances recorded on the consolidated balance sheet.
On April 17, 2020, in connection with the MSGE Distribution, the Company entered into a sublease agreement with MSG Entertainment for the Company’s principal executive
offices at Two Pennsylvania Plaza in New York. The sublease right of use assets and liabilities are recorded on the balance sheet at lease commencement based on the present
value of minimum base rent and other fixed payments over the reasonably certain lease term, which ends April 30, 2024.
In addition, in connection with the MSGE Distribution the Company entered into the Arena License Agreements with MSG Entertainment that end on June 30, 2055 and will
allow the Knicks and the Rangers to continue to play their home games at The Garden. The Arena License Agreements provide for fixed payments to be made from inception
through June 30, 2055 in 12 equal installments during each year of the contractual term. The Garden was not available for use on April 17, 2020 due to the COVID-19
pandemic and local government restrictions on gatherings; however, the licenses were viewed as a continuation of an existing pre-spin relationship where the Knicks and
Rangers used The Garden through an inter-company cost-sharing arrangement and therefore the licenses were viewed to have commenced on April 17, 2020. However, due to
the force majeure clause, the Company is not required to make payments until The Garden is available for use, and on June 30, 2020 the assets and liabilities were remeasured
utilizing the same discount rate as of April 17, 2020, taking into account the unpaid monthly installments during the lease period as a resolution of a lease contingency.
The Knicks and the Rangers are entitled to use The Garden on home game days, which are usually nonconsecutive, for a pre-defined period of time from before and after the
game. In evaluating the Company’s lease cost, the Company considered the
F- 32
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
timing of payments throughout the lease terms and the nonconsecutive periods of use, provided for within each license. While payments are made throughout the contract year
in twelve equal installments under each arrangement, the periods of use only span each of the individual team event days. As such, the Company concluded that the related
straight-line rent expense should be recorded by each team equally over the home game days as each takes place. In the event a team were to qualify for the playoffs in a given
season, a prospective adjustment may be recorded to adjust for the additional use days within that season, while the total expense for the team’s season would remain the same.
There were no events and thus no rent expense was recorded during the period from lease inception as of April 17, 2020 to June 30, 2020.
As of June 30, 2020, the Company’s existing operating leases, which are recorded on the accompanying financial statements, have remaining lease terms ranging from 3
months to 35 years. In certain instances, leases include options to renew, with varying option terms. The exercise of lease renewal, if available under the lease options, is
generally at the Company’s discretion and is considered in the Company’s assessment of the respective lease term. The Company’s lease agreements do not contain material
residual value guarantees or material restrictive covenants.
The following table summarizes the ROU assets and lease liabilities recorded on the Company’s consolidated balance sheet as of June 30, 2020:
Right-of-use assets:
Operating leases
Lease liabilities:
Operating leases, current
Operating leases, noncurrent
Total lease liabilities
Line Item in the Company’s Consolidated Balance Sheet
Right-of-use lease assets
$
718,051
Operating lease liabilities, current
Operating lease liabilities, noncurrent
39,131
679,053
718,184
$
The following table summarizes the activity recorded within the Company’s consolidated statement of operations for the year ended June 30, 2020:
Line Item in the Company’s Consolidated Statement of Operations
Operating lease cost
Direct operating expenses
Operating lease cost
Selling, general and administrative expenses
Short-term lease cost
Direct operating expenses
Total lease cost
Supplemental Information
Year Ended
June 30, 2020
341
593
138
1,072
$
$
For the year ended June 30, 2020, cash paid for amounts included in the measurement of lease liabilities was $877. For the year ended June 30, 2020, the Company had three
ROU assets of $717,115 obtained in exchange for new operating lease liabilities.
The weighted average remaining lease term for operating leases recorded on the accompanying consolidated balance sheet as of June 30, 2020 was 34.5 years. The weighted
average discount rate was 7.13% as of June 30, 2020 and represented the Company’s estimated incremental borrowing rate, assuming a secured borrowing, based on the
remaining lease term at the time of either (i) adoption of the standard or (ii) the period in which the lease term expectation commenced or was modified.
F- 33
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Maturities of operating lease liabilities as of June 30, 2020 are as follows:
Fiscal year ending June 30, 2021
Fiscal year ending June 30, 2022
Fiscal year ending June 30, 2023
Fiscal year ending June 30, 2024
Fiscal year ending June 30, 2025
Thereafter
Total lease payments
Less imputed interest
Total lease liabilities
Note 10. Goodwill and Intangible Assets
$
$
41,865
43,077
44,426
44,888
44,052
2,158,686
2,376,994
(1,658,810)
718,184
During the first quarter of fiscal year 2020, the Company performed its annual impairment test of goodwill and determined that there were no impairments of goodwill
identified for any of its reporting units as of the impairment test date, including the goodwill of the MSG Entertainment and TAO Group reporting units that were transferred to
MSG Entertainment as part of the MSGE Distribution. The Company’s goodwill is $226,955 and $226,955 as of June 30, 2020 and 2019, respectively.
The Company’s indefinite-lived intangible assets as of June 30, 2020 and 2019 are as follows:
Sports franchises
Photographic related rights
June 30,
2020
June 30,
2019
$
$
111,064 $
1,080
112,144 $
111,064
1,080
112,144
During the first quarter of fiscal year 2020, the Company performed its annual impairment test of identifiable indefinite-lived intangible assets and determined that there were
no impairments identified, including Trademarks and a portion of Photographic related rights that were transferred to MSG Entertainment as part of the MSGE Distribution.
As a result of operating disruptions due to COVID-19, the Company’s projected cash flows were directly impacted. This disruption along with the macroeconomic industry and
market conditions, resulted in the evaluation of whether there was a “triggering event”. Based on the assessment, management determined that it was not more likely than not
that an impairment exists and there was no goodwill or intangible asset balance that was impaired as of June 30, 2020.
The Company’s intangible assets subject to amortization are as follows:
June 30, 2020
Trade names
Non-compete agreements
Other intangibles
Estimated Useful Lives
Gross
Accumulated
Amortization
Net
5 years
5 years
3 years to
9.75 years
$
$
2,300 $
2,400
1,200
5,900 $
(1,342)
$
(1,400)
(404)
(3,146)
$
958
1,000
796
2,754
F- 34
Table of Contents
June 30, 2019
Trade names
Season ticket holder relationships
Non-compete agreements
Other intangibles
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Gross
Accumulated
Amortization
Net
$
2,300 $
(882) $
50,032
2,400
3,347
(47,541)
(920)
(2,421)
$
58,079 $
(51,764) $
1,418
2,491
1,480
926
6,315
Season ticket holder relationship and other intangibles were fully amortized as of June 30, 2020, and the gross carrying amount and accumulated amortization were written off.
Amortization expense for intangible assets was $3,561, $4,965, and $6,281 for the years ended June 30, 2020, 2019 and 2018, respectively.
The Company expects its aggregate annual amortization expense for existing intangible assets subject to amortization for each fiscal year from 2021 through 2025 to be as
follows:
Fiscal year ending June 30, 2021
Fiscal year ending June 30, 2022
Fiscal year ending June 30, 2023
Fiscal year ending June 30, 2024
Fiscal year ending June 30, 2025
Note 11. Fair Value Measurements
$
1,059
1,059
195
115
115
The carrying value and fair value of the Company’s financial instruments reported in the accompanying consolidated balance sheets are as follows:
Liabilities
Long-term debt(a)
_________________
June 30, 2020
June 30, 2019
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
$
350,000 $
350,000 $
— $
—
(a) On March 12, 2020, the Company borrowed $200,000 under the New York Knicks, LLC and $150,000 on the New York Rangers, LLC 5-year revolving credit facilities.
The Company’s long-term debt is classified within Level II of the fair value hierarchy as it is valued using quoted indices of similar securities for which the inputs are
readily observable. See Note 13 for more information.
Contingent Consideration Liabilities
In connection with the CLG acquisition on July 28, 2017, the Company may be required to make future payments for deferred and contingent consideration up to a total of
$9,150 based upon the achievement of certain specified objectives during the three years following the transaction as defined under the membership interest purchase
agreement. The Company recorded $6,586 as the initial fair value of deferred and contingent consideration liabilities as part of the preliminary purchase price allocation. The
fair values of these deferred and contingent consideration liabilities were estimated using weighted probabilities of achievement for the possible objective and earn-out events
and adjusted for a discount rate applicable to the deferred and potential cash payouts.
F- 35
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following table provides a reconciliation of the deferred and contingent consideration liabilities in connection with the acquisition discussed above:
Balance as of June 30, 2019
Contingent consideration payment
Change in fair value of contingent consideration (a)
Balance as of June 30, 2020
_________________
$
$
2,139
(200)
(1,603)
336
(a) The change in fair value of contingent consideration was recorded within Selling, general and administrative expenses in the accompanying consolidated statement of
operations for the year ended June 30, 2020.
Note 12. Commitments and Contingencies
Contractual Obligations and Off Balance Sheet Arrangements
The Company has certain future cash payments required under contracts entered into by the Company in the normal course of business and outstanding letters of credit.
As of June 30, 2020, future cash payments required under contracts entered into by the Company in the normal course of business in excess of one year are as follows:
Fiscal year ending June 30, 2021
Fiscal year ending June 30, 2022
Fiscal year ending June 30, 2023
Fiscal year ending June 30, 2024
Fiscal year ending June 30, 2025
Thereafter
_________________
Off-Balance Sheet
Commitments(a)
$
150,672 $
90,257
52,407
41,557
33,516
27,191
$
395,600 $
Contractual
Obligations
reflected on
the Balance
Sheet(b)
53,139 $
15,505
5,034
3,234
3,116
11,712
91,740 $
Total(c)
203,811
105,762
57,441
44,791
36,632
38,903
487,340
(a) Consist principally of the Company’s obligations under employment agreements that the Company has with its professional sports teams’ personnel that are generally
guaranteed regardless of employee injury or termination.
(b) Consist primarily of amounts earned under employment agreements that the Company has with certain of its professional sports teams’ personnel.
(c) Pension obligations have been excluded from the table above as the timing of the future cash payments is uncertain. See Note 14 for information on the future funding
requirements under our pension obligations. In addition, see Note 9 for information on the contractual obligations related to future lease payments, which are reflected on
the consolidated balance sheet as lease liabilities as of June 30, 2020.
In connection with the CLG acquisition, the Company has accrued contingent consideration as part of the purchase price. See Note 11 for further details of the amount recorded
in the accompanying consolidated balance sheet as of June 30, 2020. In addition, see Note 13 for further details of the outstanding balances under the Knicks Revolving Credit
Facility (as defined below) and Rangers Revolving Credit Facility (as defined below).
Legal Matters
The Company is a defendant in various lawsuits. Although the outcome of these lawsuits cannot be predicted with certainty (including the extent of available insurance, if any),
management does not believe that resolution of these lawsuits will have a material adverse effect on the Company.
F- 36
Table of Contents
Note 13. Credit Facilities
Knicks Revolving Credit Facility
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
On September 30, 2016, New York Knicks, LLC (“Knicks LLC”), a wholly owned subsidiary of the Company, entered into a credit agreement (the “Knicks Credit
Agreement”) with a syndicate of lenders providing for a senior secured revolving credit facility of up to $200,000 with a term of five years (the “Knicks Revolving Credit
Facility”) to fund working capital needs and for general corporate purposes. Amounts borrowed may be distributed to the Company except during an event of default.
The Knicks Revolving Credit Facility requires Knicks LLC to comply with a debt service ratio of 1.5:1.0 over a trailing four quarter period. As of June 30, 2020, Knicks LLC
was in compliance with this financial covenant.
The Knicks Revolving Credit Facility will mature and any unused commitments thereunder will expire on September 30, 2021. All borrowings under the Knicks Revolving
Credit Facility are subject to the satisfaction of certain customary conditions. Borrowings bear interest at a floating rate, which at the option of Knicks LLC may be either (i) a
base rate plus a margin ranging from 0.00% to 0.125% per annum or (ii) the London Inter-Bank Offered Rate (“LIBOR”) plus a margin ranging from 1.00% to 1.125% per
annum. Knicks LLC is required to pay a commitment fee ranging from 0.20% to 0.25% per annum in respect of the average daily unused commitments under the Knicks
Revolving Credit Facility. The outstanding balance under the Knicks Revolving Credit Facility was $200,000 as of June 30, 2020 and was recorded as Long-term debt in the
accompanying consolidated balance sheet. The interest rate on the Knicks Revolving Credit Facility as of June 30, 2020 was 1.20%. During the year ended June 30, 2020 the
Company made interest payments of $819.
All obligations under the Knicks Revolving Credit Facility are secured by a first lien security interest in certain of Knicks LLC’s assets, including, but not limited to, (i) the
Knicks LLC’s membership rights in the NBA and (ii) revenues to be paid to the Knicks LLC by the NBA pursuant to certain U.S. national broadcast agreements.
Subject to customary notice and minimum amount conditions, Knicks LLC may voluntarily prepay outstanding loans under the Knicks Revolving Credit Facility at any time,
in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans). Knicks LLC is required to make mandatory
prepayments in certain circumstances, including without limitation if the maximum available amount under the Knicks Revolving Credit Facility is greater than 350% of
qualified revenues.
In addition to the financial covenant described above, the Knicks Credit Agreement and related security agreements contain certain customary representations and warranties,
affirmative covenants and events of default. The Knicks Revolving Credit Facility contains certain restrictions on the ability of Knicks LLC to take certain actions as provided
in (and subject to various exceptions and baskets set forth in) the Knicks Revolving Credit Facility, including the following: (i) incurring additional indebtedness and
contingent liabilities; (ii) creating liens on certain assets; (iii) making restricted payments during the continuance of an event of default under the Knicks Revolving Credit
Facility; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; and (vi) taking certain actions that would invalidate the secured lenders’ liens on any
Knicks LLC’s collateral.
Knicks Unsecured Credit Facility
On September 30, 2016, Knicks LLC entered into an unsecured revolving credit facility with a lender for an initial maximum credit amount of $15,000 and a 364-day term (the
“Knicks Unsecured Credit Facility”). Knicks LLC renewed this facility with the lender on the same terms in successive years and the facility has been renewed for a new term
effective as of September 25, 2020. There was no borrowing under the Knicks Unsecured Credit Facility as of June 30, 2020. This facility does not have financial covenants.
Rangers Revolving Credit Facility
On January 25, 2017, New York Rangers, LLC (“Rangers LLC”), a wholly owned subsidiary of the Company, entered into a credit agreement (the “Rangers Credit
Agreement”) with a syndicate of lenders providing for a senior secured revolving credit facility of up to $150,000 with a term of five years (the “Rangers Revolving Credit
Facility”) to fund working capital needs and for general corporate purposes. Amounts borrowed may be distributed to the Company except during an event of default.
F- 37
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The Rangers Revolving Credit Facility requires Rangers LLC to comply with a debt service ratio of 1.5:1.0 over a trailing four quarter period. As of June 30, 2020, Rangers
LLC was in compliance with this financial covenant.
The Rangers Revolving Credit Facility will mature and any unused commitments thereunder will expire on January 25, 2022. All borrowings under the Rangers Revolving
Credit Facility are subject to the satisfaction of certain customary conditions. Borrowings bear interest at a floating rate, which at the option of Rangers LLC may be either (i) a
base rate plus a margin ranging from 0.125% to 0.50% per annum or (ii) LIBOR plus a margin ranging from 1.125% to 1.50% per annum. Rangers LLC is required to pay a
commitment fee ranging from 0.375% to 0.625% per annum in respect of the average daily unused commitments under the Rangers Revolving Credit Facility. The outstanding
balance under the Rangers Revolving Credit Facility was $150,000 as of June 30, 2020 and was recorded as Long-term debt in the accompanying consolidated balance sheet.
The interest rate on the Rangers Revolving Credit Facility as of June 30, 2020 was 1.580%. During the year ended June 30, 2020 the Company made interest payments of $760.
All obligations under the Rangers Revolving Credit Facility are secured by a first lien security interest in certain of Rangers LLC’s assets, including, but not limited to, (i)
Rangers LLC’s membership rights in the NHL, (ii) revenues to be paid to Rangers LLC by the NHL pursuant to certain U.S. and Canadian national broadcast agreements, and
(iii) revenues to be paid to Rangers LLC pursuant to local media contracts.
Subject to customary notice and minimum amount conditions, Rangers LLC may voluntarily prepay outstanding loans under the Rangers Revolving Credit Facility at any time,
in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans). Rangers LLC is required to make mandatory
prepayments in certain circumstances, including without limitation if qualified revenues are less than 17% of the maximum available amount under the Rangers Revolving
Credit Facility.
In addition to the financial covenant described above, the Rangers Credit Agreement and related security agreements contain certain customary representations and warranties,
affirmative covenants and events of default. The Rangers Revolving Credit Facility contains certain restrictions on the ability of Rangers LLC to take certain actions as
provided in (and subject to various exceptions and baskets set forth in) the Rangers Revolving Credit Facility, including the following: (i) incurring additional indebtedness and
contingent liabilities; (ii) creating liens on certain assets; (iii) making restricted payments during the continuance of an event of default under the Rangers Revolving Credit
Facility; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; and (vi) taking certain actions that would invalidate the secured lenders’ liens on any of
Rangers LLC’s assets securing the obligations under the Rangers Revolving Credit Facility.
Delayed Draw Term Loan Credit Facilities
As an additional source of liquidity for the Company in response to the COVID-19 pandemic, on April 17, 2020, MSG NYR Holdings, LLC and MSG NYK Holdings, LLC,
two indirect wholly-owned subsidiaries of the Company, each entered into a separate delayed draw term loan credit agreement with MSG Entertainment Group, LLC, a
wholly-owned subsidiary of MSG Entertainment, as lender (the “DDTL Lender”). The credit agreement for MSG NYK Holdings, LLC (the “Knicks DDTL Facility
Borrower”) provides for a $110,000 senior unsecured delayed draw term loan facility (the “Knicks DDTL Facility”) and the credit agreement for MSG NYR Holdings, LLC
(the “Rangers DDTL Facility Borrower”) provides for a $90,000 senior unsecured delayed draw term loan facility (the “Rangers DDTL Facility” and, together with the Knicks
DDTL Facility, the “DDTL Facilities”).
The DDTL Facilities will mature and any unused commitments thereunder will expire on October 17, 2021. Borrowings under the DDTL Facilities will bear interest at a
variable rate equal to either, at the election of the applicable borrower, (i) LIBOR plus 2.00% per annum or (ii) a base rate plus 1.00% per annum. Subject to the borrowing
conditions, each of the DDTL Facilities may be drawn in up to four separate borrowings of $10,000 or more. Proceeds of borrowings under the DDTL Facilities will be used
for general corporate purposes.
The availability of each of the DDTL Facilities to the respective borrowers is subject to certain conditions, including (a) the liquidity, including cash on hand and availability
under revolving credit commitments, of the Company, MSG Sports, LLC, the Knicks DDTL Facility Borrower and its subsidiaries and the Rangers DDTL Facility Borrower
and its subsidiaries (other than any liquidity that is restricted by law or contractual obligation from being transferred to the relevant DDTL Facility Borrower or its subsidiaries)
must be (i) less than $50,000 immediately prior to giving effect to any borrowing, and (ii) less than $75,000 immediately after giving effect to any borrowing, and (b) with
respect to the Knicks DDTL Facility, the Knicks DDTL Facility
F- 38
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Borrower and its subsidiaries must have used commercially reasonable efforts to raise additional financing (“New Third-Party Debt”), including additional commitments under
existing revolving facilities, prior to drawing on the Knicks DDTL Facility to the extent permitted by the debt policies of the NBA. In addition, the commitments of the DDTL
Lender to make advances under the Knicks DDTL Facility will be permanently reduced and the Knicks DDTL Facility will be subject to mandatory prepayments in an amount
equal to the net cash proceeds received by the Company, MSG Sports, LLC, the Knicks DDTL Facility Borrower, or the subsidiaries of the Knicks DDTL Facility Borrower
from any New Third-Party Debt.
Pursuant to the NBA debt policies, the NBA has consented (the “NBA Consent Letter”) to the incurrence of the indebtedness under the Knicks DDTL Facility. The NBA
Consent Letter provides that the Knicks DDTL Facility Borrower and its subsidiaries (including the Knicks basketball team) will, among other matters, (i) operate the team in a
first class manner, consistent with the manner in which NBA teams generally are operated, as determined by the NBA Commissioner in his sole discretion, and (ii) maintain
sufficient net working capital and cash reserves to pay expenses, liabilities and obligations of the team in the ordinary course and in a timely fashion. In addition, the Knicks
DDTL Facility Borrower and its subsidiaries (including the Knicks basketball team) have agreed with the NBA to not transfer certain basketball-related assets and to not make
distributions to the Company without first providing the NBA with advance notice and not receiving the objection of the NBA Commissioner.
There was no borrowing under the DDTL Facilities as of June 30, 2020.
Deferred Financing Costs
The following table summarizes deferred financing costs, net of amortization, related to the Knicks Revolving Credit Facility, Knicks Unsecured Credit Facility, and Rangers
Revolving Credit Facility as reported on the accompanying consolidated balance sheet:
Other current assets
Other assets
Note 14. Pension Plans and Other Postretirement Benefit Plan
Defined Benefit Pension Plans and Postretirement Benefit Plans
June 30,
2020
June 30,
2019
$
675 $
264
675
939
Prior to the MSGE Distribution, the Company sponsored a non-contributory, qualified cash balance retirement plan covering its non-union employees (the “Cash Balance
Pension Plan”) and an unfunded non-contributory, non-qualified excess cash balance plan (the “Excess Cash Balance Plan”) covering certain employees who participate in the
underlying qualified plan (collectively, the “Cash Balance Plans”). Since March 1, 2011, the Cash Balance Pension Plan has also included the assets and liabilities of a frozen
(as of December 31, 2007) non-contributory qualified defined benefit pension plan covering non-union employees hired prior to January 1, 2001.
Also, the Company historically sponsored an unfunded non-contributory, non-qualified defined benefit pension plan for the benefit of certain employees who participate in the
underlying qualified plan which was merged into the Cash Balance Pension Plan on March 1, 2011 (the “Excess Plan”). As of December 31, 2007, the Excess Plan was
amended to freeze all benefits earned through December 31, 2007 and to eliminate the ability of participants to earn benefits for future service under these plans.
The Cash Balance Plans were amended to freeze participation and future benefit accruals effective December 31, 2015 for all employees. Therefore, after December 31, 2015,
no employee of the Company who was not already a participant may become a participant in the plans and no further annual pay credits will be made for any future year.
Existing account balances under the plans will continue to be credited with monthly interest in accordance with the terms of the plans.
Prior to the MSGE Distribution the Company sponsored a non-contributory, qualified defined benefit pension plan covering certain of its union employees (the “Union Plan”).
Benefits payable to retirees under the Union Plan are based upon years of Benefit Service (as defined in the Union Plan document).
The Cash Balance Plans, Union Plan, and Excess Plan are collectively referred to as the “MSGE Pension Plans.”
F- 39
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
In addition, the Company also sponsored a contributory welfare plan which provided certain postretirement healthcare benefits to certain employees hired prior to January 1,
2001 who are eligible to commence receipt of early or normal benefits under the Cash Balance Pension Plan and their dependents, as well as certain union employees
(“Postretirement Plan”).
As of the MSGE Distribution Date the Company and MSG Entertainment entered into an employee matters agreement (the “Employee Matters Agreement”) which determined
each company’s obligations after the MSGE Distribution with regard to historical liabilities under the Company’s former pension and postretirement plans. Under the
Employee Matters Agreement, the MSGE Pension Plans and Postretirement Plan were transferred to MSG Entertainment. However, the Company has retained liabilities from
the Excess Cash Balance Plan and Excess Plan that related to its current employees, former employees (other than employees transferred to MSG Entertainment in connection
with the MSGE Distribution) and employees that are employed in a senior executive capacity by both the MSG Sports and MSG Entertainment. Such liabilities were
transferred to the MSG Sports, LLC Excess Cash Balance Plan (the “MSGS Excess Cash Balance Plan”) and MSG Sports, LLC Excess Retirement Plan (the “MSGS Excess
Retirement Plan”), which the Company established in connection with the MSGE Distribution and are collectively referred to the “MSGS Pension Plans”.
The following table summarizes the projected benefit obligations, assets, funded status and the amounts recorded on the Company’s consolidated balance sheets as of June 30,
2020 and 2019, associated with the MSGE Pension Plans, MSGS Pension Plans and Postretirement Plan, based upon actuarial valuations as of those measurement dates.
MSGE Pension Plans & MSGS Pension
Plans
June 30,
Postretirement Plan
June 30,
2020
2019
2020
2019
Change in benefit obligation:
Benefit obligation at beginning of period
$
173,569 $
161,236 $
4,307 $
Service cost
Interest cost
Actuarial loss (gain)
Benefits paid
Plan settlements paid
Other
Transfer due to the MSGE Distribution
Benefit obligation at end of period
Change in plan assets:
Fair value of plan assets at beginning of period
Actual return on plan assets
Employer contributions
Benefits paid
Plan settlements paid
Transfer due to the MSGE Distribution
Fair value of plan assets at end of period
Funded status at end of period
75
4,285
895
(5,315)
(551)
—
(162,901)
10,057
132,965
10,017
7,811
(5,315)
(551)
(144,927)
91
5,895
12,376
(5,686)
(343)
—
—
173,569
115,054
12,372
11,568
(5,686)
(343)
—
—
132,965
44
86
805
(1,025)
—
—
(4,217)
—
—
—
—
—
—
—
—
6,750
57
150
(572)
(565)
—
(1,513)
—
4,307
—
—
—
—
—
—
—
$
(10,057) $
(40,604) $
— $
(4,307)
F- 40
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Amounts recognized in the consolidated balance sheets as of June 30, 2020 and 2019 consist of:
Current liabilities (included in accrued employee related costs) of continuing
operations
Non-current liabilities (included in defined benefit and other postretirement
obligations) of continuing operations
Current liabilities of discontinued operations
Non-current liabilities of discontinued operations
MSGE Pension Plans & MSGS Pension
Plans
June 30,
Postretirement Plan
June 30,
2020
2019
2020
2019
$
$
(3,043) $
(2,667) $
(7,014)
—
—
(7,049)
(581)
(30,307)
(10,057) $
(40,604) $
— $
—
—
—
— $
—
—
(345)
(3,962)
(4,307)
Accumulated other comprehensive loss, before income tax, as of June 30, 2020 and 2019 consists of the following amounts that have not yet been recognized in net periodic
benefit cost:
Actuarial loss
MSGE Pension Plans & MSGS Pension
Plans
June 30,
Postretirement Plan
June 30,
2020
2019
2020
2019
$
$
(2,139) $
(2,139) $
(39,793) $
(39,793) $
— $
— $
(754)
(754)
In connection with the MSGE Distribution, the Company transferred to MSG Entertainment the accumulated other comprehensive income (loss) related to the MSGE Pension
Plans and Postretirement Plan.
The following table presents components of net periodic benefit cost for the MSGE Pension Plans, MSGS Pension Plans and Postretirement Plan included in the accompanying
consolidated statements of operations for the years ended June 30, 2020, 2019 and 2018. Service cost is recognized in direct operating expenses and selling, general and
administrative expenses. All other components of net periodic benefit cost are reported in Miscellaneous income (expense), net.
Service cost
Interest cost
Expected return on plan assets
Recognized actuarial loss
Amortization of unrecognized prior service cost (credit)
Settlement loss recognized (a)
Other
Net periodic benefit cost
_________________
MSGE Pension Plans & MSGS Pension
Plans
Years Ended June 30,
Postretirement Plan
Years Ended June 30,
2020
2019
2018
2020
2019
2018
$
75 $
91 $
85 $
44 $
57 $
4,285
(4,240)
930
—
67
—
5,895
(3,133)
1,281
—
52
—
5,231
(2,634)
1,219
—
87
—
86
—
5
—
—
—
150
—
5
(7)
—
(1,513)
$
1,117 $
4,186 $
3,988 $
135 $
(1,308) $
120
215
—
100
(37)
—
—
398
(a) For the years ended June 30, 2020, 2019 and 2018, lump-sum payments totaling $551, $343 and $506, respectively, were distributed to vested participants of the non-
qualified excess cash balance plan, triggering the recognition of settlement losses in accordance with ASC Topic 715. Due to these pension settlements, the Company was
required to remeasure its pension plan liability as of March 31, 2020, June 30, 2019 and March 31, 2018 for the years ended June 30, 2020, 2019 and 2018, respectively.
Discount rates used for the projected benefit obligation and interest cost were 3.21% and 2.55% as
F- 41
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
of June 30, 2020, respectively, 3.75% and 3.18% as of June 30, 2019, respectively, and 3.53% and 2.16% as of March 31, 2018, respectively. Additionally, settlement
charges of $67, $52 and $87 were recognized in Miscellaneous income (expense), net for the years ended June 30, 2020, 2019 and 2018, respectively.
Amounts presented in the table above include net periodic benefit cost related to continuing operations and discontinued operations as noted in the following table:
Continuing Operations
Discontinued Operations
Total net periodic benefit cost
MSGE Pension Plans & MSGS Pension Plans
Postretirement Plan
Years Ended June 30,
Years Ended June 30,
2020
2019
2018
2020
2019
2018
$
$
395 $
722
434 $
504 $
— $
— $
3,752
3,484
135
(1,308)
1,117 $
4,186 $
3,988 $
135 $
(1,308) $
—
398
398
Other pre-tax changes in plan assets and benefit obligations recognized in other comprehensive income (loss) for the years ended June 30, 2020, 2019 and 2018 are as follows:
Actuarial gain (loss), net
Recognized actuarial loss
Recognized prior service credit
Settlement loss recognized
Transfer due to the MSGE Distribution
MSGE Pension Plans & MSGS Pension Plans
Postretirement Plan
Years Ended June 30,
Years Ended June 30,
2020
2019
2018
2020
2019
2018
$
(321) $
(3,137) $
(1,978) $
— $
572 $
(1,437)
930
—
67
37,049
1,281
1,219
—
52
—
—
87
—
5
—
—
749
754 $
5
(7)
—
—
100
(37)
—
—
570 $
(1,374)
Total recognized in other comprehensive income (loss)
$
37,725 $
(1,804) $
(672) $
The estimated net loss for the MSGS Pension Plans expected to be amortized from accumulated other comprehensive income (loss) and recognized as a component of net
periodic benefit cost over the next fiscal year is $103.
Funded Status
The accumulated benefit obligation for the MSGE Pension Plans aggregated to $173,569 at June 30, 2019. As of June 30, 2019, each of the Pension Plans had accumulated
benefit obligations and projected benefit obligations in excess of plan assets. As a result of the MSGE Distribution, effective the MSGE Distribution Date, the Company
sponsors only unfunded non-contributory pension plans.
F- 42
Table of Contents
Assumptions
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Weighted-average assumptions used to determine benefit obligations (made at the end of the period) as of June 30, 2020 and 2019 are as follows:
MSGE Pension Plans & MSGS Pension
Plans
June 30,
Postretirement Plan
June 30,
2020
2019
2020
2019
Discount rate
Healthcare cost trend rate assumed for next year
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
Year that the rate reaches the ultimate trend rate
2.29%
3.58%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
3.18%
6.75%
5.00%
2027
Weighted-average assumptions used to determine net periodic benefit cost (made at the beginning of the period) for the years ended June 30, 2020, 2019 and 2018 are as
follows:
Discount rate - projected benefit obligation
Discount rate - service cost
Discount rate - interest cost
Expected long-term return on plan assets
Healthcare cost trend rate assumed for next year
Rate to which the cost trend rate is assumed to decline (the ultimate
trend rate)
Year that the rate reaches the ultimate trend rate
MSGE Pension Plans & MSGS Pension Plans
Years Ended June 30,
Postretirement Plan
Years Ended June 30,
2020
2019
2018
2020
2019
2018
3.58%
3.78%
3.10%
5.52%
n/a
n/a
n/a
4.19%
4.25%
3.90%
3.72%
n/a
n/a
n/a
3.81%
3.93%
3.32%
3.46%
n/a
n/a
n/a
3.18%
3.45%
2.84%
n/a
6.75%
5.00%
2027
4.06%
4.25%
3.67%
n/a
7.00%
5.00%
2027
3.54%
3.83%
3.05%
n/a
7.25%
5.00%
2027
The discount rates were determined (based on the expected duration of the benefit payments for the plans) from the Willis Towers Watson U.S. Rate Link: 40-90 Discount Rate
Model as of June 30, 2020 and 2019 to select a rate at which the Company believed the plans’ benefits could be effectively settled. This model was developed by examining
the yields on selected highly rated corporate bonds. The expected long-term return on plan assets is based on a periodic review and modeling of the plans’ asset allocation
structures over a long-term horizon. Expectations of returns for each asset class are the most important of the assumptions used in the review and modeling and are based on
comprehensive reviews of historical data, forward-looking economic outlook, and economic/financial market theory. The expected long-term rate of return was selected from
within the reasonable range of rates determined by (a) historical real returns, net of inflation, for the asset classes covered by the investment policy and (b) projections of
inflation over the long-term period during which benefits are payable to plan participants.
Assumed healthcare cost trend rates are a key assumption used for the amounts reported for the Postretirement Plan. A one percentage point change in assumed healthcare cost
trend rates would have the following effects:
Increase (Decrease) in Total of Service and Interest Cost
Components for the
Increase (Decrease) in Benefit Obligation
at
Years Ended June 30,
June 30,
2020
2019
2018
2020
2019
One percentage point increase
One percentage point decrease
$
12
$
(11)
19
$
(17)
37
(33)
n/a $
n/a
335
(303)
F- 43
Table of Contents
Plan Assets and Investment Policy
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The weighted-average asset allocation of the Pension Plans’ assets at June 30, 2019 was as 81% fixed income securities and 19% cash equivalents. As discussed above, in
connection with the MSGE Distribution, the Company only retained liabilities associated with unfunded and unqualified pension plans. Thus, the MSGS Pension Plans did not
carry any investments as of June 30, 2020.
Prior to the MSGE Distribution, investment allocation decisions had been made by the Company’s Investment and Benefits Committee, which considered investment advice
provided by the Company’s external investment consultant. The investment consultant took into account expected long-term risks, returns, correlation, and other prudent
investment assumptions when recommending asset classes and investment managers to the Company’s Investment and Benefits Committee. The investment consultant also
considered the pension plans’ liabilities when making investment allocation recommendations. The Company’s Investment and Benefits Committee’s decisions were
influenced by asset/liability studies conducted by the external investment consultant who combined actuarial considerations and strategic investment advice. The major
investment categories of the pension plan assets are in cash equivalents and long duration fixed income securities that are marked-to-market on a daily basis. As a result, the
pension plan assets are subjected to interest-rate risk, specifically to a rising interest rate environment, as the majority of the pension plan assets are invested in long duration
fixed income securities. However, the pension plan assets are structured in an asset/liability framework, and consequently, an increase in interest rates would cause a
corresponding decrease to the overall liability of the pension plans, thus creating a hedge against rising interest rates. Additional risks involving the asset/liability framework
include earning insufficient investment returns to cover future pension plan liabilities and imperfect hedging of such liabilities. In addition, a portion of the long duration fixed
income securities portfolio is invested in non-government securities that are subject to credit risk of the issuers who might default on interest and/or principal payments.
Investments at Estimated Fair Value
The cumulative fair values of the individual plan assets at June 30, 2019 by asset class are as follows:
Fixed income securities:
U.S. Treasury Securities
U.S. corporate bonds
Foreign issued corporate bonds
Municipal bonds
Money market accounts
Total investments measured at fair value
Fair Value
Hierarchy
June 30, 2019
I
II
II
II
I
$
$
26,238
68,968
11,436
396
25,927
132,965
Contributions for Qualified Defined Benefit Pension Plans
During the year ended June 30, 2020, the Company contributed $7,000 to the Cash Balance Pension Plan and $260 to the Union Plan. As a result of the MSGE Distribution, the
Company no longer sponsors funded qualified pension plans.
Estimated Future Benefit Payments
The following table presents estimated future fiscal year benefit payments for the MSGS Pension Plans:
Fiscal year ending June 30, 2021
Fiscal year ending June 30, 2022
Fiscal year ending June 30, 2023
Fiscal year ending June 30, 2024
Fiscal year ending June 30, 2025
Fiscal years ending June 30, 2025 – 2029
F- 44
$
3,050
320
300
350
520
2,520
Table of Contents
Defined Contribution Pension Plans
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Prior to the MSGE Distribution, the Company sponsored The Madison Square Garden 401(k) Savings Plan (the “401(k) Plan”), which is a multiple employer plan and the
MSG S&E, LLC Excess Savings Plan (collectively referred to as the “Savings Plans”) and The Madison Square Garden 401(k) Union Plan (the “Union Savings Plan”), which
is also a multiple employer plan. As a result of the MSGE Distribution, the Savings Plans and Union Savings Plan were transferred to MSG Entertainment. However, MSG
Sports employees continue to participate in the 401(k) Plan. In addition, pursuant to the Employee Matters Agreement the Company established MSG Sports LLC Excess
Savings Plan to provide non-qualified retirement benefits to eligible MSG Sports employees and assumed the liabilities associated with MSG Sports employees as of the
MSGE Distribution Date of the MSG S&E, LLC Excess Savings Plan.
Expenses related to the Savings Plans that are included in the accompanying consolidated statements of operations for the years ended June 30, 2020, 2019 and 2018 are as
follows:
Continuing Operations
Discontinued Operations
Total Savings Plan Expenses
Years Ended June 30,
2020
2019
2018
$
$
4,674 $
7,925 $
1,411
2,712
6,085 $
10,637 $
6,248
2,323
8,571
For the years ended June 30, 2020, 2019 and 2018, expenses related to the Union Savings Plan included in the accompanying consolidated statements of operations were $526,
$521 and $533, respectively. These amounts have been classified in the consolidated statements of operations as discontinued operations for all periods presented.
Multiemployer Plans
The Company contributes to a number of multiemployer defined benefit pension plans, multiemployer defined contribution pension plans, and multiemployer health and
welfare plans that provide benefits to retired union-represented employees under the terms of CBAs.
Multiemployer Defined Benefit Pension Plans
The multiemployer defined benefit pension plans to which the Company contributes generally provide for retirement and death benefits for eligible union-represented
employees based on specific eligibility/participant requirements, vesting periods and benefit formulas. The risks to the Company of participating in these multiemployer
defined benefit pension plans are different from single-employer defined benefit pension plans in the following aspects:
•
•
•
Assets contributed to a multiemployer defined benefit pension plan by one employer may be used to provide benefits to employees of other participating employers.
If a participating employer stops contributing to a multiemployer defined benefit pension plan, the unfunded obligations of the plan may be borne by the remaining
participating employers.
If the Company chooses to stop participating in some of these multiemployer defined benefit pension plans, the Company may be required to pay those plans an
amount based on the Company’s proportion of the underfunded status of the plan, referred to as a withdrawal liability. However, cessation of participation in a
multiemployer defined benefit pension plan and subsequent payment of any withdrawal liability is subject to the collective bargaining process.
The following table outlines the Company’s participation in multiemployer defined benefit pension plans for the years ended June 30, 2020, 2019 and 2018, and summarizes
the contributions that the Company has made during each period. The “EIN” and “Pension Plan Number” columns provide the Employer Identification Number and the three-
digit plan number for each applicable plan. The most recent Pension Protection Act zone status available as of June 30, 2020 and 2019 relates to the plan’s two most recent
years ended which are indicated. Among other factors, plans in the red zone are generally less than 65% funded, plans in the orange zone are both less than 80% funded and
have an accumulated funding deficiency or are expected to have a deficiency in any of the next six plan years, plans in the yellow zone are less than 80% funded, and plans in
the green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column indicates whether a funding improvement plan (“FIP”) for yellow/orange zone
plans or a rehabilitation plan (“RP”) for red zone plans is either pending or has been implemented by the trustees of such plan. The zone status and any FIP or RP information
is based on information that the
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MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Company received from the plan, and the zone status is as certified by the plan’s actuary. The last column lists the expiration date(s) or a range of expiration dates of the CBA
to which the plans are subject. There are no other significant changes that affect such comparability.
Plan Name
EIN
Pension Plan
Number
National Basketball
Association Players’
Pension Plan
National Hockey League
Players’ Retirement
Benefit Plan
All Other Multiemployer
Defined Benefit
Pension Plans
83-2172122
001
46-2555356
001
PPA Zone Status
As of June 30,
2020
Yellow
as of
2/1/2019
Green
as of
4/30/2019
2019
Yellow
as of
2/1/2018
Green
as of
4/30/2018
FIP/RP Status
Pending /
Implemented
Madison Square Garden Contributions
Years Ended June 30,
2020
2019
2018
Surcharge
Imposed
Expiration Date of
CBA
Implemented
$
3,780
$
3,217
$
1,932
No
1,150
1,197
398
381
$
5,328
$
4,795
$
1,200
402
3,534
6/2024 (with certain
termination rights
becoming effective
6/2023)
9/2026
No
No
The Company was not listed as providing more than 5 percent of the total contributions in any Form 5500 for the years ended June 30, 2020, 2019 and 2018.
Multiemployer Defined Contribution Pension Plans and Multiemployer Plans That Provide Health and Welfare Benefits
The Company contributed $1,200, $1,066 and $973 for the years ended June 30, 2020, 2019 and 2018, respectively, to multiemployer defined contribution pension plans. In
addition, the Company contributed $2,559, $2,466 and $2,198 for the years ended June 30, 2020, 2019 and 2018, respectively, to multiemployer plans that provide health and
welfare benefits to retired employees.
Note 15. Share-based Compensation
The Company has two share-based compensation plans: the 2015 Employee Stock Plan (the “Employee Stock Plan”) and the 2015 Stock Plan for Non-Employee Directors (the
“Non-Employee Director Plan”).
Under the Employee Stock Plan, the Company is authorized to grant incentive stock options, non-qualified stock options, restricted shares, restricted stock units (“RSUs”),
stock appreciation rights and other equity-based awards. The Company may grant awards for up to 2,650 shares of the Company’s Class A Common Stock (subject to certain
adjustments). Options and stock appreciation rights under the Employee Stock Plan must be granted with an exercise price of not less than the fair market value of a share of
the Company’s Class A Common Stock on the date of grant and must expire no later than 10 years from the date of grant (or up to one additional year in the case of the death
of a holder). The terms and conditions of awards granted under the Employee Stock Plan, including vesting and exercisability, are determined by the Compensation Committee
of the Board of Directors (“Compensation Committee”) and may include terms or conditions based upon performance criteria. RSUs that were awarded under the Employee
Stock Plan are generally subject to three-year cliff vesting, or vest ratably over three years, with some RSUs being subject to certain performance conditions. RSUs that were
awarded by the Company to its employees will settle in shares of the Company’s Class A Common Stock (either from treasury or with newly issued shares), or, at the option of
the Compensation Committee, in cash.
Under the Non-Employee Director Plan, the Company is authorized to grant non-qualified stock options, restricted shares, restricted stock units, stock appreciation rights and
other equity-based awards. The Company may grant awards for up to 160 shares of the Company’s Class A Common Stock (subject to certain adjustments). Options under the
Non-Employee Director Plan must be granted with an exercise price of not less than the fair market value of a share of the Company’s Class A Common Stock on the date of
grant and must expire no later than 10 years from the date of grant (or up to one additional year in the case of the death of a holder). The terms and conditions of awards
granted under the Non-Employee Director Plan, including vesting and exercisability, are determined by the Compensation Committee. Unless otherwise provided in an
applicable award agreement, options granted under this plan will be fully vested and exercisable upon the date of grant. Unless otherwise
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MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
provided in an applicable award agreement, restricted stock units granted under this plan will be fully vested, upon the date of grant and will settle in shares of the Company’s
Class A Common Stock (either from treasury or with newly issued shares), or, at the option of the Compensation Committee, in cash, on the first business day after ninety days
from the date the director’s service on the Board of Directors ceases or, if earlier, upon the director’s death.
In connection with the MSGE Distribution, pursuant to the terms of the incentive plans and award agreements, (i) each holder of an RSU and performance RSU (“PSU”)
granted under the Employee Stock Plan received one MSG Entertainment RSU or PSU in respect of every one Company RSU or PSU owned on the Record Date and continues
to be entitled to a share of the Company’s Class A Common Stock (or cash or other property) for each Company RSU or PSU in accordance with the existing award agreement,
(ii) one share of MSG Entertainment Class A Common Stock was issued under the MSG Entertainment Non-Employee Director Plan in respect of every one RSU outstanding
under the Company’s Non-Employee Director Plan, which remain outstanding and continue to be entitled to a share of the Company’s Class A Common Stock (or cash or
other property) in accordance with the existing award agreement, and (iii) each option to purchase the Company’s Class A Common Stock became two options: one option to
acquire MSG Entertainment Class A Common Stock and one option to acquire the Company’s Class A Common Stock. The existing exercise price was allocated between the
Company’s options and the new MSG Entertainment options based upon the volume-weighted average prices of the MSG Entertainment Class A Common Stock and the
Company’s Class A Common Stock using the 10-day volume weighted average trading price immediately following the MSGE Distribution, and the underlying share amount
was consistent with the one-to-one distribution ratio in the MSGE Distribution. Other than the split of the options and the allocation of the existing exercise price, there were no
additional adjustments to the existing options in connection with the MSGE Distribution.
The Company’s RSUs/PSUs and/or stock options held by individuals who are solely MSG Entertainment employees will not be expensed by the Company; however, such
RSUs/PSUs and/or stock options do have a dilutive effect on earnings (loss) per share available to the Company’s common stockholders.
Share-based Compensation Expense
Share-based compensation expense is generally recognized straight-line over the vesting term of the award, which typically provides for three-year cliff or graded vesting
subject to continued employment. For awards that are graded vesting and subject to performance conditions, in addition to continued employment, the Company uses the
graded-vesting method to recognize share-based compensation expense.
Share-based compensation expense was recognized in the consolidated statements of operations as a component of direct operating expenses or selling, general and
administrative expenses. Share-based compensation expense recorded during the years ended June 30, 2020, 2019 and 2018 was $48,693, $49,113 and $40,594, respectively.
There were no costs related to share-based compensation in continuing operations that were capitalized for the years ended June 30, 2020, 2019 and 2018.
As of June 30, 2020, there was $18,851 of unrecognized compensation cost related to unvested RSUs and PSUs held by the Company’s employees. The cost is expected to be
recognized over a weighted-average period of approximately 1.9 years for unvested RSUs and PSUs. In addition, the Company had $7,171 of unrecognized compensation cost
related to unvested stock options held by the Company’s employees, which is expected to be recognized over a weighted-average period of approximately 2.1 years as of
June 30, 2020.
Share-based compensation expense for discontinued operations during the years ended June 30, 2020, 2019 and 2018 was $8,303, $10,361 and $6,969, respectively.
F- 47
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Restricted Stock Units Award Activity
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following table summarizes activity related to the Company’s RSUs and PSUs, held by the Company and MSG Entertainment employees, for the year ended June 30,
2020:
Unvested award balance as of June 30, 2019
Granted
Vested
Forfeited
Unvested award balance as of June 30, 2020
_________________
Number of
Nonperformance
Based
Vesting
RSUs
PSUs and Performance
Based
Vesting
RSUs
Weighted-Average
Fair Value
Per Share At
Date of Grant (a)
229
171
(111)
(14)
275
359
116
(125)
(23)
327
$
$
$
$
$
252.02
243.55
214.86
258.32
262.13
(a) Weighted-average fair value per share at date of grant as of June 30, 2019 and for activity prior to the MSGE Distribution Date does not reflect any adjustment associated
with the MSGE Distribution. See above for a discussion of the treatment of RSUs and PSUs in connection with the MSGE Distribution.
The fair value of RSUs and PSUs that vested during the year ended June 30, 2020 was $60,282. Upon delivery, RSUs and PSUs granted under the Employee Stock Plan were
net share-settled to cover the required statutory tax withholding obligations. To fulfill the employees’ statutory minimum tax withholding obligations for the applicable income
and other employment taxes, 104 of these RSUs and PSUs, with an aggregate value of $26,777 were retained by the Company and the taxes paid are reflected as financing
activity in the accompanying consolidated statement of cash flows for the year ended June 30, 2020.
The fair value of RSUs and PSUs that vested during the years ended June 30, 2019 and 2018 was $51,350 and $76,226, respectively. The weighted-average fair value per share
at grant date of RSUs and PSUs granted during the years ended June 30, 2019 and 2018 was $304.53 and $214.08, respectively.
Stock Options Award Activity
The following table summarizes activity related to the Company’s stock options for the year ended June 30, 2020:
Balance as of June 30, 2019
Granted
Balance as of June 30, 2020
Exercisable as of June 30, 2020
_________________
Number of
Time Vesting Options
Weighted-Average
Exercise Price Per
Share (a)
Weighted-Average
Remaining Contractual
Term (In Years)
Aggregate Intrinsic
Value
543 $
— $
543 $
175 $
325.47
—
225.79
207.90
6.06 $
6.37 $
104
69
(a) Weighted-average exercise price per share as of June 30, 2019 and for activity prior to the MSGE Distribution Date does not reflect any adjustment associated with the
MSGE Distribution. See above for a discussion of the treatment of options in connection with the MSGE Distribution.
During the year ended June 30, 2019, the Company granted 449 stock options that consisted of market priced stock options and premium priced stock options. The exercise
prices of the premium priced stock options were set at a 10% and a 25% premium to the closing stock price at the date of grant. These stock options vest ratably over four years
and are being expensed on a straight-line basis over the vesting period. The maximum contractual term is 7.5 years. The Company calculated the fair value of the market priced
options on the date of grant using the Black-Scholes option pricing model and the premium priced options
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MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
using the Monte Carlo Simulation. The following are key assumptions used to calculate the weighted-average grant date fair value of the stock options:
Market Price
10% Premium
25% Premium
Weighted-average grant date fair value
$
79.99
$
69.33
$
Expected term
Expected volatility
Risk-free interest rate
4.98 years
5.10 years
22.11%
3.02%
22.11%
3.11%
55.64
5.29 years
22.11%
3.11%
The expected terms of the premium priced options were estimated using the simplified method but takes into account that the options are out-of-the-money at grant date and
therefore likely to be exercised later. The risk-free interest rate for the premium priced options was determined using a 7.50 year rate, different from the 4.98 year rate used to
determine the market priced stock options.
Note 16. Stock Repurchase Program
On September 11, 2015, the Company’s board of directors authorized the repurchase of up to $525,000 of the Company’s Class A Common Stock once the shares of the
Company’s Class A Common Stock began “regular way” trading on October 1, 2015. Under the authorization, shares of Class A Common Stock may be purchased from time
to time in accordance with applicable insider trading and other securities laws and regulations. The timing and amount of purchases will depend on market conditions and other
factors.
During the year ended June 30, 2020, the Company did not engage in any share repurchase activities under its share repurchase program. As of June 30, 2020, the Company
had $259,639 of availability remaining under its stock repurchase authorization.
Note 17. Related Party Transactions
As of June 30, 2020, members of the Dolan family including trusts for members of the Dolan family (collectively, the “Dolan Family Group”), for purposes of Section 13(d) of
the Securities Exchange Act of 1934, as amended, collectively beneficially own all of the Company’s outstanding Class B Common Stock and own approximately 3.5% of the
Company’s outstanding Class A Common Stock (inclusive of options exercisable within 60 days of the date hereof). Such shares of the Company’s Class A Common Stock
and Class B Common Stock, collectively, represent approximately 70.9% of the aggregate voting power of the Company’s outstanding common stock. Members of the Dolan
family are also the controlling stockholders of MSG Entertainment, MSG Networks and AMC Networks Inc. (“AMC Networks”).
Current Related Party Arrangements
The Company is party to the following agreements and/or arrangements with MSG Entertainment and MSG Networks, as applicable:
•
•
•
Sponsorship sales and service representation agreements pursuant to which MSG Entertainment has the exclusive right and obligation to sell the Company’s
sponsorships for an initial stated term of 10 years for a commission;
Team sponsorship allocation agreement with MSG Entertainment, pursuant to which teams continue receiving an allocation of sponsorship and signage revenues
associated with the sponsorship agreements that existed at the MSGE Distribution Date;
Arena License Agreements pursuant to which MSG Entertainment (i) provides the right to use The Garden for games of the Knicks and Rangers for a 35-year term in
exchange for arena license fees, (ii) shares revenues collected for suite licenses, (iii) operates and manages the sale of the sports teams merchandise at The Garden for
a commission, (iv) operates and manages the sale of food and beverage concessions and catering services during the Knicks and Rangers home games, (v) provides
day of game services that were historically provided prior to the MSGE Distribution, and (vi) provides other general services within The Garden;
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MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
• Media rights agreements, that the Company and MSG Networks entered into in connection with the MSGS Distribution, providing MSG Networks with local telecast
rights for the Knicks and Rangers Knicks for a 20-year term in exchange for media rights fees;
•
•
•
•
•
•
•
•
•
Transition Services Agreement (the “TSA”) pursuant to which the Company receives certain services from MSG Entertainment, such as information technology,
accounts payable and payroll, human resources, and other corporate functions, as well as the executive support services, in exchange for service fees;
A services agreement with MSG Networks, pursuant to which the Company provides certain legal services to MSG Networks (the “Current MSGN Services
Agreement”);
Sublease agreement, pursuant to which the Company leases an office space from MSG Entertainment;
Group ticket sales representation agreement, pursuant to which MSG Entertainment appointed the Company as its sales and service representative to sell group ticket
packages related to MSG Entertainment events in exchange for a commission;
Single night rental commission agreement, pursuant to which the Company may, from time to time, sell (or make referrals for sales of) licenses for the use of suites at
The Garden for individual MSG Entertainment events in exchange for a commission;
The DDTL Facilities with MSG Entertainment that provide for a $110,000 and $90,000 senior unsecured delayed draw term loan facilities, for the Knicks and
Rangers, respectively. See Note 13 for more information;
Aircraft sharing agreements pursuant to which MSG Entertainment has agreed from time to time to make its aircraft and an aircraft it leases from another related party
available to the Company for lease on a “time sharing” basis;
Other agreements with MSG Entertainment entered into in connection with the MSGE Distribution, including a distribution agreement, a tax disaffiliation agreement,
an employee matters agreement, a trademark license agreement and certain other arrangements; and
Other agreements with MSG Networks entered into in connection with the MSGE Distribution, including a tax disaffiliation agreement, an employee matters
agreement and certain other arrangements.
In addition, the Company shares certain executive support costs, including office space, executive assistants, security and transportation costs for: (i) the Company’s Executive
Chairman with MSG Entertainment and MSG Networks and (ii) the Company’s Vice Chairman with AMC Networks, MSG Entertainment and MSG Networks. Additionally,
the Company, MSG Entertainment, MSG Networks and AMC Networks agreed on an allocation of the costs of certain personal aircraft and helicopter use by their shared
executives.
From time to time the Company has entered into, and is expected to continue to enter into, arrangements with 605, LLC. Kristin A. Dolan, a director of the Company and
spouse of James L. Dolan, is the founder and Chief Executive Officer of 605, LLC. James L. Dolan, the Company’s Executive Chairman and a director, and Kristin A. Dolan
own 50% of 605, LLC. 605, LLC provides audience measurement and data analytics services to the Company and its subsidiaries in the ordinary course of business.
Related Party Arrangements Prior to the MSGE Distribution
Following the MSGE Distribution, except as otherwise noted, the Company is no longer party to the arrangements described below. However, the amounts associated with
such arrangements are reflected in the Company’s results of operations for the periods prior to the MSGE Distribution.
The Company had various agreements with MSG Networks, including an advertising sales representation agreement and a services agreement (the “Prior MSGN Services
Agreement”). Pursuant to the Prior MSGN Services Agreement, which was effective July 1, 2019, the Company provided certain services to MSG Networks, such as
information technology, accounts payable and payroll, human resources, and other corporate functions, as well as the executive support services described below, in exchange
for service fees. MSG Networks also provided certain services to the Company, in exchange for service fees.
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MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Effective as of the MSGE Distribution, this agreement is now between MSG Entertainment and MSG Networks. The Company separately entered into the Current MSGN
Services Agreement. See “— Current Related Party Arrangements.”
The Company shared certain executive support costs, including office space, executive assistants, security and transportation costs, for (i) the Company’s Executive Chairman
with MSG Networks and (ii) the Company’s Vice Chairman with MSG Networks and AMC Networks. Additionally, the Company, MSG Networks and AMC Networks
agreed on an allocation of the costs of certain personal aircraft and helicopter use by their shared executives. Following the MSGE Distribution, the Company also shares these
expenses with MSG Entertainment. See “— Current Related Party Arrangements.”
Prior to September 2018, the Company had an arrangement with the Dolan Family Office, LLC (“DFO”), an entity owned and controlled by Charles F. Dolan, AMC Networks
and MSG Networks providing for the sharing of certain expenses associated with executive office space which was available to James L. Dolan (the Executive Chairman and a
director of the Company, the Executive Chairman, Chief Executive Officer and a director of MSG Entertainment, the Executive Chairman and a director of MSG Networks,
and a director of AMC Networks), Charles F. Dolan (the father of James L. Dolan and the Executive Chairman and a director of AMC Networks and a director of the
Company, MSG Entertainment and MSG Networks), and the DFO.
The Company was a party to various Aircraft Support Services Agreements (the “Support Agreements”), pursuant to which the Company provided certain aircraft support
services to entities controlled by (i) James L. Dolan, (ii) Charles F. Dolan, and (iii) Patrick F. Dolan, the son of Charles F. Dolan and brother of James L. Dolan. On
December 17, 2018, the Company terminated the agreement providing services to the entity controlled by Charles F. Dolan, and entered into a new agreement with Charles F.
Dolan and certain of his children, who are siblings of James L. Dolan, specifically: Thomas C. Dolan (a director of the Company), Deborah Dolan-Sweeney, Patrick F. Dolan,
Marianne Dolan Weber (a director of the Company), and Kathleen M. Dolan, which provided substantially the same services as the prior agreement for a new aircraft.
In addition, the Company was party to reciprocal time sharing/dry lease agreements with each of (i) Quart 2C, LLC (“Q2C”), a company controlled by James L. Dolan and
Kristin A. Dolan, his spouse and a director of the Company, and (ii) Charles F. Dolan and Sterling Aviation, LLC, a company controlled by Charles F. Dolan (collectively,
“CFD”), pursuant to which the Company has agreed from time to time to make its aircraft available to each of Q2C and CFD, and Q2C and CFD have agreed from time to time
to make their aircraft available to the Company. Pursuant to the terms of the agreements, Q2C and/or CFD may lease on a non-exclusive, “time sharing” basis, the Company’s
Gulfstream Aerospace G550 aircraft (the “G550 Aircraft”). On December 17, 2018, in connection with the purchase of a new aircraft (as noted above), the Company replaced
the dry lease agreement with CFD with a new dry lease agreement with Sterling2k LLC, an entity owned and controlled by Deborah Dolan-Sweeney, the daughter of CFD and
the sister of James L. Dolan, which provides for the Company’s usage of the new aircraft on the same terms as the prior agreement.
On May 6, 2019, the Company entered into a dry lease agreement with Brighid Air, LLC (“Brighid Air”), a company owned and controlled by Patrick F. Dolan, pursuant to
which the Company was permitted to lease on a non-exclusive basis Brighid Air’s Bombardier BD100-1A10 Challenger 350 aircraft (the “Challenger”). In connection with the
dry lease agreement, on May 6, 2019, the Company also entered into a Flight Crew Services Agreement (the “Flight Crew Agreement”) with DFO, an entity owned and
controlled by Charles F. Dolan, pursuant to which the Company was permitted to utilize pilots employed by DFO for purposes of flying the Challenger when the Company was
leasing that aircraft under the Company’s dry lease agreement with Brighid Air.
The Company and each of MSG Networks and AMC Networks were party to certain aircraft time sharing agreements, pursuant to which the Company agreed from time to
time to make its aircraft available to MSG Networks and/or AMC Networks for lease on a “time sharing” basis.
In addition to the aircraft arrangements described above, certain executives of the Company were party to aircraft time sharing agreements, pursuant to which the Company
agreed from time to time to make certain aircraft available for lease on a “time sharing” basis for personal use in exchange for payment of actual expenses of the flight (as
listed in the agreement).
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Table of Contents
Revenues and Operating Expenses (Credits)
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following table summarizes the composition and amounts of the transactions with the Company’s affiliates, primarily with MSG Networks. These amounts are reflected in
revenues and operating expenses in the accompanying consolidated statements of operations for the years ended June 30, 2020, 2019 and 2018:
Revenues
Operating expenses (credits):
Corporate general and administrative expenses, net — MSG Networks
Corporate general and administrative expenses, net — MSG Entertainment
Costs associated with the Sponsorship sales and service representation agreements
Other operating expenses (credits), net
Revenues
$
$
Years Ended June 30,
2020
2019
2018
138,881 $
148,207 $
142,319
(8,376) $
(10,362) $
(9,961)
9,530
2,486
(337)
—
—
(693)
—
—
(233)
Revenues from related parties primarily consist of local media rights recognized from the licensing of team-related programming to MSG Networks under the media rights
agreements covering the Knicks and Rangers, which provide MSG Networks with exclusive media rights to team games in their local markets. In addition, pursuant to the
group ticket sales representation agreement, the Company charges MSG Entertainment a share of the cost of the Company’s sales and service staff and related overhead, which
are included in the revenues from related parties in the fiscal year 2020. Additionally, pursuant to this agreement, the Company earns commission on group ticket packages
sales related to MSG Entertainment events. The Company has not earned such commission during the fiscal year 2020.
Corporate General and Administrative Expenses, net — MSG Networks
The Company’s corporate overhead expenses that were charged to MSG Networks prior to MSGE Distribution are primarily related to centralized functions, including
executive compensation, finance, treasury, tax, internal audit, legal, information technology, human resources and risk management functions. These charges are reflected in
the Company’s results of operations for the periods prior to the MSGE Distribution as they do not meet the criteria for inclusion in discontinued operations. Except for certain
legal services, following the MSGE Distribution, the Company no longer provides these services to MSG Networks.
Corporate general and administrative expense, net — MSG Networks reflects charges from the Company to MSG Networks under the Current MSGN Services Agreement and
Prior MSGN Services Agreement of $8,474, $10,467, and $9,474, net of general and administrative costs charged to the Company by MSG Networks, for the years ended June
30, 2020, 2019 and 2018, respectively.
Corporate general and administrative expenses, net — MSG Entertainment
Corporate general and administrative expense, net — MSG Entertainment reflects charges of $8,916 from MSG Entertainment pursuant to the TSA for certain business
functions that were previously performed by internal resources. These services include information technology, accounting, accounts payable, payroll, tax, legal, human
resources, insurance and risk management, investor relations, corporate communications, benefit plan administration and reporting, and internal audit.
Costs associated with the Sponsorship sales and service representation agreements
Pursuant to the Sponsorship sales and service representation agreements, MSG Entertainment charges the Company sales commission fees and sponsorship fulfillment costs, as
well as costs of MSG Entertainment sales and service staff and overhead associated with the sales of sponsorship assets.
Other Operating Expenses, net
The Company and its related parties enter into transactions with each other in the ordinary course of business. Other operating expenses, net include net charges relating to (i)
reciprocal aircraft arrangements between the Company and each of Q2C and
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MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
CFD and (ii) time sharing agreements with MSG Networks and AMC Networks. Following the MSGE Distribution, the Company no longer provides these services to MSG
Networks. However, these charges are reflected in the Company’s results of operations for the periods prior to the MSGE Distribution as they but which do not meet the
criteria for inclusion in discontinued operations.
Discontinued operations
Related party transactions included in income (loss) from discontinued operations in the accompanying consolidated statements of operations include the following (i) revenues
from related parties of $13,106, $16,199, and $14,052 for the years ended June 30, 2020, 2019 and 2018, respectively, (ii) operating expenses charged by related parties of
$897, $3,542, and $6,088 for the years ended June 30, 2020, 2019 and 2018, respectively, (iii) interest income from nonconsolidated affiliates of $3,105 and $5,696, for the
years ended June 30, 2019 and 2018, respectively, and (iv) equity in earnings (loss) of equity-method investments of $(3,739), $7,062, and $(7,770) for the years ended June
30, 2020, 2019 and 2018, respectively.
Note 18. Income Taxes
On December 22, 2017, new tax legislation, commonly referred to as the Tax Cuts and Jobs Act (“TCJA”), was enacted, which significantly changed the existing U.S. tax
laws, including a reduction in the corporate federal income tax rate from 35% to 21% effective January 1, 2018. During the second quarter of fiscal year 2018, the Company
was required to recognize the effect of tax law changes in the period of enactment even though certain key aspects of the new law became effective January 1, 2018.
For the fiscal year ended June 30, 2018, the Company used a blended statutory federal income tax rate of 28% based upon the number of days that it was taxed at the former
rate of 35% and the number of days taxed at the new rate of 21%.
Income tax expense (benefit) attributable to continuing operations is comprised of the following components:
Current expense:
Federal
State and other
Deferred expense (benefit):
Federal
State and other
Income tax expense (benefit)
Years Ended June 30,
2020
2019
2018
$
(676) $
—
(676)
13,871
7,398
21,269
— $
357
357
(7,320)
(5,656)
(12,976)
$
20,593 $
(12,619) $
—
—
—
(55,321)
(4,071)
(59,392)
(59,392)
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MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The income tax expense (benefit) attributable to continuing operations differs from the amount derived by applying the statutory federal rate to pre-tax income principally due
to the effect of the following items:
Federal tax benefit at statutory federal rate
State income taxes, net of federal benefit
Change in the estimated applicable tax rate used to determine deferred taxes
Nondeductible disability insurance premiums expense
Federal tax credits
GAAP income of consolidated partnership attributable to non-controlling interests
Tax effect of indefinite-lived intangible amortization
Change in valuation allowance
Nondeductible officers’ compensation (a)
Nondeductible expenses
Excess tax benefit related to shared based-payments awards
Other
Income tax expense (benefit)
_________________
Years Ended June 30,
2020
2019
2018
$
(20,590) $
(12,734) $
(7,332)
391
1,027
(1,480)
492
204
46,310
4,287
762
(3,478)
—
(2,873)
(1,055)
482
(1,900)
483
204
—
8,521
596
(4,555)
212
$
20,593 $
(12,619) $
(5,973)
(1,909)
(50,169)
1,436
—
599
159
—
—
377
(1,671)
(2,241)
(59,392)
(a) The TCJA included changes to Internal Revenue Code Section 162(m), including elimination of the exception for qualified performance-based compensation over the
$1,000 annual limit. Accordingly, effective January 1, 2018, all compensation for certain officers in excess of $1,000 is nondeductible.
F- 54
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The tax effects of temporary differences which give rise to significant portions of the deferred tax assets and liabilities at June 30, 2020 and 2019 are as follows:
Deferred tax asset:
Net operating loss carryforwards
Tax credit carryforwards
Accrued employee benefits
Accrued expenses
Restricted stock units and stock options
Other
Total deferred tax assets
Less valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Intangible and other assets
Prepaid expenses
Investments
Total deferred tax liabilities
Net deferred tax liability
June 30,
2020
2019
44,935 $
6,795
38,736
4,226
6,186
2,837
103,715 $
(48,133)
55,582 $
(101,202) $
(7,164)
(4,937)
(113,303) $
57,970
5,673
36,895
24,643
7,440
4,849
137,470
(66,297)
71,173
(100,378)
(6,279)
(965)
(107,622)
(57,721) $
(36,449)
$
$
$
$
$
$
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax asset will not be
realized. The Company’s ability to realize its deferred tax assets depends upon the generation of sufficient future taxable income to allow for the utilization of its federal net
operating loss carryforward (“NOL”) and its future deductible temporary differences. Due primarily to the uncertainty related to operating disruptions due to COVID-19, in the
fourth quarter of the fiscal year ended June 30, 2020, management concluded that is more likely than not that the Company will not realize the benefit for a portion of its
deferred tax assets. The Company will continue to assess the realizability of its deferred tax assets on a quarterly basis.
The NOL as of June 30, 2020 is approximately $122,000, including $46,000, that will expire in 2036.
The Company does not have any recorded unrecognized tax benefit for uncertain tax positions as of June 30, 2020 and 2019.
Prior to the MSGE Distribution, MSG Entertainment's collection for ticket sales, sponsorships and suite rentals in advance were recorded as deferred revenue and were
recognized as revenues when earned for both accounting and tax purposes. The tax recognition on most of these deferred revenues was accelerated to the MSGE Distribution
Date. The estimated amount of tax on the acceleration of such deferred revenue is approximately $56,000 and will be the responsibility of the Company. MSG Entertainment
will not reimburse the Company for such taxes. However, the Company completely offset the taxable income of discontinued operations, including taxable income resulting
from the tax acceleration of deferred revenue with NOLs. The deferred tax assets for such NOLs had a full valuation allowance. Therefore, both the deferred tax asset and
valuation allowance were reduced by $68,000 with no residual tax expense. In addition, during the quarter ended June 30, 2020 the Company recorded a valuation allowance
increase of $46,310 that is included in tax expense attributable to continuing operations, which partially offsets the decrease recorded in discontinued operations.
As of June 30, 2019, the valuation allowance attributable to continuing operations equals the amount of historical valuation allowance in excess of the amount required for
discontinued operations.
Prior to the MSGE Distribution, the Company and MSG Entertainment entered into a Tax Disaffiliation Agreement (“TDA”) that governs the parties’ respective rights,
responsibilities and obligations with respect to taxes and tax benefits. Under the
F- 55
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
TDA, the Company will generally be responsible for all U.S. federal, state, local and other applicable income taxes of MSG Entertainment for any taxable period or portion of
such period ending on or before the MSGE Distribution Date.
The Company was notified during the third quarter of fiscal year 2018 that the Internal Revenue Service (“IRS”) was commencing an audit of the federal income tax return for
the year ended June 30, 2016. In October 2019, the Company was informed by the IRS that the audit resulted in no changes.
The Company was notified in April 2020 that the City of New York was commencing an audit of the state income tax returns for the fiscal years ended June 30, 2016 and
2017. The Company does not expect the examination, when finalized, to result in material changes.
The federal and state statute of limitations are currently open on the Company’s tax returns for 2017 and 2016, respectively, and forward.
Note 19. Concentrations of Risk
Financial instruments that may potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. The
Company monitors the financial institutions and money market funds where it invests its cash and cash equivalents with diversification among counterparties to mitigate
exposure to any single financial institution. The Company’s emphasis is primarily on safety of principal and liquidity and secondarily on maximizing the yield on its
investments.
The following individual non-affiliated customers accounted for the following percentages of the Company’s consolidated accounts receivable balances:
Customer A
Customer B
June 30,
2020
2019
55%
11%
78%
2%
The Company had non-affiliated revenues from a customer that represented 13%, 13% and 12% of consolidated revenues for the years ended June 30, 2020, 2019 and 2018.
Revenues from MSG Networks amounted to $138,173, $148,178 and $142,281 for the years ended June 30, 2020, 2019 and 2018, which represent 23%, 20% and 20%,
respectively, of the Company’s consolidated revenues (see Note 17).
As of June 30, 2020, approximately 94 full-time and part-time employees, who represent approximately 11% of the Company’s workforce, are subject to CBAs. The current
NHL CBA expires on September 15, 2022, but the NHL and NHLPA have recently agreed on terms by which the CBA will be extended through and including September 15,
2026 (with the possibility of an additional one year extension in certain circumstances). See Note 21 for summary of the principal aspects of the new NHL CBA and revenue
sharing plan. The current NBA CBA expires after the 2023-24 season (although the NBA and NBPA each has the right to terminate the CBA effective following the 2022-23
season). In addition, the NBA and the NBPA currently have the right to terminate the CBA through October 15, 2020 (unless extended). There are no union employees subject
to CBAs that expired as of June 30, 2020 and no union employees subject to CBAs that will expire by June 30, 2021 if they are not extended prior thereto.
F- 56
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 20. Interim Financial Information (Unaudited)
The following is a summary of the Company’s selected quarterly financial data for the years ended June 30, 2020 and 2019:
Revenues
Operating expenses
Operating income (loss)
Income (loss) from continuing operations
Income (loss) from discontinued operations,
net of taxes
Net income (loss)
Net income (loss) attributable to Madison
Square Garden Sports Corp.’s
stockholders
Earnings (loss) per share:
Basic
Continuing operations
Discontinued operations
Basic earnings (loss) per common share
attributable to Madison Square Garden
Sports Corp.’s stockholders
Diluted
Continuing operations
Discontinued operations
Diluted earnings (loss) per common share
attributable to Madison Square Garden
Sports Corp.’s stockholders
$
$
$
$
$
$
$
$
$
$
$
Three Months Ended
September 30,
December 31,
2019
2019
March 31,
2020
June 30,
2020
Year ended June 30,
2020
49,850 $
109,174
(59,324) $
292,798 $
293,031
(233) $
267,631 $
257,006
10,625 $
(6,960) $
37,974
(44,934) $
603,319
697,185
(93,866)
(40,191) $
(3,657) $
4,183 $
(78,976) $
(118,641)
(40,475)
(80,666) $
96,006
92,349 $
(145,249)
(141,066) $
(504)
(79,480) $
(90,222)
(208,863)
(79,981) $
94,141 $
(118,029) $
(78,519) $
(182,388)
(1.67) $
(1.69) $
(0.13) $
4.07 $
0.20 $
(5.12) $
(3.26) $
(0.01) $
(4.86)
(2.76)
(3.36) $
3.94 $
(4.92) $
(3.27) $
(7.62)
(1.67) $
(1.69) $
(0.13) $
4.06 $
0.20 $
(5.12) $
(3.26) $
(0.01) $
(4.86)
(2.76)
(3.36) $
3.93 $
(4.92) $
(3.27) $
(7.62)
F- 57
Table of Contents
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Three Months Ended
September 30,
December 31,
2018
2018
March 31,
2019
June 30,
2019
Year ended June 30,
2019
50,828 $
84,034
(33,206) $
286,931 $
298,828
(11,897) $
323,495 $
280,608
42,887 $
68,150 $
124,129
(55,979) $
729,404
787,599
(58,195)
(24,085) $
(12,714) $
26,260 $
(37,483) $
(48,022)
(9,963)
(34,048) $
88,682
75,968 $
7,903
34,163 $
(41,717)
(79,200) $
44,905
(3,117)
(32,212) $
81,599 $
35,271 $
(73,231) $
11,427
(0.99) $
(0.37) $
(0.50) $
3.93 $
1.12 $
0.36 $
(1.56) $
(1.52) $
(1.92)
2.40
(1.36) $
3.43 $
1.48 $
(3.08) $
0.48
(0.99) $
(0.37) $
(0.50) $
3.92 $
1.12 $
0.36 $
(1.56) $
(1.52) $
(1.91)
2.39
(1.36) $
3.42 $
1.48 $
(3.08) $
0.48
$
$
$
$
$
$
$
$
$
$
$
Revenues
Operating expenses
Operating income (loss)
Income (loss) from continuing operations
Income (loss) from discontinued operations,
net of taxes
Net income (loss)
Net income (loss) attributable to Madison
Square Garden Sports Corp.’s
stockholders
Earnings (loss) per share:
Basic
Continuing operations
Discontinued operations
Basic earnings (loss) per common share
attributable to Madison Square Garden
Sports Corp.’s stockholders
Diluted
Continuing operations
Discontinued operations
Diluted earnings (loss) per common share
attributable to Madison Square Garden
Sports Corp.’s stockholders
Note 21. Subsequent Events
NHL CBA
In July 2020, the NHL and NHLPA agreed to extend the NHL CBA through and including September 15, 2026 (with the possibility of an additional one-year extension in
certain circumstances) with certain modifications. The principal aspects of the NHL CBA and revenue sharing plan are expected to remain unchanged except that the new NHL
CBA limits the amount of deductions to be withheld from player salaries each year; if annual excess deductions from player salaries are insufficient to limit league-wide player
salaries to 50% of that season’s league-wide revenues, any shortfall will be carried forward to future seasons and remain due from the players to the league.
Knicks Unsecured Credit Facility
On August 11, 2020, the Company renewed Knicks Unsecured Credit Facility, which matures on September 24, 2021. See Note 13 for more information.
F- 58
Exhibit 10.22
April 17, 2020
Mr. Alex Shvartsman
c/o The Madison Square Garden Company (to be renamed Madison Square Garden Sports Corp.)
Two Pennsylvania Plaza
New York, NY 10121
Dear Alex:
This Agreement (the “Agreement”), effective as of the distribution (the “Distribution”) of the common stock of MSG Entertainment
Spinco, Inc. (to be renamed Madison Square Garden Entertainment Corp. “MSG”) to the shareholders of The Madison Square Garden
Company (to be renamed Madison Square Garden Sports Corp., the “Company”) (the “Effective Date”), will confirm the terms of your
employment by the Company.
The term of your employment under this Agreement (the “Term”) shall commence as of the Effective Date and, unless terminated
earlier in accordance with this Agreement, will expire on the third anniversary of the Effective Date (the “Expiration Date”).
Your title will continue to be Senior Vice President, Controller and Principal Accounting Officer. Throughout the Term, you agree to
devote substantially all of your business time and attention to the business and affairs of the Company and to perform your duties in a diligent,
competent, professional and skillful manner and in accordance with applicable law and the Company’s policies and procedures.
Your annual base salary will be a minimum of $375,000 paid no less frequently than monthly, subject to annual review and potential
increase by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) in its sole discretion.
You will also be eligible to participate in our discretionary annual cash bonus program with an annual target bonus opportunity equal to at
least 40% of salary. Bonus payments depend on a number of factors including Company, unit and individual performance. For the Company’s
current fiscal year, your target bonus will be based on this new target percentage and your new base salary. Except as provided below, the
decision whether or not to pay a bonus, and the amount of that bonus, if any, shall be made by the Compensation Committee in its sole
discretion. Bonuses are typically paid early in the subsequent fiscal year. Except as provided below, in order to receive a bonus, you must be
employed by the Company at the time bonuses are being paid.
You will be eligible to participate in such long-term incentive programs as are made available to similarly situated executives at the
Company. It is expected that such awards will consist of annual grants of cash and/or equity awards with an annual target value of not less than
$330,000, as determined by the Compensation Committee. With respect to the Company’s current fiscal year (ending June 30, 2020), you will
be entitled to a mid-year long-term incentive
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Alex Shvartsman
Page 2
grant representing the increase to your annual target pro-rated for the portion of the fiscal year from and after the Effective Date (based on the
number of full and partial months (so long as the Distribution occurs prior to the midpoint of such partial month) from and after the
Distribution). All awards described in this paragraph would be subject to actual grant to you by the Compensation Committee in its sole
discretion, would be pursuant to the applicable plan document and would be subject to terms and conditions established by the Compensation
Committee in its sole discretion that would be detailed in separate agreements you would receive after any award is actually made. Long term
incentive awards are currently expected to be subject to three-year vesting.
You will also be eligible for our standard benefits programs at the levels that are made available to similarly situated executives at the
Company. Participation in our benefits programs is subject to meeting the relevant eligibility requirements, payment of the required premiums
and the terms of the plans themselves. You will also be entitled to paid time off to be accrued and used in accordance with Company policy.
Upon commencement of the Term, you agree to be bound by the additional covenants and provisions that are set forth in Annex I and
Annex II hereto, which Annexes shall be deemed to be a part of the Agreement.
If your employment with the Company hereunder is terminated prior to the Expiration Date (i) by the Company (other than for
“Cause”) or (ii) by you for “Good Reason” (other than if “Cause” then exists) then, subject to your execution, delivery and non-revocation
(within any applicable revocation period) of the severance agreement described below, the Company will provide you with the following:
(1)
(2)
Severance in an amount to be determined by the Compensation Committee (the “Severance Amount”), but in no event less than
the sum of your annual base salary and your annual target bonus, each as in effect at the time your employment terminates.
Sixty percent (60%) of the Severance Amount will be payable to you on the six-month anniversary of the date your
employment so terminates (the “Termination Date”) and the remaining forty percent (40%) of the Severance Amount will be
payable to you on the twelve-month anniversary of the Termination Date; and
Any unpaid annual bonus for the Company’s fiscal year prior to the fiscal year which includes your Termination Date, and a
pro rated bonus based on the amount of your base salary actually earned by you during the Company’s fiscal year through the
Termination Date, each of which will be paid to you when such bonuses are generally paid to similarly situated active
executives and will be based on your then current annual target bonus as well as Company and your business unit performance
for the applicable fiscal year as determined by the Company in its sole discretion, but without adjustment for your individual
performance.
Your entitlement to the severance benefits describing in clauses (1) and (2) above will be subject to your prior execution, delivery and
non-revocation (within any applicable revocation period) of a reasonable severance agreement no later than the six-month anniversary of the
Termination Date. This severance agreement shall be delivered to you by the Company as soon as reasonably practicable after the Termination
Date and will include, without limitation, (x) a full and complete general release in favor of the Company and its affiliates (and their respective
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Alex Shvartsman
Page 3
directors, officers and employees), (y) non-solicitation, non-disparagement, confidentiality and further cooperation provisions substantially
similar to those set forth in Annex I hereto and (z) non-compete provisions no more restrictive than those set forth in Annex II hereto (but
limited to the one-year period from the Termination Date).
In connection with any termination of your employment, any outstanding equity and cash incentive awards shall be treated in
accordance with their terms.
For purposes of this Agreement, “Cause” means your (i) commission of an act of fraud, embezzlement, misappropriation, willful
misconduct, gross negligence or breach of fiduciary duty against the Company or an affiliate thereof, or (ii) commission of any act or omission
that results in a conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any crime involving moral
turpitude or any felony.
For purposes of this Agreement, “Good Reason” means that (i) without your written consent, (1) your base salary (as may be increased
from time to time in the Compensation Committee’s sole discretion) is reduced, (2) you are no longer the Company’s principal accounting
officer, or (3) you no longer report to the Company’s Chief Financial Officer, (ii) you have given the Company written notice, referring
specifically to this Agreement and definition, that you do not consent to such action, (iii) the Company has not corrected such action within 30
days of receiving such notice, and (iv) you voluntarily terminate your employment with the Company within 90 days following the happening
of the action described in subsection (i) above.
This Agreement does not constitute a guarantee of employment for any definite period. Your employment is at will and may be
terminated by you or the Company at any time, with or without notice or reason.
The Company may withhold from any payment due to you any taxes required to be withheld under any law, rule or regulation. If any
payment otherwise due to you hereunder would result in the imposition of the excise tax imposed by Section 4999 of the Internal Revenue
Code, the Company will instead pay you either (i) such amount or (ii) the maximum amount that could be paid to you without the imposition
of the excise tax, depending on whichever amount results in your receiving the greater amount of after-tax proceeds. In the event that the
payments and benefits payable to you would be reduced as provided in the previous sentence, then such reduction will be determined in a
manner which has the least economic cost to you and, to the extent the economic cost is equivalent, such payments or benefits will be reduced
in the inverse order of when the payments or benefits would have been made to you until the reduction specified is achieved.
If and to the extent that any payment or benefit under this Agreement, or any plan, award or arrangement of the Company or its
affiliates, is determined by the Company to constitute “non-qualified deferred compensation” subject to Section 409A of the Internal Revenue
Code (“Section 409A”) and is payable to you by reason of your termination of employment, then (a) such payment or benefit shall be made or
provided to you only upon a “separation from service” as defined for purposes of Section 409A under applicable regulations and (b) if you are
a “specified employee” (within the meaning of Section 409A as determined by the Company), such payment or benefit shall not be made or
provided before the date that is six months after the date of your separation from service (or, if earlier than the expiration of such six month
period, the date of death). Any amount not paid or benefit not provided in respect of the six month period specified in the preceding sentence
will be paid to you in a lump sum or provided to you as soon as practicable after the expiration of such six month period.
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Alex Shvartsman
Page 4
To the extent you are entitled to any expense reimbursement from the Company that is subject to Section 409A, (i) the amount of any
such expenses eligible for reimbursement in one calendar year shall not affect the expenses eligible for reimbursement in any other taxable
year (except under any lifetime limit applicable to expenses for medical care), (ii) in no event shall any such expense be reimbursed after the
last day of the calendar year following the calendar year in which you incurred such expense, and (iii) in no event shall any right to
reimbursement be subject to liquidation or exchange for another benefit.
This Agreement is personal to you and without the prior written consent of the Company shall not be assignable by you otherwise than
by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by your legal representatives.
This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. This Agreement will
automatically terminate, and be null and void ab initio and of no force or effect, if the Distribution of MSG is not completed by June 30, 2020,
in which case the Prior Agreement shall remain in full force and effect.
To the extent permitted by law, you and the Company waive any and all rights to a jury trial with respect to any matter
relating to this Agreement.
This Agreement will be governed by and construed in accordance with the law of the State of New York applicable to contracts
made and to be performed entirely within that State.
Both the Company and you hereby irrevocably submit to the jurisdiction of the courts of the State of New York and the federal courts
of the United States of America located in Manhattan solely in respect of the interpretation and enforcement of the provisions of this
Agreement, and each of us hereby waives, and agrees not to assert, as a defense that either of us, as appropriate, is not subject thereto or that
the venue thereof may not be appropriate. We each hereby agree that mailing of process or other papers in connection with any such action or
proceeding in any manner as may be permitted by law shall be valid and sufficient service thereof.
This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives. The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement. The Company and you have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the Company and you and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
You agree to keep this Agreement and its terms strictly confidential (unless it is made public by the Company); provided that (1) you
are authorized to make any disclosure required of you by any federal, state or local laws or judicial proceedings, after providing the Company
with prior written notice and an opportunity to respond to such disclosure (unless such notice is prohibited by law) and (2) you are authorized
to disclose this Agreement and its terms to your legal, financial and tax advisors and your representatives may disclose to any and all persons,
without limitation of any kind, the tax treatment and tax structure of this Agreement and all materials of any kind (including opinions or other
tax analyses) that are provided to you relating to such tax treatment or structure.
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Alex Shvartsman
Page 5
This Agreement reflects the entire understanding and agreement of you and the Company with respect to the subject matter hereof and
supersedes all prior understandings and agreements.
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Alex Shvartsman
Page 6
This Agreement will automatically terminate, and be of no further force or effect, on the Expiration Date (other than with respect to
any rights which, by the terms of this Agreement, arose before such date); provided, however that the last eight paragraphs hereof, and Annex
I and Annex II, shall remain in effect during the Term and thereafter indefinitely (unless otherwise expressly provided) and shall survive any
termination or expiration of the Agreement or any termination of your employment with the Company.
Very truly yours,
/s/ Victoria Mink
Victoria Mink
Executive Vice President & Chief Financial Officer
Accepted and Agreed:
/s/ Alex Shvartsman
Alex Shvartsman
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Alex Shvartsman
Page 7
ANNEX I
This Annex I constitutes part of the Agreement dated April 17, 2020 (the “Agreement”) by and between Alex Shvartsman (“You”) and
The Madison Square Garden Company (to be renamed Madison Square Garden Sports Corp., the “Company”).
You agree to comply with the following covenants in addition to those set forth in the Agreement.
1.
Confidentiality
(a) Confidential and Proprietary Information. You agree to retain in strict confidence and not use for any purpose whatsoever or
divulge, disseminate, copy, disclose to any third party, or otherwise use any Confidential Information, other than for legitimate business
purposes of the Company and its affiliates. As used herein, “Confidential Information” means any non-public information of a confidential,
proprietary, commercially sensitive or personal nature of, or regarding, the Company or any of its affiliates or any director, officer or member
of senior management of any of the foregoing (collectively “Covered Parties”). The term Confidential Information includes such information
in written, digital, oral or any other format and includes, but is not limited to (i) information designated or treated as confidential; (ii) budgets,
plans, forecasts or other financial or accounting data; (iii) customer, broadcast affiliate, fan, vendor, sponsor, marketing affiliate or
shareholder lists or data; (iv) technical or strategic information regarding the Covered Parties’ advertising, sports, or other businesses;
(v) advertising, sponsorship, business, sales or marketing tactics, strategies or information; (vi) policies, practices, procedures or techniques;
(vii) trade secrets or other intellectual property; (viii) information, theories or strategies relating to litigation, arbitration, mediation,
investigations or matters relating to governmental authorities; (ix) terms of agreements with third parties and third party trade secrets;
(x) information regarding employees, talent, agents, consultants, advisors or representatives, including their compensation or other human
resources policies and procedures; (xi) information or strategies relating to any potential or actual business development transactions and/or
any potential or actual business acquisition, divestiture or joint venture, and (xii) any other information the disclosure of which may have an
adverse effect on the Covered Parties’ business reputation, operations or competitive position, reputation or standing in the community.
(b) Notwithstanding the foregoing, the obligations of this section, other than with respect to employee or customer information, shall
not apply to Confidential Information that is in the public domain (through no breach by you) or specifically exempted in writing by the
applicable Covered Party from the applicability of this Agreement.
(c) Notwithstanding anything contained elsewhere in this Agreement, (i) you are authorized to make any disclosure which, in the
written advice of outside counsel, is required of you by any federal, state or local laws or judicial, arbitral or governmental agency
proceedings, after providing the Company with prior written notice (to the extent legally permissible) and an opportunity to respond prior to
such disclosure (to extent reasonably practicable), and (ii) you are authorized to disclose Confidential Information to your personal attorney,
solely for the purpose of, and to the extent necessary to, obtain personal legal advice.
(d) You agree not to issue any press release or public statement regarding your employment by the Company and/ or the
commencement thereof unless (i) so disclosed with the
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Alex Shvartsman
Page 8
prior written consent of the Company, or (ii) it is, in the written opinion of outside counsel, required and then only to the extent so required, by
applicable law.
2. Additional Understandings
You agree for yourself and others acting on your behalf, that you (and they) will not disparage, make negative statements about (either
“on the record” or “off the record”) or act in any manner which is intended to or does damage to the good will of, or the business or personal
reputations of the Company, any of its affiliates or any of their respective officers, directors, employees, successors and assigns (including,
without limitation, any former officers, directors or employees of the Company and/ or its affiliates, to the extent such individuals served in
any such capacity at any point during the Term).
This Agreement in no way restricts or prevents you from providing truthful testimony as is required by court order or other legal
process; provided that you afford the Company written notice and an opportunity to respond prior to such disclosure.
If requested by the Company, you agree to deliver to the Company upon the termination of your employment, or at any earlier time the
Company may request, all memoranda, notes, plans, files, records, reports, and software and other documents and data (and copies thereof
regardless of the form thereof (including electronic copies)) containing, reflecting or derived from Confidential Information or the Materials
(as defined below) of the Company or any of its affiliates which you may then possess or have under your control. If so requested, you shall
provide to the Company a signed statement confirming that you have fully complied with this paragraph.
In addition, you agree that the Company is the owner of all rights, title and interest in and to all documents, tapes, videos, designs,
plans, formulas, models, processes, computer programs, inventions (whether patentable or not), schematics, music, lyrics and other technical,
business, financial, advertising, sponsorship, sales, marketing, customer or product development plans, forecasts, strategies, information and
materials (in any medium whatsoever) developed or prepared by you or with your cooperation in any way in connection with your
employment by the Company (the “Materials”). The Company will have the sole and exclusive authority to use the Materials in any manner
that it deems appropriate, in perpetuity, without additional payment to you. You agree to perform all actions reasonably requested by the
Company (whether during or after the Term) to establish and confirm the Company’s ownership of such Materials (including, without
limitation, the execution and delivery of assignments, consents, powers of attorney and other instruments) and to provide reasonable assistance
to the Company or any of its affiliates in connection with the prosecution of any applications for patents, trademarks, trade names, service
marks or reissues thereof or in the prosecution or defense of interferences relating to any Materials. If the Company is unable, after reasonable
effort, to secure your signature on any such papers, any executive officer of the Company shall be entitled to execute any such papers as your
agent and attorney-in-fact, and you hereby irrevocably designate and appoint each executive officer of the Company as your agent and
attorney-in-fact to execute any such papers on your behalf, and to take any and all actions as the Company may deem necessary or desirable in
order to protect its rights and interests in any Materials, under the conditions described in this sentence.
In addition, you agree for yourself and others acting on your behalf, that you (and they) shall not, at any time, participate in any way in
the writing or scripting (including, without limitation, any “as told to” publications) of any book, article, periodical, periodical story, movie,
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Alex Shvartsman
Page 9
play, other written or theatrical work, or video that (i) relates to your services to the Company or any of its affiliates or (ii) otherwise refers to
the Company or its respective businesses, activities, directors, officers, employees or representatives, without the prior written consent of the
Company.
3. Further Cooperation
Following the date of termination of your employment with the Company, you will no longer provide any regular services to the
Company or represent yourself as a Company agent. If, however, the Company so requests, you agree to use commercially reasonable good
faith efforts to cooperate fully with the Company in connection with any matter with which you were involved prior to such employment
termination, or in any litigation or administrative proceedings or appeals (including any preparation therefore) where the Company believes
that your personal knowledge, attendance or participation could be beneficial to the Company or its affiliates. This cooperation includes,
without limitation, participation on behalf of the Company and/ or its affiliates in any litigation, administrative or similar proceeding, including
providing truthful testimony.
The Company will provide you with reasonable notice in connection with any cooperation it requires in accordance with this section
and will take reasonable steps to schedule your cooperation in any such matters so as not to materially interfere with your other professional
and personal commitments. The Company will reimburse you for any reasonable out-of-pocket expenses you reasonably incur in connection
with the cooperation you provide hereunder as soon as practicable after you present appropriate documentation evidencing such expenses. You
agree to provide the Company with an estimate of any such individual expense of more than $1,000 before it is incurred.
4. No-Hire or Solicit
During the Term and thereafter through the first anniversary of the date on which your employment with the Company has terminated
for any reason, you agree not to hire, seek to hire, or cause any person or entity to hire or seek to hire (without the prior written consent of the
Company), directly or indirectly (whether for your own interest or any other person or entity’s interest) any employee of the Company or any
of its affiliates. This restriction does not apply to any employee who was not an employee of the Company or any of its affiliates at any time
during the six-month period immediately preceding your solicitation. This restriction does not apply to any former employee who was
discharged by the Company or any of its affiliates. In addition, this restriction will not prevent you from providing references. For the
avoidance of doubt, a general (non-targeted), publicly-accessible advertisement (or web posting) of an open employment position will not in
and of itself be deemed to be a breach of the solicitation restrictions set forth in this paragraph.
5. Specific Performance; Injunctive Relief
You understand and agree that (i) the provisions of this Annex I are reasonable and appropriate for the Company’s protection of its
legitimate business interests, (ii) the consideration provided under the Agreement is sufficient to justify the restrictions and limitations
contained in this Annex I, and (iii) the Company will suffer immediate, irreparable harm in the event you breach any of your obligations under
the covenants and agreements set forth in this Annex I, that monetary damages will be inadequate to compensate the Company for such breach
and that the Company shall be entitled to injunctive relief as a remedy for any such breach (or
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Alex Shvartsman
Page 10
threatened breach). Such remedy shall not be deemed to be the exclusive remedy in the event of breach by you of any of the covenants or
agreements set forth in this Annex I, but shall be in addition to all other remedies available to the Company at law or in equity. You hereby
waive, to the extent you may legally do so, any requirement for security or the posting of any bond or other surety in connection with any
temporary or permanent award of injunctive or other equitable relief, and further waive, to the extent you may legally do so, the defense in any
action for specific performance or other equitable remedy that a remedy at law would be adequate. Notwithstanding anything to the contrary
contained in this Agreement, in the event you violate the covenants and agreements set forth in this Annex I in any material respect, then, in
addition to all other rights and remedies available to the Company, the Company shall have no further obligation to pay you any severance
benefits or to provide you with any other rights or benefits to which you would have been entitled pursuant to this Agreement had you not
breached the covenants and agreements set forth in this Annex I.
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Alex Shvartsman
Page 11
ANNEX II
This Annex II constitutes part of the Agreement dated April 17, 2020 (the “Agreement”) by and between Alex Shvartsman (“You”)
and The Madison Square Garden Company (the “Company”).
The provisions of this Annex II shall remain in effect during your employment by the Company and for one year following the
termination of your employment for any reason; provided, however, that if your employment is terminated either (i) by the Company for any
reason other than Cause or (ii) by you for Good Reason and Cause doesn’t then exist, then the provisions of this Annex II shall automatically
expire on such Termination Date (but will be included in the Company’s proposed severance agreement which, for the avoidance of doubt,
you will not be required to sign if you wish to waive your rights to the severance benefits described in the Agreement).
Capitalized terms contained herein, and not otherwise defined herein, shall have the meanings ascribed to them in the Agreement (or in
the Annex I attached thereto).
Non-Compete
You acknowledge that due to your executive position in the Company and the knowledge of the Company’s and its affiliates’
confidential and proprietary information which you will obtain during the term of your employment hereunder, your employment by certain
businesses would be irreparably harmful to the Company and/or its affiliates. During your employment with the Company and thereafter
through the first anniversary of the date on which your employment with the Company has terminated for any reason, you agree not to (other
than with the prior written consent of the Company), become employed by, advise, consult, have any material interest in or otherwise perform
services for any Competitive Entity (as defined below). A “Competitive Entity” shall mean any (A) NHL or NBA team located in New York,
New Jersey or Connecticut, or (B) affiliate of any person or entity that operates any of the types of businesses described in clause (A) above,
provided that you may become employed or otherwise provide services to such an affiliate of a Competitive Entity, so long as (x) your
services are neither provided to, nor benefit, such Competitive Entity described in clause (A) and (y) the affiliate is not a direct or indirect
parent company of the Competitive Entity described in clause (A) if the Competitive Entity subsidiary constitutes more than 30% of the total
revenue of the parent company consolidated family of companies. Additionally, the ownership by you of not more than 1% of the outstanding
equity of any publicly traded company shall not, by itself, be a violation of this Paragraph.
By accepting the provisions set forth in this Annex II, you understand that the terms and conditions of this Annex II may limit your
ability to earn a livelihood in a business similar to the business of the Company and its affiliates, but nevertheless hereby agree that the
restrictions and limitations hereof are reasonable in scope, area and duration, and that the consideration provided under the Agreement and the
severance agreement is sufficient to justify the restrictions and limitations contained herein which, in any event (given your education, skills
and ability), you do not believe would prevent you from otherwise earning a living. You further agree that the restrictions are reasonable and
necessary, are valid and enforceable under New York law, and do not impose a greater restraint than necessary to protect the Company’s
legitimate business interests.
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Alex Shvartsman
Page 12
You understand and agree that the Company will suffer immediate, irreparable harm in the event you breach any of your obligations
under the covenants and agreements set forth in this Annex II, that monetary damages will be inadequate to compensate the Company for such
breach and that the Company shall be entitled to injunctive relief as a remedy for any such breach (or threatened breach). Such remedy shall
not be deemed to be the exclusive remedy in the event of breach (or threatened breach) by you of any of the covenants or agreements set forth
in this Annex II, but shall be in addition to all other remedies available to the Company at law or in equity. You hereby waive, to the extent
you may legally do so, (i) any requirement for security or the posting of any bond or other surety in connection with any temporary or
permanent award of injunctive or other equitable relief, and (ii) the defense in any action for specific performance or other equitable remedy
that a remedy at law would be adequate. Notwithstanding anything to the contrary contained in the Agreement, in the event you violate the
covenants and agreements set forth in this Annex II, in addition to all other rights and remedies available to the Company, the Company shall
have no further obligation to pay you any severance benefits or to provide you with any other rights or benefits to which you would have been
entitled pursuant to the Agreement or the severance agreement had you not breached the covenants and agreements set forth in this Annex II.
The restrictions contained in this Annex II shall be extended on a day-for-day basis for each day during which you violate the
provisions of this Annex II in any respect.
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Exhibit 10.29
January 23, 2020
Mr. Joseph Yospe
c/o The Madison Square Garden Company
Two Pennsylvania Plaza
New York, NY 10121
Dear Joe:
This Agreement (the “Agreement”), effective as of the date hereof (the “Effective Date”), will confirm the terms of your continued
employment by The Madison Square Garden Company (the “Company”).
The term of your employment under this Agreement (the “Term”) shall commence as of the Effective Date and, unless terminated
earlier in accordance with this Agreement, will expire on the third anniversary of the Effective Date (the “Expiration Date”).
Your title will continue to be Senior Vice President, Controller and Principal Accounting Officer. Throughout the Term, you agree to
devote substantially all of your business time and attention to the business and affairs of the Company and to perform your duties in a diligent,
competent, professional and skillful manner and in accordance with applicable law and the Company’s policies and procedures.
Your annual base salary will be a minimum of $550,000 paid no less frequently than monthly, subject to annual review and potential
increase by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) in its sole discretion.
You will also be eligible to participate in our discretionary annual cash bonus program with an annual target bonus opportunity equal to at
least 50% of salary. Bonus payments are based on actual salary dollars paid during the year and depend on a number of factors including
Company, unit and individual performance. Except as provided below, the decision whether or not to pay a bonus, and the amount of that
bonus, if any, shall be made by the Compensation Committee in its sole discretion. Bonuses are typically paid early in the subsequent fiscal
year. Except as provided below, in order to receive a bonus, you must be employed by the Company at the time bonuses are being paid. Your
annual base salary and annual bonus target will be effective retroactive to December 16, 2019, and (as each may be increased from time to
time in the Compensation Committee’s sole discretion) will not be reduced during the Term.
You will be eligible to participate in such long-term incentive programs as are made available to similarly situated executives at the
Company. It is expected that such awards will consist of annual grants of cash and/or equity awards with an annual target value of not less than
$500,000, as determined by the Compensation Committee. With respect to the Company’s current fiscal year (ending June 30, 2020), you will
be entitled to a mid-year long-term incentive
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Joseph Yospe
Page 2
grant representing the increase to your annual target pro-rated for the final six months of the fiscal year. All awards described in this paragraph
would be subject to actual grant to you by the Compensation Committee in its sole discretion, would be pursuant to the applicable plan
document and would be subject to terms and conditions established by the Compensation Committee in its sole discretion that would be
detailed in separate agreements you would receive after any award is actually made. Long term incentive awards are currently expected to be
subject to three-year vesting.
You will also be eligible for our standard benefits programs at the levels that are made available to similarly situated executives at the
Company. Participation in our benefits programs is subject to meeting the relevant eligibility requirements, payment of the required premiums
and the terms of the plans themselves. You will also be entitled to paid time off to be accrued and used in accordance with Company policy.
Upon commencement of the Term, you agree to be bound by the additional covenants and provisions that are set forth in Annex I and
Annex II hereto, which Annexes shall be deemed to be a part of the Agreement.
If your employment with the Company hereunder is terminated prior to the Expiration Date (i) by the Company (other than for
“Cause”) or (ii) by you for “Good Reason” (other than if “Cause” then exists) then, subject to your execution, delivery and non-revocation
(within any applicable revocation period) of the severance agreement described below, the Company will provide you with the following:
(1)
(2)
Severance in an amount to be determined by the Compensation Committee (the “Severance Amount”), but in no event less than
the sum of your annual base salary and your annual target bonus, each as in effect at the time your employment terminates.
Sixty percent (60%) of the Severance Amount will be payable to you on the six-month anniversary of the date your
employment so terminates (the “Termination Date”) and the remaining forty percent (40%) of the Severance Amount will be
payable to you on the twelve-month anniversary of the Termination Date; and
Any unpaid annual bonus for the Company’s fiscal year prior to the fiscal year which includes your Termination Date, and a
pro rated bonus based on the amount of your base salary actually earned by you during the Company’s fiscal year through the
Termination Date, each of which will be paid to you when such bonuses are generally paid to similarly situated active
executives and will be based on your then current annual target bonus as well as Company and your business unit performance
for the applicable fiscal year as determined by the Company in its sole discretion, but without adjustment for your individual
performance.
Your entitlement to the severance benefits describing in clauses (1) and (2) above will be subject to your prior execution, delivery and
non-revocation (within any applicable revocation period) of a reasonable severance agreement no later than the six-month anniversary of the
Termination Date. This severance agreement shall be delivered to you by the Company as soon as reasonably practicable after the Termination
Date and will include, without limitation, (x) a full and complete general release in favor of the Company and its affiliates (and their respective
directors, officers and employees), (y) non-solicitation, non-disparagement, confidentiality and further cooperation provisions substantially
similar to those set forth in Annex I hereto and (z)
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Joseph Yospe
Page 3
non-compete provisions no more restrictive than those set forth in Annex II hereto (but limited to the one-year period from the Termination
Date).
In connection with any termination of your employment, any outstanding equity and cash incentive awards shall be treated in
accordance with their terms.
For purposes of this Agreement, “Cause” means your (i) commission of an act of fraud, embezzlement, misappropriation, willful
misconduct, gross negligence or breach of fiduciary duty against the Company or an affiliate thereof, or (ii) commission of any act or omission
that results in a conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any crime involving moral
turpitude or any felony.
For purposes of this Agreement, “Good Reason” means that (i) without your written consent, (1) your base salary (as may be increased
from time to time in the Compensation Committee’s sole discretion) is reduced, (2) you are no longer the Company’s principal accounting
officer, or (3) you no longer report to the Company’s Chief Financial Officer, (ii) you have given the Company written notice, referring
specifically to this Agreement and definition, that you do not consent to such action, (iii) the Company has not corrected such action within 30
days of receiving such notice, and (iv) you voluntarily terminate your employment with the Company within 90 days following the happening
of the action described in subsection (i) above.
This Agreement does not constitute a guarantee of employment for any definite period. Your employment is at will and may be
terminated by you or the Company at any time, with or without notice or reason.
The Company may withhold from any payment due to you any taxes required to be withheld under any law, rule or regulation. If any
payment otherwise due to you hereunder would result in the imposition of the excise tax imposed by Section 4999 of the Internal Revenue
Code, the Company will instead pay you either (i) such amount or (ii) the maximum amount that could be paid to you without the imposition
of the excise tax, depending on whichever amount results in your receiving the greater amount of after-tax proceeds. In the event that the
payments and benefits payable to you would be reduced as provided in the previous sentence, then such reduction will be determined in a
manner which has the least economic cost to you and, to the extent the economic cost is equivalent, such payments or benefits will be reduced
in the inverse order of when the payments or benefits would have been made to you until the reduction specified is achieved.
If and to the extent that any payment or benefit under this Agreement, or any plan, award or arrangement of the Company or its
affiliates, is determined by the Company to constitute “non-qualified deferred compensation” subject to Section 409A of the Internal Revenue
Code (“Section 409A”) and is payable to you by reason of your termination of employment, then (a) such payment or benefit shall be made or
provided to you only upon a “separation from service” as defined for purposes of Section 409A under applicable regulations and (b) if you are
a “specified employee” (within the meaning of Section 409A as determined by the Company), such payment or benefit shall not be made or
provided before the date that is six months after the date of your separation from service (or, if earlier than the expiration of such six month
period, the date of death). Any amount not paid or benefit not provided in respect of the six month period specified in the preceding sentence
will be paid to you in a lump sum or provided to you as soon as practicable after the expiration of such six month period.
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Joseph Yospe
Page 4
To the extent you are entitled to any expense reimbursement from the Company that is subject to Section 409A, (i) the amount of any
such expenses eligible for reimbursement in one calendar year shall not affect the expenses eligible for reimbursement in any other taxable
year (except under any lifetime limit applicable to expenses for medical care), (ii) in no event shall any such expense be reimbursed after the
last day of the calendar year following the calendar year in which you incurred such expense, and (iii) in no event shall any right to
reimbursement be subject to liquidation or exchange for another benefit.
This Agreement is personal to you and without the prior written consent of the Company shall not be assignable by you otherwise than
by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by your legal representatives.
This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. In connection with the
consummation of the Company’s planned spinoff of its entertainment businesses into a separately traded public company (“Spinco”), the
Company may elect, in its sole discretion, to assign its rights and obligations hereunder to Spinco, and thereafter (upon assumption of such
rights and obligations by Spinco) the Company shall have no continuing obligations hereunder. For the avoidance of doubt, upon such an
assignment, all references herein to the “Company” shall refer to Spinco to the extent that such reference is applicable to a time from and after
the assignment.
To the extent permitted by law, you and the Company waive any and all rights to a jury trial with respect to any matter
relating to this Agreement.
This Agreement will be governed by and construed in accordance with the law of the State of New York applicable to contracts
made and to be performed entirely within that State.
Both the Company and you hereby irrevocably submit to the jurisdiction of the courts of the State of New York and the federal courts
of the United States of America located in Manhattan solely in respect of the interpretation and enforcement of the provisions of this
Agreement, and each of us hereby waives, and agrees not to assert, as a defense that either of us, as appropriate, is not subject thereto or that
the venue thereof may not be appropriate. We each hereby agree that mailing of process or other papers in connection with any such action or
proceeding in any manner as may be permitted by law shall be valid and sufficient service thereof.
This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives. The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement. The Company and you have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the Company and you and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
You agree to keep this Agreement and its terms strictly confidential (unless it is made public by the Company); provided that (1) you
are authorized to make any disclosure required of you by any federal, state or local laws or judicial proceedings, after providing the Company
with prior written notice and an opportunity to respond to such disclosure (unless such notice is prohibited by law) and (2) you are authorized
to disclose this Agreement and its terms to your legal, financial and tax advisors and your representatives may disclose to any and all persons,
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Joseph Yospe
Page 5
without limitation of any kind, the tax treatment and tax structure of this Agreement and all materials of any kind (including opinions or other
tax analyses) that are provided to you relating to such tax treatment or structure.
This Agreement reflects the entire understanding and agreement of you and the Company with respect to the subject matter hereof and
supersedes all prior understandings and agreements.
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Joseph Yospe
Page 6
This Agreement will automatically terminate, and be of no further force or effect, on the Expiration Date (other than with respect to
any rights which, by the terms of this Agreement, arose before such date); provided, however that the last eight paragraphs hereof, and Annex
I and Annex II, shall remain in effect during the Term and thereafter indefinitely (unless otherwise expressly provided) and shall survive any
termination or expiration of the Agreement or any termination of your employment with the Company.
Very truly yours,
/s/ Victoria Mink
Victoria Mink
Executive Vice President & Chief Financial Officer
Accepted and Agreed:
/s/ Joseph Yospe
Joseph Yospe
Date: January 23, 2020
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Joseph Yospe
Page 7
ANNEX I
This Annex I constitutes part of the Agreement dated January 23, 2020 (the “Agreement”) by and between Joseph Yospe (“You”) and
The Madison Square Garden Company (the “Company”).
You agree to comply with the following covenants in addition to those set forth in the Agreement.
1.Confidentiality
(a) Confidential and Proprietary Information. You agree to retain in strict confidence and not use for any purpose whatsoever or
divulge, disseminate, copy, disclose to any third party, or otherwise use any Confidential Information, other than for legitimate business
purposes of the Company and its affiliates. As used herein, “Confidential Information” means any non-public information of a confidential,
proprietary, commercially sensitive or personal nature of, or regarding, the Company or any of its affiliates or any director, officer or member
of senior management of any of the foregoing (collectively “Covered Parties”). The term Confidential Information includes such information
in written, digital, oral or any other format and includes, but is not limited to (i) information designated or treated as confidential; (ii) budgets,
plans, forecasts or other financial or accounting data; (iii) customer, broadcast affiliate, fan, vendor, sponsor, marketing affiliate or
shareholder lists or data; (iv) technical or strategic information regarding the Covered Parties’ television, programming, advertising, or other
businesses; (v) advertising, sponsorship, business, sales or marketing tactics, strategies or information; (vi) policies, practices, procedures or
techniques; (vii) trade secrets or other intellectual property; (viii) information, theories or strategies relating to litigation, arbitration,
mediation, investigations or matters relating to governmental authorities; (ix) terms of agreements with third parties and third party trade
secrets; (x) information regarding employees, talent, agents, consultants, advisors or representatives, including their compensation or other
human resources policies and procedures; (xi) information or strategies relating to any potential or actual business development transactions
and/or any potential or actual business acquisition, divestiture or joint venture, and (xii) any other information the disclosure of which may
have an adverse effect on the Covered Parties’ business reputation, operations or competitive position, reputation or standing in the
community.
(b) Notwithstanding the foregoing, the obligations of this section, other than with respect to employee or customer information, shall
not apply to Confidential Information that is in the public domain (through no breach by you) or specifically exempted in writing by the
applicable Covered Party from the applicability of this Agreement.
(c) Notwithstanding anything contained elsewhere in this Agreement, (i) you are authorized to make any disclosure which, in the
written advice of outside counsel, is required of you by any federal, state or local laws or judicial, arbitral or governmental agency
proceedings, after providing the Company with prior written notice (to the extent legally permissible) and an opportunity to respond prior to
such disclosure (to extent reasonably practicable), and (ii) you are authorized to disclose Confidential Information to your personal attorney,
solely for the purpose of, and to the extent necessary to, obtain personal legal advice.
(d) You agree not to issue any press release or public statement regarding your employment by the Company and/ or the
commencement thereof unless (i) so disclosed with the
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Joseph Yospe
Page 8
prior written consent of the Company, or (ii) it is, in the written opinion of outside counsel, required and then only to the extent so required, by
applicable law.
2. Additional Understandings
You agree for yourself and others acting on your behalf, that you (and they) will not disparage, make negative statements about (either
“on the record” or “off the record”) or act in any manner which is intended to or does damage to the good will of, or the business or personal
reputations of the Company, any of its affiliates or any of their respective officers, directors, employees, successors and assigns (including,
without limitation, any former officers, directors or employees of the Company and/ or its affiliates, to the extent such individuals served in
any such capacity at any point during the Term).
This Agreement in no way restricts or prevents you from providing truthful testimony as is required by court order or other legal
process; provided that you afford the Company written notice and an opportunity to respond prior to such disclosure.
If requested by the Company, you agree to deliver to the Company upon the termination of your employment, or at any earlier time the
Company may request, all memoranda, notes, plans, files, records, reports, and software and other documents and data (and copies thereof
regardless of the form thereof (including electronic copies)) containing, reflecting or derived from Confidential Information or the Materials
(as defined below) of the Company or any of its affiliates which you may then possess or have under your control. If so requested, you shall
provide to the Company a signed statement confirming that you have fully complied with this paragraph.
In addition, you agree that the Company is the owner of all rights, title and interest in and to all documents, tapes, videos, designs,
plans, formulas, models, processes, computer programs, inventions (whether patentable or not), schematics, music, lyrics and other technical,
business, financial, advertising, sponsorship, sales, marketing, customer or product development plans, forecasts, strategies, information and
materials (in any medium whatsoever) developed or prepared by you or with your cooperation in any way in connection with your
employment by the Company (the “Materials”). The Company will have the sole and exclusive authority to use the Materials in any manner
that it deems appropriate, in perpetuity, without additional payment to you. You agree to perform all actions reasonably requested by the
Company (whether during or after the Term) to establish and confirm the Company’s ownership of such Materials (including, without
limitation, the execution and delivery of assignments, consents, powers of attorney and other instruments) and to provide reasonable assistance
to the Company or any of its affiliates in connection with the prosecution of any applications for patents, trademarks, trade names, service
marks or reissues thereof or in the prosecution or defense of interferences relating to any Materials. If the Company is unable, after reasonable
effort, to secure your signature on any such papers, any executive officer of the Company shall be entitled to execute any such papers as your
agent and attorney-in-fact, and you hereby irrevocably designate and appoint each executive officer of the Company as your agent and
attorney-in-fact to execute any such papers on your behalf, and to take any and all actions as the Company may deem necessary or desirable in
order to protect its rights and interests in any Materials, under the conditions described in this sentence.
In addition, you agree for yourself and others acting on your behalf, that you (and they) shall not, at any time, participate in any way in
the writing or scripting (including, without limitation, any “as told to” publications) of any book, article, periodical, periodical story, movie,
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Joseph Yospe
Page 9
play, other written or theatrical work, or video that (i) relates to your services to the Company or any of its affiliates or (ii) otherwise refers to
the Company or its respective businesses, activities, directors, officers, employees or representatives, without the prior written consent of the
Company.
3. Further Cooperation
Following the date of termination of your employment with the Company, you will no longer provide any regular services to the
Company or represent yourself as a Company agent. If, however, the Company so requests, you agree to use commercially reasonable good
faith efforts to cooperate fully with the Company in connection with any matter with which you were involved prior to such employment
termination, or in any litigation or administrative proceedings or appeals (including any preparation therefore) where the Company believes
that your personal knowledge, attendance or participation could be beneficial to the Company or its affiliates. This cooperation includes,
without limitation, participation on behalf of the Company and/ or its affiliates in any litigation, administrative or similar proceeding, including
providing truthful testimony.
The Company will provide you with reasonable notice in connection with any cooperation it requires in accordance with this section
and will take reasonable steps to schedule your cooperation in any such matters so as not to materially interfere with your other professional
and personal commitments. The Company will reimburse you for any reasonable out-of-pocket expenses you reasonably incur in connection
with the cooperation you provide hereunder as soon as practicable after you present appropriate documentation evidencing such expenses. You
agree to provide the Company with an estimate of any such individual expense of more than $1,000 before it is incurred.
4. No-Hire or Solicit
During the Term and thereafter through the first anniversary of the date on which your employment with the Company has terminated
for any reason, you agree not to hire, seek to hire, or cause any person or entity to hire or seek to hire (without the prior written consent of the
Company), directly or indirectly (whether for your own interest or any other person or entity’s interest) any employee of the Company or any
of its affiliates. This restriction does not apply to any employee who was not an employee of the Company or any of its affiliates at any time
during the six-month period immediately preceding your solicitation. This restriction does not apply to any former employee who was
discharged by the Company or any of its affiliates. In addition, this restriction will not prevent you from providing references. For the
avoidance of doubt, a general (non-targeted), publicly-accessible advertisement (or web posting) of an open employment position will not in
and of itself be deemed to be a breach of the solicitation restrictions set forth in this paragraph.
5. Specific Performance; Injunctive Relief
You understand and agree that (i) the provisions of this Annex I are reasonable and appropriate for the Company’s protection of its
legitimate business interests, (ii) the consideration provided under the Agreement is sufficient to justify the restrictions and limitations
contained in this Annex I, and (iii) the Company will suffer immediate, irreparable harm in the event you breach any of your obligations under
the covenants and agreements set forth in this Annex I, that monetary damages will be inadequate to compensate the Company for such breach
and that the Company shall be entitled to injunctive relief as a remedy for any such breach (or
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Joseph Yospe
Page 10
threatened breach). Such remedy shall not be deemed to be the exclusive remedy in the event of breach by you of any of the covenants or
agreements set forth in this Annex I, but shall be in addition to all other remedies available to the Company at law or in equity. You hereby
waive, to the extent you may legally do so, any requirement for security or the posting of any bond or other surety in connection with any
temporary or permanent award of injunctive or other equitable relief, and further waive, to the extent you may legally do so, the defense in any
action for specific performance or other equitable remedy that a remedy at law would be adequate. Notwithstanding anything to the contrary
contained in this Agreement, in the event you violate the covenants and agreements set forth in this Annex I in any material respect, then, in
addition to all other rights and remedies available to the Company, the Company shall have no further obligation to pay you any severance
benefits or to provide you with any other rights or benefits to which you would have been entitled pursuant to this Agreement had you not
breached the covenants and agreements set forth in this Annex I.
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Joseph Yospe
Page 11
ANNEX II
This Annex II constitutes part of the Agreement dated January 23, 2020 (the “Agreement”) by and between Joseph Yospe (“You”) and
The Madison Square Garden Company (the “Company”).
The provisions of this Annex II shall remain in effect during your employment by the Company and for one year following the
termination of your employment for any reason; provided, however, that if your employment is terminated either (i) by the Company for any
reason other than Cause or (ii) by you for Good Reason and Cause doesn’t then exist, then the provisions of this Annex II shall automatically
expire on such Termination Date (but will be included in the Company’s proposed severance agreement which, for the avoidance of doubt,
you will not be required to sign if you wish to waive your rights to the severance benefits described in the Agreement).
Capitalized terms contained herein, and not otherwise defined herein, shall have the meanings ascribed to them in the Agreement (or in
the Annex I attached thereto).
Non-Compete
You acknowledge that due to your executive position in the Company and the knowledge of the Company’s and its affiliates’
confidential and proprietary information which you will obtain during the term of your employment hereunder, your employment by certain
businesses would be irreparably harmful to the Company and/or its affiliates. During your employment with the Company and thereafter
through the first anniversary of the date on which your employment with the Company has terminated for any reason, you agree not to (other
than with the prior written consent of the Company), become employed by, advise, consult, have any material interest in or otherwise perform
services for any Competitive Entity (as defined below). A “Competitive Entity” shall mean any (A) (i) NHL or NBA team located in New
York, New Jersey or Connecticut, or (ii) any arena or theater (with at least 1,000 seats) that competes in the same city as any of the Company’s
arenas or theaters, respectively, or (B) affiliate of any person or entity that operates any of the types of businesses described in clause (A)
above, provided that you may become employed or otherwise provide services to such an affiliate of a Competitive Entity, so long as (x) your
services are neither provided to, nor benefit, such Competitive Entity described in clause (A) and (y) the affiliate is not a direct or indirect
parent company of the Competitive Entity described in clause (A) if the Competitive Entity subsidiary constitutes more than 30% of the total
revenue of the parent company consolidated family of companies. Additionally, the ownership by you of not more than 1% of the outstanding
equity of any publicly traded company shall not, by itself, be a violation of this Paragraph.
By accepting the provisions set forth in this Annex II, you understand that the terms and conditions of this Annex II may limit your
ability to earn a livelihood in a business similar to the business of the Company and its affiliates, but nevertheless hereby agree that the
restrictions and limitations hereof are reasonable in scope, area and duration, and that the consideration provided under the Agreement and the
severance agreement is sufficient to justify the restrictions and limitations contained herein which, in any event (given your education, skills
and ability), you do not believe would prevent you from otherwise earning a living. You further agree that the restrictions are reasonable and
necessary, are valid and enforceable under New York law, and do not impose a greater restraint than necessary to protect the Company’s
legitimate business interests.
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
Mr. Joseph Yospe
Page 12
You understand and agree that the Company will suffer immediate, irreparable harm in the event you breach any of your obligations
under the covenants and agreements set forth in this Annex II, that monetary damages will be inadequate to compensate the Company for such
breach and that the Company shall be entitled to injunctive relief as a remedy for any such breach (or threatened breach). Such remedy shall
not be deemed to be the exclusive remedy in the event of breach (or threatened breach) by you of any of the covenants or agreements set forth
in this Annex II, but shall be in addition to all other remedies available to the Company at law or in equity. You hereby waive, to the extent
you may legally do so, (i) any requirement for security or the posting of any bond or other surety in connection with any temporary or
permanent award of injunctive or other equitable relief, and (ii) the defense in any action for specific performance or other equitable remedy
that a remedy at law would be adequate. Notwithstanding anything to the contrary contained in the Agreement, in the event you violate the
covenants and agreements set forth in this Annex II, in addition to all other rights and remedies available to the Company, the Company shall
have no further obligation to pay you any severance benefits or to provide you with any other rights or benefits to which you would have been
entitled pursuant to the Agreement or the severance agreement had you not breached the covenants and agreements set forth in this Annex II.
The restrictions contained in this Annex II shall be extended on a day-for-day basis for each day during which you violate the
provisions of this Annex II in any respect.
THE MADISON SQUARE GARDEN COMPANY
TWO PENNSYLVANIA PLAZA, NEW YORK, NY 10121-0091
TEL 212-465-6000
CERTAIN CONFIDENTIAL INFORMATION, IDENTIFIED BY BRACKETED ASTERISKS “[*****]”, HAS BEEN OMITTED FROM THIS EXHIBIT
BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED.
Exhibit 10.69
ARENA LICENSE AGREEMENT
between
MSG ARENA, LLC
and
NEW YORK KNICKS, LLC
Dated as of April 15, 2020
TABLE OF CONTENTS
ARTICLE I DEFINITIONS
ARTICLE II TERM
Section 2.01
ARTICLE III LICENSE FEE
Section 3.01
Section 3.02
ARTICLE IV USE OF ARENA
Term; Commencement Date
License Fee
Payment of License Fee
Section 4.01
Section 4.02
Section 4.03
Section 4.04
Section 4.05
Section 4.06
Section 4.07
Section 4.08
Arena Areas
Knicks Use
Licensor’s Right of Entry
Scheduling
Alterations
Manner of the Knicks’ Use
Knicks Misuse
Surrender
ARTICLE V TICKETS, SUITES AND CLUBS
Section 5.01
Section 5.02
Section 5.03
Section 5.04
Section 5.05
Section 5.06
Section 5.07
Section 5.08
Section 5.09
Section 5.10
Prices
Ticket Revenues
Suites; Madison Club; The Loft
Future Ticket and Premium Products
Box Office; Ticket Printing; In-Arena Ticket Sales
Ticket Agent
Ticket Settlement Process
Access to Tickets
Credentials and Passes
Admission to Arena
ARTICLE VI CONCESSIONS
Section 6.01
Section 6.02
Section 6.03
Section 6.04
F&B Concessions and Catering
Team Merchandise
Non-Team Merchandise
Third-Party Contracts
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Section 6.05
Section 6.06
Operation on a Fair Basis; Standard of Service
Settlement
ARTICLE VII SIGNAGE AND SPONSORSHIPS
Section 7.01
Section 7.02
Section 7.03
Section 7.04
Section 7.05
Section 7.06
Section 7.07
Definitions
Team Sponsorship Assets
Arena Game Shared Sponsorship Assets
Non-Team Sponsorship Assets
Arena Naming Rights
Other Revenue
Signage and Sponsorship Settlement Process
ARTICLE VIII BROADCASTING
Section 8.01
Section 8.02
Broadcast Rights and Facilities
Broadcast Renovations
ARTICLE IX LICENSOR SERVICES
Section 9.01
Section 9.02
Section 9.03
Section 9.04
Section 9.05
Section 9.06
Section 9.07
General Services
Game Day Services
Delta Club and JP Morgan Club
Staffing Levels for Certain Services
Budgeting and Estimates
Settlement
Provision of Licensor Services
ARTICLE X PROMOTION; TRADEMARKS; DATA OWNERSHIP
Section 10.01
Section 10.02
Section 10.03
Promotional Outlets
Trademark Licenses
Customer Data
ARTICLE XI EXCLUSIVITY COVENANT
Section 11.01
Covenant
ARTICLE XII CASUALTY AND CONDEMNATION
Section 12.01
Section 12.02
Section 12.03
Section 12.04
Termination or Restoration Due to Condemnation
Termination or Restoration Due to Casualty
Condemnation Proceeding and Awards
Temporary Taking
ii
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27
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29
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Section 12.05
Section 12.06
Section 12.07
Inability to Timely Restore; Estimate of Time and Cost to Restore
Replacement Arena
Intention of the Parties
ARTICLE XIII INDEMNIFICATION
Section 13.01
Section 13.02
General Indemnification
Notice of Claims and Rights to Defend and Settle Claims
ARTICLE XIV INSURANCE AND SUBROGATION
Section 14.01
Section 14.02
Section 14.03
Section 14.04
Section 14.05
Section 14.06
Section 14.07
Section 14.08
Knicks Insurance Coverage
Knicks Insurance Requirements
Knicks Certificates of Insurance
Knicks Waiver of Subrogation
Licensor Insurance Coverage
Licensor Insurance Requirements
Licensor Certificates of Insurance
Licensor Waiver of Subrogation
ARTICLE XV WORK STOPPAGE
Section 15.01
Section 15.02
Section 15.03
Impact on License Fee
Treatment of Refunds or Credits
Scheduling
ARTICLE XVI CERTAIN TAXES
Section 16.01
Section 16.02
Property Taxes
Commercial Rent Tax
ARTICLE XVII KNICKS DEFAULT; LICENSOR’S RIGHTS AND REMEDIES
Section 17.01
Section 17.02
Section 17.03
Section 17.04
Knicks Default
Remedies of Licensor
Remedies of Licensor for an Exclusivity Breach
League’s Right to Notice of and Cure Knicks Defaults
iii
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ARTICLE XVIII LICENSOR DEFAULT; KNICKS’ RIGHTS AND REMEDIES; RIGHTS IN THE EVENT OF REPEAL OF
PROPERTY TAX EXEMPTION
Section 18.01
Section 18.02
Section 18.03
Licensor Default
Remedies of the Knicks
Rights in the Event of Repeal of Property Tax Exemption
ARTICLE XIX ASSIGNMENT
Section 19.01
Section 19.02
Section 19.03
Licensor Assignment
Knicks Assignment
No Other Assignment
ARTICLE XX MISCELLANEOUS
Section 20.01
Section 20.02
Section 20.03
Section 20.04
Section 20.05
Section 20.06
Section 20.07
Section 20.08
Section 20.09
Section 20.10
Section 20.11
Section 20.12
Section 20.13
Section 20.14
Section 20.15
Section 20.16
Section 20.17
Section 20.18
SCHEDULES
Force Majeure
Consents and Approvals
Entire Agreement
Notices
Successors Bound
Governing Law; Disputes
Captions and Headings; Certain Rules of Construction
Counterparts
Confidentiality
League Rules
Superior Interests
Severability
Waiver
Further Assurances
No Third-Party Beneficiary; Enforcement of Third-Party Agreements
Books and Records
Audit Rights
Access to Financial Information
iv
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59
ARENA LICENSE AGREEMENT
This ARENA LICENSE AGREEMENT (this “Agreement”) is made as of April 15, 2020 (the “Effective Date”) between MSG
Arena, LLC, a Delaware limited liability company (“Licensor”), and New York Knicks, LLC, a Delaware limited liability company (the
“Knicks”). Licensor and the Knicks are each referred to individually as a “Party” and collectively as the “Parties.”
RECITALS
A. Licensor owns and operates the arena commonly known as Madison Square Garden, which is located at 4 Pennsylvania Plaza, New
York, New York 10001 that contains approximately 18,800 seats for basketball games, and is suitable for the exhibition of
basketball games and for other purposes (the “Arena”).
B. New York Knicks, LLC owns and operates the professional basketball team known as the New York Knicks (the “Team”) in the
National Basketball Association (the “NBA” or the “League”).
C. Licensor wishes to grant the Knicks, on behalf of the Team, certain rights to use specified parts of the Arena at specified times, and
the Knicks desire to so use the Arena at such times, upon the terms and conditions set forth in this Agreement.
Now, therefore, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
[*****]
“Advertising” means, collectively, all advertising, sponsorship and promotional activity, signage, messages and displays of every kind
and nature at or regarding the Arena, whether audio or visual and whether now existing or developed in the future, including the following: (i)
the right to name the Arena or any portion thereof, including identifying such name on the Arena concourses, the entrances to the Arena,
premium seating areas or any other areas at the Arena; (ii) permanent, non-permanent and transitory signage or advertising displayed on
permanent (e.g., fixed panel) or non permanent (e.g., rotating) advertising panels or on the interior or exterior of the Arena (including Arena
marquee boards and other exterior signage); (iii) advertising appearing on fixtures or equipment (such as scoreboard advertising and canopy
advertising); (iv) audio or video public address advertising and message board advertising; (iv) electronic insertion, fascia boards, liquid
electronic displays, ribbon boards and other forms of electronic signage (“LED Signage”); (v) print and display advertising, including
advertising on or in game programs, schedules, tickets and yearbooks; (vii) promotional events or activities sponsored by corporate
partners; (viii) the exhibition and promotion of products and services at the Arena (e.g., kiosks and special areas in the concourse); (ix)
advertising worn or carried by concessionaire personnel or other personnel engaged in the operation of any Arena event; (x) advertising
affixed to or included with cups, napkins, utensils, plates or other similar items used to consume Concessions at the Arena (“Concession
Items”); (xi) advertising at concession areas; and (xii) promotional or premium item give-aways.
“Affiliate” means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by, or under
direct or indirect common control with, such specified Person, or which is a director, officer, employee, or partner (limited or general) of such
specified Person, but with respect to either Party specifically excluding the other Party and the other Party’s publicly owned parent and such
parent entity’s direct and indirect subsidiaries. For the purpose of this definition, “control”, when used with respect to any specified Person,
means the power to direct or cause, directly or indirectly, the direction of the management and policies of such Person whether through the
voting of securities, by contract or otherwise. The terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Agreement” has the meaning set forth in the preamble.
“Arena” has the meaning set forth in Recital A.
“Arena Agency Agreements” has the meaning set forth in Section 7.02(b).
“Attendance Based Allocation” has the meaning set forth in Schedule 6.01.
“Auditing Party” has the meaning set forth in Section 20.17.
“Books and Records” has the meaning set forth in Section 20.16.
“Casualty” shall mean any damage, destruction or other property casualty of any kind or nature, ordinary or extraordinary, foreseen or
unforeseen resulting from any cause, including any Force Majeure event.
“Catering Services” and “Catering Gross Receipts” have the meanings set forth in Schedule 6.01.
“Commencement Date” has the meaning set forth in Section 2.01.
“Common Areas” has the meaning set forth in Schedule 4.01.
“Concessions” means F&B Concessions, Team Merchandise sold or provided at the Arena, and Non-Team Merchandise.
“Condemnation” means a taking by eminent domain, condemnation or appropriation by any governmental authority or other Person
with the power of eminent domain for any public or private use or purpose.
2
“Condemnation Award” means all sums, amounts or other compensation for the Arena payable to the Knicks or Licensor as a result
of or in connection with any Condemnation.
“Convenience Fees” has the meaning set forth in Section 5.06(a).
“Contract Year” means, other than the Initial Contract Year, each period of the Term from July 1 through the immediately following
June 30.
“Courtside Advertising” has the meaning set forth in Section 7.01.
“Customer Data” has the meaning set forth in Section 10.03(a).
“Effective Date” has the meaning set forth in the preamble.
“Exclusivity Breach” has the meaning set forth in Section 17.01(e).
“Exhibition and Regular Season Home Games” means games played by the Team during the exhibition season or regular season of
the League where the Team (and not the opposing team) has the right to designate the location of such game or which is considered one of the
Team’s home games by the League for purposes of League Rules, standings or scheduling.
“F&B Concessions” and “F&B Concessions Gross Receipts” have the meanings set forth in Schedule 6.01.
“Facility Ticket Fee” has the meaning set forth in Section 5.02(c).
“First Full Contract Year” means July 1, 2020 through June 30, 2021.
“Force Majeure” has the meaning set forth in Section 20.01.
“Game Day Services” has the meaning set forth in Section 9.02.
“General Services” has the meaning set forth in Section 9.01.
“Gross Receipts” has the meaning set forth in Schedule 6.01.
“Home Date” means each date on which a Home Game is scheduled.
“Home Games” means collectively, Exhibition and Regular Season Home Games and Playoff Home Games.
“Initial Contract Year” means the period beginning on the Commencement Date through June 30, 2020.
“Joint Sponsors” has the meaning set forth in Section 7.02(b).
“Knicks” has the meaning set forth in the preamble.
“Knicks Default” has the meaning set forth in Section 17.01.
3
“Knicks Event” means Home Games and Other Knicks Events.
“Knicks Misuse” has the meaning set forth in Section 4.07.
“Knicks’ Personnel and Guests” means the personnel, guests and invitees of the Knicks (including holders of tickets of admission to
the Arena, holders of press and media credentials, and visiting team personnel).
“League” has the meaning set forth in Recital B.
“League Rules” means (a) all of the mandates, rules, regulations, policies, bulletins, directives, memoranda, resolutions and
agreements of the NBA (or its members generally), the other NBA Entities, their respective governing bodies (including the NBA Board of
Governors and the committees thereof), and the NBA Commissioner generally applicable to members of the NBA and (b) all agreements and
arrangements to which the Knicks or the Team is (or after the date of this Agreement may become) subject or by which the Knicks or the
Team or their assets are (or may become) bound with or in favor of any of the NBA Entities, including without limitation the Transaction
Agreement dated as of the date hereof, in each case, as they presently exist or as they may, from time to time, be entered into, created or
amended, including the Constitution and By-Laws of the NBA, the operations manual of the NBA, any collective bargaining agreement to
which the NBA is a party, trademark and other intellectual property license agreements and all current and future television, radio, and other
agreements involving the broadcast of NBA games.
“License Fee” has the meaning set forth in Section 3.01.
“Licensor” has the meaning set forth in the preamble.
“Licensor Default” has the meaning set forth in Section 18.01.
“Licensor Promotion” has the meaning set forth in Section 10.01(a).
“Licensor Services” means, collectively, General Services and Game Day Services.
“Madison Club” has the meaning set forth in Section 5.03(d).
“Maximum Credit or Refund” has the meaning set forth in Section 15.02.
“MSG Sports” means MSG Sports, LLC, the parent company of the Knicks and the Rangers.
“NBA” has the meaning set forth in Recital B.
“NBA Entities” means the NBA, NBA Properties, Inc., NBA Media Ventures, LLC, NBA Development League Holdings, LLC,
WNBA Holdings, LLC, any other entity formed generally by the NBA members and each direct and indirect subsidiary of any of the
foregoing, and each of their respective successors and assigns.
4
“Net Profits” has the meaning set forth in Schedule 6.01.
“No Fault Occurrence” has the meaning set forth in Section 18.03.
“Non-Auditing Party” has the meaning set forth in Section 20.17.
“Non-Team Merchandise” means all programs, other publications, and merchandise other than Team Merchandise.
“Other Arena Event” has the meaning set forth in Section 4.04(c).
“Other Knicks Event” has the meaning set forth in Section 4.04(b).
“Party” or “Parties” has the meaning set forth in the preamble.
“Person” means any individual, corporation, company, voluntary association, partnership, incorporated organization, trust, limited
liability company, or any other entity or organization.
“Playoff Home Games” means games played after the end of the League’s regular season as part of its championship tournament, for
which the Team must qualify based on its regular season record, where the Team (and not the opposing team) has the right to designate the
location of such game or which is considered one of the Team’s home games by the League for purposes of League Rules or scheduling.
“Property Tax Exemption” has the meaning set forth in Section 16.01.
“Property Tax Exemption Agreement” has the meaning set forth in Section 16.01.
“Rangers” has the meaning set forth in Section 4.04(a).
“Rangers Games” has the meaning set forth in Section 4.04(a).
“Representatives” has the meaning set forth in Section 20.09.
“Standard” means, with respect to the applicable requirement, obligation or matter, (a) in compliance with applicable law, (b) in
compliance with League Rules (including the NBA Arena Standards) and (c) at a first-class level equal to or better than that at which NBA
arenas in major U.S. markets are then operated, maintained and improved for NBA games (in the case of improvements, taking into reasonable
consideration the age and location of the Arena and its existing structural limitations), and in no event less than the highest standard of quality
and manner in which the Arena (i) was operated, maintained and improved historically (post 2011-2013 transformation) with respect to Home
Games and (ii) will be operated, maintained and improved for Other Arena Events.
“Suite 200” has the meaning set forth in Section 5.03(h).
“Suites” shall mean the premium locations within the Arena currently designated as “Event Level Suites,” “Madison Level Suites” and
“Signature Level Suites” as more specifically described in Schedule 4.01, and any replacement suites in those locations.
5
“Team” has the meaning set forth in Recital B.
“Team Areas” has the meaning set forth in Schedule 4.01.
“Team Merchandise” means merchandise (including programs and other publications) that bears the Team’s name, logo(s), or other
intellectual property relating to the Team, or any other League intellectual property, including any merchandise relating to or depicting (as the
case may be) the League and/or any of its teams, players, and/or events (e.g., the NBA All-Star Game, the NBA Playoffs,), or the logo(s) of
any of the foregoing.
“Team Merchandise Allocation” has the meaning set forth in Section 6.02(d).
“Term” has the meaning set forth in Section 2.01.
“The Loft” has the meaning set forth in Section 5.03(d).
“Ticket” or “Tickets” has the meaning set forth in Section 5.01.
“Ticket Agent” has the meaning set forth in Section 5.06(a).
“Ticket Agent Agreement” has the meaning set forth in Section 5.06(a).
“Untenantable Condition” means a condition of the Arena that occurs on account of a Casualty or Condemnation and, as a result of
which League Rules or applicable law prohibit the playing of Home Games at the Arena or would entail denial of access to or loss of a
material portion of (i) the general seating areas of the Arena or (ii) revenues of the Knicks derived from the Arena.
“VIP Club Services” has the meaning set forth in Section 9.03.
“VIP Clubs” has the meaning set forth in Section 9.03.
“Work Stoppage” has the meaning set forth in Section 15.01.
ARTICLE II
TERM
Section 2.01 Term; Commencement Date. The term of this Agreement shall commence on April 17, 2020 (the “Commencement
Date”) and, unless earlier terminated in accordance with the terms of this Agreement, shall end on June 30, 2055 (the “Term”).
ARTICLE III
LICENSE FEE
Section 3.01 License Fee. The Knicks shall pay to Licensor a license fee, without any right of offset, reduction or abatement (except
as expressly provided in this Agreement), as follows: (a) for the Initial Contract Year, a prorated amount equal to $21,800,000 divided by
forty-
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four (44), multiplied by the number of Exhibition and Regular Season Home games scheduled to be played in the Arena in the Initial Contract
Year; (b) for the First Full Contract Year, $22,454,000; and (c) for each subsequent Contract Year, 103% of the license fee for the immediately
preceding Contract Year (the “License Fee”).
Section 3.02 Payment of License Fee. For each Contract Year, the Knicks shall pay the License Fee in twelve (12) equal
installments on the first business day of each month during the Contract Year, except that the License Fee for the Initial Contract Year shall be
paid in equal monthly installments on the first business day of the month following the Commencement Date and the first business day of each
remaining month in the Initial Contract Year.
ARTICLE IV
USE OF ARENA
Section 4.01 Arena Areas. The Arena includes the areas identified on Schedule 4.01 attached hereto. The Parties shall regularly
coordinate and discuss with one another and accommodate the other’s reasonable requests for adjustment thereto. The Parties acknowledge
and agree that the precise locations, square footage, appearance and amenities of the Common Areas and Team Areas set forth therein shall be
subject to change from time to time during the Term in accordance with Section 4.05.
Section 4.02 Knicks Use. Licensor hereby grants to the Knicks and Knicks’ Personnel and Guests, and the Knicks hereby accept
from Licensor, for itself and the Knicks’ Personnel and Guests, a license to use the Arena as follows:
(a) Common Areas and Team Areas. Subject to League Rules, on each Home Date, beginning at approximately the earlier of
10:00 a.m. or three (3) hours prior to the start of any Home Game, until two (2) hours after the completion of such Home Game, the Knicks
shall have the exclusive right and license to use the Common Areas and the Team Areas for the purpose of playing of Home Games and
conducting related activities, and the presentation thereof by any and all means, live and over radio and television and all other means of
communication now existing and hereafter developed, and such other uses expressly permitted in this Agreement or as may be agreed to by the
Parties. Notwithstanding the foregoing start time, Licensor may schedule Other Arena Events (as defined below) on Home Dates (each, a
“Shared Date”) in accordance with Section 4.04(c); provided that in no event shall the Knicks have exclusive access to the Common Areas
and Team Areas any later than approximately three (3) hours prior to the start of any Home Game (or as otherwise required by League Rules).
Licensor shall reimburse the Knicks for any costs incurred by the Knicks solely as a result of a Home Game occurring on a Shared Date (e.g.,
visiting team relocating a shootaround). In addition, the Knicks shall have reasonable access, on a non-exclusive basis, to the Common Areas
and the Team Areas for purposes related to the business or basketball operations of the Knicks at reasonable times on days that are not Home
Dates and during periods on Home Dates other than those specified above (but in no case during ticketed Other Arena Events (as defined in
Section 4.04(c) below)), provided the Knicks’ use of the Common Areas may not unreasonably interfere with any use by Licensor or
authorized use by its other licensees (including the Rangers).
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(b) Access. All rights and licenses set forth in this Section 4.02 include in favor of the Knicks and the Knicks’ Personnel and
Guests (including holders of tickets of admission to the Arena, holders of press and media credentials, and visiting team personnel), subject to
the Arena’s safety and security protocols as provided in Section 4.06(b), (i) rights and licenses of entry, ingress and egress over and across all
applicable portions of the Arena, and (ii) the right and license to bring onto the Arena (and to permit the Knicks’ Personnel and Guests to bring
into the Arena), and retain ownership and control of, items of personal property and equipment.
(c) Grant of License. This Agreement is intended to, and shall be construed as, a grant of a license by Licensor to the Knicks
and the Knicks’ Personnel and Guests, and shall not operate to vest in the Knicks any ownership or leasehold interest, or other real estate
interest, in the Arena or the property of Licensor, whether real or personal, tangible or intangible, or any use or possessory rights other than
those rights expressly granted by the license hereunder (and then subject to and in accordance with all of the provisions of this Agreement).
Section 4.03 Licensor’s Right of Entry. Notwithstanding the provisions of Section 4.02, but subject to League Rules, Licensor and
its agents and representatives shall have the right to enter into and upon any and all parts of the Arena, including the Team Areas and the
Common Areas, as necessary for the purpose of carrying out its obligations under this Agreement, to operate the Arena, to perform necessary
safety, security and maintenance activities and for other purposes that do not unreasonably interfere with the Knicks’ rights hereunder.
Section 4.04 Scheduling.
(a) Team Games. The scheduling procedure for Home Games shall continue in a manner consistent with past practice, subject
to, and at all times in accordance with, League Rules (including, without limitation, with respect to playoff scheduling). It is understood
between the Parties that Licensor is entering into a simultaneous license with New York Rangers, LLC (the “Rangers”), on behalf of the
professional hockey team known as the New York Rangers, to host hockey games (“Rangers Games”) in the Arena. The Parties will continue
to cooperate with each other in good faith recognizing that Licensor has obligations to the Rangers. Consistent with past practice, Licensor will
jointly coordinate with the League and the National Hockey League in scheduling Home Games and Rangers Games. In addition, each Party
shall (i) use reasonable efforts to avoid material business impacts on the other Party where such Party has the ability to do so and (ii)
reasonably cooperate and honor requests for changes to previously scheduled or held dates. For the avoidance of doubt, in the event of any
conflict between any of the foregoing and League Rules, League Rules shall control and govern.
(b) Other Knicks Events and Usage.
(i) Subject to the terms of this subsection, the Knicks shall be entitled to license the Arena without payment of an
incremental license fee on up to two (2) occasions per Contract Year, to present certain Team-related events other than Home Games
(e.g., open practices, try-outs; scrimmages; camps, clinics and youth academies; marketing, promotion or other related purposes; press
gatherings; Knicks charity events (which may be ticketed); luncheons, meetings, parties ticket sales events, season subscriber events
and similar functions as mutually agreed) (each, an “Other Knicks Event”). Dates
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for Other Knicks Events may be reserved no earlier than sixty (60) in advance of the proposed event and such reservations shall be
subject to any dates previously booked by Licensor for Other Arena Events.
(ii) The Knicks may use such Team Areas and Common Areas, and Licensor shall provide such Licensor Services (for
which Game-Day Services the Knicks shall pay or reimburse Licensor as provided herein), as are reasonably requested by the Knicks
for such Other Knicks Events. Other Knicks Events shall be subject to any other terms and conditions to be negotiated by the Parties.
Unless the Parties agree otherwise with respect to a particular event, all terms of this Agreement applicable to Home Games will apply
to Other Knicks Events.
(iii) At the Knicks’ request, Licensor may, in its discretion, license the Arena and/or other Licensor-owned venues
(e.g., Beacon Theater, Radio City, Tao) to the Knicks to the extent available and without payment of an incremental license fee (the
Knicks shall pay any expenses). Such events may be in addition to Other Knicks Events.
(c) Other Arena Events. Subject to Section 4.04(a), Licensor shall be entitled to schedule Rangers Games, other sporting
events, concerts, and any other types of events in the Arena (each, an “Other Arena Event”), including, for the avoidance of doubt, on the
same day as a Home Game; provided that: (i) no Other Arena Event shall relieve Licensor of its obligations hereunder, including to deliver the
Common Areas and Team Areas to the Knicks in the condition required by ARTICLE IX by or before the times required in Section 4.02(a),
(ii) no Other Arena Event shall be scheduled if it could reasonably be expected to materially interfere with the presentation, use or operation of
the Arena for any previously scheduled Knicks Events (or the revenues derived by the Knicks therefrom) , and (iii) [*****].
Section 4.05 Alterations.
(a) Knicks Alterations.
(i) During the Term, and subject to any existing union jurisdictional arrangement relating to the Arena, the Knicks may
make non-structural alterations to the Team Areas, subject to Licensor’s approval thereof, which approval shall not be unreasonably
withheld, conditioned or delayed (it being understood that Licensor may deny its approval if such alterations would reasonably be
expected to adversely impact in a material way Licensor or any third party who regularly uses the space (e.g. the Rangers)). Licensor
shall reimburse the Knicks for the cost of such alterations to the extent necessary to comply with its obligations under this Agreement,
provided that any such cost must be preapproved in writing by Licensor, which approval shall not be unreasonably withheld,
conditioned or delayed. To the extent those alterations are not necessary for Licensor to comply with its obligations under this
Agreement, those alterations shall be made at the Knicks’ sole cost and expense.
(ii) During the Term, the Knicks may also request that Licensor make alterations to the Team Areas or Common
Areas. Licensor shall make those alterations to the extent necessary to comply with its obligations under this Agreement, at Licensor’s
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sole cost and expense. To the extent those alterations are not necessary for Licensor to comply with its obligations under this
Agreement, those alterations shall be subject to the approval of Licensor, such approval not to be unreasonably withheld, conditioned
or delayed, and shall be made at the Knicks’ sole cost and expense (subject to the Knicks’ approval of Licensor’s plans and costs); it
being understood that Licensor may deny its approval if such alterations would reasonably be expected to adversely impact in a
material way Licensor or any third party who regularly uses the space (e.g. the Rangers).
(b) Licensor Alterations.
(i) Licensor shall have the right to make alterations or other changes to the Arena, in its sole discretion and at its sole
cost and expense; provided that Licensor shall be required to obtain the prior written consent (not to be unreasonably withheld,
conditioned or delayed) of the Knicks to the extent that any such alterations or changes could reasonably be expected to impact the
Knicks’ rights or obligations hereunder, or the presentation, set-up, use or operation of the Arena for any Knicks Event.
(ii) Without limiting ARTICLE IX, Licensor shall be responsible for making alterations, upgrades, modifications and
improvements to the Arena (and the components thereof) at Licensor’s sole cost and expense (subject to Section 4.05(c)), as may be
required from time to time in order to maintain the Arena in accordance with the Standard.
(iii) Alterations intended to generate additional premium seating revenues for both Licensor and the Knicks shall be
governed by the terms of Section 5.04.
(c) Alterations Pursuant to League Rules. Notwithstanding anything to the contrary contained in this Agreement, any
alterations, upgrades, modifications or improvements to the Arena that are made solely to comply with any new or amended League Rules that
are enacted after the Commencement Date shall be made at the Knicks’ sole expense.
(d) The Parties shall cooperate in good faith to agree on the plans and specifications for alterations made under Sections
4.05(a) - (c) and the time period during which such alterations are expected to be made. All such alterations shall (i) be made by Licensor or its
contractors (except for alterations made pursuant to Section 4.05(a)(i)), (ii) comply with all applicable laws, ordinances, orders, regulations
and League Rules, (iii) be completed in a good and workmanlike manner, using new materials or their equivalent, without unreasonable delay,
(iv) not interfere with gameplay in accordance with League Rules and (v) not materially interfere with the presentation, set-up, use or
operation of the Arena for any Knicks Event (or the revenues derived by the Knicks therefrom), without the Knicks’ prior written approval.
Section 4.06 Manner of the Knicks’ Use. At all times during the Term:
(a) The Knicks shall use the Arena in accordance with all League Rules and applicable laws, ordinances, and regulations.
Licensor shall operate the Arena in accordance with all League Rules, applicable laws, ordinances, and regulations. [*****].
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(b) The Knicks and their guests, invitees, patrons, and designees shall be subject to any reasonable and nondiscriminatory
rules and regulations and security procedures that Licensor imposes on the use of the Arena, so long as the same (i) are not inconsistent with
the other provisions of this Agreement (including Licensor’s requirement to maintain and operate the Arena in accordance with the Standard)
or League Rules, and (ii) are uniformly applied to all other occupants and users of the Arena except to the extent necessitated by differing
particular event types.
(c) Each Party shall, at any time and from time to time, upon not less than ten (10) days prior written request from the other
Party, execute, acknowledge and deliver to the requesting Party, in a form reasonably satisfactory to the requesting Party and, if applicable, its
existing or prospective direct or indirect lender or purchaser, a written estoppel statement certifying, (i) that this Agreement is unmodified and
in full force and effect (or, if there have been modifications, that the same is in full force and effect as modified and stating the modifications),
(ii) if true (or, if not entirely true, listing any exceptions), that the requesting Party is not in default hereunder, (iii) the date to which the
License Fee and other charges have been paid in advance, if any, and (iv) such other accurate certifications as may reasonably be required by
the requesting Party or its existing or prospective direct or indirect lender or purchaser, and agreeing to give copies to the requesting Party’s
existing or prospective direct or indirect lender or purchaser of all material notices by the stating Party to the requesting Party, and agreeing to
afford the requesting Party’s existing or prospective direct or indirect lender or purchaser an opportunity to cure any default of the stating Party
within the applicable cure period afforded to the requesting Party hereunder. It is intended that any such statement delivered pursuant to this
subsection may be relied upon by any prospective direct or indirect lender to or purchaser of the Knicks or of the Arena and their respective
successors and assigns.
Section 4.07 Knicks Misuse. The Knicks shall promptly reimburse Licensor for costs of cleaning, repairs or replacements, net of
insurance proceeds received under Article XIV, necessitated by (a) uses by the Knicks not permitted under this Agreement, or (b) grossly
negligent, reckless or willful acts of the Knicks or visiting NBA teams for Knicks Events that cause such damage (collectively, “Knicks
Misuse”).
Section 4.08 Surrender. Upon the expiration of the Term or earlier termination of this Agreement, the Knicks shall promptly vacate
the Arena under the direction of and in the manner reasonably approved by Licensor, and shall surrender all of its keys, access cards, and other
credentials and access items for the Arena to Licensor, and shall inform Licensor of all combinations on all of its locks, safes, and vaults, if
any, in the Arena. Without limiting the foregoing, the Knicks shall not remove any alterations, improvements, or other property (other than
personal property not affixed or attached to the Arena or any elements thereof) from the Arena unless permitted to do so by Licensor, and the
Knicks shall promptly reimburse Licensor for the cost of repairing any damage caused by such removal. Any personal property of the Knicks
which remains in the Arena after the expiration of the Term or earlier termination of this Agreement may, at the option of Licensor, be deemed
to have been abandoned, and, in Licensor’s sole discretion, (a) may be retained by Licensor as its property, (b) shall be disposed of by the
Knicks at the request of Licensor, or (c) may be disposed of by Licensor.
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ARTICLE V
TICKETS, SUITES AND CLUBS
Section 5.01 Prices. As between Licensor and the Knicks, (a) the Knicks shall have sole discretion to control the manifest and
determine the prices and fees (subject to Section 5.06(a)) for all tickets and other indicia authorizing admission (each a “Ticket”) for general
admission seating, standing room and other general admission spectator positions in the Arena for all Knicks Events, and (b) except as
provided below, Licensor shall have sole discretion to control the manifest and determine the license fees to be paid for the Suites, The Loft,
the Madison Club and similar premium spaces developed in accordance with Section 5.03 and Section 5.04 during the Term. There shall be no
limit on the number of complimentary Tickets the Knicks may issue.
Section 5.02 Ticket Revenues.
(a) Ticket Sales. The Knicks shall have the exclusive right to sell and resell all Tickets and retain all revenues from all Ticket
sales and resales, including the Facility Ticket Fee (as defined in Section 5.02(c)), the Knicks’ share of any Convenience Fee (as defined in
Section 5.06(a)), and any personal seat licenses the Knicks may elect to sell, provided, that the Knicks right to sell personal seat licenses shall
be limited to Knicks Events only (and no Other Arena Events) and provided further, that any “form” agreement for the sale or licensing of
personal seat licenses shall be subject to Licensor’s prior approval, not to be unreasonably withheld, conditioned or delayed and the Knicks
shall not make any material alterations to such form agreement that adversely impact Licensor without Licensor’s prior written approval, not
to be unreasonably withheld, conditioned or delayed.
(b) Loaded-Value Tickets. To the extent that the Knicks offer a ticket product where the ticketholder is entitled to gratis
Concessions in addition to seating to a Home Game, Licensor shall provide such Concessions and the Knicks shall remit to Licensor the actual
retail value of any Concessions redeemed by each such ticketholder, which revenue will be included in Team Merchandise revenue (to the
extent that the sale/redemption relates to Team Merchandise) or F&B Concessions Gross Receipts, as applicable. To the extent that the
sale/redemption relates to Non-Team Merchandise, Licensor shall retain all such redeemed amounts. For purposes of clarity, any revenue
associated with loaded-value tickets that is not redeemed for Concessions shall remain the property of the Knicks.
(c) Facility Ticket Fee. [*****] shall charge to all initial Home Game Ticket purchasers a per-Ticket facility fee (the “Facility
Ticket Fee”), in an amount determined from time to time by Licensor following consultation with the Knicks. [*****].
Section 5.03 Suites; Madison Club; The Loft
(a) Suites. Subject to other provisions of this Section 5.03, Licensor shall have the exclusive right to license Suites to third
parties for all or a portion of Knicks Events and Other Arena Events and collect license fees for the privilege of using the Suites and related
amenities. Licensor shall be responsible for all costs of licensing, operating, servicing and maintaining the Suites in accordance with the
Standard. Revenues generated from the licensing of Suites shall be
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allocated as set forth in Section 5.03(b). All of the terms and conditions of such licenses and appurtenant Arena admission tickets and other
rights and obligations related to the occupancy of Suites, shall be governed by separate agreements (each, a “Suite Agreement”) entered into
between Licensor and the licensees of Suites. Licensor’s “form” Suite Agreements shall be subject to the prior written approval of the Knicks
(not to be unreasonably withheld, conditioned or delayed) and Licensor shall not make any material alterations to the form Suite Agreements
or any executed Suite Agreement that adversely impact the Knicks without the Knicks’ prior written approval, not to be unreasonably
withheld, conditioned or delayed.
(b) Suites Revenue.
(i) All-Event Suites. For Suites licensed for all or substantially all Arena events including Home Games (other than
certain major Other Arena Events, including All-Star Games, awards shows, major college championship events, etc.), including those
sold on a half-share, quarter-share or other fractional portion basis, the Knicks shall receive [*****]% of all revenues collected or
received by Licensor from the sale of such Suites (the “Knicks Suites Revenue Share”), net of contracted catering credits (if any),
taxes and credit card fees, and Licensor shall retain the remaining amounts, except as provided in Section 5.03(g) and 6.01(a)
([*****]). In the event of a No Fault Occurrence, the Knicks Suites Revenue Share shall be increased to [*****]%.
(ii) Team-Only and Single Game Suites. The Knicks shall receive all revenues collected or received by Licensor from
the sale of Suites licensed only for individual or packages of Home Games and/or other Knicks Events, net of the retail value of food
and beverage packages included in the license fee (“Included F&B Packages”), contracted catering credits (if any), taxes and credit
card fees, less a Licensor commission of [*****]% of such net revenue (provided that, in the event of a No Fault Occurrence, the
Parties will agree on an appropriate reduction to such commission to account for any reduction in the additional amount that would
have been payable to the Knicks under the last sentence of Section 5.03(b)(i) if all Suites were sold for all Arena events).
(iii) Custom Team and Non-Team Suite Packages. For customized Suite packages (i.e., a pre-determined mix of events
that include Knicks Events and Other Arena Events), revenues shall be proportionally allocated to each event included in such package
based on the then-applicable rate card for the included events. The Knicks shall receive all revenues collected or received by Licensor
attributable to the Knicks Events included in such package, net of Included F&B Packages, contracted catering credits (if any), taxes
and credit card fees, to the extent used during Knicks Events, less a Licensor commission of [*****]% of such net revenue as so
allocated (provided that, in the event of a No Fault Occurrence, the Parties will agree on an appropriate reduction to such commission
to account for any reduction in the additional amount that would have been payable to the Knicks under the last sentence of Section
5.03(b)(i) if all Suites were sold for all Arena events).
(iv) Suite Passes for Knicks Events. Notwithstanding the foregoing, all revenues from the sale or license of passes for
incremental admission to Suites for Knicks Events (commonly known as “suite passes”), net of taxes and credit card fees, shall be
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retained by the Knicks. The parties shall agree on the terms and pricing of such suite passes, which shall be sold by Licensor.
(v) Catering Credits. Any contracted catering credits or Included F&B Packages granted to a Suite licensee as part of a
Suite license shall be included in Catering Gross Receipts as and to the extent used during Knicks Events. Any contracted catering
credits or Included F&B Packages granted to a Suite licensee as part of a (x) single-game or Team-only package or (y) customized
Suite package including Knicks Events and Other Arena Events (as described in Section 5.03(b)(iii)) shall be subject to the prior
written approval of the Knicks, such approval not to be unreasonably withheld, conditioned or delayed. With respect to any contracted
catering credits or Included F&B Packages granted to a Suite licensee as part of any suite package containing a mix of Team and non-
Team events, Licensor shall ensure that such contracted catering credits or Included F&B Packages have the same terms and
conditions, at the Suite licensee’s discretion, at both Knicks Events and Other Arena Events.
(c) Suite 16. The Knicks acknowledge that Suite 16 on the tenth floor of the Arena is currently licensed to the TAO Group, in
which Licensor’s parent company has a majority ownership interest. The Knicks agree that notwithstanding Licensor’s ownership interest in
the TAO Group, the Knicks’ share of the license revenue for this suite shall be calculated based on the fees paid or payable to Licensor by the
TAO Group, and not with respect to any membership or other revenue or income generated by the TAO Group, provided that such fees are
established and maintained on an arms-length basis (it being acknowledged that the fee payable by the TAO Group to Licensor for the twelve-
month period ended June 30, 2019 is arms-length for purposes of this Section 5.03(c)).
(d) The Madison Club and The Loft.
(i) Certain clients will pay Licensor membership fees that entitle them to access (a) the 170-seat defined hospitality and
seating space on the west side of the Arena currently known as the “Madison Club” during all Home Games and all Rangers Games,
boxing, tennis, and NCAA college basketball events at the Arena (the “Madison Club”); and/or (b) the 48-seat defined hospitality and
seating space on the east side of the Arena currently known as “The Loft at Madison Square Garden” during all Arena events including
Home Games (other than certain major Other Arena Events, including All-Star Games, awards shows, major college championship
events, etc.) (“The Loft”). Licensor shall not sell more than 170 or 48 tickets of admission or memberships to the Madison Club or The
Loft, respectively, for any Knicks Events without the prior written consent of the Knicks, not to be unreasonably withheld, conditioned
or delayed.
(ii) Licensor shall be responsible for selling and servicing Madison Club and Loft memberships and operating,
maintaining and servicing the Madison Club and The Loft in accordance with the Standard. The Knicks shall receive [*****]% of all
revenues collected or received by Licensor from the sale of memberships to the Madison Club and The Loft, net of taxes and credit
card fees (the “Knicks Hospitality Share”). The Knicks shall reimburse Licensor for (a) the direct cost of providing complimentary
food and beverage, and (b) the cost of other direct event variable labor (e.g., concierge, coat check,
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etc.), other than labor related to Concessions that are sold, attributable to the Madison Club and The Loft for Home Games, in each
case under (a) and (b), which costs shall be consistent for all events and on a basis as determined in consultation with the Knicks.
Schedule 5.03(d) sets forth the staffing levels for the Madison Club and The Loft as of the 2019-20 Season (which takes into account
the services provided for the Madison Club and The Loft as of the 2019-20 Season). For all Home Games and similar (based on factors
including expected attendance) Other Arena Events, Licensor shall maintain substantially similar levels of service and staffing (as set
forth on Schedule 5.03(d)), provided that the Parties shall regularly coordinate and discuss with one another the appropriate levels of
service and staffing and accommodate the other’s reasonable requests for adjustment thereto. In the event of a No Fault Occurrence, the
Knicks Hospitality Share shall be increased to [*****]%.
(i) To the extent that Licensor sells specialized packages that are different from those referenced in Sections 5.03(d)(i)-
(ii) above, the parties shall coordinate and agree on appropriate pricing, revenue share and/or commissions. To the extent that Licensor
provides members of the Madison Club and/or The Loft with limited amount of gratis Concessions (e.g., through a loaded ticket)
(“Gratis Concessions”), the Parties shall coordinate and mutually agree on appropriate terms, costs and revenue allocations for such
Gratis Concessions.
(ii) All of the terms and conditions of the sale of such memberships shall be governed by separate agreements (the
“Hospitality Agreements”) entered into between Licensor and the members of the Madison Club and The Loft. Licensor’s “form”
Hospitality Agreements shall be subject to the prior written approval of the Knicks (not to be unreasonably withheld, conditioned or
delayed) and Licensor shall not make any alterations to such form Hospitality Agreement or any executed Hospitality Agreement that
materially adversely impact the Knicks without the Knicks’ prior written approval, not to be unreasonably delayed or withheld.
(e) Sales by the Knicks. Licensor may from time to time authorize the Knicks to attempt to license or sell on Licensor’s behalf
the Suites or memberships referred to in this Section 5.03. For purposes of clarity, the Parties agree that the revenue sharing referred to in this
Section 5.03 shall apply whether the license or sale is consummated by Licensor, Knicks or MSG Sports’ employees; provided that, if the
license or sale is of Team-only or single game Suites (as described in Section 5.03(b)(ii)) or custom Team and non-Team Suite packages (as
described in Section 5.03(b)(iii)) and is consummated by the Knicks or MSG Sports, Licensor’s commission on such license or sale shall be
[*****]% of the applicable net revenue.
(f) Settlement. Licensor shall remit to the Knicks on a monthly basis a cash payment equal to the Knicks’ share of revenues
collected or received for the Suites, the Madison Club, The Loft (and any similar premium spaces developed during the Term in accordance
with Section 5.04 ), in each case, in accordance with Section 9.06. To the extent that Licensor receives value in kind as payment for the sale of
licenses or memberships to the Suites, the Madison Club or The Lofts, Licensor shall pay to the Knicks an amount based on the rate card value
of such license or membership (e.g., if Licensor receives value in kind as full payment for an all-Event Suite, Licensor shall pay the Knicks the
Knicks Hospitality Share of the rate card value of such
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Suite license). Licensor shall be responsible for the payment of all taxes and credit card fees with respect to all sales made by Licensor or its
agents pursuant to this Agreement.
(a) Complimentary Suites and Usage.
(i) The Knicks shall have the exclusive right to use without payment of a fee or other consideration one (1) Event
Level Suite and associated tickets for each Knicks Event. Such suite shall be what is currently designated Event Level Suite 20, or
another Event Level Suite as designated by Licensor, subject to Team’s approval, not to be unreasonably withheld, conditioned or
delayed.
(ii) The Knicks may not license to third parties the Suite or associated tickets referred to in subsection (i), provided that
it may request Licensor to attempt to license or sell such Suite or associated tickets for a particular Home Game or Home Games and/or
Other Knicks Events. Any resulting revenue, net of Included F&B Packages, contracted catering credits (if any), taxes and credit card
fees, will be shared by Licensor and the Knicks as if it were a single-game suite license pursuant to Section 5.03(b)(ii). Licensor may
use or license such Suite or associated tickets for Other Arena Events without payment to the Knicks of the revenue share otherwise
attributable to the license of Suites set forth in Section 5.03(b).
(iii) Upon request by the Knicks, and subject to availability, Licensor shall make available, at no cost, one (1)
Madison-level or Signature-level Suite on a Home Game by Home Game basis solely for use by visiting team owners and executives
and their guests.
(iv) Licensor shall have the right to use one (1) Event Level Suite for all Knicks Events and Other Arena Events
without payment to the Knicks of the revenue share otherwise attributable to the license of Suites set forth in Section 5.03(b).
Notwithstanding the foregoing, to the extent Licensor decides to license such Event Level Suite in whole or in part to a third party and
receives a license fee therefor, the Knicks shall receive their applicable revenue share (if any) as provided in Section 5.03(b). Such
suite shall be the Suite currently designated Event Level Suite 19, or another Event Level Suite as designated by Licensor, subject to
Team’s approval, not to be unreasonably withheld, conditioned or delayed.
(v) Unsold Suite, Madison Club and Loft Inventory. Suites and associated tickets related to the Suites, the Madison
Club and the Loft that are not licensed or sold for Home Games may be used by Licensor for prospecting for Suite, Madison Club and
Loft licensees. Additional unsold Suite, Madison Club and Loft inventory may be used to provide for complimentary attendance by
employees of the Knicks, Licensor and their respective Affiliates or for other business relationships in accordance with each
company’s complimentary ticket program. The Parties shall mutually determine how to allocate unsold suite inventory between the
Parties, provided, that if the Parties cannot agree, [*****] of such inventory shall be available to the Knicks for such purposes and
[*****] of such inventory shall be retained by Licensor for such purposes. In no event may the unused Suites or associated tickets
related to Suites, Madison Club or Loft allocated under
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this Section 5.03(g)(v) be licensed or sold by either Party, without the consent of the other Party (not to be unreasonably withheld,
conditioned or delayed), in which case the Knicks shall receive their applicable revenue share as provided in Sections 5.03(b) or
5.03(d).
(b) Suite 200. Licensor shall maintain the executive lounge currently designated “Suite 200” (or a private hospitality area of
substantially similar size offering substantially similar amenities, in the same or a different location in the Arena) for the use of senior
executives and their invited guests (“Suite 200”). The Knicks shall have access to Suite 200 during Home Games in a manner consistent with
past practice and shall bear or reimburse Licensor for all out-of-pocket costs associated with operating Suite 200 for Home Games. Any annual
increase to the aggregate costs charged to the Knicks for operating Suite 200 shall not exceed [*****]% without the Knicks prior written
approval, not to be unreasonably withheld, conditioned or delayed. The Knicks agree that senior executives of Licensor and their invited
guests shall have complimentary access to Suite 200 during Home Games on the same basis as senior executives of the Knicks and their
invited guests.
Section 5.04 Future Ticket and Premium Products.
(a) Licensor, after consultation with and receipt of prior written approval from the Knicks, such approval not to be
unreasonably withheld, conditioned or delayed, may develop new seating products where the ticket purchaser has the option to purchase seats
for multiple event types (e.g., Home Games and Other Arena Events). If the Knicks approve such new seating products, the Knicks shall
provide the required ticket inventory, and Licensor shall provide applicable amenities, at prices and other economic terms and splits to be
negotiated and agreed upon by the Parties.
(b) Licensor, after consultation with and receipt of prior written approval from the Knicks, such approval not to be
unreasonably withheld, conditioned or delayed, may develop new suites and/or seating products (e.g., new or altered premium spaces) where
amenities additional to admission are provided to the ticket purchaser, licensor or member. If the Knicks approve such new seating products,
allocation of capital and operating expenses, revenues and obligations shall be determined in a manner to be agreed upon.
Section 5.05 Box Office; Ticket Printing; In-Arena Ticket Sales.
(a) Box Office Operations. If Licensor generally operates a box office (including will call support) for Other Arena Events,
Licensor will also operate a box office (including will call support) during reasonable business hours, and for all Knicks Events commencing
at the earlier of (i) noon and (ii) the opening of the Arena doors for the applicable Knicks Events and ending no earlier than the
commencement of the third quarter of the Knicks Events, and shall provide substantially equivalent service and staffing, with respect to the
sale of tickets for Home Games and Other Knicks Events to Other Arena Events all in a manner consistent with past practice, provided that the
Parties shall regularly coordinate and discuss with one another the appropriate levels of service and staffing and accommodate the other’s
reasonable requests for adjustment thereto. At the Knicks’ request, Licensor shall share with the Knicks all Customer Data (as defined in
Section 10.03) relating to the Knicks generated through box office operations.
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(b) Full and Partial Season Ticket Packages. If requested by the Knicks and for so long as Licensor is generally printing
tickets for Other Arena Events, Licensor shall coordinate, at the Knicks’ reasonable direction, cost and expense, the printing of Tickets for full
and partial season packages. The Knicks shall sell, invoice and collect all revenues from such Ticket packages in its sole discretion. The
Knicks shall be responsible for all credit card fees and other similar charges in connection with the sale of such Tickets. The Knicks shall
develop any and all creative content to be included on such Tickets printed by Licensor at the Knicks’ request.
(c) Group Ticket Packages. If requested by the Knicks and for so long as Licensor is generally printing tickets for Other Arena
Events, Licensor shall coordinate, at the Knicks’ reasonable direction, cost and expense, the printing of Tickets for group packages. The
Knicks shall sell, invoice and collect all revenues from such Ticket packages in its sole discretion. The Knicks shall be responsible for all
credit card fees and other similar charges in connection with the sale of such Tickets. The Knicks shall develop any and all creative content to
be included on such Tickets printed by Licensor at the Knicks’ request.
(d) In-Arena Ticket Sales. During Knicks Events, the Knicks shall be permitted to have tables and kiosks on the concourse for
the sole purpose of selling season (including partial) ticket and group ticket packages for the Knicks and its Affiliates. The placement of such
tables and kiosks shall be reasonably determined by Licensor consistent with past practice.
Section 5.06 Ticket Agent.
(a) Ticket Agent Agreements. The Knicks shall be required to utilize and comply with the current primary and secondary
ticket provider agreement(s) with Licensor’s ticket agent (the “Ticket Agent”), and any amendment, modification or replacement of the same
in accordance with Section 5.06(b), (the “Ticket Agent Agreements”) for applicable Ticket transactions for Home Games and any Other
Knicks Events to which tickets are sold. It is understood that a portion of any upfront or annual fees received by Licensor from the Ticket
Agent during the Term shall be allocated to the Knicks on a pro rata basis on equitable terms (e.g., based on projected ticket sales for the
businesses covered by the Ticket Agent Agreements). [*****].
(b) Amended or Replacement Ticket Agent Agreements. Licensor shall have the right to negotiate and administer any
amendments to the current Ticket Agent Agreements or any replacement ticket provider agreement with a third party, provided that, (i) any
portion of such amendment or replacement agreement that relates to the Knicks or Knicks Events or (ii) any renewal or extension of the
current Ticket Agent Agreements or any replacement ticket provider agreement, in each case, shall be subject to the prior written approval of
the Knicks. If the Knicks do not grant such approval, the Knicks may enter into its own ticket provider agreement(s), provided that the Knicks
or such other ticket provider shall pay all costs needed to implement such other ticketing systems at the Arena.
(c) Access to Systems and Data. Licensor shall use commercially reasonable efforts to (i) include in its Ticket Agent
Agreements an obligation to provide the Knicks with substantially similar access to relevant information about the Knicks’ customers and
sales activity that resides in the Ticket Agent’s database and other system components as is provided under Licensor’s current agreement with
Ticketmaster; (ii) enforce such obligation on behalf of the
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Knicks at the Knicks’ expense and (iii) enforce any other terms of any Ticket Agent Agreements that affect the Knicks at the Knicks’ expense;
it being understood that, with respect to any agreements where the Knicks are an express party or a third party beneficiary, Licensor shall have
no obligations under clauses (ii) or (iii), above.
Section 5.07 Ticket Settlement Process. Licensor shall (with respect to box office sales), and shall cause Ticket Agent to, remit to
the Knicks all amounts collected in connection with the sale of Tickets on a weekly basis, together with an itemized statement indicating the
number and price of each Ticket sold and related fees collected.
Section 5.08 Access to Tickets
(a) Complimentary Licensor Tickets for Home Games. Licensor shall be afforded access to a pool of complimentary tickets
for Home Games throughout the Term, on the following terms:
(i) The pool shall include [*****], or other sections as the Parties may otherwise agree, it being understood that the
Parties shall regularly coordinate and discuss with one another and accommodate the other’s reasonable requests for adjustment to the
number and location of the “additional” complimentary tickets described in clause (y).
(ii) Complimentary tickets may be used by Licensor for its and its Affiliates’ employees or other business purposes but
may not be resold. If such complimentary tickets will not be used, such tickets may be sold by the Knicks and the Knicks may retain all
revenue therefrom.
(b) Pools of Tickets for Purchase. In addition, the Knicks shall be afforded access to purchase tickets from a pool of tickets for
Other Arena Events and Licensor shall be afforded access to purchase tickets from a pool of tickets for Home Games, in each case subject to
availability. Such tickets may be used by the Knicks or Licensor (as applicable) for their Affiliates, employees or other business purposes but
may not be resold. Each ticket pool shall also be subject to such other procedures, restraints and limitations as determined by the Party offering
access. In both cases, the Parties shall regularly coordinate and discuss with one another and accommodate the other’s reasonable requests for
adjustment to the number and location of the tickets in the pool.
Section 5.09 Credentials and Passes. The Knicks may issue a reasonable number of passes to photo, press and media, staff, visiting
teams, performers (e.g., dance teams and halftime performers), League personnel and any other Person, pursuant to the directions of the
Knicks from time to time, permitting such selected persons free access to the Arena for Knicks Events and to specified areas of the Arena
normally closed to the public; provided, however, any such issuance is in accordance with League Rules, including, without limitation, the
then-prevailing NBA Arena Security Standards (including, as of the Commencement Date, Section V(A) therein) and Licensor’s Arena safety
and security protocols.
Section 5.10 Admission to Arena. Licensor shall not grant any spectator admission to the Arena for any Knicks Event unless such
spectator has acquired and displays a Ticket or other indicia of admission (e.g., a press or related pass) to such Knicks Event issued by
Licensor or the Knicks (or, if applicable, the League) in accordance with this Agreement.
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ARTICLE VI
CONCESSIONS
Section 6.01 F&B Concessions and Catering
(a) Licensor shall have the exclusive right and obligation to operate and manage the sale of F&B Concessions and Catering
Services during all Knicks Events in a manner reasonably calculated to maximize profits but subject to providing a positive customer
experience in accordance with the Standard and subject to Schedule 6.01. The Knicks shall receive [*****]% of the Net Profits (as defined in
Schedule 6.01) from the sale of F&B Concessions and Catering Services attributable to Knicks Events (the “Knicks F&B Concessions and
Catering Share”). To the extent Licensor directly manages and conducts the sale of such F&B Concessions and Catering Services, such sales
shall be provided in accordance with Schedule 6.01. In the event of a No Fault Occurrence, the Knicks F&B Concessions and Catering Share
shall be increased to [*****]%.
(b) In the event Licensor retains a third party to provide F&B Concessions and/or Catering Services or enters into a lease,
license or operating agreement for food and beverage space, in each case, in accordance with Section 6.04 the Knicks shall receive [*****]%
of all amounts received by Licensor (including any annual payments, up-front payments, advances, back-end payments, earn-outs, guarantees,
allowances, rebates, refunds, discounts or any other payments or revenues retained by Licensor or its Affiliate) attributable to Knicks Events
from any such arrangement or agreement (the “Third Party F&B Share”); provided that, with respect to amounts received that cannot be
specifically traced to a Knicks Event as opposed to an Other Arena Event, Licensor shall reasonably and fairly estimate the portion of the total
amount that is attributable to Knicks Events (which estimate shall be subject to the review and approval of the Knicks, not to be unreasonably
withheld, conditioned or delayed) and shall remit to the Knicks the Third Party F&B Share of the portion of such amount. In the event of a No
Fault Occurrence, the Third Party F&B Share shall be increased to [*****]%.
Section 6.02 Team Merchandise.
(a) Licensor shall have the exclusive right and obligation, at its sole cost and expense, to operate and manage the sale of Team
Merchandise at the Arena (excluding collectibles and game-used items) in a manner reasonably calculated to maximize revenues, but subject
to providing a positive customer experience in accordance with the Standard. Schedule 6.02 sets forth the service and staffing for the sale of
Team Merchandise for Regular Season Home Games as of the 2019-20 Season. Licensor shall maintain at least substantially similar levels of
service and staffing for all Home Games provided that the Parties shall regularly coordinate and discuss with one another the appropriate
levels of service and staffing and accommodate the other’s reasonable requests for adjustment thereto. Notwithstanding anything herein to the
contrary, as between the Parties, the Knicks shall have the exclusive right to sell and control the sale of Team Merchandise online and
anywhere else (other than at the Arena) and retain all revenue therefrom.
(b) The Knicks shall source, purchase and own all Team Merchandise it designates for sale at the Arena and consign it to
Licensor for sale. Licensor shall be responsible
for reasonable storage and inventory control for Team Merchandise. The Knicks shall set the pricing of Team Merchandise. Licensor, at its
sole cost, shall offer and sell Team Merchandise, and provide appropriate sales staff and supervision, at points of sale in existing and
replacement in-Arena stores and other locations designated or approved by the Knicks (such approval not to be unreasonably withheld,
conditioned or delayed), on Home Dates and at other times pursuant to Section 6.02(d).
(c) Licensor shall retain [*****]% of revenues, net of taxes and credit card fees, collected by Licensor from the sale of Team
Merchandise sold at the Arena by or on behalf of Licensor and remit the remainder to the Knicks, provided that the Knicks shall retain all
revenue from any collectibles or game-used items received pursuant to any third-party agreement (e.g., Fanatics). Licensor shall be responsible
for the payment of all taxes and credit card fees with respect to all such sales.
(d) Licensor shall dedicate to Team Merchandise designated by the Knicks a minimum of [*****]% of the display space
designated by Licensor in consultation with the Knicks (the “Team Merchandise Allocation”) in the Madison Square Garden Store located in
Chase Square and other subsequent stores located within the Arena that do not require an individual to have a ticket to access such store. It is
understood and agreed that the Knicks and the Rangers (to the extent that they remain affiliated entities) may allocate display space to each
other on an event-by-event and day-by-day basis; for the avoidance of doubt, Licensor shall not have access to more than [*****]% of the
display space in the Madison Square Garden Store, except as provided in subsection (e), below.
(e) Licensor and the Knicks agree that no Team Merchandise shall be required to be offered in such stores (or elsewhere in the
Arena) while the Arena is being used for Other Arena Events.
(f) The Parties shall regularly coordinate and discuss with one another the appropriate relative levels and locations of display
space and accommodate the other’s reasonable requests for adjustment thereto.
Section 6.03 Non-Team Merchandise. Subject to Section 6.02, Licensor shall have the exclusive right to control the operation and
sale of Non-Team Merchandise at the Arena at any time. Licensor shall retain all revenue from the sale of all Non-Team Merchandise.
Licensor may use up to [*****]% of the display space in concourses and other ticketed areas during Home Games for the sale of Non-Team
Merchandise, provided that such merchandise and the locations in which it is displayed and sold shall require the approval of the Knicks, not
to be unreasonably withheld, conditioned or delayed. The Parties shall regularly coordinate and discuss with one another the appropriate
relative levels and locations of display space and accommodate the other’s reasonable requests for adjustment thereto.
Section 6.04 Third-Party Contracts. Licensor shall have the right to enter into a contract or contracts with one or more third parties
pursuant to which such third parties shall conduct and manage the sale of some or all Concessions and/or Catering Services, provided that
Licensor shall be required to obtain the prior written approval of the Knicks, not to be unreasonably withheld, conditioned or delayed, for
service providers that (i) do not or will not provide similar
services during Other Arena Events or (ii) will conduct or manage the sale of a majority of F&B Concessions or Team Merchandise.
Notwithstanding the foregoing, Licensor shall reasonably consult with the Knicks regarding the terms of any proposed agreement with any
third party that shall conduct or manage the sale of a majority of F&B Concessions or Team Merchandise.
Section 6.05 Operation on a Fair Basis; Standard of Service. Licensor shall operate, or contract with a third party for the operation
of, Concessions and/or Catering Services on a basis that is fair to both Licensor and the Knicks and equivalent for Knicks Events and Other
Arena Events. The quality of the service provided for Knicks Events shall be consistent with the Standard.
Section 6.06 Settlement. Licensor shall, or shall cause any third party conducting and managing the sale of Concessions and/or
Catering Services to, remit to the Knicks all amounts from the sale of Concessions and/or Catering Services that the Knicks are entitled to
under this ARTICLE VI in accordance with Section 9.06.
ARTICLE VII
SIGNAGE AND SPONSORSHIPS
Section 7.01 Definitions.
“Arena Game Shared Sponsorship Assets” means Advertising (including digital and fixed signage) visible or audible inside the
Arena during Home Games and Other Arena Events, but expressly excluding Team Sponsorship Assets and Arena Naming Rights, which
includes, without limitation, (a) bridge signage and entitlements, (b) vomitorium signage, (c) GardenVision underbelly and other fixed signage
and Advertising on fixtures and equipment, (d) Advertising at concession areas and on Concession Items, (e) Advertising worn or carried by
concessionaire personnel or other personnel engaged in the operation of Arena events and (f) naming rights and other entitlements of the
lobby, concourses, suite levels, clubs and all other spaces in the Arena. For avoidance of doubt, Arena Game Shared Sponsorship Assets shall
not include any Advertising (i) outside of the building entrances to the Arena (e.g., marquee spots or signage, outdoor digital board
Advertising, breezeway signage or banners, Arena rooftop signage, etc.) which is not visible or audible inside the Arena bowl and sold to be
visible or audible by seated Arena patrons, which Licensor shall have the exclusive right to sell and retain all revenue from or (ii) that is a
Team Sponsorship Asset, which the Knicks shall have the exclusive right to sell and retain all revenue from in accordance with Section 7.02,
whether or not such Advertising may also be visible or audible inside the Arena during Other Arena Events.
“Arena Naming Rights” means the right of a sponsor to have its brand integrated into the name of the Arena, e.g., the “[*****]
Madison Square Garden”.
“Courtside Advertising” means electronic, virtual, and static Advertising and other signage displayed at Knicks Events that appears
inside the Arena spectator bowl on: (a) seat back sleeves and other signage within the teams’ bench areas (e.g., sports drink-branded coolers,
cups, squeeze bottles, and towels); (b) the basketball playing floor (both “in-bounds” and “out-of-bounds” surface areas); (c) the basketball
stanchions; (d) the backboard; (e) the backboard spine
and base; (f) any moving or movable items (e.g., an indoor blimp/drone, t-shirt machines); (g) the scorer’s, press, or other tables immediately
surrounding the basketball playing floor (e.g., courtside and baseline signage devices); (h) entitlement of “Celebrity Row”; (i) team bench
kickplates; (j) presentation of the “Seventh Avenue Squad” and Knicks City Dancers (or other pep squad); (k) seat back sleeves in stands that
are present for Home Games or Other Knicks Events only; and (l) any other equipment, fixtures and items used by the Knicks in the vicinity of
the basketball playing floor not already covered in the definition of Team Sponsorship Assets (but excluding any Arena Game Shared
Sponsorship Assets).
“In-Bowl Variable Advertising” means Advertising and other visual signage appearing on, and other audio airing through or in
connection with, (a) in-Arena electronic scoreboards, telescreens and any other message boards, (b) in-Arena LED Signage, (c) any part of the
Arena spectator bowl through projection technology, augmented reality and/or virtual reality, and (d) Arena audio or visual public address
Advertising.
“Non-Team Sponsorship Assets” means Advertising controlled by Licensor to the extent that it creates no direct association with the
Team, other than Team Sponsorship Assets, Arena Naming Rights and Arena Game Shared Sponsorship Assets.
“Sponsorship Sales and Service Representation Agreement” means the agreement between Licensor’s affiliate, MSG Entertainment
Group, LLC (“MSGE”) and the Knicks’ parent entity, Knicks Holding, LLC (“Knicks Holding”), entered into approximately
contemporaneously herewith, whereby Knicks Holding authorizes MSGE to enter into sponsorship agreements that include Team Sponsorship
Assets.
“Team Sponsorship Allocation Agreement” means the agreement between MSGE and MSG Sports, entered into approximately
contemporaneously herewith, whereby MSG Sports agrees to deliver certain Team Sponsorship Assets in connection with certain current
sponsorship agreements, and MSGE agrees to allocate and pay to Knicks Holding certain amounts with respect to such agreements.
“Team Sponsorship Assets” means, with respect to the Knicks or Knicks Events only (in each case, including within three (3) hours
before, during and within two (2) hours after each Knicks Event), (a) Courtside Advertising; (b) In-Bowl Variable Advertising; (c) Advertising
on Team programs, schedules, yearbooks and tickets; (d) GardenVision underbelly and other fixed signage and Advertising on fixtures and
equipment; (e) Advertising relating to the player introduction tunnel (connecting locker room area to court); (f) Advertising relating to Team
game day contests and promotions (e.g., bobblehead night, hat night, etc.); (g) Advertising that has been sold specifically with respect to only
the Team (e.g., temporary Arena bowl stair signage present only for Knicks Events); (h) concourse activations; (i) Advertising relating to the
Team and Knicks Event visiting team player locker rooms, training rooms and interview rooms; (j) the exhibition and promotion of products
and services at the Arena (e.g., kiosks and special areas in the concourse) during Knicks Events or on any date in which a Knicks Event is
scheduled to the extent pertaining to any Knicks Event (but excluding food and beverage and merchandise otherwise covered by this
Agreement); (k) promotional or premium item give-aways at Knicks Events; (l) such other Advertising and sponsorship assets as currently
exist or may later be developed that are Team- or Knicks Event-specific; and (m) for the avoidance of doubt, all other advertising,
sponsorship and promotional activities relating to the Team that is not related to the Arena (including advertising on Team uniforms,
broadcasts, websites, mobile application and social media platforms).
Section 7.02 Team Sponsorship Assets
(a) Subject to subsections (b)-(c) of this Section 7.02, the Knicks shall have the exclusive right to sell and retain all revenue
from, and shall be responsible for all direct out of pocket costs and expenses related to, the operation and sale of Team Sponsorship Assets,
including the right to enter into category-exclusive sponsorship agreements with respect to Team Sponsorship Assets. Notwithstanding the
foregoing, Licensor shall have the right to (i) alter digital signage platforms at any time (e.g., elimination of LED ring) at Licensor’s sole cost
and expense, subject to reasonable advance consultation with the Knicks and provided that if such alterations would eliminate or materially
alter any Team Sponsorship Assets contained in any agreement under which the Knicks provide or are committed to provide Team
Sponsorship Assets as of the date of such alteration, Licensor will provide to the Knicks a replacement asset of equal or greater value (A)
reasonably acceptable to the Knicks and (B) if such replacement is not permitted under such agreement, acceptable to the sponsor party to such
agreement, and (ii) (x) approve, in its sole discretion, any permanent affixed signage in the Arena by the Knicks or (y) approve, such approval
not to be unreasonably withheld, conditioned or delayed, any temporary affixed signage by the Knicks on [*****] (clauses (1), (2) and (3)
collectively, the “Restricted Signage Areas”); provided that (A) [*****] and (B) [*****]. For the avoidance of doubt, any concourse, lobby
or similar activations shall be subject to Sections 4.06(a) and 4.06(b). Licensor shall provide and maintain the in-Arena signage, assets and
other elements associated with Team Sponsorship Assets (to the extent in the control of Licensor) in accordance with the Standard.
(b) The Parties acknowledge and agree that their rights and obligations under this Section 7.02 shall be subject and
subordinate to the Sponsorship Sales and Service Representation Agreement and the Team Sponsorship Allocation Agreement (collectively,
the “Arena Agency Agreements”), as of the Effective Date and throughout the respective terms of such agreements. Pursuant to such Arena
Agency Agreements, the Knicks shall be (i) required to provide Team Sponsorship Assets inventory committed to, and to comply with
promotional category exclusivities granted to, certain Licensor sponsors (“Joint Sponsors”) in accordance with such Joint Sponsors’
respective agreements (each a “Joint Sponsorship Agreement”) with Licensor and (ii) entitled to certain allocations of revenue received by
Licensor pursuant to such agreements; each of (i) and (ii) as set forth in more detail in the Team Sponsorship Allocation Agreement.
(c) Subject to League Rules, the name and logo of any Arena Naming Rights partner or “Marquee”-level sponsor shall be
exhibited on Team’s home playing surface near Team’s mid-court logo at the Arena (with [*****]% of the allocable revenue therefrom
delivered to the Knicks).
(d) The Parties shall meet and confer regularly (contemplated to be no less frequently than once per calendar quarter) to
discuss in good faith opportunities to maximize the collective value of their sponsorships by combining the sales of Team Sponsorship Assets,
Arena Game Shared Sponsorship Assets and/or Non-Team Sponsorship Assets.
(e) Notwithstanding anything to the contrary contained herein, in no event shall the Knicks cover or interfere with any Arena
Game Sponsorship Assets with any temporary, virtual or any other type of signage. Notwithstanding anything to the contrary contained herein,
in no event shall Licensor cover or interfere with any Team Sponsorship Assets with any temporary, virtual or any other type of signage.
Section 7.03 Arena Game Shared Sponsorship Assets
Licensor shall have the exclusive right to sell all Arena Game Shared Sponsorship Assets, provided that Licensor shall not, without the
Knicks’ prior written approval, (a) enter into any agreement that includes any Team Sponsorship Assets or (b) enter into any agreement or
modify any arena inventory or signage existing as of the date hereof if such agreement or modification would reasonably be expected to (i)
cause a breach under any agreement that includes Team Sponsorship Assets, (ii) eliminate, or substantially impair (i.e. effectively eliminate all
or most of the value of) any physical Team Sponsorship Assets inventory in the Arena or (iii) limit or restrict the Knicks’ ability to include
Team Sponsorship Assets in any exclusive or non-exclusive advertising or sponsorship agreements, in each case under clauses (i), (ii) or (iii),
unless Licensor provides to the Knicks a replacement asset of equal or greater value (A) reasonably acceptable to the Knicks and (B) if such
replacement is not permitted under such agreement, acceptable to the sponsor party to such agreement. The Knicks shall not enter into any
agreement (and has not as of the Effective Date) that contains Arena Game Shared Sponsorship Assets or would cause a breach under any
agreement that includes Arena Game Shared Sponsorship Assets without Licensor’s prior written approval. The Knicks shall be entitled to
[*****]% of net revenue from the sale of Arena Game Shared Sponsorship Assets (the “Knicks Arena Game Shared Sponsorships Share”),
i.e., gross revenue therefrom less any of the following paid by Licensor: taxes and applicable fees; and actual out-of-pocket costs for signage
fabrication, installation and removal costs; provided that, if (a) an Arena Game Shared Sponsorship Asset is not visible, audible or otherwise
present during substantially all Other Arena Events, (b) an Arena Game Shared Sponsorship Asset is not visible, audible or otherwise present
for a similar length of time during Other Arena Events and Knicks Events, or (c) such Arena Game Shared Sponsorship Assets does not
include substantially all Knicks Events, then, in each instance, the revenues shall be proportionally allocated to each event included in such
agreement, in a reasonable manner and as mutually agreed by Licensor and the Knicks, and the Knicks shall receive the appropriate
proportional amount of revenues attributable to the Knicks Events (e.g., treatment of the JP Morgan Club, as currently operated). In the event
of a No Fault Occurrence, the Knicks Arena Game Shared Sponsorships Share shall be increased to [*****]% (and in the case of any
proportional allocation of revenues pursuant to the proviso in the foregoing sentence, the Parties will agree on an appropriate increase in favor
of the Knicks to such allocation).
Section 7.04 Non-Team Sponsorship Assets
(a) The Knicks shall have no rights whatsoever with respect to Non-Team Sponsorship Assets.
Section 7.05 Arena Naming Rights
(a) The Knicks shall be entitled to [*****]% of revenue from the sale of any Arena Naming Rights, excluding any amounts
already allocable to the Knicks pursuant to the terms of this Agreement or otherwise.
Section 7.06 Other Revenue
(a) The Parties shall discuss in good faith the allocation of other Advertising income, revenues and fees derived from
operations at the Arena that are not otherwise provided herein, to the extent attributable to Knicks Events.
Section 7.07 Signage and Sponsorship Settlement Process
Licensor shall remit to the Knicks a cash payment equal to all amounts collected or received from the sale of Arena Game Shared
Sponsorship Assets and Arena Naming Rights that the Knicks are entitled to under this ARTICLE VII in accordance with Section 9.06.
ARTICLE VIII
BROADCASTING
Section 8.01 Broadcast Rights and Facilities.
(a) As between the Parties, the Knicks shall own and control all rights with respect to the broadcasts and telecasts of each
Knicks Event by any means whatsoever (including, without limitation, radio; over the air, pay-per-view, and basic and pay cable television;
and streaming and other forms of electronic and digital media now known or hereafter created) (the “Broadcast Rights”) and shall retain all
revenues in connection with such Broadcast Rights. Subject to League Rules, the Knicks may not authorize or purport to authorize their media
rightsholder to include in telecasts or broadcasts of Home Games any “virtual signage” in the Restricted Signage Areas without the prior
written consent of Licensor, which consent shall not be unreasonably withheld, conditioned or delayed. For the avoidance of doubt, the
foregoing sentence shall not apply to any League telecasts or broadcasts (including, without limitation, any national and international telecasts
or broadcasts) or any visiting team telecasts or broadcasts, with respect to which the Knicks and Licensor each reserve all rights.
(b) Licensor shall ensure that the press areas, broadcast areas, playing surfaces, Team Areas and Common Areas continue to
be wired or otherwise equipped throughout the Term for the production of such broadcasts and telecasts in accordance with League Rules.
(c) Licensor shall cooperate with the Knicks and provide access for the producers of such broadcasts and telecasts to such
truck loading docks, camera positions, and other Arena facilities reasonably required for the production of such broadcasts and telecasts in
accordance with League Rules, at the Knicks’ or its broadcaster’s expense. Subject to League Rules, Licensor shall cooperate with and provide
access for broadcast and telecast producers acting on behalf of all other duly authorized parties (e.g., opposing teams and the NBA) at such
games.
(d) Notwithstanding the foregoing, Licensor retains the right to assign and reassign facilities, locations and spaces for the
conduct of broadcasting in a manner consistent with League Rules; provided that Licensor will consult with the Knicks prior to any proposed
changes to the locations and spaces for the conduct of broadcasting during Home Games. For example, and without limiting the previous
sentence, Licensor is not obligated to continue to provide the courtside studio, or the studio facilities on the bridge level, in their current
locations.
Section 8.02 Broadcast Renovations. At the Knicks’ written request, Licensor shall make such alterations to the Arena’s broadcast
facilities and equipment as are reasonably necessary to comply with League Rules, and any broadcast agreements between the Knicks and/or
the League and a broadcaster, provided that the Knicks shall be responsible for any upfront and continuing costs related to such alterations.
ARTICLE IX
LICENSOR SERVICES
Section 9.01 General Services. During the Term, Licensor, at its sole cost and expense (except as otherwise expressly provided
herein), shall provide the following services, to and for the benefit of the Knicks (and the Arena generally), each in accordance with the
Standard (“General Services”), provided that the Parties shall regularly coordinate and discuss with one another the appropriate levels and
quality of staffing, equipment and service and accommodate the other’s reasonable requests for adjustment thereto .
(a) Heating, ventilation, and air-conditioning.
(b) Subject to unavailability due to causes beyond Licensor’s reasonable control, utilities, including electricity, gas, steam,
chilled water, hot and cold water, lighting, sewer, Wi-Fi (or comparable data delivery pipeline or service) service accessible to Knicks
employees and patrons during Knicks Events, telephone and intercommunications equipment, elevators, and escalators.
(c) Lighting equipment and apparatus, including as may be required by League Rules.
(d) Maintenance and repair of the Arena and all of its components in compliance with all applicable governmental laws,
ordinances, and regulations and in clean and good condition, subject to ordinary wear and tear, subject to the Knicks’ obligation to pay for
maintenance and repairs necessitated by Knicks Misuse.
(e) Twenty-four (24) hour per day, year-round protection and security of the Arena and all its facilities (including Team
Areas), and all property of the Knicks and Knicks personnel located in the Arena.
(f) Reasonable grounds maintenance and snow and ice removal, including, but not limited to, keeping sidewalks and other
areas immediately surrounding the Arena in compliance with all applicable governmental laws, ordinances, and regulations and reasonably
free of snow, ice, debris, dirt, litter, and trash.
(g) Box office services in accordance with Section 5.05(a).
(h) Repair and maintenance, in each case, in accordance with League Rules, of the playing surfaces and related equipment
(including the court, baskets and basket stanchions), and all back-up equipment and to the Knicks’ reasonable satisfaction in accordance with
League Rules, all such costs to be borne or reimbursed by the Knicks, except to the extent repair or replacement is necessitated by the
negligence of Licensor or its agents or other parties permitted by Licensor to use the foregoing (e.g., college teams using basketball court), or
required by League Rules.
(i) All other services and functions needed to operate, repair and maintain the Arena in accordance with the Standard,
including pest control and obtaining and maintaining all necessary licenses and permits.
(j) Without limiting any of the foregoing, Licensor shall operate, maintain and improve the Arena in accordance with the
Standard at all times throughout the Term.
Section 9.02 Game Day Services. In addition to the General Services provided pursuant to Section 9.01, Licensor shall provide to
and for the benefit of the Knicks, the following day-of-game services on the dates of all Knicks Events, each in accordance with the Standard
(“Game Day Services”), for which the Knicks shall reimburse Licensor’s actual out-of-pocket operating cost (except as otherwise provided in
this Agreement (e.g., operation of Suites, Advertising, Concessions and General Services)) without markup or overhead, as the same may be
adjusted pursuant to Section 9.04:
(a) Set-up of playing surfaces for the Knicks’ use on Home Dates (and for Other Knicks Events), by or before the time
required in Section 4.02(a), in accordance with League Rules, and subject to the Knicks’ reasonable satisfaction.
(b) Operating in house broadcast production facilities in the Arena in accordance with Article VIII (currently known as
“GardenVision”) at a level consistent with past practice, it being understood that the Knicks maintain exclusive rights and remain responsible
for providing the direction and production of all game presentation elements.
(c) Operating the Arena during and cleaning up the Arena after, Home Games and Other Knicks Events, including the
following event-specific personnel and their successors in name or function: security personnel, building security personnel, street patrol
personnel (including supervisors), paid NYPD detail, anti-bomb canines and handlers, ushers, ticket takers, concourse “Directors,” elevator
operators, restroom attendants, event office administrators, guest experience representatives, guest service supervisors, security supervisors,
concourse supervisors, concourse managers, laborers/utility workers, carpenters, electricians, custodial porters, telecommunications
technicians, spotlight operators and stagehands (as required based on the production elements for such Home Game or Other Knicks Event),
and other necessary labor and third-party services, including overnight labor and supervisors, medical and emergency services staff or
contractors and rubbish removal, all in a manner consistent with past practice, but not including game officials, referees, or timekeepers. The
Knicks shall only be responsible for the
costs relating to the foregoing personnel to the extent allocable to Home Games or Other Knicks Events.
(d) If requested by the Knicks, Game Day box office personnel incremental to the staffing provided as General Services
pursuant to Section 9.01(g) in a manner consistent with past practice.
(e) Any additional services reasonably requested by the Knicks in writing and approved by Licensor, which approval shall not
be unreasonably withheld, conditioned or delayed.
(f) With respect to all Game Day Services, all costs charged to the Knicks shall be nondiscriminatory and consistent with rates
incurred by Licensor for all other events at the Arena.
Section 9.03 Delta Club and JP Morgan Club. During Knicks Events, the Knicks shall be permitted to provide certain ticketholders
(subject to physical capacity constraints) with access to (a) the club currently known as the Delta Sky 360 Club and (b) the club currently
known as the JP Morgan Club (collectively, the “VIP Clubs”). Ticketholders who have access to the VIP Clubs shall be entitled to a certain
amount of complimentary food and beverage. The Knicks shall have the sole discretion in determining the price charged to ticketholders for
access to, as well as the menu offered in, the VIP Clubs, and shall retain all revenues therefrom. Licensor shall operate the VIP Clubs in
accordance with the Standard (the “VIP Club Services”), for which the Knicks shall reimburse Licensor’s actual cost, without markup or
overhead, attributable to such Knicks Events.
Section 9.04 Staffing Levels for Certain Services
(a) Schedule 9.04 sets forth the staffing levels for Game Day Services, VIP Club Services and Suite 200 for Home Games as
of the 2019-20 Season. Licensor shall maintain substantially similar levels of staffing for all Home Games, provided that the Parties shall
regularly coordinate and discuss with one another the appropriate levels of staffing and accommodate the other’s reasonable requests for
adjustment thereto. Licensor shall be responsible for retaining, managing and supervising all personnel in Licensor’s provision of the General
Services, Game Day Services VIP Club Services and Suite 200. Licensor shall use reasonable efforts to accommodate the Knicks reasonable
requests with respect to the provision of all Game Day Services.
(b) Licensor shall not do or fail to do anything that will result in or will cause the Arena not being reasonably fit or otherwise
available for use for Home Games in accordance with the League Rules as and when required to enable the Knicks to comply with its
obligations under this Agreement.
Section 9.05 Budgeting and Estimates.
(a) Following reasonable consultation with the Knicks, Licensor shall provide the Knicks with reasonably detailed annual
estimates of revenues and expenses by month and Home Game (the “Annual Budget”) related to Game Day Services, VIP Club Services,
Suite 200 and any other revenues to be recouped and expenses to be paid by the Knicks under this Agreement (such costs and expenses,
collectively, the “Knicks Costs”). The Annual Budget shall be provided
at such times as may be reasonably required by the Knicks in accordance with the Knicks’ reasonable budgeting and forecasting processes.
Upon receipt of the Annual Budget, the Knicks shall have a period of fifteen (15) days to review each estimate and forecast, and identify any
objections it has to the Annual Budget. The Knicks and Licensor will then negotiate for a period of fifteen (15) days regarding any
disagreements in respect of the Annual Budget. Subject to Section 9.05(b) below, if the Knicks and Licensor are unable to agree with respect
to a particular cost within an Annual Budget within such period, the corresponding line item from the most recent approved Annual Budget
will control with respect to such line item until such time, if any, that the Knicks and Licensor agree on such proposed line item; provided,
that: (1) if such line item in the Annual Budget did not appear in the corresponding most recent approved Annual Budget, then Licensor shall
not be entitled to payment or reimbursement for expenses in such line item and Licensor shall have no obligation to provide such product or
service until the proposed line item is approved by the Knicks (not to be unreasonably withheld, conditioned or delayed); and (2) if such line
item appeared in the prior Annual Budget, then Licensor shall be entitled to payment or reimbursement in an amount not to exceed the
applicable line item of the prior approved Annual Budget multiplied by 104 %. The Annual Budget for the 2019-20 Contract Year is attached
hereto.
(b) [*****].
(c) The Knicks Costs shall be consistent with the costs incurred for Other Arena Events, it being understood that costs will
differ based on the nature and need of the events and circumstances outside of the reasonable control of Licensor (e.g., Force Majeure). The
amount payable by the Knicks to Licensor for Game Day Services and VIP Club Services shall be determined on a monthly basis in
accordance with Section 9.06. The Knicks’ consent shall be required for any deviation from the approved Annual Budget and, without such
approval, the Knicks shall not be responsible for any costs or expenses in excess of such line items in the approved Annual Budget.
Section 9.06 Settlement.
(a) Not later than the fifteenth (15th) day of each calendar month, Licensor shall provide the Knicks a report (“Monthly
Report”) calculating (i) each item of revenue (including any deductions therefrom) that is shared with or allocated or payable to the Knicks in
accordance with this Agreement with respect to the immediately preceding calendar month and (ii) each item of cost or expense incurred by
Licensor during the immediately preceding calendar month for which Licensor is entitled to payment or reimbursement (in whole or in part)
from the Knicks in accordance with this Agreement (clauses (i) and (ii) collectively, the “Applicable Amounts”). Each Monthly Report shall
include a reasonable amount of detail describing each of the Applicable Amounts and copies of ledgers, invoices or other reasonable evidence
of each of the Applicable Amounts. Each Monthly Report delivered by Licensor to the Knicks shall set forth for each Joint Sponsorship
Agreement during such Monthly Period, (x) the Revenues under such Joint Sponsorship Agreement allocated to the Knicks, on the one hand,
and Licensor, on the other hand and (y) the Team entitlements (including Team Sponsorship Assets, Tickets, ticket banks, etc. provided to
such Joint Sponsor) and Arena entitlements (including Non-Team Sponsorship Assets, Arena Game Shared Sponsorship Assets, Suites, etc.
provided to such Joint Sponsor) contributed and their respective rate card values or fair market value (as applicable) under such Joint
Sponsorship Agreement. Licensor shall pay the Knicks the net amount payable under each
Monthly Report on or prior to the fifteenth (15th) day of each calendar month (i.e., the date in which the related Monthly Report is required to
be provided to the Knicks).
(b) Notwithstanding payment of the net amount under a Monthly Report, the Knicks may reasonably request additional
information regarding such Monthly Report and the Licensor agrees to provide such additional information. The Knicks may dispute any
amount in any Monthly Report, except for the License Fee and the percentage of the Knicks’ Tax Share (e.g., 50%). The Parties shall promptly
confer to resolve any such areas of disagreement, and each Party shall be entitled to refer any disagreement that cannot be resolved to the
Accounting Firm in accordance with Section 9.06(c). Notwithstanding the foregoing, the acceptance of a Monthly Report (or any portion
thereof) and the payment of any amounts in accordance therewith shall be without prejudice to the Knicks’ rights to subsequently dispute any
Applicable Amounts (including pursuant to Section 9.06(c) and Section 20.17). Licensor shall pay the Knicks any disputed amounts that it is
determined to owe in a Monthly Report within five (5) business days after the dispute is resolved by the Parties or by the Accounting Firm in
accordance with Section 9.06(c).
(c) Notwithstanding Section 20.06, in the event of a dispute between the Parties with respect to the determination of any
Applicable Amounts, the Parties shall refer such disputed matters set forth in Sections 9.06(a) and 9.06(b) to a mutually agreed upon national
independent accounting firm (the “Accounting Firm”), and the Parties shall cooperate with the Accounting Firm to enable such Accounting
Firm to resolve the dispute as promptly as practicable. The Accounting Firm shall address only those items in dispute and may not assign a
value greater than the greatest value for such item claimed by either Party or smaller than the smallest value for such item claimed by either
Party. In the absence of manifest error, the resolution of disputed items by the Accounting Firm shall constitute an arbitral award that is final,
binding and non-appealable. The costs and expenses of the Accounting Firm incurred pursuant to this Section 9.06 shall be borne by the
Knicks, on the one hand, and the Licensor, on the other hand, in proportion to the allocation by the Accounting Firm of the net dollar amount
of disputed matters, such that the prevailing party (or parties) pay a lesser proportion (or none, as applicable) of such costs and expenses.
(d) Licensor will use commercially reasonable efforts to maximize any revenues that are contractually payable to the Knicks
hereunder, including using commercially reasonable efforts to collect such revenues. Notwithstanding anything herein to the contrary, if any
revenue payable to a Party by an Affiliate of such Party is subject to sharing with the other Party hereunder (including, for example, pursuant
to Section 5.03(c)), such revenue shall be deemed “collected” by the Party to whom it is payable on the earlier of (i) the date on which such
revenue is actually collected and (ii) the date on which such revenue is payable pursuant to the terms of the applicable contract or other
arrangement.
Section 9.07 Provision of Licensor Services.
(a) Licensor shall have the right to delegate, subcontract, or sublicense to a third party, including Licensor’s Affiliates, the
provision of Licensor Services and no such delegation, subcontract or sublicense shall relieve Licensor of any of its obligations hereunder;
provided that, Licensor shall be required to obtain consent of the Knicks (not to be unreasonably withheld, conditioned or delayed) in
connection with the delegation, subcontracting, or sublicensing of
Licensor Services to any third party service providers that (i) do not or will not provide similar services during Other Arena Events or (ii) will
provide, conduct or manage the majority of a particular material Licensor Service. Subject to the preceding sentence, Licensor shall make the
final decision regarding the selection of any such third party.
(b) Licensor shall make reasonable efforts to minimize interference with the Knicks’ use of the Arena, and in no event shall
Licensor materially interfere with the Knicks’ ability to conduct or broadcast Knicks Events or materially reduce or interfere with the Knicks’
permitted use of the Arena or ingress thereto or egress therefrom, subject to Licensor’s Arena safety and security protocols in accordance with
Section 4.06(b).
(c) For clarity, as between Licensor and the Knicks, the Knicks shall have the right to fully control all Home Game
entertainment and basketball operations (including scoreboard and audio operations), with assistance from Licensor’s production staff through
the applicable General Services and/or Game Day Services.
ARTICLE X
PROMOTION; TRADEMARKS; DATA OWNERSHIP
Section 10.01 Promotional Outlets
(a) [*****].
(b) [*****].
(c) [*****].
(d) At the commencement of the Term, Licensor’s use of the Knicks’ in-game and broadcast promotional outlets set forth in
subparagraphs (a) and (b), and the Knicks’ use of the Licensor promotional outlets set forth in subparagraph (c), shall each be generally
consistent with the allocations set forth on Schedule 10.01, provided that the Parties shall regularly coordinate and discuss with one another
their desired promotional efforts, inventory availability and needs and shall accommodate the other’s reasonable requests for adjustment to the
number and type of assets (including newly-developed assets) to which the other shall have access, and the manner in which they are used. It is
understood and agreed that, to the extent that they remain affiliated entities, the Knicks and the Rangers may share the promotional assets
granted to them pursuant to their respective license agreements with Licensor.
Section 10.02 Trademark Licenses.
(a) The Knicks hereby grant to Licensor for the Term non-exclusive royalty-free licenses by the Knicks and Team of all
intellectual property owned or licensed by the Knicks or the Team, including but not limited to images, likenesses, service marks, tradenames
and trademarks, for the exclusive purposes of promoting the Arena as the home arena of the Team, operating the Arena and providing the
Licensor Services. Licensor’s use of such licenses shall be in accordance with and subject to League Rules and subject to the Knicks prior
written approval. Licensor shall not have any right to sublicense, or seek or receive any payments from third parties
specifically for the use of, the Knicks’ intellectual property, except in accordance with ARTICLE VII, it being understood that Licensor may
exercise the right to promote the Arena as the home arena of the Team in places and in a manner that may also incorporate in an incidental
manner promotion of Licensor’s marketing partners and sponsors (including, without limitation, use in connection with the Knicks’
intellectual property any overall Arena marketing partner(s) “lock-up logo” or naming rights, sponsored Licensor web pages and upcoming
events promotions, etc.).
(b) The Knicks shall be permitted to reference the Arena as their home venue on all material promoting the Team and ticket
sales (and the Ticket Agent). In connection therewith, Licensor and its Affiliates hereby grant to the Knicks a non-exclusive royalty-free
license to use the trademarks “MADISON SQUARE GARDEN,” “MSG,” “THE WORLD’S MOST FAMOUS ARENA” and related logos
solely for such promotional purposes. The Knicks’ use of such licenses shall be subject to the Licensor’s prior written approval, not to be
unreasonably withheld, conditioned or delayed. The Knicks shall not have any right to sublicense, or seek or receive any payments from third
parties specifically for the use of, Licensor’s intellectual property.
Section 10.03 Customer Data[*****]:
(a) [*****].
(b) [*****].
(c) [*****].
(d) Data Use and Sharing. Each Party shall, to the fullest extent permitted by law, share their owned Customer Data with the
other Party for use by the other Party and their affiliates, subject to the prior approval in each case by the Customer Data-owning Party, such
approval not to be unreasonably withheld or delayed, provided, that any sale, licensing or disclosure to a third party of Customer Data owned
by the other Party is subject to the prior written consent of the Customer Data-owning Party in their sole discretion. Each Party shall use
commercially reasonable efforts to ensure that all Customer Data is collected in such a manner that it may be shared with the other Party under
this Section 10.03 and applicable law. For purposes of clarity, the Party that is the owner of Customer Data pursuant to this Section 10.03 or
otherwise may use such data for any and all purposes, including the sale, licensing or disclosure of such data to third parties.
(e) Confidentiality and Data Protection. The Parties agree to establish appropriate safeguards to protect the confidentiality of
shared Customer Data and to prevent unauthorized use or access. Specifically, each Party shall implement and maintain an information
security management policy with standards that are no less rigorous than accepted industry practices, comply with all applicable laws to
protect the Customer Data from unauthorized access, destruction, use, modification, or disclosure, as well as comply with the provisions of
this Agreement. At a minimum, each Party shall implement physical, technical, and administrative information safeguards that provide for: (a)
protection of business facilities, paper files, servers, computing equipment, including all mobile devices and other equipment with information
storage capability, and backup systems containing Customer Data; (b) network, application (including databases), and platform security; (c)
business systems designed to optimize security; (d) secure,
encrypted transmission and secure, encrypted storage of Customer Data; (e) a minimum of two factor authentication and access control
mechanisms; and (f) personnel security, including background checks on all such personnel, use of unique, robust passwords, and annual
training on how to comply with a Party’s physical, technical, and administrative information security safeguards. Each Party shall regularly
test and monitor the effectiveness of their security practices and procedures relating to the Customer Data, and will evaluate and adjust their
information security program in light of the results of the testing and monitoring, any material changes to their operations or business
arrangements, or any other circumstances that a Party knows or reasonably should know may have a material effect on their information
security program.
(f) The Parties shall also share with each other the results of fan and guest surveys, focus groups, etc. to the extent the
information relates to guests’ experiences in connection with Home Games (including customer service, quality of Concessions, cleanliness,
game presentation, arriving and departing, etc.).
ARTICLE XI
EXCLUSIVITY COVENANT
Section 11.01 Covenant. Notwithstanding anything to the contrary contained in this Agreement, including Section 20.10 with respect
to League Rules, the Knicks hereby agree that during the Term, the Team shall not play any Home Games in any location other than the
Arena, except as provided in ARTICLE XII or Section 20.01; provided that if the Property Tax Exemption is no longer in effect, the Knicks
may play up to two (2) Home Games each season at other locations outside of the New York metropolitan area in accordance with League
Rules. Notwithstanding anything to the contrary contained in this Agreement, the Knicks agree to fully comply with the obligations
undertaken by its predecessor Madison Square Garden Center, Inc. under the Property Tax Exemption Agreement as the owner of the Team.
Licensor agrees to fully comply and cause full compliance with all other obligations undertaken by its predecessor Madison Square Garden
Center, Inc. under the Property Tax Exemption Agreement.
ARTICLE XII
CASUALTY AND CONDEMNATION
Section 12.01 Termination or Restoration Due to Condemnation.
(a) In the event that title to all or substantially all of the Arena or the right of Licensor to occupy or possess all or substantially
all of the Arena shall be taken by Condemnation (a “Total Taking”), Licensor shall provide prompt notice of such Total Taking to the Knicks,
and, except in the case of a Temporary Taking, this Agreement shall terminate and be of no further force upon the earlier of (i) the date when
the possession of all or such substantial portion of the Arena or right so taken shall be required for such use or purpose or (b) the effective date
of the Total Taking.
(b) In the event of a Condemnation other than a Total Taking, this Agreement shall continue in full force and effect; provided,
however, that if any such Condemnation results
in an Untenantable Condition (including for this purpose a Temporary Taking that results in an Untenantable Condition for a period in excess
of (i) [*****], or (ii) in the case of any such Temporary Taking that occurs during the last five (5) Contract Years of the Term, [*****]) then
each Party shall have the right, in its sole discretion, to terminate this Agreement by notice to the other given within 30 days after the date of
the Knicks’ receipt of the Estimate (as defined in Section 12.05(a)) with respect to such Condemnation, without any further liability hereunder,
except for any liability hereunder which, by the specific terms of this Agreement survives termination; provided further, however, that neither
Party shall have such termination right if (x) the then applicable legal requirements, zoning laws, building regulations and other governmental
or quasi-governmental ordinances, rules or regulations (collectively, “Governmental Rules”) do not prohibit or materially restrict the
performance of the Condemnation Restoration Work (as defined in Section 12.01(c)), (y) the Estimated Date (as defined in Section 12.05(a))
with respect to such Condemnation shall be a date that occurs on or before the date that is (i) [*****] after the date of such Condemnation, or
(ii) in the case of any such Condemnation that occurs during the last five (5) Contract Years of the Term, [*****] after the date of such
Condemnation and (z) the remaining portions of the Arena can be restored in a manner as shall satisfy the requirements of the definition of
Condemnation Restoration Work. Further, and notwithstanding anything to the contrary contained in the foregoing, if the Estimated
Restoration Cost with respect to such Condemnation exceeds [*****]% of the full replacement value of the portions of the Arena that are not
subject to such Condemnation, then Licensor shall have the right, in its sole discretion, to terminate this Agreement by notice to the Knicks
given within 90 days after the date of the Knicks’ receipt of the Estimate with respect to such Condemnation, without any further liability
hereunder, except for any liability hereunder which, by the specific terms of this Agreement survives termination. If either Party terminates
this Agreement as provided in this Section 12.01(b), then such termination shall be effective on the date specified in such Party’s notice of
termination, but no earlier than thirty (30) days after the date of such notice and no later than one hundred eighty (180) days after the date of
such notice, as if said date were the date fixed for the expiration of the Term
(c) If neither party has the right to terminate this Agreement, or if neither party shall timely elect to terminate this Agreement,
as provided in paragraph (b) above, Licensor shall, at its sole cost and expense, commence as soon as reasonably practicable and with
reasonable diligence proceed to perform the work (the “Condemnation Restoration Work”) to and repair and restore the part of the Arena
not taken to an architecturally complete unit and, to the extent commercially practicable, to substantially its former condition, as and to the
extent necessary to remedy the Untenantable Condition, using materials, equipment and construction techniques which are common at the time
of such Condemnation and with such changes as may be required by then applicable Governmental Rules or that Licensor may otherwise
deem appropriate in each case, in a manner consistent with and as necessary to maintain the Standard; it being agreed, however, that Licensor
shall be required to obtain the prior written consent of the Knicks to any changes that are not required by then applicable Governmental Rules
and that could materially adversely impact the Knicks’ rights or obligations under this Agreement. Licensor shall (i) keep the Knicks
reasonably apprised of the progress and the estimated date of completion of the Condemnation Restoration Work, and (ii) provide such
information as may be reasonably requested by the Knicks from time to time with respect to the progress of such Condemnation Restoration
Work. Licensor shall use commercially reasonable efforts (which shall not require Licensor to employ overtime labor or otherwise incur
overtime charges) to substantially complete
such Condemnation Restoration Work as soon as commercially practicable, but in all events, on or before the Condemnation Outside Date (as
defined in Section 12.01(d)) applicable to such Condemnation (it being agreed that the Knicks’ sole remedy on account of Licensor’s failure to
substantially complete such Condemnation Restoration Work shall be the rights of the Knicks to terminate this Agreement as provided in
paragraphs 12.01(d) and 12.05(b)(iv) below). The Condemnation Restoration Work shall not include the repair and restoration of any of the
trade fixtures, personal property or equipment of the Knicks (all of which the Knicks shall repair and restore at its sole cost and expense).
(d) Notwithstanding anything to the contrary contained herein, the Knicks shall have the right to terminate this Agreement
(without any further liability hereunder, except for any liability hereunder which, by the specific terms of this Agreement survives termination)
if the Condemnation Restoration Work required as a result of such Condemnation is not substantially completed by the Condemnation Outside
Date applicable to such Condemnation (as such Condemnation Outside Date is postponed pursuant to the below provisions of this Section
12.01(d)), which right may be exercised by the Knicks upon written notice to Licensor given within thirty (30) days after such applicable
Condemnation Outside Date but before the substantial completion of the Condemnation Restoration Work; provided, however, that if a Final
Revised Estimated Date for such Condemnation shall have been determined pursuant to Section 12.05(b) below, then the Knicks shall have the
right to terminate this Agreement pursuant to this Section 12.01(d) (without any further liability hereunder, except for any liability hereunder
which, by the specific terms of this Agreement survives termination) only if the Condemnation Restoration Work is not substantially
completed by the later to occur of the Condemnation Outside Date applicable to such Condemnation (as such Condemnation Outside Date is
postponed pursuant to the below provisions of this Section 12.01(d)) and such Final Revised Estimated Date, which right may be exercised by
the Knicks upon written notice to Licensor given within thirty (30) days after the later to occur of such Condemnation Outside Date and such
Final Revised Estimated Date, but before the substantial completion of the Condemnation Restoration Work. If Licensor has not completed the
Condemnation Restoration Work prior to the date that is [*****] after the giving of such notice by the Knicks (which date shall be postponed
by one day for each day that Licensor is actually delayed in substantially completing the Condemnation Restoration Work by (i) any acts or
omissions of the Knicks, the League or their respective agents, employees or contractors or (ii) any one or more events of Force Majeure
(provided that the maximum period such date shall be postponed due to events of Force Majeure is an additional [*****])), then this
Agreement shall be terminated automatically effective as of such date, without any further liability hereunder, except for any liability
hereunder which, by the specific terms of this Agreement survives termination. For all purposes hereof, the “Condemnation Outside Date”
applicable to any Condemnation shall be determined as follows:
(w) If the Estimate with respect to the Condemnation Restoration Work required as a result of such
Condemnation provides for an Estimated Date that will occur on or prior to the [*****] after the date of such Condemnation, then the
“Condemnation Outside Date” applicable to such Condemnation shall be the date that is [*****] following such Estimated Date;
provided, however, that such date shall be postponed by one day for each day that Licensor is actually delayed in substantially
completing the Condemnation Restoration Work by (i) any acts or omissions of the Knicks, the League or their respective agents,
employees or contractors or (ii) any one or more events of Force Majeure (provided that the maximum period such Condemnation
Outside Date shall be postponed due to events of Force Majeure is an additional [*****]).
(x) If the Estimate with respect to the Condemnation Restoration Work required as a result of such
Condemnation provides for an Estimated Date that will occur during the period commencing on the [*****] after the date of such
Condemnation and ending on the [*****] after the date of such Condemnation, then the “Condemnation Outside Date” applicable to
such Condemnation shall be the date that is [*****] following such Estimated Date; provided, however, that such date shall be
postponed by one day for each day that Licensor is actually delayed in substantially completing the Condemnation Restoration Work
by (i) any acts or omissions of the Knicks, the League or their respective agents, employees or contractors or (ii) any one or more
events of Force Majeure (provided that the maximum period such Condemnation Outside Date shall be postponed due to events of
Force Majeure is an additional [*****]).
(y) If the Estimate with respect to the Condemnation Restoration Work required as a result of such
Condemnation provides for an Estimated Date that will occur during the period commencing on the [*****] after the date of such
Condemnation and ending on the [*****] after the date of such Condemnation, then the “Condemnation Outside Date” applicable to
such Condemnation shall be the date that is [*****] following such Estimated Date; provided, however, that such date shall be
postponed by one day for each day that Licensor is actually delayed in substantially completing the Condemnation Restoration Work
by (i) any acts or omissions of the Knicks, the League or their respective agents, employees or contractors or (ii) any one or more
events of Force Majeure (provided that the maximum period such Condemnation Outside Date shall be postponed due to events of
Force Majeure is an additional [*****]).
(z) If the Estimate with respect to the Condemnation Restoration Work required as a result of such
Condemnation provides for an Estimated Date that will occur on or after the [*****] following the date of such Condemnation, then
the “Condemnation Outside Date” applicable to such Condemnation shall be the date that is [*****] following such Estimated Date;
provided, however, that such date shall be postponed by one day for each day that Licensor is actually delayed in substantially
completing the Condemnation Restoration Work by (i) any acts or omissions of the Knicks, the League or their respective agents,
employees or contractors or (ii) any one or more events of Force Majeure (provided that the maximum period such Condemnation
Outside Date shall be postponed due to events of Force Majeure is an additional [*****]).
Section 12.02 Termination or Restoration Due to Casualty.
(a) If all or any material portion of the Arena is damaged or destroyed by Casualty such that an Untenantable Condition exists
(each, a “Total Casualty”), and the Estimate with respect to such Casualty delivered pursuant to Section 12.05 below indicates that the
Casualty Restoration Work (defined below) would not reasonably be expected to be substantially completed (i) within 24 months after the
occurrence of such Casualty, or (ii) in the case of any Casualty that occurs during the last five (5) Contract Years of the Term, within 12
months after the occurrence of such Casualty, then the Knicks shall have the right to terminate this Agreement without any
further liability hereunder, except for any liability hereunder which, by the specific terms of this Agreement survives termination. If the Knicks
wish to exercise such right of termination, it shall do so by notice to Licensor given not later than the date that is thirty (30) days after the date
of the Estimate with respect to such Casualty under Section 12.05.
(b) In the event there shall occur a Total Casualty and (i) Licensor is prohibited or materially restricted by then applicable
Governmental Rules from performing the Casualty Restoration Work, or (ii) the Estimate with respect to such Casualty indicates that the
Casualty Restoration Work would not reasonably be expected to be substantially completed (x) within [*****] after the occurrence of such
Casualty, or (y) in the case of any Casualty that occurs during the last five (5) Contract Years of the Term, within [*****] after the occurrence
of such Casualty, or (iii) the Estimated Restoration Cost with respect to such Casualty exceeds [*****]% of the full replacement value of the
Arena immediately prior to such Casualty, then, and in any of such events, Licensor shall have the right, in its sole discretion, to terminate this
Agreement without any further liability hereunder, except for any liability hereunder which, by the specific terms of this Agreement survives
termination. If Licensor wishes to exercise such right of termination, it shall do so by notice to the Knicks given not later than the date that is
thirty (30) days after the date of the Estimate with respect to such Casualty under Section 12.05. If either Party terminates this Agreement as
provided in this Section 12.02(b) or in Section 12.02(a) above, then such termination shall be effective on the date specified in such Party’s
notice of termination, but no earlier than thirty (30) days after the date of such notice and no later than one hundred eighty (180) days after the
date of such notice, as if said date were the date fixed for the expiration of the Term
(c) In the event of a Casualty with respect to which neither party has the right to terminate this Agreement, or neither party
timely elects to terminate this Agreement, pursuant to paragraphs (a) or (b) above, Licensor shall, at its sole cost and expense, commence as
soon as reasonably practicable and with reasonable diligence proceed to perform the work (the “Casualty Restoration Work”) to repair and
restore the Arena to substantially its former condition, as and to the extent necessary to remedy the Untenantable Condition, using materials,
equipment and construction techniques which are common at the time of such Casualty and with such changes as may be required by then
applicable Governmental Rules or that Licensor may deem appropriate, in each case, in a manner consistent with and as necessary to maintain
the Standard; it being agreed, however, that Licensor shall be required to obtain the prior written consent of the Knicks to any changes that are
not required by then applicable Governmental Rules and that could materially adversely impact the Knicks’ rights or obligations under this
Agreement. Licensor shall (i) keep the Knicks reasonably apprised of the progress and the estimated date of completion of the Casualty
Restoration Work, and (ii) provide such information as may be reasonably requested by the Knicks from time to time with respect to the
progress of the Casualty Restoration Work. Licensor shall use commercially reasonable efforts (which shall not require Licensor to employ
overtime labor or otherwise incur overtime charges) to substantially complete such Casualty Restoration Work as soon as commercially
practicable, but in all events, on or before the Casualty Outside Date (as defined in Section 12.02(d)) applicable to such Casualty (it being
agreed that the Knicks’ sole remedy on account of Licensor’s failure to substantially complete such Casualty Restoration Work shall be the
rights of the Knicks to terminate this Agreement as provided in Section 12.02(d) and 12.05(b)(iv) below). The Casualty Restoration Work
shall not include the repair and restoration of any of the trade fixtures, personal property or equipment of the Knicks (all of which the Knicks
shall repair and restore at its sole cost and expense).
(d) Notwithstanding anything to the contrary contained herein, the Knicks shall have the right to terminate this Agreement
(without any further liability hereunder, except for any liability hereunder which, by the specific terms of this Agreement survives termination)
if the Casualty Restoration Work required as a result of such Casualty shall not be substantially completed by the Casualty Outside Date
applicable to such Casualty (as such Casualty Outside Date is postponed pursuant to the below provisions of this Section 12.02(d)), which
right may be exercised by the Knicks upon written notice to Licensor given within thirty (30) days after such applicable Casualty Outside Date
but before the substantial completion of the Casualty Restoration Work; provided, however, that if a Final Revised Estimated Date for such
Casualty shall have been determined pursuant to Section 12.05(b) below, then the Knicks shall have the right to terminate this Agreement
pursuant to this Section 12.02(d) (without any further liability hereunder, except for any liability hereunder which, by the specific terms of this
Agreement survives termination) only if the Casualty Restoration Work is not substantially completed by the later to occur of the Casualty
Outside Date applicable to such Casualty (as such Casualty Outside Date is postponed pursuant to the below provisions of this Section
12.02(d)) and such Final Revised Estimated Date for such Casualty, which right may be exercised by the Knicks upon written notice to
Licensor given within thirty (30) days after the later to occur of such Casualty Outside Date and such Final Revised Estimated Date but before
the substantial completion of the Casualty Restoration Work. If Licensor has not completed the Casualty Restoration Work prior to the date
that is [*****] after the giving of such notice by the Knicks (which date shall be postponed by one day for each day that Licensor is actually
delayed in substantially completing the Casualty Restoration Work by (i) any acts or omissions of the Knicks, the League or their respective
agents, employees or contractors or (ii) any one or more events of Force Majeure (provided that the maximum period such date shall be
postponed due to events of Force Majeure is an additional [*****])), then this Agreement shall be terminated automatically effective as of
such date, without any further liability hereunder, except for any liability hereunder which, by the specific terms of this Agreement survives
termination. For all purposes hereof, the “Casualty Outside Date” applicable to any Casualty shall be determined as follows:
(w) If the Estimate with respect to the Casualty Restoration Work required as a result of such Casualty
provides for an Estimated Date that will occur on or prior to the [*****] after the date of such Casualty, then the “Casualty
Outside Date” applicable to such Casualty shall be the date that is [*****] following such Estimated Date; provided, however,
that such date shall be postponed by one day for each day that Licensor is actually delayed in substantially completing the
Casualty Restoration Work by (i) any acts or omissions of the Knicks, the League or their respective agents, employees or
contractors or (ii) any one or more events of Force Majeure (provided that the maximum period such Casualty Outside Date
shall be postponed due to events of Force Majeure is an additional [*****]).
(x) If the Estimate with respect to the Casualty Restoration Work required as a result of such Casualty provides
for an Estimated Date that will occur during the period commencing on the [*****] after the date of such Casualty and ending
on the [*****] after the date of such Casualty, then the “Casualty Outside Date” applicable to such Casualty shall be the date
that is [*****] following such Estimated Date; provided, however, that such date shall be
postponed by one day for each day that Licensor is actually delayed in substantially completing the Casualty Restoration Work
by (i) any acts or omissions of the Knicks, the League or their respective agents, employees or contractors or (ii) any one or
more events of Force Majeure (provided that the maximum period such Casualty Outside Date shall be postponed due to events
of Force Majeure is an additional [*****]).
(y) If the Estimate with respect to the Casualty Restoration Work required as a result of such Casualty provides
for an Estimated Date that will occur during the period commencing on the [*****] after the date of such Casualty and ending
on the [*****] after the date of such Casualty, then the “Casualty Outside Date” applicable to such Casualty shall be the date
that is [*****] following such Estimated Date; provided, however, that such date shall be postponed by one day for each day
that Licensor is actually delayed in substantially completing the Casualty Restoration Work by (i) any acts or omissions of the
Knicks, the League or their respective agents, employees or contractors or (ii) any one or more events of Force Majeure
(provided that the maximum period such Casualty Outside Date shall be postponed due to events of Force Majeure is an
additional [*****]).
(z) If the Estimate with respect to the Casualty Restoration Work required as a result of such Casualty provides
for an Estimated Date that will occur on or after the [*****] following the date of such Casualty, then the “Casualty Outside
Date” applicable to such Casualty shall be the date that is [*****] following such Estimated Date; provided, however, that such
date shall be postponed by one day for each day that Licensor is actually delayed in substantially completing the Casualty
Restoration Work by (i) any acts or omissions of the Knicks, the League or their respective agents, employees or contractors or
(ii) any one or more events of Force Majeure (provided that the maximum period such Casualty Outside Date shall be
postponed due to events of Force Majeure is an additional [*****]).
Section 12.03 Condemnation Proceeding and Awards. Upon commencement of any Condemnation action or proceeding, Licensor
and the Knicks shall cooperate with each other, and provide each other with such information and assistance, as each shall reasonably request
in connection therewith. Licensor and the Knicks each shall have the right, at its own expense, to appear and to participate in any and all
hearings, trials and appeals relating thereto even if this Agreement has been terminated. Subject to the other provisions of this Section 12.03, in
any Condemnation (x) the Knicks shall have the right to assert a claim against the condemning authority for, and receive from the condemning
authority, all Condemnation Awards for, (i) any damage to the Knicks’ business or any loss in value of any of the rights granted to the Knicks
under this Agreement (if applicable, as if this Agreement had not been terminated), (ii) the value of any of the Knicks’ personal property
(tangible or intangible) taken or damaged as result of the Condemnation, (iii) any relocation costs of the Knicks’ business, and (iv) any other
damages to which the Knicks may be entitled under any applicable law, ordinance, order or regulation, and (y) Licensor shall have the right to
assert a claim against the condemning authority for, and receive from the condemning authority, all Condemnation Awards for, (i) the loss in
value of its ownership
of and rights in and to the Arena and its other property (tangible and intangible), (ii) any damage to, or relocation costs of, Licensor’s business,
and (iii) any other damages to which Licensor may be entitled under any applicable law, ordinance, order or regulation. The Parties shall
request that all Condemnation Awards be specifically allocated by the applicable condemning authority (it being agreed that Licensor may
direct that any such awards allocated to Licensor be paid to any Superior Interest Holder designated by Licensor for such purpose). If any
Condemnation Award is not specifically allocated between the Parties by the applicable condemning authority, the Condemnation Award shall
be equitably allocated and distributed to Licensor and the Knicks in such manner as the Parties shall mutually agree.
Section 12.04 Temporary Taking. If the whole or any part of the Arena or the right of Licensor to occupy or possess the whole or
any part of the Arena shall be taken in any Condemnation for a temporary use or occupancy not to exceed an aggregate of [*****], or in the
case of any such Condemnation that occurs during the last five (5) Contract Years of the Term, [*****] (a “Temporary Taking”), the Term
shall not be reduced, extended or affected in any way, and neither Licensor nor the Knicks shall be relieved of its obligations under this
Agreement, except that (a) the Knicks shall have the right to make a claim against the condemning authority for, and receive from the
condemning authority and retain, an award of any damages sustained by the Knicks as a result of such Temporary Taking, and (b) the Knicks’
obligation to pay the License Fee shall be abated during periods that the Arena is unavailable to the Knicks for the playing of Home Games in
accordance with the terms and conditions of this Agreement.
Section 12.05 Inability to Timely Restore; Estimate of Time and Cost to Restore.
(a) The determination of the estimated time and costs that are reasonably expected to be necessary to perform and substantially
complete any Condemnation Restoration Work or any Casualty Restoration Work shall be made by an independent architect or construction
manager that is experienced in arena construction projects, well-regarded in the industry and selected by Licensor and reasonably approved by
the Knicks. In the event of any Condemnation or Casualty resulting in an Untenantable Condition, Licensor shall furnish to the Knicks an
estimate (the “Estimate”), prepared and certified by such independent architect or construction manager (the “Estimator”) of (i) the estimated
date (the “Estimated Date”) by which the Condemnation Restoration Work or Casualty Restoration Work, as the case may be, will be
substantially completed and (ii) the estimated cost (the “Estimated Restoration Cost”) to perform the Condemnation Restoration Work or
Casualty Restoration Work, as the case may be. Licensor shall use commercially reasonable efforts to cause such independent architect or
construction manager to make its determination as soon as reasonably practicable (and, in the case of a Casualty, no later than [*****] after
the date of such Casualty) and will deliver the Estimate to the Knicks promptly upon Licensor’s receipt thereof.
(b) (i) If, during the performance of the Condemnation Restoration Work or the Casualty Restoration Work required as a result of
any Condemnation or Casualty, the Knicks reasonably believe that the substantial completion of such Condemnation Restoration Work or such
Casualty Restoration Work, as the case may be, will not, absent extraordinary efforts that Licensor does not agree (if not already obligated to
take pursuant to this Agreement), be achieved by the applicable Condemnation Outside Date or applicable Casualty Outside Date therefor (as
such Condemnation Outside Date or such Casualty Outside Date may have theretofore been
postponed pursuant to the provisions of Section 12.01(d) or Section 12.02(d) above, respectively), then the Knicks, by notice given to Licensor
and the Estimator, shall have the right (not to be exercised more than once in any six (6) month period) with respect to such Condemnation or
such Casualty to request that the Estimator determine the estimated date (the “Revised Estimated Date”) by which such Condemnation
Restoration Work or such Casualty Restoration Work, as the case may be, is then reasonably expected to be substantially completed.
(ii) If the Knicks give such notice pursuant to Section 12.05(b)(i) above, then Licensor, within ten (10) business days after its
receipt of such notice, shall have the right to submit to the Knicks and to the Estimator a notice that (x) sets forth any information that Licensor
reasonably believes is relevant to the determination of the Revised Estimated Date and/or (y) indicates the measures that Licensor intends and
agrees to implement in an effort to cause the substantial completion of such Condemnation Restoration Work or such Casualty Restoration
Work, as the case may be, to be achieved by the applicable Condemnation Outside Date or the applicable Casualty Outside Date (as such
Condemnation Outside Date or such Casualty Outside Date may have theretofore been postponed pursuant to the provisions of Section
12.01(d) or Section 12.02(d) above, respectively). Within ten (10) business days after the Knicks’ receipt of Licensor’s notice (or, if Licensor
does not give such notice, within twenty (20) business days after Licensor’s receipt of the Knicks notice given pursuant to Section 12.05(b)(i)
above), the Knicks shall have the right to submit to Licensor and the Estimator a notice that sets forth any information that the Knicks
reasonably believes is relevant to the determination of the Revised Estimated Date. In determining the Revised Estimated Date, the Estimator
shall take into consideration all information and measures set forth in any notices provided by the Parties pursuant to the two immediately
preceding sentences, as well as all other relevant factors. Licensor shall use commercially reasonable efforts to cause the Estimator to make its
determination of the Revised Estimated Date as soon as reasonably practicable after receipt of the Knicks’ notice given pursuant to Section
12.05(b)(i) above and the notices which each Party is entitled to deliver pursuant to this Section 12.05(b)(ii), and Licensor shall deliver such
determination of the Revised Estimated Date to the Knicks promptly upon Licensor’s receipt thereof.
(iii) Each Party shall have the option (the “Review Option”), exercised by notice given to the other within ten (10) business
days after Licensor delivers to the Knicks the Estimator’s determination of the Revised Estimated Date, to require that the Estimator’s
determination of the Revised Estimated Date be reviewed by another independent architect or construction manager that is experienced in
arena construction projects, well-regarded in the industry and mutually selected by the Parties (the “Second Estimator”). If the Parties are
unable to mutually select the Second Estimator within ten (10) business days after the giving of a notice exercising the Review Option, then
either Licensor or the Knicks, by giving ten (10) days’ notice to the other, shall have the right to request that the presiding judge of the lowest
level court of general jurisdiction for the district in which the Arena is located select the Second Estimator. Licensor shall use commercially
reasonable efforts to cause the Second Estimator, as soon as reasonably practicable after the selection thereof, to (x) review the Estimator’s
determination of the Revised Estimated Date, (y) make its own determination of the Revised Estimated Date (which determination shall be
made in accordance with the provisions of Section 12.05 (b)(ii) above) and (z) deliver to Licensor written notice indicating whether the Second
Estimator agrees with the determination of the Estimator and, if not, setting forth the Second Estimator’s determination of the Revised
Estimated Date. For all purposes of this Agreement, the “Final Revised Estimated
Date” shall mean either (a) the Revised Estimated Date determined by the Estimator, if neither Party timely exercises the Review Option or if
a Party exercises the Review Option and the Second Estimator agrees with the Estimator’s determination of the Revised Estimated Date; or (b)
the Revised Estimated Date determined by the Second Estimator, if a Party exercises the Review Option and the Second Estimator disagrees
with the Estimator’s determination of the Revised Estimated Date and therefore issues its own determination of the Revised Estimated Date.
Licensor shall deliver the Second Estimator’s written notice to the Knicks promptly upon Licensor’s receipt thereof. The fees and expenses of
the Estimator and the Second Estimator for the exercise set forth in this Section 12.05(b)(iii) and in Section 12.05(b)(ii) above shall be borne
equally by Licensor and the Knicks.
(iv) If the Final Revised Estimated Date with respect to any Condemnation or Casualty is later than the date that is 365
days after the applicable Condemnation Outside Date or applicable Casualty Outside Date therefor (each of which, for purposes of this
paragraph (iv), shall be deemed to be such applicable Condemnation Outside Date or such applicable Casualty Outside as postponed by the
maximum number of days by which same may be postponed due to events of Force Majeure pursuant to Section 12.01(d) or Section 12.02(d)
above, respectively), then the Knicks shall have the right to terminate this Agreement without any further liability hereunder, except for any
liability hereunder which, by the specific terms of this Agreement survives termination. If the Knicks wish to exercise such right of
termination, then it shall do so by notice to Licensor given not later than the date that is sixty (60) days after the date on which the Final
Revised Estimated Date is determined (it being agreed that the Final Revised Estimated Date shall be deemed determined either as of the date
on which the Parties’ right to exercise the Review Option shall have lapsed or, if a Party timely exercises the Review Option, as of the date on
which the Second Estimator’s notice of determination is given to the Knicks). If the Knicks terminate this Agreement as provided in this
Section 12.05(b)(iv), then such termination shall be effective on the date specified in the Knick’s notice of termination, but no earlier than
thirty (30) days after the date of such notice and no later than one hundred eighty (180) days after the date of such notice, as if said date were
the date fixed for the expiration of the Term.
Section 12.06 Replacement Arena; Rent Abatement. In the event of the occurrence of a Condemnation or Casualty that results in
an Untenantable Condition but does not result in termination of this Agreement, the Knicks, during the continuance of such Untenantable
Condition, shall have the right to use an alternate site for Knicks Events while the Arena is being restored, provided such use fully complies
with the requirements of Paragraph 6 of the Property Tax Exemption Agreement, and the Knicks’ obligation to pay the License Fee shall be
abated during such periods in accordance with Section 20.01.
Section 12.07 Intention of the Parties. The provisions of this Article XII shall be deemed an express agreement governing any case
of the Arena or any portion thereof becoming untenantable or unfit for occupancy, and Section 227 of the Real Property Law of the State of
New York, providing for such contingency in the absence of an express agreement, and any other legal requirements of like import, now or
hereafter in force, shall have no application in such case and are expressly waived by the Parties.
ARTICLE XIII
INDEMNIFICATION
Section 13.01 General Indemnification
(a) To the extent permitted by applicable law, and subject to any valid and collectible insurance, Licensor and the Knicks shall
indemnify, defend and hold harmless the other and its current and future Affiliates, and each of their respective directors, officers, employees,
agents, successors and assigns from and against any and all claims, liability, loss, damages (whether actual, incidental, consequential, punitive
or otherwise), judgments, settlement expenses, cost and expenses whatsoever, including court costs, reasonable attorneys’ fees and related
disbursements, with regard to any action, cause of action or claim of any nature (each, a “Loss”), in any way arising out of or related to (i) the
indemnifying Party’s acts or omissions in or about the Arena (except to the extent caused by the indemnified Party’s negligence or
misconduct); (ii) the indemnifying Party’s failure to fulfill any duty or obligation hereunder or to comply with applicable law or the
obligations applicable to the indemnifying Party in [*****]; or (iii) the indemnifying Party’s breach of any representations, warranties or
covenants contained in this Agreement. Each Party’s indemnity hereunder shall include the acts and omissions of its contractors, licensees,
agents and employees.
(b) Without limiting the provisions of Subparagraph 13.01(a), Licensor and the Knicks indemnify the other party for any
damage to the property (whether in or about the Arena) of the other party caused by the acts or omissions of the indemnifying party’s
contractors, licensees, agents, employees and invitees, limited however (for purposes of clarity), in the case of the Knicks, to Knicks Misuse.
All repairs to the damaged property of Licensor shall be made by firm(s) designated by Licensor.
(c) Notwithstanding the foregoing, for so long as Licensor and the Knicks are under common control, the Parties intend for all
Losses to be covered, consistent with past practice and the terms and conditions of the applicable insurance policies, by the NBA’s master
insurance program for the benefit of teams, whether such Loss was caused by Licensor, the Knicks or any third party (including any
ticketholders).
Section 13.02 Notice of Claims and Rights to Defend and Settle Claims. The indemnified Party agrees to serve the indemnifying
Party with prompt written notice of any claims which could give rise to the indemnifying Party’s indemnity hereunder, and the indemnifying
Party and its insurance carrier(s) shall have the right to defend such claims with counsel of their choosing. The indemnified Party shall not
settle any claim without the indemnifying Party’s (or its insurer’s) prior written consent, not to be unreasonably withheld or delayed.
ARTICLE XIV
INSURANCE AND SUBROGATION
Section 14.01 Knicks Insurance Coverage. The Knicks shall, from and after the Commencement Date, maintain at its expense in
force the following minimum insurance:
(a) Property insurance for the full one hundred percent (100%) of replacement cost of all of the Knicks’ equipment,
improvements, and betterments owned by the Knicks, literary or musical material, and all other properties and materials owned, rented or
brought onto the premises by the Knicks. Coverage shall be on an All Risk of physical loss or damage basis and shall include business
interruption coverage in reasonable and customary amounts with customary deductibles and coinsurance against physical loss or damage or
destruction from such perils;
(b) Commercial general liability insurance covering against bodily injury and property damage having a limit of not less than
$[*****] for each occurrence and a limit of not less than $[*****] in the aggregate for each occurrence. Coverages shall be in accordance with
the ISO form or equivalent, for response to any occurrence in and about the Arena in connection with any Knicks Event and covering the
Knicks’ contractual liability for indemnification under this Agreement, including but not limited to Section 4.07 and Article XIII herein. Such
insurance shall include, but not be limited to, premises operations, products and completed operations, personal injury, advertising injury and
independent contractors and containing provisions for separation of insureds or severability of interests. Coverage under the Knicks policy
shall be on a primary and non-contributory basis with any insurance available to Licensor for claims arising in connection with Knicks'
operations. The Knicks GL Policy shall be in such amount and with such policy limits so that the coverage and limits are adequate to maintain
the Knicks Excess/Umbrella Policy without gaps in coverage between the Knicks GL Policy and the Knicks Excess/Umbrella Policy;
(c) Liquor liability insurance coverage having limits of not less than $[*****] for each common cause and in the aggregate;
(d) Automobile liability insurance coverage with a combined single limit of no less than $[*****];
(e) Employer’s liability insurance with the following minimum limits: bodily injury by accident – $[*****] each accident;
bodily injury by disease – $[*****] policy limit and $[*****] each employee;
(f) Umbrella or excess liability coverage, following the terms, conditions, and extensions of coverages, to apply over and
above the primary coverages in subsections (b), (c) and (d) and (e), in an amount not less than $[*****] in the aggregate;
(g) Statutory worker’s compensation coverage;
(h) Employment practices liability insurance with minimum limits of $[*****];
(i) Broad-form Media liability insurance with limits of no less than $[*****] per claim/$[*****] aggregate; and
(j) Disability insurance as required by the State of New York.
(k) The insurance referred to in this Section 14.01, with the exception of property insurance, worker’s compensation and
employer’s liability coverage, shall name Licensor and its Affiliates and mortgagees, and each of their respective directors, officers,
employees, agents, successors and assigns, and any other parties designated by Licensor, as additional
insureds. Licensor shall also have the right to require the Knicks, from time to time, to increase the scope and limits of any insurance coverage
required to be carried herein, so long as such increase is commercially reasonable under the circumstances.
Section 14.02 Knicks Insurance RequirementsThe Knicks shall, at its own expense, obtain and maintain during the Term and for
three (3) years thereafter, policies of insurance as required herein written by an insurance carrier(s) reasonably acceptable to Licensor that
is/are authorized to do business in the State of New York, rated A VII or better in the most current edition of A.M. Best’s Insurance Report (or
if such report shall cease to be published, such comparable rating system as reasonably determined by Licensor), and with deductible and self-
insurance retention amounts that are not in excess of amounts which are commercially reasonable under the circumstances (except that in the
event that any maximum deductible or self-insurance retention amounts are mandated either by law, such mandated maximum amounts shall
not be exceeded regardless of whether higher amounts may be commercially reasonable under the circumstances).
(a) In the event of cancellation of any policies, the applicable carrier shall provide at least thirty (30) days advance written
notice of same to the additional insureds described in Section 14.01. If the policies cannot be amended to provide for such cancellation, the
Knicks agree to provide written notice of cancellation as described herein.
(b) In the event that Licensor is in receipt of such notice of non-payment and/or cancellation, Licensor shall have the right, but
not the obligation, to pay for any commercially reasonable costs and expenses which shall be required to maintain or reinstate such insurance,
and to charge the Knicks for any and all expenses incurred in connection therewith.
Section 14.03 Knicks Certificates of Insurance. The Knicks shall provide Licensor with appropriate evidence of insurance setting
forth the required coverages not later than ten (10) days prior to the date on which such coverage is required to be obtained hereunder. For
each consecutive year, the Knicks shall provide appropriate evidence of insurance no later than ten (10) days before the policies are required to
be renewed. At the request of Licensor, the Knicks shall obtain, release, and forward duplicate original copies of any policy or policies for
review by Licensor or its agent to determine if all insurance requirements have been met.
Section 14.04 Knicks Waiver of Subrogation. The Knicks shall require each of their carriers to include a waiver of the insurance
carriers’ claims and rights of subrogation against Licensor.
Section 14.05 Licensor Insurance Coverage. Licensor shall, from and after the Commencement Date, maintain at its expense in
force the following minimum insurance:
(a) Property insurance for the full one hundred percent (100%) of replacement cost of the Arena, including all improvements,
and betterments and personal property owned by Licensor. Coverage shall be on an All Risk of physical loss or damage basis, including losses
arising out of a terrorism event, and shall include business interruption and loss of rental income coverages in reasonable and customary
amounts with customary deductibles;
(b) Commercial general liability insurance covering against bodily injury and property damage having a limit of not less than
$[*****] for each occurrence and a limit of not
less than $[*****] in the aggregate for each occurrence. Coverages shall be in accordance with the ISO form or equivalent, for response to any
occurrence in and about the Arena.. Such insurance shall include, but not be limited to, premises operations, products and completed
operations, personal injury, advertising injury and independent contractors and containing provisions for separation of insureds or severability
of interests. For so long as Licensor and the Knicks are under common control, coverage under the Licensor's policy shall be in excess to any
insurance required of the Knicks. The Licensor's GL Policy shall be in such amount and with such policy limits so that the coverage and limits
are adequate to maintain the Licensor's Excess/Umbrella Policy without gaps in coverage between the Licensor's GL Policy and the Licensor's
Excess/Umbrella Policy;
(c) Umbrella or excess liability coverage, following the terms, conditions, and extensions of coverages, to apply over and
above the primary coverages in subsection (b), and the employer's liability coverage in subsection (d), in an amount not less than $[*****] in
the aggregate;
(d) Employer’s liability insurance with the following minimum limits: bodily injury by accident – $[*****] each accident;
bodily injury by disease – $[*****] policy limit and $[*****] each employee;
(e) Statutory worker’s compensation coverage;
(f) Disability insurance as required by the State of New York.
Section 14.06 Licensor Insurance Requirements. Licensor shall, at its own expense, obtain and maintain during the Term and for
three (3) years thereafter, policies of insurance as required herein written by an insurance carrier(s) reasonably acceptable to the Knicks that is
authorized to do business in the State of New York, rated A VII or better in the most current edition of A.M. Best’s Insurance Report (or if
such report shall cease to be published, such comparable rating system as reasonably determined by the Knicks), and with deductible and self-
insurance retention amounts that are not in excess of amounts which are commercially reasonable under the circumstances (except that in the
event that any maximum deductible or self-insurance retention amounts are mandated either by law, such mandated maximum amounts shall
not be exceeded regardless of whether higher amounts may be commercially reasonable under the circumstances). The insurance referred to in
Section 14.05, with the exception of property insurance, worker’s compensation and employer’s liability coverage, shall name Knicks and its
Affiliates, and each of their respective directors, officers, employees, agents, successors and assigns, and any other parties designated by
Knicks, as additional insureds.
Section 14.07 Licensor Certificates of Insurance. Licensor shall provide the Knicks with appropriate evidence of insurance setting
forth the required coverages not later than ten (10) days prior to the date on which such coverage is required to be obtained hereunder. For
each consecutive year, Licensor shall provide appropriate evidence of insurance no later than ten (10) days before the policies are required to
be renewed. At the request of the Knicks, Licensor shall obtain, release, and forward duplicate original copies of any policy or policies for
review by Licensor or its agent to determine if all insurance requirements have been met.
Section 14.08 Licensor Waiver of Subrogation. Licensor shall include in each of its policies, a waiver of the insurance carriers’
rights of subrogation against the Knicks.
ARTICLE XV
WORK STOPPAGE
Section 15.01 Impact on License Fee. If, during any NBA season, any previously scheduled Home Game is cancelled as a result of a
strike, work stoppage, lockout, or other suspension or cancellation of NBA play arising out of a labor dispute involving NBA players or
referees, or any other League-related labor or other dispute (each a “Work Stoppage”), there shall be no reduction in the License Fee,
provided, however, that, upon any such cancellation, Licensor shall use commercially reasonable efforts to hold the Arena out for relicense on
such Home Date, and in the event that Licensor relicenses the Arena on such Home Date during the time of the previously scheduled Home
Game, Licensor will refund to the Knicks the lesser of (i) [*****] of any net contribution attributable to the relicense of the Arena and (ii) the
pro rata portion of the annual License Fee attributable to such Home Date (i.e. 1/44th of the License Fee if there had been 41 home games and
3 preseason games scheduled) (the “Work Stoppage Abatement”). If, during any season in which the Knicks receive a Work Stoppage
Abatement, any previously scheduled Home Games are cancelled as a result of a Work Stoppage and subsequently rescheduled, any Work
Stoppage Abatement received by the Knicks shall be reduced by an amount equal to the Work Stoppage Abatement, divided by the number of
Home Games that were cancelled and multiplied by the number of Home Games that were subsequently rescheduled.
Section 15.02 Treatment of Refunds or Credits. Any refunds or credits granted to Licensor’s suite or other licensees, sponsors,
advertisers or other third parties (including any concessionaire or service provider) that relates to the Work Stoppage shall be determined in
Licensor’s reasonable discretion, but may not exceed the Team’s allocable share of such revenue for a full-season work stoppage (pro rata for
a partial-season work stoppage) (“Maximum Credit or Refund”). Licensor shall retain [*****]% of the difference, if any, between the
Maximum Credit or Refund and the actual credit or refund attributable to such assets. Any refunds or credits shall be deducted from the
Knicks’ share of revenue under this Agreement for the applicable Arena assets.
Section 15.03 Scheduling. If a Work Stoppage results in the partial cancellation of a season, the Parties shall mutually agree in good
faith on the rescheduling of Home Games.
ARTICLE XVI
CERTAIN TAXES
Section 16.01 Property Taxes.
(a) The Knicks shall be responsible for the payment, without demand, counter-claim or offset, of fifty percent (50%) (the “Knicks’
Tax Share”) of any real property or similar taxes applicable to the Arena (“Arena Property Tax”). Licensor may notify any jurisdiction
imposing (or proposing to impose) any Arena Property Tax that the Knicks have full responsibility for the
payment of 50% of any such Arena Property Tax and, to the extent permitted by applicable law, rule or regulation, Licensor shall arrange for
such Arena Property Tax to be billed directly to the Knicks. Licensor shall promptly provide to the Knicks copies of all materials relating to
any Arena Property Tax that it receives from any government authority.
(b) Licensor and the Knicks acknowledge that, as of the Commencement Date, Licensor is exempt, pursuant to the laws of the State
of New York and that certain agreement between the Mayor of the City of New York, acting as Chief Executive Officer of, and for, the City of
New York, and Licensor’s and the Knicks’ predecessor-in-interest Madison Square Garden Center, Inc., dated July 15, 1982 (the “Property
Tax Exemption Agreement”), from paying any Arena Property Tax in connection with the Arena (the “Property Tax Exemption”).
Licensor and the Knicks shall each use all commercially reasonable efforts to cause the Property Tax Exemption to remain in effect at all times
during the term of this Agreement.
Section 16.02 Commercial Rent Tax. The Knicks shall be responsible for paying directly, and shall timely pay, to the City of New
York the “Commercial Rent Or Occupancy Tax” imposed pursuant to Chapter 7 of Title 11 of the New York City Administrative Code, or
successor or similar tax assessed or imposed on a tenant as a consequence of the Knicks’ status as a licensee under this Agreement.
ARTICLE XVII
KNICKS DEFAULT; LICENSOR’S RIGHTS AND REMEDIES
Section 17.01 Knicks Default. The occurrence of any one or more of the following events shall constitute a default by the Knicks
under this Agreement (each, a “Knicks Default”):
(a) Failure by the Knicks to timely pay any amount owed by the Knicks to Licensor pursuant to this Agreement if such failure
shall continue for thirty (30) days after notice thereof is received by the Knicks from Licensor;
(b) Failure by the Knicks to maintain the Team’s membership in the NBA;
(c) The levy upon or other execution or the attachment by legal process of the interest of the Knicks in the Arena herein, or the
filing or creation of a lien in respect of such interest, which levy, attachment or lien shall not be released, discharged or bonded against within
sixty (60) days from the date of such filing;
(d) The making by the Knicks of an assignment for the benefit of creditors; an adjudication that the Knicks are bankrupt,
insolvent or unable to pay its debts as they mature; the filing by or against the Knicks of a petition to have the Knicks adjudged bankrupt, or a
petition for reorganization or arrangement under any law relating to bankruptcy unless, in the case of a petition filed against the Knicks, the
case is dismissed within sixty (60) days after the filing thereof; the appointment of a trustee or receiver to take possession of substantially all of
the Knicks’ assets or the Knicks’ interests in this Agreement unless the appointment is revoked within sixty (60) days after the appointment
thereof; or an attachment, execution or levy against substantially all of the Knicks’ interests in this Agreement unless the attachment, execution
or levy is revoked within sixty (60) days after the attachment, execution or levy;
(e) Breach by the Knicks of ARTICLE XI (an “Exclusivity Breach”); and
(f) Failure by the Knicks to observe or perform in any material respect any covenant, agreement, condition, or provision of
this Agreement not otherwise specified in this ARTICLE XVII if such failure shall continue for sixty (60) days after notice thereof from
Licensor to the Knicks; provided that the Knicks shall not be in a Knicks Default with respect to matters that cannot reasonably be cured
within sixty (60) days so long as within sixty (60) days after such notice the Knicks commence such cure and diligently and continuously
proceed to complete the same, but in any event, the Knicks shall not have more than ninety (90) days from its receipt of such notice to cure
such failure.
Section 17.02 Remedies of Licensor. If a Knicks Default occurs, Licensor shall have the following rights and remedies which shall
be distinct, separate, and, to the extent not mutually exclusive, cumulative:
(a) In addition to any other legal or equitable damages as may be available to Licensor and subject to clause (b) below,
Licensor may enforce this Agreement by seeking specific performance of any Knicks covenant or agreement contained herein or the
enforcement of any other appropriate legal or equitable remedy, including self-help (following notice, expiration of any applicable cure period,
and failure to cure) and recoupment from the Knicks of the reasonable cost of curing any default on the Knicks’ behalf (and the right to offset
such cost from any amounts due from Licensor pursuant to this Agreement);
(b) Licensor shall be entitled to all reasonable costs, charges, expenses, and attorneys’ fees incurred by the Licensor in
connection with a Knicks Default; and
(c) Notwithstanding anything in this Agreement to the contrary, Licensor shall not, under any circumstances, have the right to
terminate this Agreement, except as set forth in ARTCLE XII.
Section 17.03 Remedies of Licensor for an Exclusivity Breach. The Knicks hereby acknowledge that Licensor and its Affiliates
will be irreparably and continually harmed by any Exclusivity Breach or the threat thereof and that damages for an Exclusivity Breach cannot
be estimated with any degree of certainty and that monetary damages cannot fairly or adequately compensate Licensor for an Exclusivity
Breach. The Knicks further acknowledge that Licensor does not have an adequate remedy at law for an Exclusivity Breach. Accordingly, the
Knicks hereby acknowledge that, in the event of an Exclusivity Breach, Licensor shall, in addition to any other applicable available rights and
remedies, be entitled to seek and obtain, and the Knicks hereby consent to the entry of, a temporary restraining order, together with temporary,
preliminary and permanent injunctive or other equitable relief, from any court of competent jurisdiction to enjoin any violation or threatened
violation of ARTICLE XI and to compel the Knicks to comply with or restrain or cease from breaching or violating the covenants of
ARTICLE XI. The Knicks hereby waive any requirement that Licensor post a bond or other security in connection with injunctive or other
equitable relief.
Section 17.04 League’s Right to Notice of and Cure Knicks Defaults. Licensor shall simultaneously serve the League, at the
addresses set forth in Section 20.04, with copies of all notices of Knicks Defaults served upon the Knicks. Licensor shall accept a cure of a
Knicks Default by the League within the applicable cure period.
ARTICLE XVIII
LICENSOR DEFAULT; KNICKS’ RIGHTS AND REMEDIES; RIGHTS IN THE EVENT OF REPEAL OF PROPERTY TAX
EXEMPTION
Section 18.01 Licensor Default. The occurrence of any one or more of the following shall constitute a default by Licensor under this
Agreement (each, a “Licensor Default”):
(a) Failure by Licensor to timely pay any amount owed by Licensor to the Knicks pursuant to this Agreement if such failure
shall continue for thirty (30) days after notice thereof is received by Licensor;
(b) The making by Licensor of an assignment for the benefit of creditors; an adjudication that Licensor is bankrupt, insolvent
or unable to pay its debts as they mature; the filing by or against Licensor of a petition to have Licensor adjudged bankrupt, or a petition for
reorganization or arrangement under any law relating to bankruptcy unless, in the case of a petition filed against the Licensor, the case is
dismissed within sixty (60) days after the filing thereof; the appointment of a trustee or receiver to take possession of substantially all of
Licensor’s assets or Licensor’s interests in this Agreement; or an attachment, execution or levy against substantially all of Licensor’s interests
in this Agreement;
(c) Failure by Licensor to provide the Knicks with any of the Knicks’ rights hereunder that interferes with the playing of
Home Games in the Arena;
(d) Failure by Licensor to cause the Arena to be maintained and operated in accordance with, or otherwise to meet and
observe, the Standard, and such failure shall continue for fifteen (15) days after notice thereof from the Knicks to Licensor; provided that if
such failure cannot reasonably be cured within such fifteen (15) days, then Licensor shall have up to an additional fifteen (15) days to cure
such failure as long as, within fifteen (15) days after such notice, it diligently undertakes and pursues such cure and provides the Knicks with
reasonable evidence that it is diligently undertaking and pursuing such cure, but in any event, Licensor shall not have more thirty (30) days
from its receipt of notice of such failure from the Knicks to cure such failure; and
(e) Failure by Licensor to observe or perform in any material respect any covenant, agreement, condition, or provision of this
Agreement not otherwise specified in this ARTICLE XVIII if such failure shall continue for sixty (60) days after notice thereof from the
Knicks to Licensor; provided that Licensor shall not be in a Licensor Default with respect to matters that cannot reasonably be cured within
sixty (60) days so long as within sixty (60) days after such notice Licensor commences such cure and diligently and continuously proceeds to
complete the same, but in any event, Licensor shall not have more than ninety (90) days from its receipt of such notice to cure such failure.
Section 18.02 Remedies of the Knicks. If a Licensor Default occurs, the Knicks shall have the following rights and remedies, which
shall be distinct, separate, and, to the extent not mutually exclusive, cumulative:
(a) In addition to any other legal or equitable remedies as may be available to the Knicks and subject to clause (b) below, the
Knicks may enforce the provisions of this Agreement and may enforce and protect the rights of the Knicks herein by seeking specific
performance of any covenant or agreement contained herein, or the enforcement of any other appropriate legal or equitable remedy, including
self-help (following notice, expiration of applicable cure period, and failure to cure) and recoupment from Licensor of the reasonable cost of
curing any default on Licensor’s behalf (and the right to offset such cost, or any amounts due from Licensor pursuant to this Agreement,
against any amount then owed by the Knicks to Licensor pursuant to this Agreement), and recovery of all monies due or to become due from
Licensor under any provisions of this Agreement;
(b) The Knicks shall be entitled to all reasonable costs, charges, expenses, and attorneys’ fees incurred by the Knicks in
connection with a Licensor Default; and
(c) Notwithstanding anything in this Agreement to the contrary, the Knicks shall not, under any circumstances, have the right
to terminate this Agreement, except as set forth in ARTICLE XII.
Section 18.03 Rights in the Event of Repeal of Property Tax Exemption
(a) In the event the Property Tax Exemption is no longer in effect [*****] (a “No Fault Occurrence”), the Knicks shall remain
responsible for fifty percent (50%) of the Arena Property Tax for the remainder of the Term, unless the Parties agree to extend this provision.
(b) In the event the Property Tax Exemption is no longer in effect due to a breach of the Property Tax Exemption Agreement
by the Knicks that leads to the loss of the Property Tax Exemption, the Knicks shall be responsible for 100% of any Arena Property Tax for
the remainder of the Term.
(c) Notwithstanding anything to the contrary in Sections 16.01 or 18.03(a), in the event of a loss of the Property Tax
Exemption [*****].
(d) [*****].
ARTICLE XIX
ASSIGNMENT
Section 19.01 Licensor Assignment. Licensor shall have the right to assign this Agreement upon written notice to the Knicks to any
Person that acquires the Arena, provided the assignee agrees in writing to assume all of Licensor’s obligations under this Agreement.
Section 19.02 Knicks Assignment. The Knicks shall have the right to assign this Agreement upon written notice to Licensor to any
Person that acquires the Team in accordance
with League Rules, provided the assignee agrees in writing to assume all of the Knicks’ obligations under this Agreement. The Knicks shall
further have the rights to collaterally assign this Agreement to secure indebtedness of the Knicks incurred in accordance with League Rules.
Section 19.03 No Other Assignment. Except as set forth in this ARTICLE XIX, neither Party shall be permitted to assign this
Agreement without the prior written consent of the other Party. A change in ownership of either Party shall not be deemed an assignment
under this Section 19.
ARTICLE XX
MISCELLANEOUS
Section 20.01 Force Majeure. Should any fire or other casualty, act of God, earthquake, flood, epidemic, landslide, enemy act, war,
riot, act or threat of terrorism, civil commotion, general unavailability of certain materials; a strike, slowdown, boycott or labor dispute (other
than a strike, slowdown, boycott or labor dispute involving the League), or any other similar event beyond the reasonable control of the subject
Party (each, a “Force Majeure”) prevent performance of this Agreement by such Party in accordance with its provisions, performance of this
Agreement (other than the payment of any sum of money owed hereunder, subject to the final two sentences of this Section 20.01) by such
Party shall be suspended or excused to the extent commensurate with such interfering occurrence. In the event of a Force Majeure, the Knicks
shall be permitted to schedule and play Home Games at an alternate location, provided that playing games in such location fully complies with
the requirements of Paragraph 6 of the Property Tax Exemption Agreement. In the event of a Force Majeure (including a governmental action)
that results in (a) attendance at Arena events being limited to 1000 attendees or less per event for any period (a “Restricted Attendance
Period”), the Knicks shall be permitted to schedule and play Home Games at the Arena during the Restricted Attendance Period; the pro rata
License Fee attributable to any Home Games played at the Arena during any Restricted Attendance Period shall be reduced by 80% or (b)
attendance at Arena events being materially limited (but greater than 1000 attendees), the parties will negotiate in good faith to agree on an
appropriate reduction to the License Fee. Notwithstanding anything herein to the contrary, the Knicks’ obligation to pay the License Fee for
periods for which the Arena is unavailable for Home Games due to a Force Majeure event (including a governmental action or the occurrence
of any Untenantable Condition) shall be abated during such periods.
Section 20.02 Consents and Approvals. Any consents or approvals permitted or required to be given by Licensor or the Knicks
under this Agreement shall not be valid unless such consent or approval is in writing, signed by the Party by or on whose behalf such consent
or approval is executed.
Section 20.03 Entire Agreement. This Agreement, including the schedules and exhibits attached hereto, which are incorporated
herein, constitutes the entire agreement between and among the Parties, and supersedes any previous oral or written agreements,
representations and covenants, regarding the subject matter hereof and is a binding and enforceable agreement between and among the Parties
and their respective successors and permitted assigns. This Agreement may not be amended, modified, supplemented or terminated unless in
writing executed by the Parties and, in each case, unless approved in advance in writing by the NBA. Notwithstanding anything
herein to the contrary, any agreement, consent, waiver or modification to the terms of this Agreement, whether or not contemplated herein, that
would constitute a material modification to the terms of this Agreement that would remain in effect after the Parties are no longer affiliated,
shall require the prior written approval of the NBA. Subject to the foregoing obligations to obtain NBA approval, in the event of any proposed
change of control or ownership of either Party, the Parties may mutually agree to amend, modify or supplement this Agreement in order to
facilitate such change of control or ownership transaction.
Section 20.04 Notices. All notices, demands, consents, approvals, statements, requests, and reports to be given under this Agreement
shall be in writing, signed by the Party or an officer, agent, or attorney of the Party giving the notice and shall be deemed to be given upon
receipt if delivered personally by nationally recognized overnight courier providing a receipt for delivery, by certified or registered mail,
postage prepaid with return receipt requested, or by personal delivery at the applicable address set forth below or to such other address as that
Party may designate in writing.
For the Knicks:
With copies to:
MSG Sports, LLC
Two Pennsylvania Plaza
New York, New York 10121
Attention: President
MSG Sports, LLC
Two Pennsylvania Plaza
New York, New York 10121
Attention: General Counsel
For the NBA: National Basketball Association
For Licensor:
With a copy to:
645 Fifth Avenue
New York, New York 10022
Attention: General Counsel
MSG Arena, LLC
c/o MSG Entertainment Group, LLC
Two Pennsylvania Plaza
New York, New York 10121
Attention: President
MSG Arena, LLC
c/o MSG Entertainment Group, LLC
Two Pennsylvania Plaza
New York, New York 10121
Attention: General Counsel
Section 20.05 Successors Bound. The covenants, terms, provisions, and conditions of this Agreement shall be binding upon
Licensor and the Knicks and their respective successors and permitted assigns and inure to the benefit of Licensor and the Knicks and their
respective successors and, to the extent permitted herein, assigns.
Section 20.06 Governing Law; Disputes.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard
to its choice of law provisions.
(b) Any disputes arising under this Agreement, shall be submitted to, and resolved exclusively and finally through, the
following arbitration process (“Arbitration”). Except as set forth below, the Arbitration process shall be administered by the American
Arbitration Association (“AAA”) under the Commercial Arbitration Rules in effect at the time the Dispute or Controversy is submitted to the
AAA for Arbitration. The panel (the “Arbitration Panel”) will consist of three (3) neutral arbitrators (each, an “Arbitrator”) selected in
accordance with applicable AAA procedures. In proposing a list of candidates for Arbitrators, AAA will take into account the Parties’ desire to
obtain potential Arbitrators with significant experience in the operation of comparable sports or entertainment facilities or in the entertainment
and sports business generally, or with specific experience regarding the nature of the dispute. Barring extraordinary circumstances, an initial
conference with the Arbitration Panel shall be scheduled to take place in New York, New York within thirty (30) days after the appointment of
the third Arbitrator. At such conference, a schedule shall be established for such discovery, if any, as a majority of the Arbitration Panel deems
appropriate in light of the nature of the dispute and the Parties’ desire to resolve disputes in a prompt and cost-effective manner, and the date
of the Arbitration hearing shall be established by vote of a majority of the Arbitration Panel. Barring extraordinary circumstances, the award
will be rendered no later than fourteen (14) days from the date of the conclusion of the hearing. Unless the Parties otherwise agree, the
Arbitration shall take place in New York, New York. Each Party irrevocably consents to the delivery of service of process with respect to any
Arbitration in any manner permitted for the giving of notices under Section 20.04. The Arbitration Panel shall not have the authority to alter,
change, amend, modify, waive, add to or delete from any provision of this Agreement. If the Parties initiate multiple arbitration proceedings,
the subject matters of which are related by common questions of law or fact and that could result in conflicting awards or obligations, such
proceedings shall be consolidated into a single arbitral proceeding. Notwithstanding anything contained in the AAA rules to the contrary,
subject to Article XIII, unless the Arbitration Panel finds that one or more claims or defenses were frivolous or knowingly false when made,
each Party shall bear the cost of its own legal representation and expert witness fees, as well as its share of the fees and costs payable to the
AAA and the Arbitrators, in any Arbitration under this Agreement. If the Arbitration Panel finds that one or more claims or defenses were
frivolous or knowingly false when made, the Arbitration Panel shall be entitled to require the Party that made such frivolous or knowingly
false claims or defenses to bear all or a portion of the other Party’s legal fees and expert witness fees incurred in connection with such
frivolous claims or defenses. All provisions of this Agreement applicable to disputes generally shall apply to the Arbitration. All decisions by
the Arbitration Panel shall be (i) decided by majority vote and (ii) final and binding on the Parties and may be enforced by any court of
competent jurisdiction.
(c) Notwithstanding any provision of this Agreement to the contrary, each Party may seek injunctive or other equitable relief
(but not a declaratory judgment) from a court of law, as described in Section 20.06(d), with respect to any dispute. If a dispute requires
emergency relief before the matter may be effectively resolved through arbitration, the Arbitration procedures set forth above will continue to
govern the ultimate resolution of the dispute
notwithstanding the fact that a court of competent jurisdiction may have entered an order providing for injunctive or other equitable relief.
(d) Any action that seeks injunctive or other equitable relief or confirmation of an award rendered in an Arbitration may only
be brought by suit, action or proceeding before any federal or state court located in the Borough of Manhattan, City of New York, each of the
Parties voluntarily and irrevocably consents and (without waiving service of process) submits to the personal jurisdiction and venue of the
courts located in the Borough of Manhattan, City of New York that have subject matter jurisdiction, waives all objections as to venue and any
claim that it is not personally subject to such jurisdiction or to seek a change of venue, agrees not to bring any such action or proceeding in any
other forum, and waives the right to a trial by jury.
(e) This Section 20.06 shall survive any termination or expiration of the Term.
Section 20.07 Captions and Headings; Certain Rules of Construction.
(a) The captions and headings throughout this Agreement are for convenience and reference only and the words contained
therein shall in no way be held or deemed to define, limit, describe, explain, modify, amplify, or add to the interpretation, construction, or
meaning of any provisions of this Agreement or the scope or intent thereof, nor in any way affect this Agreement.
(b) Unless the context, otherwise requires: (i) a term has the meaning assigned to it, (ii) “or” is not exclusive, (iii) words in the
singular include the plural and words in the plural include the singular, (iv) “herein,” “hereof ” and other words of similar import refer to this
Agreement as a whole and not to any particular article, section or other subdivision, (v) all references to “clauses,” “sections” or “articles”
refer to clauses, sections or articles of this Agreement, (vi) “including” means “including, without limitation” and (vii) the masculine, feminine
and neuter adjectives and pronouns include one another.
Section 20.08 Counterparts. This Agreement may be executed by facsimile or PDF signature and in any number of counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Section 20.09 Confidentiality. Subject to League Rules and the rights of any mortgagees each Party agrees that, commencing on the
Commencement Date and continuing for a period of five (5) years after the expiration or earlier termination of this Agreement, the Parties
shall keep confidential the terms and conditions of this Agreement; provided that disclosure may be made (a) to their directors, equity holders,
officers, Affiliates, employees, agents, advisors, and representatives (collectively, their “Representatives”) (b) if disclosure is required by
court order, or applicable law or regulation, including disclosures required by any governmental or regulatory body having the authority to
regulate or oversee any aspect of the business of either Party (e.g., the Securities and Exchange Commission) (in which case the Party required
to disclose such Confidential Information shall notify the other Party and use commercially reasonable efforts to obtain confidential treatment
of any information so required to be disclosed), (c) if disclosure is required to comply with a request or requirement of a governmental or
administrative entity or agent thereof, (d) to the League and/or any League Representatives, (e) as required by League
Rules, (f) for valid business purposes to existing or prospective lenders, investors and employees of partners and Affiliates, (g) to enforce any
of a Party’s rights pursuant to this Agreement, or (h) to governmental authorities, to the extent necessary to perform a Party’s obligations under
this Agreement. Each Party shall direct their Representatives to maintain such information in the strictest confidence. No Party shall make any
public announcement with respect to this Agreement or the transactions contemplated hereby without the prior written consent of the other
Parties, not to be unreasonably withheld, conditioned or delayed.
Section 20.10 League Rules. This Agreement is subject to League Rules and Licensor hereby covenants to comply with all League
Rules in connection with its performance hereunder and its operation of the Arena for Knicks Events. In the event of any conflict between this
Agreement and League Rules with respect to the Parties’ rights and obligations hereunder, League Rules shall control and govern in all
respects. Nothing in this Section 20.10 shall affect the Knicks’ obligations under Section 11.01 or Article XIII.
Section 20.11 Superior Interests
(a) Each mortgagee or similar party named in any mortgage or similar instrument now existing or hereafter made and
encumbering an interest in the Arena superior to that of Licensor (each such mortgage and similar instrument being hereinafter collectively
referred to as “Superior Interests”, and the holder of the mortgagee’s and similar party’s interest being hereinafter collectively referred to as
“Superior Interest Holders”) shall agree in a commercially reasonable form of instrument that, if it succeeds to the interest of Licensor in the
Arena by termination of the Superior Interest by any means, it will recognize the rights and interest of the Knicks under this Agreement to use
and occupy the Arena if and as long as a Knicks Default has not occurred and is continuing (which agreement may, at such Superior Interest
Holder’s option require attornment by the Knicks), in consideration of which the rights and interests of the Knicks to use and occupy the Arena
shall be subject and subordinate to the Superior Interest and to any and all advances to be made therein, and to the interest thereon, and all
renewals, replacements and extensions thereof. The Superior Interest Holder may elect that, instead of making this Agreement subject and
subordinate to its Superior Interest, the rights and interest of the Knicks under this Agreement shall have priority over the lien of the Superior
Interest in question. The Knicks agree that it will, within ten (10) days after demand in writing, execute and deliver such reasonable
instruments may be required, either to make this Agreement subject and subordinate to such a Superior Interest (subject to the Superior Interest
Holder’s agreement as aforesaid to recognize the rights and interest of the Knicks under this Agreement to use and occupy the Arena if and as
long as a Knicks Default has not occurred and is continuing), or to give this Agreement priority over the lien of such Superior Interest,
whichever alternative may be elected by the respective Superior Interest Holder.
Section 20.12 Severability. If any Article, Section, Subsection, Schedule, Exhibit, term, or provision of this Agreement or the
application thereof to any Party or circumstance shall, to any extent, be invalid or unenforceable, the remainder of the Article, Section,
Subsection, Schedule, Exhibit, term, or provision of this Agreement or the application of same to Parties or circumstances other than those to
which it is held invalid or unenforceable shall not be affected thereby and each remaining Article, Section, Subsection, Schedule, Exhibit,
term, or provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
Section 20.13 Waiver. No waiver of any right, obligation or default shall be implied, but must be in writing, signed by the Party
against whom the waiver is sought to be enforced. Any particular waiver of any right, obligation or default shall not be construed as a waiver
of any subsequent or other right, obligation or default.
Section 20.14 Further Assurances. Licensor and the Knicks shall execute, acknowledge, and deliver, after the date hereof, without
additional consideration, such further assurances, instruments, and documents, and shall take such further actions, as Licensor or the Knicks
shall reasonably request of the other in order to fulfill the intent of this Agreement and the transactions contemplated thereby.
Section 20.15 No Third-Party Beneficiary; Enforcement of Third-Party Agreements.
(a) The provisions of this Agreement are for the exclusive benefit of the Parties and not for the benefit of any third person, nor
shall this Agreement be deemed to have conferred any rights, express or implied, upon any third person unless otherwise expressly provided
for herein; provided, that the League is a third party beneficiary of (i) the Knicks cure rights as set forth in Section 17.04, (ii) the obligations of
the Parties to obtain the League’s written approval prior to any amendment, modification, waiver, supplementation or termination of this
Agreement (as set forth in Section 20.03), and (iii) the enforcement of Section 20.10.
(b) Licensor shall use commercially reasonable efforts to enforce any agreement between Licensor and any third-party (or
third-parties) (including, without limitation, [*****], Ticket Agent Agreements, Suite Agreements, Hospitality Agreements and Joint Sponsor
Agreements) that apply to any of the Knicks rights or obligations under this Agreement.
Section 20.16 Books and Records. Licensor and the Knicks shall each keep full, true, and correct contracts, books and records in
accordance with generally accepted accounting principles consistently applied (and shall require all of their agents, contractors, and
concessionaires to keep such books and records of their transactions to the extent that such transactions would be the subject of the calculation
of any payments due from one Party to the other under this Agreement) setting forth the factual, accounting, and legal bases upon which the
calculation of payments herein are made (the “Books and Records”), and in such detail that would reasonably enable a reasonably qualified
third party to readily and independently make such calculations and verify the accuracy of statements of same which are furnished by one
Party to the other under this Agreement. Each Party’s books and records shall be (a) retained for at least three (3) years following the other
Party’s receipt of the respective statement(s) to which they apply, and (b) made available for inspections and copying by the other Party’s duly
authorized representatives at all reasonable times at reasonable office locations in the New York, NY metropolitan area. Each Party shall
promptly furnish to the other a complete copy of any report of any such examination or inspection.
Section 20.17 Audit Rights. Each Party (the “Auditing Party”) shall be entitled to audit the relevant Books and Records of the
other Party (the “Non-Auditing Party”) for the sole purpose, and only to the extent, of determining the Non-Auditing Party’s compliance with
the financial terms of this Agreement. Such audit right shall be exercisable by the Auditing Party by
providing the Non-Auditing Party with not less than five (5) business days written notice. Except as otherwise set forth below, all costs and
expenses of any such audit shall be paid by the Auditing Party. If the audit discloses that the Non-Auditing Party has failed to pay any amounts
due under this Agreement, the Non-Auditing Party shall remit the underpayment to the Auditing Party within thirty (30) days following the
Auditing Party’s delivery of notice and evidence of underpayment to the Non- Auditing Party. If the audit reveals an underpayment to the
Auditing Party of greater than 5%, then the Non- Auditing Party shall pay all costs and expenses associated with such audit, provided that the
auditor is an independent certified public accounting firm paid on an hourly (and not contingency) basis.
Section 20.18 Access to Financial Information. Licensor acknowledges that existing League Rules on financial reporting under the
League’s collective bargaining agreements and revenue sharing plans requires the Team, annually and from time to time, to provide the
League and auditors for the League and its players’ association detailed financial information, including information that is in the possession
of Licensor. Licensor agrees to provide the information requested by the League and/or the auditors for these purposes and to use
commercially reasonable efforts to provide the staff and other support necessary to comply with these requests and the related process.
[signatures on next page]
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IN WITNESS WHEREOF, the Parties have entered into this Agreement as of the date first above written.
LICENSOR:
MSG ARENA, LLC
By: /s/ Philip D’Ambrosio
Name: Philip D’Ambrosio
Title: Senior Vice President, Treasurer
KNICKS:
NEW YORK KNICKS, LLC
By: /s/ Victoria M. Mink
Name: Victoria M. Mink
Title: Executive Vice President and
Chief Financial Officer
CERTAIN CONFIDENTIAL INFORMATION, IDENTIFIED BY BRACKETED ASTERISKS “[*****]”, HAS BEEN OMITTED FROM THIS EXHIBIT
BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED.
Exhibit 10.70
ARENA LICENSE AGREEMENT
between
MSG ARENA, LLC
and
NEW YORK RANGERS, LLC
Dated as of April 15, 2020
1
ARENA LICENSE AGREEMENT
This ARENA LICENSE AGREEMENT (this “Agreement”) is made as of April 15, 2020 (the “Effective Date”) between
MSG Arena, LLC, a Delaware limited liability company (“Licensor”), and New York Rangers, LLC, a Delaware limited liability company
(the “Rangers”). Licensor and the Rangers are each referred to individually as a “Party” and collectively as the “Parties.”
RECITALS
A. Licensor owns and operates the arena commonly known as Madison Square Garden, which is located at 4 Pennsylvania
Plaza, New York, New York 10001 that contains approximately 17,000 seats for hockey games, and is suitable for the exhibition of ice hockey
games and for other purposes (the “Arena”).
B. New York Rangers, LLC owns and operates the professional hockey team known as the New York Rangers (the “Team”)
in the National Hockey League (the “NHL” or the “League”).
C. Licensor wishes to grant the Rangers, on behalf of the Team, certain rights to use specified parts of the Arena at specified
times, and the Rangers desire to so use the Arena at such times, upon the terms and conditions set forth in this Agreement.
Now, therefore, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
[*****].
“Advertising” means, collectively, all advertising, sponsorship and promotional activity, signage, messages and displays of every kind
and nature at or regarding the Arena, whether audio or visual and whether now existing or developed in the future, including the following: (i)
the right to name the Arena or any portion thereof, including identifying such name on the Arena concourses, the entrances to the Arena,
premium seating areas or any other areas at the Arena; (ii) permanent, non-permanent and transitory signage or advertising displayed on
permanent (e.g., fixed panel) or non‑permanent (e.g., rotating) advertising panels or on the interior or exterior of the Arena (including Arena
marquee boards and other exterior signage); (iii) advertising appearing on fixtures or equipment (such as scoreboard advertising and canopy
advertising); (iv) audio or video public address advertising and message board advertising; (v) electronic insertion, fascia boards, liquid
electronic displays, ribbon boards and other forms of electronic signage (“LED Signage”); (vi) print and display advertising, including
advertising on or in game programs, schedules, tickets and yearbooks; (vii) promotional events or activities sponsored by corporate partners;
(viii) the exhibition and promotion of products and services at the Arena (e.g., kiosks and special areas in the concourse); (ix) advertising worn
or carried by concessionaire personnel or
2
other personnel engaged in the operation of any Arena event; (x) advertising affixed to or included with cups, napkins, utensils, plates or other
similar items used to consume Concessions at the Arena (“Concession Items”); (xi) advertising at concession areas; and (xii) promotional or
premium item give-aways.
“Affiliate” means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by, or under
direct or indirect common control with, such specified Person, or which is a director, officer, employee, or partner (limited or general) of such
specified Person, but with respect to either Party specifically excluding the other Party and the other Party’s publicly owned parent and such
parent entity’s direct and indirect subsidiaries. For the purpose of this definition, “control”, when used with respect to any specified Person,
means the power to direct or cause, directly or indirectly, the direction of the management and policies of such Person whether through the
voting of securities, by contract or otherwise. The terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Agreement” has the meaning set forth in the preamble.
“Arena” has the meaning set forth in Recital A.
“Arena Agency Agreements” has the meaning set forth in Section 7.02(b).
“Attendance Based Allocation” has the meaning set forth in Schedule 6.01.
“Auditing Party” has the meaning set forth in Section 20.17.
“Books and Records” has the meaning set forth in Section 20.16.
“Casualty” shall mean any damage, destruction or other property casualty of any kind or nature, ordinary or extraordinary, foreseen or
unforeseen resulting from any cause, including any Force Majeure event.
“Catering Services” and “Catering Gross Receipts” have the meanings set forth in Schedule 6.01.
“Commencement Date” has the meaning set forth in Section 2.01.
“Common Areas” has the meaning set forth in Schedule 4.01.
“Concessions” means F&B Concessions, Team Merchandise sold or provided at the Arena, and Non-Team Merchandise.
“Condemnation” means a taking by eminent domain, condemnation or appropriation by any governmental authority or other Person
with the power of eminent domain for any public or private use or purpose.
“Condemnation Award” means all sums, amounts or other compensation for the Arena payable to the Rangers or Licensor as a result
of or in connection with any Condemnation.
3
“Convenience Fees” has the meaning set forth in Section 5.06(a).
“Contract Year” means, other than the Initial Contract Year, each period of the Term from July 1 through the immediately following
June 30.
“Customer Data” has the meaning set forth in Section 10.03(a).
“Effective Date” has the meaning set forth in the preamble.
“Exclusivity Breach” has the meaning set forth in Section 17.01(e).
“Exhibition and Regular Season Home Games” means games played by the Team during the exhibition season or regular season of
the League where the Team (and not the opposing team) has the right to designate the location of such game or which is considered one of the
Team’s home games by the League for purposes of League Rules, standings or scheduling.
“F&B Concessions” and “F&B Concessions Gross Receipts” have the meanings set forth in Schedule 6.01.
“Facility Ticket Fee” has the meaning set forth in Section 5.02(c).
“First Full Contract Year” means July 1, 2020 through June 30, 2021.
“Force Majeure” has the meaning set forth in Section 20.01.
“Game Day Services” has the meaning set forth in Section 9.02.
“General Services” has the meaning set forth in Section 9.01.
“Gross Receipts” has the meaning set forth in Schedule 6.01.
“Home Date” means each date on which a Home Game is scheduled.
“Home Games” means collectively, Exhibition and Regular Season Home Games and Playoff Home Games.
“Initial Contract Year” means the period beginning on the Commencement Date through June 30, 2020.
“Joint Sponsors” has the meaning set forth in Section 7.02(b).
“Knicks” has the meaning set forth in Section 4.04(a).
“Knicks Games” has the meaning set forth in Section 4.04(a).
“League” has the meaning set forth in Recital B.
“League Rules” means (a) the NHL Constitution, (b) the NHL By-laws, (c) the governing documents of each of the NHL Entities, (d)
all other existing or future rules, regulations,
4
interpretations, memoranda, procedures, directives, policies, guidelines, positions, and resolutions of, including, without limitation, positions
taken with, and agreements, covenants, representations and warranties made to, any court or governmental or quasi-governmental agency by,
each of the NHL Entities, the NHL Board of Governors and the NHL Commissioner, (e) the Transaction Agreement, dated as of the date
hereof, among the NHL, the Rangers and certain other parties thereto (the “Transaction Agreement”) and each Prior Consent Agreement (as
defined in Transaction Agreement), (f) the Settlement Documents as defined in the Settlement Agreement dated March 23, 2009, (g) the
Lender Letter Agreement (as defined in the Transaction Agreement), (h) the current and future Collective Bargaining Agreements between the
NHL and the National Hockey League Players’ Association and between the NHL and the National Hockey League Officials’ Association and
all other agreements, consent agreements, decrees, cooperation agreements and settlement agreements presently or hereafter in effect or
entered into between or among any NHL Entity or Entities, on the one hand, and the NHL member clubs generally, on the other hand, or any
NHL Entity or Entities and/or the NHL member clubs generally, on the one hand, and other persons, on the other hand, in furtherance of the
NHL’s (or any other NHL Entity’s) business or interests or as otherwise authorized, directly or indirectly, by the NHL Board of Governors, the
NHL Commissioner, the applicable NHL Entity, the NHL Constitution or the NHL By-laws and (i) the NHL Commissioner’s interpretation
of, opinions concerning, and the custom and practice under, any of the foregoing, all as may be amended from time to time.
“License Fee” has the meaning set forth in Section 3.01.
“Licensor” has the meaning set forth in the preamble.
“Licensor Default” has the meaning set forth in Section 18.01.
“Licensor Promotion” has the meaning set forth in Section 10.01(a).
“Licensor Services” means, collectively, General Services and Game Day Services.
“Madison Club” has the meaning set forth in Section 5.03(d).
“Maximum Credit or Refund” has the meaning set forth in Section 15.02.
“MSG Sports” means MSG Sports, LLC, the parent company of the Rangers and the Knicks.
“NHL” has the meaning set forth in Recital B.
“NHL Entities” means the NHL, NHL Enterprises, L.P., NHL Enterprises Canada, L.P., NHL Enterprises, Inc., National Hockey
League Enterprises Canada, Inc., NHL Enterprises B.V., Intra-Continental Ensurers, Limited, NHL Interactive CyberEnterprises, LLC, NHL
Network US, L.P., NHL Network US, Inc., NHL WCH 16, LP, NHL WCH 16, Inc., NHL WCH 16 Canada Holdco, Inc., NHL WCH 16 US,
LP, NHL WCH 16 US GP, LLC, NHL WCH 16 US Holdco, LLC, NHL China Holdings, LLC, any entity that may be formed by the NHL
member clubs generally after the date of this Agreement (but excluding the NHL member clubs), and each of their respective subsidiaries and
other present or future affiliates.
5
“Net Profits” has the meaning set forth in Schedule 6.01.
“No Fault Occurrence” has the meaning set forth in Section 18.03.
“Non-Auditing Party” has the meaning set forth in Section 20.17.
“Non-Team Merchandise” means all programs, other publications, and merchandise other than Team Merchandise.
“Other Arena Event” has the meaning set forth in Section 4.04(c).
“Other Rangers Event” has the meaning set forth in Section 4.04(b).
“Party” or “Parties” has the meaning set forth in the preamble.
“Person” means any individual, corporation, company, voluntary association, partnership, incorporated organization, trust, limited
liability company, or any other entity or organization.
“Playoff Home Games” means games played after the end of the League’s regular season as part of its championship tournament, for
which the Team must qualify based on its regular season record, where the Team (and not the opposing team) has the right to designate the
location of such game or which is considered one of the Team’s home games by the League for purposes of League Rules or scheduling.
“Property Tax Exemption” has the meaning set forth in Section 16.01.
“Property Tax Exemption Agreement” has the meaning set forth in Section 16.01.
“Rangers” has the meaning set forth in the preamble.
“Rangers Default” has the meaning set forth in Section 17.01.
“Rangers Event” means Home Games and Other Rangers Events.
“Rangers Misuse” has the meaning set forth in Section 4.07.
“Rangers’ Personnel and Guests” means the personnel, guests and invitees of the Rangers (including holders of tickets of admission
to the Arena, holders of press and media credentials, and visiting team personnel).
“Rangers’ Promotional Use” has the meaning set forth in Section 10.01(d).
“Representatives” has the meaning set forth in Section 20.09.
“Rinkside Advertising” has the meaning set forth in Section 7.01.
“Standard” means, with respect to the applicable requirement, obligation or matter, (a) in compliance with applicable law, (b) in
compliance with League Rules and (c) at a first-class level equal to or better than that at which NHL arenas in major U.S. markets are then
operated,
6
maintained and improved for NHL games (in the case of improvements, taking into reasonable consideration the age and location of the Arena
and its existing structural limitations), and in no event less than the highest standard of quality and manner in which the Arena (i) was
operated, maintained and improved historically (post 2011 - 2013 transformation) with respect to Home Games and (ii) will be operated,
maintained and improved for Other Arena Events.
“Suite 200” has the meaning set forth in Section 5.03(h).
“Suites” shall mean the premium locations within the Arena currently designated as “Event Level Suites,” “Madison Level Suites” and
“Signature Level Suites” as more specifically described in Schedule 4.01, and any replacement suites in those locations.
“Team” has the meaning set forth in Recital B.
“Team Areas” has the meaning set forth in Schedule 4.01.
“Team Merchandise” means merchandise (including programs and other publications) that bears the Team’s name, logo(s), or other
intellectual property relating to the Team, or any other League intellectual property, including any merchandise relating to or depicting (as the
case may be) the League and/or any of its teams, players, and/or events (e.g., the NHL All-Star Game, the Stanley Cup Playoffs, the NHL
Winter Classic), or the logo(s) of any of the foregoing.
“Team Merchandise Allocation” has the meaning set forth in Section 6.02(d).
“Term” has the meaning set forth in Section 2.01.
“The Loft” has the meaning set forth in Section 5.03(d).
“Ticket” or “Tickets” has the meaning set forth in Section 5.01.
“Ticket Agent” has the meaning set forth in Section 5.06(a).
“Ticket Agent Agreement” has the meaning set forth in Section 5.06(a).
“Untenantable Condition” means a condition of the Arena that occurs on account of a Casualty or Condemnation and, as a result of
which League Rules or applicable law prohibit the playing of Home Games at the Arena or would entail denial of access to or loss of a
material portion of (i) the general seating areas of the Arena or (ii) revenues of the Rangers derived from the Arena.
“VIP Club Services” has the meaning set forth in Section 9.03.
“VIP Clubs” has the meaning set forth in Section 9.03.
“Work Stoppage” has the meaning set forth in Section 15.01.
7
ARTICLE II
TERM
Section 2.01 Term; Commencement Date. The term of this Agreement shall commence on April 17, 2020 (the “Commencement
Date”) and, unless earlier terminated in accordance with the terms of this Agreement, shall end on June 30, 2055 (the “Term”).
ARTICLE III
LICENSE FEE
Section 3.01 License Fee. The Rangers shall pay to Licensor a license fee, without any
right of offset, reduction or abatement (except as expressly provided in this Agreement), as follows: (a) for the Initial Contract Year, a prorated
amount equal to $16,200,000 divided by forty-four (44), multiplied by the number of Exhibition and Regular Season Home games scheduled
to be played in the Arena in the Initial Contract Year; (b) for the First Full Contract Year, $16,686,000; and (c) for each subsequent Contract
Year, 103% of the license fee for the immediately preceding Contract Year (the “License Fee”).
Section 3.02 Payment of License Fee. For each Contract Year, the Rangers shall pay the License Fee in twelve (12) equal
installments on the first business day of each month during the Contract Year, except that the License Fee for the Initial Contract Year shall be
paid in equal monthly installments on the first business day of the month following the Commencement Date and the first business day of each
remaining month in the Initial Contract Year.
ARTICLE IV
USE OF ARENA
Section 4.01 Arena Areas. The Arena includes the areas identified on Schedule 4.01 attached hereto. The Parties shall regularly
coordinate and discuss with one another and accommodate the other’s reasonable requests for adjustment thereto. The Parties acknowledge
and agree that the precise locations, square footage, appearance and amenities of the Common Areas and Team Areas set forth therein shall be
subject to change from time to time during the Term in accordance with Section 4.05.
Section 4.02 Rangers Use. Licensor hereby grants to the Rangers and the Rangers’ Personnel and Guests, and the Rangers hereby
accept from Licensor, for itself and the Rangers’ Personnel and Guests, a license to use the Arena as follows:
(a) Common Areas and Team Areas. Subject to League Rules, on each Home Date, beginning at approximately 10:00 a.m.,
until two (2) hours after the completion of such Home Game, the Rangers shall have the exclusive right and license to use the Common Areas
and the Team Areas for the purpose of playing of Home Games and conducting related activities, and the presentation thereof by any and all
means, live and over radio and television and all other
8
means of communication now existing and hereafter developed, and such other uses expressly permitted in this Agreement or as may be
agreed to by the Parties. Notwithstanding the foregoing start time, Licensor may schedule Other Arena Events (as defined below) on Home
Dates (each, a “Shared Date”) in accordance with Section 4.04(c); provided that in no event shall the Rangers have exclusive access to the
Common Areas and Team Areas any later than three (3) hours prior to the start of any Home Game. Licensor shall reimburse the Rangers for
any costs incurred by the Rangers solely as a result of a Home Game occurring on a Shared Date (e.g., visiting team relocating a morning
skate). In addition, the Rangers shall have reasonable access, on a non-exclusive basis, to the Common Areas and the Team Areas for purposes
related to the business or hockey operations of the Rangers at reasonable times on days that are not Home Dates and during periods on Home
Dates other than those specified above (but in no case during ticketed Other Arena Events (as defined in Section 4.04(c) below)), provided the
Rangers’ use of the Common Areas may not unreasonably interfere with any use by Licensor or authorized use by its other licensees
(including the Knicks).
(b) Access. All rights and licenses set forth in this Section 4.02 include in favor of the Rangers and the Rangers Personnel and
Guests (including holders of tickets of admission to the Arena, holders of press and media credentials, and visiting team personnel), subject to
the Arena’s safety and security protocols as provided in Section 4.06(b), (i) rights and licenses of entry, ingress and egress over and across all
applicable portions of the Arena, and (ii) the right and license to bring into the Arena (and to permit the Rangers Personnel and Guests into the
Arena), and retain ownership and control of, items of personal property and equipment.
(c) Grant of License. This Agreement is intended to, and shall be construed as, a grant of a license by Licensor to the Rangers
and the Rangers Personnel and Guests, and shall not operate to vest in the Rangers any ownership or leasehold interest, or other real estate
interest, in the Arena or the property of Licensor, whether real or personal, tangible or intangible, or any use or possessory rights other than
those rights expressly granted by the license hereunder (and then subject to and in accordance with all of the provisions of this Agreement).
Section 4.03 Licensor’s Right of Entry. Notwithstanding the provisions of Section 4.02, but subject to League Rules, Licensor and
its agents and representatives shall have the right to enter into and upon any and all parts of the Arena, including the Team Areas and the
Common Areas, as necessary for the purpose of carrying out its obligations under this Agreement, to operate the Arena, to perform necessary
safety, security and maintenance activities and for other purposes that do not unreasonably interfere with the Rangers’ rights hereunder.
Section 4.04 Scheduling.
(a) Team Games. The scheduling procedure for Home Games shall continue in a manner consistent with past practice, subject to, and
at all times in accordance with, League Rules. It is understood between the Parties that Licensor is entering into a simultaneous license with
New York Knicks, LLC (the “Knicks”), on behalf of the professional basketball team known as the
9
New York Knicks, to host basketball games (“Knicks Games”) in the Arena. The Parties will continue to cooperate with each other in good
faith recognizing that Licensor has obligations to the Knicks. Consistent with past practice, Licensor will jointly coordinate with the League
and the National Basketball Association in scheduling Home Games and Knicks Games. In addition, each Party shall (i) use reasonable efforts
to avoid material business impacts on the other Party where such Party has the ability to do so and (ii) reasonably cooperate and honor requests
for changes to previously scheduled or held dates. For the avoidance of doubt, in the event of any conflict between any of the foregoing and
League Rules, League Rules shall control and govern.
(b) Other Rangers Events and Usage.
(i)
Subject to the terms of this subsection, the Rangers shall be entitled to license the Arena without payment of
an incremental license fee on up to two (2) occasions per Contract Year, to present certain Team-related events other than Home
Games (e.g., open practices, ticket sales events, season subscriber events and similar functions as mutually agreed) (each, an “Other
Rangers Event”). Dates for Other Rangers Events may be reserved no earlier than forty-five (45) days in advance of the proposed
event and such reservations shall be subject to any dates previously booked by Licensor for Other Arena Events.
(ii) The Rangers may use such Team Areas and Common Areas, and Licensor shall provide such Licensor Services
(for which Game-Day Services the Rangers shall pay or reimburse Licensor as provided herein), as are reasonably necessary or
requested by the Rangers for such Other Rangers Events. Other Rangers Events shall be subject to other terms and conditions to be
negotiated by the Parties. Unless the Parties agree otherwise with respect to a particular event, all terms of this Agreement applicable to
Home Games will apply to Other Rangers Events.
(iii) At the Rangers’ request, Licensor may, in its discretion, license the Arena and/or other Licensor-owned venues
(e.g., Beacon Theater, Radio City, Tao) to the Rangers to the extent available and without payment of an incremental license fee (the
Rangers shall pay any expenses). Such events may be in addition to Other Rangers Events.
(c) Other Arena Events. Subject to Section 4.04(a), Licensor shall be entitled to schedule Knicks Games, other sporting events,
concerts, and any other types of events in the Arena (each, an “Other Arena Event”), including, for the avoidance of doubt, on the same day
as a Home Game; provided that: (i) no Other Arena Event shall relieve Licensor of its obligations hereunder, including to deliver the Common
Areas and Team Areas to the Rangers in the condition required by ARTICLE IX by or before the times required in Section 4.02(a), and (ii) no
Other Arena Event shall be scheduled if it could reasonably be expected to materially interfere with the presentation, use or operation of the
Arena for any previously scheduled Rangers Events (or the revenues derived by the Rangers therefrom).
10
Section 4.05 Alterations.
(a) Rangers Alterations. During the Term, the Rangers may request that Licensor make alterations to the Team Areas and/or Common
Areas. Licensor shall make those alterations to the extent necessary to comply with its obligations under this Agreement, at Licensor’s sole
cost and expense. To the extent those alterations are not necessary for Licensor to comply with its obligations under this Agreement, those
alterations shall be subject to the approval of Licensor, such approval not to be unreasonably withheld, conditioned or delayed, and shall be
made at the Rangers’ sole cost and expense (subject to the Rangers’ approval of Licensor’s plans and costs); it being understood that Licensor
may deny its approval if it reasonably determines that such alterations would materially adversely impact Licensor or any third party who
regularly uses the space (e.g., the Knicks).
(b) Licensor Alterations.
(i)
Licensor shall have the right to make alterations or other changes to the Arena, in its sole discretion and at its sole cost
and expense; provided that Licensor shall be required to obtain the prior written consent (not to be unreasonably
withheld, conditioned or delayed) of the Rangers to the extent that any such alterations or changes could reasonably be
expected to impact the Rangers’ rights or obligations hereunder, or the presentation, set-up, use or operation of the
Arena for any Rangers Event.
(ii) Without limiting ARTICLE IX, Licensor shall be responsible for making alterations, upgrades, modifications and
improvements to the Arena (and the components thereof) at Licensor’s sole cost and expense (subject to Section
4.05(c)), as may be required from time to time in order to maintain the Arena in accordance with the Standard.
(iii)
Alterations intended to generate additional premium seating revenues for both Licensor and the Rangers shall be
governed by the terms of Section 5.04.
(c) Alterations Pursuant to League Rules. Notwithstanding anything to the contrary contained in this Agreement, any alterations,
upgrades, modifications or improvements to the Arena that are made solely to comply with any new or amended League Rules that are enacted
after the Commencement Date shall be made at the Rangers’ sole expense.
The Parties shall cooperate in good faith to agree on the plans and specifications for alterations made under Sections 4.05(a) – (c) and
the time period during which such alterations are expected to be made. All such alterations shall (i) be made by Licensor or its
contractors, (ii) comply with all applicable laws, ordinances, orders, regulations and
11
League Rules, (iii) be completed in a good and workmanlike manner, using new materials or their equivalent, without unreasonable
delay, (iv) not interfere with gameplay in accordance with League Rules and (v) not materially interfere with the presentation, set-up,
use or operation of the Arena for any Rangers Event (or the revenues derived by the Rangers therefrom), without the Rangers’ prior
written approval.
Section 4.06 Manner of the Rangers’ Use. At all times during the Term:
(a) The Rangers shall use the Arena in accordance with all League Rules and applicable laws, ordinances, and regulations. Licensor
shall operate the Arena in accordance with all League Rules, applicable laws, ordinances, and regulations. [*****].
(b) The Rangers and their guests, invitees, patrons, and designees shall be subject to any reasonable and nondiscriminatory rules and
regulations and security procedures that Licensor imposes on the use of the Arena, so long as the same (i) are not inconsistent with the other
provisions of this Agreement (including Licensor’s requirement to maintain and operate the Arena in accordance with the Standard) or League
Rules, and (ii) are uniformly applied to all other occupants and users of the Arena except to the extent necessitated by differing particular event
types.
(c) Each Party shall, at any time and from time to time, upon not less than ten (10) days prior written request from the other Party,
execute, acknowledge and deliver to the requesting Party, in a form reasonably satisfactory to the requesting Party and, if applicable, its
existing or prospective direct or indirect lender or purchaser, a written estoppel statement certifying, (i) that this Agreement is unmodified and
in full force and effect (or, if there have been modifications, that the same is in full force and effect as modified and stating the modifications),
(ii) if true (or, if not entirely true, listing any exceptions), that the requesting Party is not in default hereunder, (iii) the date to which the
License Fee and other charges have been paid in advance, if any, and (iv) such other accurate certifications as may reasonably be required by
the requesting Party or its existing or prospective direct or indirect lender or purchaser, and agreeing to give copies to the requesting Party’s
existing or prospective direct or indirect lender or purchaser of all material notices by the stating Party to the requesting Party, and agreeing to
afford the requesting Party’s existing or prospective direct or indirect lender or purchaser an opportunity to cure any default of the stating Party
within the applicable cure period afforded to the requesting Party hereunder. It is intended that any such statement delivered pursuant to this
subsection may be relied upon by any prospective direct or indirect lender to or purchaser of the Rangers or of the Arena and their respective
successors and assigns.
Section 4.07 Rangers Misuse. The Rangers shall promptly reimburse Licensor for costs of cleaning, repairs or replacements, net
of insurance proceeds received under Article XIV, necessitated by (a) uses by the Rangers not permitted under this Agreement, or (b) grossly
negligent, reckless or willful acts of the Rangers or visiting NHL teams for Rangers Events that cause such damage (collectively, “Rangers
Misuse”).
Section 4.08 Surrender. Upon the expiration of the Term or earlier termination of this Agreement, the Rangers shall promptly
vacate the Arena under the direction of and in the manner reasonably approved by Licensor, and shall surrender all of its keys, access cards,
and other
12
credentials and access items for the Arena to Licensor, and shall inform Licensor of all combinations on all of its locks, safes, and vaults, if
any, in the Arena. Without limiting the foregoing, the Rangers shall not remove any alterations, improvements, or other property (other than
personal property not affixed or attached to the Arena or any elements thereof) from the Arena unless permitted to do so by Licensor, and the
Rangers shall promptly reimburse Licensor for the cost of repairing any damage caused by such removal. Any personal property of the
Rangers which remains in the Arena after the expiration of the Term or earlier termination of this Agreement may, at the option of Licensor,
be deemed to have been abandoned, and, in Licensor’s sole discretion, (a) may be retained by Licensor as its property, (b) shall be disposed of
by the Rangers at the request of Licensor, or (c) may be disposed of by Licensor.
ARTICLE V
TICKETS, SUITES AND CLUBS
Section 5.01 Prices. As between Licensor and the Rangers, (a) the Rangers shall have sole discretion to control the manifest and
determine the prices and fees (subject to Section 5.06(a)) for all tickets and other indicia authorizing admission (each a “Ticket”) for general
admission seating, standing room and other general admission spectator positions in the Arena for all Rangers Events, and (b) except as
provided below, Licensor shall have sole discretion to control the manifest and determine the license fees to be paid for the Suites, The Loft,
the Madison Club and similar premium spaces developed in accordance with Section 5.03 and Section 5.04 during the Term. There shall be no
limit on the number of complimentary Tickets the Rangers may issue.
Section 5.02 Ticket Revenues.
(a) Ticket Sales. The Rangers shall have the exclusive right to sell and resell all Tickets and retain all revenues from all Ticket sales
and resales, including the Facility Ticket Fee (as defined in Section 5.02(c)), the Rangers’ share of any Convenience Fee (as defined in Section
5.06(a)), and any personal seat licenses the Rangers may elect to sell, provided, that the Rangers right to sell personal seat licenses shall be
limited to Rangers Events only (and no Other Arena Events) and provided further, that any “form” agreement for the sale or licensing of
personal seat licenses shall be subject to Licensor’s prior approval, not to be unreasonably withheld, conditioned or delayed, and the Rangers
shall not make any material alterations to such form agreement that adversely impact Licensor without Licensor’s prior written approval, not
to be unreasonably withheld, conditioned or delayed.
(b) Loaded-Value Tickets. To the extent that the Rangers offer a ticket product with which the ticketholder is entitled to gratis
Concessions in addition to seating to a Home Game, Licensor shall provide such Concessions and the Rangers shall remit to Licensor the
actual retail value of any Concessions redeemed by each such ticketholder, which revenue will be included in Team Merchandise revenue (to
the extent that the sale/redemption relates to Team Merchandise) or F&B Concessions Gross Receipts, as applicable. To the extent that the
sale/redemption relates to Non-Team Merchandise, Licensor shall retain all such redeemed amounts. For purposes of clarity, any revenue
associated with loaded-value tickets that is not redeemed for Concessions shall remain the property of the Rangers.
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(c) Facility Ticket Fee. [*****] shall charge to all primary Home Game Ticket purchasers a per-Ticket facility fee (the “Facility
Ticket Fee”), in an amount determined from time to time by Licensor following consultation with the Rangers. [*****].
Section 5.03 Suites; Madison Club; The Loft.
(a) Suites. Subject to other provisions of this Section 5.03, Licensor shall have the exclusive right to license Suites to third parties for
all or a portion of Rangers Events and Other Arena Events and collect license fees for the privilege of using the Suites and related amenities.
Licensor shall be responsible for all costs of licensing, operating, servicing and maintaining the Suites in accordance with the Standard.
Revenues generated from the licensing of Suites shall be allocated as set forth in Section 5.03(b). All of the terms and conditions of such
licenses and appurtenant Arena admission tickets and other rights and obligations related to the occupancy of Suites shall be governed by
separate agreements (each, a “Suite Agreement”) entered into between Licensor and the licensees of Suites. Licensor’s “form” Suite
Agreements shall be subject to the prior written approval of the Rangers (not to be unreasonably withheld, conditioned or delayed), and
Licensor shall not make any material alterations to the form Suite Agreements or any executed Suite Agreement that adversely impact the
Rangers without the Rangers’ prior written approval, not to be unreasonably withheld, conditioned or delayed.
(b) Suites Revenue.
(i)
(ii)
All-Event Suites. For Suites licensed for all or substantially all Arena events including Home Games (other than certain
major Other Arena Events, including All-Star Games, awards shows, major college championship events, etc.),
including those sold on a half-share, quarter-share or other fractional portion basis, the Rangers shall receive [*****]%
of all revenues collected or received by Licensor from the sale of such Suites (the “Rangers Suites Revenue Share”),
net of contracted catering credits (if any), taxes and credit card fees, and Licensor shall retain the remaining amounts,
except as provided in Section 5.03(g) and 6.01(a) ([*****]). In the event of a No Fault Occurrence, the Rangers Suites
Revenue Share shall be increased to [*****]%.
Team-Only and Single Game Suites. The Rangers shall receive all revenues collected or received by Licensor from the
sale of Suites licensed only for individual or packages of Home Games and/or other Rangers Events, net of the retail
value of food and beverage packages included in the license fee (“Included F&B Packages”), contracted catering credits
(if any), taxes and credit card fees, less a Licensor commission of [*****]% of such net revenue (provided that, in the
event of a No Fault Occurrence, the Parties will agree on an appropriate reduction to such commission to account for
any reduction in the additional amount that would have been payable to the Rangers under the last sentence of Section
5.03(b)(i) if all Suites were sold for all Arena events).
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(iii)
(iv)
(v)
Custom Team and Non-Team Suite Packages. For customized Suite packages (i.e., a pre-determined mix of events that
include Rangers Events and Other Arena Events), revenues shall be proportionally allocated to each event included in
such package based on the then-applicable rate card for the included events. The Rangers shall receive all revenues
collected or received by Licensor attributable to the Rangers Events included in such package, net of Included F&B
Packages, contracted catering credits (if any), taxes and credit card fees, to the extent used during Rangers Events, less a
Licensor commission of [*****]% of such net revenue as so allocated (provided that, in the event of a No Fault
Occurrence, the Parties will agree on an appropriate reduction to such commission to account for any reduction in the
additional amount that would have been payable to the Rangers under the last sentence of Section 5.03(b)(i) if all Suites
were sold for all Arena events).
Suite Passes for Rangers Events. Notwithstanding the foregoing, all revenues from the sale or license of passes for
incremental admission to Suites for Rangers Events (commonly known as “suite passes”), net of taxes and credit card
fees, shall be retained by the Rangers. The parties shall agree on the terms and pricing of such suite passes, which shall
be sold by Licensor.
Catering Credits. Any contracted catering credits or Included F&B Packages granted to a Suite licensee as part of a
Suite license shall be included in Catering Gross Receipts as and to the extent used during Rangers Events. Any
contracted catering credits or Included F&B Packages granted to a Suite licensee as part of a (x) single-game or Team-
only package or (y) customized Suite package including Rangers Events and Other Arena Events (as described in
Section 5.03(b)(iii)) shall be subject to the prior written approval of the Rangers, such approval not to be unreasonably
withheld, conditioned or delayed. With respect to any contracted catering credits or Included F&B Packages granted to a
Suite licensee as part of any suite package containing a mix of Team and non-Team events, Licensor shall ensure that
such contracted catering credits or Included F&B Packages have the same terms and conditions, at the Suite licensee’s
discretion, at both Team Events and Other Arena Events.
(c) Suite 16. The Rangers acknowledge that Suite 16 on the tenth floor of the Arena is currently licensed to the TAO Group, in which
Licensor’s parent company has a majority ownership interest. The Rangers agree that notwithstanding Licensor’s ownership interest in the
TAO Group, the Rangers’ share of the license revenue for this suite shall be calculated based on the fees paid or payable to Licensor by the
TAO Group, and not with respect to any membership or other revenue or income generated by the TAO Group, provided that such fees are
established and maintained on an arms-length basis (it being acknowledged that the fee payable by the TAO Group to Licensor for the twelve-
month period ended June 30, 2019 is arms-length for purposes of this Section 5.03(c)).
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(d) The Madison Club and The Loft.
(i)
(ii)
Certain clients will pay Licensor membership fees that entitle them to access (a) the 170-seat defined hospitality and
seating space on the west side of the Arena currently known as the “Madison Club” during all Home Games and all
Knicks Games, boxing, tennis, and NCAA college basketball events at the Arena (the “Madison Club”); and/or (b) the
48-seat defined hospitality and seating space on the east side of the Arena currently known as “The Loft at Madison
Square Garden” during all Arena events including Home Games (other than certain major Other Arena Events,
including All-Star Games, awards shows, major college championship events, etc.) (“The Loft”).
Licensor shall be responsible for selling and servicing Madison Club and Loft memberships and operating, maintaining
and servicing the Madison Club and The Loft in accordance with the Standard. The Rangers shall receive [*****]% of
all revenues collected or received by Licensor from the sale of memberships to the Madison Club and The Loft, net of
taxes and credit card fees (the “Rangers Hospitality Share”). The Rangers shall reimburse Licensor for (a) the direct
cost of providing complimentary food and beverage, and (b) the cost of other direct event variable labor (e.g., concierge,
coat check, etc.), other than labor related to Concessions that are sold, attributable to the Madison Club and The Loft for
Home Games, in each case under (a) and (b), which costs shall be consistent for all events and on a basis as determined
in consultation with the Rangers. Schedule 5.03(d) sets forth the staffing levels for the Madison Club and The Loft as of
the 2019-20 Season (which takes into account the services provided for the Madison Club and The Loft as of the 2019-
20 Season). For all Home Games and similar (based on factors including expected attendance) Other Arena Events,
Licensor shall maintain substantially similar levels of service and staffing (as set forth on Schedule 5.03(d)), provided
that the Parties shall regularly coordinate and discuss with one another the appropriate levels of service and staffing and
accommodate the other’s reasonable requests for adjustment thereto. In the event of a No Fault Occurrence, the Rangers
Hospitality Share shall be increased to [*****]%.
(iii)
To the extent that Licensor sells specialized packages that are different from those referenced in Sections 5.03(d)(i)-(ii)
above, the parties shall coordinate and agree on appropriate pricing, revenue share and/or commissions. To the extent
that Licensor provides members of the Madison Club and/or The Loft with limited amount of gratis Concessions (e.g.,
through a loaded ticket) (“Gratis Concessions”), the Parties shall coordinate and mutually agree on appropriate terms,
costs and revenue allocations for such Gratis Concessions.
(i)
All of the terms and conditions of the sale of such memberships shall be governed by separate agreements (the
“Hospitality Agreements”) entered
16
into between Licensor and the members of the Madison Club and The Loft. Licensor’s “form” Hospitality Agreements
shall be subject to the prior written approval of the Rangers (not to be unreasonably withheld, conditioned or delayed)
and Licensor shall not make any alterations to such form Hospitality Agreement or any executed Hospitality Agreement
that materially adversely impact the Rangers without the Rangers’ prior written approval, not to be unreasonably
delayed or withheld.
(e) Sales by the Rangers. Licensor may from time to time authorize the Rangers to attempt to license or sell on Licensor’s behalf the
Suites or memberships referred to in this Section 5.03. For purposes of clarity, the Parties agree that the revenue sharing referred to in
this Section 5.03 shall apply whether the license or sale is consummated by Licensor, Rangers or MSG Sports’ employees; provided
that, if the license or sale is of Team-only or single game Suites (as described in Section 5.03(b)(ii)) or custom Team and non-Team
Suite packages (as described in Section 5.03(b)(iii)) and is consummated by the Rangers or MSG Sports, Licensor’s commission on
such license or sale shall be [*****]% of the applicable net revenue.
(f) Settlement. Licensor shall remit to the Rangers on a monthly basis a cash payment equal to the Rangers’ share of revenues
collected or received for the Suites, the Madison Club, The Loft (and any similar premium spaces developed during the Term in
accordance with Section 5.04), in each case, in accordance with Section 9.06. To the extent that Licensor receives value in kind as
payment for the sale of licenses or memberships to the Suites, the Madison Club or The Lofts, Licensor shall pay to the Rangers an
amount based on the rate card value of such license or membership (e.g., if Licensor receives value in kind as full payment for an all-
Event Suite, Licensor shall pay the Rangers the Rangers Hospitality Share of the rate card value of such Suite license). Licensor shall
be responsible for the payment of all taxes and credit card fees with respect to all sales made by Licensor or its agents pursuant to this
Agreement.
(g) Complimentary Suites and Usage.
(i)
(ii)
The Rangers shall have the right to use without payment of a license fee one (1) Event Level Suite or a comparable suite
product for each Rangers Event. Licensor shall determine the location of such Suite based on availability and sales
levels and prospects, provided that the Rangers shall initially be permitted to use what is currently designated Event
Level Suite 20.
The Rangers may not license to third parties the Suite or associated tickets referred to in subsection (i), provided that it
may request Licensor to attempt to license or sell such Suite or associated tickets for a particular Home Game or Home
Games and/or Other Rangers Events. Any resulting revenue, net of Included F&B Packages, contracted catering credits
(if any), taxes and credit card fees, will be shared by Licensor and the Rangers as if it were a single-game suite license
pursuant to Section 5.03(b)(ii). Licensor may use or license such Suite or associated tickets for Other Arena Events
without
17
payment to the Rangers of the revenue share otherwise attributable to the license of Suites set forth in Section 5.03(b).
(iii)
(iv)
(v)
Upon request by the Rangers, and subject to availability, Licensor shall make available, at no cost, one (1) Madison-
level or Signature-level Suite on a Home Game by Home Game basis solely for use by visiting team owners, executives
and their guests.
Licensor shall have the right to use one (1) Event Level Suite for all Rangers Events and Other Arena Events without
payment to the Rangers of the revenue share otherwise attributable to the license of Suites set forth in Section 5.03(b).
Notwithstanding the foregoing, to the extent Licensor decides to license such Event Level Suite in whole or in part to a
third party and receives a license fee therefor, the Rangers shall receive their applicable revenue share (if any) as
provided in Section 5.03(b).
Unsold Suite, Madison Club and Loft Inventory. Suites and associated tickets related to the Suites, the Madison Club
and the Loft that are not licensed or sold for Home Games may be used by Licensor for prospecting for Suite, Madison
Club and Loft licensees. Additional unsold Suite, Madison Club and Loft inventory may be used to provide for
complimentary attendance by employees of the Rangers, Licensor and their respective Affiliates or for other business
relationships in accordance with each company’s complimentary ticket program. The Parties shall mutually determine
how to allocate unsold suite inventory between the Parties, provided, that if the Parties cannot agree, [*****] of such
inventory shall be available to the Rangers for such purposes and [*****] of such inventory shall be retained by
Licensor for such purposes. In no event may the unused Suites or associated tickets related to Suites, Madison Club or
Loft allocated under this Section 5.03(g)(v) be licensed or sold by either Party, without the consent of the other Party
(not to be unreasonably withheld, conditioned or delayed), in which case the Rangers shall receive their applicable
revenue share as provided in Sections 5.03(b) or 5.03(d).
(h) Suite 200. Licensor shall maintain the executive lounge currently designated “Suite 200” (or a private hospitality area of
substantially similar size offering substantially similar amenities, in the same or a different location in the Arena) for the use of senior
executives and their invited guests (“Suite 200”). The Rangers shall have access to Suite 200 during Home Games in a manner
consistent with past practice and shall bear or reimburse Licensor for all out-of-pocket costs associated with operating Suite 200 for
Home Games. Any annual increase to the aggregate costs charged to the Rangers for operating Suite 200 shall not exceed [*****]%
without the Rangers prior written approval, not to be unreasonably withheld, conditioned or delayed. The Rangers agree that senior
executives of Licensor and their invited guests shall have complimentary access to Suite 200 during Home Games on the same basis as
senior executives of the Rangers and their invited guests.
18
Section 5.04 Future Ticket and Premium Products.
(a) Licensor, after consultation with and receipt of prior written approval from the Rangers (such approval not to be unreasonably
withheld, conditioned or delayed), may develop after the Commencement Date new seating products where the ticket purchaser has the option
to purchase seats for multiple event types (e.g., Home Games and Other Arena Events). If the Rangers approve such new seating products, the
Rangers shall provide the required ticket inventory, and Licensor shall provide applicable amenities, at prices and other economic terms and
splits to be negotiated and agreed upon by the Parties.
(b) Licensor, after consultation with and receipt of prior written approval from the Rangers, such approval not to be unreasonably
withheld, conditioned or delayed, may develop after the Commencement Date new suites and/or seating products (e.g., new or altered
premium spaces) where amenities additional to admission are provided to the ticket purchaser, licensor or member. In such event, allocation of
capital and operating expenses, revenues and obligations shall be determined in a manner to be agreed upon.
Section 5.05 Box Office; Ticket Printing; In-Arena Ticket Sales.
(a) Box Office Operations. If Licensor generally operates a box office (including will call support) for Other Arena Events, Licensor
will also operate a box office (including will call support) during reasonable business hours, and for all Rangers Events commencing at the
earlier of (i) noon and (ii) the opening of the Arena doors for the applicable Rangers Events and ending no earlier than the commencement of
the third period of the Rangers Events, and shall provide substantially equivalent service and staffing, with respect to the sale of tickets for
Home Games and Other Rangers Events as to Other Arena Events all in a manner consistent with past practice, provided that the Parties shall
regularly coordinate and discuss with one another the appropriate levels of service and staffing, sales strategies and priorities and
accommodate the other’s reasonable requests for adjustment thereto. At the Rangers’ request, Licensor shall share with the Rangers all
Customer Data (as defined in Section 10.03) relating to the Rangers that is generated through box office operations.
(b) Full and Partial Season Ticket Packages. If requested by the Rangers, and for so long as Licensor is generally printing tickets for
Other Arena Events, Licensor shall coordinate, at the Rangers’ reasonable direction, cost and expense, the printing of Tickets for full and
partial season packages. The Rangers shall sell, invoice and collect all revenues from such Ticket packages, in its sole discretion. The Rangers
shall be responsible for all credit card fees and other similar charges in connection with the sale of such Tickets. The Rangers shall develop
any and all creative content to be included on such Tickets printed by Licensor at the Rangers’ request.
(c) Group Ticket Packages. If requested by the Rangers, and for so long as Licensor is generally printing tickets for Other Arena
Events, Licensor shall coordinate, at the Rangers’ reasonable direction, cost and expense, the printing of Tickets for group packages. The
Rangers shall sell, invoice and collect all revenues from such Ticket packages, in its sole discretion. The Rangers shall be responsible for all
credit card fees and other similar charges in connection with the sale of such Tickets. The Rangers shall develop any and all creative content to
be included on such Tickets printed by Licensor at the Rangers’ request.
19
(d) In-Arena Ticket Sales. During Rangers Events, the Rangers shall be permitted to have tables and kiosks on the concourse for the
sole purpose of selling season (including partial) ticket and group ticket packages for the Rangers and its Affiliates. The placement of such
tables and kiosks shall be reasonably determined by Licensor consistent with past practice.
Section 5.06 Ticket Agent.
(a) Ticket Agent Agreements. The Rangers shall be required to utilize and comply with the current primary and secondary ticket
provider agreement(s) with Licensor’s ticket agent (the “Ticket Agent”), and any amendment, modification or replacement of the same in
accordance with Section 5.06(b), (the “Ticket Agent Agreements”) for applicable Ticket transactions for Home Games and any Other
Rangers Events to which tickets are sold. It is understood that a portion of any upfront or annual fees received by Licensor from the Ticket
Agent during the Term shall be allocated to the Rangers on a pro rata basis on equitable terms (e.g., based on projected ticket sales for the
businesses covered by the Ticket Agent Agreements). [*****].
(b) Amended or Replacement Ticket Agent Agreements. Licensor shall have the right to negotiate and administer any amendments to
the current Ticket Agent Agreements or any replacement ticket provider agreement with a third party, provided that, (i) any portion of such
amendment or replacement agreement that relates to the Rangers or Rangers Events or (ii) any renewal or extension of the current Ticket
Agent Agreements or any replacement ticket provider agreement, in each case, shall be subject to the prior written approval of the Rangers. If
the Rangers do not grant such approval, the Rangers may enter into its own ticket provider agreement(s), provided that the Rangers or such
other ticket provider shall pay all costs needed to implement such other ticketing systems at the Arena.
(c) Access to Systems and Data. Licensor shall use commercially reasonable efforts to (i) include in its Ticket Agent Agreements an
obligation to provide the Rangers with substantially similar access to relevant information about the Rangers’ customers and sales activity that
resides in the Ticket Agent’s database and other system components as are provided under Licensor’s current agreement with Ticketmaster,
(ii) enforce such obligation on behalf of the Rangers at the Rangers’ expense and (iii) enforce any other terms of any Ticket Agent Agreements
that affect the Rangers at the Rangers’ expense; it being understood that, with respect to any agreements where the Rangers are an express
party or a third party beneficiary, Licensor shall have no obligations under clauses (ii) or (iii), above.
Section 5.07 Ticket Settlement Process. Licensor shall, or shall cause Ticket Agent to, remit to the Rangers all amounts collected in
connection with the sale of Tickets on a weekly basis, together with an itemized statement indicating the number and price of each Ticket
sold and related fees collected.
Section 5.08 Access to Tickets.
(a) Complimentary Tickets for Home Games. Licensor shall be afforded access to a pool of complimentary tickets for Home Games
throughout the Term, on the following terms:
20
(i)
(ii)
The pool shall include [*****], or other sections as the Parties may otherwise agree, it being understood that the Parties
shall regularly coordinate and discuss with one another and accommodate the other’s reasonable requests for adjustment
to the number and location of the “additional” complimentary tickets described in clause (y).
Complimentary tickets may be used by Licensor for its and its Affiliates’ employees or other business purposes but may
not be resold. If such complimentary tickets will not be used, such tickets may be sold by the Rangers and the Rangers
may retain all revenue therefrom.
(b) Pools of Tickets for Purchase. The Rangers shall be afforded access to purchase tickets from a pool of tickets for Other Arena
Events, and Licensor shall be afforded access to purchase tickets from a pool of tickets for Home Games, in each case subject to availability.
Such tickets may be used by the Rangers or Licensor (as applicable) for their Affiliates, employees or other business purposes but may not be
resold. Each ticket pool shall also be subject to such other procedures, restraints and limitations as may be determined by the Party offering
access. In both cases, the Parties shall regularly coordinate and discuss with one another and accommodate the other’s reasonable requests for
adjustment to the number and locations of the tickets in the pool.
Section 5.09 Credentials and Passes. The Rangers may issue a reasonable number of passes to photo, press and media, staff, visiting
teams, performers (e.g., dance teams and intermission performers), League personnel and any other Person, pursuant to the directions of the
Rangers from time to time, permitting such selected persons free access to the Arena for Rangers Events and to specified areas of the Arena
normally closed to the public; provided, however, that any such issuance is in accordance with League Rules, including, without limitation, the
then-prevailing NHL Recommendations for Arena Security and Licensor’s Arena safety and security protocols.
Section 5.10 Admission to Arena. Licensor shall not grant any spectator admission to the Arena for any Rangers Event unless such
spectator has acquired and displays a Ticket or other indicia of admission (e.g., a press or related pass) to such Rangers Event issued by
Licensor or the Rangers (or, if applicable, the League) in accordance with this Agreement.
ARTICLE VI
CONCESSIONS
Section 6.01 F&B Concessions and Catering.
(a) Licensor shall have the exclusive right and obligation to operate and manage the sale of F&B Concessions and Catering Services
during all Rangers Events in a manner reasonably calculated to maximize profits but subject to providing a positive customer experience in
accordance with the Standard and subject to Schedule 6.01. The Rangers shall receive [*****]% of the Net Profits (as defined in Schedule
6.01) from the sale of F&B Concessions and Catering Services attributable to Rangers Events (the “Rangers F&B Concessions and Catering
Share”). To the extent Licensor directly manages and conducts the sale of such F&B Concessions and
21
Catering Services, such sales shall be provided in accordance with Schedule 6.01. In the event of a No Fault Occurrence, the Rangers F&B
Concessions and Catering Share shall be increased to [*****]%.
(b) In the event Licensor retains a third party to provide F&B Concessions and/or Catering Services or enters into a lease, license or
operating agreement for food and beverage space, in each case, in accordance with Section 6.04 the Rangers shall receive [*****]% of all
amounts received by Licensor (including any annual payments, up-front payments, advances, back-end payments, earn-outs, guarantees,
allowances, rebates, refunds, discounts or any other payments or revenues retained by Licensor or its Affiliate) attributable to Rangers Events
from any such arrangement or agreement (the “Third Party F&B Share”); provided that, with respect to amounts received that cannot be
specifically traced to a Rangers Event as opposed to an Other Arena Event, Licensor shall reasonably and fairly estimate the portion of the
total amount that is attributable to Rangers Events (which estimate shall be subject to the review and approval of the Rangers, not to be
unreasonably withheld, conditioned or delayed) and shall remit to the Rangers the Third Party F&B Share of the portion of such amount. In the
event of a No Fault Occurrence, the Third Party F&B Share shall be increased to [*****]%.
Section 6.02 Team Merchandise.
(a) Licensor shall have the exclusive right and obligation, at its sole cost and expense, to operate and manage the sale of Team
Merchandise at the Arena (excluding collectibles and game-used items) in a manner reasonably calculated to maximize revenues, but subject
to providing a positive customer experience in accordance with the Standard. Schedule 6.02 sets forth the service and staffing for the sale of
Team Merchandise for Regular Season Home Games as of the 2019-20 Season. Licensor shall maintain at least substantially similar levels of
service and staffing for all Home Games provided that the Parties shall regularly coordinate and discuss with one another the appropriate
levels of service and staffing and accommodate the other’s reasonable requests for adjustment thereto. Notwithstanding anything herein to the
contrary, as between the Parties, the Rangers shall have the exclusive right to sell and control the sale of Team Merchandise online and
anywhere else (other than at the Arena) and retain all revenue therefrom.
(b) The Rangers shall source, purchase and own all Team Merchandise it designates for sale at the Arena and consign it to Licensor
for sale. Licensor shall be responsible for reasonable storage and inventory control for Team Merchandise. The Rangers shall set the pricing of
Team Merchandise. Licensor, at its sole cost, shall offer and sell Team Merchandise, and provide appropriate sales staff and supervision, at
points of sale in existing and replacement in-Arena stores and other locations designated or approved by the Rangers (such approval not to be
unreasonably withheld, conditioned or delayed), on Home Dates and at other times pursuant to Section 6.02(d).
(c) Licensor shall retain [*****]% of revenues, net of taxes and credit card fees, collected by Licensor from the sale of Team
Merchandise sold at the Arena by or on behalf of Licensor and remit the remainder to the Rangers, provided that the Rangers shall retain all
revenue from any collectibles or game-used items received pursuant to any third-party agreement (e.g., Fanatics). Licensor shall be responsible
for the payment of all taxes and credit card fees with respect to all such sales.
22
(d) Licensor shall dedicate to Team Merchandise designated by the Rangers a minimum of [*****]% of the display space designated
by Licensor in consultation with the Rangers (the “Team Merchandise Allocation”) in the Madison Square Garden Store located in Chase
Square and other subsequent stores located within the Arena that do not require an individual to have a ticket to access such store. It is
understood and agreed that the Rangers and the Knicks (to the extent that they remain affiliated entities) may allocate display space to each
other on an event-by-event and day-by-day basis; for the avoidance of doubt, Licensor shall not have access to more than [*****]% of the
display space in the Madison Square Garden Store, except as provided in subsection (e), below.
(e) Licensor and the Rangers agree that no Team Merchandise shall be required to be offered in such stores (or elsewhere in the
Arena) while the Arena is being used for Other Arena Events.
(f) The Parties shall regularly coordinate and discuss with one another the appropriate relative levels and locations of display space
and accommodate the other’s reasonable requests for adjustment thereto.
Section 6.03 Non-Team Merchandise. Subject to Section 6.02, Licensor shall have the exclusive right to control the operation and
sale of Non-Team Merchandise at the Arena at any time. Licensor shall retain all revenue from the sale of all Non-Team Merchandise.
Licensor may use up to [*****]% of the display space in concourses and other ticketed areas during Home Games for the sale of Non-Team
Merchandise, provided that such merchandise and the locations in which it is displayed and sold shall require the approval of the Rangers, not
to be unreasonably withheld, conditioned or delayed. The Parties shall regularly coordinate and discuss with one another the appropriate
relative levels and locations of display space and accommodate the other’s reasonable requests for adjustment thereto.
Section 6.04 Third-Party Contracts. Licensor shall have the right to enter into a contract or contracts with one or more third parties
pursuant to which such third parties shall conduct and manage the sale of some or all Concessions and/or Catering Services, provided that
Licensor shall be required to obtain the prior written approval of the Rangers, not to be unreasonably withheld, conditioned or delayed, for
service providers that (i) do not or will not provide similar services during Other Arena Events or (ii) will conduct or manage the sale of a
majority of F&B Concessions or Team Merchandise. Notwithstanding the foregoing, Licensor shall reasonably consult with the Rangers
regarding the terms of any proposed agreement with any third party that shall conduct or manage the sale of a majority of F&B Concessions or
Team Merchandise.
Section 6.05 Operation on a Fair Basis; Standard of Service. Licensor shall operate, or contract with a third party for the operation
of, Concessions and/or Catering Services on a basis that is fair to both Licensor and the Rangers and equivalent for Rangers Events and Other
Arena Events. The quality of the service provided for Rangers Events shall be consistent with the Standard.
Section 6.06 Settlement. Licensor shall, or shall cause any third party conducting and managing the sale of Concessions and/or
Catering Services to, remit to the Rangers all amounts
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from the sale of Concessions and/or Catering Services that the Rangers are entitled to under this ARTICLE VI in accordance with Section
9.06.
ARTICLE VII
SIGNAGE AND SPONSORSHIPS
Section 7.01 Definitions.
“Arena Game Shared Sponsorship Assets” means Advertising (including digital and fixed signage) visible or audible inside the
Arena during Home Games and Other Arena Events, but expressly excluding Team Sponsorship Assets, and Arena Naming Rights, which
includes, without limitation, (a) bridge signage and entitlements, (b) vomitorium signage, (c) GardenVision underbelly and other fixed signage
and Advertising on fixtures and equipment, (d) Advertising at concession areas and on Concession Items, (e) Advertising worn or carried by
concessionaire personnel or other personnel engaged in the operation of Arena events and (f) naming rights and other entitlements of the
lobby, concourses, suite levels, clubs and all other spaces in the Arena. For avoidance of doubt, Arena Game Shared Sponsorship Assets shall
not include any Advertising (i) outside of the building entrances to the Arena (e.g., marquee spots or signage, outdoor digital board
Advertising, breezeway signage or banners, Arena rooftop signage, etc.) which is not visible or audible inside the Arena bowl and sold to be
visible or audible by seated Arena patrons, which Licensor shall have the exclusive right to sell and retain all revenue from or (ii) that is a
Team Sponsorship Asset, which the Rangers shall have the exclusive right to sell and retain all revenue from in accordance with Section 7.02,
whether or not such Advertising may also be visible or audible inside the Arena during Other Arena Events.
“Arena Naming Rights” means the right of a sponsor to have its brand integrated into the name of the Arena, e.g., the “[*****]
Madison Square Garden”.
“In-Bowl Variable Advertising” means Advertising and other visual signage appearing on, and other audio airing through or in
connection with, (a) in-Arena electronic scoreboards, telescreens and any other message boards, (b) in-Arena LED Signage, (c) any part of the
Arena spectator bowl through projection technology, augmented reality and/or virtual reality, and (d) Arena audio or visual public address
Advertising.
“Non-Team Sponsorship Assets” means Advertising controlled by Licensor to the extent that it creates no direct association with the
Team, other than Team Sponsorship Assets, Arena Naming Rights and Arena Game Shared Sponsorship Assets.
“Rinkside Advertising” means electronic, virtual, and static Advertising displayed at Rangers Events that appears inside the Arena
spectator bowl on: (a) seat back sleeves and other signage within the teams’ bench areas (e.g., sports drink-branded coolers, cups, squeeze
bottles, and towels); (b) on or under the ice; (c) on dasherboards and plexiglass surrounding the ice hockey rink; (d) any moving or movable
items (e.g., shovels, brooms and other ice-cleaning equipment, an indoor blimp/drone, t-shirt machines, the Zamboni ice machine); (e) within
the penalty box; (f) between the team benches; (g) presentation of the “Rangers Blue Crew” (or other pep squad); (h) seat back sleeves in
stands that are present for Home Games or Other Rangers Events only; (i) any
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other Advertising provided under and subject to the NHL’s “Line of Sight Guidelines” and any other applicable League Rules; and (j) any
other equipment, fixtures and items used by the Rangers in the vicinity of the ice hockey rink not already covered in the definition of Team
Sponsorship Assets.
“Sponsorship Sales and Service Representation Agreement” means the agreement between Licensor’s affiliate, MSG Entertainment
Group, LLC (“MSGE”) and the Rangers, entered into approximately contemporaneously herewith, whereby the Rangers authorizes MSGE to
enter into sponsorship agreements that include Team Sponsorship Assets.
“Team Sponsorship Allocation Agreement” means the agreement between MSGE and MSG Sports, entered into approximately
contemporaneously herewith, whereby MSG Sports agrees to deliver certain Team Sponsorship Assets in connection with certain current
sponsorship agreements, and MSGE agrees to allocate and pay to the Rangers certain amounts with respect to such agreements.
“Team Sponsorship Assets” means, with respect to the Rangers or Rangers Events only (in each case, including within three (3) hours
before, during and within two (2) hours after each Rangers Event), (a) Rinkside Advertising; (b) In-Bowl Variable Advertising; (c)
Advertising on Team programs, schedules, yearbooks and tickets; (d) GardenVision underbelly and other fixed signage and Advertising on
fixtures and equipment; (e) Advertising relating to the player introduction tunnel (connecting locker room area to rink); (f) Advertising relating
to Team game day contests and promotions (e.g., bobblehead night, hat night, puck-night, etc.); (g) Advertising that has been sold specifically
with respect to only the Team (e.g., temporary Arena bowl stair signage present only for Rangers Events); (h) concourse activations (i)
Advertising relating to the Team and visiting team player locker rooms, training rooms and interview rooms; (j) the exhibition and promotion
of products and services at the Arena (e.g., kiosks and special areas in the concourse) during Rangers Events or on any date in which a Rangers
Event is scheduled to the extent pertaining to any Rangers Event (but excluding food and beverage and merchandise otherwise covered by this
Agreement); (k) promotional or premium item give-aways at Rangers Events; (l) such other Advertising and sponsorship assets as currently
exist or may later be developed that are Team- or Rangers Event-specific; and (m) for the avoidance of doubt, all other advertising,
sponsorship and promotional activity relating to the Team that is not related to the Arena (including advertising on Team uniforms, broadcasts,
websites, mobile applications and social media platforms).
Section 7.02 Team Sponsorship Assets.
(a) Subject to subsections (b)-(e) of this Section 7.02, the Rangers shall have the exclusive right to sell and retain all revenue from,
and shall be responsible for all direct out of pocket costs and expenses related to, the operation and sale of Team Sponsorship Assets, including
the right to enter into category-exclusive sponsorship agreements with respect to Team Sponsorship Assets. Notwithstanding the foregoing,
Licensor shall have the right to (i) alter digital signage platforms at any time (e.g., elimination of LED ring) at Licensor’s sole cost and
expense, subject to reasonable advance consultation with the Rangers and provided that if such alterations would eliminate or materially alter
any Team Sponsorship Assets contained in any agreement under which the Rangers provide or are committed to provide Team Sponsorship
Assets as of the
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date of such alteration, Licensor will provide to the Rangers a replacement asset of equal or greater value (A) reasonably acceptable to the
Rangers and (B) if such replacement is not permitted under such agreement, acceptable to the sponsor party to such agreement and (ii) (x)
approve, in its sole discretion, any permanent affixed signage in the Arena by the Rangers or (y) approve, such approval not to be
unreasonably withheld, conditioned or delayed, any temporary affixed signage by the Rangers on [*****] (clauses (1), (2) and (3) collectively,
the “Restricted Signage Areas”); provided that (A) [*****] and (B) [*****]. For the avoidance of doubt, any concourse, lobby or similar
activations shall be subject to Sections 4.06(a) and 4.06(b). Licensor shall provide and maintain the in-Arena signage, assets and other
elements associated with Team Sponsorship Assets (to the extent in the control of Licensor) in accordance with the Standard.
(b) The Parties acknowledge and agree that their rights and obligations under this Section 7.02 shall be subject and subordinate to the
Sponsorship Sales and Service Representation Agreement and the Team Sponsorship Allocation Agreement (collectively, the “Arena Agency
Agreements”), as of the Effective Date and throughout the respective terms of such agreements. Pursuant to such Arena Agency Agreements,
the Rangers shall be (i) required to provide Team Sponsorship Assets inventory committed to, and to comply with promotional category
exclusivities granted to, certain Licensor sponsors (“Joint Sponsors”) in accordance with such Joint Sponsors’ respective agreements (each, a
“Joint Sponsorship Agreement”) with Licensor and (ii) entitled to certain allocations of revenue received by Licensor pursuant to such
agreements; each of (i) and (ii) as set forth in more detail in the Team Sponsorship Allocation Agreement.
(c) Subject to League Rules, the name and logo of any Arena Naming Rights partner or “Marquee”-level sponsor shall be exhibited
on Team’s home playing surface near Team’s center-ice logo at the Arena (with [*****]% of the allocable revenue therefrom delivered to the
Rangers).
(d) The Parties shall meet and confer regularly (contemplated to be no less frequently than once per calendar quarter) to discuss in
good faith opportunities to maximize the collective value of their sponsorships by combining the sales of Team Sponsorship Assets, Arena
Game Shared Sponsorship Assets and/or Non-Team Sponsorship Assets.
(e) Notwithstanding anything to the contrary contained herein, in no event shall the Rangers cover or interfere with any Arena Game
Sponsorship Assets with any temporary, virtual or any other type of signage. Notwithstanding anything to the contrary contained herein, in no
event shall Licensor cover or interfere with any Team Sponsorship Assets with any temporary, virtual or any other type of signage.
Section 7.03 Arena Game Shared Sponsorship Assets. Licensor shall have the exclusive right to sell all Arena Game Shared
Sponsorship Assets, provided that Licensor shall not, without the Rangers’ prior written approval, (a) enter into any agreement that includes
any Team Sponsorship Assets or (b) enter into any agreement or modify any arena inventory or signage existing as of the date hereof if such
agreement or modification would reasonably be expected to (i) cause a breach under any agreement that includes Team Sponsorship Assets,
(ii) eliminate, or substantially impair (i.e. effectively eliminate all or most of the value of) any physical Team Sponsorship Assets in the Arena
or (iii) limit or restrict the Rangers’ ability to include Team Sponsorship Assets in any exclusive or non-exclusive advertising or sponsorship
agreements, in
26
each case under clauses (i), (ii) or (iii), unless Licensor provides to the Rangers a replacement asset of equal or greater value (A) reasonably
acceptable to the Rangers and (B) if such replacement is not permitted under such agreement, acceptable to the sponsor party to such
agreement. The Rangers shall not enter into any agreement (and has not as of the Effective Date) that contains Arena Game Shared
Sponsorship Assets or would cause a breach under any agreement that includes Arena Game Shared Sponsorship Assets without Licensor’s
prior written approval. The Rangers shall be entitled to (i) [*****]% of net revenue from the sale of Arena Game Shared Sponsorship Assets
(the “Rangers Arena Game Sponsorships Share”), i.e., gross revenue therefrom less any of the following paid by Licensor: taxes and
applicable fees; and actual out-of-pocket costs for signage fabrication, installation and removal costs; provided that, if (a) an Arena Game
Shared Sponsorship Asset is not visible, audible or otherwise present during substantially all Other Arena Events, (b) an Arena Game Shared
Sponsorship Asset is not visible, audible or otherwise present for a similar length of time during Other Arena Events and Rangers Events, or
(c) such Arena Game Shared Sponsorship Assets does not include substantially all Rangers Events, then, in each instance, the revenues shall
be proportionally allocated to each event included in such agreement, in a reasonable manner and as mutually agreed by Licensor and the
Rangers, and the Rangers shall receive the appropriate proportional amount of revenues attributable to the Rangers Events (e.g., treatment of
the JP Morgan Club, as currently operated). In the event of a No Fault Occurrence, the Rangers Arena Game Shared Sponsorships Share shall
be increased to [*****]% (and in the case of any proportional allocation of revenues pursuant to the proviso in the foregoing sentence, the
Parties will agree on an appropriate increase in favor of the Rangers to such allocation).
Section 7.04 Non-Team Sponsorship Assets. The Rangers shall have no rights whatsoever with respect to Non-Team Sponsorship
Assets.
Section 7.05 Arena Naming Rights. The Rangers shall be entitled to [*****]% of revenue from the sale of any Arena Naming
Rights, excluding any amounts already allocable to the Rangers pursuant to the terms of this Agreement or otherwise.
Section 7.06 Other Revenue. The Parties shall discuss in good faith the allocation of other Advertising income, revenues and fees
derived from operations at the Arena that are not otherwise provided herein, to the extent attributable to Rangers Events.
Section 7.07 Signage and Sponsorship Settlement Process. Licensor shall remit to the Rangers a cash payment equal to all amounts
collected or received from the sale of Arena Game Shared Sponsorship Assets and Arena Naming Rights that the Rangers are entitled to under
this ARTICLE VII in accordance with Section 9.06.
Section 8.01 Broadcast Rights and Facilities.
ARTICLE VIII
BROADCASTING
(a) As between the Parties, the Rangers shall own and control all rights with respect to the broadcasts and telecasts of each Rangers
Event by any means whatsoever (including, without
27
limitation, radio; over the air, pay-per-view, and basic and pay cable television; and streaming and other forms of electronic and digital media
now known or hereafter created) (the “Broadcast Rights”) and shall retain all revenues in connection with such Broadcast Rights. The
Rangers may not authorize or purport to authorize their media rightsholder to include in telecasts or broadcasts of Home Games any “virtual
signage” in the Restricted Signage Areas without the prior written consent of Licensor, which consent shall not be unreasonably withheld,
conditioned or delayed. For the avoidance of doubt, the foregoing sentence shall not apply to (i) any virtual signage being used as of the 2019-
20 Season (i.e., one (1) position on the glass at each end of the ice and one (1) position between the benches) without the prior written consent
of Licensor, which consent shall not be unreasonably withheld or delayed or (ii) any League telecasts or broadcasts (including, without
limitation, any national and international telecasts or broadcasts) or any visiting team telecasts or broadcasts, with respect to which the Rangers
and Licensor each reserve all rights.
(b) Licensor shall ensure that the press areas, broadcast areas, playing surfaces, Team Areas and Common Areas continue to be wired
or otherwise equipped throughout the Term for the production of such broadcasts and telecasts in accordance with League Rules.
(c) Licensor shall cooperate with the Rangers and provide access for the producers of such broadcasts and telecasts to such truck
loading docks, camera positions, and other Arena facilities reasonably required for the production of such broadcasts and telecasts in
accordance with League Rules, at the Rangers’ or its broadcaster’s expense. Subject to League Rules, Licensor shall cooperate with and
provide access for broadcast and telecast producers acting on behalf of all other duly authorized parties (e.g., opposing teams and the NHL) at
such games.
(d) Notwithstanding the foregoing, Licensor retains the right to assign and reassign facilities, locations and spaces for the conduct of
broadcasting in a manner consistent with League Rules; provided that Licensor will consult with the Rangers prior to any proposed changes to
the locations and spaces for the conduct of broadcasting during Home Games. For example, and without limiting the previous sentence,
Licensor is not obligated to continue to provide the rinkside studio, or the studio facilities on the bridge level, in their current locations.
Section 8.02 Broadcast Renovations. At the Rangers’ written request, Licensor shall make such alterations to the Arena’s broadcast
facilities and equipment as are reasonably necessary to comply with League Rules, and any broadcast agreements between the Rangers and/or
the League and a broadcaster, provided that the Rangers shall be responsible for any upfront and continuing costs related to such alterations.
ARTICLE IX
LICENSOR SERVICES
Section 9.01 General Services. During the Term, Licensor, at its sole cost and expense (except as otherwise expressly provided
herein), shall provide the following services, to and for the benefit of the Rangers (and the Arena generally), each in accordance with the
Standard (“General Services”), provided that the Parties shall regularly coordinate and discuss with one another the appropriate levels and
quality of staffing, equipment and service and accommodate the other’s reasonable requests for adjustment thereto.
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(a) Heating, ventilation, and air-conditioning.
(b) Subject to unavailability due to causes beyond Licensor’s reasonable control, utilities, including electricity, gas, steam, chilled
water, hot and cold water, lighting, sewer, Wi-Fi (or comparable data delivery pipeline or service) service accessible to Rangers employees
and patrons during Rangers Events, telephone and intercommunications equipment, elevators, and escalators.
(c) Lighting equipment and apparatus, including as may be required by League Rules.
(d) Maintenance and repair of the Arena and all of its components in compliance with all applicable governmental laws, ordinances,
and regulations and in clean and good condition, subject to ordinary wear and tear, subject to the Rangers’ obligation to pay for maintenance
and repairs necessitated by Rangers Misuse.
(e) Twenty-four (24) hour per day, year-round protection and security of the Arena and all its facilities (including Team Areas), and
all property of the Rangers and Rangers personnel located in the Arena.
(f) Reasonable grounds maintenance and snow and ice removal, including, but not limited to, keeping sidewalks and other areas
immediately surrounding the Arena in compliance with all applicable governmental laws, ordinances, and regulations and reasonably free of
snow, ice, debris, dirt, litter, and trash.
(g) Box office services in accordance with Section 5.05(a).
(h) Repair and maintenance, in each case in accordance with League Rules, of the playing surfaces and related equipment (including
the ice surface, Zambonis, goals, dasherboards, and glass), and all back-up equipment and to the Rangers’ reasonable satisfaction in
accordance with League Rules, all such costs to be borne or reimbursed by the Rangers, except to the extent repair or replacement is
necessitated by the negligence of Licensor or its agents or other parties permitted by Licensor to use the foregoing (e.g., college teams using
hockey rink), or required by League Rules.
(i) Without limiting the generality of Section 9.01(h), the Parties agree that Licensor shall own and maintain the “ice plant” and “ice
floor” and related equipment supporting the operation of the ice rink but that the Rangers shall bear or reimburse Licensor for the cost of the
labor, supplies and equipment required for such operation, including for cleaning the pipes and other ice-system elements and for purchasing
and recycling the brine used in the ice system.
(j) All other services and functions needed to operate, repair and maintain the Arena in accordance with the Standard, including pest
control and obtaining and maintaining all necessary licenses and permits.
(k) Without limiting any of the foregoing, Licensor shall operate, maintain and improve the Arena in accordance with the Standard at
all times throughout the Term.
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Section 9.02 Game Day Services. In addition to the General Services provided pursuant to Section 9.01, Licensor shall provide to
and for the benefit of the Rangers, the following day-of-game services on the dates of all Rangers Events, each in accordance with the
Standard (“Game Day Services”), for which the Rangers shall reimburse Licensor’s actual out-of-pocket operating cost (except as otherwise
provided in this Agreement (e.g., operation of Suites, Advertising, Concessions and General Services)) without markup or overhead, as the
same may be adjusted pursuant to Section 9.04:
(a) Set-up of playing surfaces for the Rangers’ use on Home Dates (and for Other Rangers Events), by or before the time required in
Section 4.02(a), in accordance with League Rules, and subject to the Rangers’ reasonable satisfaction.
(b) Operating in‑house broadcast production facilities in the Arena in accordance with Article VIII (currently known as
“GardenVision”) at a level consistent with past practice, it being understood that the Rangers maintain exclusive rights and remain responsible
for providing the direction and production of all game presentation elements.
(c) Operating the Arena during and cleaning up the Arena after, a Home Game and Other Rangers Events, including the following
event-specific personnel and their successors in name or function: security personnel, building security personnel, street patrol personnel
(including supervisors), paid NYPD detail, anti-bomb canines and handlers, ushers, ticket takers, concourse “Directors,” elevator operators,
restroom attendants, event office administrators, guest experience representatives, guest service supervisors, security supervisors, concourse
supervisors, concourse managers, laborers/utility workers, carpenters, electricians, custodial porters, telecommunications technicians, spotlight
operators and stagehands (as required based on the production elements for such Home Game or Other Rangers Event), and other necessary
labor and third-party services, including overnight labor and supervisors, medical and emergency services staff or contractors and rubbish
removal, all in a manner consistent with past practice, but not including game officials, referees, or timekeepers. The Rangers shall only be
responsible for the costs relating to the foregoing personnel to the extent allocable to Rangers Events.
(d) If requested by the Rangers, Game Day box office personnel incremental to the staffing provided as General Services pursuant to
Section 9.01(g) in a manner consistent with past practice.
(e) Any additional services reasonably requested by the Rangers in writing and approved by Licensor, which approval shall not be
unreasonably withheld, conditioned or delayed.
(f) With respect to all Game Day Services, all costs charged to the Rangers shall be nondiscriminatory and consistent with rates
incurred by Licensor for all other events at the Arena.
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Section 9.03 Delta Club and JP Morgan Club. During Rangers Events, the Rangers shall be permitted to provide certain
ticketholders (subject to physical capacity constraints) with access to (a) the club currently known as the Delta Sky 360 Club and (b) the club
currently known as the JP Morgan Club (collectively, the “VIP Clubs”). Ticketholders who have access to the VIP Clubs shall be entitled to a
certain amount of complimentary food and beverage. The Rangers shall have the sole discretion in determining the price charged to
ticketholders for access to, as well as the menu offered in, the VIP Clubs, and shall retain all revenues therefrom. Licensor shall operate the
VIP Clubs in accordance with the Standard (the “VIP Club Services”), for which the Rangers shall reimburse Licensor’s actual cost, without
markup or overhead, attributable to such Rangers Events.
Section 9.04 Staffing Levels for Certain Services.
(a) Schedule 9.04 sets forth the staffing levels for Game Day Services, VIP Club Services and Suite 200 for Home Games as of the
2019-20 Season. Licensor shall maintain substantially similar levels of staffing for all Home Games, provided that the Parties shall regularly
coordinate and discuss with one another the appropriate levels of staffing and accommodate the other’s reasonable requests for adjustment
thereto. Licensor shall be responsible for retaining, managing and supervising all personnel in Licensor’s provision of the General Services,
Game Day Services, VIP Club Services and Suite 200. Licensor shall use reasonable efforts to accommodate the Rangers’ reasonable requests
with respect to the provision of all Game Day Services.
(b) Licensor shall not do or fail to do anything that will result in or will cause the Arena not being reasonably fit or otherwise
available for use for Home Games in accordance with the League Rules as and when required to enable the Rangers to comply with its
obligations under this Agreement.
Section 9.05 Budgeting and Estimates.
(a) Following reasonable consultation with the Rangers, Licensor shall provide the Rangers with reasonably detailed annual
estimates of revenues and expenses by month and Home Game (the “Annual Budget”) related to Game Day Services, VIP Club Services,
Suite 200 and any other revenues to be recouped and expenses to be paid by the Rangers under this Agreement (such costs and expenses,
collectively, the “Rangers Costs”). The Annual Budget shall be provided at such times as may be reasonably required by the Rangers in
accordance with the Rangers’ reasonable budgeting and forecasting processes. Upon receipt of the Annual Budget, the Rangers shall have a
period of fifteen (15) days to review each estimate and forecast, and identify any objections it has to the Annual Budget. The Rangers and
Licensor will then negotiate for a period of fifteen (15) days regarding any disagreements in respect of the Annual Budget. Subject to Section
9.05(b) below, if the Rangers and Licensor are unable to agree with respect to a particular cost within an Annual Budget within such period,
the corresponding line item from the most recent approved Annual Budget will control with respect to such line item until such time, if any,
that the Rangers and Licensor agree on such proposed line item; provided, that: (1) if such line item in the Annual Budget did not appear in the
corresponding most recent approved Annual Budget, then Licensor shall not be entitled to payment or reimbursement for expenses in such line
item and Licensor shall have no obligation to provide such product or service until the proposed
31
line item is approved by the Rangers (not to be unreasonably withheld, conditioned or delayed); and (2) if such line item appeared in the prior
Annual Budget, then Licensor shall be entitled to payment or reimbursement in an amount not to exceed the applicable line item of the prior
approved Annual Budget multiplied by 104%. The Annual Budget for the 2019-20 Contract Year is attached hereto.
(b) [*****].
(c) The Rangers Costs shall be consistent with the costs incurred for Other Arena Events, it being understood that costs will
differ based on the nature and need of the events and circumstances outside of the reasonable control of Licensor (e.g., Force Majeure). The
amount payable by the Rangers to Licensor for Game Day Services and VIP Club Services shall be determined on a monthly basis in
accordance with Section 9.06. The Rangers’ consent shall be required for any deviation from the approved Annual Budget and, without such
approval, the Rangers shall not be responsible for any costs or expenses in excess of such line items in the approved Annual Budget.
Section 9.06 Settlement.
(a) Not later than the fifteenth (15th) day of each calendar month, Licensor shall provide the Rangers a report (“Monthly Report”)
calculating (i) each item of revenue (including any deductions therefrom) that is shared with or allocated or payable to the Rangers in
accordance with this Agreement with respect to the immediately preceding calendar month and (ii) each item of cost or expense
incurred by Licensor during the immediately preceding calendar month for which Licensor is entitled to payment or reimbursement (in
whole or in part) from the Rangers in accordance with this Agreement (clauses (i) and (ii) collectively, the “Applicable Amounts”).
Each Monthly Report shall include a reasonable amount of detail describing each of the Applicable Amounts and copies of ledgers,
invoices or other reasonable evidence of each of the Applicable Amounts. Each Monthly Report delivered by Licensor to the Rangers
shall set forth for each Joint Sponsorship Agreement during such Monthly Period, (x) the Revenues under such Joint Sponsorship
Agreement allocated to the Rangers, on the one hand, and Licensor, on the other hand and (y) the Team entitlements (including Team
Sponsorship Assets, Tickets, ticket banks, etc. provided to such Joint Sponsor) and Arena entitlements (including Non-Team
Sponsorship Assets, Arena Game Shared Sponsorship Assets, Suites, etc. provided to such Joint Sponsor) contributed and their
respective rate card values or fair market value (as applicable) under such Joint Sponsorship Agreement. Licensor shall pay the
Rangers the net amount payable under each Monthly Report on or prior to the fifteenth (15th) day of each calendar month (i.e., the date
in which the related Monthly Report is required to be provided to the Rangers).
(b) Notwithstanding payment of the net amount under a Monthly Report, the Rangers may reasonably request additional information
regarding such Monthly Report and the Licensor agrees to provide such additional information. The Rangers may dispute any amount
in any Monthly Report, except for the License Fee and the percentage of the Rangers’ Tax Share (e.g., 50%). The Parties shall
promptly confer to resolve any such areas of disagreement, and each Party shall be entitled to refer any disagreement that cannot be
32
resolved to the Accounting Firm in accordance with Section 9.06(c). Notwithstanding the foregoing, the acceptance of a Monthly
Report (or any portion thereof) and the payment of any amounts in accordance therewith shall be without prejudice to the Rangers’
rights to subsequently dispute any Applicable Amounts (including pursuant to Section 9.06(c) and Section 20.17). Licensor shall pay
the Rangers any disputed amounts that it is determined to owe in a Monthly Report within five (5) business days after the dispute is
resolved by the Parties or by the Accounting Firm in accordance with Section 9.06(c).
(c) Notwithstanding Section 20.06, in the event of a dispute between the Parties with respect to the determination of any Applicable
Amounts, the Parties shall refer such disputed matters set forth in Sections 9.06(a) and 9.06(b) to a mutually agreed upon national
independent accounting firm (the “Accounting Firm”), and the Parties shall cooperate with the Accounting Firm to enable such
Accounting Firm to resolve the dispute as promptly as practicable. The Accounting Firm shall address only those items in dispute and
may not assign a value greater than the greatest value for such item claimed by either Party or smaller than the smallest value for such
item claimed by either Party. In the absence of manifest error, the resolution of disputed items by the Accounting Firm shall constitute
an arbitral award that is final, binding and non-appealable. The costs and expenses of the Accounting Firm incurred pursuant to this
Section 9.06 shall be borne by the Rangers, on the one hand, and the Licensor, on the other hand, in proportion to the allocation by the
Accounting Firm of the net dollar amount of disputed matters, such that the prevailing party (or parties) pay a lesser proportion (or
none, as applicable) of such costs and expenses.
(d) Licensor will use commercially reasonable efforts to maximize any revenues that are contractually payable to the Rangers hereunder,
including using commercially reasonable efforts to collect such revenues. Notwithstanding anything herein to the contrary, if any
revenue payable to a Party by an Affiliate of such Party is subject to sharing with the other Party hereunder (including, for example,
pursuant to Section 5.03(c)), such revenue shall be deemed “collected” by the Party to whom it is payable on the earlier of (i) the date
on which such revenue is actually collected and (ii) the date on which such revenue is payable pursuant to the terms of the applicable
contract or other arrangement.
Section 9.07 Provision of Licensor Services.
(a) Licensor shall have the right to delegate, subcontract, or sublicense to a third party, including Licensor’s Affiliates, the provision
of Licensor Services and no such delegation, subcontract or sublicense shall relieve Licensor of any of its obligations hereunder; provided that
Licensor shall be required to obtain consent of the Rangers (not to be unreasonably withheld, conditioned or delayed) in connection with the
delegation, subcontracting, or sublicensing of Licensor Services to any third party service providers that (i) do not or will not provide similar
services during Other Arena Events or (ii) will provide, conduct or manage the majority of a particular material Licensor Service. Subject to
the preceding sentence, Licensor shall make the final decision regarding the selection of any such third party.
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(b) Licensor shall make reasonable efforts to minimize interference with the Rangers’ use of the Arena, and in no event shall Licensor
materially interfere with the Rangers’ ability to conduct or broadcast Rangers Events or materially reduce or interfere with the Rangers’
permitted use of the Arena or ingress thereto or egress therefrom, subject to Licensor’s Arena safety and security protocols in accordance with
Section 4.06(b).
(c) For clarity, as between Licensor and the Rangers, the Rangers shall have the right to fully control all Home Game entertainment
and hockey operations (including scoreboard and audio operations), with assistance from Licensor’s production staff through the applicable
General Services and/or Game Day Services.
ARTICLE X
PROMOTION; TRADEMARKS; DATA OWNERSHIP
Section 10.01 Promotional Outlets.
(a) [*****].
(b) [*****].
(c) [*****].
(d) At the commencement of the Term, Licensor’s use of the Rangers’ in-game and broadcast promotional outlets set forth in
subparagraphs (a) and (b), and the Rangers’ use of the Licensor promotional outlets (the “Rangers’ Promotional Use”) set forth in
subparagraph (c), shall each be generally consistent with the allocations set forth on Schedule 10.01, provided that the Parties shall regularly
coordinate and discuss with one another their desired promotional efforts, inventory availability and needs and shall accommodate the other’s
reasonable requests for adjustment to the number and type of assets (including newly-developed assets) to which the other shall have access,
and the manner in which they are used. It is understood and agreed that, to the extent that they remain affiliated entities, the Rangers and the
Knicks may share the promotional assets granted to them pursuant to their respective license agreements with Licensor.
Section 10.02 Trademark Licenses.
(a) The Rangers hereby grant to Licensor for the Term a non-exclusive royalty-free license to use all Team-related intellectual
property owned or licensed by the Rangers, including but not limited to images, likenesses, service marks, tradenames and trademarks (the
“Rangers IP”), for the purposes of (i) promoting the Arena as the home arena of the Team, (ii) operating the Arena, and (iii) providing the
Licensor Services. In all instances Licensor’s use of such Rangers IP shall be in accordance with League Rules. Licensor is solely responsible
for clearing any third-party rights that may be used in connection with the Rangers IP. Licensor shall not have any right to sublicense, or seek
or receive any payments from third parties specifically for the use of, the Rangers IP, except in accordance with ARTICLE VII, it being
understood that the license granted hereunder shall include the right for Licensor to promote the Arena as the home arena of the Team in
places and in a manner that may also incorporate in an incidental manner promotion of Licensor’s marketing partners and sponsors (including,
without limitation, use in connection with
34
the Rangers IP any overall Arena marketing partner(s) “lock-up logo” or naming rights, sponsored Licensor web pages and upcoming events
promotions, etc.) so long as no association is created between the Rangers and any third party, except in accordance with League Rules.
(b) The Rangers shall be required and permitted to reference the Arena as their home venue on all material promoting the Team and
ticket sales. In connection therewith, Licensor and its Affiliates hereby grant to the Rangers a non-exclusive royalty-free license to use the
trademarks “MADISON SQUARE GARDEN,” “MSG,” “THE WORLD’S MOST FAMOUS ARENA” and related logos solely for such
promotional purposes.
(c) The Parties shall mutually agree on an appropriate approval process regarding the use of the other Party’s intellectual property in
order to maintain quality control standards.
Section 10.03 Customer Data. [*****]:
(a) [*****].
(b) [*****].
(c) [*****].
(d) Data Use and Sharing. Each Party shall, to the fullest extent permitted by law and its privacy policy, share their owned Customer
Data with the other Party for use by the other Party and their affiliates, subject to the prior approval in each case by the Customer Data-owning
Party, such approval not to be unreasonably withheld or delayed, provided, that any sale or licensing to a third party of Customer Data owned
by the other Party is subject to the prior written consent of the Customer Data-owning Party in their sole discretion. Each Party shall use
commercially reasonable efforts to ensure that all Customer Data is collected in such a manner that it may be shared with the other Party under
this Section 10.03 and applicable law. For purposes of clarity, the Party that is the owner of Customer Data pursuant to this Section 10.03 or
otherwise may use such data for any and all purposes, including the sale or licensing of such data to third parties, subject to compliance with
applicable law and such Party’s privacy policy.
(e) Confidentiality and Data Protection.
(i)
The Parties agree to establish appropriate safeguards to protect the confidentiality of shared Customer Data and to
prevent unauthorized use, disclosure or access. Specifically, each Party shall implement and maintain an information
security management policy with standards that are no less rigorous than accepted industry practices, comply with all
applicable laws to protect the Customer Data from unauthorized access, destruction, use, modification, or disclosure,
and comply with the provisions of this Agreement. At a minimum, each Party shall implement physical, technical, and
administrative information safeguards that provide for: (a) protection of business facilities, paper files, servers,
computing equipment, including all mobile devices and other equipment with information storage capability, and
backup systems containing Customer Data; (b) network, application (including databases), and platform security; (c)
business systems designed
35
to optimize security; (d) secure, encrypted transmission and secure, encrypted storage of Customer Data; (e) a minimum
of two factor authentication and access control mechanisms; and (f) personnel security, including background checks on
all such personnel, use of unique, robust passwords, and annual training on how to comply with a Party’s physical,
technical, and administrative information security safeguards. Each Party shall regularly test and monitor the
effectiveness of their security practices and procedures relating to the Customer Data, and will evaluate and adjust their
information security program in light of the results of the testing and monitoring, any material changes to their
operations or business arrangements, or any other circumstances that a Party knows or reasonably should know may
have a material effect on their information security program.
(ii)
(iii)
As of and following the Effective Date, each Party (the “Affected Party”) shall provide immediate written notice to the
other Party upon discovery or notification (either of the foregoing, “Discovery”) of any (i) unauthorized or unlawful
access to, or acquisition, use or disclosure of, Customer Data or (ii) event which, after Discovery, would lead a
reasonable person to conclude that there was, or likely was, unauthorized or unlawful access to, or acquisition, use or
disclosure of, Customer Data (either of the foregoing, a “Data Breach”). Such notice shall include (and be supplemented
in writing to the other Party on an ongoing basis as reasonably requested by the other Party), to the extent known by the
Affected Party and reasonably relevant to such breach: (i) the general circumstances and extent of any Data Breach or
intrusion into the Affected Party’s systems that are used to protect, store, process or use Customer Data; (ii) the types
and volume of Customer Data involved in the Data Breach; (iii) the Affected Party’s plans for corrective actions to
respond to the Data Breach; (iv) the identities of all individuals whose Customer Data was or may have been affected by
the Data Breach; (v) steps taken to secure Customer Data and preserve information for any necessary investigation; and
(vi) any other related information reasonably requested by the other Party.
The Affected Party shall, at its own expense, reasonably cooperate with the other Party in connection with any notice to
third parties of such Data Breach and any other remediation efforts required by applicable law. Without limiting the
foregoing, the Affected Party shall, at its own expense, promptly reimburse the other Party for all costs and expenses
(including legal fees) reasonably incurred by the other Party in connection with the Data Breach, including without
limitation costs and expenses (including legal fees) reasonably incurred in connection with any notices to third parties or
other remediation efforts required by applicable law. Neither Party will name the other in any press release or other
public disclosure without prior written approval, except to the extent required by applicable law.
36
(iv)
The Affected Party shall use commercially reasonable efforts to detect, respond to and contain vulnerabilities, activities
and other circumstances that caused or gave rise to the Data Breach as promptly as reasonably practicable after
Discovery and in accordance with industry standards, the provisions of this Agreement and applicable law. Without
limiting the foregoing, the Affected Party shall promptly take commercially reasonable corrective actions, and will
reasonably cooperate with the other Party in reasonable and lawful efforts to prevent, eradicate, mitigate and rectify
such Data Breach.
(v)
The Affected Party shall, at its own expense, reasonably cooperate with the other Party in investigating and responding
to each Data Breach, including by (i) providing information and responding to inquiries and (ii) obtaining copies of
information, data and records, in each case as reasonably requested by the other Party.
(f) To the extent permitted by applicable law and each Party’s respective privacy policy, the Parties shall also share with each other
the results of fan and guest surveys, focus groups, etc. to the extent the information relates to guests’ experiences in connection with Home
Games (including customer service, quality of Concessions, cleanliness, game presentation, arriving and departing, etc.).
ARTICLE XI
EXCLUSIVITY COVENANT
Section 11.01 Covenant. Notwithstanding anything to the contrary contained in this Agreement, including Section 20.10 with respect
to League Rules, the Rangers hereby agree during the Term that the Team shall not play any Home Games in any location other than the
Arena, except as provided in ARTICLE XII or Section 20.01. Notwithstanding anything to the contrary contained in this Agreement, the
Rangers agree to fully comply with the obligations undertaken by its predecessor Madison Square Garden Center, Inc. under the Property Tax
Exemption Agreement as the owner of the Team. Licensor agrees to fully comply and cause full compliance with all other obligations
undertaken by its predecessor Madison Square Garden Center, Inc. under the Property Tax Exemption Agreement.
ARTICLE XII
CASUALTY AND CONDEMNATION
Section 12.01 Termination or Restoration Due to Condemnation.
(a) In the event that title to all or substantially all of the Arena or the right of Licensor to occupy or possess all or substantially all of
the Arena shall be taken by Condemnation (a “Total Taking”), Licensor shall provide prompt notice of such Total Taking to the Rangers, and,
except in the case of a Temporary Taking, this Agreement shall terminate and be of no further force upon
37
the earlier of (i) the date when the possession of all or such substantial portion of the Arena or right so taken shall be required for such use or
purpose or (b) the effective date of the Total Taking.
(b) In the event of a Condemnation other than a Total Taking, this Agreement shall continue in full force and effect; provided,
however, that if any such Condemnation results in an Untenantable Condition (including for this purpose a Temporary Taking that results in an
Untenantable Condition for a period in excess of (i) [*****], or (ii) in the case of any such Temporary Taking that occurs during the last five
(5) Contract Years of the Term, [*****]) then each Party shall have the right, in its sole discretion, to terminate this Agreement by notice to
the other given within 30 days after the date of the Rangers’ receipt of the Estimate (as defined in Section 12.05(a)) with respect to such
Condemnation, without any further liability hereunder, except for any liability hereunder which, by the specific terms of this Agreement
survives termination; provided further, however, that neither Party shall have such termination right if (x) the then applicable legal
requirements, zoning laws, building regulations and other governmental or quasi-governmental ordinances, rules or regulations (collectively,
“Governmental Rules”) do not prohibit or materially restrict the performance of the Condemnation Restoration Work (as defined in Section
12.01(c)), (y) the Estimated Date (as defined in Section 12.05(a)) with respect to such Condemnation shall be a date that occurs on or before
the date that is (i) [*****] after the date of such Condemnation, or (ii) in the case of any such Condemnation that occurs during the last five (5)
Contract Years of the Term, [*****] after the date of such Condemnation and (z) the remaining portions of the Arena can be restored in a
manner as shall satisfy the requirements of the definition of Condemnation Restoration Work. Further, and notwithstanding anything to the
contrary contained in the foregoing, if the Estimated Restoration Cost with respect to such Condemnation exceeds [*****]% of the full
replacement value of the portions of the Arena that are not subject to such Condemnation, then Licensor shall have the right, in its sole
discretion, to terminate this Agreement by notice to the Rangers given within 90 days after the date of the Rangers’ receipt of the Estimate
with respect to such Condemnation, without any further liability hereunder, except for any liability hereunder which, by the specific terms of
this Agreement survives termination. If either Party terminates this Agreement as provided in this Section 12.01(b), then such termination shall
be effective on the date specified in such Party’s notice of termination, but no earlier than thirty (30) days after the date of such notice and no
later than one hundred eighty (180) days after the date of such notice, as if said date were the date fixed for the expiration of the Term
(c) If neither party has the right to terminate this Agreement, or if neither party shall timely elect to terminate this Agreement, as
provided in paragraph (b) above, Licensor shall, at its sole cost and expense, commence as soon as reasonably practicable and with reasonable
diligence proceed to perform the work (the “Condemnation Restoration Work”) to and repair and restore the part of the Arena not taken to
an architecturally complete unit and, to the extent commercially practicable, to substantially its former condition, as and to the extent necessary
to remedy the Untenantable Condition, using materials, equipment and construction techniques which are common at the time of such
Condemnation and with such changes as may be required by then applicable Governmental Rules or that Licensor may otherwise deem
appropriate in each case, in a manner consistent with and as necessary to maintain the Standard; it being agreed, however, that Licensor shall
be required to obtain the prior written consent of the Rangers to any changes that are not required by then applicable Governmental Rules and
that could materially adversely impact the Rangers’ rights or obligations under this Agreement. Licensor shall (i) keep the Rangers
38
reasonably apprised of the progress and the estimated date of completion of the Condemnation Restoration Work, and (ii) provide such
information as may be reasonably requested by the Rangers from time to time with respect to the progress of such Condemnation Restoration
Work. Licensor shall use commercially reasonable efforts (which shall not require Licensor to employ overtime labor or otherwise incur
overtime charges) to substantially complete such Condemnation Restoration Work as soon as commercially practicable, but in all events, on or
before the Condemnation Outside Date (as defined in Section 12.01(d)) applicable to such Condemnation (it being agreed that the Rangers’
sole remedy on account of Licensor’s failure to substantially complete such Condemnation Restoration Work shall be the rights of the Rangers
to terminate this Agreement as provided in paragraphs 12.01(d) and 12.05(b)(iv) below). The Condemnation Restoration Work shall not
include the repair and restoration of any of the trade fixtures, personal property or equipment of the Rangers (all of which the Rangers shall
repair and restore at its sole cost and expense).
(d) Notwithstanding anything to the contrary contained herein, the Rangers shall have the right to terminate this Agreement (without
any further liability hereunder, except for any liability hereunder which, by the specific terms of this Agreement survives termination) if the
Condemnation Restoration Work required as a result of such Condemnation is not substantially completed by the Condemnation Outside Date
applicable to such Condemnation (as such Condemnation Outside Date is postponed pursuant to the below provisions of this Section
12.01(d)), which right may be exercised by the Rangers upon written notice to Licensor given within thirty (30) days after such applicable
Condemnation Outside Date but before the substantial completion of the Condemnation Restoration Work; provided, however, that if a Final
Revised Estimated Date for such Condemnation shall have been determined pursuant to Section 12.05(b) below, then the Rangers shall have
the right to terminate this Agreement pursuant to this Section 12.01(d) (without any further liability hereunder, except for any liability
hereunder which, by the specific terms of this Agreement survives termination) only if the Condemnation Restoration Work is not
substantially completed by the later to occur of the Condemnation Outside Date applicable to such Condemnation (as such Condemnation
Outside Date is postponed pursuant to the below provisions of this Section 12.01(d)) and such Final Revised Estimated Date, which right may
be exercised by the Rangers upon written notice to Licensor given within thirty (30) days after the later to occur of such Condemnation
Outside Date and such Final Revised Estimated Date, but before the substantial completion of the Condemnation Restoration Work. If
Licensor has not completed the Condemnation Restoration Work prior to the date that is [*****] after the giving of such notice by the Rangers
(which date shall be postponed by one day for each day that Licensor is actually delayed in substantially completing the Condemnation
Restoration Work by (i) any acts or omissions of the Rangers, the League or their respective agents, employees or contractors or (ii) any one or
more events of Force Majeure (provided that the maximum period such date shall be postponed due to events of Force Majeure is an additional
[*****])), then this Agreement shall be terminated automatically effective as of such date, without any further liability hereunder, except for
any liability hereunder which, by the specific terms of this Agreement survives termination. For all purposes hereof, the “Condemnation
Outside Date” applicable to any Condemnation shall be determined as follows:
39
(w) If the Estimate with respect to the Condemnation Restoration Work required as a result of such Condemnation provides for an
Estimated Date that will occur on or prior to the [*****] after the date of such Condemnation, then the “Condemnation Outside Date”
applicable to such Condemnation shall be the date that is [*****] following such Estimated Date; provided, however, that such date
shall be postponed by one day for each day that Licensor is actually delayed in substantially completing the Condemnation Restoration
Work by (i) any acts or omissions of the Rangers, the League or their respective agents, employees or contractors or (ii) any one or
more events of Force Majeure (provided that the maximum period such Condemnation Outside Date shall be postponed due to events
of Force Majeure is an additional [*****]).
(x) If the Estimate with respect to the Condemnation Restoration Work required as a result of such Condemnation provides for an
Estimated Date that will occur during the period commencing on the [*****] after the date of such Condemnation and ending on the
[*****] after the date of such Condemnation, then the “Condemnation Outside Date” applicable to such Condemnation shall be the
date that is [*****] following such Estimated Date; provided, however, that such date shall be postponed by one day for each day that
Licensor is actually delayed in substantially completing the Condemnation Restoration Work by (i) any acts or omissions of the
Rangers, the League or their respective agents, employees or contractors or (ii) any one or more events of Force Majeure (provided that
the maximum period such Condemnation Outside Date shall be postponed due to events of Force Majeure is an additional [*****]).
(y) If the Estimate with respect to the Condemnation Restoration Work required as a result of such Condemnation provides for an
Estimated Date that will occur during the period commencing on the [*****] after the date of such Condemnation and ending on the
[*****] after the date of such Condemnation, then the “Condemnation Outside Date” applicable to such Condemnation shall be the
date that is [*****] following such Estimated Date; provided, however, that such date shall be postponed by one day for each day that
Licensor is actually delayed in substantially completing the Condemnation Restoration Work by (i) any acts or omissions of the
Rangers, the League or their respective agents, employees or contractors or (ii) any one or more events of Force Majeure (provided that
the maximum period such Condemnation Outside Date shall be postponed due to events of Force Majeure is an additional [*****]).
(z) If the Estimate with respect to the Condemnation Restoration Work required as a result of such Condemnation provides for an
Estimated Date that will occur on or after the [*****] following the date of such Condemnation, then the “Condemnation Outside
Date” applicable to such Condemnation shall be the date that is [*****] following such Estimated Date; provided, however, that such
date shall be postponed by one day for each day that Licensor is actually delayed in substantially completing the Condemnation
Restoration Work by (i) any acts or omissions of the Rangers, the League or their respective agents, employees or contractors or (ii)
any one or more events of Force Majeure (provided that the maximum period such Condemnation Outside Date shall be postponed due
to events of Force Majeure is an additional [*****]).
40
Section 12.02 Termination or Restoration Due to Casualty.
(a) If all or any material portion of the Arena is damaged or destroyed by Casualty such that an Untenantable Condition exists (each, a
“Total Casualty”), and the Estimate with respect to such Casualty delivered pursuant to Section 12.05 below indicates that the Casualty
Restoration Work (defined below) would not reasonably be expected to be substantially completed (i) within 24 months after the occurrence of
such Casualty, or (ii) in the case of any Casualty that occurs during the last five (5) Contract Years of the Term, within 12 months after the
occurrence of such Casualty, then the Rangers shall have the right to terminate this Agreement without any further liability hereunder, except
for any liability hereunder which, by the specific terms of this Agreement survives termination. If the Rangers wish to exercise such right of
termination, it shall do so by notice to Licensor given not later than the date that is thirty (30) days after the date of the Estimate with respect to
such Casualty under Section 12.05.
(b) In the event there shall occur a Total Casualty and (i) Licensor is prohibited or materially restricted by then applicable
Governmental Rules from performing the Casualty Restoration Work, or (ii) the Estimate with respect to such Casualty indicates that the
Casualty Restoration Work would not reasonably be expected to be substantially completed (x) within [*****] after the occurrence of such
Casualty, or (y) in the case of any Casualty that occurs during the last five (5) Contract Years of the Term, within [*****] after the occurrence
of such Casualty, or (iii) the Estimated Restoration Cost with respect to such Casualty exceeds [*****]% of the full replacement value of the
Arena immediately prior to such Casualty, then, and in any of such events, Licensor shall have the right, in its sole discretion, to terminate this
Agreement without any further liability hereunder, except for any liability hereunder which, by the specific terms of this Agreement survives
termination. If Licensor wishes to exercise such right of termination, it shall do so by notice to the Rangers given not later than the date that is
thirty (30) days after the date of the Estimate with respect to such Casualty under Section 12.05. If either Party terminates this Agreement as
provided in this Section 12.02(b) or in Section 12.02(a) above, then such termination shall be effective on the date specified in such Party’s
notice of termination, but no earlier than thirty (30) days after the date of such notice and no later than one hundred eighty (180) days after the
date of such notice, as if said date were the date fixed for the expiration of the Term
(c) In the event of a Casualty with respect to which neither party has the right to terminate this Agreement, or neither party timely
elects to terminate this Agreement, pursuant to paragraphs (a) or (b) above, Licensor shall, at its sole cost and expense, commence as soon as
reasonably practicable and with reasonable diligence proceed to perform the work (the “Casualty Restoration Work”) to repair and restore
the Arena to substantially its former condition, as and to the extent necessary to remedy the Untenantable Condition, using materials,
equipment and construction techniques which are common at the time of such Casualty and with such changes as may be required by then
applicable Governmental Rules or that Licensor may deem appropriate, in each case, in a manner consistent with and as necessary to maintain
the Standard; it being agreed, however, that Licensor shall be required to obtain the prior written consent of the Rangers to any changes that
are not required by then applicable Governmental Rules and that could materially adversely impact the Rangers’ rights or obligations under
this Agreement. Licensor shall (i) keep the Rangers reasonably apprised of the progress and the estimated date of completion of the Casualty
Restoration Work, and (ii) provide such information as may be reasonably requested by the Rangers from time to time with respect to the
progress of the Casualty Restoration Work.
41
Licensor shall use commercially reasonable efforts (which shall not require Licensor to employ overtime labor or otherwise incur overtime
charges) to substantially complete such Casualty Restoration Work as soon as commercially practicable, but in all events, on or before the
Casualty Outside Date (as defined in Section 12.02(d)) applicable to such Casualty (it being agreed that the Rangers’ sole remedy on account
of Licensor’s failure to substantially complete such Casualty Restoration Work shall be the rights of the Rangers to terminate this Agreement
as provided in Section 12.02(d) and 12.05(b)(iv) below). The Casualty Restoration Work shall not include the repair and restoration of any of
the trade fixtures, personal property or equipment of the Rangers (all of which the Rangers shall repair and restore at its sole cost and expense).
(d) Notwithstanding anything to the contrary contained herein, the Rangers shall have the right to terminate this Agreement (without
any further liability hereunder, except for any liability hereunder which, by the specific terms of this Agreement survives termination) if the
Casualty Restoration Work required as a result of such Casualty shall not be substantially completed by the Casualty Outside Date applicable
to such Casualty (as such Casualty Outside Date is postponed pursuant to the below provisions of this Section 12.02(d)), which right may be
exercised by the Rangers upon written notice to Licensor given within thirty (30) days after such applicable Casualty Outside Date but before
the substantial completion of the Casualty Restoration Work; provided, however, that if a Final Revised Estimated Date for such Casualty shall
have been determined pursuant to Section 12.05(b) below, then the Rangers shall have the right to terminate this Agreement pursuant to this
Section 12.02(d) (without any further liability hereunder, except for any liability hereunder which, by the specific terms of this Agreement
survives termination) only if the Casualty Restoration Work is not substantially completed by the later to occur of the Casualty Outside Date
applicable to such Casualty (as such Casualty Outside Date is postponed pursuant to the below provisions of this Section 12.02(d)) and such
Final Revised Estimated Date for such Casualty, which right may be exercised by the Rangers upon written notice to Licensor given within
thirty (30) days after the later to occur of such Casualty Outside Date and such Final Revised Estimated Date but before the substantial
completion of the Casualty Restoration Work. If Licensor has not completed the Casualty Restoration Work prior to the date that is [*****]
after the giving of such notice by the Rangers (which date shall be postponed by one day for each day that Licensor is actually delayed in
substantially completing the Casualty Restoration Work by (i) any acts or omissions of the Rangers, the League or their respective agents,
employees or contractors or (ii) any one or more events of Force Majeure (provided that the maximum period such date shall be postponed due
to events of Force Majeure is an additional [*****])), then this Agreement shall be terminated automatically effective as of such date, without
any further liability hereunder, except for any liability hereunder which, by the specific terms of this Agreement survives termination. For all
purposes hereof, the “Casualty Outside Date” applicable to any Casualty shall be determined as follows:
(w) If the Estimate with respect to the Casualty Restoration Work required as a result of such Casualty provides for an Estimated
Date that will occur on or prior to the [*****] after the date of such Casualty, then the “Casualty Outside Date” applicable to such
Casualty shall be the date that is [*****] following such Estimated Date; provided, however, that such date shall be postponed by one
day for each day that Licensor is actually delayed in substantially completing the Casualty Restoration Work by (i) any acts or
omissions of the Rangers, the League or their respective agents, employees or contractors or (ii) any one or more events of Force
Majeure (provided that the maximum period such
42
Casualty Outside Date shall be postponed due to events of Force Majeure is an additional [*****]).
(x) If the Estimate with respect to the Casualty Restoration Work required as a result of such Casualty provides for an Estimated Date
that will occur during the period commencing on the [*****] after the date of such Casualty and ending on the [*****] after the date of
such Casualty, then the “Casualty Outside Date” applicable to such Casualty shall be the date that is [*****] following such Estimated
Date; provided, however, that such date shall be postponed by one day for each day that Licensor is actually delayed in substantially
completing the Casualty Restoration Work by (i) any acts or omissions of the Rangers, the League or their respective agents,
employees or contractors or (ii) any one or more events of Force Majeure (provided that the maximum period such Casualty Outside
Date shall be postponed due to events of Force Majeure is an additional [*****]).
(y) If the Estimate with respect to the Casualty Restoration Work required as a result of such Casualty provides for an Estimated Date
that will occur during the period commencing on the [*****] after the date of such Casualty and ending on the [*****] after the date of
such Casualty, then the “Casualty Outside Date” applicable to such Casualty shall be the date that is [*****] following such Estimated
Date; provided, however, that such date shall be postponed by one day for each day that Licensor is actually delayed in substantially
completing the Casualty Restoration Work by (i) any acts or omissions of the Rangers, the League or their respective agents,
employees or contractors or (ii) any one or more events of Force Majeure (provided that the maximum period such Casualty Outside
Date shall be postponed due to events of Force Majeure is an additional [*****]).
(z) If the Estimate with respect to the Casualty Restoration Work required as a result of such Casualty provides for an Estimated Date
that will occur on or after the [*****] following the date of such Casualty, then the “Casualty Outside Date” applicable to such
Casualty shall be the date that is [*****] following such Estimated Date; provided, however, that such date shall be postponed by one
day for each day that Licensor is actually delayed in substantially completing the Casualty Restoration Work by (i) any acts or
omissions of the Rangers, the League or their respective agents, employees or contractors or (ii) any one or more events of Force
Majeure (provided that the maximum period such Casualty Outside Date shall be postponed due to events of Force Majeure is an
additional [*****]).
Section 12.03 Condemnation Proceeding and Awards. Upon commencement of any Condemnation action or proceeding, Licensor
and the Rangers shall cooperate with each other, and provide each other with such information and assistance, as each shall reasonably request
in connection therewith. Licensor and the Rangers each shall have the right, at its own expense, to appear and to participate in any and all
hearings, trials and appeals relating thereto even if this Agreement has been terminated. Subject to the other provisions of this Section 12.03, in
any Condemnation (x) the Rangers shall have the right to assert a claim against the condemning authority for, and receive from the
condemning authority, all Condemnation Awards for, (i) any damage to the Rangers’ business or any loss in value of any of the rights granted
to the Rangers under this Agreement (if applicable, as if this Agreement had not been terminated), (ii) the value
43
of any of the Rangers’ personal property (tangible or intangible) taken or damaged as result of the Condemnation, (iii) any relocation costs of
the Rangers’ business, and (iv) any other damages to which the Rangers may be entitled under any applicable law, ordinance, order or
regulation, and (y) Licensor shall have the right to assert a claim against the condemning authority for, and receive from the condemning
authority, all Condemnation Awards for, (i) the loss in value of its ownership of and rights in and to the Arena and its other property (tangible
and intangible), (ii) any damage to, or relocation costs of, Licensor’s business, and (iii) any other damages to which Licensor may be entitled
under any applicable law, ordinance, order or regulation. The Parties shall request that all Condemnation Awards be specifically allocated by
the applicable condemning authority (it being agreed that Licensor may direct that any such awards allocated to Licensor be paid to any
Superior Interest Holder designated by Licensor for such purpose). If any Condemnation Award is not specifically allocated between the
Parties by the applicable condemning authority, the Condemnation Award shall be equitably allocated and distributed to Licensor and the
Rangers in such manner as the Parties shall mutually agree.
Section 12.04 Temporary Taking. If the whole or any part of the Arena or the right of Licensor to occupy or possess the whole or
any part of the Arena shall be taken in any Condemnation for a temporary use or occupancy not to exceed an aggregate of [*****] (a
“Temporary Taking”), the Term shall not be reduced, extended or affected in any way, and neither Licensor nor the Rangers shall be relieved
of its obligations under this Agreement, except that (a) the Rangers shall have the right to make a claim against the condemning authority for,
and receive from the condemning authority and retain, an award of any damages sustained by the Rangers as a result of such Temporary
Taking, and (b) the Rangers’ obligation to pay the License Fee shall be abated during periods that the Arena is unavailable to the Rangers for
the playing of Home Games in accordance with the terms and conditions of this Agreement.
Section 12.05 Inability to Timely Restore; Estimate of Time and Cost to Restore.
(a) The determination of the estimated time and costs that are reasonably expected to be necessary to perform and substantially
complete any Condemnation Restoration Work or any Casualty Restoration Work shall be made by an independent architect or construction
manager that is experienced in arena construction projects, well-regarded in the industry and selected by Licensor and reasonably approved by
the Rangers. In the event of any Condemnation or Casualty resulting in an Untenantable Condition, Licensor shall furnish to the Rangers an
estimate (the “Estimate”), prepared and certified by such independent architect or construction manager (the “Estimator”) of (i) the estimated
date (the “Estimated Date”) by which the Condemnation Restoration Work or Casualty Restoration Work, as the case may be, will be
substantially completed and (ii) the estimated cost (the “Estimated Restoration Cost”) to perform the Condemnation Restoration Work or
Casualty Restoration Work, as the case may be. Licensor shall use commercially reasonable efforts to cause such independent architect or
construction manager to make its determination as soon as reasonably practicable (and, in the case of a Casualty, no later than [*****] after
the date of such Casualty) and will deliver the Estimate to the Rangers promptly upon Licensor’s receipt thereof.
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(b) (i) If, during the performance of the Condemnation Restoration Work or the Casualty Restoration Work required as a result of
any Condemnation or Casualty, the Rangers reasonably believe that the substantial completion of such Condemnation Restoration
Work or such Casualty Restoration Work, as the case may be, will not, absent extraordinary efforts that Licensor does not agree (if not
already obligated to take pursuant to this Agreement), be achieved by the applicable Condemnation Outside Date or applicable
Casualty Outside Date therefor (as such Condemnation Outside Date or such Casualty Outside Date may have theretofore been
postponed pursuant to the provisions of Section 12.01(d) or Section 12.02(d) above, respectively), then the Rangers, by notice given to
Licensor and the Estimator, shall have the right (not to be exercised more than once in any six (6) month period) with respect to such
Condemnation or such Casualty to request that the Estimator determine the estimated date (the “Revised Estimated Date”) by which
such Condemnation Restoration Work or such Casualty Restoration Work, as the case may be, is then reasonably expected to be
substantially completed.
(ii) If the Rangers give such notice pursuant to Section 12.05(b)(i) above, then Licensor, within ten (10) business days after its receipt
of such notice, shall have the right to submit to the Rangers and to the Estimator a notice that (x) sets forth any information that
Licensor reasonably believes is relevant to the determination of the Revised Estimated Date and/or (y) indicates the measures that
Licensor intends and agrees to implement in an effort to cause the substantial completion of such Condemnation Restoration Work or
such Casualty Restoration Work, as the case may be, to be achieved by the applicable Condemnation Outside Date or the applicable
Casualty Outside Date (as such Condemnation Outside Date or such Casualty Outside Date may have theretofore been postponed
pursuant to the provisions of Section 12.01(d) or Section 12.02(d) above, respectively). Within ten (10) business days after the
Rangers’ receipt of Licensor’s notice (or, if Licensor does not give such notice, within twenty (20) business days after Licensor’s
receipt of the Rangers notice given pursuant to Section 12.05(b)(i) above), the Rangers shall have the right to submit to Licensor and
the Estimator a notice that sets forth any information that the Rangers reasonably believes is relevant to the determination of the
Revised Estimated Date. In determining the Revised Estimated Date, the Estimator shall take into consideration all information and
measures set forth in any notices provided by the Parties pursuant to the two immediately preceding sentences, as well as all other
relevant factors. Licensor shall use commercially reasonable efforts to cause the Estimator to make its determination of the Revised
Estimated Date as soon as reasonably practicable after receipt of the Rangers’ notice given pursuant to Section 12.05(b)(i) above and
the notices which each Party is entitled to deliver pursuant to this Section 12.05(b)(ii), and Licensor shall deliver such determination of
the Revised Estimated Date to the Rangers promptly upon Licensor’s receipt thereof.
(iii) Each Party shall have the option (the “Review Option”), exercised by notice given to the other within ten (10) business days
after Licensor delivers to the Rangers the Estimator’s determination of the Revised Estimated Date, to require that the Estimator’s
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determination of the Revised Estimated Date be reviewed by another independent architect or construction manager that is experienced
in arena construction projects, well-regarded in the industry and mutually selected by the Parties (the “Second Estimator”). If the
Parties are unable to mutually select the Second Estimator within ten (10) business days after the giving of a notice exercising the
Review Option, then either Licensor or the Rangers, by giving ten (10) days’ notice to the other, shall have the right to request that the
presiding judge of the lowest level court of general jurisdiction for the district in which the Arena is located select the Second
Estimator. Licensor shall use commercially reasonable efforts to cause the Second Estimator, as soon as reasonably practicable after
the selection thereof, to (x) review the Estimator’s determination of the Revised Estimated Date, (y) make its own determination of the
Revised Estimated Date (which determination shall be made in accordance with the provisions of Section 12.05 (b)(ii) above) and (z)
deliver to Licensor written notice indicating whether the Second Estimator agrees with the determination of the Estimator and, if not,
setting forth the Second Estimator’s determination of the Revised Estimated Date. For all purposes of this Agreement, the “Final
Revised Estimated Date” shall mean either (a) the Revised Estimated Date determined by the Estimator, if neither Party timely
exercises the Review Option or if a Party exercises the Review Option and the Second Estimator agrees with the Estimator’s
determination of the Revised Estimated Date; or (b) the Revised Estimated Date determined by the Second Estimator, if a Party
exercises the Review Option and the Second Estimator disagrees with the Estimator’s determination of the Revised Estimated Date and
therefore issues its own determination of the Revised Estimated Date. Licensor shall deliver the Second Estimator’s written notice to
the Rangers promptly upon Licensor’s receipt thereof. The fees and expenses of the Estimator and the Second Estimator for the
exercise set forth in this Section 12.05(b)(iii) and in Section 12.05(b)(ii) above shall be borne equally by Licensor and the Rangers.
(iv) If the Final Revised Estimated Date with respect to any Condemnation or Casualty is later than the date that is 365 days after the
applicable Condemnation Outside Date or applicable Casualty Outside Date therefor (each of which, for purposes of this paragraph
(iv), shall be deemed to be such applicable Condemnation Outside Date or such applicable Casualty Outside as postponed by the
maximum number of days by which same may be postponed due to events of Force Majeure pursuant to Section 12.01(d) or Section
12.02(d) above, respectively), then the Rangers shall have the right to terminate this Agreement without any further liability hereunder,
except for any liability hereunder which, by the specific terms of this Agreement survives termination. If the Rangers wish to exercise
such right of termination, then it shall do so by notice to Licensor given not later than the date that is sixty (60) days after the date on
which the Final Revised Estimated Date is determined (it being agreed that the Final Revised Estimated Date shall be deemed
determined either as of the date on which the Parties’ right to exercise the Review Option shall have lapsed or, if a Party timely
exercises the Review Option, as of the date on which the Second Estimator’s notice of determination is given to the Rangers). If the
Rangers terminate this Agreement as provided in this Section 12.05(b)(iv), then such termination shall be effective on the date
specified in the Knick’s notice of termination, but no earlier than thirty (30) days after the date of such notice and no later than one
hundred eighty (180)
46
days after the date of such notice, as if said date were the date fixed for the expiration of the Term.
Section 12.06 Replacement Arena; Rent Abatement. In the event of the occurrence of a Condemnation or Casualty that results in
an Untenantable Condition but does not result in termination of this Agreement, the Rangers, during the continuance of such Untenantable
Condition, shall have the right to use an alternate site for Rangers Events while the Arena is being restored, provided such use fully complies
with the requirements of Paragraph 6 of the Property Tax Exemption Agreement, and the Rangers’ obligation to pay the License Fee shall be
abated during such periods in accordance with Section 20.01.
Section 12.07 Intention of the Parties. The provisions of this Article XII shall be deemed an express agreement governing any case
of the Arena or any portion thereof becoming untenantable or unfit for occupancy, and Section 227 of the Real Property Law of the State of
New York, providing for such contingency in the absence of an express agreement, and any other legal requirements of like import, now or
hereafter in force, shall have no application in such case and are expressly waived by the Parties.
ARTICLE XIII
INDEMNIFICATION
Section 13.01 General Indemnification.
(a) To the extent permitted by applicable law, Licensor and the Rangers shall indemnify, defend and hold harmless the other and its
current and future Affiliates, and each of their respective directors, officers, employees, agents, successors and assigns from and against any
and all claims, liability, loss, damages (whether actual, incidental, consequential, punitive or otherwise), judgments, settlement expenses, cost
and expenses whatsoever, including court costs, reasonable attorneys’ fees and related disbursements, with regard to any action, cause of
action or claim of any nature (each, a “Loss”), in any way arising out of or related to (i) the indemnifying Party’s acts or omissions in or about
the Arena (except to the extent solely caused by the indemnified Party’s negligence or misconduct); (ii) the indemnifying Party’s failure to
fulfill any duty or obligation hereunder or to comply with applicable law or the obligations applicable to the indemnifying Party in [*****]; or
(iii) the indemnifying Party’s breach of any representations, warranties or covenants contained in this Agreement. Each Party’s indemnity
hereunder shall include the acts and omissions of its contractors, licensees, agents and employees.
(b) Without limiting the provisions of Subparagraph 13.01(a), Licensor and the Rangers indemnify the other party for any damage to
the property (whether in or about the Arena) of the other party caused by the acts or omissions of the indemnifying party’s contractors,
licensees, agents, employees and invitees, limited however (for purposes of clarity), in the case of the Rangers, to Rangers Misuse. All repairs
to the damaged property of Licensor shall be made by firm(s) designated by Licensor.
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(c) While the Parties are Affiliates, Sections 13.01(a) and 13.01(b) shall not restrict the Parties’ access to the League’s leaguewide
insurance policies, to the extent they would otherwise be covered by the terms of such policies.
Section 13.02 Notice of Claims and Rights to Defend and Settle Claims. The indemnified Party agrees to serve the indemnifying
Party with prompt written notice of any claims which could give rise to the indemnifying Party’s indemnity hereunder, and the indemnifying
Party and its insurance carrier(s) shall have the right to defend such claims with counsel of their choosing. The indemnified Party shall not
settle any claim without the indemnifying Party’s (or its insurer’s) prior written consent, not to be unreasonably withheld or delayed.
ARTICLE XIV
INSURANCE AND SUBROGATION
Section 14.01 Rangers Insurance Coverage. The Rangers shall, from and after the Commencement Date, maintain at its expense in
force the following insurance:
(a) Property insurance for the full one hundred percent (100%) of replacement cost of all of the Rangers’ equipment, improvements,
and betterments owned by the Rangers, literary or musical material, and all other properties and materials owned, rented or brought onto the
premises by the Rangers. Coverage shall be on an All Risk of physical loss or damage basis;
(b) Commercial general liability insurance covering against bodily injury and property damage having a limit of not less than
$[*****] for each occurrence and a limit of not less than $[*****] in the aggregate for each occurrence. Coverages shall be in accordance with
the ISO form or equivalent. Such insurance shall include, but not be limited to, contractual liability, premises operations, products, completed
operations, personal injury, advertising injury, bodily injury and property damage;
(c) Liquor liability insurance coverage having limits of not less than $[*****] for each common cause and in the aggregate;
(d) Automobile liability insurance coverage for bodily injury and property damage with a combined single limit of no less than
$[*****];
(e) Employer’s liability insurance with the following minimum limits: bodily injury by accident - $[*****] each accident; bodily
injury by disease - $[*****] policy limit and $[*****] each employee;
(f) Umbrella or excess liability coverage, following the terms, conditions, and extensions of coverages, to apply over and above the
primary coverages in subsections (b), (c), (d), and (e), in an amount not less than $[*****] in the aggregate;
(g) Statutory worker’s compensation coverage;
(h) Employment practices liability insurance with minimum limits of $[*****] per claim;
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(i) Media liability policy with limits of no less than $[*****] per claim/$[*****] aggregate; and
(j) Disability insurance as required by the State of New York.
The insurance referred to in this Section 14.01, with the exception of property insurance, employment practices liability insurance, worker’s
compensation and employer’s liability coverage, shall name Licensor and its Affiliates and mortgagees, and each of their respective directors,
officers, employees, agents, successors and assigns, as additional insureds for claims arising in connection with Rangers’ operations. Licensor
shall also have the right to require the Rangers, from time to time, to increase the scope and limits of any insurance coverage required to be
carried herein, so long as such increase is commercially reasonable under the circumstances.
Section 14.02 Rangers Insurance Requirements.
(a) The Rangers shall, at its own expense, obtain and maintain during the Term and if written on a claims made basis for three (3)
years thereafter, policies of insurance as required herein written by an insurance carrier(s) reasonably acceptable to Licensor that is authorized
to do business in the State of New York, rated A-VII or better in the most current edition of A.M. Best’s Insurance Report (or if such report
shall cease to be published, such comparable rating system as reasonably determined by Licensor), and with deductible and self-insurance
retention amounts that are not in excess of amounts which are commercially reasonable under the circumstances (except that in the event that
any maximum deductible or self-insurance retention amounts are mandated either by law, such mandated maximum amounts shall not be
exceeded regardless of whether higher amounts may be commercially reasonable under the circumstances). All liability insurance policies
must provide Cross Liability coverage (separation of insureds or severability of interest provisions). Further, coverage for the additional
insureds shall apply on a primary and non-contributory basis irrespective of any other insurance maintained by the additional insureds, whether
collectible or not, for claims arising in connection with the Rangers’ operations. Policies written on a claims made basis shall be maintained
for a period of at least three (3) years after termination of the Term. The insurance requirements set forth will in no way modify, reduce, or
limit the indemnification herein made by the Rangers. Receipt of a certificate of insurance, endorsement or policy of insurance which is more
restrictive than the contracted for insurance shall not be construed as a waiver or modification of the insurance requirements above or an
implied agreement to modify same, nor is any verbal agreement to modify same permissible or binding.
(b) In the event of cancellation of any policies with respect to non-payment of any premium or premiums, the Rangers shall provide at
least ten (10) days advance written notice of same to the Licensor.
(c) In the event that Licensor is in receipt of such notice of non-payment and/or cancellation, Licensor shall have the right, but not the
obligation, to pay for any commercially reasonable costs and expenses which shall be required to maintain or reinstate such insurance, and to
charge the Rangers for any and all expenses incurred in connection therewith.
49
Section 14.03 Rangers Certificates of Insurance. The Rangers shall provide Licensor with appropriate evidence of insurance
setting forth the required coverages not later than ten (10) days prior to the date on which such coverage is required to be obtained hereunder.
For each consecutive year, the Rangers shall provide appropriate evidence of insurance no later than ten (10) days before the policies are
required to be renewed.
Section 14.04 Rangers Waiver of Subrogation. The Rangers shall include in each of their policies insuring against (a) loss, damage
or destruction by fire or any other peril covering any property owned, borrowed, or in the Rangers’ care, custody, or control, or (b) injuries to
any employee or agent of the Rangers, a waiver of the insurance carriers’ rights of subrogation against Licensor. If such waiver is unobtainable
from any of the Rangers’ insurance carriers, the Rangers shall obtain (i) an express agreement that such policy shall not be invalidated if the
Rangers waive or had waived the right of recovery against Licensor, or (ii) any other form of permission of release of Licensor.
Section 14.05 Licensor Insurance Coverage. Licensor shall, from and after the Commencement Date, maintain at its expense in
force the following minimum insurance:
(a) Property insurance for the replacement cost of the Arena, including all equipment, improvements and betterments owned by
Licensor. Coverage shall be on an All Risk of physical loss or damage basis, including losses arising out of a terrorism event;
(b) Employer’s liability insurance with the following minimum limits: bodily injury by accident - $[*****] each accident; bodily
injury by disease - $[*****] policy limit and $[*****] each employee;
(c) Statutory worker’s compensation coverage;
(d) Disability insurance as required by the State of New York;
(e) Commercial general liability insurance covering against bodily injury and property damage having a limit of not less than
$[*****] for each occurrence and a limit of not less than $[*****] in the aggregate for each occurrence. Coverages shall be in accordance with
the ISO form or equivalent. Such insurance shall include, but not be limited to, contractual liability, premises operations, products, completed
operations, personal injury, advertising injury, bodily injury and property damage;
(f) Liquor liability insurance coverage having limits of not less than $[*****] for each common cause and in the aggregate;
(g) Automobile liability insurance coverage for bodily injury and property damage with a combined single limit of no less than
$[*****];
(h) Umbrella or excess liability coverage, following the terms, conditions, and extensions of coverages, to apply over the employer’s
liability coverage in subsection (b) and above the primary coverages (e), (f) and (g), in an amount not less than $[*****] in the aggregate;
(i) Employment practices liability insurance with minimum limits of $[*****];
50
(j) Media liability policy with limits of no less than $[*****] per claim/$[*****] aggregate.
The liability insurance referred to in this Section 14.05, in paragraphs (e) and (h), shall include the Rangers and its Affiliates, and each of their
respective directors, officers, employees, agents, successors and assigns, as additional insureds for claims arising in connection with Licensor’s
operations. However, the insurance referred to in this Section 14.05 will be in excess of any insurance purchased and maintained by the
Rangers. The Rangers shall also have the right to require Licensor, from time to time, to increase the scope and limits of any insurance
coverage required to be carried herein, so long as such increase is commercially reasonable under the circumstances.
Section 14.06 Licensor Insurance Requirements.
(a) Licensor shall, at its own expense, obtain and maintain during the Term and if written on a claims made basis for three (3) years
thereafter, policies of insurance as required herein written by an insurance carrier(s) reasonably acceptable to the Rangers that are authorized
to do business in the State of New York, rated A VII or better in the most current edition of A.M. Best’s Insurance Report (or if such report
shall cease to be published, such comparable rating system as reasonably determined by the Rangers), and with deductible and self-insurance
retention amounts that are not in excess of amounts which are commercially reasonable under the circumstances (except that in the event that
any maximum deductible or self-insurance retention amounts are mandated either by law, such mandated maximum amounts shall not be
exceeded regardless of whether higher amounts may be commercially reasonable under the circumstances). All liability insurance policies
must provide Cross Liability coverage (separation of insureds or severability of interest provisions). Policies written on a claims made basis
shall be maintained for a period of three (3) years after termination of the Term. The insurance requirements set forth will in no way modify,
reduce, or limit the indemnification herein made by Licensor. Receipt of a certificate of insurance, endorsement or policy of insurance which is
more restrictive than the contracted for insurance shall not be construed as a waiver or modification of the insurance requirements above or an
implied agreement to modify same, nor is any verbal agreement to modify same permissible or binding.
(b) In the event of cancellation of any policies with respect to non-payment of any premium or premiums, Licensor shall provide at
least ten (10) days advance written notice of same to the Rangers.
(c) In the event that the Rangers are in receipt of such notice of non-payment and/or cancellation, the Rangers shall have the right, but
not the obligation, to pay for any commercially reasonable costs and expenses which shall be required to maintain or reinstate such insurance,
and to charge Licensor for any and all expenses incurred in connection therewith.
Section 14.07 Licensor Certificates of Insurance. Licensor shall provide the Rangers with appropriate evidence of insurance
setting forth the required coverages not later than ten (10) days prior to the date on which such coverage is required to be obtained hereunder.
For each consecutive year, Licensor shall provide appropriate evidence of insurance no later than ten (10) days before the policies are required
to be renewed.
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Section 14.08 Licensor Waiver of Subrogation. Licensor shall include in each of its policies insuring against (a) loss, damage or
destruction by fire or any other peril covering any owned property or (b) injuries to any employee or agent of Licensor, a waiver of the
insurance carriers’ rights of subrogation against the Rangers. If such waiver is unobtainable from any of Licensor’s insurance carriers,
Licensor shall obtain (i) an express agreement that such policy shall not be invalidated if Licensor waives or had waived the right of recovery
against the Rangers, or (ii) any other form of permission of release of the Rangers.
ARTICLE XV
WORK STOPPAGE
Section 15.01 Impact on License Fee. If, during any NHL season, any previously scheduled Home Game is cancelled as a result of
a strike, work stoppage, lockout, or other suspension or cancellation of NHL play arising out of a labor dispute involving NHL players or
referees, or any other League-related labor or other dispute (each a “Work Stoppage”), there shall be no reduction in the License Fee;
provided, however, that, upon any such cancellation, Licensor shall use commercially reasonable efforts to hold the Arena out for relicense on
such Home Date, and in the event that Licensor relicenses the Arena on such Home Date during the time of the previously scheduled Home
Game, Licensor will refund to the Rangers the lesser of (i) [*****] of any net contribution attributable to the relicense of the Arena and (ii) the
pro rata portion of the annual License Fee attributable to such Home Date (i.e. 1/44th of the License Fee if there had been 41 home games and
3 preseason games scheduled) (the “Work Stoppage Abatement”). If, during any season in which the Rangers receive a Work Stoppage
Abatement, any previously scheduled Home Games are cancelled as a result of a Work Stoppage and subsequently rescheduled, any Work
Stoppage Abatement received by the Rangers shall be reduced by an amount equal to the Work Stoppage Abatement, divided by the number
of Home Games that were cancelled and multiplied by the number of Home Games that were subsequently rescheduled.
Section 15.02 Treatment of Refunds or Credits. Any refunds or credits granted to Licensor’s suite or other licensees, sponsors,
advertisers or other third parties (including any concessionaire or service provider) that relates to the Work Stoppage shall be determined in
Licensor’s reasonable discretion, but may not exceed the Team’s allocable share of such revenue for a full-season work stoppage (pro rata for
a partial-season work stoppage) (“Maximum Credit or Refund”). Licensor shall retain [*****]% of the difference, if any, between the
Maximum Credit or Refund and the actual credit or refund attributable to such assets. Any refunds or credits shall be deducted from the
Rangers’ share of revenue under this Agreement for the applicable Arena assets.
Section 15.03 Scheduling. Upon the occurrence of a Work Stoppage, Licensor may schedule events on previously scheduled Home
Dates during the period for which the League has cancelled games. If a Work Stoppage results in the partial cancellation of a season, the
Parties shall mutually agree in good faith on the rescheduling of Home Games.
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ARTICLE XVI
CERTAIN TAXES
Section 16.01 Property Taxes.
(a) The Rangers shall be responsible for the payment, without demand, counter-claim or offset, of fifty percent (50%) (the “Rangers’
Tax Share”) of any real property or similar taxes applicable to the Arena (“Arena Property Tax”). Licensor may notify any jurisdiction
imposing (or proposing to impose) any Arena Property Tax that the Rangers have full responsibility for the payment of 50% of any such Arena
Property Tax and, to the extent permitted by applicable law, rule or regulation, Licensor shall arrange for such Arena Property Tax to be billed
directly to the Rangers. Licensor shall promptly provide to the Rangers copies of all materials relating to any Arena Property Tax that it
receives from any government authority.
(b) Licensor and the Rangers acknowledge that, as of the Commencement Date, Licensor is exempt, pursuant to the laws of the State
of New York and that certain agreement between the Mayor of the City of New York, acting as Chief Executive Officer of, and for, the City of
New York, and Licensor’s and the Rangers’ predecessor-in-interest Madison Square Garden Center, Inc., dated July 15, 1982 (the “Property
Tax Exemption Agreement”), from paying any Arena Property Tax in connection with the Arena (the “Property Tax Exemption”).
Licensor and the Rangers shall each use all commercially reasonable efforts to cause the Property Tax Exemption to remain in effect at all
times during the term of this Agreement.
Section 16.02 Commercial Rent Tax. The Rangers shall be responsible for paying directly, and shall timely pay, to the City of New
York the “Commercial Rent Or Occupancy Tax” imposed pursuant to Chapter 7 of Title 11 of the New York City Administrative Code, or
successor or similar tax assessed or imposed on a tenant as a consequence of the Rangers’ status as a licensee under this Agreement.
ARTICLE XVII
RANGERS DEFAULT; LICENSOR’S RIGHTS AND REMEDIES
Section 17.01 Rangers Default. The occurrence of any one or more of the following events shall constitute a default by the Rangers
under this Agreement (each, a “Rangers Default”):
(a) Failure by the Rangers to timely pay any amount owed by the Rangers to Licensor pursuant to this Agreement if such failure shall
continue for fourteen (14) days after notice thereof is received by the Rangers from Licensor;
(b) Failure by the Rangers to maintain the Team’s membership in the NHL;
(c) The levy upon or other execution or the attachment by legal process of the interest of the Rangers in the Arena herein, or the filing
or creation of a lien in respect of such interest, which levy, attachment or lien shall not be released, discharged or bonded against within sixty
(60) days from the date of such filing;
53
(d) The making by the Rangers of an assignment for the benefit of creditors; an adjudication that the Rangers are bankrupt, insolvent
or unable to pay its debts as they mature; the filing by or against the Rangers of a petition to have the Rangers adjudged bankrupt, or a petition
for reorganization or arrangement under any law relating to bankruptcy unless, in the case of a petition filed against the Rangers, the case is
dismissed within sixty (60) days after the filing thereof; the appointment of a trustee or receiver to take possession of substantially all of the
Rangers’ assets or the Rangers’ interests in this Agreement unless the appointment is revoked within sixty (60) days after the appointment
thereof; or an attachment, execution or levy against substantially all of the Rangers’ interests in this Agreement unless the attachment,
execution or levy is revoked within sixty (60) days after the attachment, execution or levy;
(e) Breach by the Rangers of ARTICLE XI (an “Exclusivity Breach”); and
(f) Failure by the Rangers to observe or perform in any material respect any covenant, agreement, condition, or provision of this
Agreement not otherwise specified in this ARTICLE XVII if such failure shall continue for sixty (60) days after notice thereof from Licensor
to the Rangers; provided that the Rangers shall not be in a Rangers Default with respect to matters that cannot reasonably be cured within sixty
(60) days so long as within sixty (60) days after such notice the Rangers commence such cure and diligently and continuously proceed to
complete the same, but in any event, the Rangers shall not have more than ninety (90) days from its receipt of such notice to cure such failure.
Section 17.02 Remedies of Licensor. If a Rangers Default occurs, Licensor shall have the following rights and remedies which shall
be distinct, separate, and, to the extent not mutually exclusive, cumulative:
(a) In addition to any other legal or equitable damages as may be available to Licensor and subject to clause (b) below, Licensor may
enforce this Agreement by seeking specific performance of any Rangers covenant or agreement contained herein or the enforcement of any
other appropriate legal or equitable remedy, including self-help (following notice, expiration of any applicable cure period, and failure to cure)
and recoupment from the Rangers of the reasonable cost of curing any default on the Rangers’ behalf (and the right to offset such cost from
any amounts due from Licensor pursuant to this Agreement); and
(b) Notwithstanding anything in this Agreement to the contrary, Licensor shall not, under any circumstances, have the right to
terminate this Agreement.
Section 17.03 Remedies of Licensor for an Exclusivity Breach. The Rangers hereby acknowledge that Licensor and its Affiliates
will be irreparably and continually harmed by any Exclusivity Breach or the threat thereof and that damages for an Exclusivity Breach cannot
be estimated with any degree of certainty and that monetary damages cannot fairly or adequately compensate Licensor for an Exclusivity
Breach. The Rangers further acknowledge that Licensor does not have an adequate remedy at law for an Exclusivity Breach. Accordingly, the
Rangers hereby acknowledge that, in the event of an Exclusivity Breach, Licensor shall, in addition to any other applicable available rights and
remedies, be entitled to seek and obtain, and the Rangers hereby consent to the entry of, a temporary restraining order, together with
temporary, preliminary and permanent injunctive or other equitable relief, from any court of competent jurisdiction to
54
enjoin any violation or threatened violation of ARTICLE XI and to compel the Rangers to comply with or restrain or cease from breaching or
violating the covenants of ARTICLE XI. The Rangers hereby waive any requirement that Licensor post a bond or other security in connection
with injunctive or other equitable relief.
Section 17.04 League’s Right to Notice of and Cure Rangers Defaults. Licensor shall simultaneously serve the League, at the
addresses set forth in Section 20.04, with copies of all notices of Rangers Defaults served upon the Rangers. Licensor shall accept a cure of a
Rangers Default by the League within the applicable cure period.
ARTICLE XVIII
LICENSOR DEFAULT; RANGERS’ RIGHTS AND REMEDIES; RIGHTS IN THE EVENT OF REPEAL OF PROPERTY TAX
EXEMPTION
Section 18.01 Licensor Default. The occurrence of any one or more of the following shall constitute a default by Licensor under this
Agreement (each, a “Licensor Default”):
(a) Failure by Licensor to timely pay any amount owed by Licensor to the Rangers pursuant to this Agreement if such failure shall
continue for fourteen (14) days after notice thereof is received by Licensor;
(b) The making by Licensor of an assignment for the benefit of creditors; an adjudication that Licensor is bankrupt, insolvent or
unable to pay its debts as they mature; the filing by or against Licensor of a petition to have Licensor adjudged bankrupt, or a petition for
reorganization or arrangement under any law relating to bankruptcy unless, in the case of a petition filed against the Licensor, the case is
dismissed within sixty (60) days after the filing thereof; the appointment of a trustee or receiver to take possession of substantially all of
Licensor’s assets or Licensor’s interests in this Agreement; or an attachment, execution or levy against substantially all of Licensor’s interests
in this Agreement;
(c) Failure by Licensor to provide the Rangers with any of the Rangers’ rights hereunder that interferes with the playing of Home
Games in the Arena;
(d) Failure by Licensor to cause the Arena to be maintained and operated in accordance with, or otherwise to meet and observe, the
Standard, and such failure shall continue for fifteen (15) days after notice thereof from the Rangers to Licensor; provided that if such failure
cannot reasonably be cured within such fifteen (15) days, then Licensor shall have up to an additional fifteen (15) days to cure such failure as
long as, within fifteen (15) days after such notice, it diligently undertakes and pursues such cure and provides the Rangers with reasonable
evidence that it is diligently undertaking and pursuing such cure, but in any event, Licensor shall not have more thirty (30) days from its
receipt of notice of such failure from the Rangers to cure such failure; and
(e) Failure by Licensor to observe or perform in any material respect any covenant, agreement, condition, or provision of this
Agreement not otherwise specified in this ARTICLE XVIII if such failure shall continue for sixty (60) days after notice thereof from the
Rangers to Licensor; provided that Licensor shall not be in a Licensor Default with respect to matters that
55
cannot reasonably be cured within sixty (60) days so long as within sixty (60) days after such notice Licensor commences such cure and
diligently and continuously proceeds to complete the same, but in any event, Licensor shall not have more than ninety (90) days from its
receipt of such notice to cure such failure.
Section 18.02 Remedies of the Rangers. If a Licensor Default occurs, the Rangers shall have the following rights and remedies,
which shall be distinct, separate, and, to the extent not mutually exclusive, cumulative:
(a) In addition to any other legal or equitable remedies as may be available to the Rangers and subject to clause (b) below, the
Rangers may enforce the provisions of this Agreement and may enforce and protect the rights of the Rangers herein by seeking specific
performance of any covenant or agreement contained herein, or the enforcement of any other appropriate legal or equitable remedy, including
self-help (following notice, expiration of applicable cure period, and failure to cure) and recoupment from Licensor of the reasonable cost of
curing any default on Licensor’s behalf (and the right to offset such cost, or any amounts due from Licensor pursuant to this Agreement,
against any amount then owed by the Rangers to Licensor pursuant to this Agreement), and recovery of all monies due or to become due from
Licensor under any provisions of this Agreement;
(b) Notwithstanding anything in this Agreement to the contrary, the Rangers shall not, under any circumstances, have the right to
terminate this Agreement, except as set forth in ARTICLE XII.
Section 18.03 Rights in the Event of Repeal of Property Tax Exemption.
(a) In the event the Property Tax Exemption is no longer in effect [*****] (a “No Fault Occurrence”), the Rangers shall remain
responsible for fifty percent (50%) of the Arena Property Tax for the remainder of the Term, unless the Parties agree to extend this provision.
(b) In the event the Property Tax Exemption is no longer in effect due to a breach of the Property Tax Exemption Agreement by the
Rangers that leads to the loss of the Property Tax Exemption, the Rangers shall be responsible for 100% of any Arena Property Tax for the
remainder of the Term.
(c) Notwithstanding anything to the contrary in Sections 16.01 or 18.03(a), in the event of a loss of the Property Tax Exemption
[*****].
(d) [*****].
ARTICLE XIX
ASSIGNMENT
Section 19.01 Licensor Assignment. Licensor shall have the right to assign this Agreement upon written notice to the Rangers to
any Person that acquires the Arena, provided the assignee agrees in writing to assume all of Licensor’s obligations under this Agreement.
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Section 19.02 Rangers Assignment. The Rangers shall have the right to assign this Agreement upon written notice to Licensor to any
Person that acquires the Team in accordance with League Rules, provided the assignee agrees in writing to assume all of the Rangers’
obligations under this Agreement. The Rangers shall further have the rights to collaterally assign this Agreement to secure indebtedness of
the Rangers incurred in accordance with League Rules.
Section 19.03 No Other Assignment. Except as set forth in this ARTICLE XIX, neither Party shall be permitted to assign this
Agreement without the prior written consent of the other Party, not to be unreasonably withheld, conditioned or delayed. A change in
ownership of either Party shall not be deemed an assignment under this Section 19.
ARTICLE XX
MISCELLANEOUS
Section 20.01 Force Majeure. Should any fire or other casualty, act of God, earthquake, flood, epidemic, landslide, enemy act, war,
riot, act or threat of terrorism, civil commotion, general unavailability of certain materials; a strike, slowdown, boycott or labor dispute (other
than a strike, slowdown, boycott or labor dispute involving the League), or any other similar event beyond the reasonable control of the subject
Party (each, a “Force Majeure”) prevent performance of this Agreement by such Party in accordance with its provisions, performance of this
Agreement (other than the payment of any sum of money owed hereunder, subject to the final two sentences of this Section 20.01) by such
Party shall be suspended or excused to the extent commensurate with such interfering occurrence. In the event of a Force Majeure, the Rangers
shall be permitted to schedule and play Home Games at an alternate location, provided that playing games in such location fully complies with
the requirements of Paragraph 6 of the Property Tax Exemption Agreement. In the event of a Force Majeure (including a governmental action)
that results in (a) attendance at Arena events being limited to 1000 attendees or less per event for any period (a “Restricted Attendance
Period”), the Rangers shall be permitted to schedule and play Home Games at the Arena during the Restricted Attendance Period; the pro rata
License Fee attributable to any Home Games played at the Arena during any Restricted Attendance Period shall be reduced by 80% or (b)
attendance at Arena events being materially limited (but greater than 1000 attendees), the parties will negotiate in good faith to agree on an
appropriate reduction to the License Fee. Notwithstanding anything herein to the contrary, the Rangers’ obligation to pay the License Fee for
periods for which the Arena is unavailable for Home Games due to a Force Majeure event (including a governmental action or the occurrence
of any Untenantable Condition) shall be abated during such periods.
Section 20.02 Consents and Approvals. Any consents or approvals permitted or required to be given by Licensor or the Rangers
under this Agreement shall not be valid unless such consent or approval is in writing, signed by the Party by or on whose behalf such consent
or approval is executed.
Section 20.03 Entire Agreement. This Agreement, including the schedules and exhibits attached hereto, which are incorporated
herein, constitutes the entire agreement between and among the Parties, and supersedes any previous oral or written agreements,
representations and covenants, regarding the subject matter hereof and is a binding and enforceable agreement between
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and among the Parties and their respective successors and permitted assigns. This Agreement may not be amended, modified or supplemented
unless in writing executed by the Parties.
Section 20.04 Notices. All notices, demands, consents, approvals, statements, requests, and reports to be given under this Agreement
shall be in writing, signed by the Party or an officer, agent, or attorney of the Party giving the notice and shall be deemed to be given upon
receipt if delivered personally by nationally recognized overnight courier providing a receipt for delivery, by certified or registered mail,
postage prepaid with return receipt requested, or by personal delivery at the applicable address set forth below or to such other address as that
Party may designate in writing.
For the Rangers:
With copies to:
For Licensor:
With a copy to:
MSG Sports, LLC
Two Pennsylvania Plaza
New York, New York 10121
Attention: President
MSG Sports, LLC
Two Pennsylvania Plaza
New York, New York 10121
Attention: General Counsel
MSG Arena, LLC
c/o MSG Entertainment Group, LLC
Two Pennsylvania Plaza
New York, New York 10121
Attention: President
MSG Arena, LLC
c/o MSG Entertainment Group, LLC
Two Pennsylvania Plaza
New York, New York 10121
Attention: General Counsel
Section 20.05 Successors Bound. The covenants, terms, provisions, and conditions of this Agreement shall be binding upon
Licensor and the Rangers and their respective successors and permitted assigns and inure to the benefit of Licensor and the Rangers and their
respective successors and, to the extent permitted herein, assigns.
Section 20.06 Governing Law; Disputes. This Agreement shall be governed by and construed in accordance with the laws of the
State of New York without regard to its choice of law provisions. In connection with any disputes arising under this Agreement, each of the
Parties voluntarily and irrevocably consents and (without waiving service of process) submits to the personal jurisdiction and venue of the
courts located in the Borough of Manhattan, City of New York that have subject matter jurisdiction, waives all objections as to venue and any
claim that it is not personally subject to such jurisdiction or to seek a change of venue, agrees not to bring any action or proceeding in any
other forum, and waives the right to a trial by jury.
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Section 20.07 Captions and Headings; Certain Rules of Construction.
(a) The captions and headings throughout this Agreement are for convenience and reference only and the words contained therein
shall in no way be held or deemed to define, limit, describe, explain, modify, amplify, or add to the interpretation, construction, or meaning of
any provisions of this Agreement or the scope or intent thereof, nor in any way affect this Agreement.
(b) Unless the context, otherwise requires: (i) a term has the meaning assigned to it, (ii) “or” is not exclusive, (iii) words in the
singular include the plural and words in the plural include the singular, (iv) “herein,” “hereof ”and other words of similar import refer to this
Agreement as a whole and not to any particular article, section or other subdivision, (v) all references to “clauses,” “sections” or “articles”
refer to clauses, sections or articles of this Agreement, (vi) “including” means “including, without limitation” and (vii) the masculine, feminine
and neuter adjectives and pronouns include one another.
Section 20.08 Counterparts. This Agreement may be executed by facsimile or PDF signature and in any number of counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Section 20.09 Confidentiality. Subject to League Rules and the rights of any mortgagees each Party agrees that, commencing on the
Commencement Date and continuing for a period of five (5) years after the expiration or earlier termination of this Agreement, the Parties
shall keep confidential the terms and conditions of this Agreement; provided that disclosure may be made (a) to their directors, equity holders,
officers, Affiliates, employees, agents, advisors, and representatives (collectively, their “Representatives”) (b) if disclosure is required by
court order, or applicable law or regulation, including disclosures required by any governmental or regulatory body having the authority to
regulate or oversee any aspect of the business of either Party (e.g., the Securities and Exchange Commission) (in which case the Party required
to disclose such Confidential Information shall notify the other Party and use commercially reasonable efforts to obtain confidential treatment
of any information so required to be disclosed), (c) if disclosure is required to comply with a request or requirement of a governmental or
administrative entity or agent thereof, (d) to the League and/or any League Representatives, (e) as required by League Rules, (f) for valid
business purposes to existing or prospective lenders, investors and employees of partners and Affiliates, (g) to enforce any of a Party’s rights
pursuant to this Agreement, or (h) to governmental authorities, to the extent necessary to perform a Party’s obligations under this Agreement.
Each Party shall direct their Representatives to maintain such information in the strictest confidence. No Party shall make any public
announcement with respect to this Agreement or the transactions contemplated hereby without the prior written consent of the other Parties,
not to be unreasonably withheld, conditioned or delayed.
Section 20.10 League Rules. This Agreement is subject to League Rules and Licensor hereby covenants to comply with all League
Rules in connection with its performance hereunder and its operation of the Arena for Rangers Events. In the event of any conflict between
this Agreement and League Rules with respect to the Parties’ rights and obligations hereunder, League Rules shall control and govern in all
respects. Nothing in this Section 20.10 shall affect the Rangers’ obligations under Section 11.01 or Article XIII.
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Section 20.11 Superior Interests.
Each mortgagee or similar party named in any mortgage or similar instrument now existing or hereafter made and encumbering an
interest in the Arena superior to that of Licensor (each such mortgage and similar instrument being hereinafter collectively referred to as
“Superior Interests”, and the holder of the mortgagee’s and similar party’s interest being hereinafter collectively referred to as “Superior
Interest Holders”) shall agree in a commercially reasonable form of instrument that, if it succeeds to the interest of Licensor in the Arena by
termination of the Superior Interest by any means, it will recognize the rights and interest of the Rangers under this Agreement to use and
occupy the Arena if and as long as no Rangers Default has occurred and is continuing (which agreement may, at such Superior Interest
Holder’s option require attornment by the Rangers), in consideration of which the rights and interests of the Rangers to use and occupy the
Arena shall be subject and subordinate to the Superior Interest and to any and all advances to be made therein, and to the interest thereon, and
all renewals, replacements and extensions thereof. The Superior Interest Holder may elect that, instead of making this Agreement subject and
subordinate to its Superior Interest, the rights and interest of the Rangers under this Agreement shall have priority over the lien of the Superior
Interest in question. The Rangers agree that it will, within ten (10) days after demand in writing, execute and deliver such reasonable
instruments may be required, either to make this Agreement subject and subordinate to such a Superior Interest (subject to the Superior Interest
Holder’s agreement as aforesaid to recognize the rights and interest of the Rangers under this Agreement to use and occupy the Arena if and as
long as a Rangers Default has not occurred and is continuing), or to give this Agreement priority over the lien of such Superior Interest,
whichever alternative may be elected by the respective Superior Interest Holder.
Section 20.12 Severability. If any Article, Section, Subsection, Schedule, Exhibit, term, or provision of this Agreement or the
application thereof to any Party or circumstance shall, to any extent, be invalid or unenforceable, the remainder of the Article, Section,
Subsection, Schedule, Exhibit, term, or provision of this Agreement or the application of same to Parties or circumstances other than those to
which it is held invalid or unenforceable shall not be affected thereby and each remaining Article, Section, Subsection, Schedule, Exhibit,
term, or provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
Section 20.13 Waiver. No waiver of any right, obligation or default shall be implied, but must be in writing, signed by the Party
against whom the waiver is sought to be enforced. Any particular waiver of any right, obligation or default shall not be construed as a waiver
of any subsequent or other right, obligation or default.
Section 20.14 Further Assurances. Licensor and the Rangers shall execute, acknowledge, and deliver, after the date hereof, without
additional consideration, such further assurances, instruments, and documents, and shall take such further actions, as Licensor or the Rangers
shall reasonably request of the other in order to fulfill the intent of this Agreement and the transactions contemplated thereby.
Section 20.15 No Third-Party Beneficiary: Enforcement of Third Party Agreements.
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(a) The provisions of this Agreement are for the exclusive benefit of the Parties and not for the benefit of any third person, nor shall
this Agreement be deemed to have conferred any rights, express or implied, upon any third person unless otherwise expressly provided for
herein provided, that the League is a third party beneficiary of (i) the Rangers cure rights as set forth in Section 17.04, and (ii) the enforcement
of Section 20.10.
(b) Licensor shall use commercially reasonable efforts to enforce any agreement between Licensor and any third-party (or third-
parties) (including, without limitation, [*****], Ticket Agent Agreements, Suite Agreements, Hospitality Agreement and Joint Sponsor
Agreements) that apply to any of the Rangers rights or obligations under this Agreement.
Section 20.16 Books and Records. Licensor and the Rangers shall each keep full, true, and correct contracts, books and records in
accordance with generally accepted accounting principles consistently applied (and shall require all of their agents, contractors, and
concessionaires to keep such books and records of their transactions to the extent that such transactions would be the subject of the calculation
of any payments due from one Party to the other under this Agreement) setting forth the factual, accounting, and legal bases upon which the
calculation of payments herein are made (the “Books and Records”), and in such detail that would reasonably enable a reasonably qualified
third party to readily and independently make such calculations and verify the accuracy of statements of same which are furnished by one
Party to the other under this Agreement. Each Party’s books and records shall be (a) retained for at least three (3) years following the other
Party’s receipt of the respective statement(s) to which they apply, and (b) made available for inspections and copying by the other Party’s duly
authorized representatives at all reasonable times at reasonable office locations in the New York, NY metropolitan area. Each Party shall
promptly furnish to the other a complete copy of any report of any such examination or inspection.
Section 20.17 Audit Rights. Each Party (the “Auditing Party”) shall be entitled to audit the relevant Books and Records of the
other Party (the “Non-Auditing Party”) for the sole purpose, and only to the extent, of determining the Non-Auditing Party’s compliance with
the financial terms of this Agreement. Such audit right shall be exercisable by the Auditing Party by providing the Non-Auditing Party with
not less than five (5) business days written notice. Except as otherwise set forth below, all costs and expenses of any such audit shall be paid
by the Auditing Party. If the audit discloses that the Non-Auditing Party has failed to pay any amounts due under this Agreement, the Non-
Auditing Party shall remit the underpayment to the Auditing Party within thirty (30) days following the Auditing Party’s delivery of notice and
evidence of underpayment to the Non- Auditing Party. If the audit reveals an underpayment to the Auditing Party of greater than 5%, then the
Non- Auditing Party shall pay all costs and expenses associated with such audit, provided that the auditor is an independent certified public
accounting firm paid on an hourly (and not contingency) basis.
Section 20.18 Access to Financial Information. Licensor acknowledges that existing League Rules on financial reporting under the
League’s collective bargaining agreements and revenue sharing plans requires the Team, annually and from time to time, to provide the
League and auditors for the League and its players’ association detailed financial information, including information that is in the possession
of Licensor. Licensor agrees to provide the information requested by the League and/or the auditors for these purposes and to use
commercially reasonable
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efforts to provide the staff and other support necessary to comply with these requests and the related process.
[signatures on next page]
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IN WITNESS WHEREOF, the Parties have entered into this Agreement as of the date first above written.
LICENSOR:
MSG ARENA, LLC
By: /s/ Philip D’Ambrosio
Name: Philip D’Ambrosio
Title: Senior Vice President, Treasurer
RANGERS:
NEW YORK RANGERS, LLC
By: /s/ Victoria M. Mink
Name: Victoria M. Mink
Title: Executive Vice President and
Chief Financial Officer
TRANSACTION AGREEMENT
Exhibit 10.71
Transaction Agreement (this “Agreement”), dated as of April 15, 2020, by and among New York Knicks, LLC, a Delaware
limited liability company (“Knicks LLC”), Westchester Knicks, LLC, a Delaware limited liability company (“Westchester Knicks”), Knicks
Gaming, LLC, a Delaware limited liability company (“Knicks Gaming”), Knicks Holdings, LLC, a Delaware limited liability company
(“Knicks Holdings”), MSG NYK Holdings, LLC, a Delaware limited liability company (“MSG NYK Holdings”), MSG Sports, LLC, a
Delaware limited liability company (“MSG Sports”), The Madison Square Garden Company (to be renamed Madison Square Garden Sports
Corp.), a Delaware corporation (“MSG” and together with Knicks LLC, Westchester Knicks, Knicks Gaming, Knicks Holdings, MSG NYK
Holdings and MSG Sports, the “Team Parties”), MSG Arena, LLC, a Delaware limited liability company (“Arenaco”), MSG Arena Holdings,
LLC, a Delaware limited liability company (“Arena Holdco” and together with Arenaco, the “Arena Companies”), MSG National Properties,
LLC, a Delaware limited liability company (“National Properties”), MSG Entertainment Group, LLC, a Delaware limited liability company
(formerly MSG Sports & Entertainment, LLC) (“MSGE Group”), MSG Entertainment Spinco, Inc., a Delaware corporation (to be renamed
Madison Square Garden Entertainment Corp.) (“Spinco” and together with the Arena Companies, National Properties and MSGE Group, the
“Spinco Parties”), Charles F. Dolan (“CD”), Helen A. Dolan (“HD”), James L. Dolan (“JD” and together with CD, HD and the Team Parties,
the “Principal Owners,” and the Principal Owners and the Spinco Parties being referred to collectively as the “Transaction Parties”), solely
with respect to Section 7, the Charles F. Dolan 2018 Grantor Retained Annuity Trust #1M (the “CFD 2018 GRAT”), the Helen A. Dolan 2018
Grantor Retained Annuity Trust #1M (the “HAD 2018 GRAT”), the Charles F. Dolan 2019 Grantor
Retained Annuity Trust #1M (the “CFD 2019 GRAT”) and the Helen A. Dolan 2019 Grantor Retained Annuity Trust #1M (the “HAD 2018
GRAT” and together with the CFD 2018 GRAT, the HAD 2018 GRAT and the CFD 2019 GRAT, the “New Trusts”), on the one hand, each
Principal Owner c/o Madison Square Garden Sports Corp., Two Pennsylvania Plaza, New York, New York 10121, Attn: General Counsel and
each Spinco Party c/o The Madison Square Garden Company, Two Pennsylvania Plaza, New York, New York 10121, Attn: General Counsel;
and the National Basketball Association (“NBA”), on the other hand, c/o National Basketball Association, Olympic Tower, 645 Fifth Avenue,
New York, New York 10022, Attn: General Counsel.
RECITALS
A. The NBA and certain of the Transaction Parties are parties to (i) the Agreement and Undertaking (the “2015 Agreement
and Undertaking”), dated as of September 28, 2015, from certain of the Transaction Parties and certain other entities in favor of the NBA
Entities (as defined therein), and (ii) the Transfer Consent Agreement (the “Transfer Consent Agreement” and together with the 2015
Agreement and Undertaking, the “2015 Agreements”), dated as of September 28, 2015, among certain of the Transaction Parties and certain
other entities and the NBA.
B. MSG plans to separate (the “Spin-Off”) its entertainment business (which includes the Madison Square Garden Arena (the
“Arena”)) from its sports business (which includes the NBA membership known as the New York Knickerbockers (the “Membership”) and all
assets comprising the New York Knickerbockers basketball team (collectively with the Membership, the “Knickerbockers”) on April 17, 2020
(the “Spin-Off Date”).
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C. After giving effect to the Spin-Off, MSG will remain a publicly-traded company listed on the New York Stock Exchange
(the “NYSE”).
D. As steps in effecting the Spin-Off, on the date hereof, (i) MSG Sports will distribute its 100% ownership interest in Knicks
Holdings to its direct wholly-owned subsidiary MSG NYK Holdings, (ii) MSGE Group will distribute its 100% ownership interest in Arena
Holdco to its indirect wholly-owned subsidiary National Properties (iii) MSGE Group will distribute its 100% ownership interest in MSG
Sports to its direct parent MSG (the transactions described in clauses (i), (ii) and (iii) collectively, the “Distribution”), and (iv) MSGE Group
will become a subsidiary of Spinco (together with the Distribution and the Spin-Off, the “Proposed Transactions”).
E. In connection with the Spin-Off, on the Spin-Off Date, (i) Arenaco will enter into the Arena License Agreement (the
“Arena License Agreement”) with Knicks LLC pursuant to which the Knicks team will play its home games at the Arena and (ii) a subsidiary
of Spinco will enter into the Sponsorship Sales and Service Representation Agreement (the “Sponsorship Sales and Service Representation
Agreement”) with Knicks Holdings pursuant to which the subsidiary of Spinco will act as sales and service representative for sponsorships
with respect to the Knickerbockers.
F. After giving effect to the Proposed Transactions: (i) all of the membership interests of Arenaco will be directly owned by
Arena Holdco, (ii) all of the membership interests of Arena Holdco will be directly owned by National Properties, (iii) all of the membership
interests of National Properties will be directly owned by S&E, LLC, (iv) all of the membership interests of S&E LLC will be directly owned
by Spinco, and (v) Spinco will be a publicly-traded company listed on the NYSE.
3
G. After giving effect to the Proposed Transactions, the direct and indirect ownership of the Team Parties will be as set forth
on Schedule 1(xiv).
H. After giving effect to the Proposed Transactions: (i) the ultimate ownership of the Knickerbockers, the Team Parties and
the Arena immediately following the Spin-Off by the stockholders of MSG (with respect to the Knickerbockers and the Team Parties) and
Spinco (with respect to the Arena), respectively, shall be the same as it was immediately prior to the Spin-Off (including the Dolan family’s
ability to elect a majority of the board of directors), and (ii) the Spinco Parties will no longer own any direct or indirect interest in the
Knickerbockers or any Team Party.
I. The Proposed Transactions require the approval of the NBA. The NBA has approved the Proposed Transactions upon the
condition that each of the Transaction Parties executes, delivers and performs this Agreement and the Closing Certificate (as defined below).
NOW, THEREFORE, in consideration of the approval by the NBA of the Proposed Transactions, the Transaction Parties agree
and undertake in favor of the NBA and the other Affiliated NBA Parties (as defined below), subject to the NBA’s confirmation in Section 7
below, as follows:
1. The Transaction Parties jointly and severally represent, warrant and agree as follows:
(i) Each Transaction Party that is an entity is duly organized, validly existing and in good standing under the laws of
the jurisdiction of its formation, and has the power and authority to own, operate and lease its properties and to carry on its business. Each
Transaction Party has the power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement
constitutes a valid and binding obligation of each Transaction Party, enforceable against it in accordance with its terms.
4
(ii) All consents, approvals and filings necessary for the consummation of the Proposed Transactions have been
obtained or made and are in full force and effect.
(iii) There is no action, suit or proceeding pending or, to the knowledge of any Transaction Party, threatened against
any Transaction Party that is reasonably likely to result in a material adverse change in the business, properties, assets or prospects or in the
condition, financial or otherwise (a “Material Adverse Change”), of such Transaction Party, or which is reasonably likely to prevent, impede
or adversely affect the consummation of the Proposed Transactions. There is no order, writ, injunction or decree that has been issued by, or, to
the knowledge of any Transaction Party, requested by, any court or governmental agency which has resulted or is reasonably likely to result in
any Material Adverse Change with respect to any Transaction Party or which is reasonably likely to prevent, impede or adversely affect the
consummation of the Proposed Transactions or, with respect to the Principal Owners, the operation of the Membership.
(iv) Each Transaction Party is in compliance in all material respects with all laws, regulations and orders, federal, state,
provincial or otherwise, except where the failure to be in compliance (individually or collectively) would not be reasonably likely to result in a
Material Adverse Change with respect to such Transaction Party or have a material adverse effect on the ability of such Transaction Party to
conduct its business as currently conducted or, with respect to the Principal Owners, the operation of the Membership.
(v) Each Transaction Party has performed in all material respects all obligations required to be performed by such
Transaction Party to date with respect to the Proposed Transactions. No Transaction Party is in default under any material contract, agreement,
lease, or other instrument relating to the Proposed Transactions to which such Transaction Party is a party or by which such Transaction Party
is bound. Each of the Transaction Documents (as defined below)
5
constitutes a valid and binding obligation enforceable against each Transaction Party that is a party thereto in accordance with its terms.
(vi) The execution and delivery of this Agreement and the Transaction Documents, and the compliance by the
Transaction Parties with their terms, will not conflict with, or result in the breach or termination of, any of the terms, conditions or provisions
of, or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any Transaction Party’s properties or assets
pursuant to any indenture, mortgage, lease, agreement or other instrument to which such Transaction Party is a party or by which such
Transaction Party is bound. The Proposed Transactions will have no material adverse effect on the business, assets, operations or condition,
financial or otherwise, of Knicks LLC, any other Team Party, Arenaco, the Knickerbockers or the Arena.
(vii) After giving effect to the Proposed Transactions and except as provided in Schedule 1(vii), none of the assets of
Knicks LLC (including the Membership) or assets of any other Team Party constituting Basketball-Related Assets, including direct or indirect
ownership interests in the Knickerbockers or any Team Party (except for shares of MSG that may be pledged without NBA approval as
provided in Section 3 of the Transfer Consent Agreement), are, and after giving effect to the Proposed Transactions none of such assets will
be, pledged to secure the indebtedness or obligations of any person or entity. After giving effect to the Proposed Transactions and the potential
financing contemplated by National Properties to occur subsequent to the Proposed Transactions, neither the Arena nor any direct or indirect
ownership interests in the Arena Companies or National Properties (except for shares of Spinco that may be pledged without NBA approval to
the same extent shares of MSG may be pledged without NBA approval as provided in Section 3 of the Transfer Consent Agreement) are, and
after giving effect to the Proposed
6
Transactions none of such assets or interests will be, pledged to secure the indebtedness or obligations of any person or entity. As used in this
Agreement, the terms “interest” and “ownership interest” shall include, individually and collectively, each economic, voting, management,
disposition and other right associated with such interest or ownership interest, including, without limitation, the right to receive dividends and
distributions upon a sale transaction or otherwise.
(viii) After giving effect to the Proposed Transactions and except as provided in Schedule 1(vii), the Transaction
Parties do not have, and after giving effect to the Proposed Transactions, the Transaction Parties will not have (as of the Spin-Off Date), any
Enterprise Indebtedness (as defined in the NBA Debt Policies).
(ix) None of the Transaction Parties has any Claims (as defined below) against any of the Affiliated NBA Parties,
except for claims of the type described in Section 3(b).
(x) The Proposed Transactions (other than the Spin-Off) have been consummated today and the Spin-Off shall be
consummated on the Spin-Off Date, in each case in accordance with the terms of the documents listed on Schedule 1(x) (the “Transaction
Documents”).
(xi) Except as provided in the Transaction Documents and except as provided in Schedule 1(vii), there are no
agreements, arrangements or understandings, whether written or oral, among any of the Transaction Parties or their respective Affiliates (as
defined below) relating to or entered into in connection with the Proposed Transactions or relating to the ownership, control, management,
right to transfer direct or indirect interests in, or financing of the Knickerbockers or any of the Transaction Parties (including, without
limitation, partnership or shareholders agreements). The NBA has received true and complete copies of each of the Transaction Documents,
including the Arena License Agreement, the Sponsorship Sales and Service
7
Representation Agreement and the Team Sponsorship Allocation Agreement, in the forms to be entered into on the Spin-Off Date.
(xii) All information furnished by or on behalf of the Transaction Parties to the NBA Entities in connection with the
request for approval of the Proposed Transactions is true and correct in all material respects and has not contained any material misstatement
or omitted any material statement which would make such information not misleading.
(xiii) After giving effect to the Proposed Transactions, except (A) as described on Schedule 1(xiv), and (B) with
respect to shares of MSG that may be transferred without NBA approval as provided in Section 3 of the Transfer Consent Agreement, there are
no options, warrants, rights (contingent or otherwise) or convertible securities of any kind entitling any person or entity to acquire, directly or
indirectly, any shares, partnership interests, membership interests, debt instruments or other economic rights in the Knickerbockers or any of
the Team Parties (“Contingent Interests”), nor does the Knickerbockers or any of the Team Parties have any obligation to issue any such
Contingent Interests. No Transaction Party is holding its direct or indirect interest in the Knickerbockers or rights under the Transaction
Documents for the benefit of any other person or entity. After giving effect to the Proposed Transactions, no Principal Owner presently has
any intention of, or agreement or arrangement with respect to, selling, relocating or otherwise transferring any of its direct or indirect interests
in (a) the Knickerbockers or (b) any other Basketball-Related Asset. After giving effect to the Proposed Transactions, no Spinco Party
presently has any intention of, or agreement or arrangement with respect to, selling, relocating or otherwise transferring any of its direct or
indirect interests in the Arena. As used in this Agreement, the term “Basketball-Related Assets” means, collectively, (a) the Knickerbockers,
(b) any and all other assets used in or related to the ownership or operation of the Knickerbockers or the performance or
8
exhibition by the Knickerbockers of NBA games in which it is a participant, and (c) any and all assets arising out of or created or issued by
virtue of, as a result of, or in connection with, the admission or current status of the Knickerbockers as a member of the NBA, including,
without limitation, media rights, sponsorship rights, rights to attend Knickerbockers games and all rights to derive revenues from any of the
foregoing; “Basketball-Related Assets” include any agreements to the extent they grant other persons any such rights, whether or not they
include the grant of additional rights. Following the consummation of the Proposed Transactions, all Basketball-Related Assets (other than the
Arena) will be owned by Knicks LLC and neither Spinco nor any of its subsidiaries will own any Basketball-Related Assets (other than the
Arena). Following the consummation of the Proposed Transactions, Arenaco will continue to own the Arena and will be an indirect, wholly-
owned subsidiary of Spinco; and no Team Party will have any direct or indirect ownership interest in Arenaco. Following the consummation
of the Proposed Transactions and for so long as it remains an affiliate of Knicks LLC, Arena Holdco, Arenaco and any other direct or indirect
subsidiary of Spinco that does not own substantial assets other than such entity’s direct or indirect ownership interests in the Arena will be an
“Arena Affiliate” for purposes of the NBA Debt Policies; thereafter, such entities shall not be “Arena Affiliates” for purposes of the NBA
Debt Policies and therefore the Arena and any direct or indirect ownership interests in the Arena Companies may be pledged to secure the
indebtedness or obligations of any person or entity. For the avoidance of doubt, following the consummation of the Proposed Transactions,
none of Spinco, MSG S&E or any of their respective direct or indirect subsidiaries that is not an Arena Affiliate shall be subject to the Arena
Indebtedness limitations in the NBA Debt Policies or any NBA restriction on pledging any of such entity’s assets (other than direct or indirect
equity interests in an Arena Affiliate as provided in Section 1(vii)) provided that it complies with the foregoing
9
covenant to not own any Basketball-Related Assets (other than the Arena) and each of the other terms of this Agreement and the Transaction
Documents.
(xiv) Schedule 1(xiv) contains a true and complete list, after giving effect to the Proposed Transactions, of (x) all of
the individuals and entities that directly or indirectly own interests in the Knickerbockers (other than shareholders of MSG), and their
respective percentage ownership interests in the Knickerbockers and each intermediate entity; (y) all of the individuals and entities that
directly or indirectly own shares of Class B common stock of MSG (including the trustees and beneficiaries of any trusts), and their respective
percentage ownership interests in MSG and each intermediate entity; and (z) except as set forth in clause (y), to the best knowledge of the
Principal Owners and as of the date or dates indicated, all of the individuals and entities that directly or indirectly own 5% or more of the
shares of Class A common stock of MSG, and their respective percentage ownership interests in MSG and each intermediate entity. CD, HD
and trusts of which they are the sole trustees collectively own approximately 4.98% of the shares of Class B common stock of MSG, 1.1% of
the total outstanding shares of common stock of MSG and 3.5%% of the voting power of MSG. CD, HD, JD, descendants of CD and HD, and
trusts for their benefit collectively own all of the shares of Class B common stock of MSG, approximately 20.6% of the total outstanding
shares of common stock of MSG and approximately 70.7% of the voting power of MSG. After giving effect to the Proposed Transactions, the
Spinco Parties will not own any shares of MSG. Knicks LLC directly owns the Membership, and owns, leases or has the right to use all other
assets used in or necessary for the customary operation of the Membership and the performance or exhibition by the Membership of games in
which its NBA team is a participant, and all other assets arising out of or in connection with the Membership’s status as a member of the NBA.
10
(xv) The Controlling Owner (as defined in the NBA Ownership Transfer Policies) of the Knickerbockers shall
continue to be JD. Any proposed successor Controlling Owner shall be subject to the prior approval of the NBA and must satisfy all
requirements of the NBA Rules (as defined in the Transfer Consent Agreement). The persons serving as the Alternate Governors of the
Knickerbockers shall initially be Andrew Lustgarten and Leon Rose.
(xvi) All of the intellectual property relating to or used by any of the Transaction Parties in the operation of the
Knickerbockers is owned by Knicks, LLC, other than intellectual property owned by third parties and licensed to Knicks, LLC (including
pursuant to the Arena License Agreement between Knicks, LLC and Arenaco).
(xvii) As of the Spin-Off Date, MSG has cash and cash equivalents in excess of $100 million and undrawn availability
under committed lines of credit in excess of $200 million, in each case that is available to fund the operations, liabilities and obligations of
Knicks LLC as such funding is required.
(xviii) None of the Transaction Parties or its Affiliates (other than Knicks LLC) has any interest in any business that
has a relationship with any NBA player or player agent that would constitute a violation of NBA Rules.
2. (a) The Transaction Parties agree that none of the Transaction Documents (other than the Arena License Agreement and
the Sponsorship Sales and Service Representation Agreement, which include provisions relating to NBA approval of amendments,
modifications, terminations, waivers and supplements) shall be amended, modified, terminated or waived in any respect, and none of the
Transaction Parties or their Affiliates shall enter into any new agreements, arrangements or understandings, in each case that change in a
material way any management, control
11
or ownership arrangement or the business transaction presented to and approved by the NBA without the prior written consent of the NBA.
The Arena License Agreement, the Sponsorship Sales and Service Representation Agreement and the Team Sponsorship Allocation
Agreement shall not be amended, modified, terminated, waived or supplemented unless approved in advance in writing by the NBA as
provided therein. None of the Transaction Parties shall assign, pledge or otherwise encumber any of their rights, or delegate any of their duties,
under any of the Transaction Documents, without the prior written consent of the NBA, and any assignment, pledge, encumbrance or
delegation in violation of this provision shall be void.
(b) The Principal Owners shall cause Knicks LLC to operate the Knickerbockers in a first class manner, consistent
with the manner in which NBA teams generally are operated, as determined by the NBA Commissioner; provided that CD, HD and JD shall
not have Financial Responsibility pursuant to this sentence. The Spinco Parties, CD, HD and JD shall cause Arenaco to operate the Arena in a
first class manner, consistent with the manner in which NBA arenas generally are operated, as determined by the NBA Commissioner;
provided that CD, HD and JD shall not have Financial Responsibility pursuant to this sentence. For purposes of this Agreement, “Financial
Responsibility” shall mean personal liability for the debts, liabilities or obligations of, and any obligation to make any capital contribution or
loan to, the applicable Transaction Party or any of its Affiliates.
(c) MSG and each other Team Party (including, without limitation, Knicks LLC) shall at all times pay in the ordinary
course and in a timely fashion all of its expenses, liabilities and obligations (including, without limitation, all dues, assessments, capital
contributions and other amounts payable to the NBA Entities) and shall maintain sufficient net working capital and cash reserves to pay such
expenses, liabilities and obligations. The Team Parties (other than
12
Knicks LLC) agree jointly and severally to provide Knicks LLC with all required operating support, financial and otherwise, necessary for
Knicks LLC to pay such expenses, liabilities and obligations as and when due, and to otherwise operate the Knickerbockers in a first class
manner in accordance with Section 2(b). Subject to complying with the preceding sentence, MSG agrees to provide each other Team Party
with all required operating support, financial and otherwise, necessary for such Team Party to pay such expenses, liabilities and obligations as
and when due, and to otherwise operate its business in a first class manner consistent with the operation of the Knickerbockers. Spinco agrees
to provide each other Spinco Party with all required operating support, financial and otherwise, necessary to operate the Arena in a first class
manner in accordance with Section 2(b) and pay its expenses, liabilities and obligations as and when due. For the avoidance of doubt, none of
CD, HD nor JD shall have Financial Responsibility pursuant to this provision.
(d) After the date of this Agreement, (i) the Principal Owners shall cause Knicks LLC to be party to all agreements
exclusively relating to the Knickerbockers, including agreements granting rights to Basketball-Related Assets that exclusively relate to the
Knickerbockers, (ii) if such agreements relate to businesses of a Transaction Party or its Affiliate other than the Knickerbockers, the
Transaction Parties shall ensure that there will be a fair market allocation of revenues and expenses among Knicks LLC and such other
businesses, and (iii) the Principal Owners shall cause all other newly acquired Basketball-Related Assets that exclusively relate to the
Knickerbockers to be owned directly by Knicks LLC. The Spinco Parties shall not take any action inconsistent with the provisions of this
paragraph.
(e) From and after the date of this Agreement, (i) the Team Parties agree not to incur any Enterprise Indebtedness
without the prior approval of the NBA and compliance
13
with the applicable NBA Rules and (ii) the Spinco Parties agree not to incur any Enterprise Indebtedness without the prior approval of the
NBA and compliance with the applicable NBA Rules.
3. (a) Each of the Transaction Parties, on its own behalf and on behalf of its Affiliates, hereby releases and forever
discharges the NBA Entities, each of the present and future member teams of the NBA (the “NBA Teams”) (other than New York Knicks,
LLC), and each of their respective predecessors, successors, assigns and affiliates, and the past, present and future direct and indirect directors,
officers, employees, agents, owners, partners, members, managers, shareholders, governors, affiliates and subsidiaries of each of the foregoing
(collectively, including the NBA Entities and NBA Teams, the “Affiliated NBA Parties”) from all actions, causes of action, suits, debts, losses,
costs, controversies, damages, liabilities, judgments, claims, and demands whatsoever, in law, admiralty or equity (collectively, “Claims”),
known or unknown and arising out of or relating to (i) the Proposed Transactions, or (ii) facts, circumstances, acts or omissions existing or
occurring on or prior to the date of this Agreement relating to the business of the NBA Entities or the game of NBA, WNBA, NBA 2K League
or G League basketball, that any of the Transaction Parties (or its Affiliates) ever had, now has or hereafter can, shall or may have against any
of them. Each of the Transaction Parties represents and warrants to the NBA Entities that none of the Claims purportedly released under the
prior sentence has been assigned or transferred to any other party. Notwithstanding anything to the contrary stated above, the Transaction
Parties are not releasing or discharging the Los Angeles Clippers (or their owners or affiliated entities) with respect to the ongoing dispute
involving their plans for a new arena in Inglewood, California.
(a) The release and discharge set forth in Section 3(a) shall not apply to terminate, modify or amend any contracts or
agreements between or among the Transaction Parties (or their Affiliates) and any of the Affiliated NBA Parties which were entered into by
the Transaction
14
Parties (or their Affiliates) in the ordinary course of their business, or release or discharge any amounts due in the ordinary course under any of
those agreements.
4. (a) The Transaction Parties jointly and severally shall indemnify, defend and hold harmless each of the Affiliated NBA
Parties from and against all actions, causes of action, suits, debts, obligations, losses, damages, amounts paid in settlement, liabilities, costs
and expenses (including, without limitation, interest, penalties and reasonable attorneys’ fees and expenses) (collectively, “Losses”) resulting
to, imposed upon, asserted against or incurred by any Affiliated NBA Party (including, but not limited to, in any action between any of the
Transaction Parties and any Affiliated NBA Party) in connection with or arising out of (i) the Proposed Transactions or any transactions or
other acts or occurrences relating to the Proposed Transactions; (ii) any breach or misrepresentation by any of the Transaction Parties under
this Agreement; (iii) any act or omission (or alleged act or omission), whether on, prior to or after the date of this Agreement, by or on behalf
of any of the Transaction Parties or their respective past, present or future Affiliates, except that in the case of Losses suffered by owners of
NBA Teams or their affiliates (other than their NBA Teams and the NBA Entities), such Losses must arise from acts or circumstances related
to the business of the NBA Entities or the game of NBA, WNBA, NBA 2K League or G-League basketball, and in the case of Losses suffered
by NBA Teams or their affiliates (other than the NBA Entities), such Losses shall not include damages payable by such NBA Team or affiliate
to a Transaction Party in a proceeding in which such Transaction Party is the prevailing party, or expenses incurred by such NBA Team or
affiliate in such proceeding; or (iv) any Claim (other than a Claim against a particular NBA Team or its owners) by an Affiliate of any of the
Transaction Parties that would have been released by such Affiliate under Section 3(a) (after giving effect to Section 3(b)) if it had been
defined as an “Transaction Party” for purposes of this Agreement. Notwithstanding anything to the
15
contrary stated above, the Transaction Parties are not indemnifying the Los Angeles Clippers (or their owners or affiliated entities) with
respect to the ongoing dispute involving their plans for a new arena in Inglewood, California.
(a) Upon the request of the NBA, the applicable Transaction Parties shall advance to the NBA or another indemnified
party an amount equal to any Losses as those Losses are incurred; provided that in a proceeding between a Transaction Party or its Affiliate
and an NBA Team or its affiliate (other than their NBA Teams and the NBA Entities), such Losses must only be advanced upon a final
determination that the Transaction Party or its Affiliate is liable in such proceeding.
(b) None of the Affiliated NBA Parties shall be entitled to bring an indemnification claim against any of the
Transaction Parties under this Section 4 without the approval of the NBA Commissioner.
(c) Any Affiliated NBA Party claiming a right of indemnity hereunder shall give the indemnifying party prompt notice
of the claim, action, suit, proceeding or circumstance giving rise to the potential Losses and shall afford the indemnifying party the opportunity
to participate in the defense of such claim, action, suit or proceeding; provided, however, that the failure of any Affiliated NBA Party to give
such prompt notice shall not affect its right to receive indemnification under this Agreement except to the extent the indemnifying party is
materially and adversely affected by the failure.
5. Each Transaction Party acknowledges that from time to time it and one or more of the NBA Entities will jointly retain one
or more law firms or experts to represent and advise them (“League Advisors”). Each Transaction Party agrees and consents to the
representation of the NBA Entities and the other NBA Teams by League Advisors in connection with any and all
16
controversies and disputes, including any litigation or other adversarial proceeding adverse to such Transaction Party. In any such adverse
representation, the current or prior representation of such Transaction Party by that League Advisor, and the information that was conveyed to
that League Advisor in the course of such representation, shall not be asserted as, and shall not constitute, a basis to disqualify that League
Advisor from the adverse representation.
6. Any notice or other communication under this Agreement shall be in writing and shall be considered given when delivered
personally, sent by reputable overnight courier or mailed by registered mail, return receipt requested, to the parties at the addresses set forth
above (or at such other address as a party may specify by notice similarly given).
7. This Agreement and the Closing Certificate contain the entire agreement of the parties hereto with respect to the Proposed
Transactions, and supersedes all prior agreements or understandings, whether written or oral, relating to the subject matter hereof; provided
that nothing in this Agreement or the Closing Certificate shall (a) amend, terminate or waive any of the terms or provisions (including
representations and indemnities) of any Agreement and Undertaking or other agreement or certificate executed by any of the Transaction
Parties prior to the date of this Agreement, or (b) affect any rights or Claims of the Affiliated NBA Parties, or liabilities or obligations of any
of the Transaction Parties or other parties, under any such Agreement and Undertaking or other agreement or certificate arising or accrued
through the date of this Agreement, each of which shall remain in full force and effect. Notwithstanding the foregoing or anything to the
contrary in this Agreement, the Transaction Parties and the NBA confirm that after the Spin-Off Date: (i) no Spinco Party shall have any
further obligation under Section 1, the second sentence of Section 2 or the second sentence of Section 4(b) of the 2015 Agreement and
Undertaking, (ii) MSG shall have not have any further obligation to provide operating support to any Spinco Party
17
under the third sentence of Section 4(b) of the 2015 Agreement and Undertaking, (iii) no Spinco Party shall have any obligation under Section
7(a)(ii) or (iii) of the 2015 Agreement and Undertaking for breaches, acts or omissions of any Team Party occurring after the Spin-Off Date,
(iv) the first sentence of Section 2 of the 2015 Agreement and Undertaking shall remain applicable to the Spinco Parties provided that the first
sentence of Section 2 of the 2015 Agreement and Undertaking shall not be violated with respect to any NBA Entity or any NBA Team by any
position or action taken by the Spinco Parties or their subsidiaries in the ordinary course of their respective businesses at any time after they
are no longer affiliates of Knicks LLC, and (v) no Team Party shall have any obligation under Section 7(a)(ii) or (iii) of the 2015 Agreement
and Undertaking for breaches, acts or omissions of any Spinco Party occurring after the Spin-Off Date. MSG NYK Holdings agrees to be
bound by and comply with each provision of any Agreement and Undertaking and any Transfer Consent Agreement executed by any of the
Transaction Parties prior to the date of this Agreement applicable to Knicks Holdings, including, without limitation, the 2015 Agreements.
Each of the New Trusts agrees to be bound by and comply with each provision of any Agreement and Undertaking and any Transfer Consent
Agreement executed by any of the Transaction Parties prior to the date of this Agreement applicable to Trusts (as defined in the 2015
Agreement and Undertaking), including, without limitation, the 2015 Agreements.
8. This Agreement shall be governed by and construed in accordance with the law of the State of New York applicable to
agreements made and to be performed entirely in New York. Pursuant to Article 24(h) of the NBA Constitution, the provisions of this
Agreement shall be interpreted by the NBA Commissioner.
9. Subject to Section 3(b) of the Transfer Consent Agreement, in the event of any breach by any of the Transaction Parties of
its agreements contained herein, in addition to all
18
other legal and equitable rights and remedies available to the NBA Entities and the NBA Teams (including, without limitation, the authority of
the NBA Commissioner to impose fines and other penalties under Article 24 of the NBA Constitution), such breach shall constitute a failure to
fulfill a contractual obligation within the meaning of Article 13(d) of the NBA Constitution, and shall entitle the NBA Entities and NBA
Teams to exercise all rights and remedies against Knicks LLC and any other applicable Team Party as if Knicks LLC or such Team Party had
itself committed such breach.
10. The covenants and agreements by the Transaction Parties contained in this Agreement shall be construed as several
covenants by each of the Transaction Parties in favor of the NBA Entities that may be relied on solely by the NBA Entities, and not as
covenants between any of the Transaction Parties. Accordingly, any of such covenants and agreements, and any of the representations made by
the Transaction Parties in this Agreement, may be waived, amended, consented to or otherwise approved by the NBA Entities, on the one
hand, and the particular Transaction Party to which such covenant, agreement or representation applies, on the other hand, without the consent
or approval of any other party, including, but not limited to, in cases where one or more other Transaction Parties has made the same or a
similar covenant, agreement or representation that is not being waived, amended, consented to or otherwise approved by the NBA Entities as
to such Transaction Party, as applicable. The covenants and agreements by the Principal Owners contained in this Agreement shall apply to
them in their capacities as owners of an interest in the Membership and otherwise.
11. As used in this Agreement, the term “Affiliate” means: (a) with respect to a specified person or entity, (i) any other person
or entity directly or indirectly controlled by, controlling or under common control with the specified person or entity, (ii) any person who is an
19
officer, director or trustee of, or serves in a similar capacity with respect to, the specified entity, (iii) any other person or entity that, directly or
indirectly, is the beneficial owner of 50% or more of any class of equity interests of the specified entity, or of which the specified person or
entity, directly or indirectly, is the owner of 50% or more of any class of equity interests, and (iv) the spouse, children and other lineal
descendants (collectively, “Relatives”) of the specified person, any trust for the benefit of the specified person or his or her Relatives, and any
entity directly or indirectly controlled by one or more Relatives of the specified person; and (b) with respect to each Principal Owner, (i) each
direct or indirect owner of Class B common stock of MSG (including trusts and trustees and beneficiaries of trusts), and their respective
Affiliates, and (ii) each other Transaction Party and its Affiliates. For the avoidance of doubt, each of MSG, Spinco and their direct and
indirect subsidiaries are Affiliates of each the Principal Owners as of the date of this Agreement and the Spin-Off Date.
12. The Transaction Parties acknowledge and agree that the NBA’s approval of the Proposed Transactions is subject to: (i) the
Spin-Off being consummated on the Spin-Off Date strictly in accordance with the Distribution Agreement and the other applicable
Transaction Documents, (ii) the Transaction Parties executing and delivering to the NBA a certificate dated the Spin-Off Date in the form
attached as Exhibit A hereto (the “Closing Certificate”), and (iii) the ownership structure of the Transaction Parties upon consummation of the
Proposed Transactions conforming to Schedule 1(xiv) hereto. If any condition in the foregoing clauses (i)-(iii) is not satisfied, the approval of
the NBA with respect to the Proposed Transactions (but not the representations, warranties and obligations of the Transaction Parties
hereunder) shall be void ab initio. MSGE Group agrees to cooperate in good faith with the NBA to update Schedule 1 and Schedule 2 to the
Team Sponsorship Allocation Agreement within thirty (30) days after the date
20
hereof to reflect the allocations among (i) Team Sponsorship Assets, Arena Game Shared Sponsorship Assets and Non-Team Sponsorship
Assets (each as defined in the Arena License Agreement) and (ii) Knicks LLC, New York Rangers, LLC and the other applicable subsidiaries
of MSG Sports.
13. This Agreement may be executed in counterparts, which together shall constitute the same instrument.
[Signature pages follow]
21
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement, intending to be bound hereby, as of
the date first written above.
NATIONAL BASKETBALL ASSOCIATION
By:
/s/ Richard Buchanan
Name: Richard Buchanan
Title: General Counsel
NEW YORK KNICKS, LLC
By:
/s/ James L. Dolan
Name: James L. Dolan
Title: Executive Chairman and Chief Executive Officer
WESTCHESTER KNICKS, LLC
By:
/s/ James L. Dolan
Name: James L. Dolan
Title: Executive Chairman and Chief Executive Officer
KNICKS GAMING, LLC
By:
/s/ James L. Dolan
Name: James L. Dolan
Title: Executive Chairman and Chief Executive Officer
KNICKS HOLDINGS, LLC
By:
/s/ James L. Dolan
Name: James L. Dolan
Title: Executive Chairman and Chief Executive Officer
MSG NYK HOLDINGS, LLC
By:
/s/ James L. Dolan
Name: James L. Dolan
Title: Executive Chairman and Chief Executive Officer
MSG SPORTS, LLC
By:
/s/ James L. Dolan
Name: James L. Dolan
Title: Executive Chairman and Chief Executive Officer
THE MADISON SQUARE GARDEN COMPANY
(to be renamed Madison Square Garden Sports Corp.)
By:
/s/ James L. Dolan
Name: James L. Dolan
Title: Executive Chairman and Chief Executive Officer
MSG ARENA, LLC
By:
/s/ Andrew Lustgarten
Name: Andrew Lustgarten
Title: President
MSG ARENA HOLDINGS, LLC
By:
/s/ Andrew Lustgarten
Name: Andrew Lustgarten
Title: President
MSG ENTERTAINMENT GROUP, LLC
(formerly MSG Sports & Entertainment, LLC)
By:
/s/ Andrew Lustgarten
Name: Andrew Lustgarten
Title: President
MSG NATIONAL PROPERTIES, LLC
By:
/s/ Andrew Lustgarten
Name: Andrew Lustgarten
Title: President
MSG ENTERTAINMENT SPINCO, INC.
(to be renamed Madison Square Garden Entertainment Corp.)
By:
/s/ Andrew Lustgarten
Name: Andrew Lustgarten
Title: President
CHARLES F. DOLAN, individually and as
Trustee of the Charles A. Dolan 2018 Grantor Retained Annuity Trust #1M and 2019 Grantor
Retained Annuity Trust #1M
/s/ Charles F. Dolan
Charles F. Dolan
HELEN A. DOLAN, individually and as
Trustee of the Helen A. Dolan 2018 Grantor Retained Annuity Trust #1M and 2019 Grantor
Retained Annuity Trust #1M
/s/ Helen A. Dolan
Helen A. Dolan
JAMES L. DOLAN, individually
/s/ James L. Dolan
James L. Dolan
Exhibit 10.72
TRANSACTION AGREEMENT
THIS TRANSACTION AGREEMENT (this “Agreement”) is made this 15th day of April, 2020 by and among: (i) the
NATIONAL HOCKEY LEAGUE, a joint venture organized as an unincorporated association (the “NHL”), (ii) NEW YORK RANGERS,
LLC, a Delaware limited liability company (“Rangers LLC”), RANGERS HOLDINGS, LLC, a Delaware limited liability company (“RH
LLC”), MSG NYR HOLDINGS, LLC, a Delaware limited liability company (“MSG NYR Holdings”), MSG SPORTS, LLC, a Delaware
limited liability company (“MSG Sports”), and THE MADISON SQUARE GARDEN COMPANY, a Delaware corporation (to be renamed
Madison Square Garden Sports Corp.) (“TMSGC”) (the entities listed in this clause (ii) are referred to collectively as the “Club Parties”); (iii)
MSG ARENA, LLC, a Delaware limited liability company (“Arenaco”), and MSG ARENA HOLDINGS, LLC, a Delaware limited liability
company (“Arena Holdco” and together with Arenaco, the “Arena Companies”), and (iv) MSG NATIONAL PROPERTIES, LLC, a Delaware
limited liability company (“National Properties”), MSG ENTERTAINMENT GROUP, LLC, a Delaware limited liability company (formerly
MSG Sports & Entertainment, LLC) (“MSGE Group”), and MSG ENTERTAINMENT SPINCO, INC., a Delaware corporation (to be
renamed Madison Square Garden Entertainment Corp.) (“Spinco”) (the entities listed in this clause (iv) together with the Arena Companies,
the “Spinco Parties”, and the Spinco Parties together with the Club Parties, the “Transaction Parties”).
Background
(a)
The NHL and certain of the Transaction Parties are parties to (i) the Transaction Approval Agreement (the “2015
Transaction Approval Agreement”), dated as of September 28, 2015, by and among the NHL, certain of the Transaction Parties and certain
other entities, and (ii) the Transfer Consent Agreement (the “2015 Transfer Consent Agreement” and together with the 2015 Transaction
Approval Agreement, the “2015 Agreements”), dated as of September 28, 2015, by and among the NHL, certain of the Transaction Parties and
certain other entities.
(b) TMSGC plans to separate (the “Spin-Off”) its entertainment business (which include the Madison Square Garden Arena
(the “Arena”)) from its sports business (which includes the membership in the NHL of the New York Rangers hockey club (the “Rangers”)).
(c) After giving effect to the Spin-Off, TMSGC will remain a publicly-traded company listed on the New York Stock
Exchange (the “NYSE”).
(d) As steps in effecting the Spin-Off, on or prior to the date of the Spin-Off (the “Spin-Off Date”), (i) MSG Sports will
distribute its 100% ownership interest in RH LLC to its direct wholly-owned subsidiary MSG NYR Holdings, (ii) MSGE Group proposes to
distribute its 100% ownership interest in MSG Sports to its direct parent TMSGC (the transactions described in
clauses (i) and (ii) collectively, the “Distribution”), and (iii) MSGE Group will become a subsidiary of Spinco (together with the Distribution
and the Spin-Off, the “Proposed Transactions”).
(e) After giving effect to the Proposed Transactions: (i) all of the membership interests of Arenaco will be directly owned by
Arena Holdco, (ii) all of the membership interests of Arena Holdco will be directly owned by National Properties, (iii) all of the membership
interests of National Properties will be directly owned by MSGE Group, (iv) all of the membership interests of MSGE Group will be directly
owned by Spinco, (v) Spinco will be a publicly-traded company listed on the NYSE and (vi) the direct and indirect ownership of the Club
Parties will be set forth on Schedule 1.
(f) After giving effect to the Proposed Transactions: (i) the ultimate ownership of the Rangers, the Club Parties and the Arena
immediately following the Spin-Off by the stockholders of TMSGC (with respect to the Rangers and the Club Parties) and Spinco (with
respect to the Arena), respectively, shall be the same as it was immediately prior to the Spin-Off (including the Dolan family’s ability to elect a
majority of the board of directors), and (ii) the Spinco Parties will no longer own any direct or indirect interest in the Rangers or any Club
Party.
(g) The NHL has approved the Distribution upon the condition that each of the Transaction Parties executes, delivers and
performs this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements set forth herein, and subject
to the following terms and conditions, it is agreed as follows:
1.
Representations and Warranties. The Transaction Parties jointly and severally represent and warrant as of the date hereof and
as of the Spin-Off Date to the NHL as follows:
(a) If it is a corporation or limited liability company, it is duly organized, validly existing and in good standing under the laws
of the state of its existence, and has the power and authority to own, operate and lease its properties and to carry on its business.
(b) Each Transaction Party has the power and authority to execute and deliver this Agreement and to perform its obligations
hereunder.
(c) The execution, delivery and performance of this Agreement constitutes a valid and binding obligation of each Transaction
Party enforceable against it in accordance with its terms.
(d) Except as set forth in Schedule 1 hereto, the ownership interests in each Transaction Party described in paragraph (e) of the
“Background” Section hereof are validly issued and fully paid and, except for restrictions on transfers of common stock under the Transaction
Documents or with respect to publicly traded shares of TMSGC or Spinco held by persons other
-2-
than Dolan family members, trusts or affiliates, are held free and clear of any liens, security interests, pledges, charges, encumbrances or
claims of liability. Except as otherwise permitted hereunder, (i) each Club Party presently has no intention of selling directly any part of its
interest in the Rangers, or any of the assets of the Rangers, or any other Hockey-Related Asset (as defined below) and (ii) except for the
securities described on Schedule 1 hereto, there are no options, warrants, put or call rights or any other rights of acquisition or conversion that
would entitle any person or entity to acquire any direct or indirect interest, whether equity or otherwise, in any Club Party. Except as otherwise
permitted hereunder, (i) each Spinco Party presently has no intention of selling directly any part of its interest in the Arena and (ii) except for
the securities described on Schedule 1 hereto, there are no options, warrants, put or call rights or any other rights of acquisition or conversion
that would entitle any person or entity to acquire any direct or indirect interest, whether equity or otherwise, in any Spinco Party. The
ownership structure of each Transaction Party conforms to the provisions of paragraphs (e) and (f) of the “Background” Section hereof.
(e) After giving effect to the Proposed Transactions, James Dolan remains the Governor of the Rangers and the Executive
Chairman of TMSGC, and continues to be responsible for and has the authority to manage the business and affairs of the Rangers and each
Club Party, subject to certain prior approvals of the board of directors and stockholders of TMSGC as required by law.
(f) There is no action, suit, or proceeding pending against the Rangers or any Transaction Party which involves the likelihood
of any adverse judgment or liability not fully covered by insurance or with respect to which adequate reserves have not been established in
accordance with generally accepted accounting principles in effect from time to time in the United States (“GAAP”) and which may result in a
material adverse change in the business, properties or assets or in the condition, financial or otherwise, of any Transaction Party or which may
prevent or impede the consummation of the transactions contemplated by this Agreement. There is no order, writ, injunction or decree that has
been issued by, or, to the knowledge of the Transaction Parties, requested by, any court or governmental agency which does or may result in
any material adverse change in the business, properties or assets or in the condition financial or otherwise, of any Transaction Party or which
may prevent or impede the consummation of the transactions contemplated by this Agreement.
(g) To the best of the knowledge and belief of the Transaction Parties, each Transaction Party has complied in all material
respects with all material laws, regulations and orders, federal or otherwise.
(h) All material consents, waivers, approvals, orders and authorizations of any persons or entities or governmental or
regulatory authorities (or registrations, declarations, filings
-3-
or recordings with any such authorities) that are required in connection with the Proposed Transactions have been obtained (or made) and are
in full force and effect.
(i) Each Transaction Party has performed in all material respects all obligations required to be performed by such Transaction
Party to date with respect to the Proposed Transactions and, except as disclosed in any schedules hereto, no Transaction Party is in default
under any material contract, agreement, lease, or other instrument relating to the same to which such Transaction Party is a party or by which
such Transaction Party is bound.
(j) The execution and delivery of this Agreement, and compliance with the terms hereof and thereof by each Transaction
Party, will not conflict with, or result in the breach of, any of the terms, conditions or provisions of, or constitute a default under, or result in
the creation of any lien, charge or encumbrance upon any Transaction Party’s properties or assets pursuant to any indenture, mortgage, lease,
agreement or other instrument to which any Transaction Party is a party or by which any Transaction Party is bound.
(k) To the best of the Transaction Parties’ knowledge, no Transaction Party has any Claims against any of the Affiliated NHL
Parties.
(l) Each of the Transaction Parties has the power and authority to execute and deliver each Transaction Document to which it
(or he or she, as the case may be) is a party and to perform its (or his or her, as the case may be) obligations thereunder.
(m) The Transaction Parties have furnished to the NHL true, complete and correct copies of all documents relating to the
Proposed Transactions, a complete list of which is provided on Schedule 2 (the “Transaction Documents”). The Transaction Documents have
been (or will be as of the Spin-Off Date) executed in the form delivered to the NHL and there are no other material arrangements, agreements,
or understandings, whether written or oral, among the parties to the Transaction Documents which relate to the Proposed Transactions. True
and correct copies of all documents described or referred to herein or in any Schedule attached hereto have heretofore been delivered or made
available to the NHL or will be made available upon request. All other information furnished by each Transaction Party to the NHL in
connection with the request for approval of the Distribution is true and correct in all material respects and has not omitted any material
statement which would make such information not misleading.
2. Post Transaction Capital Structure. The Transaction Parties represent, warrant and covenant that: (a) none of the Transaction
Parties has pledged or granted a security interest in the Franchise, their direct or indirect interests therein or any other Hockey-Related Assets
to secure any debt obligation, nor shall any Club Party grant such a pledge or security interest without the NHL’s prior written consent (to the
extent required by the NHL Constitution and Agreements (as defined below)); provided, however, that Rangers LLC may pledge its assets in
accordance with,
-4-
and subject to, the terms and conditions of that certain letter agreement, dated January 25, 2017, by and among the NHL, the lenders party
thereto, JPMorgan Chase Bank, N.A., as administrative agent, Rangers LLC and the other parties thereto relating to certain obligations
secured, among other things, by certain assets of Rangers LLC (as amended, restated, amended and restated, replaced, supplemented or
otherwise modified from time to time, the “Lender Letter Agreement”) and (b) neither Spinco nor any of its subsidiaries shall at any time
following the date hereof own or have any rights whatsoever with respect to any Hockey-Related Assets (as all of such assets are, and at all
times following the date hereof shall be, owned solely and directly by Rangers LLC, without restriction by, or reservation of rights in favor of,
Spinco or any of its subsidiaries), any direct or indirect ownership or other interest in, or any indebtedness of, Rangers LLC or the Franchise,
in each case, without the prior written consent of the NHL.
3. Release and Limitation of Liability.
(a) As partial consideration for the NHL’s approval of the Distribution, each of the Transaction Parties on its own behalf and
on behalf of its successors and assigns, but not on behalf of any other affiliate or subsidiary or in its capacity as a partner, shareholder or agent
of any such affiliate or subsidiary, hereby forever release and discharge the NHL, all of the other NHL Entities, all of the Member Clubs
(except the Rangers, but including future Member Clubs), each of their respective predecessors, affiliates, successors and assigns, and any of
their respective past, present and future direct and indirect owners, partners, shareholders, members, managers, directors, officers, agents,
governors, trustees and employees in their respective capacities as such (collectively, “Affiliated NHL Parties”) from any and all claims,
demands, causes of action and liabilities of any kind whatsoever (upon any legal or equitable theory, whether contractual, common-law,
statutory, decisional, Canadian, United States, state, provincial, local or otherwise) (collectively, “Claims”) that any Transaction Party ever
had, now has or hereafter can, shall or may have by reason of or concerning any act, omission, transaction, occurrence, rule, regulation,
resolution, policy, procedure, or directive taken, occurring, or existing at any time up to and including the date of the execution of this
Agreement, relating to, or arising from, any hockey operations or any NHL activity, including without limitation, the performance,
presentation or exploitation of any hockey game or hockey exhibition, or in respect of the Proposed Transactions; provided that nothing in this
paragraph shall be construed or interpreted as a release and discharge by any of the Transaction Parties of (x) any Claims expressly reserved in
the Settlement Documents as defined in the Settlement Agreement dated March 23, 2009 (the “Settlement Agreement”) pursuant to paragraphs
13 and 16 of the Supplemental Agreement dated as of March 23, 2009, except that the Transaction Parties acknowledge that the actions,
policies or practices described in paragraphs 13 and 16 of such Supplemental Agreement have not changed materially between the Effective
Date of the Settlement Documents and the date of the execution of this Agreement; (y) any obligation of the NHL or any Affiliated NHL Party
under any of the Settlement Documents, or (z) any amounts due to any of the Transaction Parties from any Affiliated NHL Parties in the
ordinary course, or any amounts due or
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claims under agreements executed prior to the date hereof (including, but not limited to, in respect of player transactions). With respect to the
preceding sentence of this paragraph, the parties agree that no inferences shall be drawn against the Affiliated NHL Parties from the absence of
a provision that the release applies to such actions, policies or practices continuing materially unchanged after the date of the execution of this
Agreement and, as such, either party shall be free to raise any and all arguments whatsoever about the scope and/or applicability of the Court’s
October 10, 2008 Opinion in Madison Square Garden, L.P. v. National Hockey League, et al., No. 07 CIV. 8455 (LAP) relating to the extent
to which the Claims covered by the preceding sentence of this paragraph are released as related to actions, policies and practices that continue
materially unchanged after the date of the execution of this Agreement, provided, for clarity, that all Claims covered by the preceding sentence
of this paragraph that exist as of the date of the execution of this Agreement are released. To the extent any Affiliated NHL Party asserts a
claim against any Transaction Party, then the release contained in this paragraph shall not prohibit such Transaction Party from asserting a
defense or counterclaim to that claim. Except as expressly described herein, nothing in this paragraph shall be construed to be in derogation or
as a limitation of any rights that the Transaction Parties or any Affiliated NHL Party has pursuant to the Settlement Documents.
(b) Except as permitted pursuant to the Settlement Documents and without limiting Rangers LLC’s rights thereunder, the
Transaction Parties hereby agree, based upon facts known to, or facts that reasonably should have been known to, the Transaction Parties on
the date hereof, not to initiate a judicial or other proceeding against the NHL challenging any provision of the NHL Constitution and
Agreements as in effect and interpreted on the date hereof as they may apply to acts or omissions up to and including the date hereof.
(c) Without limiting any other rights any Affiliated NHL Party may have, and without limiting any party’s affirmative
obligation to pay the amounts referenced in this Agreement and/or the Lender Letter Agreement:
(i) the Transaction Parties hereby jointly and severally agree to indemnify and hold harmless the Affiliated NHL
Parties from and against any and all losses, obligations, claims, liabilities, fines, penalties, damages, costs and expenses
(including without limitation, reasonable costs of investigation and settlement and attorneys’ fees, including in actions with
Affiliated NHL Parties) incurred or required to be paid by an Affiliated NHL Party (collectively, “Losses”), arising out of,
attributable to, in connection with or in any way relating to the Proposed Transactions and any other transactions or other acts
or occurrences relating to or contemplated by the Proposed Transactions or the Transaction Documents and/or the NHL’s and
Member Clubs’, where applicable, consideration of and approval of the Distribution;
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(ii) the Club Parties hereby jointly and severally agree to indemnify and hold harmless the Affiliated NHL Parties from
and against any and all Losses arising out of, attributable to, in connection with or in any way relating to: (A) any breach of any
warranty, covenant, obligation or agreement or any misrepresentation in this Agreement or the Lender Letter Agreement by any
Club Party or any breach of any warranty, covenant, obligation or agreement or any misrepresentation in the letter agreement
dated as of the date hereof in favor of the NHL by Charles Dolan, Helen Dolan and James Dolan (the “Letter Agreement”), or
(B) any act, omission, liability or obligation (including, without limitation, all obligations set forth in this Agreement and/or the
Lender Letter Agreement) of any Club Party, any of their respective subsidiaries or other past, present or future affiliates or any
of their respective past, present or future shareholders, partners, principals, members, managers, investors, directors, officers,
employees, representatives or agents; and
(iii) the Spinco Parties hereby jointly and severally agree to indemnify and hold harmless the Affiliated NHL Parties
from and against any and all Losses arising out of, attributable to, in connection with or in any way relating to: (A) any breach
of any warranty, covenant, obligation or agreement or any misrepresentation in this Agreement by any Spinco Party, or (B) any
act, omission, liability or obligation (including, without limitation, all obligations set forth in this Agreement) of any Spinco
Party, any of their respective subsidiaries or other past, present or future affiliates or any of their respective past, present or
future shareholders, partners, principals, members, managers, investors, directors, officers, employees, representatives or
agents.
No Affiliated NHL Party other than the NHL or other NHL Entities shall be entitled to indemnification under clause (ii)(B) or (iii)(B) above
unless the Commissioner determines that such indemnification is appropriate in the Commissioner’s sole discretion. Any Affiliated NHL Party
claiming a right of indemnity hereunder shall give the indemnifying party prompt notice of the claim, action, suit, proceeding or circumstance
giving rise to the potential Losses and shall afford the indemnifying party the opportunity to participate in the defense of such claim, action,
suit or proceeding; provided, however, that the failure of any Affiliated NHL Party to give such prompt notice shall not affect its right to
receive indemnification under this Agreement except to the extent that indemnifying party is materially and adversely affected by the failure.
No claim against either an individual Member Club or which is based primarily on an act or omission of the Rangers for which
indemnification is sought under this paragraph will be settled without the consent of the indemnifying parties, such consent not to be
unreasonably withheld.
(d) Nothing contained in this Agreement shall be, or be construed or deemed to be, a subordination by the NHL of the NHL’s
rights: (i) to receive payments on account of
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indebtedness or liabilities now or hereafter owing to it by any Club Party, the Rangers or any other entity or (ii) to defer or off-set any
distribution to any Club Party, or the Rangers. Nothing in this Agreement shall be construed in any respect as a guaranty or indemnity by the
NHL, or any of its Member Clubs, of any debts, liabilities or obligations whatsoever of the Rangers, any Transaction Party or any other party.
4. Confirmation of Agreements. The Transaction Parties and the NHL confirm that the Consent Agreement dated as of June 17, 1997
(the “1997 Agreement”), the Consent Agreement dated as of March 29, 2001 (the “2001 Agreement”), the Consent Agreement dated as of
December 5, 2002 (the “2002 Agreement”), the Transfer Consent Agreement and Transaction Approval Agreement, each dated February 9,
2010 (the “2010 Agreements”), the 2015 Agreements and any other consent agreement at any time executed by any of the Transaction Parties
with the NHL (collectively, including the 1997 Agreement, the 2001 Agreement, the 2002 Agreement, the 2010 Agreements and the 2015
Agreements, the “Prior Consent Agreements”), have not been amended or modified by this Agreement and remain in full force and effect,
except that Section 2 hereof shall supersede Section 5(b) of the 2015 Transaction Approval Agreement. The parties hereto acknowledge and
agree that the NHL shall not seek to enforce against MSGE Group, Arenaco or Arena Holdco their respective obligations set forth in Sections
4(b), 5(c), 7(d), 7(f), 7(g), 7(h), 9(b) and 12 of the 2015 Transaction Approval Agreement or set forth in Sections 1(c) and 1(d) of the 2015
Transfer Consent Agreement, in each case with respect to matters occurring following the date of this Agreement. Nothing in this Agreement
shall be construed to amend or modify any of the agreements in favor of the NHL given by Charles Dolan, James Dolan or trusts for the
benefit of members of their families, including the Letter Agreement, the letter agreement dated September 30, 2015 in favor of the NHL by
Charles Dolan, James Dolan, trusts for the benefit of members of their families and certain other parties, the agreement of Charles Dolan dated
June 17, 1997 and the agreement of such trusts dated March 10, 1995, all of which remain in full force and effect. MSG NYR Holdings agrees
to be bound by and comply with each provision of the Prior Consent Agreements applicable to RH LLC.
5. Additional Provisions.
(a) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns, including but not limited to, any corporation or other business entity into which any party shall be merged, consolidated or
amalgamated or to which substantially all of the assets of a party shall be transferred in each case in accordance with the NHL Constitution
and Agreements. No Transaction Party may assign any of its rights or delegate any of its duties under this Agreement without the prior written
consent of the NHL. Notwithstanding anything in any Transaction Document to the contrary, except as provided in paragraph 11 of the
Settlement Agreement, any dispute between or among the parties hereunder relating to the subject matter hereof shall be deemed to be a
dispute which shall be resolved in accordance with Section
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6.3 of the NHL Constitution and the Commissioner shall have full and exclusive jurisdiction and authority to arbitrate and resolve such dispute
unless the NHL shall have waived the application of Section 6.3 of the NHL Constitution to any future agreement or relationship in a writing
that refers to that provision.
(b) Any notice or other communication under this Agreement shall be in writing and shall be considered given when delivered
personally or sent by facsimile (with a copy by any other means permitted for the giving of notices under this section), one (1) day after being
sent by a reputable overnight courier, or three (3) days after being mailed by registered or certified mail, postage prepaid, return receipt
requested, as follows:
If to the NHL (prior to
July 1, 2020):
and to:
with a copy to:
If to the NHL (on or after
July 1, 2020):
with a copy to:
National Hockey League
1185 Avenue of the Americas
New York, New York 10036
Attention: General Counsel
National Hockey League
One Manhattan West
395 9th Avenue
New York, New York 10001
Attention: General Counsel
Proskauer Rose LLP
Eleven Times Square
New York, New York 10036
Attention: Wayne D. Katz, Esq.
National Hockey League
One Manhattan West
395 9th Avenue
New York, New York 10001
Attention: General Counsel
Proskauer Rose LLP
Eleven Times Square
New York, New York 10036
Attention: Wayne D. Katz, Esq.
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If to any Transaction Party: Two Penn Plaza
New York, New York 10121
Attention: General Counsel
or to such other persons or to such other addresses as the parties hereto shall designate from time to time by like notice. The NHL’s addresses provided in this Section 5(b)
shall supersede and replace all notice addresses provided by the NHL in any contract, agreement or other instrument executed by any Transaction Party (or any of their
affiliates) with the NHL.
(c) Except as provided in the Settlement Documents, this Agreement and the exhibits and schedules annexed hereto and made
a part hereof contain the entire agreement among the parties hereto with respect to the Proposed Transactions. This Agreement shall not be
modified, supplemented, or terminated orally, and shall be governed by the laws of the State of New York applicable to agreements made and
to be performed entirely in New York. It is acknowledged and agreed that the NHL will suffer immediate and irreparable harm in the event of
a breach of this Agreement by any other party hereto of any of its obligations hereunder and will not have an adequate remedy at law, and
therefore, the NHL shall in addition to any other remedy available to it at law or in equity, except as otherwise provided herein, be entitled to
temporary, preliminary and permanent injunctive relief and a decree for specific performance in the event of a breach or threatened or
attempted breach, without the necessity of showing any actual damage or irreparable harm or the posting of any bond or furnishing of any
other security. The Transaction Parties also acknowledge and agree that to the extent permitted by the NHL Constitution and Agreements
(including this Agreement), certain actions of only one or more of the Transaction Parties or their respective affiliates or subsidiaries may
result in the exercise of rights and remedies against Rangers LLC or the Franchise, including, but not limited to, the involuntary termination of
the Franchise. This Agreement shall be interpreted neutrally and without regard to the party that drafted it and, in particular, no rule of
construction shall be applied as against any party hereto that would result in the resolution of an ambiguity contained herein against the
drafting party solely by reason of such party being the drafting party.
(d) This Agreement may be executed in counterparts (including by facsimile or other electronic transmission), each of which
shall constitute an original, but all of which taken together shall constitute one and the same instrument.
(e) No failure on the part of any party to exercise, and no delay of exercising, any right, power or remedy under this
Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or remedy preclude any other or
further exercise thereof or of any other right, power or remedy. No waiver by any party of another party’s compliance with the provisions of
this Agreement shall be effective unless set forth in a writing signed by the party granting such waiver, and no waiver of any provision on any
one occasion shall constitute a waiver of such provision or any other provision on any subsequent occasion.
-10-
(f) All of the parties to this Agreement acknowledge, covenant and agree that the NHL has reviewed the Transaction
Documents that have been supplied to it for certain limited purposes only and that the NHL is not charged with knowledge of, or deemed to
have any independent obligations under, any of the Transaction Documents. For greater certainty and clarity, notwithstanding anything
contained in any Transaction Document, whether to the contrary or otherwise, in the event of any conflict or ambiguity between any term or
provision contained in this Agreement on one hand, and any Transaction Document on the other hand, the terms of this Agreement shall
control.
(g) The headings in the sections of this Agreement are inserted for convenience of reference only and shall not constitute a
part thereof.
(h) All capitalized terms used in this Agreement but not otherwise defined shall have the meanings assigned to such terms in
the 2015 Transaction Approval Agreement; provided that as used in this Agreement, the term “Hockey-Related Assets” shall exclude the
Arena and shall include the rights of the Club Parties under the Arena License Agreement entered into by Arenaco and Rangers LLC in
connection with the Spin-Off, pursuant to which the Rangers will play their home games at the Arena. As used in this Agreement, the term
“NHL Constitution and Agreements” shall mean (i) the NHL Constitution, (ii) the NHL By-laws, (iii) the governing documents of each of the
NHL, NHL Enterprises, L.P., NHL Enterprises Canada, L.P., NHL Enterprises, Inc., National Hockey League Enterprises Canada, Inc., NHL
Enterprises B.V., Intra-Continental Ensurers, Limited, NHL Interactive CyberEnterprises, LLC, NHL Network US, L.P., NHL Network US,
Inc., NHL WCH 16, LP, NHL WCH 16, Inc., NHL WCH 16 Canada Holdco, Inc., NHL WCH 16 US, LP, NHL WCH 16 US GP, LLC, NHL
WCH 16 US Holdco, LLC, NHL China Holdings, LLC, any entity that may be formed by the NHL member clubs (the “Member Clubs”)
generally after the date of this Agreement, and each of their respective subsidiaries and other present or future affiliates (all of the foregoing
entities, including the NHL but excluding the Member Clubs, the “NHL Entities”), (iv) all other existing or future rules, regulations,
interpretations, memoranda, procedures, directives, policies, guidelines, positions, and resolutions of, including, without limitation, positions
taken with, and covenants, representations and warranties made to, any court or governmental or quasi-governmental agency by, each of the
NHL Entities, the NHL Board of Governors and the NHL Commissioner (the “Commissioner”), (v) this Agreement, the Letter Agreement
and, subject to Section 4, each Prior Consent Agreement (as defined in Section 4), (vi) the Lender Letter Agreement, (vii) the current and
future Collective Bargaining Agreements between the NHL and the National Hockey League Players’ Association and between the NHL and
the National Hockey League Officials’ Association and all other agreements, consent agreements, decrees, cooperation agreements and
settlement agreements presently or hereafter in effect or entered into between or among any NHL Entity or Entities, on the one hand, and the
Member Clubs generally, on the other hand, or any NHL Entity or Entities and/or the Member Clubs generally, on the one hand, and other
persons, on the other hand, in furtherance of the NHL’s (or any other NHL Entity’s) business or
-11-
interests or as otherwise authorized, directly or indirectly, by the NHL Board of Governors, the Commissioner, the applicable NHL Entity, the
NHL Constitution or the NHL By-laws, and (viii) the Commissioner's interpretation of, opinions concerning, and the custom and practice
under, any of the foregoing, all as may be amended from time to time.
(i) This Agreement does not create, and shall not be construed as creating, any rights enforceable by any person not a party to
this Agreement (except for the NHL Entities and as provided in Section 3).
(j) If any provision of this Agreement shall be deemed invalid or unenforceable by a court having jurisdiction, the balance of
this Agreement shall remain in effect and shall be enforced to the maximum extent permitted by law.
(k) As used in this Agreement, the term “affiliate” means, with respect to a specified person or entity: (i) any other person or
entity directly or indirectly controlled by, controlling, or under common control with the specified person or entity, and (ii) any family member
of the specified person or trust for the benefit of one or more family members of the specified person.
(l) Subject to the third sentence of Section 5(a), the courts of New York State located in New York County and the United
States District Court for the Southern District of New York located in New York County shall have exclusive jurisdiction over the parties (and
the subject matter) with respect to any dispute or controversy arising under or in connection with this Agreement, and by execution of this
Agreement, each Transaction Party submits to and accepts the exclusive jurisdiction of those courts and irrevocably agrees to be bound by any
final judgment rendered thereby in connection with this Agreement or any matter affecting any Transaction Party or the Rangers, in general. A
summons or complaint in any such action or proceeding may be served in accordance with Section 5(b). Each Transaction Party irrevocably
waives any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens,
which it may now or hereafter have to the bringing of any such action or proceeding in any such jurisdiction.
(m) The Transaction Parties covenant and agree, in accordance with the third paragraph of Article 3.5 of the NHL
Constitution, that all legal fees and costs incurred by the NHL with respect to the transactions contemplated by this Agreement shall be
charged to the Franchise and shall be the obligation thereof.
(n) Whenever the context may require, any pronoun shall include the corresponding masculine and feminine forms.
[Signature pages follow.]
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IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above.
NATIONAL HOCKEY LEAGUE
By: /s/ Thomas A. Ferree
Name: Thomas A. Ferree
Title: Senior Vice President
and Deputy General Counsel
[Signature Page to NHL Transaction Agreement]
NEW YORK RANGERS, LLC
By: /s/ James L. Dolan
Name: James L. Dolan
Title: Executive Chairman and Chief Executive Officer
RANGERS HOLDINGS, LLC
By: /s/ James L. Dolan
Name: James L. Dolan
Title: Executive Chairman and Chief Executive Officer
MSG NYR HOLDINGS, LLC
By: /s/ James L. Dolan
Name: James L. Dolan
Title: Executive Chairman and Chief Executive Officer
MSG SPORTS, LLC
By: /s/ James L. Dolan
Name: James L. Dolan
Title: Executive Chairman and Chief Executive Officer
THE MADISON SQUARE GARDEN COMPANY
(to be renamed Madison Square Garden Sports Corp.)
By: /s/ James L. Dolan
Name: James L. Dolan
Title: Executive Chairman and Chief Executive Officer
[Signature Page to NHL Transaction Agreement]
MSG ARENA, LLC
By: /s/ Andrew Lustgarten
Name: Andrew Lustgarten
Title: President
MSG ARENA HOLDINGS, LLC
By: /s/ Andrew Lustgarten
Name: Andrew Lustgarten
Title: President
MSG ENTERTAINMENT GROUP, LLC
(formerly MSG Sports & Entertainment, LLC)
By: /s/ Andrew Lustgarten
Name: Andrew Lustgarten
Title: President
MSG ENTERTAINMENT SPINCO, INC.
(to be renamed Madison Square Garden Entertainment Corp.)
By: /s/ Andrew Lustgarten
Name: Andrew Lustgarten
Title: President
[Signature Page to NHL Transaction Agreement]
MSG NATIONAL PROPERTIES, LLC
By: /s/ Andrew Lustgarten
Name: Andrew Lustgarten
Title: President
[Signature Page to NHL Transaction Agreement]
TIME SHARING AGREEMENT
Exhibit 10.73
THIS TIME SHARING AGREEMENT is entered into effective as of the 15th day of April, 2020, by and between MSG ENTERTAINMENT GROUP,
LLC, a Delaware limited liability company with a place of business at 2 Penn Plaza, New York, New York 10121 (“Lessor”), and MSG SPORTS, LLC, a Delaware limited
liability company with a place of business at 2 Penn Plaza, New York, New York 10121 (“Lessee”).
W I T N E S S E T H
N919 AM (the “Aircraft”); and
WHEREAS, Lessor is the lessee and the operator of a Gulfstream Aerospace G450 aircraft, manufacturer’s serial number 4179, United States registration
WHEREAS, Lessor has engaged fully-qualified and credentialed flight crew to operate the Aircraft; and
Aviation Regulations (“FAR”) upon the terms and subject to the conditions set forth herein;
WHEREAS, Lessor has agreed to lease the Aircraft, with flight crew, to Lessee on a “time sharing” basis as defined in Section 91.501(c)(1) of the Federal
consideration, the receipt and sufficiency of which are acknowledged, Lessor and Lessee, intending to be legally bound, hereby agree as follows:
NOW, THEREFORE, in consideration of the foregoing premises, and the covenants and agreements set forth herein, and for other good and valuable
1.
Lease of Aircraft. Lessor agrees to lease the Aircraft to Lessee pursuant to the provisions of FAR Section 91.501(b)(6) and Section 91.501(c)(1)
and this Agreement, and to provide a fully-qualified and credentialed flight crew for all flights to be conducted hereunder during the Term (as defined in Section 13) hereof.
The parties acknowledge and agree that this Agreement did not result in any way from any direct or indirect advertising, holding out or soliciting on the part of Lessor or any
person purportedly acting on behalf of Lessor. Lessor and Lessee intend that the lease of the Aircraft effected by this Agreement shall be treated as a “wet lease” pursuant to
which Lessor provides transportation services to Lessee in accordance with FAR Section 91.501(b)(6) and Section 91.501(c)(1).
under this Agreement, not to exceed the maximum amount legally payable for such flight under FAR Section 91.501(d)(1)-(10):
2.
Payment for Use of Aircraft. Lessee shall pay Lessor the following listed actual expenses of each flight (the “Reimbursement Amount”) conducted
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
fuel, oil, lubricants and other additives;
travel expenses of crew, including food, lodging and ground transportation;
hangar and tie-down costs away from the Aircraft’s base of operation;
additional insurance obtained for the specific flight at the request of Lessee;
landing fees, airport taxes and similar assessments;
customs, foreign permit and similar fees directly related to the flight;
in-flight food and beverages;
in-flight telecommunication expenses;
passenger ground transportation;
flight planning and weather contract services; and
1
(k)
an additional charge equal to 100% of the expenses listed in Section 2(a).
Lessee shall be obligated to pay Lessor the Reimbursement Amount for all occupied legs and for deadhead flights to the extent attributable to flights under
this Agreement. Lessor and Lessee agree to allocate in good faith the treatment of any flight or deadhead flight that may be for the joint benefit of Lessor and Lessee (e.g.,
involving employees of both parties).
3.
Operational Control of Aircraft. Lessor and Lessee intend and agree that on all flights conducted under this Agreement, Lessor shall have
complete and exclusive operational control over the Aircraft, its flight crews and maintenance, and complete and exclusive possession, command and control of the Aircraft.
Lessor shall have complete and exclusive responsibility for scheduling, dispatching and flight following of the Aircraft on all flights conducted under this Agreement, which
responsibility includes the sole and exclusive right over initiating, conducting and terminating such flights. Lessee shall have no responsibility for scheduling, dispatching or
flight following on any flight conducted under this Agreement, nor any right over initiating, conducting or terminating any such flight. Nothing in this Agreement is intended or
shall be construed so as to convey to Lessee any operational control over, or possession, command and control of, the Aircraft, all of which are expressly retained by Lessor.
4.
Scheduling.
(a)
Lessee will provide Lessor with requests for flight time and proposed flight schedules as far in advance of any given flight as possible. Lessee or
the designated authorized representative(s) of Lessee shall submit scheduling requests under this Agreement to the designated authorized representative(s) of Lessor. Requests
for flight time shall be in such form (whether oral or written) mutually convenient to, and agreed upon by, the parties. In addition to proposed schedules and flight times,
Lessee shall upon request provide Lessor with the following information for each proposed flight prior to scheduled departure: (i) proposed departure point; (ii) destination;
(iii) date and time of flight; (iv) the number of anticipated passengers; (v) the nature and extent of luggage to be carried; (vi) the date and time of a return flight, if any; and (vii)
any other pertinent information concerning the proposed flight that Lessor or the flight crew may request.
(b)
Subject to Aircraft and crew availability and to any usage limitations established by Lessor, Lessor shall use its good faith efforts, consistent with
Lessor’s approved policies, in order to accommodate the needs of Lessee, to avoid conflicts in scheduling, and to enable Lessee to enjoy the benefits of this Agreement;
however, Lessee acknowledges and agrees that notwithstanding anything in this Agreement to the contrary, (i) Lessor shall have sole and exclusive final authority over the
scheduling of the Aircraft; and (ii) the needs of Lessor for the Aircraft shall take precedence over Lessee’s rights and Lessor’s obligations under this Agreement.
either party without incurring liability to the other party. In the event that cancellation is necessary, the canceling party shall provide the maximum notice practicable.
(c)
Although every good faith effort shall be made to avoid its occurrence, any flight scheduled under this Agreement is subject to cancellation by
5.
Billing. Lessor shall pay all expenses relating to the operation of the Aircraft under this Agreement (in accordance with Section 2 hereof) on a
monthly basis. As soon as possible after the end of each monthly period during the Term, Lessor shall provide to Lessee an invoice showing all use of the Aircraft by Lessee
under this Agreement during that month and a complete accounting detailing all amounts payable by Lessee pursuant to Section 2 for that month, including such detail
supporting all expenses paid or incurred by Lessor for which reimbursement is sought as Lessee may reasonably request. Lessee shall pay all amounts due to Lessor under this
Section 5 not later than 30 days after receipt of the invoice therefor.
(utilizing an inspection program listed in FAR Section 91.409(f)), and shall take such requirements into account in scheduling the Aircraft hereunder.
6.
Maintenance of Aircraft. Lessor shall be solely responsible for securing maintenance, preventive maintenance and inspections of the Aircraft
2
7.
(a)
Flight Crew.
Lessor shall employ or engage and as between Lessor and Lessee shall be responsible for the payment of all salaries, benefits and/or
compensation for a fully-qualified flight crew with appropriate credentials to conduct each flight undertaken under this Agreement. All flight crewmembers shall be included
on any insurance policies that Lessor is required to maintain hereunder.
(b)
The qualified flight crew provided by Lessor shall exercise all of its duties and responsibilities with regard to the safety of each flight conducted
hereunder in accordance with applicable FAR’s. The Aircraft shall be operated under the standards and policies established by Lessor. Final authority to initiate or terminate
each flight, and otherwise to decide all matters relating to the safety of any given flight or requested flight, shall rest with the pilot-in-command of that flight. The flight crew
may, in its sole discretion, terminate any flight, refuse to commence any flight, or take any other action that, in the judgment of the pilot-in-command, is necessitated by
considerations of safety. No such termination or refusal to commence by the pilot-in-command shall create or support any liability for loss, injury, damage or delay in favor of
Lessee or any other person. Lessor shall not be liable to Lessee or any other person for loss, injury or damage occasioned by the delay or failure to furnish the Aircraft and
flight crew pursuant to this Agreement for any reason.
8.
(a)
Insurance.
At all times during the Term of this Agreement, Lessor shall maintain at its sole cost and expense (i) comprehensive aircraft and liability
insurance against bodily injury and property damage claims, including, without limitation, contractual liability, premises damage, personal property liability, personal injury
liability, death and property damage liability, public and passenger legal liability coverage, in an amount not less than $100,000,000 for each single occurrence and (ii) hull
insurance for the full replacement cost of the aircraft.
(b)
Any policies of aircraft and liability insurance carried in accordance with this Section 8 and any policies taken out in substitution or replacement
of any such policies (i) shall name Lessee and its employees, agents, licensees and guests as additional insured; (ii) shall provide for 30 days written notice to Lessee by such
insurer of cancellation, change, non-renewal or reduction (seven days in the case of war risk and allied perils coverage or such shorter period as is customarily available in the
industry); (iii) shall provide that in respect of the interests of Lessee in such policies, the insurance shall not be invalidated by any action or inaction of Lessor regardless of any
breach or violation of any warranties, declarations or conditions contained in such policies by or binding upon Lessor; and (iv) shall permit the use of the Aircraft by Lessor for
compensation or hire to the extent permitted under applicable law. Each such policy shall be primary insurance, not subject to any co-insurance clause and shall be without
right of contribution from any other insurance.
(c)
Lessor shall use reasonable commercial efforts to provide such additional insurance coverage for specific flights under this Agreement, if any, as
Lessee may request in writing. Lessee also acknowledges that any trips scheduled to the European Union may require Lessor to purchase additional insurance to comply with
local regulations. The cost of all additional flight-specific insurance shall be borne by Lessee as set forth in Section 2(d) hereof.
Each party agrees that it will not do any act or voluntarily suffer or permit any act to be done whereby any insurance required hereunder shall or
may be suspended, impaired or defeated. In no event shall Lessor suffer or permit the Aircraft to be used or operated under this Agreement without such insurance being fully
in effect.
(d)
(e)
(f)
Lessor shall ensure that worker’s compensation insurance with all-states coverage is provided for the Aircraft’s crew and maintenance personnel.
Lessor shall deliver certificates of insurance to Lessee with respect to the insurance required or permitted to be provided by it hereunder not later
than the first flight of the Aircraft under this Agreement and upon the renewal date of each policy.
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9.
Taxes. Lessee shall be responsible for paying, and Lessor shall be responsible for collecting from Lessee and paying over to the appropriate
authorities, all applicable Federal transportation taxes and sales, use or other excise taxes imposed by any governmental authority in connection with any use of the Aircraft by
Lessee hereunder. Each party shall indemnify the other party against any and all claims, liabilities, costs and expenses (including attorney’s fees as and when incurred) arising
out of its breach of this undertaking.
10.
Lessee’s Representations and Warranties. Lessee represents and warrants that:
(a)
for common carriage.
Lessee will not use the Aircraft for the purposes of providing transportation of passengers or cargo in air commerce for compensation or hire or
(b)
Lessee shall refrain from incurring any mechanic’s or other liens in connection with inspection, preventive maintenance, maintenance or storage
of the Aircraft, and shall not attempt to convey, mortgage, assign, lease or in any way alienate the Aircraft or create any kind of lien or security interest involving the Aircraft
or do anything or take any action that might mature into such a lien.
for any reason. It also will ensure that no liens or encumbrances of any kind whatsoever are created or placed against the Aircraft for claims against Lessee or by Lessee.
(c)
Lessee shall not lien or otherwise encumber or create or place any lien or other encumbrance of any kind whatsoever, on or against the Aircraft
aircraft under a time sharing agreement, and applicable company policies of Lessor.
(d)
Lessee will abide by and conform to all laws, governmental and airport orders, rules and regulations, as shall be imposed upon the lessee of an
airport orders, rules and regulations, as shall from time to time be in effect relating in any way to the operation and use of the Aircraft pursuant to this Agreement.
11.
Lessor’s Representations and Warranties. Lessor represents and warrants that it will abide by and conform to all such laws, governmental and
12.
Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, LESSOR HAS MADE NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, INCLUDING ANY WITH RESPECT TO ITS CONDITION,
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR TO
ANY OTHER PERSON FOR ANY INCIDENTIAL, CONSEQUENTIAL OR SPECIAL DAMAGES, HOWEVER ARISING.
13.
Term. The term of this Agreement (the “Term”) shall commence on the effective date hereof and expire on June 30, 2020, and thereafter shall
automatically renew for successive one-year terms. Notwithstanding the foregoing, either party shall have the right to terminate this Agreement after the initial term upon 30
days prior written notice. In addition, this Agreement shall terminate (i) immediately upon breach of the terms of this Agreement by the other party, or (ii) for any reason or no
reason by written notice given to the other party not less than 30 days prior to the proposed termination date.
14.
Limitation of Liability. Lessee, for itself and on behalf of its agents, guests, invitees, licensees and employees, covenants and agrees that the
insurance described in Section 8 hereof shall be the sole recourse for any and all liabilities, claims, demands, suits, causes of action, losses, penalties, fines, expenses or
damages, including attorney’s fees, court costs and witness fees, attributable to the use, operation or maintenance of the Aircraft pursuant to this Agreement or performance of
or failure to perform any obligation under this Agreement.
Relationship of Parties. Lessor is strictly an independent contractor lessor/provider of transportation services with respect to Lessee. Nothing in
this Agreement is intended, nor shall it be construed so as, to constitute the parties as partners or joint venturers or principal and agent. All persons furnished by Lessor for the
performance of the operations and activities contemplated by this Agreement shall at all times and for all purposes be considered Lessor’s employees or agents.
15.
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16.
Governing Law; Severability. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York,
without regard to its choice of law rules. If any provision of this Agreement conflicts with any statute or rule of law of the State of New York, or is otherwise unenforceable,
such provision shall be deemed null and void only the extent of such conflict or unenforceability, and shall be deemed separate from, and shall not invalidate, any other
provision of this Agreement.
writing signed by each of the parties hereto.
17.
Amendment. This Agreement may not be amended, supplemented, modified or terminated, or any of its terms varied, except by an agreement in
18.
Counterparts. This Time Sharing Agreement may be executed in counterparts, each of which shall, for all purposes, be deemed an original and
all such counterparts, taken together, shall constitute one and the same agreement, even though all parties may not have executed the same counterpart. Each party may
transmit its signature by facsimile, and such faxed signature shall have the same force and effect as an original signature.
19.
Successors and Assigns. This Time Sharing Agreement shall be binding upon the parties hereto and their respective successors and assigns, and
shall inure to the benefit of the parties hereto and, except as otherwise provided herein, their respective successors and permitted assigns. Lessee agrees that Lessee shall not
directly or indirectly sublease, assign, transfer, pledge or hypothecate this Agreement or any part hereof without the prior written consent of Lessor, which may be given or
withheld by Lessor in its sole and absolute discretion.
20.
Notices. All notices or other communications delivered or given under this Agreement shall be in writing and shall be deemed to have been duly
given if hand-delivered, sent by certified or registered mail, return receipt requested, or nationally-utilized overnight delivery service, or confirmed facsimile transmission, as
the case may be. Such notices shall be addressed to the parties at the addresses set forth above, or to such other address as may be designated by any party in a writing delivered
to the other in the manner set forth in this Section 20. In the case of notices to Lessor, a copy of each such notice shall be sent to MSG Entertainment Group, LLC, 2 Penn
Plaza, New York, New York 10121, attention: General Counsel. Notices sent by certified or registered mail shall be deemed received three business days after being mailed.
All other notices shall be deemed received on the date delivered. Routine communications may be made by e-mail or fax to the addresses set forth therein.
21.
Truth-in-Leasing Compliance. Lessor, on behalf of the Lessee, shall (i) mail a copy of this Agreement to the Aircraft Registration Branch,
Technical Section, of the FAA in Oklahoma City within 24 hours of its execution; (ii) notify the Farmingdale Flight Standards District Office at least 48 hours prior to the first
flight by Lessor under this Agreement of the registration number of the Aircraft, and the location of the airport of departure and departure time of the first flight; and (iii) carry
a copy of this Agreement onboard the Aircraft at all times when the Aircraft is being operated under this Agreement.
22.
(A)
TRUTH IN LEASING STATEMENT UNDER FAR SECTION 91.23:
LESSOR HEREBY CERTIFIES THAT THE AIRCRAFT HAS BEEN MAINTAINED AND INSPECTED UNDER FAR PART 91 DURING
THE 12-MONTH PERIOD PRECEDING THE DATE OF EXECUTION OF THIS AGREEMENT. THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED IN
COMPLIANCE WITH THE MAINTENANCE AND INSPECTION REQUIREMENTS OF FAR PART 91 FOR ALL OPERATIONS TO BE CONDUCTED UNDER THIS
AGREEMENT.
RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT FOR ALL OPERATIONS UNDER THIS AGREEMENT.
(B)
MSG ENTERTAINMENT GROUP, LLC, 2 PENN PLAZA, NEW YORK, NEW YORK 10121, HEREBY CERTIFIES THAT IT IS
FEDERAL AVIATION REGULATIONS.
(C)
EACH PARTY HEREBY CERTIFIES THAT IT UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE
5
PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE.
(D)
THE PARTIES UNDERSTAND THAT AN EXPLANATION OF THE FACTORS BEARING ON OPERATIONAL CONTROL AND THE
6
IN WITNESS WHEREOF, Lessor and Lessee have executed this Time Sharing Agreement effective as of the date first above written.
LESSOR:
MSG ENTERTAINMENT GROUP, LLC
/s/ Philip D’Ambrosio
Philip D’Ambrosio
Senior Vice President, Treasurer
By:
Name:
Title:
LESSEE:
MSG SPORTS, LLC
By:
Name:
Title:
/s/ Victoria M. Mink
Victoria M. Mink
Executive Vice President and Chief Financial Officer
[Signature Page to Time Sharing Agreement (G450)]
TIME SHARING AGREEMENT
Exhibit 10.74
THIS TIME SHARING AGREEMENT (this “Agreement”) is entered into effective as of the 15th day of April, 2020, by and between
MSG Entertainment Group, LLC (“Lessor”), and MSG Sports, LLC, a limited liability company with a place of business at Two Pennsylvania Plaza,
New York, New York 10121 (“Lessee”).
W I T N E S S E T H:
WHEREAS, Lessor is the lessee and the operator of a Gulfstream Aerospace GV-SP (G550) aircraft, manufacturer’s serial number
5264, United States registration N551TG (the “Aircraft”); and
WHEREAS, Lessor has employed or engaged a fully-qualified and credentialed flight crew to operate the Aircraft; and
WHEREAS, Lessor has agreed to lease the Aircraft, with flight crew, to Lessee on a “time sharing” basis as defined in Section
91.501(c)(1) of the Federal Aviation Regulations (“FAR”) upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises, and the covenants and agreements set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which are acknowledged, Lessor and Lessee, intending to be legally bound, hereby agree as
follows:
1.
Lease of Aircraft. Lessor agrees to lease the Aircraft to Lessee pursuant to the provisions of FAR Section 91.501(b)(6) and
Section 91.501(c)(1) and this Agreement, and to provide a fully-qualified and credentialed flight crew for all flights to be conducted hereunder during
the Term (as defined in Section 13) hereof. The parties acknowledge and agree that this Agreement did not result in any way from any direct or indirect
advertising, holding out or soliciting on the part of Lessor or any person purportedly acting on behalf of Lessor. Lessor and Lessee intend that the lease
of the Aircraft effected by this Agreement shall be treated as a “wet lease” pursuant to which Lessor provides transportation services to Lessee in
accordance with FAR Section 91.501(b)(6) and Section 91.501(c)(1).
Agreement, not to exceed the maximum amount legally payable for such flight under FAR Section 91.501(d)(1)-(10):
2.
Payment for Use of Aircraft. Lessee shall pay Lessor the following actual expenses of each flight conducted under this
(a) fuel, oil, lubricants and other additives;
(b) travel expenses of crew, including food, lodging and ground transportation;
(c) hangar and tie-down costs away from the Aircraft’s base of operation;
(d) additional insurance obtained for the specific flight at the request of Lessee;
(e) landing fees, airport taxes and similar assessments;
(f) customs, foreign permit and similar fees directly related to the flight;
(g) in-flight food and beverages;
(h) passenger ground transportation;
(i) flight planning and weather contract services; and
1
(j) An additional charge equal to 100 percent of the expenses listed in paragraph (2)(a) of this section.
Lessee shall be obligated to reimburse Lessor for the actual expenses set forth in Section 2(a)-(i) for occupied legs and for deadhead
flights. Nothing herein shall prevent Lessor from utilizing empty space on any flight leg in which case Lessor and Lessee agree to adjust in good faith
the expenses of any such flight segment.
3.
Operational Control of Aircraft. Lessor and Lessee intend and agree that on all flights conducted under this Agreement, Lessor
shall have complete and exclusive operational control over the Aircraft, its flight crews and maintenance, and complete and exclusive possession,
command and control of the Aircraft. Lessor shall have complete and exclusive responsibility for scheduling, dispatching and flight following of the
Aircraft on all flights conducted under this Agreement, which responsibility includes the sole and exclusive right over initiating, conducting and
terminating such flights. Lessee shall have no responsibility for scheduling, dispatching or flight following on any flight conducted under this
Agreement, nor any right over initiating, conducting or terminating any such flight. Nothing in this Agreement is intended or shall be construed so as to
convey to Lessee any operational control over, or possession, command and control of, the Aircraft, all of which are expressly retained by Lessor.
4.
Scheduling.
(a) Lessee will provide Lessor with requests for flight time and proposed flight schedules as far in advance of any given flight as
possible. Lessee or the designated authorized representative(s) of Lessee shall submit scheduling requests under this Agreement to the designated
authorized representative(s) of Lessor. Requests for flight time shall be in such form (whether oral or written) mutually convenient to, and agreed upon
by, the parties. In addition to proposed schedules and flight times, Lessee shall upon request provide Lessor with the following information for each
proposed flight prior to scheduled departure: (i) proposed departure point; (ii) destination; (iii) date and time of flight; (iv) the number of anticipated
passengers; (v) the nature and extent of luggage to be carried; (vi) the date and time of a return flight, if any; and (vii) any other pertinent information
concerning the proposed flight that Lessor or the flight crew may request.
(b) Subject to Aircraft and crew availability and to any usage limitations established by Lessor, Lessor shall use its good faith efforts,
consistent with Lessor’s approved policies, in order to accommodate the needs of Lessee, to avoid conflicts in scheduling, and to enable Lessee to enjoy
the benefits of this Agreement; however, Lessee acknowledges and agrees that notwithstanding anything in this Agreement to the contrary, (i) Lessor
shall have sole and exclusive final authority over the scheduling of the Aircraft; and (ii) the needs of Lessor for the Aircraft shall take precedence over
Lessee’s rights and Lessor’s obligations under this Agreement.
(c) Although every good faith effort shall be made to avoid its occurrence, any flight scheduled under this Agreement is subject to
cancellation by either party without incurring liability to the other party. In the event that cancellation is necessary, the canceling party shall provide the
maximum notice practicable.
5.
Billing. Lessor shall pay all expenses relating to the operation of the Aircraft under this Agreement on a monthly basis. As
soon as possible after the end of each monthly period during the Term, Lessor shall provide to Lessee an invoice showing all use of the Aircraft by
Lessee under this Agreement during that month and a complete accounting detailing all amounts payable by Lessee pursuant to Section 2 for that month,
including such detail supporting all expenses paid or incurred by Lessor for which reimbursement is sought as Lessee may reasonably request. Lessee
shall pay all amounts due to Lessor under this Section 5 not later than thirty (30) days after receipt of the invoice therefor.
2
Maintenance of Aircraft. Lessor shall be solely responsible for securing maintenance, preventive maintenance and inspections
of the Aircraft (utilizing an inspection program listed in FAR Section 91.409(f)), and shall take such requirements into account in scheduling the
Aircraft hereunder.
6.
7.
Flight Crew.
(a) Lessor shall employ or engage and pay all salaries, benefits and/or compensation for a fully-qualified flight crew with appropriate
credentials to conduct each flight undertaken under this Agreement. Lessor may use temporary flight crewmembers for a flight under this Agreement
only if any such temporary crewmember is FlightSafety (or SimuFlite) trained, is current on the Aircraft and satisfies all of the requirements and
conditions under the insurance coverage for the Aircraft. All flight crewmembers shall be included on any insurance policies that Lessor is required to
maintain hereunder.
(b) The qualified flight crew provided by Lessor shall exercise all of its duties and responsibilities with regard to the safety of each
flight conducted hereunder in accordance with applicable FARs. The Aircraft shall be operated under the standards and policies established by Lessor.
Final authority to initiate or terminate each flight, and otherwise to decide all matters relating to the safety of any given flight or requested flight, shall
rest with the pilot-in command of that flight. The pilot-in-command may, in its sole discretion, terminate any flight, refuse to commence any flight, or
take any other action that, in the judgment of the pilot-in command, is necessitated by considerations of safety. No such termination or refusal to
commence by the pilot-in-command shall create or support any liability for loss, injury, damage or delay in favor of Lessee or any other person. Lessor
shall not be liable to Lessee or any other person for loss, injury or damage occasioned by the delay or failure to furnish the Aircraft and flight crew
pursuant to this Agreement for any reason.
8.
Insurance.
(a) At all times during the Term of this Agreement, Lessor shall maintain at its sole cost and expense (i) all risk, both ground and in-
flight hull insurance in an amount not less than forty million ($40,000,000) United States dollars; (ii) liability coverage covering passengers, non-
passengers, third party liability (including war risk AV 52) and property damage of not less than three hundred million ($300,000,000) United States
dollars for each occurrence but sublimited to twenty five million ($25,000,000) United States dollars for each occurrence and aggregate with respect to
Personal Injury Liability; and (iii) products liability insurance including completed operations in an amount not less than three hundred million
($300,000,000) United States dollars per occurrence and aggregate.
(b) Any policies of aircraft and liability insurance carried in accordance with this Section 8 and any policies taken out in substitution or
replacement of any such policies (i) shall name Lessee and its affiliates and each of their respective members, managers, shareholders, officers,
directors, partners, employees, agents, licensees and guests as additional insureds (without responsibility for premiums) with respect to the liability
coverage; (ii) shall waive any right of set-off and any right of subrogation against any of the additional insureds; (iii) shall provide for thirty (30) days
written notice to Lessee by such insurer of cancellation, change, non-renewal or reduction (seven (7) days in the case of war risk and allied perils
coverage or such shorter period as is customarily available in the industry); (iv) shall be primary, not subject to any co-insurance clause, not
contributory or subject to offset with respect to any other policies in force; and (v) shall include a severability of interest clause providing that the
policies will operate in the same manner to give each insured the same protection as if there were a separate policy issued to each insured except for the
limit of liability.
(c) Lessor shall use reasonable commercial efforts to provide such additional insurance coverage for specific flights under this
Agreement, if any, as Lessee may request in writing. Lessee also acknowledges that any trips scheduled to the European Union may require Lessor to
purchase additional
3
insurance to comply with local regulations. The cost of all additional flight-specific insurance shall be borne by Lessee as set forth in Section 2(d)
hereof.
(d) Each party agrees that it will not do any act or voluntarily suffer or permit any act to be done whereby any insurance required
hereunder shall or may be suspended, impaired or defeated. In no event shall Lessor suffer or permit the Aircraft to be used or operated under this
Agreement without such insurance being fully in effect.
(e) Lessor shall ensure that worker’s compensation insurance with all-states coverage is provided for the Aircraft’s crew and
maintenance personnel.
(f) Lessor shall deliver certificates of insurance to Lessee with respect to the insurance required or permitted to be provided by it
hereunder not later than the first flight of the Aircraft under this Agreement and upon the renewal date of each policy.
9.
Taxes. Lessee shall be responsible for paying, and Lessor shall be responsible for collecting from Lessee and paying over to
the appropriate authorities, all applicable Federal transportation taxes and sales, use or other excise taxes imposed by any governmental authority in
connection with any use of the Aircraft by Lessee hereunder. Each party shall indemnify the other party against any and all claims, liabilities, costs and
expenses (including attorney’s fees as and when incurred) arising out of its breach of this undertaking.
10.
Lessee’s Representations and Warranties. Lessee represents and warrants that:
(a) It will not use the Aircraft for the purposes of providing transportation of passengers or cargo in air commerce for compensation or
hire or for common carriage.
(b) It shall refrain from incurring any mechanic’s or other liens in connection with inspection, preventive maintenance, maintenance or
storage of the Aircraft, and shall not attempt to convey, mortgage, assign, lease or in any way alienate the Aircraft or create any kind of lien or security
interest involving the Aircraft or do anything or take any action that might mature into such a lien.
(c) It shall not lien or otherwise encumber or create or place any lien or other encumbrance of any kind whatsoever, on or against the
Aircraft for any reason. It also will ensure that no liens or encumbrances of any kind whatsoever are created or placed against the Aircraft for claims
against Lessee or by Lessee.
(d) It will abide by and conform to all laws, governmental and airport orders, rules and regulations, as shall be imposed upon the lessee
of an aircraft under a time sharing agreement, and applicable company policies of Lessor.
Lessor’s Representations and Warranties. Lessor represents and warrants that it will abide by and conform to all such laws,
governmental and airport orders, rules and regulations, as shall from time to time be in effect relating in any way to the operation and use of the Aircraft
pursuant to this Agreement.
11.
12.
Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, LESSOR HAS MADE NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, INCLUDING ANY WITH RESPECT
TO ITS CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. IN NO EVENT SHALL EITHER PARTY BE
LIABLE TO THE OTHER PARTY OR TO ANY OTHER PERSON FOR ANY INCIDENTIAL, CONSEQUENTIAL OR SPECIAL DAMAGES,
HOWEVER ARISING.
and thereafter shall automatically renew for successive one-year
13.
Term. The term of this Agreement (the “Term”) shall commence on the effective date hereof and expire on June 30, 2020,
4
terms. Notwithstanding the foregoing, either party shall have the right to terminate this Agreement after the initial term upon 30 days prior written
notice. In addition, this Agreement shall terminate (i) effective on the date specified in a written notice from Lessor to Lessee to the effect that Lessor no
longer operates the Aircraft, which notice shall be given by Lessor to Lessee as soon as reasonably practicable after Lessor becomes aware that such is
or will be the case or (ii) immediately upon a Change of Control of Lessee. “Change of Control” shall mean the acquisition, in a transaction or a series
of related transactions, by any person or group, other than Charles F. Dolan or members of the immediate family of Charles F. Dolan or trusts for the
benefit of Charles F. Dolan or his immediate family (or an entity or entities controlled by any of them), of the power to direct the management of
Madison Square Garden Sports Corp. or substantially all its assets (as constituted immediately prior to such transaction or transactions).
14.
Limitation of Liability. The parties, for themselves and on behalf of their representatives, guests, invitees, licensees, servants
and employees, covenant and agree that the insurance described in Section 8 hereof shall be the sole recourse for any and all liabilities, claims, demands,
suits, causes of action, losses, penalties, fines, expenses or damages, including attorneys fees, court costs and witness fees, attributable to the use,
operation or maintenance of the Aircraft pursuant to this Agreement or performance of or failure to perform any obligation under this Agreement,
except in the event that Lessor fails to obtain and maintain the insurance required hereunder or in the event of the gross negligence of the party at fault.
15.
Relationship of Parties. Lessor is strictly an independent contractor lessor/provider of transportation services with respect to
Lessee. Nothing in this Agreement is intended, nor shall it be construed so as, to constitute the parties as partners or joint venturers or principal and
agent. All persons furnished by Lessor for the performance of the operations and activities contemplated by this Agreement shall at all times and for all
purposes be considered Lessor’s employees or agents.
16.
Governing Law; Severability. This Agreement shall be governed by and interpreted in accordance with the laws of the State
of New York, determined without regard to its conflicts of laws principles. If any provision of this Agreement conflicts with any statute or rule of law of
the State of New York, or is otherwise unenforceable, such provision shall be deemed null and void only the extent of such conflict or unenforceability,
and shall be deemed separate from, and shall not invalidate, any other provision of this Agreement.
by an agreement in writing signed by each of the parties hereto.
17.
Amendment. This Agreement may not be amended, supplemented, modified or terminated, or any of its terms varied, except
18.
Counterparts. This Time Sharing Agreement may for all purposes be executed in several counterparts, each of which shall
be deemed an original, and all such counterparts, taken together, shall constitute the same instrument, even though all parties may not have executed the
same counterpart of this Agreement. Each party may transmit its signature by confirmed facsimile or PDF transmission, and such signatures shall have
the same force and effect as an original signature.
19.
Successors and Assigns. This Time Sharing Agreement shall be binding upon the parties hereto, and their respective heirs,
executors, administrators, other legal representatives, successors and assigns, and shall inure to the benefit of the parties hereto, and, except as otherwise
provided herein, to their respective heirs, executors, administrators, other legal representatives, successors and permitted assigns. Lessee agrees that it
shall not directly or indirectly sublease, assign, transfer, pledge or hypothecate this Agreement or any part hereof (including any assignment or transfer
pursuant to the laws of intestacy) without the prior written consent of Lessor, which may be given or withheld by Lessor in its sole and absolute
discretion.
deemed to have been duly given if hand delivered, sent by certified
20.
Notices. All notices or other communications delivered or given under this Agreement shall be in writing and shall be
5
or registered mail, return receipt requested, or nationally-utilized overnight delivery service, PDF or confirmed facsimile transmission, as the case may
be. Such notices shall be addressed to the parties at the addresses set forth above, or to such other address as may be designated by any party in a writing
delivered to the other in the manner set forth in this Section 19. In the case of notices to Lessee, a copy of each such notice shall be sent to 11 Penn
Plaza, New York, NY 10001. Notices sent by certified or registered mail shall be deemed received three (3) business days after being mailed. All other
notices shall be deemed received on the date delivered. Routine communications may be made by e-mail to Lessor at joe.yospe@msg.com and to
Lessee at alex.shvartsman@msg.com.
21.
Truth-in-Leasing Compliance. Lessor, on behalf of Lessee, shall (i) mail a copy of this Agreement to the Aircraft
Registration Branch, Technical Section, of the FAA in Oklahoma City within twenty four (24) hours of its execution; (ii) notify the nearest Flight
Standards District Office at least fo1iy eight (48) hours prior to the first flight by Lessor under this Agreement of the registration number of the Aircraft,
and the location of the airport of departure and departure time of the first flight; and (iii) carry a copy of this Agreement onboard the Aircraft at all times
when the Aircraft is being operated under this Agreement.
22.
TRUTH IN LEASING STATEMENT UNDER FAR SECTION 91.23:
(a) LESSOR HEREBY CERTIFIES THAT THE AIRCRAFT HAS BEEN MAINTAINED AND INSPECTED UNDER FAR
PART 91 DURING THE 12-MONTH PERIOD PRECEDING THE DATE OF EXECUTION OF THIS AGREEMENT OR SINCE ITS
MANUFACTURE. THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED IN COMPLIANCE WITH THE MAINTENANCE
AND INSPECTION REQUIREMENTS OF FAR PART 91 FOR ALL OPERATIONS TO BE CONDUCTED UNDER THIS AGREEMENT.
(b) LESSOR HEREBY CERTIFIES THAT IT IS RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT FOR
ALL OPERATIONS UNDER THIS AGREEMENT.
(c) EACH PARTY HEREBY CERTIFIES THAT IT UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH
APPLICABLE FEDERAL AVIATION REGULATIONS.
(d) THE PARTIES UNDERSTAND THAT AN EXPLANATION OF THE FACTORS BEARING ON OPERATIONAL CONTROL
AND THE PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS
DISTRICT OFFICE.
(the remainder of this page has been left blank)
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IN WITNESS WHEREOF, Lessor and Lessee have executed this Time Sharing Agreement effective as of the date first above written.
LESSOR:
MSG Entertainment Group, LLC
By: /s/ Philip D’Ambrosio
Name: Philip D’Ambrosio
Title: Senior Vice President, Treasurer
LESSEE:
MSG Sports, LLC
By: /s/ Victoria M. Mink
Name: Victoria M. Mink
Title: Executive Vice President and Chief Financial Officer
[Signature Page to Time Sharing Agreement (G550)]
Exhibit 10.75
MADISON SQUARE GARDEN SPORTS CORP.
Policy Concerning Certain Matters Relating to Madison Square Garden Entertainment Corp.,
MSG Networks Inc. and AMC Networks Inc.,
Including Responsibilities of Overlapping Directors and Officers
A.
Certain Acknowledgements; Definitions.
Madison Square Garden Sports Corp. (the “Corporation”) recognizes that (a) certain directors and officers of the Corporation and its
subsidiaries (the “Overlap Persons”) have served and may serve as directors, officers, employees and agents of Madison Square Garden Entertainment
Corp. (formerly MSG Entertainment Spinco, Inc. and referred to herein as “MSG Entertainment”), MSG Networks Inc. (“MSG Networks”), AMC
Networks Inc. (“AMC Networks”), and their respective subsidiaries and successors (each of the foregoing, including its subsidiaries and successors, is
an “Other Entity”), (b) the Corporation and its subsidiaries, directly or indirectly, may engage in the same, similar or related lines of business as those
engaged in by any Other Entity and other business activities that overlap with or compete with those in which such Other Entity may engage, (c) the
Corporation or its subsidiaries may have an interest in the same areas of business opportunity as an Other Entity, (d) the Corporation will derive
substantial benefits from the service as directors or officers of the Corporation and its subsidiaries of Overlap Persons, and (e) it is in the best interests of
the Corporation that the rights of the Corporation, and the duties of any Overlap Persons, be determined and delineated as provided in this Policy in
respect of any Potential Business Opportunities (as defined below) and in respect of the agreements and transactions referred to herein. The provisions
of this Policy will, to the fullest extent permitted by law, regulate and define the conduct of the business and affairs of the Corporation and its officers
and directors who are Overlap Persons in connection with any Potential Business Opportunities and in connection with any agreements and transactions
referred to herein. Any person purchasing or otherwise acquiring any shares of capital stock of the Corporation, or any interest therein, will be deemed
to have notice of and to have consented to the provisions of this Policy. References in this Policy to “directors,” “officers,” “employees” and “agents” of
any person will be deemed to include those persons who hold similar positions or exercise similar powers and authority with respect to any other entity
that is a limited liability company, partnership, joint venture or other non-corporate entity.
B.
Duties of Directors and Officers Regarding Potential Business Opportunities; Renunciation of Interest in Potential Business
Opportunities.
The Corporation hereby renounces, on behalf of itself and its subsidiaries, to the fullest extent permitted by law, any interest or expectancy in
any Potential Business Opportunity that is not a Restricted Potential Business Opportunity. If a director or officer of the Corporation who is an Overlap
Person is presented or offered, or otherwise acquires knowledge of, a potential transaction or matter that may constitute or present a business
opportunity for the Corporation or any of its subsidiaries, in which the Corporation or any of its subsidiaries could, but for the provisions of this Policy,
have an interest or expectancy (any such transaction or matter, and any such actual or potential business opportunity, a
1
“Potential Business Opportunity”), (i) such Overlap Person will, to the fullest extent permitted by law, have no duty or obligation to refrain from
referring such Potential Business Opportunity to any Other Entity and, if such Overlap Person refers such Potential Business Opportunity to an Other
Entity, such Overlap Person shall have no duty or obligation to refer such Potential Business Opportunity to the Corporation or to any of its subsidiaries
or to give any notice to the Corporation or to any of its subsidiaries regarding such Potential Business Opportunity (or any matter related thereto), (ii) if
such Overlap Person refers a Potential Business Opportunity to an Other Entity, such Overlap Person, to the fullest extent permitted by law, will not be
liable to the Corporation as a director, officer, stockholder or otherwise, for any failure to refer such Potential Business Opportunity to the Corporation,
or for referring such Potential Business Opportunity to any Other Entity, or for any failure to give any notice to the Corporation regarding such Potential
Business Opportunity or any matter relating thereto; (iii) any Other Entity may participate, engage or invest in any such Potential Business Opportunity
notwithstanding that such Potential Business Opportunity may have been referred to such Other Entity by an Overlap Person, and (iv) if a director or
officer who is an Overlap Person refers a Potential Business Opportunity to an Other Entity, then, as between the Corporation and/or its subsidiaries, on
the one hand, and such Other Entity, on the other hand, the Corporation and its subsidiaries shall be deemed to have renounced any interest, expectancy
or right in or to such Potential Business Opportunity or to receive any income or proceeds derived therefrom solely as a result of such Overlap Person
having been presented or offered, or otherwise acquiring knowledge of, such Potential Business Opportunity, unless in each case referred to in clause
(i), (ii), (iii) or (iv), such Potential Business Opportunity satisfies all of the following conditions (any Potential Business Opportunity that satisfies all of
such conditions, a “Restricted Potential Business Opportunity”): (A) such Potential Business Opportunity was expressly presented or offered to the
Overlap Person solely in his or her capacity as a director or officer of the Corporation; (B) the Overlap Person believed that the Corporation possessed,
or would reasonably be expected to be able to possess, the resources necessary to exploit such Potential Business Opportunity; and (C) such opportunity
relates exclusively to the ownership of a franchise in the National Basketball Association, the National Hockey League, the National Football League,
Major League Baseball or Major League Soccer located in New York, New Jersey or Connecticut; provided, that the Corporation or any of its
subsidiaries is directly engaged in such business at the time the Potential Business Opportunity is presented or offered to the Overlap Person. In the
event the Corporation’s board of directors declines to pursue a Restricted Potential Business Opportunity, Overlap Persons shall be free to refer such
Restricted Potential Business Opportunity to an Other Entity.
C.
Certain Agreements and Transactions Permitted.
No contract, agreement, arrangement or transaction (or any amendment, modification or termination thereof) entered into between the
Corporation and/or any of its subsidiaries, on the one hand, and an Other Entity, on the other hand, before the Corporation ceased to be an indirect,
wholly-owned subsidiary of MSG Networks, or before MSG Entertainment ceased to be a direct, wholly-owned subsidiary of the Corporation, shall be
void or voidable or be considered unfair to the Corporation or any of its subsidiaries solely because such Other Entity is a party thereto, or because any
directors, officers or employees of such Other Entity were present at or participated in any meeting of the board of directors, or a committee thereof, of
the Corporation, or the board of directors, or committee thereof, of any subsidiary
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of the Corporation, that authorized the contract, agreement, arrangement or transaction (or any amendment, modification or termination thereof), or
because his, her or their votes were counted for such purpose. The Corporation may from time to time enter into and perform, and cause or permit any
of its subsidiaries to enter into and perform, one or more contracts, agreements, arrangements or transactions (or amendments, modifications or
supplements thereto) with an Other Entity. To the fullest extent permitted by law, no such contract, agreement, arrangement or transaction (nor any such
amendments, modifications or supplements), nor the performance thereof by the Corporation or any subsidiary of the Corporation or an Other Entity,
shall be considered contrary to any fiduciary duty owed to the Corporation (or to any subsidiary of the Corporation, or to any stockholder of the
Corporation or any of its subsidiaries) by any director or officer of the Corporation (or by any director or officer of any subsidiary of the Corporation)
who is an Overlap Person. To the fullest extent permitted by law, no director or officer of the Corporation or any subsidiary of the Corporation who is
an Overlap Person thereof shall have or be under any fiduciary duty to the Corporation (or to any subsidiary of the Corporation, or to any stockholder of
the Corporation or any of its subsidiaries) to refrain from acting on behalf of the Corporation, any subsidiary of the Corporation or an Other Entity, in
respect of any such contract, agreement, arrangement or transaction or performing any such contract, agreement, arrangement or transaction in
accordance with its terms and each such director or officer of the Corporation or any subsidiary of the Corporation who is an Overlap Person shall be
deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation and
its subsidiaries, and shall be deemed not to have breached his or her duties of loyalty to the Corporation or any of its subsidiaries or any of their
respective stockholders, and not to have derived an improper personal benefit therefrom.
D.
Amendment of this Policy.
No alteration, amendment or repeal of, or adoption of any provision inconsistent with, any provision of this Policy will have any effect upon (a)
any agreement between the Corporation or a subsidiary thereof and any Other Entity, that was entered into before the time of such alteration,
amendment or repeal or adoption of any such inconsistent provision (the “Amendment Time”), or any transaction entered into in connection with the
performance of any such agreement, whether such transaction is entered into before or after the Amendment Time, (b) any transaction entered into
between the Corporation or a subsidiary thereof and any Other Entity, before the Amendment Time, (c) the allocation of any business opportunity
between the Corporation or any subsidiary thereof and any Other Entity before the Amendment Time, or (d) any duty or obligation owed by any director
or officer of the Corporation or any subsidiary of the Corporation (or the absence of any such duty or obligation) with respect to any Potential Business
Opportunity which such director or officer was offered, or of which such director or officer otherwise became aware, before the Amendment Time
(regardless of whether any proceeding relating to any of the above is commenced before or after the Amendment Time).
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CERTAIN CONFIDENTIAL INFORMATION, IDENTIFIED BY BRACKETED ASTERISKS “[*****]”, HAS BEEN OMITTED FROM THIS EXHIBIT
BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED.
Exhibit 10.76
SPONSORSHIP SALES AND SERVICE REPRESENTATION AGREEMENT
THIS SPONSORSHIP SALES AND SERVICE REPRESENTATION AGREEMENT (this “Agreement”) is made and entered into as of
April 15, 2020 (the “Effective Date”) by and between Knicks Holdings, LLC (“Knicks, LLC”), a Delaware limited liability company with offices at 2
Penn Plaza, New York, NY 10121, and MSG Entertainment Group, LLC (formerly MSG Sports & Entertainment, LLC), a Delaware limited liability
company with offices at 2 Penn Plaza, New York, NY 10121 (“Representative”).
WHEREAS, Representative directly or indirectly owns and operates, inter alia, the sports and entertainment complex known as Madison
Square Garden (the “Arena”); and
WHEREAS, Knicks, LLC indirectly owns and operates the New York Knicks (the “Knicks”), the Westchester Knicks (the “WCK”) and
Knicks Gaming (collectively with the Knicks and WCK, the “Teams”); and
WHEREAS, Knicks, LLC desires to appoint Representative as sales and service representative for sponsorships with respect to the Teams, and
Representative desires to be so appointed and to perform the services described herein, each on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth, the parties agree as follows:
1. Appointment.
1.1 Appointment. Subject to the terms of this Agreement, Knicks, LLC hereby appoints Representative as its exclusive (except as otherwise
provided in this Agreement) sales and service representative for all sponsorship benefits available for sale in connection with the Teams (such
sponsorship benefits, the “Team Sponsorship Assets”) to be sold in accordance with the terms and conditions set forth herein, which shall include, but
not be limited to, the items listed on Schedule A hereto, as well as such other sellable sponsorship assets as the parties agree, after good faith
consideration and discussion, are later developed and/or appropriately deemed to relate primarily to one or more of the Teams. As clarification, Team
Sponsorship Assets hereunder shall not include Arena Game Shared Sponsorship Assets (as defined in that certain Arena License Agreement between
Knicks, LLC’s subsidiary New York Knicks, LLC (“NYK, LLC”) and Representative’s subsidiary MSG Arena, LLC (collectively, the “Arena License
Parties”) of even date herewith (the “Arena License”)), Tickets for Knicks Events (each as defined in the Arena License) (“Tickets”), hospitality at
Knicks Events (e.g., suite licenses, memberships to the Madison Club and The Loft, newly-created hospitality space sales) (“Hospitality”) or Broadcast
Advertising Inventory (as defined below), with respect to all of which Knicks, LLC shall have the exclusive rights or receive an agreed-upon allocation
pursuant to that Arena License. “Broadcast Advertising Inventory” means any audio-visual, audio-only, video-only, graphical, text or any other form of
advertising units or sponsorship rights, regardless of the medium (now known or hereafter developed) in which such advertising units or sponsorship
rights are available or promoted, whether displayed or distributed via billboards, studio signage, tickers, “double-box commercials,” banners, links,
bugs, fly-outs, overlays, companion banners, or in-stream, pre-roll or post-roll and, for clarity, including promotional spots, product/service placement,
designations, integrations and the like, in each case, associated with any Broadcast Rights (as defined in the Arena License) of the Knicks.
Notwithstanding anything set forth herein, the parties acknowledge that various rights with respect to the Broadcast Advertising Inventory have been
granted to MSG Networks Holdings, L.P. (“MSGN”) via a certain Broadcast Rights Agreement between NYK, LLC and MSGN, and that MSGN has,
in turn, via a certain advertising sales representation agreement (the “Network Rep Agreement”), granted to
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Representative the exclusive right to sell such Broadcast Advertising Inventory; nothing contained herein is intended to affect such grants of rights.
1.2 Exclusivity. The exclusivity granted above means that, except as provided in Section 5.4, Knicks, LLC shall not (a) sell on its own behalf
Team Sponsorship Assets without the prior written approval of Representative, such approval not to be unreasonably withheld, conditioned or delayed,
or (b) appoint a third party to sell Team Sponsorship Assets on Knicks, LLC’s behalf without the prior written approval of Representative.
Notwithstanding anything to the contrary in this Agreement, Knicks, LLC may include Team Sponsorship Assets in agreements that Knicks, LLC or
any of its affiliates enters into independently of Representative that are principally related to non-sponsorship matters (e.g., ticketing and Broadcast
Rights agreements), as long as such inclusion does not violate the terms of a then-existing Sponsorship Agreement (as defined below), and (x) no
revenue from such agreements shall be included in Gross Revenue (as defined below) and (y) no Commissions shall be received by Representative for
such agreements.
1.3 (a) Contracting Process. Representative shall negotiate, on behalf of Knicks, LLC, sponsorship agreements that provide for the sale of,
payment for and delivery of Team Sponsorship Assets. Such agreements, as well as any sponsorship agreements in existence as of the Effective Date
that include Team Sponsorship Assets, shall hereinafter be referred to as “Sponsorship Agreements.” Representative shall make commercially
reasonable, good faith efforts to ensure that the appropriate Knicks-specific entity is the direct contracting party with all sponsors with respect to whom
the sponsorship assets purchased are exclusively such Team’s assets, and that NYK, LLC, or its parent, MSG Sports, LLC, is the direct contracting
party with all sponsors with respect to whom the sponsorship assets purchased are exclusively or primarily Team Sponsorship Assets of more than one
Team, and payments shall be made directly from the sponsor to such Knicks-specific entity, NYK, LLC or MSG Sports, LLC, as applicable, in such
instances, subject to the final sentence of this subsection (a). Where Representative is unable to effect that outcome, or where Team Sponsorship Assets
are included in multi-property deals that do not consist exclusively or primarily of Team Sponsorship Assets, Representative shall make commercially
reasonable, good faith efforts to include applicable Team entities and/or NYK, LLC as express third-party beneficiaries in any such agreements entered
into during the Term. It is agreed and acknowledged that Sponsorship Agreements that are entered into by NYK, LLC, MSG Sports, LLC or any other
Knicks-specific entity that include Arena Game Shared Sponsorship Assets, Non-Team Sponsorship Assets and/or, during the term of the Network Rep
Agreement, Broadcast Advertising Inventory shall be subject to the payment of appropriate allocations with respect to all revenue related to such assets,
which allocations shall be agreed upon by the parties in advance of Knicks, LLC’s approval of any such Sponsorship Agreement and set forth in
Schedule 2 of the Team Sponsorship Allocation Agreement (defined in Section 3.3 below).
(b) Knicks Approval. Notwithstanding anything herein to the contrary, Sponsorship Agreements that include Team Sponsorship Assets (and
any amendment thereto or termination, extension or renewal thereof) shall be subject to the prior written approval of Knicks, LLC, which shall not be
unreasonably withheld, conditioned or delayed; provided, however, that, in any instance in which Team Sponsorship Assets are not included in a
potential Sponsorship Agreement, or an agreement is not reached, in either case by virtue of Knicks, LLC’s failure to approve of such inclusion, the
parties will discuss in good faith a downward adjustment to that Contract Year’s Annual Sales Target (as defined in Section 4.3 below).
2. Term. Subject to the terms of this Agreement (including without limitation Section 7 hereof), the term of this Agreement shall commence as of
the Effective Date and expire on June 30, 2030 (the “Initial Term”). The term of this Agreement shall automatically extend for one-year periods after the
expiration of the Initial Term and any subsequent one-year renewal terms (each, a “Renewal Term” and, collectively with the Initial Term, the “Term”),
unless either party delivers written notice to the other party at least twelve (12) months prior to the expiration of the Initial Term or six (6) months prior
to the expiration of any Renewal Term that it wishes to terminate the Agreement effective as of the expiration of the then-applicable Term. As used
herein, “Contract Year” means each twelve-month period during the Term commencing on July 1 and ending on the immediately-succeeding June 30;
provided, however, that the period beginning on the Effective Date and ending June 30, 2020 (the “Stub Year”) shall be deemed a Contract Year.
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3. Team Sponsorship Assets.
3.1 Availability of Assets. Subject to League Rules (as defined in the Arena License), Knicks, LLC and Representative, in each case, to the
extent within its control, shall at all times maintain availability of Team Sponsorship Assets that are included in any then-active Sponsorship
Agreements, as well as such other Team Sponsorship Assets as Knicks, LLC may otherwise commit to a third party sponsor, unless either Knicks, LLC
or Representative is able to provide one or more “make good” assets that are acceptable to the affected sponsor or elimination of the asset(s) is
otherwise agreed upon by the parties. Representative shall comply and ensure that other applicable parties comply, with each Sponsorship Agreement in
all respects.
3.2 Elimination and Addition of Assets. With respect to any currently-available Team Sponsorship Assets that are not, at any given time,
included in any then-active Sponsorship Agreements, Knicks, LLC may elect to eliminate such Team Sponsorship Assets with respect to any Contract
Year (an “Asset Reduction”); provided that, to the extent that such elimination has or is expected to materially affect sales of Team Sponsorship Assets,
the Annual Sales Target for such Contract Year will be adjusted pursuant to Section 4.4(a) below. Any addition of new Team Sponsorship Assets with
respect to any Contract Year shall be similarly factored in when the parties set the Annual Sales Target, as well as in the contemplation of any mid-year
adjustment pursuant to Section 4.4(b) below.
3.3 [*****]. With respect to all Team Sponsorship Assets sold pursuant to this Agreement, Knicks, LLC and Representative, in each case, to
the extent within their respective control, shall use commercially reasonable efforts to provide such Team Sponsorship Assets to Representative or the
respective sponsor (as appropriate) in accordance with the terms of the relevant Sponsorship Agreement. If Knicks, LLC is unable to provide such Team
Sponsorship Assets at the appointed time or manner for any reason, then Representative, [*****], shall [*****] use commercially reasonable efforts to
replace the undelivered Team Sponsorship Assets with alternative Team Sponsorship Assets (of the same Team as the undelivered benefits, if feasible),
which alternative Team Sponsorship Assets Knicks, LLC would then provide (as approved by Knicks, LLC). [*****].
4. Commissions; Annual Sales Target; Rate Card.
4.1 Commissions. Subject to the terms of this Agreement, in consideration of the services of Representative, Representative will, for each
Contract Year after the Stub Year, and except as otherwise agreed by the parties, receive commissions with respect to each Contract Year on the sale of
Team Sponsorship Assets (“Commissions”) based on the following commission structure:
(a)
except as set forth in subsections (c)-(g) and Section 7.1(d) below, with respect to Gross Revenue (as defined below) up to the
Annual Sales Target for such Contract Year, the Commission shall be [*****];
(b)
except as set forth in subsection (c)-(g) below, for any Gross Revenue above the Annual Sales Target for such Contract Year, the
Commission shall be [*****] in excess of such Contract Year’s Annual Sales Target;
(c)
with respect to Sponsorship Tickets (as defined in Section 4.8) included in any Sponsorship Agreement, Representative shall be
entitled to no Commission thereon, unless separately agreed to in writing (email being sufficient) by Knicks, LLC;
(d)
with respect to any Sponsorship Hospitality (as defined in Section 4.9) included in any Sponsorship Agreement, Representative shall
be entitled to no Commission thereon pursuant to this Agreement, and the parties understand and acknowledge that Representative and Knicks, LLC
shall be entitled to compensation therefrom as set forth in Article V of the Arena License;
(e)
with respect to any Team Sponsorship Assets delivered after the Term hereof in accordance with Section 7.1(f) below, the
Commission shall be as set forth in such Section; and
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(f)
with respect to any Team Sponsorship Asset (other than Sponsorship Tickets or Sponsorship Hospitality) for which the Fulfillment
Costs (as defined below) exceed thirty (30%) of the value allocated to such asset, the Commission thereon shall be [*****]. For avoidance of doubt, any
commissions, fees or other amounts paid to or retained by agencies or other Representative-engaged third parties with respect to the sale of Team
Sponsorship Assets shall be borne by Representative without any reduction in the amounts payable to Knicks, LLC from the gross amount of the sale
other than the Commissions.
(g)
Commissions shall be paid by Knicks, LLC to Representative on a monthly basis, via offset against amounts due from Representative
to Knicks, LLC under Section 6.2 below or, only to the extent necessary, via wire transfer from Knicks, LLC to Representative. Each such payment
shall be consistent with the amount set forth for Commissions for such month in the applicable Monthly Report (as defined in Section 6.2). To the extent
that a Commissions payment is to be made by wire payment, such payment will be made within five (5) days following Knicks, LLC’s receipt of the
applicable Monthly Report; provided, however, that, to the extent that Knicks, LLC has requested additional information or raised a dispute as to a
Monthly Report, either pursuant to Section 6.2, such payment shall be made within five (5) days following its receipt of such information and/or the
resolution of the dispute in accordance with the process set forth in such Section.
“Gross Revenue” shall mean gross sales revenue actually received by Representative, Knicks, LLC, MSG Sports, LLC or the appropriate
Knicks-specific entity without duplication, as applicable, from Team Sponsorship Assets contained in Sponsorship Agreements (and for this purpose,
prior to any deduction of the applicable Commission). For avoidance of doubt, sponsorship fees under any Sponsorship Agreement shall count toward
Gross Revenue for the purpose of this Agreement in the Sponsorship Agreement contract year to which such fees relate under such Sponsorship
Agreement, consistent with Representative’s past practice, regardless of any recognition of revenue pursuant to GAAP that is inconsistent therewith.
Notwithstanding anything to the contrary contained herein, the parties acknowledge and agree that, with respect to any Contract Year, for purposes of (i)
calculating the Commission pursuant to this Section 4.1 and (ii) determining whether or not the Annual Sales Target has been achieved, Gross Revenue
shall not include any revenue generated from the sale of Arena Game Shared Sponsorship Assets or Non-Team Sponsorship Assets (each as defined in
the Arena License) and/or Team Sponsorship Assets sold incrementally with respect to any playoff games (“Playoff Sponsorship Assets”). Except as
otherwise agreed by the parties, the Commission payable on gross revenue generated from the sale of Playoff Sponsorship Assets (other than
Sponsorship Tickets and Sponsorship Hospitality) shall be [*****].
4.1A. Sales Operations Payment. With respect to any Contract Year, in addition to any Commission to which Representative is entitled,
Knicks, LLC shall also pay to Representative an amount covering a share of the cost of Representative’s sales and service staff and overhead (the “Sales
Operations Payment”). With respect to the Stub Year, the Sales Operations Payment shall be $[*****]; with respect to the 2020-21 Contract Year, the
Sales Operations Payment shall be $[*****]. With respect to the 2021-22 Contract Year and each Contract Year thereafter, the Sales Operations
Payment will be 103% of the Sales Operations Payment for the immediately-preceding Contract Year. Representative may deduct and retain one-twelfth
(1/12) (or, with respect to the Stub Year, the applicable pro-rated monthly amount) (either, a “Monthly SO/OH Payment”) of the applicable Contract
Year’s Sales Operations Payment from each Monthly Net Sponsorship Payment it makes pursuant to Section 6.2 below; provided, however, that, with
respect to any shortfall in any month (i.e., any monthly portion of the Sales Operations Payment that is not paid by offset against that month’s Monthly
Net Sponsorship Payment to Knicks, LLC), Knicks, LLC shall, no more than fifteen (15) days following the end of such month, pay such shortfall to
Representative. Notwithstanding anything herein to the contrary, the Sales Operations Payment shall terminate in the event of any termination of this
Agreement, and the Sales Operations Payment for the Contract Year in which such termination occurs shall be reduced on a pro-rata basis.
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4.2 Fulfillment Costs. “Fulfillment Costs” shall mean the direct incremental out-of-pocket costs incurred by either Representative or Knicks,
LLC in fulfilling Sponsorship Agreement obligations or otherwise delivering Team Sponsorship Assets that Representative has sold hereunder (e.g.,
digital content creation, development of new inventory, costs of T-shirts, etc.); provided, however, that, for avoidance of doubt, “Fulfillment Costs”
shall not include Commissions payable to Representative, Representative overhead (including employee compensation) or sales costs (e.g., sales
materials, research, travel and entertainment, training, CRM, software, client hospitality, agency commission, etc.). Representative and Knicks, LLC
shall regularly discuss and collaborate in good faith to determine the appropriate levels of Fulfillment Costs with respect to Team Sponsorship Assets,
taking into account such considerations as sponsor satisfaction, Team brand maintenance, etc. Except as otherwise agreed by the parties, Knicks, LLC
shall be responsible for paying all such Fulfillment Costs that either party incurs, and Representative may deduct from the payments it makes to Knicks,
LLC pursuant to Section 6.2 hereof the amounts of such Fulfillment Costs that it has directly incurred in accordance with this Agreement, provided that,
upon any such deduction, it shall provide to Knicks, LLC invoices or receipts reflecting such costs concurrently with its delivery of the relevant
payment. Notwithstanding anything herein to the contrary, Representative shall not incur Fulfillment Costs payable by Knicks, LLC without the prior
written approval of Knicks, LLC (including approval in any deal budget) or any Fulfillment Costs in excess of those previously approved by Knicks,
LLC including as expressly set forth in any deal budget.
4.3 Annual Sales Target. “Annual Sales Target” shall mean, for each Contract Year following the Stub Year, an amount to be mutually agreed
by the parties (determination of which, if necessary, will be escalated to a senior executive of each party) following good faith discussions for a
reasonable period of time prior to and/or during Knicks, LLC’s budget process for the applicable Contract Year; provided, however, that, in the event
that the parties are unable to agree on an Annual Sales Target for any Contract Year, the Annual Sales Target will be 103% of the Annual Sales Target
for the immediately-preceding Contract Year (provided further that the Annual Sales Target for the 2020-21 Contract Year will be no less than the gross
sales revenue actually received by Representative, Knicks, LLC, MSG Sports, LLC or the appropriate Knicks-specific entity without duplication, as
applicable, from Team Sponsorship Assets contained in Sponsorship Agreements during the 2019-20 fiscal year (i.e., July 1, 2019 through June 30,
2020)). For clarity, the Annual Sales Target amounts shall not include Gross Revenue from the sale of Arena Game Shared Sponsorship Assets, Non-
Team Sponsorship Assets and/or Playoff Sponsorship Assets.
4.4 Adjustments to Annual Sales Target. The Annual Sales Target for any Contract Year may be adjusted in each of the following instances:
(a)
In the event of a material Asset Reduction or if there is any addition of new Team Sponsorship Assets, in each case, as described in
Section 3.2 above, the Annual Sales Target for the applicable Contract Year will, if requested by either party, be adjusted upward or downward, as
applicable by the allocated value of the applicable additional or undelivered Team Sponsorship Assets or the past or expected value of the affected sales
category and/or asset inventory, as mutually agreed by the parties following good faith discussions.
(b)
In the event of League Rules changes that either newly permit or preclude the sale of certain Team Sponsorship Assets (e.g., the
National Basketball Association (the “NBA”) creating new team sponsorship inventory, NBA termination of a jersey patch program) or sales of
advertising in a particular sales category in advance of or within any Contract Year, which changes have or are expected to have a material impact on
sales of Team Sponsorship Assets, the Annual Sales Target for such Contract Year may be adjusted upward or downward, as applicable, by the value of
the applicable Team Sponsorship Assets or the past or expected value of the affected sales category and/or asset inventory, as applicable, as mutually
agreed by the parties following good faith discussions.
(c)
[*****].
If, with respect to good faith discussions as to an adjustment as contemplated above, by the end of thirty (30) days of such discussions (during which, if
necessary, such discussions will be escalated to a senior executive of each party), the parties have not agreed on an appropriate adjustment to the Annual
Sales Target, then within twenty (20)
5
days of the expiration of such thirty-day period, either party shall have the right to submit to binding arbitration the issue of the appropriate adjustment
to the Annual Sales Target. Any such arbitration shall be conducted in accordance with Section 6 below, or such other procedures as the parties agree
upon.
4.5 Shortfalls.
(a) In the event that either (i) the Gross Revenue for any Contract Year is less than [*****]% of the Annual Sales Target for such Contract
Year, or (ii) with respect to the 2021-22 Contract Year and beyond, the sum of the Gross Revenue for any Contract Year (the “Base Year”) and the
Gross Revenue for the Contract Year immediately-preceding the Base Year is less than [*****]% of the sum of the Annual Sales Target for such
immediately-preceding Contract Year and the Annual Sales Target for such Base Year (the difference between the Gross Revenue and the Annual Sales
Target for such Contract Year, or between the average Gross Revenue and average Annual Sales Targets for such Contract Year and Base Year, as the
case may be, the “Shortfall”), then Knicks, LLC will have the right to request a payment (the “Shortfall Payment”) from Representative in an amount
equal to the Shortfall (less any Commissions that would have applied if such amount were Gross Revenue) within thirty (30) days following its receipt
of the June Monthly Report (as defined in Section 6.2 below). Knicks, LLC shall designate the applicable Shortfall in its request (i.e., if both (i) and (ii)
of the first sentence of this Section 4.5 are triggered, Knicks, LLC may choose the Shortfall it wishes to designate in its request to Representative).
Except as provided in subsections (b) and (c) below with respect to a Shortfall relating to the final Contract Year of the Agreement alone,
Representative may elect as to whether or not to make a requested Shortfall Payment. If Representative does not make such Shortfall Payment to
Knicks, LLC within thirty (30) days after receipt of Knicks, LLC’s request, then, within thirty (30) days of the earlier of Representative’s written notice
to Knicks, LLC of such fact or the expiration of such thirty (30) day period, Knicks, LLC will have the right, exercisable by written notice to
Representative, to terminate this Agreement effective, at Knicks, LLC’s election and as set forth in such notice, either (i) sixty (60) days following the
receipt of such notice or (ii) at the expiration of the then-current Contract Year.
(b) If Knicks, LLC requests a Shortfall Payment with respect to a Shortfall in connection with the final Contract Year only, Representative
shall pay, within thirty (30) days following the end of such Contract Year, such Shortfall, and may not elect not to make such payment.
(c) For avoidance of doubt, if Representative makes a Shortfall Payment to Knicks, LLC relating to a Contract Year or pair of Contract Years,
the Annual Sales Target(s) will be deemed to have been met for such Contract Year(s).
4.6 Rate Card. Knicks, LLC’s budgeted rate card for Team Sponsorship Assets (the “Rate Card”) for the 2019-20 Contract Year has been
agreed upon by the parties and is attached hereto as Schedule B. For subsequent Contract Years, such Rate Card will be set by Knicks, LLC following
consultation with Representative as part of Knicks, LLC’s annual budgeting process, and such Rate Card shall in each instance be set at levels that do
not impede Representative’s ability to meet the Annual Sales Target for the relevant Contract Year. Representative will not sell any Team Sponsorship
Assets below such Rate Card by more than twenty percent (20%) without Knicks, LLC’s prior written approval.
4.7 Inclusion in Multi‑Property Sponsorships. Representative may, during the Term, include Team Sponsorship Assets in other multi-property
Sponsorship Agreements (i.e., marketing and sponsorship arrangements that include Team Sponsorship Assets as well as Non-Team Sponsorship Assets
and/or Arena Game Shared Sponsorship Assets, each as defined in the Arena License), provided that, (i) without limiting Knicks, LLC’s approval right
with respect to all Sponsorship Agreements, Knicks, LLC has approved such inclusion (which approval shall not be unreasonably withheld, conditioned
or delayed), (ii) unless otherwise agreed by Knicks, LLC, such Team Sponsorship Assets shall be valued at not less than the fair market value thereof, as
such may be adjusted consistent with Representative’s methodology for uniformly adjusting elements of multi-element agreements in effect as of the
date hereof (i.e., the then-current prices actually recently agreed and paid by third parties for similar type and amount of inventory, if any, subject to any
deal-wide discount or premium (historically referred to as a “GAAP adjustment”)),
6
(iii) to the extent such agreement is category-exclusive, it shall be deemed reasonable for Knicks, LLC to disapprove any such agreement if the value of
such agreement that is allocated to Knicks, LLC (including Knicks, LLC’s allocation of Arena Game Shared Sponsorship Assets) represents [*****]
and (iv) any in-game integrations will be subject to Knicks, LLC’s prior written approval (not to be unreasonably withheld, conditioned or delayed).
4.8 Inclusion of Tickets. For avoidance of doubt, Representative may include a reasonable number of Tickets in Sponsorship Agreements
(“Sponsorship Tickets”), consistent with past practice and subject to the prior approval of Knicks, LLC, and, subject to Section 4.1(c), Knicks, LLC will
receive face value therefor or such lesser amounts as to which Knicks, LLC may agree.
4.9 Inclusion of Hospitality. For avoidance of doubt, Representative may include a reasonable amount of Hospitality in Sponsorship
Agreements (“Sponsorship Hospitality”), consistent with past practice and subject to the prior approval of Knicks, LLC, and, subject to Section 4.1(d),
Knicks, LLC will receive rate card rates therefor or such lesser amounts as to which Knicks, LLC may agree.
5. Responsibilities.
5.1 Representative’s Sales and Service Responsibilities. Representative accepts appointment as sales and service representative for the sale of
Team Sponsorship Assets and the servicing of relationships with Team sponsors, including fulfillment/delivery/activation of Team Sponsorship Assets,
efforts to retain and renew Team sponsors, collections and dispute resolutions, and all other activities relating to the relationship between Knicks, LLC
and the Teams’ respective sponsors. Representative accepts all obligations attendant thereto hereunder and agrees to comply with the terms and
conditions of this Agreement and to use commercially reasonable efforts to maximize the net revenue generated and collected from the sale of the Team
Sponsorship Assets in connection with its duties hereunder. Representative shall provide a professional sales and service staff and appropriate resources
to perform its duties hereunder. In addition, Representative shall establish (in consultation with Knicks, LLC) and maintain, at Representative’s cost,
throughout the Term an incentive sales and retention plan that is designed to ensure that Representative’s sales and service force is appropriately
incentivized to optimize the revenue generated with respect to the sales of Team Sponsorship Assets hereunder. Representative’s performance of its
duties hereunder shall be conducted in such a manner as to minimize interference with each Team’s use of the Arena. Without limiting the foregoing,
standards of quality and minimum levels of all duties to be performed hereunder by Representative, including staffing, shall be subject to League Rules
and Knicks, LLC’s reasonable satisfaction.
5.2 Books and Records. Representative shall keep and maintain complete and accurate books and records of all financial and other matters
relating to this Agreement. Representative shall provide all necessary internal accounting services related to the sale of the Team Sponsorship Assets
hereunder, including accounts payable, billing, accounts receivable and collection, which shall be performed in a manner generally consistent with past
practice. Representative shall furnish Knicks, LLC with financial information required to close its books each month promptly following the end of such
month and such other information as is reasonably requested by Knicks, LLC for forecasting, budgeting and other business purposes.
5.3 Content Standards and Approval. All creative materials presented by Representative for use with respect to the Team Sponsorship Assets
must comply with League Rules and Knicks, LLC’s standards, and such creative materials shall be subject to Knicks, LLC’s right to review and/or
approve the same. Knicks, LLC reserves the right, in its sole discretion, to reject any creative material in the event of a conflict with Knicks, LLC’s
standards for such, or in the event that Knicks, LLC deems any such creative material to be defamatory, abusive, obscene or in violation of any Knicks,
LLC policy or League Rules, or for reasons of quality. For clarity, Representative shall not present to Knicks, LLC nor propose any sale of Team
Sponsorship Assets in connection with any sponsor that was previously rejected hereunder unless otherwise agreed in writing by Knicks, LLC.
5.4 Sales Support. In support of Representative’s sales efforts hereunder, Knicks, LLC shall use commercially reasonable efforts to (a)
regularly work with Representative to develop new Team Sponsorship Assets,
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(b) provide reasonable amounts of Team tickets and hospitality to Representative to be used for potential purchasers of Team Sponsorship Assets (such
amounts as agreed to by the parties), and (c) otherwise assist and support such sales efforts, consistent with past practice, including provision of access
to Teams events and spaces (e.g., access for tours of Teams’ training center) for Representative’s employees and Teams sponsors and Teams
sponsorship prospects. With respect to the provision of tickets by Knicks, LLC to Representative pursuant to clause (b) of this Section 5.4, (i) the parties
shall work in good faith to determine the number of tickets to be provided for any game, and have agreed upon an expected average per-game number of
tickets with respect to the 2019-20 Contract Year and (ii) with respect to each Contract Year thereafter, the parties shall, as part of the annual budget
process, agree on the appropriate average per-game number of tickets, taking into account such factors as actual utilization during the preceding
Contract Year and the extent to which the utilization of such tickets advanced the goals of this Agreement.
5.5 Transition Obligations. During the final Contract Year of the Term, Representative and Knicks, LLC shall reasonably cooperate and take
all reasonable and appropriate actions to successfully transition the marketing and sale of Team Sponsorship Assets from Representative to Knicks, LLC
or a third party designated by Knicks, LLC. Notwithstanding anything contained in Sections 1.1 or 1.2, as of the final Contract Year, the exclusivity
granted to Representative herein shall not preclude Knicks, LLC from selling Team Sponsorship Assets with respect to periods following the expiration
date, and the parties shall coordinate sales efforts in good faith during such final Contract Year.
6. Arbitration, Payments, Reporting Requirements, Restrictions & Approval Rights.
6.1 Arbitration. Any arbitration brought under Section 4.4 of this Agreement shall be conducted by a single, neutral arbitrator in New York in
accordance with the rules of the American Arbitration Association (the “AAA”). The arbitrator shall be mutually agreed upon by the parties or, failing
such agreement within fifteen (15) days after the petition for arbitration is filed, such arbitrator shall be promptly selected in accordance with the rules
of AAA relating thereto. The arbitrator shall render his/her decision as to the appropriate modification (if any) to the Annual Sales Target within ninety
(90) days after his/her selection, and such decision shall be binding upon the parties. The fees and expenses of the arbitrator shall be shared equally by
Representative and Knicks, LLC. The parties shall make all reasonable efforts to adhere to, and cause the arbitrator to adhere to, the time limits set forth
herein. In the event that such time limits cannot be met despite such reasonable efforts, the validity of the arbitrator’s decision shall not be affected as a
result thereof and the arbitrator may extend such time limits as necessary.
6.2 Monthly Reports. Subject to Section 1.3, during the Term, Representative shall pay Knicks, LLC, no more than ten (10) days after the end
of each calendar month (each, a “Monthly Net Sponsorship Payment”), an amount consisting of Gross Revenue that has been received by
Representative (including such amounts as are set forth in Sections 2 and 4 of the Team Sponsorship Allocation Agreement), less (a) any Commissions
to which Representative is entitled under Section 4.1 hereof, (b) the Monthly SO/OH Payment due pursuant to Section 4.1A, (c) any payment due to
Representative from Knicks, LLC pursuant to Section 3 of the Team Sponsorship Allocation Agreement and (d) Fulfillment Costs incurred by
Representative. Each such payment shall be accompanied by a reasonably-detailed settlement report (each, a “Monthly Report”), which Monthly Report
shall detail Gross Revenue and Commissions due thereon with respect to the applicable month, except that (i) the Monthly Report for June of each
Contract Year shall be provided to Knicks, LLC on or before the immediately-following July 10th and (ii) if, due to the offsets set forth in (a), (b), (c)
and/or (d), no payment from Representative to Knicks, LLC is due with respect to any month, Representative shall nevertheless timely provide a
Monthly Report. Notwithstanding payment made in accordance with the foregoing provisions of this Section 6.2, Knicks, LLC may reasonably request
additional information regarding such Monthly Report, and Representative agrees to provide such additional information. Knicks, LLC may dispute any
amount in any Monthly Report. The parties shall promptly confer to resolve any such areas of disagreement, and each party shall be entitled to refer any
disagreement that cannot be resolved to the Accounting Firm (as defined in the Arena License) in accordance with Section 9.06(c) of the Arena License.
Notwithstanding the foregoing, the acceptance of a Monthly Report (or any portion thereof) and the payment of any amounts in accordance therewith
shall be without prejudice to Knicks, LLC’s rights to subsequently dispute any applicable amounts (including pursuant to Section 9.06(c) of the Arena
License and Section 6.6 hereto).
8
Representative shall pay Knicks, LLC any disputed amounts agreed upon by the parties or awarded by the Accounting Firm, as applicable, within five
(5) business days after the dispute is resolved by the parties or by the Accounting Firm in accordance with Section 9.06(c) of the Arena License.
6.3 Data Exchange Obligations.
(a) The parties will cooperate in good faith with respect to reasonable requests for sales information and data, including Sponsorship Customer
Data, as defined below, relating to the Team Sponsorship Assets during the Term in order to maximize the Gross Revenue from Representative’s sale of
the Team Sponsorship Assets hereunder.
(b) Representative shall promptly provide to Knicks, LLC all consumer data that Representative obtains relating to Team Sponsorship Assets
(“Sponsorship Customer Data”), and, subject to the sentence that follows, Knicks, LLC shall solely retain rights in such Sponsorship Customer Data.
Notwithstanding the foregoing, Representative shall have the right to use such Sponsorship Customer Data that Representative has obtained in
furtherance of its sales efforts under this Agreement, as well as for its own purposes unrelated thereto; provided, however, that Representative may not
sell, lease or otherwise convey such Sponsorship Customer Data to any third party.
(c)
As to all consumer data other than Sponsorship Customer Data, the rights to such as between the parties shall be the same as those set
forth as between the Arena License Parties in Article X of the Arena License.
(d)
The obligations set forth in this Section 6.3 are subject to any applicable legal and regulatory requirements.
6.4 Services. Unless otherwise agreed to by the parties, Representative shall provide services with respect to accounting, billing and collection
efforts in relation to the sale of Team Sponsorship Assets by Representative.
6.5 Asset Inclusion Beyond Term. Notwithstanding anything herein to the contrary, Representative acknowledges and agrees that Knicks,
LLC must approve in writing in its sole discretion any inclusion of Team Sponsorship Assets with respect to periods which follow the (i) then-scheduled
expiration date of the Term of this Agreement (i.e., after June 30, 2030 with respect to the Initial Term, and after the then-upcoming June 30th during
any Renewal Term) or (ii) termination date for which notice of termination has been given, in each case, in Sponsorship Agreements (multi-element or
otherwise) that are scheduled to expire after the conclusion of such Term.
6.6 Audit Rights. Each party shall permit the other party, at its cost, either itself or through an independent auditor selected by the auditing
party, during regular business hours at the offices of the party being audited, to inspect, make copies of and otherwise audit such books and records as
are related to the services and sponsorship relationships hereunder upon no less than thirty (30) days’ notice; provided, however, that (a) neither party
may request an audit more than once per Contract Year and (b) no audit may cover a period covered by a prior audit. If, as a result of any such audit, it
is determined that either party has underpaid the other party, such underpaying party shall reimburse the other party within thirty (30) days of its receipt
of notice thereof for the underpayment (plus interest thereon). If such underpayment exceeds five percent (5%) of the amount properly due, the costs of
such audit shall also be reimbursed.
6.7 Collections. Subject to any alternative procedure that may be agreed upon by the parties, Representative shall provide a monthly detailed
list of outstanding accounts. Representative shall maintain reasonably detailed records of collection efforts. Knicks, LLC will, upon Representative’s
request, work with Representative (at the sole cost of Representative) in making collection efforts when the balance is sixty (60) days or more past due.
In making its collections efforts, Representative shall use the same degree of diligence that it employs with respect to its own accounts receivable. With
respect to the institution of legal proceedings in connection with unpaid invoices
9
under any agreement, the party whose allocation of funds in such agreement is greater may determine whether such legal proceedings shall be instituted,
regardless of whether such party is the contracting party, and the contracting party shall comply with such determination. The costs of legal proceedings
shall be funded pro rata by the parties, regardless of who determined to bring such proceedings; provided that any reimbursement of such costs shall
also be distributed pro rata among the parties. In the event that either party collects any previously-unpaid amounts directly, it will immediately notify
the other party of such collection in writing. In the event of such a collection by Knicks, LLC, Representative may deduct the appropriate Commission
attributable to such amount (calculated following deduction of any attorneys’ fees incurred by Knicks, LLC) from its next monthly remittance pursuant
to Sections 2 and 4 of the Team Sponsorship Allocation Agreement. For the avoidance of doubt, Representative shall have no liability to Knicks, LLC
with respect to uncollected amounts to the extent Representative is in compliance with this Agreement. Notwithstanding anything herein to the contrary,
if any revenue payable to Representative by an affiliate of Representative is subject to sharing with Knicks, LLC hereunder, such revenue shall be
deemed “collected” by Representative on the earlier of (i) the date on which such revenue is actually collected and (ii) the date on which such revenue is
payable pursuant to the terms of the applicable contract or other arrangement.
7. Termination.
7.1 Rights.
(a) In the event that either party (the “Defaulting Party”) has failed to comply with any material provision of this Agreement and has not cured
such noncompliance within thirty (30) days after delivery of written notice thereof from the other party (the “Non-Defaulting Party”), then this
Agreement, at the option of the Non-Defaulting Party, may be terminated upon the date specified in a notice to the Defaulting Party, which date shall be
not less than thirty (30) days after the date such notice is given to the Defaulting Party. The Non-Defaulting Party shall have all of its contractual rights
hereunder, in addition to all other rights and remedies to which it may be entitled at law, in equity or otherwise.
(b) Knicks, LLC shall have the right to terminate this Agreement in accordance with the terms set forth in Section 4.5 above.
(c) Either party shall have the right to terminate this Agreement upon written notice to the other party in the event that the other party becomes
insolvent or files or has filed against it any action in the nature of bankruptcy.
(d) Each party shall have the right to terminate this Agreement as of June 30, 2025 by providing written notice to the other party on or before
March 31, 2025.
(e) Each party shall have the right to terminate this Agreement upon written notice to the other party within sixty (60) days after a change of
control of either party (including a change of control of the terminating party), including any transaction in which any third party acquires substantially
all of the assets of Knicks, LLC.
(f) In the event of any early termination of this Agreement and/or at the expiration of this Agreement, (i) Knicks, LLC shall continue to honor
all Sponsorship Agreements properly entered into by Representative prior to such termination or expiration, and Representative shall continue to pay to
Knicks, LLC its share with respect to such Sponsorship Agreements in accordance with the Team Sponsorship Allocation Agreement, (ii) both parties
will perform their respective obligations hereunder that relate to periods prior to the effective date of termination but that, by their nature, are necessarily
performed subsequent to such effective date (including, without limitation, in the case of Representative, billing, collections, provision of Monthly
Reports and payments to Knicks, LLC) and (iii) Representative shall assign to Knicks, LLC (or any other party designated by Knicks, LLC) (A) each
Sponsorship Agreement with respect to which the sponsorship assets purchased are exclusively or primarily Team Sponsorship Assets and (B) the rights
under each other Sponsorship Agreement to the extent relating to Team Sponsorship Assets. Notwithstanding the foregoing, the post-termination/post-
expiration Commissions payable hereunder for Gross Revenue received pursuant to Sponsorship Agreements following the effective date of expiration
or termination of
10
this Agreement shall be an amount equal to (x) [*****], less (y) the reasonable costs incurred by Knicks, LLC and its Affiliates in connection with their
performance of services that were previously performed by Representative and its Affiliates hereunder.
(g) In the event that Representative properly terminates this Agreement pursuant to Subsection 7.1(a), Knicks, LLC (or its parent entity MSG
Sports, LLC) shall, subject to the remainder of this Section 7.1(g), be solely responsible for all severance costs associated with any termination of any
employee of Representative as of the effective date of such termination of this Agreement who supports, in whole or in part, Representative in carrying
out its responsibilities hereunder that does not become an employee of Knicks, LLC or MSG Sports, LLC prior to, upon or promptly following the
effective date of his or her termination. Representative shall use commercially reasonable efforts to minimize any such severance costs, which will (in
any event and without limiting the foregoing) be reasonable and generally consistent with Representative’s past practice for similarly-situated
employees.
7.2 Payments. In the event of termination of this Agreement for any reason, each party shall be obligated for all amounts payable by it
pursuant to its terms.
8.
Representations and Warranties.
8.1 Representations and Warranties of Representative.
(a) Representative represents and warrants to Knicks, LLC that (i) Representative is a limited liability company duly organized, validly
existing and in good standing under the laws of Delaware, (ii) it has the power and authority to enter into this Agreement and to fully perform its
obligations hereunder, (iii) this Agreement constitutes the valid, legal and binding obligation of Representative and is enforceable against Representative
in accordance with its terms, and (iv) there are no actions, suits or proceedings of a material nature pending or, to its best knowledge, threatened against
Representative that would affect its ability to enter into this Agreement or perform its obligations hereunder.
(b) Representative represents, warrants and agrees that it shall not sell any Team Sponsorship Assets for Knicks, LLC (or Non-Team
Sponsorship Assets and Arena Game Shared Sponsorship Assets, where sold with Team Sponsorship Assets) if Representative has actual knowledge
that (i) Knicks, LLC’s exhibition thereof (including, without limitation, any and all visual, literary, dramatic and musical material and software included
therein) would infringe any copyright, trademark, patent or any other intellectual property, proprietary or other rights of any nature whatsoever of any
person or entity and/or (ii) such assets do not comply (or would not comply, as sold by Representative) with all applicable rules, regulations and laws,
including any applicable League Rules.
(c) Representative represents, warrants and agrees that it will use good faith efforts to ensure that every sponsor and agency that purchases
Team Sponsorship Assets from Representative shall sign an agreement with Representative that includes an indemnity in favor of Knicks, LLC, its
affiliated companies, directors, officers, employees, contractors, agents, successors and assigns relating to any sponsor advertising material to be utilized
as part of the Team Sponsorship Assets that is generally consistent with past practice (the “Knicks, LLC Indemnity”). Representative shall provide
Knicks, LLC with a copy of any such signed agreement (including the foregoing Knicks, LLC Indemnity) upon Knicks, LLC’s request.
(d) Representative represents, warrants and agrees that it shall ensure that, unless otherwise approved by Knicks, LLC, each agency and
sponsor to whom Representative sells Team Sponsorship Assets shall be subjected to the credit check and customer qualification procedures as are
applied to Representatives sales of its own sponsorship assets.
8.2 Representations and Warranties of Knicks, LLC. (a) Knicks, LLC represents and warrants to Representative that (i) it is duly organized,
validly existing and in good standing under the laws of Delaware, (ii) it has the power and authority to enter into this Agreement and to fully perform its
obligations hereunder, (iii) this
11
Agreement constitutes the valid, legal and binding obligation of Knicks, LLC and is enforceable against Knicks, LLC in accordance with its terms and
(iv) there are no actions, suits or proceedings of a material nature pending or to its best knowledge, threatened against Knicks, LLC that would affect its
ability to enter into this Agreement or perform its obligations hereunder.
(b) With respect to any agreements that Knicks, LLC enters into directly with a sponsor or agency, as set forth in Section 1.3 above, for the
purchase of Team Sponsorship Assets, Knicks, LLC represents, warrants and agrees that it will use good faith efforts to ensure that such sponsors and
agencies sign an agreement with Knicks, LLC that includes an indemnity in favor of Representative, its affiliated companies, directors, officers,
employees, contractors, agents, successors and assigns relating to any sponsor advertising material to be utilized as part of the Team Sponsorship Assets
that is generally consistent with past practice (the “Representative Indemnity”). Knicks, LLC shall provide Representative with a copy of any such
signed agreement (including the foregoing Representative Indemnity) upon Representative’s request.
8.3 Survival. The terms of this Section 8 shall survive the expiration or earlier termination of this agreement.
9. Indemnity.
9.1. Representative Indemnity. Representative shall at all times, when requested, defend, indemnify and hold harmless Knicks, LLC and
Knicks, LLC’s owners (direct and indirect), related companies and affiliates and their respective directors, officers, employees, contractors, agents,
successors and assigns (collectively, the “Knicks, LLC Indemnitees”) from and against, and shall reimburse such Knicks, LLC Indemnitees with respect
to, any and all claims, actions, liabilities, losses, damages, costs and expenses including, without limitation, reasonable attorneys’ fees, disbursements
and court costs, incurred by each Knicks, LLC Indemnitee by reason of or arising out of or in connection with any breach by Representative of any
covenant, agreement, representation or warranty contained herein.
9.2 Knicks, LLC Indemnity. Knicks, LLC shall at all times, when requested, defend, indemnify and hold harmless Representative and
Representative’s owners (direct and indirect), related companies and affiliates and their respective directors, officers, employees, contractors, agents,
successors and assigns (collectively, the “Representative Indemnitees”) from and against, and shall reimburse such Representative Indemnitees with
respect to, any and all claims, actions, liabilities, losses, damages, costs and expenses including, without limitation, reasonable attorneys’ fees,
disbursements and court costs, incurred by each Representative Indemnitee by reason of or arising out of or in connection with any breach by Knicks,
LLC of any covenant, agreement, representation or warranty contained herein.
9.3 Indemnity Procedures. If any complaint, lawsuit or enforcement action is received by or filed against any party entitled to the benefit of
indemnification hereunder, or if such party receives notice of any matter for which indemnification is to be given hereunder, written notice thereof shall
be given to the indemnifying party. The indemnifying party shall engage attorneys of its own choice at its own cost, risk and expense, subject to
approval of the indemnified party, which shall not be unreasonably withheld. The indemnified party shall cooperate in the investigation, trial and
defense of such claim, lawsuit or action and any appeal arising therefrom. The indemnified party may, at its own cost, retain its own counsel to
participate in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom. The indemnifying party shall not settle any
claim, lawsuit or enforcement action without the written consent of the indemnified party, which shall not be unreasonably withheld.
9.4 Survival. The terms of this Section 9 shall survive the expiration or earlier termination of this agreement.
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10. Miscellaneous.
10.1 Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of New York without regard to
laws regarding choice of law or jurisdiction. The parties consent to the jurisdiction of the courts located in the state of New York (state or federal, as
applicable) for the limited purpose of enforcement of the provisions of this Agreement and related matters.
10.2 Severability. If any term, provision, covenant or condition of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the provisions shall remain in full force and effect and shall in no way be affected, impaired or invalidated,
unless such invalidity, voidness or unenforceability materially alters the purposes of this Agreement.
10.3 Notices. All notices, requests, consents, directions, demands, waivers and other communications provided for herein shall be in writing
and shall be deemed given, made or served if personally delivered, sent by express overnight courier service, sent by certified mail, postage prepaid,
return receipt requested, or telecopied to the applicable party at the address listed below:
If to Representative:
MSG Entertainment Group, LLC
2 Penn Plaza, 14th Floor
New York, NY 10121
Attention: EVP of Marketing Partnerships
With a copy to:
MSG Entertainment Group, LLC
2 Pennsylvania Plaza, 19th Floor
New York, New York 10121
Attention: General Counsel
If to Knicks, LLC:
Knicks, LLC
2 Pennsylvania Plaza
New York, New York 10121
Attention: President
with a copy to:
Knicks, LLC
2 Pennsylvania Plaza
New York, New York 10121
Attention: General Counsel
If to the NBA:
National Basketball Association
645 Fifth Avenue
New York, New York 10022
Attention: General Counsel
13
or as to each party, at such other addresses as shall be designated by such party in a written notice to the other party. All such notices shall be deemed
effective (i) if personally delivered, on the date of delivery, (ii) if mailed, the first business day that is at least three (3) days after the date deposited in
the U.S. Mail or (iii) if telecopied or sent by express overnight courier service, one business day after the date transmitted by telecopier or delivered to,
or picked up by, a nationally recognized express overnight courier service for next day delivery.
10.4 Assignment; Binding Upon Successors. Representative shall have the right to assign this Agreement upon written notice to Knicks, LLC
to any person or entity that acquires the Arena, provided the assignee agrees in writing to assume all of Representative’s obligations under this
Agreement. Knicks, LLC shall have the right to assign this Agreement upon written notice to Representative to any person or entity that acquires the
Team in accordance with League Rules, provided the assignee agrees in writing to assume all of Knicks, LLC’s obligations under this Agreement.
Knicks, LLC shall further have the right to collaterally assign this Agreement to secure indebtedness of the Knicks incurred in accordance with League
Rules. Except as set forth in this Section 10.4, neither party shall be permitted to assign this Agreement without the prior written consent of the other
party, not to be unreasonably withheld, conditioned or delayed. Notwithstanding anything herein to the contrary, any agreement, consent, waiver or
modification to the terms of this Agreement, whether or not contemplated herein, that would constitute a material modification to the terms of this
Agreement that would remain in effect after the parties are no longer affiliated, shall require the prior written approval of the NBA. Subject to the
foregoing obligations to obtain NBA approval, a change of control or ownership of either party shall not be deemed an assignment under this Section
10.4, and, in the event of any such proposed change of control or ownership of either party, the parties may mutually agree to amend, modify or
supplement this Agreement in order to facilitate such change of control or ownership transaction.
10.5 Modifications, Amendments, Waivers and Termination. This Agreement may not be amended, modified, supplemented or terminated
unless in writing executed by the parties hereto and, in each case, unless approved in advance in writing by the NBA.
10.6 Confidentiality. The parties agree that this Agreement (including its existence and all provisions hereof), any and all information related
to the business and activities of the other party that may be obtained from any source or may be developed as a result of this Agreement, and any other
information of the other party that is designated proprietary or confidential or that any reasonable person would regard as such based on the nature or
source of the information (collectively, “Confidential Information”), in each case, shall be kept confidential and shall not be disclosed to third parties,
except that each party may disclose such Confidential Information only (a) to its agents, representatives, affiliated entities and employees who need to
know and who shall agree to be bound by the terms and conditions of this Agreement (including without limitation the confidentiality obligations of this
paragraph), (b) in response to a lawfully-served subpoena, (c) pursuant to any law, rule, regulation or request to produce documentation made by any
governmental body (including, but not limited to, the Securities Exchange Commission), national securities exchange or in any administrative or judicial
proceeding, (d) to any prospective lender, investor, financing entity or prospective purchaser of a direct or indirect interest in such party or the assets of
such party, provided that any such person or entity agrees to be bound by the confidentiality obligations of this paragraph, (e) the NBA and any agents,
representatives, affiliated entities and employees of the NBA and/or (f) as required by League Rules.
10.7 Interpretation. The section headings contained in this Agreement are solely for purpose of convenience and shall neither be deemed a part
of this Agreement nor used in any interpretation hereof.
10.8 Integration. This Agreement contains all of the agreements of the parties hereto with respect to the matters covered hereby, and
supersedes in their entirety any prior agreements, oral or written, of the parties.
10.9 No Third-Party Beneficiaries. The execution and delivery of this Agreement shall not be deemed to confer any rights upon, nor obligate
either of the parties hereto, to any person or entity not a party to this Agreement; provided that the NBA is a third party beneficiary with respect to
Sections 10.4, 10.5, 10.6 and 10.12.
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10.10 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original Agreement, but
all of which together shall constitute one and the same instrument.
10.11 Limited Recourse. Any recourse, action or claim to which either party is entitled hereunder shall extend only to the other party and not
to any direct or indirect owner of such party or any agent of such party, past, present or future.
10.12 Subordination. This Agreement is subject to and limited by Representative’s and Knicks, LLC’s agreements with, and the rules,
regulations and agreements of, all leagues (including without limitation, League Rules and any restrictions on the sale of sponsorship assets or
categories based on League Rules as a result of the National Basketball Association’s sponsorship partnerships), associations, individual athletic teams,
program suppliers and distributors, as such agreements, rules or regulations may from time to time be amended, entered into, interpreted, enacted,
performed or enforced. Knicks, LLC and Representative hereby covenant to comply with all League Rules in connection with their respective
performances hereunder. In the event of any conflict between this Agreement and League Rules, League Rules shall control and govern in all respects,
and the performance of Knicks, LLC shall be excused to the extent that the same is prohibited by League Rules. Each agreement entered into by either
Party in performance of its obligations hereunder (e.g., each Sponsorship Agreement entered into with a third party as described in Section 1.3) shall (a)
be subject to League Rules (including any applicable approval rights) and (b) include all NBA-required subordination language.
10.13 No Joint Venture. Nothing contained herein shall constitute or be deemed to constitute the parties as partners or joint venturers. The
parties hereto are independent contractors responsible for their own obligations.
10.14 Limitation of Liability. EXCEPT TO THE EXTENT ARISING FROM A PARTY’S INDEMNIFICATION OBLIGATIONS WITH
RESPECT TO THIRD PARTY CLAIMS PURSUANT TO SECTION 9 ABOVE, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES OR LOST
PROFITS, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10.15 No Conflict. Knicks, LLC acknowledges and agrees that, as part of its regular business practices, Representative and its affiliates
undertake representations of the type contemplated hereunder for affiliates of Representative including the television networks known as “the MSG
Network” and “MSG+,” sports teams and venues that may have interests in conflict with those of Knicks, LLC or one or more of the Teams. Knicks,
LLC agrees that such representations by Representative or its affiliates shall not be construed or deemed to be a violation or breach of any obligation on
the part of Representative to Knicks, LLC hereunder.
[Signature page to follow]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.
KNICKS HOLDINGS, LLC
By: /s/ Victoria M. Mink
Name: Victoria M. Mink
Title: Executive Vice President and Chief Financial Officer
MSG ENTERTAINMENT GROUP, LLC
By: /s/ Philip D’Ambrosio
Name: Philip D’Ambrosio
Title: Senior Vice President, Treasurer
CERTAIN CONFIDENTIAL INFORMATION, IDENTIFIED BY BRACKETED ASTERISKS “[*****]”, HAS BEEN OMITTED FROM THIS EXHIBIT
BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED.
Exhibit 10.77
SPONSORSHIP SALES AND SERVICE REPRESENTATION AGREEMENT
THIS SPONSORSHIP SALES AND SERVICE REPRESENTATION AGREEMENT (this “Agreement”) is made and entered into as of
April 15, 2020 (the “Effective Date”) by and between New York Rangers, LLC (“Rangers, LLC”), a Delaware limited liability company with offices at
2 Penn Plaza, New York, NY 10121, and MSG Entertainment Group, LLC (formerly MSG Sports & Entertainment, LLC), a Delaware limited liability
company with offices at 2 Penn Plaza, New York, NY 10121 (“Representative”).
WHEREAS, Representative directly or indirectly owns and operates, inter alia, the sports and entertainment complex known as Madison
Square Garden (the “Arena”); and
WHEREAS, Rangers, LLC owns and operates the New York Rangers (the “Rangers”); and
WHEREAS, Rangers, LLC desires to appoint Representative as sales and service representative for sponsorships with respect to the Rangers,
and Representative desires to be so appointed and to perform the services described herein, each on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth, the parties agree as follows:
1. Appointment.
1.1 Appointment. Subject to the terms of this Agreement, Rangers, LLC hereby appoints Representative as its exclusive (except as otherwise
provided in this Agreement) sales and service representative for all sponsorship benefits available for sale in connection with the Rangers (such
sponsorship benefits, the “Team Sponsorship Assets”) to be sold in accordance with the terms and conditions set forth herein, which shall include, but
not be limited to, the items listed on Schedule A hereto, as well as such other sellable sponsorship assets as the parties agree, after good faith
consideration and discussion, are later developed and/or appropriately deemed to relate primarily to the Rangers. As clarification, Team Sponsorship
Assets hereunder shall not include Arena Game Shared Sponsorship Assets (as defined in that certain Arena License Agreement between Rangers, LLC
and Representative’s subsidiary MSG Arena, LLC (collectively, the “Arena License Parties ”) of even date herewith (the “Arena License”)),
Tickets for Rangers Events (each as defined in the Arena License) (“Tickets”), hospitality at Rangers Events (e.g., suite licenses, memberships to the
Madison Club and The Loft, newly-created hospitality space sales) (“Hospitality”) or Broadcast Advertising Inventory (as defined below), with respect
to all of which Rangers, LLC shall have the exclusive rights or receive an agreed-upon allocation pursuant to that Arena License. “Broadcast
Advertising Inventory” means any audio-visual, audio-only, video-only, graphical, text or any other form of advertising units or sponsorship rights,
regardless of the medium (now known or hereafter developed) in which such advertising units or sponsorship rights are available or promoted, whether
displayed or distributed via billboards, studio signage, tickers, “double-box commercials,” banners, links, bugs, fly-outs, overlays, companion banners,
or in-stream, pre-roll or post-roll and, for clarity, including promotional spots, product/service placement, designations, integrations and the like, in each
case, associated with any Broadcast Rights (as defined in the Arena License) of the Rangers. Notwithstanding anything set forth herein, the parties
acknowledge that various rights with respect to the Broadcast Advertising Inventory have been granted to MSG Networks Holdings, L.P. (“MSGN”) via
a certain Broadcast Rights Agreement between Rangers, LLC and MSGN, and that MSGN has, in turn, via a certain advertising sales representation
agreement (the “Network Rep Agreement”), granted to Representative the exclusive right to sell such Broadcast Advertising Inventory; nothing
contained herein is intended to affect such grants of rights.
1
1.2 Exclusivity. The exclusivity granted above means that, except as provided in Section 5.4, Rangers, LLC shall not (a) sell on its own
behalf Team Sponsorship Assets without the prior written approval of Representative, such approval not to be unreasonably withheld, conditioned or
delayed, or (b) appoint a third party to sell Team Sponsorship Assets on Rangers, LLC’s behalf without the prior written approval of Representative.
Notwithstanding anything to the contrary in this Agreement, Rangers, LLC may include Team Sponsorship Assets in agreements that Rangers, LLC or
any of its affiliates enters into independently of Representative that are principally related to non-sponsorship matters (e.g., ticketing and Broadcast
Rights agreements), as long as such inclusion does not violate the terms of a then-existing Sponsorship Agreement (as defined below), and (x) no
revenue from such agreements shall be included in Gross Revenue (as defined below) and (y) no Commissions shall be received by Representative for
such agreements.
1.3 (a) Contracting Process. Representative shall negotiate, on behalf of Rangers, LLC, sponsorship agreements that provide for the sale of,
payment for and delivery of Team Sponsorship Assets. Such agreements, as well as any sponsorship agreements in existence as of the Effective Date
that include Team Sponsorship Assets shall hereinafter be referred to as “Sponsorship Agreements.” Representative shall make commercially
reasonable, good faith efforts to ensure that Rangers, LLC is the direct contracting party with all sponsors with respect to whom the sponsorship assets
purchased are exclusively or primarily Team Sponsorship Assets, and payments shall be made directly from the sponsor to Rangers, LLC in such
instances, subject to the final sentence of this subsection (a). Where Representative is unable to effect that outcome, or where Team Sponsorship Assets
are included in multi-property deals that do not consist exclusively or primarily of Team Sponsorship Assets, Representative shall make commercially
reasonable, good faith efforts to include Rangers, LLC as an express third-party beneficiary in any such agreements entered into during the Term. It is
agreed and acknowledged that Sponsorship Agreements that are entered into by Rangers, LLC, MSG Sports, LLC or any other Rangers-specific entity
that include Arena Game Shared Sponsorship Assets, Non-Team Sponsorship Assets and/or, during the term of the Network Rep Agreement, Broadcast
Advertising Inventory shall be subject to the payment of appropriate allocations with respect to all revenue related to such assets, which allocations shall
be agreed upon by the parties in advance of Rangers, LLC’s approval of any such Sponsorship Agreement and set forth in Schedule 2 of the Team
Sponsorship Allocation Agreement (defined in Section 3.3 below).
(b) Rangers Approval. Notwithstanding anything herein to the contrary, Sponsorship Agreements that include Team Sponsorship Assets (and
any amendment thereto or termination, extension or renewal thereof) shall be subject to the prior written approval of Rangers, LLC, which shall not be
unreasonably withheld, conditioned or delayed; provided, however, that, in any instance in which Team Sponsorship Assets are not included in a
potential Sponsorship Agreement, or an agreement is not reached, in either case by virtue of Rangers, LLC’s failure to approve of such inclusion, the
parties will discuss in good faith a downward adjustment to that Contract Year’s Annual Sales Target (as defined in Section 4.3 below).
2. Term. Subject to the terms of this Agreement (including without limitation Section 7 hereof), the term of this Agreement shall commence as of
the Effective Date and expire on June 30, 2030 (the “Initial Term”). The term of this Agreement shall automatically extend for one-year periods after the
expiration of the Initial Term and any subsequent one-year renewal terms (each, a “Renewal Term” and, collectively with the Initial Term, the “Term”),
unless either party delivers written notice to the other party at least twelve (12) months prior to the expiration of the Initial Term or six (6) months prior
to the expiration of any Renewal Term that it wishes to terminate the Agreement effective as of the expiration of the then-applicable Term. As used
herein, “Contract Year” means each twelve-month period during the Term commencing on July 1 and ending on the immediately-succeeding June 30;
provided, however, that the period beginning on the Effective Date and ending June 30, 2020 (the “Stub Year”) shall be deemed a Contract Year.
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3. Team Sponsorship Assets.
3.1 Availability of Assets. Subject to League Rules (as defined in the Arena License), Rangers, LLC and Representative, in each case, to the
extent within its control, shall at all times maintain availability of Team Sponsorship Assets that are included in any then-active Sponsorship
Agreements, as well as such other Team Sponsorship Assets as Rangers, LLC may otherwise commit to a third party sponsor, unless either Rangers,
LLC or Representative is able to provide one or more “make good” assets that are acceptable to the affected sponsor or elimination of the asset(s) is
otherwise agreed upon by the parties. Representative shall comply, and ensure that other applicable parties comply, with each Sponsorship Agreement
in all respects.
3.2 Elimination and Addition of Assets. With respect to any currently-available Team Sponsorship Assets that are not, at any given time,
included in any then-active Sponsorship Agreements, Rangers, LLC may elect to eliminate such Team Sponsorship Assets with respect to any Contract
Year (an “Asset Reduction”); provided that, to the extent that such elimination has or is expected to materially affect sales of Team Sponsorship Assets,
the Annual Sales Target for such Contract Year will be adjusted pursuant to Section 4.4(a) below. Any addition of new Team Sponsorship Assets with
respect to any Contract Year shall be similarly factored in when the parties set the Annual Sales Target, as well as in the contemplation of any mid-year
adjustment pursuant to Section 4.4(b) below.
3.3 [*****]. With respect to all Team Sponsorship Assets sold pursuant to this Agreement, Rangers, LLC and Representative, in each case, to
the extent within their respective control, shall use commercially reasonable efforts to provide such Team Sponsorship Assets to Representative or the
respective sponsor (as appropriate) in accordance with the terms of the relevant Sponsorship Agreement. If Rangers, LLC is unable to provide such
Team Sponsorship Assets at the appointed time or manner for any reason, then Representative, [*****], shall [*****] use commercially reasonable efforts
to replace the undelivered Team Sponsorship Assets with alternative Team Sponsorship Assets, which alternative Team Sponsorship Assets Rangers,
LLC would then provide (as approved by Rangers, LLC). [*****].
4. Commissions; Annual Sales Target; Rate Card.
4.1 Commissions. Subject to the terms of this Agreement, in consideration of the services of Representative, Representative will, for each
Contract Year after the Stub Year, and except as otherwise agreed by the parties, receive commissions with respect to each Contract Year on the sale of
Team Sponsorship Assets (“Commissions”) based on the following commission structure:
(a)
except as set forth in subsections (c)-(g) and Section 7.1(d) below, with respect to Gross Revenue (as defined below) up to the Annual
Sales Target for such Contract Year, the Commission shall be [*****];
(b)
except as set forth in subsection (c)-(g) below, for any Gross Revenue above the Annual Sales Target for such Contract Year, the
Commission shall be [*****] in excess of such Contract Year’s Annual Sales Target;
(c)
with respect to Sponsorship Tickets (as defined in Section 4.8) included in any Sponsorship Agreement, Representative shall be
entitled to no Commission thereon, unless separately agreed to in writing (email being sufficient) by Rangers, LLC;
(d)
with respect to any Sponsorship Hospitality (as defined in Section 4.9) included in any Sponsorship Agreement, Representative shall
be entitled to no Commission thereon pursuant to this Agreement, and the parties understand and acknowledge that Representative shall be entitled to
compensation therefrom as set forth in Article V of the Arena License;
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(e)
with respect to any Team Sponsorship Assets delivered after the Term hereof in accordance with Section 7.1(f) below, the
Commission shall be as set forth in such Section; and
(f)
with respect to any Team Sponsorship Asset (other than Sponsorship Tickets or Sponsorship Hospitality) for which the Fulfillment
Costs (as defined below) exceed thirty (30%) of the value allocated to such asset, the Commission thereon shall be [*****]. For avoidance of doubt, any
commissions, fees or other amounts paid to or retained by agencies or other Representative-engaged third parties with respect to the sale of Team
Sponsorship Assets shall be borne by Representative without any reduction in the amounts payable to Rangers, LLC from the gross amount of the sale
other than the Commissions.
(g)
Commissions shall be paid by Rangers, LLC to Representative on a monthly basis, via offset against amounts due from
Representative to Rangers, LLC under Section 6.2 below or, only to the extent necessary, via wire transfer from Rangers, LLC to Representative. Each
such payment shall be consistent with the amount set forth for Commissions for such month in the applicable Monthly Report (as defined in Section
6.2). To the extent that a Commissions payment is to be made by wire payment, such payment will be made within five (5) days following Rangers,
LLC’s receipt of the applicable Monthly Report; provided, however, that, to the extent that Rangers, LLC has requested additional information or raised
a dispute as to a Monthly Report, either pursuant to Section 6.2, such payment shall be made within five (5) days following its receipt of such
information and/or the resolution of the dispute in accordance with the process set forth in such Section
“Gross Revenue” shall mean gross sales revenue actually received by Representative, Rangers, LLC or MSG Sports, as applicable, from Team
Sponsorship Assets contained in Sponsorship Agreements (and for this purpose, prior to any deduction of the applicable Commission). For avoidance of
doubt, sponsorship fees under any Sponsorship Agreement shall count toward Gross Revenue for the purpose of this Agreement in the Sponsorship
Agreement contract year to which such fees relate under such Sponsorship Agreement, consistent with Representative’s past practice, regardless of any
recognition of revenue pursuant to GAAP that is inconsistent therewith. Notwithstanding anything to the contrary contained herein, the parties
acknowledge and agree that, with respect to any Contract Year, for purposes of (i) calculating the Commission pursuant to this Section 4.1 and (ii)
determining whether or not the Annual Sales Target has been achieved, Gross Revenue shall not include any revenue generated from the sale of Arena
Game Shared Sponsorship Assets or Non-Team Sponsorship Assets (each as defined in the Arena License) and/or Team Sponsorship Assets sold
incrementally with respect to any playoff games (“Playoff Sponsorship Assets”). Except as otherwise agreed by the parties, the Commission payable on
gross revenue generated from the sale of Playoff Sponsorship Assets (other than Sponsorship Tickets and Sponsorship Hospitality) shall be [*****].
4.1A. Sales Operations Payment. With respect to any Contract Year, in addition to any Commission to which Representative is entitled,
Rangers, LLC shall also pay to Representative an amount covering a share of the cost of Representative’s sales and service staff and overhead (the
“Sales Operations Payment”). With respect to the Stub Year, the Sales Operations Payment shall be $[*****]; with respect to the 2020-21 Contract Year,
the Sales Operations Payment shall be $[*****]. With respect to the 2021-22 Contract Year and each Contract Year thereafter, the Sales Operations
Payment will be 103% of the Sales Operations Payment for the immediately preceding Contract Year. Representative may deduct and retain one-twelfth
(1/12) (or, with respect to the Stub Year, the applicable pro-rated monthly amount) (either, a “Monthly SO/OH Payment”) of the applicable Contract
Year’s Sales Operations Payment from each Monthly Net Sponsorship Payment it makes pursuant to Section 6.2 below; provided, however, that, with
respect to any shortfall in any month (i.e., any monthly portion of the Sales Operations Payment that is not paid by offset against that month’s Monthly
Net Sponsorship Payment to Rangers, LLC), Rangers, LLC shall, no more than fifteen (15) days following the end of such month, pay such shortfall to
Representative. Notwithstanding anything herein to the contrary, the Sales Operations Payment shall terminate in the event of any termination of this
Agreement, and the Sales Operations Payment for the Contract Year in which such termination occurs shall be reduced on a pro-rata basis.
4
4.2 Fulfillment Costs. “Fulfillment Costs” shall mean the direct incremental out-of-pocket costs incurred by either Representative or Rangers,
LLC in fulfilling Sponsorship Agreement obligations or otherwise delivering Team Sponsorship Assets that Representative has sold hereunder (e.g.,
digital content creation, development of new inventory, costs of T-shirts, etc.); provided, however, that, for avoidance of doubt, “Fulfillment Costs”
shall not include Commissions payable to Representative, Representative overhead (including employee compensation) or sales costs (e.g., sales
materials, research, travel and entertainment, training, CRM, software, client hospitality, agency commission, etc.). Representative and Rangers, LLC
shall regularly discuss and collaborate in good faith to determine the appropriate levels of Fulfillment Costs with respect to Team Sponsorship Assets,
taking into account such considerations as sponsor satisfaction, Rangers brand maintenance, etc. Except as otherwise agreed by the parties, Rangers,
LLC shall be responsible for paying all such Fulfillment Costs that either party incurs, and Representative may deduct from the payments it makes to
Rangers, LLC pursuant to Section 6.2 hereof the amounts of such Fulfillment Costs that it has directly incurred in accordance with this Agreement,
provided that, upon any such deduction, it shall provide to Rangers, LLC invoices or receipts reflecting such costs concurrently with its delivery of the
relevant payment. Notwithstanding anything herein to the contrary, Representative shall not incur Fulfillment Costs payable by Rangers, LLC without
the prior written approval of Rangers, LLC (including approval in any deal budget) in excess of those previously approved by Rangers, LLC including
as set forth in any deal budget.
4.3 Annual Sales Target. “Annual Sales Target” shall mean, for each Contract Year following the Stub Year, an amount to be mutually agreed
by the parties (determination of which, if necessary, will be escalated to a senior executive of each party) following good faith discussions for a
reasonable period of time prior to and/or during Rangers, LLC’s budget process for the applicable Contract Year; provided, however, that, in the event
that the parties are unable to agree on an Annual Sales Target for any Contract Year, the Annual Sales Target will be 103% of the Annual Sales Target
for the immediately preceding Contract Year (provided further that the Annual Sales Target for the 2020-21 Contract Year will be no less than the gross
sales revenue actually received by Representative, Rangers, LLC, MSG Sports, LLC or the appropriate Rangers-specific entity without duplication, as
applicable, from Team Sponsorship Assets contained in Sponsorship Agreements during the 2019-20 fiscal year (i.e., July 1, 2019 through June 30,
2020)). For clarity, the Annual Sales Target amounts shall not include Gross Revenue from the sale of Arena Game Shared Sponsorship Assets, Non-
Team Sponsorship Assets and/or Playoff Sponsorship Assets.
4.4 Adjustments to Annual Sales Target. The Annual Sales Target for any Contract Year may be adjusted in each of the following instances:
(a)
In the event of a material Asset Reduction or if there is any addition of new Team Sponsorship Assets, in each case, as described in
Section 3.2 above, the Annual Sales Target for the applicable Contract Year will, if requested by either party, be adjusted upward or downward, as
applicable, by the allocated value of the applicable additional undelivered Team Sponsorship Assets or the past or expected value of the affected sales
category and/or asset inventory, as mutually agreed by the parties following good faith discussions.
(b)
In the event of League Rules changes that either newly permit or preclude the sale of certain Team Sponsorship Assets (e.g., the
National Hockey League (“NHL”) creating new team sponsorship inventory) or sales of advertising in a particular sales category in advance of or
within any Contract Year, which changes have or are expected to have a material impact on sales of Team Sponsorship Assets, the Annual Sales Target
for such Contract Year may be adjusted upward or downward, as applicable, by the value of the applicable Team Sponsorship Assets or the past or
expected value of the affected sales category and/or asset inventory, as applicable, as mutually agreed by the parties following good faith discussions.
(c)
[*****].
If, with respect to good faith discussions as to an adjustment as contemplated above, by the end of thirty (30) days of such discussions (during which, if
necessary, such discussions will be escalated to a senior executive of each
5
party), the parties have not agreed on an appropriate adjustment to the Annual Sales Target, then within twenty (20) days of the expiration of such
thirty-day period, either party shall have the right to submit to binding arbitration the issue of the appropriate adjustment to the Annual Sales Target.
Any such arbitration shall be conducted in accordance with Section 6 below, or such other procedures as the parties agree upon.
4.5 Shortfalls.
(a) In the event that either (i) the Gross Revenue for any Contract Year is less than [*****]% of the Annual Sales Target for such Contract
Year, or (ii) with respect to the 2021-22 Contract Year and beyond, the sum of the Gross Revenue for any Contract Year (the “Base Year”) and the
Gross Revenue for the Contract Year immediately preceding the Base Year is less than [*****]% of the sum of the Annual Sales Target for such
immediately-preceding Contract Year and the Annual Sales Target for such Base Year (the difference between the Gross Revenue and the Annual Sales
Target for such Contract Year, or between the average Gross Revenue and average Annual Sales Targets for such Contract Year and Base Year, as the
case may be, the “Shortfall”), then Rangers, LLC will have the right to request a payment (the “Shortfall Payment”) from Representative in an amount
equal to the Shortfall (less any Commissions that would have applied if such amount were Gross Revenue) within thirty (30) days following its receipt
of the June Monthly Report (as defined in Section 6.2 below). Rangers, LLC shall designate the applicable Shortfall in its request (i.e., if both (i) and (ii)
of the first sentence of this Section 4.5 are triggered, Rangers, LLC may choose the Shortfall it wishes to designate in its request to Representative).
Except as provided in subsections (b) and (c) below with respect to a Shortfall relating to the final Contract Year of the Agreement alone,
Representative may elect as to whether or not to make a requested Shortfall Payment. If Representative does not make such Shortfall Payment to
Rangers, LLC within thirty (30) days after receipt of Rangers LLC’s request, then, within thirty (30) days of the earlier of Representative’s written
notice to Rangers, LLC of such fact or the expiration of such thirty (30) day period, Rangers, LLC will have the right, exercisable by written notice to
Representative, to terminate this Agreement effective, at Rangers, LLC’s election and as set forth in such notice, either (i) sixty (60) days following the
receipt of such notice or (ii) at the expiration of the then-current Contract Year.
(b) If Rangers, LLC requests a Shortfall Payment with respect to a Shortfall in connection with the final Contract Year only, Representative
shall pay, within thirty (30) days following the end of such Contract Year, such Shortfall, and may not elect not to make such payment.
(c)
For avoidance of doubt, if Representative makes a Shortfall Payment to Rangers, LLC relating to a Contract Year or pair of Contract
Years, the Annual Sales Target(s) will be deemed to have been met for such Contract Year(s).
4.6 Rate Card. Rangers, LLC’s budgeted rate card for Team Sponsorship Assets (the “Rate Card”) for the 2019-20 Contract Year has been
agreed upon by the parties and is attached hereto as Schedule B. For subsequent Contract Years, such Rate Card will be set by Rangers, LLC following
consultation with Representative as part of Rangers, LLC’s annual budgeting process, and such Rate Card shall in each instance be set at levels that do
not impede Representative’s ability to meet the Annual Sales Target for the relevant Contract Year. Representative will not sell any Team Sponsorship
Assets below such Rate Card by more than twenty percent (20%) without Rangers, LLC’s prior written approval.
4.7 Inclusion in Multi‑Property Sponsorships. Representative may, during the Term, include Team Sponsorship Assets in other multi-property
Sponsorship Agreements (i.e., marketing and sponsorship arrangements that include Team Sponsorship Assets as well as Non-Team Sponsorship Assets
and/or Arena Game Shared Sponsorship Assets, each as defined in the Arena License), provided that (i) without limiting Rangers, LLC’s approval right
with respect to all Sponsorship Agreements, Rangers, LLC has approved such inclusion (which approval shall not be unreasonably withheld,
conditioned or delayed), (ii) unless otherwise agreed by Rangers, LLC, such Team Sponsorship Assets shall be valued at not less than the fair market
value thereof, as such may be adjusted consistent with Representative’s methodology for uniformly adjusting elements of multi-element agreements in
effect as of the
6
date hereof (i.e., the then-current prices actually recently agreed and paid by third parties for similar type and amount of inventory, if any, subject to any
deal-wide discount or premium (historically referred to as a “GAAP adjustment”)), (iii) to the extent such agreement is category-exclusive, it shall be
deemed reasonable for Rangers, LLC to disapprove any such agreement if the value of such agreement that is allocated to Rangers, LLC (including
Rangers, LLC’s allocation of Arena Game Shared Sponsorship Assets) represents [*****] and (iv) any in-game integrations will be subject to Rangers,
LLC’s prior written approval (not to be unreasonably withheld, conditioned or delayed).
4.8 Inclusion of Tickets. For avoidance of doubt, Representative may include a reasonable number of Tickets in Sponsorship Agreements
(“Sponsorship Tickets”), consistent with past practice and subject to the prior approval of Rangers, LLC, and, subject to Section 4.1(c), Rangers, LLC
will receive face value therefor or such lesser amounts as to which Rangers, LLC may agree.
4.9 Inclusion of Hospitality. For avoidance of doubt, Representative may include a reasonable amount of Hospitality in Sponsorship
Agreements (“Sponsorship Hospitality”), consistent with past practice and subject to the prior approval of Rangers, LLC, and, subject to Section 4.1(d),
Rangers, LLC will receive rate card rates therefor or such lesser amounts as to which Rangers, LLC may agree.
5. Responsibilities.
5.1 Representative’s Sales and Service Responsibilities. Representative accepts appointment as sales and service representative for the sale of
Team Sponsorship Assets and the servicing of relationships with Rangers sponsors, including fulfillment/delivery/activation of Team Sponsorship
Assets, efforts to retain and renew Rangers sponsors, collections and dispute resolutions, and all other activities relating to the relationship between
Rangers, LLC and the Rangers’ sponsors. Representative accepts all obligations attendant thereto hereunder and agrees to comply with the terms and
conditions of this Agreement and to use commercially reasonable efforts to maximize the net revenue generated and collected from the sale of the Team
Sponsorship Assets in connection with its duties hereunder. Representative shall provide a professional sales and service staff and appropriate resources
to perform its duties hereunder. In addition, Representative shall establish (in consultation with Rangers, LLC) and maintain, at Representative’s cost,
throughout the Term an incentive sales and retention plan that is designed to ensure that Representative’s sales and service force is appropriately
incentivized to optimize the revenue generated with respect to the sales of Team Sponsorship Assets hereunder. Representative’s performance of its
duties hereunder shall be conducted in such a manner as to minimize interference with the Rangers’ use of the Arena. Without limiting the foregoing,
standards of quality and minimum levels of all duties to be performed hereunder by Representative, including staffing, shall be subject to League Rules
and Rangers, LLC’s reasonable satisfaction.
5.2 Books and Records. Representative shall keep and maintain complete and accurate books and records of all financial and other matters
relating to this Agreement. Representative shall provide all necessary internal accounting services related to the sale of the Team Sponsorship Assets
hereunder, including accounts payable, billing, accounts receivable and collection, which shall be performed in a manner generally consistent with past
practice. Representative shall furnish Rangers, LLC with financial information required to close its books each month promptly following the end of
such month and such other information as is reasonably requested by Rangers, LLC for forecasting, budgeting and other business purposes.
5.3 Content Standards and Approval. All creative materials presented by Representative for use with respect to the Team Sponsorship Assets
must comply with League Rules and Rangers, LLC’s standards, and such creative materials shall be subject to Rangers, LLC’s right to review and/or
approve the same. Rangers, LLC reserves the right, in its sole discretion, to reject any creative material in the event of a conflict with Rangers, LLC’s
standards for such, or in the event that Rangers, LLC deems any such creative material to be defamatory, abusive, obscene or in violation of any
Rangers, LLC policy or League Rules, or for reasons of quality. For clarity, Representative shall not present to Rangers, LLC nor propose any sale of
Team Sponsorship Assets in connection with any sponsor that was previously rejected hereunder unless otherwise agreed in writing by Rangers, LLC.
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5.4 Sales Support. In support of Representative’s sales efforts hereunder, Rangers, LLC shall use commercially reasonable efforts to (a)
regularly work with Representative to develop new Team Sponsorship Assets, (b) provide reasonable amounts of Rangers tickets and hospitality to
Representative to be used for potential purchasers of Team Sponsorship Assets (such amounts as agreed to by the parties) and (c) otherwise assist and
support such sales efforts, consistent with past practice, including provision of access to Rangers events and spaces (e.g., access for tours of the
Rangers’ training center) for Representative’s employees and Rangers sponsors and sponsorship prospects. With respect to the provision of tickets by
Rangers, LLC to Representative pursuant to clause (b) of this Section 5.4, (i) the parties shall work in good faith to determine the number of tickets to be
provided for any game, and have agreed upon an expected average per-game number of tickets with respect to the 2019-20 Contract Year and (ii) with
respect to each Contract Year thereafter, the parties shall, as part of the annual budget process, agree on the appropriate average per-game number of
tickets, taking into account such factors as actual utilization during the preceding Contract Year and the extent to which the utilization of such tickets
advanced the goals of this Agreement.
5.5 Transition Obligations. During the final Contract Year of the Term, Representative and Rangers, LLC shall reasonably cooperate and take
all reasonable and appropriate actions to successfully transition the marketing and sale of Team Sponsorship Assets from Representative to Rangers,
LLC or a third party designated by Rangers, LLC. Notwithstanding anything contained in Sections 1.1 or 1.2, as of the final Contract Year, the
exclusivity granted to Representative herein shall not preclude Rangers, LLC from selling Team Sponsorship Assets with respect to periods following
the expiration date, and the parties shall coordinate sales efforts in good faith during such final Contract Year.
6. Arbitration, Payments, Reporting Requirements, Restrictions & Approval Rights.
6.1 Arbitration. Any arbitration brought under Section 4.4 of this Agreement shall be conducted by a single, neutral arbitrator in New York in
accordance with the rules of the American Arbitration Association (the “AAA”). The arbitrator shall be mutually agreed upon by the parties or, failing
such agreement within fifteen (15) days after the petition for arbitration is filed, such arbitrator shall be promptly selected in accordance with the rules
of AAA relating thereto. The arbitrator shall render his/her decision as to the appropriate modification (if any) to the Annual Sales Target within ninety
(90) days after his/her selection, and such decision shall be binding upon the parties. The fees and expenses of the arbitrator shall be shared equally by
Representative and Rangers, LLC. The parties shall make all reasonable efforts to adhere to, and cause the arbitrator to adhere to, the time limits set
forth herein. In the event that such time limits cannot be met despite such reasonable efforts, the validity of the arbitrator’s decision shall not be affected
as a result thereof and the arbitrator may extend such time limits as necessary.
6.2 Monthly Reports. Subject to Section 1.3, during the Term, Representative shall pay Rangers, LLC, no more than ten (10) days after the
end of each calendar month (each, a “Monthly Net Sponsorship Payment”), an amount consisting of Gross Revenue that has been received by
Representative (including such amounts as are set forth in Sections 2 and 4 of the Team Sponsorship Allocation Agreement), less (a) any Commissions
to which Representative is entitled under Section 4.1 hereof, (b) the Monthly SO/OH Payment due pursuant to Section 4.1A, (c) any payment due to
Representative from Rangers, LLC pursuant to Section 3 of the Team Sponsorship Allocation Agreement and (d) Fulfillment Costs incurred by
Representative. Each such payment shall be accompanied by a reasonably-detailed settlement report (each, a “Monthly Report”), which Monthly Report
shall detail Gross Revenue and Commissions due thereon with respect to the applicable month, except that (i) the Monthly Report for June of each
Contract Year shall be provided to Rangers, LLC on or before the immediately-following July 10th and (ii) if, due to the offsets set forth in (a), (b), (c)
and/or (d), no payment from Representative to Rangers, LLC is due with respect to any month, Representative shall nevertheless timely provide a
Monthly Report. Notwithstanding payment made in accordance with the foregoing provisions of this Section 6.2, Rangers, LLC may reasonably request
additional information regarding such Monthly Report, and Representative agrees to provide such additional information. Rangers, LLC may dispute
any amount in any Monthly Report. The parties shall promptly confer to resolve any such areas of disagreement, and each party shall be entitled to refer
any disagreement that cannot be resolved to the Accounting Firm (as defined in the Arena License) in accordance with Section 9.06(c) of the Arena
License. Notwithstanding the foregoing, the acceptance of a Monthly Report (or any portion thereof) and the payment of any
8
amounts in accordance therewith shall be without prejudice to Rangers, LLC’s rights to subsequently dispute any applicable amounts (including
pursuant to Section 9.06(c) of the Arena License and Section 6.6 hereto). Representative shall pay Rangers, LLC any disputed amounts agreed upon by
the parties or awarded by the Accounting Firm, as applicable, within five (5) business days after the dispute is resolved by the parties or by the
Accounting Firm in accordance with Section 9.06(c) of the Arena License.
6.3 Data Exchange Obligations.
(a) The parties will cooperate in good faith with respect to reasonable requests for sales information and data, including Sponsorship Customer
Data, as defined below, relating to the Team Sponsorship Assets during the Term in order to maximize the Gross Revenue from Representative’s sale of
the Team Sponsorship Assets hereunder.
(b) Representative shall promptly provide to Rangers, LLC all consumer data that Representative obtains relating to Team Sponsorship Assets
(“Sponsorship Customer Data”), and, subject to the sentence that follows, Rangers, LLC shall solely retain rights in such Sponsorship Customer Data.
Notwithstanding the foregoing, Representative shall have the right to use such Sponsorship Customer Data that Representative has obtained in
furtherance of its sales efforts under this Agreement, as well as for its own purposes unrelated thereto; provided, however, that Representative may not
sell, lease or otherwise convey such Sponsorship Customer Data to any third party.
(c)
As to all consumer data other than Sponsorship Customer Data, the rights to such as between the parties shall be the same as those set
forth as between the Arena License Parties in Article X of the Arena License.
(d)
The obligations set forth in this Section 6.3 are subject to any applicable legal and regulatory requirements.
6.4 Services. Unless otherwise agreed to by the parties, Representative shall provide services with respect to accounting, billing and collection
efforts in relation to the sale of Team Sponsorship Assets by Representative.
6.5 Asset Inclusion Beyond Term. Notwithstanding anything herein to the contrary, Representative acknowledges and agrees that Rangers,
LLC must approve in writing in its sole discretion any inclusion of Team Sponsorship Assets with respect to periods which follow the (i) then-scheduled
expiration date of the Term of this Agreement (i.e., after June 30, 2030 with respect to the Initial Term, and after the then-upcoming June 30th during
any Renewal Term) or (ii) termination date for which notice of termination has been given, in each case, in Sponsorship Agreements (multi-element or
otherwise) that are scheduled to expire after the conclusion of such Term.
6.6 Audit Rights. Each party shall permit the other party, at its cost, either itself or through an independent auditor selected by the auditing
party, during regular business hours at the offices of the party being audited, to inspect, make copies of and otherwise audit such books and records as
are related to the services and sponsorship relationships hereunder upon no less than thirty (30) days’ notice; provided, however, that (a) neither party
may request an audit more than once per Contract Year and (b) no audit may cover a period covered by a prior audit. If, as a result of any such audit, it
is determined that either party has underpaid the other party, such underpaying party shall reimburse the other party within thirty (30) days of its receipt
of notice thereof for the underpayment (plus interest thereon). If such underpayment exceeds five percent (5%) of the amount properly due, the costs of
such audit shall also be reimbursed.
6.7 Collections. Subject to any alternative procedure that may be agreed upon by the parties, Representative shall provide a monthly detailed
list of outstanding accounts. Representative shall maintain reasonably detailed records of collection efforts. Rangers, LLC will, upon Representative’s
request, work with Representative (at the sole cost of Representative) in making collection efforts when the balance is sixty (60) days or more past due.
9
In making its collections efforts, Representative shall use the same degree of diligence that it employs with respect to its own accounts receivable. With
respect to the institution of legal proceedings in connection with unpaid invoices under any agreement, the party whose allocation of funds in such
agreement is greater may determine whether such legal proceedings shall be instituted, regardless of whether such party is the contracting party, and the
contracting party shall comply with such determination. The costs of legal proceedings shall be funded pro rata by the parties, regardless of who
determined to bring such proceedings; provided that any reimbursement of such costs shall also be distributed pro rata among the parties. In the event
that either party collects any previously-unpaid amounts directly, it will immediately notify the other party of such collection in writing. In the event of
such a collection by Rangers, LLC, Representative may deduct the appropriate Commission attributable to such amount (calculated following deduction
of any attorneys’ fees incurred by Rangers, LLC) from its next monthly remittance pursuant to Sections 2 and 4 of the Team Sponsorship Allocation
Agreement. For the avoidance of doubt, Representative shall have no liability to Rangers, LLC with respect to uncollected amounts, to the extent
Representative is in compliance with this Agreement. Notwithstanding anything herein to the contrary, if any revenue payable to Representative by an
affiliate of Representative is subject to sharing with Rangers, LLC hereunder, such revenue shall be deemed “collected” by Representative on the earlier
of (i) the date on which such revenue is actually collected and (ii) the date on which such revenue is payable pursuant to the terms of the applicable
contract or other arrangement.
7. Termination.
7.1 Rights.
(a) In the event that either party (the “Defaulting Party”) has failed to comply with any material provision of this Agreement and has not cured
such noncompliance within thirty (30) days after delivery of written notice thereof from the other party (the “Non-Defaulting Party”), then this
Agreement, at the option of the Non-Defaulting Party, may be terminated upon the date specified in a notice to the Defaulting Party, which date shall be
not less than thirty (30) days after the date such notice is given to the Defaulting Party. The Non-Defaulting Party shall have all of its contractual rights
hereunder, in addition to all other rights and remedies to which it may be entitled at law, in equity or otherwise.
(b) Rangers, LLC shall have the right to terminate this Agreement in accordance with the terms set forth in Section 4.5 above.
(c) Either party shall have the right to terminate this Agreement upon written notice to the other party in the event that the other party becomes
insolvent or files or has filed against it any action in the nature of bankruptcy.
(d)
Each party shall have the right to terminate this Agreement as of June 30, 2025 by providing written notice to the other party on or
before March 31, 2025.
(e)
Each party shall have the right to terminate this Agreement upon written notice to the other party within sixty (60) days after a change
of control of either party (including a change of control of the terminating party), including any transaction in which any third party acquires
substantially all of the assets of Rangers, LLC.
(f)
In the event of any early termination of this Agreement and/or at the expiration of this Agreement, (i) Rangers, LLC shall continue to
honor all Sponsorship Agreements properly entered into by Representative prior to such termination or expiration, and Representative shall continue to
pay to Rangers, LLC its share with respect to such Sponsorship Agreements in accordance with the Team Sponsorship Allocation Agreement, (ii) both
parties will perform their respective obligations hereunder that relate to periods prior to the effective date of termination but that, by their nature, are
necessarily performed subsequent to such effective date (including, without limitation, in the case of Representative, billing, collections, provision of
Monthly Reports and payments to Rangers, LLC) and (iii) Representative shall assign to Rangers, LLC (or any other party designated by Rangers, LLC)
(A) each Sponsorship Agreement with respect to which the sponsorship assets purchased are exclusively or primarily Team Sponsorship Assets and (B)
the rights under each other Sponsorship Agreement to the extent relating to Team
10
Sponsorship Assets. Notwithstanding the foregoing, the post-termination/post-expiration Commissions payable hereunder for Gross Revenue received
pursuant to Sponsorship Agreements following the effective date of expiration or termination of this Agreement shall be an amount equal to (x) [*****],
less (y) the reasonable costs incurred by Rangers, LLC and its Affiliates in connection with their performance of services that were previously
performed by Representative and its Affiliates hereunder.
(g)
In the event that Representative properly terminates this Agreement pursuant to Subsection 7.1(a), Rangers, LLC (or its parent entity
MSG Sports, LLC) shall, subject to the remainder of this Section 7.1(g), be solely responsible for all severance costs associated with any termination of
any employee of Representative as of the effective date of such termination of this Agreement who supports, in whole or in part, Representative in
carrying out its responsibilities hereunder that does not become an employee of Rangers, LLC or MSG Sports, LLC prior to, upon or promptly
following the effective date of his or her termination. Representative shall use commercially reasonable efforts to minimize any such severance costs,
which will (in any event and without limiting the foregoing) be reasonable and generally consistent with Representative’s past practice for similarly-
situated employees.
7.2 Payments. In the event of termination of this Agreement for any reason, each party shall be obligated for all amounts payable by it
pursuant to its terms.
8.
Representations and Warranties.
8.1 Representations and Warranties of Representative.
(a) Representative represents and warrants to Rangers, LLC that (i) Representative is a limited liability company duly organized, validly
existing and in good standing under the laws of Delaware, (ii) it has the power and authority to enter into this Agreement and to fully perform its
obligations hereunder, (iii) this Agreement constitutes the valid, legal and binding obligation of Representative and is enforceable against Representative
in accordance with its terms, and (iv) there are no actions, suits or proceedings of a material nature pending or, to its best knowledge, threatened against
Representative that would affect its ability to enter into this Agreement or perform its obligations hereunder.
(b) Representative represents, warrants and agrees that it shall not sell any Team Sponsorship Assets for Rangers, LLC (or Non-Team
Sponsorship Assets and Arena Game Shared Sponsorship Assets, where sold with Team Sponsorship Assets) if Representative has actual knowledge
that (i) Rangers, LLC’s exhibition thereof (including, without limitation, any and all visual, literary, dramatic and musical material and software
included therein) would infringe any copyright, trademark, patent or any other intellectual property, proprietary or other rights of any nature whatsoever
of any person or entity and/or (ii) such assets do not comply (or would not comply, as sold by Representative) with all applicable rules, regulations and
laws, including any applicable League Rules.
(c) Representative represents, warrants and agrees that it will use good faith efforts to ensure that every sponsor and agency that purchases
Team Sponsorship Assets from Representative shall sign an agreement with Representative that includes an indemnity in favor of Rangers, LLC, its
affiliated companies, directors, officers, employees, contractors, agents, successors and assigns relating to any sponsor advertising material to be utilized
as part of the Team Sponsorship Assets that is generally consistent with past practice (the “Rangers, LLC Indemnity”). Representative shall provide
Rangers, LLC with a copy of any such signed agreement (including the foregoing Rangers, LLC Indemnity) upon Rangers, LLC’s request.
(d) Representative represents, warrants and agrees that it shall ensure that, unless otherwise approved by Rangers, LLC, each agency and
sponsor to whom Representative sells Team Sponsorship Assets shall be subjected to the credit check and customer qualification procedures as are
applied to Representatives sales of its own sponsorship assets.
11
8.2 Representations and Warranties of Rangers, LLC. (a) Rangers, LLC represents and warrants to Representative that (i) it is duly organized,
validly existing and in good standing under the laws of Delaware, (ii) it has the power and authority to enter into this Agreement and to fully perform its
obligations hereunder, (iii) this Agreement constitutes the valid, legal and binding obligation of Rangers, LLC and is enforceable against Rangers, LLC
in accordance with its terms and (iv) there are no actions, suits or proceedings of a material nature pending or to its best knowledge, threatened against
Rangers, LLC that would affect its ability to enter into this Agreement or perform its obligations hereunder.
(b) With respect to any agreements that Rangers, LLC enters into directly with a sponsor or agency, as set forth in Section 1.3 above, for the
purchase of Team Sponsorship Assets, Rangers, LLC represents, warrants and agrees that it will use good faith efforts to ensure that such sponsors and
agencies sign an agreement with Rangers, LLC that includes an indemnity in favor of Representative, its affiliated companies, directors, officers,
employees, contractors, agents, successors and assigns relating to any sponsor advertising material to be utilized as part of the Team Sponsorship Assets
that is generally consistent with past practice (the “Representative Indemnity”). Rangers, LLC shall provide Representative with a copy of any such
signed agreement (including the foregoing Representative Indemnity) upon Representative’s request.
8.3 Survival. The terms of this Section 8 shall survive the expiration or earlier termination of this agreement.
9. Indemnity.
9.1. Representative Indemnity. Representative shall at all times, when requested, defend, indemnify and hold harmless Rangers, LLC and
Rangers, LLC’s owners (direct and indirect), related companies and affiliates and their respective directors, officers, employees, contractors, agents,
successors and assigns (collectively, the “Rangers, LLC Indemnitees”) from and against, and shall reimburse such Rangers, LLC Indemnitees with
respect to, any and all claims, actions, liabilities, losses, damages, costs and expenses including, without limitation, reasonable attorneys’ fees,
disbursements and court costs, incurred by each Rangers, LLC Indemnitee by reason of or arising out of or in connection with any breach by
Representative of any covenant, agreement, representation or warranty contained herein.
9.2 Rangers, LLC Indemnity. Rangers, LLC shall at all times, when requested, defend, indemnify and hold harmless Representative and
Representative’s owners (direct and indirect), related companies and affiliates and their respective directors, officers, employees, contractors, agents,
successors and assigns (collectively, the “Representative Indemnitees”) from and against, and shall reimburse such Representative Indemnitees with
respect to, any and all claims, actions, liabilities, losses, damages, costs and expenses including, without limitation, reasonable attorneys’ fees,
disbursements and court costs, incurred by each Representative Indemnitee by reason of or arising out of or in connection with any breach by Rangers,
LLC of any covenant, agreement, representation or warranty contained herein.
9.3 Indemnity Procedures. If any complaint, lawsuit or enforcement action is received by or filed against any party entitled to the benefit of
indemnification hereunder, or if such party receives notice of any matter for which indemnification is to be given hereunder, written notice thereof shall
be given to the indemnifying party. The indemnifying party shall engage attorneys of its own choice at its own cost, risk and expense, subject to
approval of the indemnified party, which shall not be unreasonably withheld. The indemnified party shall cooperate in the investigation, trial and
defense of such claim, lawsuit or action and any appeal arising therefrom. The indemnified party may, at its own cost, retain its own counsel to
participate in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom. The indemnifying party shall not settle any
claim, lawsuit or enforcement action without the written consent of the indemnified party, which shall not be unreasonably withheld.
9.4 Survival. The terms of this Section 9 shall survive the expiration or earlier termination of this agreement.
12
10. Miscellaneous.
10.1 Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of New York without regard to
laws regarding choice of law or jurisdiction. The parties consent to the jurisdiction of the courts located in the state of New York (state or federal, as
applicable) for the limited purpose of enforcement of the provisions of this Agreement and related matters.
10.2 Severability. If any term, provision, covenant or condition of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the provisions shall remain in full force and effect and shall in no way be affected, impaired or invalidated,
unless such invalidity, voidness or unenforceability materially alters the purposes of this Agreement.
10.3 Notices. All notices, requests, consents, directions, demands, waivers and other communications provided for herein shall be in writing
and shall be deemed given, made or served if personally delivered, sent by express overnight courier service, sent by certified mail, postage prepaid,
return receipt requested, or telecopied to the applicable party at the address listed below:
If to Representative:
MSG Entertainment Group, LLC
2 Penn Plaza, 14th Floor
New York, NY 10121
Attention: EVP of Marketing Partnerships
With a copy to:
MSG Entertainment Group, LLC
2 Pennsylvania Plaza, 19th Floor
New York, New York 10121
Attention: General Counsel
If to Rangers, LLC:
Rangers, LLC
2 Pennsylvania Plaza
New York, New York 10121
Attention: President
with a copy to:
Rangers, LLC
2 Pennsylvania Plaza
New York, New York 10121
Attention: General Counsel
If to the NHL:
Prior to March 1, 2020:
National Hockey League
1185 Avenue of the Americas
New York, NY 10036
13
Attention: General Counsel
On or after March 1, 2020:
National Hockey League
One Manhattan West
395 9th Avenue
New York, New York 10001
or as to each party, at such other addresses as shall be designated by such party in a written notice to the other party. All such notices shall be deemed
effective (i) if personally delivered, on the date of delivery, (ii) if mailed, the first business day that is at least three (3) days after the date deposited in
the U.S. Mail or (iii) if telecopied or sent by express overnight courier service, one business day after the date transmitted by telecopier or delivered to,
or picked up by, a nationally recognized express overnight courier service for next day delivery.
10.4 Assignment; Binding Upon Successors. Representative shall have the right to assign this Agreement upon written notice to Rangers, LLC
to any person or entity that acquires the Arena, provided that the assignee agrees in writing to assume all of Representative’s obligations under this
Agreement. Rangers, LLC shall have the right to assign this Agreement upon written notice to Representative to any person or entity that acquires the
Team in accordance with League Rules, provided that the assignee agrees in writing to assume all of Rangers, LLC’s obligations under this Agreement.
Rangers, LLC shall further have the right to collaterally assign this Agreement to secure indebtedness of the Rangers incurred in accordance with
League Rules. Except as set forth in this Section 10.4, neither party shall be permitted to assign this Agreement without the prior written consent of the
other party, not to be unreasonably withheld, conditioned or delayed. A change in ownership of either party shall not be deemed an assignment under
this Section 10.4.
10.5 Modifications, Amendments and Waivers. This Agreement may be amended at any time only by the written agreement of both of the
parties hereto.
10.6 Confidentiality. The parties agree that this Agreement (including its existence and all provisions hereof), any and all information related
to the business and activities of the other party that may be obtained from any source or may be developed as a result of this Agreement, and any other
information of the other party that is designated proprietary or confidential or that any reasonable person would regard as such based on the nature or
source of the information (collectively, “Confidential Information”), in each case, shall be kept confidential and shall not be disclosed to third parties,
except that each party may disclose such Confidential Information only (a) to its agents, representatives, affiliated entities and employees who need to
know and who shall agree to be bound by the terms and conditions of this Agreement (including without limitation the confidentiality obligations of this
paragraph), (b) in response to a lawfully-served subpoena, (c) pursuant to any law, rule, regulation or request to produce documentation made by any
governmental body (including, but not limited to, the Securities Exchange Commission), national securities exchange or in any administrative or judicial
proceeding, (d) to any prospective lender, investor, financing entity or prospective purchaser of a direct or indirect interest in such party or the assets of
such party, provided that any such person or entity agrees to be bound by the confidentiality obligations of this paragraph, (e) the NHL and any agents,
representatives, affiliated entities and employees of the NHL and/or (f) as required by League Rules.
10.7 Interpretation. The section headings contained in this Agreement are solely for purpose of convenience and shall neither be deemed a part
of this Agreement nor used in any interpretation hereof.
10.8 Integration. This Agreement contains all of the agreements of the parties hereto with respect to the matters covered hereby, and
supersedes in their entirety any prior agreements, oral or written, of the parties.
14
10.9 No Third-Party Beneficiaries. The execution and delivery of this Agreement shall not be deemed to confer any rights upon, nor obligate
either of the parties hereto, to any person or entity not a party to this Agreement; provided that the NHL is a third party beneficiary with respect to
Section 10.12.
10.10 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original Agreement, but
all of which together shall constitute one and the same instrument.
10.11 Limited Recourse. Any recourse, action or claim to which either party is entitled hereunder shall extend only to the other party and not
to any direct or indirect owner of such party or any agent of such party, past, present or future.
10.12 Subordination. This Agreement is subject to and limited by Representative’s and Rangers, LLC’s agreements with, and the rules,
regulations and agreements of, all leagues (including, without limitation, League Rules and any restrictions on the sale of sponsorship assets or
categories based on League Rules as a result of the NHL’s sponsorship partnerships), associations, individual athletic teams, program suppliers and
distributors, as such agreements, rules or regulations may from time to time be amended, entered into, interpreted, enacted, performed or enforced.
Rangers, LLC and Representative hereby covenant to comply with all League Rules in connection with their respective performances hereunder. In the
event of any conflict between this Agreement and League Rules, League Rules shall control and govern in all respects, and the performance of Rangers,
LLC shall be excused to the extent that the same is prohibited by League Rules. Each agreement entered into by either Party in performance of its
obligations hereunder (e.g., each Sponsorship Agreement entered into with a third party as described in Section 1.3) shall (a) be subject to League Rules
(including any applicable approval rights) and (b) include all NHL-required subordination language.
10.13 No Joint Venture. Nothing contained herein shall constitute or be deemed to constitute the parties as partners or joint venturers. The
parties hereto are independent contractors responsible for their own obligations.
10.14 Limitation of Liability. EXCEPT TO THE EXTENT ARISING FROM A PARTY’S INDEMNIFICATION OBLIGATIONS WITH
RESPECT TO THIRD PARTY CLAIMS PURSUANT TO SECTION 9 ABOVE, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES OR LOST
PROFITS, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10.15 No Conflict. Rangers, LLC acknowledges and agrees that, as part of its regular business practices, Representative and its affiliates
undertake representations of the type contemplated hereunder for affiliates of Representative including the television networks known as “the MSG
Network” and “MSG+,” sports teams and venues that may have interests in conflict with those of MSG Sports or the Rangers. Rangers, LLC agrees that
such representations by Representative or its affiliates shall not be construed or deemed to be a violation or breach of any obligation on the part of
Representative to Rangers, LLC hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.
NEW YORK RANGERS, LLC
By: /s/ Victoria M. Mink
Name: Victoria M. Mink
Title: Executive Vice President and Chief Financial Officer
MSG ENTERTAINMENT GROUP, LLC
By: /s/ Philip D’Ambrosio
Name: Philip D’Ambrosio
Title: Senior Vice President, Treasurer
15
Exhibit 10.78
August 21, 2020
Mr. Lawrence J. Burian
Madison Square Garden Sports Corp.
Two Pennsylvania Plaza
New York, New York 10121
Dear Lawrence:
Reference is made to your Employment Agreement, dated as of September 6, 2018 (the
“Employment Agreement”) with Madison Square Garden Sports Corp. (formerly The Madison Square Garden Company, the “Company”), as amended
by letter agreement dated June 19, 2020 (“Amendment #1”). Capitalized terms not defined in this letter have the meaning set forth in either the
Employment Agreement or Amendment #1, as applicable.
With respect to any Spin Termination, the Company hereby agrees to further extend the date by
which you may terminate your employment for Good Reason to November 17, 2020 (i.e., you must provide written notice to the Company on or before
November 2, 2020 that you do not consent to the Company’s actions and intend to terminate your employment for “Good Reason”, 15 days prior to the
deadline), provided that such date may be further extended if mutually agreed by the parties. For the avoidance of doubt, nothing in this letter (i) waives
your obligation, if you determine to exercise a Good Reason termination, to provide the written notice described above in the form required by the
Employment Agreement, or (ii) waives the Company’s right to correct any such action as provided in the Employment Agreement (if such action can be
corrected).
Except as expressly set forth herein, the Employment Agreement (as previously amended) shall remain in full force and effect in accordance
with its terms. The following provisions of the Employment Agreement shall be incorporated into, and be effective mutatis mutandis with respect to,
this letter as if set forth herein in their entirety: Paragraphs 18, 19 and 20. This letter reflects the entire understanding and agreement of you and the
Company with respect to the subject matter hereof and supersedes all prior understandings or agreements relating thereto. This agreement may be
executed in several counterparts (including, without limitation, by facsimile, PDF or electronic transmission), each of which will be deemed an original,
and such counterparts will constitute one and the same instrument.
Please sign below to indicate your agreement and acknowledgement to the terms and conditions of this letter, which will become a
binding agreement upon our receipt.
* * *
Sincerely,
Madison Square Garden Sports Corp.
By: /s/ Andrew Lustgarten______________
Name: Andrew Lustgarten
Title:President & Chief Executive Officer
Accepted and Agreed:
/s/ Lawrence J. Burian__________________
Lawrence J. Burian
Date: August 21, 2020
[Signature Page]
Madison Square Garden Sports Corp.
Subsidiaries
ENTITY NAME
Exhibit 21.1
STATE/COUNTRY
FORMED
Nova Scotia
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
1
3292592 Nova Scotia Company
CLG Esports Holdings, LLC
CLG Esports, LLC
Hartford Wolfpack, LLC
Knicks Gaming, LLC
Knicks Holdings, LLC
MSG CLG, LLC
MSG Esports, LLC
MSG Flight Operations, L.L.C.
MSG NYK Holdings, LLC
MSG NYR Holdings, LLC
MSGS Publishing, LLC
MSGS Music, LLC
MSGS Songs, LLC
MSG Sports, LLC
MSG Training Center, LLC
New York Knicks, LLC
New York Rangers, LLC
Rangers Holdings, LLC
Westchester Knicks, LLC
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
The Board of Directors
Madison Square Garden Sports Corp.:
We consent to the incorporation by reference in the registration statement (No. 333-207183) on Form S-8 of Madison Square Garden Sports Corp. of our reports dated
August 28, 2020, with respect to the consolidated balance sheets of Madison Square Garden Sports Corp. as of June 30, 2020 and 2019, the related consolidated statements of
operations, comprehensive income (loss), cash flows, and equity and redeemable noncontrolling interests for each of the years in the three-year period ended June 30, 2020,
and the related notes and financial statement schedule II, and the effectiveness of internal control over financial reporting as of June 30, 2020, which reports appear in the
June 30, 2020 annual report on Form 10‑K of Madison Square Garden Sports Corp.
Our report refers to a change in the accounting method for leases effective July 1, 2019 due to the adoption of Accounting Standards Codification (ASC) Topic 842, and for
revenue effective July 1, 2018 due to the adoption of ASC Topic 606.
/s/ KPMG LLP
New York, New York
August 28, 2020
Exhibit 31.1
I, Andrew Lustgarten, certify that:
Certification
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Madison Square Garden Sports Corp.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter
(the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over
financial reporting.
Date: August 28, 2020
/s/ ANDREW LUSTGARTEN
Andrew Lustgarten
President and Chief Executive Officer
Exhibit 31.2
I, Victoria M. Mink, certify that:
Certification
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Madison Square Garden Sports Corp.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter
(the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial
reporting.
Date: August 28, 2020
/s/ VICTORIA M. MINK
Victoria M. Mink
Executive Vice President, Chief Financial Officer
and Treasurer
Pursuant to 18 U.S.C. §1350, the undersigned officer of Madison Square Garden Sports Corp. (the “Company”), hereby certifies, to such officer's knowledge, that the
Company's Annual Report on Form 10-K for the year ended June 30, 2020 (the “Report”) fully complies with the requirements of §13(a) or §15(d), as applicable, of the
Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Certification
Exhibit 32.1
Date: August 28, 2020
The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.
/s/ ANDREW LUSTGARTEN
Andrew Lustgarten
President and Chief Executive Officer
Certification
Exhibit 32.2
Pursuant to 18 U.S.C. §1350, the undersigned officer of Madison Square Garden Sports Corp. (the “Company”), hereby certifies, to such officer's knowledge, that the
Company's Annual Report on Form 10-K for the year ended June 30, 2020 (the “Report”) fully complies with the requirements of §13(a) or §15(d), as applicable, of the
Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Date: August 28, 2020
The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.
/s/ VICTORIA M. MINK
Victoria M. Mink
Executive Vice President, Chief Financial Officer
and Treasurer