I had written last week about the right of first refusal common in partnership agreements, and how it may affect the sale of a majority interest in the Sacramento Kings to a Seattle Group. If you are involved in a partnership agreement contemplating a sale of an interest, you should consult with an experienced Sacramento business attorney.
The NBC sports blog ProBasketballTalk has published what it believes is language from the Kings governing partnership agreement. It is as follows:
Notwithstanding the provisions of Section 7.1 hereof, if a Partner desires to assign all or part of his or its interest in the Partnership and such assignment is not specifically permitted under Sections 7.2A or 7.2B above, then the assignment shall be subject to the right of first opportunity hereinafter described in this Section 7.3. Before a Partner (the “Selling Partner”) actually concludes a sale of its interest in the Partnership subject to this Section 7.3, the Selling Partner shall give notice to (a) the General Partner and each other Limited Partner if the Selling Partner is a Limited Partner, and (b) to each Limited Partner if the Selling Partner is the General Partner (such Partner or Partners other than the Selling Partner being individually and collectively herein called “Non-Selling Partner”) setting forth the purchase price for which it will offer such Partnership interest for sale (“which purchase price must be payable entirely in cash or part in cash and the balance pursuant to one or more promissory notes”).
A ‘right of first opportunity” is the same as a right of first refusal. The last portion, “which purchase price must be payable entirely in cash or part in cash and the balance pursuant to one or more promissory notes,” is crafted to avoid the problem I discussed last week regarding strict performance. By restricting the purchase to cash, the non-selling partner may be required to strictly perform according to the terms of the agreement, meaning cash and notes.