ARTICLE VII: BASKETBALL RELATED INCOME, SALARY CAP, MINIMUM TEAM SALARY, AND ESCROW ARRANGEMENT

INDEX
Section 1. Definitions
Section 2. Calculation of Salary Cap and Minimum Team Salary
Section 3. Determination of Salary
Section 4. Determination of Team Salary
Section 5. Operation of Salary Cap
Section 6. Exceptions to the Salary Cap
Section 7. Extensions, Renegotiations and Other Amendments
Section 8. Trade Rules
Section 9. Miscellaneous
Section 10. Accounting Procedures
Section 11. Players Association Audit Rights
Section 12. Escrow and Tax Arrangement

Section 1. Definitions
For purposes of this Agreement, the following terms shall have the meanings set forth below:

(a) Basketball Related Income.

(1) “Basketball Related Income” (“BRI”) for a Salary Cap Year means the aggregate operating revenues (including the value of any property or services received in any barter transactions), accounted for in accordance with Section 1(b)(1) below, received or to be received for or with respect to such Salary Cap Year by the NBA, NBA Properties, Inc., including any of its subsidiaries whether now in existence or created in the future (hereinafter, “Properties”), NBA Media Ventures LLC (“Media Ventures”), any other entity which is controlled by, or in which the NBA, Properties, Media Ventures, and/or a group of NBA Teams owns at least 50% of the issued and outstanding ownership interests (hereinafter, “League-related entity”) (but excluding the amount of such League-related entity’s revenues equal to the portion of its total revenues that is proportionate to the share of the entity’s profits to which ownership interests not owned by the NBA, Properties, Media Ventures and/or a group of NBA Teams are entitled), all NBA Teams other than Expansion Teams during their first two (2) Salary Cap Years (but including the Expansion Teams’ shares of national television, radio, cable and other broadcast revenues, and any other League-wide revenues shared by the Expansion Teams, provided such revenues are otherwise included in BRI) and Related Parties (in accordance with Section 1(a)(7)(i) below), from all sources, whether known or unknown, whether now in existence or created in the future, to the extent derived from, relating to, or arising directly or indirectly out of, the performance of Players in NBA basketball games or in NBA-related activities. For purposes of this definition of BRI: (x) “operating revenues” shall include, but not be limited to, any type of revenue included in BRI for the 1995-96 and 1996-97 Salary Cap Years (without regard to whether such type of revenue is received on a lump-sum, non-recurring or extraordinary basis, but subject to any specific rules set forth in this Article VII relating to the recognition or amortization of such amounts); and (y) “Player” means a person: who is under a Player Contract to an NBA Team; who completed the playing services called for under a Player Contract with an NBA Team at the conclusion of the prior Season; or who was under a Player Contract with an NBA Team during (but not at the conclusion of) the prior Season, but only with respect to the period for which he was under such Contract. Subject to the foregoing, BRI shall include, but not be limited to, the following revenues:

(i) Regular Season gate receipts, net of applicable taxes, surcharges, imposts, and other charges (including, without limitation, charges related to arena financings) imposed by governmental or quasi-governmental agencies other than income taxes (collectively, “Taxes”), including, without limitation, gate receipts received or to be received by a Related Party in accordance with Section 1(a)(7)(i) below, including: (A) the value (determined on the basis of the price of the ticket) of all tickets traded by a Team for goods or services; and (B) the value (determined on the basis of the League-wide average ticket price for non-Season tickets) of all tickets for Regular Season games provided by a Team on a complimentary basis, without monetary or other compensation to a Team; provided, however, that (x) the value of the “Excluded Complimentary Tickets” with respect to all Regular Season games in a Season shall be excluded from BRI, and (y) in addition, tickets provided as part of sponsorships and other transactions, where the proceeds from such transactions have been included in BRI, shall not be included in determining the number of complimentary tickets in any Season. For purposes of the foregoing, “Excluded Complimentary Tickets” shall mean: 1.35 million tickets for the 2005-06 Season; 1.40 million tickets for the 2006-07 Season; 1.45 million tickets for the 2007-08 Season; 1.50 million tickets for the 2008-09 Season; 1.55 million tickets for the 2009-10 Season; 1.6 million tickets for the 2010-2011 Season; and, in the event the NBA exercises its option to extend the Agreement pursuant to Article XXXIX of this Agreement, 1.6 million tickets for the 2011-2012 Season;

(ii) all proceeds of any kind, net of reasonable and customary expenses related thereto, from the broadcast or exhibition of, or the sale, license or other conveyance or exploitation of the right to broadcast or exhibit, NBA preseason, Regular Season and Playoff games and summer league and other NBA-related off-season games involving Players, highlights or portions of such games, and non-game NBA programming, on any and all forms of radio, television, telephone, internet, and any other communications media, forms of reproduction and other technologies, whether presently existing or not, anywhere in the world, whether live or on any form of delay, including, without limitation, network, local, cable, direct broadcast satellite and any form of pay television, and all other means of distribution and exploitation, whether presently existing or not and whether now known or hereafter developed, including, without limitation, such proceeds received or to be received by a Related Party (in accordance with Section 1(a)(7)(i) below), but not including the value of any broadcast, cablecast or telecast time provided as part of any such transaction that is used solely: (A) to promote or advertise the NBA, its Teams, Players, the NBA Development League (the “NBADL”) (except to the extent the value of such time exceeds $5 million), or the sport of basketball (but not the value of time used to promote or advertise the Women’s National Basketball Association (the “WNBA”) which shall be included in BRI); (B) to promote or advertise products, programming, merchandise, services or events that produce revenues that are includable in BRI or are receivable by Properties pursuant to the Group License Agreement (as defined in Article XXXVII, Section 1; (C) to promote or advertise charitable, not-for-profit or governmental organizations or agencies; or (D) for public service announcements;

(iii) all Exhibition game proceeds of any kind, net of Taxes and all reasonable and customary game, pre-season and training camp expenses, including, without limitation, such proceeds received or to be received by a Related Party (in accordance with Section 1(a)(7)(i) below);

(iv) all playoff gate receipts of any kind, net of Taxes, arena rentals to the extent reasonable and customary, and all other reasonable and customary expenses, except the player playoff pool, including, without limitation, such proceeds received or to be received by a Related Party (in accordance with Section 1(a)(7)(i) below);

(v) all proceeds of any kind, net of reasonable and customary expenses (including Taxes) related thereto, subject to the provisions of Section 1(a)(6) below, from in-arena sales of novelties and concessions, sales of novelties in team-identified stores located within such radius of the Team’s home arena as is permitted by the NBA, NBA game parking and programs, Team sponsorships (whether or not the proceeds are directly or indirectly donated to charity), Team promotions, temporary arena signage, arena club revenues, summer camps, non-NBA basketball tournaments, mascot and dance team appearances, the sale of the right to pour beverages or (except as provided in Section 1(a)(2)(xx) below) to provide concessions, in each case, to the extent that such proceeds are related to the performance of Players in NBA basketball games or NBA-related activities, including, without limitation, such proceeds received or to be received by a Related Party (in accordance with Section 1(a)(7)(i) below);

(vi) forty (40) percent of the gross proceeds, net of Taxes, from the sale of fixed arena signage within or outside of the arena in which an NBA Team plays more than one-half of its Regular Season home games, including, without limitation, such proceeds received or to be received by a Related Party (in accordance with Section 1(a)(7)(i) below);

(vii) forty (40) percent of the gross proceeds of any kind, net of Taxes, from the sale, lease or licensing of luxury suites calculated on the basis of the actual proceeds received by the entity, including, without limitation, proceeds received or to be received by a Related Party (in accordance with Section 1(a)(7)(i) below), that sold, leased, or licensed such luxury suites; provided, however, that, other than the additional amounts paid by luxury suite holders to the Team for tickets pursuant to arrangements in which admission to games is not part of the agreement to buy, lease or license the luxury suite, thereby requiring the luxury suiteholder to make a separate payment for such admission, if any, this amount shall be the only amount included in BRI for the sale, lease or licensing of luxury suites and that, to the extent that the sale, lease or licensing of the luxury suite grants rights to the luxury suite for a period of more than one (1) year, for purposes of calculating the amount includable in BRI for any Salary Cap Year, the proceeds shall be determined on the basis of the annual fee or charge provided for in any such transaction and, if payments are made in addition to or in the absence of such an annual fee or charge, the value of such payments shall be amortized over the period of the sale, lease or license, unless such period exceeds twenty (20) years, in which event an amortization period of twenty (20) years shall be used;

(viii) forty-five (45) percent for the 2005-06 through 2007-08 Seasons, and fifty (50) percent for the 2008-09 through 2010-11 Seasons (and, in the event that the NBA exercises its option to extend the Agreement pursuant to Article XXXIX, fifty (50) percent for the 2011-12 Season) of the gross proceeds, net of Taxes, from arena naming rights agreements with respect to arenas in which an NBA Team plays more than one-half of its Regular Season home games, including, without limitation, such proceeds received or to be received by a Related Party (in accordance with Section 1(a)(7)(i) below);

(ix) except as provided in Section 1(a)(2) below, proceeds received by Properties, net of Taxes and actual expenses that are directly attributable to the generation of such proceeds, as long as those expenses are consistent with the types and categories of expenses incurred by Properties as reflected in the audited financial reports for Properties for the year ended July 31, 1994 (or, in the case of new sources of proceeds or new types of expenses, as long as the expenses are reasonable and customary in the opinion of the Accountants (as defined in Section 10(a) below), subject to the provisions of Section 1(a)(6) below), including proceeds derived from the following categories (defined in the same manner as was used in those audited financial reports): (A) international television; (B) sponsorships; (C) NBA-related revenues from NBA Entertainment; (D) the All-Star Game; (E) other NBA special events; and (F) all other sources of revenue received by Properties other than those specifically excluded under Section 1(a)(2) below;

(x) proceeds from premium seat licenses (other than licenses of luxury suites, which are governed by Section 1(a)(1)(vii) above), net of Taxes, attributable to NBA-related events amortized over the period of the license (including, without limitation, such proceeds received or to be received by a Related Party (in accordance with Section 1(a)(7)(i) below), unless such period exceeds twenty (20) years, in which event an amortization period of twenty years shall be used; and

(xi) if the right to receive revenues included in BRI is sold or transferred to an entity other than an entity referred to in Section 1(a)(1) above (such that those revenues would not be included in BRI pursuant to that subsection), then BRI shall be deemed to include the amount of revenues that would have been received by the seller or transferor and would have been included in BRI in such Salary Cap Year (subject to any applicable allocations provided for above), absent such sale or transfer, provided that a pledge, hypothecation, collateral assignment or other similar transaction involving such revenues shall not be considered a sale or transfer within the meaning of this Section 1(a)(1)(xi).

(2) Notwithstanding anything to the contrary in Section (a)(1) above, it is understood that the following is a non-exclusive list of examples of revenues that are or may be received by the NBA, Properties, Media Ventures, other League-related entities, NBA Teams and Related Parties (the foregoing persons or entities, beginning with “NBA,” collectively referred to in this Section 1(a)(2) only as “NBA-related entities”) that are not derived from, and do not relate to or arise out of, the performance of Players in NBA basketball games or in NBA-related activities or are otherwise expressly excluded from the definition of BRI:

(i) needs from the assignment of Player Contracts;

(ii) proceeds (A) from the sale, transfer or other disposition of any of the assets or property (excluding ordinary course sales of inventory and the revenues (if any) deemed to be included in BRI pursuant to Section 1(a)(1)(xi) above) of, or ownership interests in, any NBA-related entity, or (B) from loans or other financing transactions;

(iii) proceeds from the grant of Expansion Teams;

(iv) dues;

(v) capital contributions received by an NBA-related entity from one of its owners, shareholders, members or partners;

(vi) fines and compensation withheld in connection with suspensions;

(vii) revenue sharing (by means of revenue transfers or otherwise) among Teams;

(viii) interest income;

(ix) insurance recoveries, except where, and only to the extent that, such recoveries are in respect of lost revenues that would have otherwise been included in BRI, in which event such recoveries shall be included in BRI in the Salary Cap Year in which they are received;

(x) proceeds from the sale or rental of real estate;

(xi) any thing of value received in connection with the design or construction of a new or renovated arena or other team facility including, but not limited to, receipt of title to or a leasehold interest in real property or improvements, reimbursement of project-related expenses, benefits from project-related infrastructure improvements, or tax abatements, unless (and only to the extent that) such value is being provided to the Team or a Related Party in lieu of payments that the Team or Related Party would have otherwise received pursuant to an arena lease or other instrument concerning a Team’s use of an arena (“lease”) and would have constituted BRI if paid to the Team or a Related Party; provided, however, that the determination of the amount, if any, to be included in BRI with respect to the value of any of the foregoing shall be made either (A) in accordance with the provisions of Section 1(a)(4) below or (B) based upon direct evidence that the Team or Related Party, after proposing that it would receive certain revenues constituting arena-generated BRI, subsequently agreed specifically to forego such revenues in direct exchange for a thing of value (as described above in this Section 1(a)(2)(xi)) with the consequence that the arena-generated BRI revenues received or to be received by the Team or Related Party were or would be (in the opinion of the Accountants) less than the fair market value of arena-generated BRI revenues received or to be received by other NBA Teams in similar transactions, or (C) based upon direct evidence that the parties to the transaction had agreed that certain revenues constituting arena-generated BRI would be paid to the Team or Related Party and that such revenues were subsequently foregone by the Team or the Related Party in direct exchange for a thing of value (as described above in this Section 1(a)(2)(xi)); and provided further that, when a determination is made pursuant to clause (B) or clause (C) of this Section 1(a)(2), the amount(s), if any, to be included in BRI shall be allocated (with an appropriate interest adjustment to reflect the time value of money where the thing of value received by the Team or Related Party is in the form of cash or a cash equivalent, such as a check or wire transfer) over the Salary Cap Years in which the arena-generated BRI revenues foregone would have been received by the Team or Related Party (up to a maximum of twenty (20) Salary Cap Years) and not on a lump-sum basis;

(xii) any thing of value that induces or is intended to induce a Team either to relocate to or remain in a particular geographic location, unless (and only to the extent that) such value is being provided to the Team or a Related Party in lieu of payments that the Team or Related Party would have otherwise received pursuant to an arena lease and that would have constituted BRI had they been paid to the Team or a Related Party; provided, however, that the determination of the amount, if any, to be included in BRI shall be made either (A) in accordance with the provisions of Section 1(a)(4) below or (B) based upon direct evidence that the parties to the transaction had agreed that certain revenues constituting arena-generated BRI would be foregone by the Team or Related Party, in direct exchange for a thing of value as described above in this Section 1(a)(2)(xii), and provided, further that, when a determination is made pursuant to clause (B) of this Section 1(a)(2)(xii), the amount(s), if any, to be included in BRI shall be allocated (with an appropriate interest adjustment to reflect the time value of money where the thing of value received by the Team or Related Party is in the form of cash or a cash equivalent, such as a check or wire transfer) over the Salary Cap Years in which the arena-generated BRI revenues foregone would have been received by the Team or Related Party (up to a maximum of fifteen (15) Salary Cap Years) and not on a lump-sum basis;

(xiii) payments made to Teams or to the NBA pursuant to the provisions of Article VII, Section 12 (Escrow/Tax Arrangement) below;

(xiv) distributions, dividends or royalties paid by any NBA-related entity to owners, shareholders, members or partners;

(xv) any category or source of revenue or proceeds that was expressly identified in any BRI Report (as defined in Section 10(b) below) or in any document or written communication (including debriefing memos) authored by the Accountants and provided to the Players Association and the NBA (but excluding any underlying work papers) in connection with the Audit Reports for any of the 1995-96 through 2004-05 Salary Cap Years that was not included in BRI for such Salary Cap Years, unless such category or source was included on the “open issues” list prepared by the Accountants in connection with any of the Audit Reports for the 1999-2000 through 2004-05 Salary Cap Years, in which case such category or source shall be included in or excluded from BRI, as the case may be, in accordance with the other terms of this Article;

(xvi) proceeds received by (A) Properties pursuant to the Group License Agreement (including, but not limited to, proceeds received pursuant to the license of “fantasy games,” which proceeds are to be included in the computation of Player Merchandise Revenues in accordance with the Group License Agreement), or (B) by a League-related entity relating to the following categories defined in the same manner as was used in the audited financial reports for Properties for the year ended July 31, 1997: (x) licensing; and/or (y) a League-related entity’s representation of, and services performed for, third parties. For purposes of the foregoing sentence, “third parties” refers to persons or entities that are not owned or controlled by persons or entities that own a majority interest in or otherwise control an NBA Team or, if such third party is a Related Party, proceeds received by the League-related entity shall not be included in BRI if representation of such Related Party does not relate either to such entity’s NBA ownership or NBA Players;

(xvii) monies collected from team-related fundraising for charitable purposes or other charitable activities, other than monies paid pursuant to Team sponsorship agreements that are included in BRI pursuant to Section 1(a)(1)(v) above; and

(xviii) proceeds solely related to the NBADL;

(xix) proceeds from the leasing or use of any Team physical assets (e.g., a Team plane); and

(xx) any thing of value received from a concessionaire, food service vendor or other third party equipment or service provider that, if received in kind, is installed in an NBA arena or, if received in cash, is directed to defraying the costs of the construction or substantial renovation of an NBA arena.

(3) The parties agree that (i) in determining whether a category or source of revenue or proceeds constitutes BRI: (A) consideration shall be given to whether such category or source is more similar in kind or nature to the included categories and sources listed in Section 1(a)(1)(i) through (xi) above, on the one hand, or to the excluded categories and sources listed in Section 1(a)(2)(i) through (xx) above, on the other; and, (B) no inference may be drawn from the fact that such category or source was not included in the categories and sources listed in Section 1(a)(1)(i) through (x) above, or the fact that such category or source was not included in the categories and sources listed in Sections 1(a)(2)(i) through (xx) above; and (ii) in any proceeding involving a dispute over (A) the includability or categorization of any revenue or expense item for BRI purposes; (B) the amount to be included in or deducted from BRI with respect to any revenue or expense item; or (C) the accounting methodology used by the Accountants in connection with any audit of BRI, the parties may refer to the past practice of the parties or the Accountants in connection with the Audit Reports for any of the 1999-2000 through 2004-05 Salary Cap Years; provided, however, that no reference may be made to the past practice of the parties or the Accountants with respect to any source or category of revenue or expense that was included on the “open issues” list prepared by the Accountants in connection with any of such Audit Reports.

(4) The parties agree that, with respect to any lease entered into after the date of this Agreement between a Team (or a Related Party) and an arena that is not a Related Party, the Accountants may attribute to the Team (or a Related Party) for purposes of computing BRI for a Salary Cap Year portions of arena revenues received by the arena or its related entities that would be included in BRI if received by the Team (or a Related Party) to the following extent: in the event of a renewal, extension or renegotiation of a lease between the same parties, or a new lease entered into by a Team (or a Related Party) with an arena that is not a Related Party, the Team will be deemed to receive in the first Salary Cap Year covered by the new lease or by the renewal, extension or renegotiation of the existing lease (as the case may be) the greater of (i) the amount of such revenues that the Team or the Related Party in fact receives under the lease or, (ii) if in the opinion of the Accountants, the Team (and/or the Related Party) is receiving substantially less than fair market value as determined by the Accountants (taking into account factors such as the rent paid by the Team or the Related Party, the number and identity of other major tenants in the arena, market conditions, the extent to which arena revenues are used to fund construction or renovations of the arena, and comparable lease arrangements in the NBA), an amount determined by the Accountants to constitute the fair market value of the revenues that a tenant, in the same circumstances as the Team or Related Party, would receive for such Salary Cap Year. In either of the preceding cases, the Accountants will also determine the amount to be included in BRI for Salary Cap Years beyond the first Salary Cap Year.

(5)

(i) In no event shall the same revenues be included in BRI, directly or indirectly, more than once (including as a result of changes in accounting methods or practices), the purpose of this provision being to preclude the double-counting of revenues, whether in the same or in multiple Salary Cap Years.

(ii) In no event shall the same expenses be deducted from BRI, directly or indirectly, more than once (including as a result of changes in accounting methods or practices), the purpose of this provision being to preclude the double-counting of expenses, whether in the same or in multiple Salary Cap Years.

(6) Subject to Section 11 below (Players Association Audit Rights):

(i) With respect to expenses incurred in connection with all proceeds coming within Section 1(a)(1)(v) and (ix) above, all reported expenses shall be conclusively presumed to be reasonable and customary (other than expenses related to sources of revenues that were not reflected in the audited financial report for Properties for the year ended July 31, 1994), and such expenses shall not be the subject of the accounting procedures set forth in Section 10 below. Such expenses shall be disallowed, however, to the extent that they exceed the ratio of League-wide reported expenses to League-wide reported revenues (the “Expense Ratio”) for that category of revenues set forth in Exhibit D hereto.

(ii) With respect to the NBA Store (the “Store”) and any other new venture undertaken by the NBA, Properties, Media Ventures, or any other League-related entity requiring significant capital investment or start-up costs (“New Venture”), reasonable and customary expenses shall include, but not be limited to, cost of goods sold, sales tax, all reasonable operating expenses of the Store or New Venture (including, but not limited to, salaries and benefits directly related to the operations of the Store or New Venture, promotional and advertising costs, rent, direct overhead, general and administrative expenses of the Store or New Venture), reasonable financing costs and amortization of capital improvements and start-up costs; provided, however, that in no event shall the expenses attributable to the Store or New Venture cause the amount included in BRI for the Store or New Venture to be less than zero (0) for any Salary Cap Year.

(iii) With respect to new categories of revenue that may be included in BRI during the term of this Agreement (other than revenues attributable to the Store or a New Venture), the NBA, Properties, Media Ventures, other League-related entities, NBA Teams and Related Parties shall be able to deduct all expenses that the parties agree (or, in the absence of such agreement, that the Accountants determine) are reasonable and customary, provided, however, that if a new category of revenue is substantially similar to the type of revenues described in Section 1(a)(1)(i) and (iv) above, the expenses attributable to such new category of revenue shall be deductible only to the extent contemplated by such subsections.

(7) It is acknowledged by the parties hereto that for purposes of determining BRI:

(i) Some NBA Teams have engaged or may engage in transactions with third parties that control, or own at least 50% of, the NBA Team or that are controlled or owned at least 50% by the persons or entities controlling or owning at least 50% of the NBA Team (such third parties are referred to in this Agreement as a “Related Party”), and Related Parties themselves engage in transactions with third parties that may result in a Related Party’s receipt of revenues that constitute BRI. (Any entity that was an “entity related to an NBA team” as defined by Article VII, Section 1(a)(4)(i) of the September 18, 1995 Collective Bargaining Agreement between the NBA and the Players Association (the “1995 CBA”) shall be deemed a Related Party under this Agreement for so long as such entity continues to be an entity related to an NBA Team within the meaning of the 1995 CBA.) As provided in Section 1(a)(1) above, the relevant proceeds received by any Related Party that come within such subsection and that relate to such Related Party’s Team shall be included in BRI. However, with respect to any such revenues or proceeds retained or received by a Related Party (other than arena revenues that relate to such Related Party’s Team including, but not limited to, in-arena sales of novelties and concessions, NBA game parking, arena club revenues, suite and seat revenues and fixed and temporary in-arena signage, which shall be included in BRI as if received by the Team), or by a Team pursuant to a transaction with a Related Party, such revenues or proceeds shall be included in BRI only to the extent that the NBA and the Players Association agree or, if they fail to agree, the Accountants shall reasonably determine the amount, if any, of such revenues or proceeds to attribute to the Team (taking into account factors such as the nature of the transaction, arrangement and/or relationship between the Team and the Related Party or between the Related Party and a third-party, any amounts included in BRI with respect to other Teams (or Related Parties) that have entered into comparable transactions, arrangements and/or relationships with third parties, market conditions, the nature of any services or activities performed by the Related Party for, or in connection with, the generation of revenues or proceeds and the amount of revenues or proceeds that the Related Party would be expected to retain or receive with respect to comparable transactions, arrangements and/or relationships with third parties), and the amount so attributed shall be the only amount included in BRI. To the extent that the amount of such proceeds to be included in BRI cannot reasonably be determined with respect to any particular transaction, the Accountants shall determine a reasonable amount with respect to such transaction, which shall be included in BRI. (In the event the Accountants refuse to make any such determination, such determination shall be made by (A) the TV Expert referred to in Section 1(a)(7)(ii) below if such transaction is a Related Party television transaction, or (B) a jointly selected expert with respect to any such transaction that involves revenues in non-television BRI categories.) Without limiting the foregoing, in no event shall BRI include consideration paid to a Related Party in connection with rights acquired by such Related Party from a Team for fair market value, even if such consideration relates to NBA games or NBA-related activities (including, by way of example and not limitation, advertising revenue or subscriber fees earned by a Related Party television network that relate, directly or indirectly, to the telecast of NBA games licensed to the television network by a Team).

(ii) In the event that, following the execution of this Agreement, a Team (other than the New York Knicks (“Knicks”)) enters into a local or regional telecast agreement with a Related Party, a copy of such agreement shall be provided to the Players Association within ten (10) days of approval of such agreement by the NBA. The Players Association and the NBA shall each have the right, not later than ten (10) days following the date on which the Players Association receives a copy of such agreement, to submit such agreement to a jointly-selected television valuation expert or (in the absence of such agreement) determined in accordance with the procedure set forth in this subsection (“TV Expert”) for the limited purpose set forth in this Section 1(a)(7)(ii). In the event that the parties have not jointly selected a TV Expert within twenty (20) days following the date on which the Players Association receives a copy of such agreement, each party shall appoint its own television valuation designee and the two designees so appointed shall within ten (10) days of their appointment, jointly select a third party to serve as the TV Expert. Such TV Expert shall review such agreement to determine if the aggregate amount to be paid to the Team by the Related Party for the rights to telecast the Team’s games pursuant to such agreement is more than 15% above or more than 15% below the fair market value of such rights over the term of such agreement. In the event that the TV Expert determines that such aggregate amount is more than 15% above or below fair market value, the TV Expert shall be instructed to submit to the parties the amount for each Season of such agreement that he determines reflects the fair market value of such rights and such amounts, and no other amounts, shall be included in BRI with respect to such agreement for each Salary Cap Year covered by such agreement. Any determination made by the TV Expert pursuant to either of the preceding two sentences shall be submitted to the parties no later than twenty (20) days from the date on which such agreement was submitted to the TV Expert for his review. Any fees or costs associated with the retention or determination of the TV Expert shall be borne equally by the Players Association and NBA. The Players Association and the TV Expert shall maintain the confidentiality of any such agreement (and any determination made by the TV expert in accordance with this Section 1(a)(7)(ii)) pursuant to the terms of Section 11(c) below relating to confidentiality of BRI Audits.

(iii) With respect to the transactions listed below in this Section 1(a)(7)(iii), the parties agree that, because the proceeds attributable to these transactions cannot be accurately ascertained, the following procedures shall be used for each NBA Season in which MSG Network is a Related Party of the Knicks (in the case of Section 1(a)(7)(iii)(A) below) and the Madison Square Garden arena is a Related Party of the Knicks (in the case of Section 1(a)(7)(iii)(B) below):

(A) New York Knicks transaction with MSG Network regarding the sale of local media rights: BRI for the Knicks for each NBA Season covered by this Agreement shall include an amount equal to the net proceeds included in BRI attributable to the Los Angeles Lakers’ sale, license or other conveyance of all local media rights (including, but not limited to, broadcast and cable television and radio) for such NBA season.

(B) New York Knicks transactions with Related Parties involving signage: BRI for the Knicks for the 1999-2000 NBA Season shall include $3,750,000 for signage. In each subsequent Season covered by this Agreement, this amount shall be increased (or decreased, as the case may be) by the League-wide percentage increase (or decrease) in signage as determined in accordance with Section 1(a)(1)(v) and (a)(1)(vi) above.

At such time as the MSG Network and/or the Madison Square Garden Arena are no longer Related Parties, BRI for the New York Knicks in the categories described in Section 1(a)(7)(iii)(A) and/or (B) above, as the case may be, shall not be determined in accordance with the foregoing and will instead be determined by the applicable provisions of Section 1(a)(1) and (a)(7)(ii) above.

(8) In the event that, pursuant to the NBA’s national broadcast, national telecast and network cable television agreements, NBA Teams receive revenue sharing proceeds that are attributable to NBA game telecasts in more than one Salary Cap Year, such proceeds shall be allocated over the same number of Salary Cap Years (beginning with first Salary Cap Year after the Salary Cap Year in which such proceeds are actually received) as the number of Salary Cap Years in which such games were televised. Any other contingent payments received by the NBA pursuant to such agreements shall be included in BRI to the extent and in a manner agreed upon by the parties, or, if the parties cannot agree, in a reasonable manner determined by the Accountants.

(9) The NBA and each NBA Team shall in good faith act and use their best efforts to maximize BRI for each Salary Cap Year during the term of this Agreement. In the exercise of such best efforts, the NBA and each NBA Team shall be entitled to act in a manner consistent with their sound business judgment and shall not take any action intended to benefit, at the expense of BRI, other commercial activities (such as the WNBA and the NBADL) unrelated to the performance of Players in NBA basketball games or in NBA-related activities. Without limiting the generality of the foregoing, the parties agree that it is within the sound business judgment of the NBA and each NBA Team to enter into, terminate or modify commercial arrangements or transactions, in good faith, in response to market exigencies, the acts or needs of unrelated third-party business partners, and/or the best interests of NBA fans.

(10) The parties agree that upon a finding by the System Arbitrator (which, if appealed, is affirmed by the Appeals Panel) that the NBA or an NBA Team (or a Related Party) has willfully failed to provide to the Accountants information concerning revenues or expenses material to the Accountants’ preparation of an Audit Report, and that such failure to provide information resulted in an understatement of BRI of more than $2.5 million with respect to the 2005-06 Salary Cap Year (increasing by 4.5% for each subsequent Salary Cap Year of this Agreement, beginning in the 2006-07 Salary Cap Year), then the amount by which BRI was understated shall be included in BRI in the Salary Cap Year in which such finding is made, with interest accruing from the date of the Audit Report for the Salary Cap Year in which such amount would have been included but for such understatement, with interest (at a rate equal to the one year Treasury Bill rate as published in the Wall Street Journal on the date of the issuance of such Audit Report). In addition, if any Team, or if the NBA, violates the foregoing, it shall be fined $1 million for its first violation during the term of this Agreement and an additional $1 million for each additional violation. (For example, if a Team violates the foregoing for the first time, it shall be fined $1 million; if such Team violates the foregoing a second time, it shall be fined $2 million; and if such Team violates the foregoing a third time, it shall be fined $3 million.) Fifty percent (50%) of any such fine amounts shall be remitted by the NBA to an NBPA-Selected Charitable Organization (as defined in Article VI, Section 6 above) and 50% shall be remitted by the NBA to a Section 501(c)(3) organization selected by the NBA.

(11) Neither the NBA or a League-related entity nor a Team or a Related Party will enter into any lease or other agreement providing for the receipt of revenues includable in BRI that contains provisions that purport to limit access of the Accountants to the books and records of the NBA, such League-related entity, such Team, or such Related Party in a manner inconsistent with the terms of this Agreement or that would preclude the calculation of revenues (if any) to be included in BRI pursuant to the provisions of Section 1(a)(1)(xi) above.

(12) Premium payments made by a Team for any insurance that, if paid, would be includable in BRI pursuant to Section 1(a)(2)(ix) above, shall be deducted from such Team’s BRI for the Salary Cap Year in which any such insurance recovery is received.

(b) Accounting Methods/Lump Sum Payments.

(c) “Projected BRI” for a Salary Cap Year means the sum of amounts determined in accordance with the following:

(d) “Local Expansion Team BRI” means the BRI of the Expansion Teams during their first two (2) Seasons, but not including the Expansion Teams’ share of League-wide revenues that are otherwise included in BRI (including, but not limited to, their share of national television, cable, radio and other broadcast revenues).

(e) “Projected Local Expansion Team BRI” means Local Expansion Team BRI for the immediately preceding Season, increased by 4.5%.

(f) “Interim Projected BRI” means a projection of BRI for a Salary Cap Year using Estimated BRI in place of BRI for the previous Salary Cap Year.

(g) “Barter” means to trade by exchanging one commodity, service or other non-cash item for another.

(h) “Estimated Total Benefits” means the estimate of Total Benefits for a Salary Cap Year as set forth in the Interim Audit Report (as defined in Section 10(a) below) for such Salary Cap Year.

(i) “Estimated Total Salaries” means the estimate of Total Salaries for a Salary Cap Year as set forth in the Interim Audit Report for such Salary Cap Year.

(j) “Estimated Total Salaries and Benefits” means the sum of Estimated Total Benefits and Estimated Total Salaries for a Salary Cap Year as set forth in the Interim Audit Report for such Salary Cap Year.

(k) “Estimated BRI” means the estimate of BRI for a Salary Cap Year as set forth in the Interim Audit Report for such Salary Cap Year.

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