ARTICLE 26: NO CIRCUMVENTION
Preamble. It is the parties' intention that there be full, accurate and timely disclosure and reporting of all revenues and financial information as required by Article 50, as well as of any and all agreements involving payments to Players, and that such disclosures and agreements be consistent with this Agreement, including but not limited to the provisions of Article 50. This Article 26 is designed to prohibit and prevent conduct that Circumvents the terms of this Agreement, while not deterring or prohibiting conduct permitted by this Agreement, the latter conduct not being a Circumvention.
26.1 General. The activities described or referred to in, or expressly prohibited by, Sections 26.2 through 26.7, and 26.15, whether completed or attempted, directly or indirectly, shall be deemed Circumventions under this Agreement and shall be penalized as described in and provided by Section 26.13.
26.2 Undisclosed Terms and Revenues.
A Club (directly or indirectly through a "Club Actor," i.e., any owner, shareholder, Club Affiliated Entity, the NHL or third party acting at the behest of a Club) and a Player (directly or indirectly through a "Player Actor," i.e., his Certified Agent or any other individual, any entity, or the NHLPA, acting on behalf of the Player) may not, at any time, enter into undisclosed agreements of any kind, express or implied, oral or written, or promises, undertakings, representations, commitments, inducements, assurances of intent, or understandings of any kind involving consideration of any kind to be paid, furnished or made available or guaranteed to the Player, or Player Actor, by the Club or Club Actor either prior to, during, or after the term of the Player's SPC.
26.3 Circumventions.
(a) No Club or Club Actor, directly or indirectly, may: (i) enter into any agreements, promises, undertakings, representations, commitments, inducements, assurances of intent, or understandings of any kind, whether express, implied, oral or written, including without limitation, any SPC, Qualifying Offer, Offer Sheet or other transaction, or (ii) take or fail to take any action whatsoever, if either (i) or (ii) is intended to or has the effect of defeating or Circumventing the provisions of this Agreement or the intention of the parties as reflected by the provisions of this Agreement, including without limitation, provisions with respect to the financial and other reporting obligations of the Clubs and the League, Team Payroll Range, Player Compensation Cost Redistribution System, the Entry Level System and/or Free Agency.
(i) Any act by a Club Actor that, if committed by the Club would constitute a Circumvention, shall be imputed to the Club and shall be deemed to be a Circumvention by the Club.
(b) No Player or Player Actor, directly or indirectly, may: (i) enter into any agreements, promises, undertakings, representations, commitments, inducements, assurances of intent, or understandings of any kind, whether express, implied, oral or written, including without limitation, any SPC, Qualifying Offer, Offer Sheet or other transaction, or (ii) take or fail to take any action whatsoever, if the Player knows or reasonably should have known (measured by the objective standard of the "reasonable Player under the circumstances") that either (i) or (ii) is intended to and has the effect of defeating or Circumventing the provisions of this Agreement or the intention of the parties as reflected by the provisions of this Agreement, including without limitation, provisions with respect to the Team Payroll Range, the Entry Level System and/or Free Agency.
(c) Such knowledge or knowledge imputed under Section 26.3(c)(i) of a Player applies to all references to Players set forth in Sections 26.1, 26.3 and 26.5, i.e., a Player has not engaged in a Circumvention unless the Player knew or reasonably should have known that the conduct at issue was intended to have and did have the effect of defeating or Circumventing the provisions of this Agreement or the intention of the parties as reflected by the provisions of this Agreement, including without limitation, provisions with respect to the Team Payroll Range, the Entry Level System, and/or Free Agency.
(i) Any act by a Player Actor that, if committed by the Player would constitute a Circumvention, shall be imputed to the Player and shall be deemed to be a Circumvention by the Player.
(d) No Club or Club Actor or Player or Player Actor may commit any act through a third party where, if such activity were attributed to the Club itself, or to the Player himself, as the case may be, it would constitute a Circumvention. Such activities as are, or are attempted to be, carried out by or through third parties that constitute Circumventions shall be treated as if the Circumvention were committed by the Club itself, or the Player himself, as the case may be.
(e) No Club or Club Actor may provide, directly or indirectly, any Player or Player Actor, with anything of value from a Club or Club Actor other than his Player Salary and Bonuses set forth in, and in accordance with the terms of, his SPC, and his share of Benefits and Government Mandates/Other Programs, as set forth in this Agreement or as otherwise expressly permitted by this Agreement. A Player or Player Actor may not receive, directly or indirectly, anything of value from a Club or Club Actor other than his Player Salary and Bonuses set forth in, and in accordance with the terms of, his SPC, and his share of Benefits and Government Mandates/Other Programs as set forth in this Agreement or as otherwise expressly permitted by this Agreement. Notwithstanding the fact that a Player must disgorge anything of value he may have received in violation of the prior sentence, a Player shall not be guilty of a Circumvention in the absence of knowledge that the entity from which he received something of value, was a Club Actor. No Club or Club Actor or Player or Player Actor may engage in any conduct that is intended to pay or provide, or has the effect of, paying or providing to a Player, anything of value other than that which the Player may properly receive through his SPC, and his share of Benefits and Government Mandates/Other Programs, or as otherwise expressly permitted by this Agreement. For example, a Player is prohibited from entering into an agreement with a broadcasting company that is a Club Affiliated Entity, in which the Player agrees to host a weekly television show, for which he is to be compensated the fair market value of such services, as this would be something of value other than which the Player may properly receive through his SPC, or his share of Benefits and Government Mandates/Other Programs, or as otherwise expressly permitted by this Agreement.
(i) However, nothing in this Section 26.3(e) is intended to prohibit a Player from entering into a sponsorship, endorsement or other commercial arrangement with a local sponsor or entity with which his Club does business but which is not a Club Affiliated Entity, in which the Player receives something of value, provided the thing of value received is commensurate with (i.e., not clearly in excess of) the fair market value of the services rendered by the Player on behalf of the sponsor or entity. With respect to any sponsorship or endorsement arrangement between a Player and a national sponsor, any thing of value provided to a Player under such arrangement shall be presumptively acceptable (i.e., such thing of value need not meet the "fair market value" test set forth in the preceding sentence), provided that such arrangement was not made at the behest of the Player's Club or any other Club Actor. However, the NHL shall have the right to challenge before the System Arbitrator, through an expedited arbitration proceeding pursuant to the third sentence of Section 26.13(a) below, the bona fides of any such national sponsorship or endorsement arrangement on the grounds that it was actually provided for the benefit of a particular Club.
(ii) Each Club shall maintain a list of sponsors with which it does business, which lists shall be updated as necessary and shall be provided to the NHLPA periodically.
(f) No Club or Club Actor or Player or Player Actor shall induce or attempt to induce any other Club or Club Actor or Player or Player Actor or cause any other Club or Club Actor or Player or Player Actor to be induced to engage in any Circumvention that violates this Section 26.3.
(g) Neither a Club nor a Club Actor may pay or provide a Player anything of value, except as provided in his SPC, and such payment must not be in a form other than U.S. dollars, except as expressly provided in Section 50.2(a) of this Agreement (regarding Traditional Hockey Practices). Upon a finding of this Circumvention by the System Arbitrator, the Player shall forfeit to the League such prohibited payment or other thing of value.
(h) Neither a Club nor the NHL may fail to report, fully, accurately and timely, either through the HRR Reporting Package, or to the Independent Accountants, all revenues and other information that the Club or the NHL is obligated to disclose under this Agreement, included but not limited to the provisions of Article 50.
(i) Any act, conduct, or activity that is permitted by this Agreement shall not be a Circumvention.
26.4 Circumvention by NHL or NHLPA. It shall be a Circumvention for the NHLPA or the NHL to engage in any conduct prohibited by Section 26.3. It shall not be a Circumvention for the NHL or the NHLPA to advise their respective constituents as to whether specific practices comply with this Agreement.
26.5 Circumventing Activities of Individuals Who Subsequently Become Players. Any act committed by a Club, Club Actor, Player or Player Actor involving, related to, or attributable to an individual who subsequently becomes a Player, which would have been a Circumvention if the individual had been a Player at the time such act occurred, shall be deemed to be a Circumvention for purposes of this Article 26.
26.6 Prohibition Against Payments to Certified Agents. No Club or Club Actor shall be permitted to pay money or provide anything else of value to a Certified Agent.
26.7 Disclosure of Agreements.
(a) It is the affirmative obligation of each Club, Club Actor and the NHL upon learning of any Circumvention or fact that would reasonably appear to indicate the occurrence of a Circumvention, promptly to disclose in writing such Circumvention(s), and/or fact(s) to the Commissioner of the NHL.
(b) It is the affirmative obligation of each Certified Agent and the NHLPA upon learning of any Circumvention or fact that would reasonably appear to indicate the occurrence of a Circumvention, promptly to disclose in writing such Circumvention(s) and/or fact(s) to the Executive Director of the NHLPA.
(c) The failure to promptly disclose as required in (a) and (b) above shall be deemed a Circumvention.
26.8 Required Annual Certifications.
(a) In order to retain his status as a Certified Agent, in addition to the requirements of the Agent Certification Program, each Certified Agent shall annually certify to the NHLPA that during the prior year he has not violated this Article 26, and each Certified Agent must commit to abide by Article 26 prospectively and to subject himself and his agency (if any) to the jurisdiction of the System Arbitrator under Article 26 and Article 48. The Certified Agent shall make this annual certification by signing and submitting to the NHLPA the form annexed hereto as Exhibit 31, by no later than March 1 of each League Year. The NHLPA shall represent to the NHL that each Certified Agent on the list it shall attach to its representation has submitted said form, properly executed, to the NHLPA.
(b) In any proceeding before the System Arbitrator in which it is alleged that a Certified Agent has violated this Article 26, the System Arbitrator shall make a specific determination with respect to such allegation. If the System Arbitrator finds such violation he shall refer such finding to the NHLPA. The NHLPA shall accept as binding and conclusive the finding(s) of the System Arbitrator that a violation of this Article 26 has occurred and shall consider such finding(s) as establishing a violation of the NHLPA's regulations applicable to such Certified Agent. The NHLPA represents that it will impose such discipline as is appropriate under the circumstances on the Certified Agent found to have violated Article 26.
(c) In order to retain his status as a General Manager or CFO or Club President, each General Manager or CFO or Club President shall annually certify to the NHL that during the prior year he has not violated this Article 26, and each General Manager, CFO and Club President must commit to the NHL to abide by Article 26 prospectively and to subject himself to the jurisdiction of the System Arbitrator under Articles 26 and 48. The General Manager, CFO and Club President shall make this annual certification by signing and submitting to the NHL the form annexed hereto as Exhibit 32, by no later than March 1 of each League Year. The NHL shall represent to the NHLPA that each Club executive or official on the list it attaches to its representation has submitted said form, properly executed, to the NHL.
(d) Each Club shall annually certify, through one of its Governors, that during the prior year, that to the best of his knowledge, the Club has not violated this Article 26, and each such Governor must commit to the NHL to abide by Article 26 prospectively and to subject the Club to the jurisdiction of the System Arbitrator under Articles 26 and 48. The Governor shall make this annual certification by signing and submitting to the NHL the form annexed hereto as Exhibit 33, by no later than March 1 of each League Year. The NHL shall represent to the NHLPA that each Governor on the list it attached to its representation has submitted said form, properly executed, to the NHL.
26.9 Violative Filings. Any Club which files an SPC, which if approved and registered, would cause the Club's Averaged Club Salary to impermissibly exceed the Upper Limit of the Range, shall be fined a minimum of $25,000, regardless of whether the SPC was registered and regardless of whether the terms of the SPC constitute or are the result of a Circumvention.
26.10 Investigations.
(a) The Commissioner of the NHL or the Executive Director of the NHLPA (the "Investigator") may, sua sponte or based upon reports or complaints received by either, commence an investigation regarding whether a Circumvention has occurred.
(b) The Investigator's authority to investigate (i) a possible Circumvention relating to an SPC shall in no way be limited by the fact that such SPC was approved and registered by Central Registry pursuant to Article 11 of this Agreement; or (ii) a possible Circumvention relating to financial reporting by a Club, Clubs or the League shall in no way be limited by the fact that the Initial, Interim or Final HRR Report has been issued by the Independent Accountants.
(c) The Investigator may obtain the authority, upon good cause shown to the System Arbitrator, to require any Player, Player Actor, Club or Club Actor to produce any relevant books and records, including without limitation, insurance records, telephone records, e-mails, tax returns or other relevant tax materials disclosing (i) the income or revenue information of the Player, Player Actor, Club or Club Actor and/or (ii) any information of the Club or any Club Actor in the custody or control of the Player or the Player Agent, which materials and information shall be treated as highly confidential.
(d) There shall be no limitation of time barring the investigation of a Circumvention by the Commissioner.
(e) At the conclusion of his investigation, the Investigator shall issue a written determination regarding whether or not, in his opinion, a Circumvention has occurred. The Investigator's determination shall not be binding, but it shall be fully admissible in any hearing commenced before the System Arbitrator pursuant to Section 26.13 below.
(f) The Investigator's failure to initiate an investigation of a suspected Circumvention may be grieved under Section 26.13 but such failure shall not itself be considered a Circumvention.
26.11 The NHL and the NHLPA may each file a complaint directly with the System Arbitrator, subject only to the provision of Section 26.13.
26.12 Joint Discussions on Possible Circumventions. Each Investigator shall notify the other after he has concluded an investigation under Section 26.10. Within three (3) days after such notification, and prior to the Investigator's issuance of a report concerning the results of such investigation, the parties shall meet and confer to try to resolve the matter. If the parties reach a resolution, the Investigator reserves the discretion as to whether to issue a report concerning the alleged Circumvention. If the matter is not resolved, the Investigator shall issue a report concerning the alleged Circumvention. Neither the NHL nor NHLPA may commence any action before the System Arbitrator pursuant to Section 26.13 below prior to the parties having met and conferred pursuant to this Section 26.12.
26.13 Enforcement by the System Arbitrator.
(a) Failing a resolution through the joint conference established pursuant to Section 26.12 above regarding any possible Circumvention, either the NHL or NHLPA may commence any action before the System Arbitrator alleging that a Circumvention has occurred. Such action must be filed within forty-eight (48) hours of the joint conference's declaration that they have not reached a resolution regarding the alleged Circumvention, or shall be deemed waived. An action under this Section 26.13 shall be heard and decided under Article 48 within seven (7) days of the filing of the action, and a decision shall be rendered within three (3) days thereafter. The parties may jointly agree to extend any of the above deadlines.
(b) The System Arbitrator may find a Circumvention has occurred based on direct or circumstantial evidence, including without limitation, evidence that an SPC or any provision of an SPC cannot reasonably be explained in the absence of conduct prohibited by this Article 26. The investigation and findings of the Investigator pursuant to Section 26.10 shall be fully admissible in any proceeding before the System Arbitrator under this Section 26.13.
(c) In the event that the System Arbitrator finds that a Circumvention has been committed by a Player or Player Actor, the System Arbitrator may impose any or all of the following penalties and/or remedies set forth below. In the event that the System Arbitrator finds that a Circumvention has been committed by a Club or a Club Actor, the Commissioner may impose any or all of the following penalties and/or remedies set forth below:
(i) Impose a fine of up to $5 million in the case of a Circumvention by a Club or Club Actor, but in no circumstances shall such fine be less than $1 million against any Club or Club Actor if such party is found to have violated Article 50 of this Agreement. If such a fine is assessed against a Club (except in the case of a financial reporting violation), that Club's Payroll Room shall also be reduced by such amount for the following League Year, and if such reduction of the Club's Payroll Room renders the Club out of compliance with the Payroll Range (i.e., the Club does not have sufficient Payroll Room to accommodate its Player commitments comprising Club Salary) for such following League Year, then the Club must take such steps as are necessary (e.g. Assignment, Buy-Out, Waivers, etc.) and as are permitted by this Agreement to ensure that the Club will be in compliance with Article 50 of this Agreement upon commencement of the following League Year;
(ii) Impose a fine against a Player of up to the lesser of $1 million or twenty-five (25%) percent of a Player's Paragraph 1 Salary in the case of a Circumvention by a Player or Player Actor, but in no circumstances shall such fine be below the lesser of $250,000 or twenty-five (25%) percent of the Player's Paragraph 1 Salary. Notwithstanding the $1 million limitation set forth above, any additional amounts by which the Player has been unjustly enriched due to the Circumvention shall be ordered to be disgorged;
(iii) Direct a Club to forfeit draft picks (the number, placement, and League Year of which shall be determined in the Commissioner's sole discretion);
(iv) Declare a forfeiture of any NHL Game(s) determined to have been affected by a Circumvention;
(v) Direct a Club to disclose and report to the Independent Accountants all information required by this Agreement, including, without limitation, by the provisions of Article 50;
(vi) Void any SPC, or any extension of an SPC, between any Player and any Club when both the Player or Player Actor and the Club or Club Actor are found to have committed such a violation with respect to such SPC or extension; and
(vii) Suspend any Club employee, Player, or Certified Agent involved in such a violation for a period of time determined in the sole discretion of the Commissioner, the System Arbitrator, or the NHLPA, respectively.
26.14 Fines. Fines paid pursuant to this Article by Club or Club Actors shall be contributed to the Emergency Assistance Fund. Fines paid by Players or Player Actors shall be contributed to The National Hockey League Foundation.
26.15 Examples of Circumvention. The following is a non-exhaustive list of activities that either constitute a Circumvention under this Article 26 or from which a Circumvention may be inferred:
(a) A Club has a Club Salary that would exceed the Upper Limit, other than through the Bona-Fide Long-Term Injury/Illness Exception or the "Performance Bonus Cushion," such as by virtue of an undisclosed agreement or undisclosed payment to Players on its roster.
(b) A Club has an agreement to pay money or anything else of value to a Player not expressly permitted by this Agreement, or makes such a payment to a Player.
(c) A Player enters into a sponsorship or endorsement arrangement with a local sponsor or entity with which his Club does business, in which the Player receives something of value that is disproportionate to (i.e., clearly in excess of) the fair market value of the services rendered by the Player on behalf of the sponsor or endorser.
(d) A Club having access to the Averaged Amount Joint Exhibit and Averaged Club Salary Joint Exhibit and charged with the knowledge that it does not have sufficient Payroll Room to sign an SPC, as required by Article 50, proceeds to sign such SPC. Although it shall not be a Circumvention attributable or imputed to a Player if such Player signs an SPC that puts his Club out of compliance with the Payroll Range, the Certified Agent representing the Player in such circumstance, having access to the Averaged Amount Joint Exhibit and Averaged Club Salary Joint Exhibit, shall be charged with possession of the knowledge that the signing of that SPC will put the Club out of compliance with the Payroll Range.
(e) A Club and a Player, during the Player's active career, agree that upon the Player's retirement, he will receive a sum of money for services to be provided to the Club after retirement.
(f) A Club or Club Actor pays a Player or Player Actor for a "no-show" job, or for a job in which the payment to the Player or Player Actor clearly exceeds the fair market value of the services rendered.
(g) A Club fails to report sales from one of the ticket windows in its box office.
(h) A Club has an undisclosed agreement to obtain payment for tickets reported as complimentary tickets.
(i) A Club has an agreement below fair market value with a Club Affiliated Entity to broadcast or otherwise present footage of the Club's NHL Games.
(j) A Club fails to disclose a barter arrangement that should have been included in its HRR Reporting Package.
(k) A Club fails to report revenue generated from mascot appearances.
26.16 If a governmental entity imposes a payroll tax on Player income, which tax proceeds are transferred, by statutory mandate, directly to the employing Club, the amounts so directly transferred to the Club shall be returned by the Club to the taxed Players.
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