ARTICLE 49: PLAYER COMPENSATION COST REDISTRIBUTION SYSTEM
Preamble. The NHLPA has conditioned its agreement to the Team Payroll Range System, set forth in Article 50 of this Agreement, on the NHL's agreement to establish this Player Compensation Cost Redistribution System. The Player Compensation Cost Redistribution System acknowledges the reality that the Upper Limit of the Payroll Range prevents certain high-revenue Clubs from spending as much of their revenues toward Player Compensation (i.e., Player Salaries, Bonuses and Benefits) as they might otherwise be capable of spending. In addition, there may be lower-revenue Clubs that may have challenges in spending much more than the Lower Limit of the Payroll Range. The NHLPA has focused on the limitations on the spending ability of the Clubs, and desires that these Clubs be financially supported and thereby able to spend sufficient amounts on Player Compensation Costs to achieve a closer range of payroll spending than might otherwise occur.
The Player Compensation Cost Redistribution System described herein, therefore, is designed to cause certain high-revenue Clubs to contribute even more of their revenues toward the payment of Player Compensation – albeit indirectly – by redistributing a certain portion of the revenues of such Clubs to the lower-grossing, small market Clubs so that such lower-grossing, small market Clubs may be able to, and elect to, spend more on Player Compensation. The Player Compensation Cost Redistribution System is intended to enhance the ability of all Clubs to be financially competitive with one another, and, at the very least, to allow all eligible Clubs to be able to spend to at least twenty-five (25) percent of the Team Payroll Range, plus the Club's share of Benefits, on Player Compensation (i.e., Player Salaries, Bonuses and Benefits).
For all League Years, the League's Player Compensation Cost Redistribution commitments shall be sourced: first, up to twenty-five (25) percent from excess centrally generated League revenues, if any; next, up to one-third (?) of the remaining balance from any refund from the Escrow Account (to the extent the League is entitled to a year-end distribution from the Escrow Account in any League Year), but only from such amounts that are attributable to the Players on the ten highest-revenue Clubs that spent more than the Midpoint of the Payroll Range; and finally, the remainder to be sourced fifty (50) percent from the playoff revenues of all participating Playoff Clubs and fifty (50) percent from certain regular-season revenues of the ten highest-revenue Clubs (the amount of all such assessments to be determined in accordance with the terms of this Player Compensation Cost Redistribution System, as set forth herein). In addition, once the League has satisfied its commitment to bring all eligible Clubs up to the Targeted Team Player Compensation (which shall be determined based upon the League's "need-based distribution formula" in each League Year), as set forth herein, then the League shall use any further Escrow Account funds owed to the League to increase all Recipient Clubs' available funds for Player Compensation, up to as high as the Midpoint of the Payroll Range.
In each League Year, the League shall have a Minimum Redistribution Commitment. To the extent that the Minimum Redistribution Commitment exceeds the amount of Player Compensation Cost Redistribution that is necessary in any League Year (based upon the League's "need-based distribution formula"), up to $10 million of any such "excess" shall be applied to a Joint Marketing Account for the benefit of both the NHL and the NHLPA, and the League shall then have no further Player Compensation Cost Redistribution obligations for that League Year. Any excess beyond such amount shall be distributed to the Clubs as set forth herein. To the extent that the amount of Player Compensation Cost Redistribution that is necessary in a League Year is greater than the amount of the Minimum Redistribution Commitment, then the League shall nevertheless commit to whatever level of Player Compensation Cost Redistribution is necessary, over and above the Minimum Redistribution Commitment, to effectuate the goals of this Player Compensation Cost Redistribution System.
49.1 Definitions. For purposes of this Player Compensation Cost Redistribution System, the League, within its sole discretion, may use any methodology it deems appropriate for the definition and treatment of revenues (as well as the netting of costs against such revenues) received by Clubs and Club Affiliated Entities, which methodology shall allow for departures from the definition and treatment of revenues and costs set forth in Article 50 so long as the required amount of dollars are provided. The League will provide the NHLPA with an explanation of its definition and treatment of such revenues contemporaneously with its distribution of any funds to the Clubs pursuant to this Article 49. All revenues collected and distributed pursuant to this Player Compensation Cost Redistribution System are based on U.S. dollars, or U.S. dollar equivalents, converted at the average Canadian dollar to U.S. dollar exchange rate for that League Year, as determined by the Bank of Canada.
As used in this Player Compensation Cost Redistribution System, the following terms shall have the following meanings :
(a) "Arena Costs" when used for a particular League Year for a Club shall mean all costs incurred by such Club for both: (1) arena and building operations related to the playing of NHL hockey at such Club's home arena in such League Year during the preseason and regular season only, including, without limitation, arena rent, security expenses, repairs and maintenance costs, ambulance and first aid costs, salary and benefits of arena personnel (e.g., ushers, entertainment, announcer(s) and other game personnel), property and liability insurance costs, and property taxes, but not including any depreciation and/or leasehold amortization expenses; and (2) ticket office operations for NHL hockey events for the preseason and regular season only, including, without limitation, direct salaries and benefits for ticket office employees, ticket printing fees, and fees paid to credit card companies. In the case of any Arena Costs that are allocated between NHL hockey-related activities and non-NHL hockey related activities for Clubs and Club Affiliated Entities, such Arena Costs shall be allocated in a manner determined in the NHL's sole discretion.
(b) "Available Team Player Compensation" when used for a particular League Year for a Club shall mean the result obtained by multiplying its Club Gross Preseason and Regular Season Revenues for such League Year by the Applicable Percentage of HRR that constitutes the Players' Share for that League Year, as set forth in Section 50.4(b) of this Agreement. The Available Team Player Compensation for a Club, for purposes of this Player Compensation Cost Redistribution System, is the amount that such Club is deemed to have "available" for the payment of Player Compensation (i.e., Salary, Bonuses and Benefits).
Illustration: Assume the Applicable Percentage is fifty-four (54) percent. If a Club has Club Gross Preseason and Regular Season Revenues of $58.0 million, then its Available Team Player Compensation is fifty-four (54) percent of $58.0 million, or $31.32 million.
(c) "Club Gross Preseason and Regular Season Revenues" when used for a particular League Year for a Club shall mean a Club's contribution to HRR (subject however, for purposes of this Article 49, to the League's adjustment to the methodology and treatment of revenues and costs set forth in Article 50) for that League Year from the preseason and regular season only (i.e., not from the playoffs). For purposes of this Player Compensation Cost Redistribution System, the preseason and regular season revenues of the Clubs are the relevant measure to be used to determine which Clubs shall be Contributing Clubs (subject to Section 49.5(d) below) and which Clubs shall be Recipient Clubs. In measuring a Club's Club Gross Preseason and Regular Season Revenues for purposes of this Player Compensation Cost Redistribution System, the League shall use its own methodology, deemed to be appropriate within its sole discretion, for the definition and treatment of revenues (as well as the netting of costs against such revenues) received by Clubs and Club Affiliated Entities, which methodology shall allow for departures from the provisions of Article 50 regarding the definition and treatment of HRR, and revenues included in HRR.
(d) "Club Gross Preseason and Regular Season Revenues Net of Arena Costs" when used for a particular League Year for a Club shall mean such Club's Club Gross Preseason and Regular Season Revenues, less such Club's Arena Costs for such League Year.
(e) "Contributing Club" shall mean a Club that contributes funds as part of this Player Compensation Cost Redistribution System.
(f) "Designated Market Area" ("DMA") shall mean each Club's DMA, as defined by Nielsen Media Research, which publishes yearly reports setting forth various Designated Television Market Areas throughout the United States and Canada. With respect to Clubs with home markets that are not covered by Nielsen Media Research, the DMA for such markets shall be obtained from the Bureau of Broadcast Management ("BBM"), or such equivalent company.
(g) "Distribution" shall mean an amount paid to a Recipient Club as part of this Player Compensation Cost Redistribution System.
(h) "Escrow Funding Phase" shall mean the process for raising a portion of the League's Player Compensation Cost Redistribution System commitment in a League Year, with such portion to be taken out of the portion of the Escrow Account refund (in the event of an Overage as set forth in Section 50.11 of this Agreement), if any, that is attributable to the Players on the ten highest-revenue Clubs that had an Actual Club Salary for such League Year in excess of the Midpoint of the Payroll Range.
(i) "Ineligible Club" shall mean a Club that is not eligible to receive a Distribution under this Player Compensation Cost Redistribution System.
(j) "Maximum Distribution" shall mean, for any Club, the difference between the Targeted Team Player Compensation and the Minimum Team Player Compensation for that League Year. No Club shall be permitted to receive a Distribution in excess of the Maximum Distribution in any League Year, although to the extent there are any Escrow Account funds remaining following the Escrow Funding Phase, as described herein, the Clubs that have already received the Maximum Distribution shall nevertheless be eligible to receive further funds out of the Escrow Account, in accordance with Section 49.7, below.
Illustration: If the Minimum Team Player Compensation for a League Year were $20 million, and the Targeted Team Player Compensation were $28.2 million, then the Maximum Distribution would be $8.2 million, and, subject to Section 49.7 below, no Club would be permitted to receive a Distribution in excess of $8.2 million.
(k) "Minimum Redistribution Commitment" when used for a particular League Year shall mean the minimum guaranteed amount that the League shall commit to Player Compensation Cost Redistribution in such League Year, although in the event that the amount of the Player Compensation Cost Redistribution System commitment that is necessary in any League Year, plus $10 million, is less than the amount of the Minimum Redistribution Commitment, the League need not raise or distribute the entire amount of the Minimum Redistribution Commitment. In any League Year, the amount of the Minimum Redistribution Commitment shall be calculated by multiplying the amount of League-wide Actual HRR in such League Year (as set forth in the Final HRR Report described in Section 50.12 of this Agreement) by four and one-half (4.5) percent.
Illustration #1: Assume for a League Year that League-wide Actual HRR is calculated to be $1.74 billion. The amount of the Minimum Redistribution Commitment for such League Year would be four and one-half (4.5) percent of $1.74 billion, or $78.3 million.
Illustration #2: Assume for a League Year that League-wide Actual HRR is calculated to be $2.3 billion. The amount of the Minimum Redistribution Commitment for such League Year would be four and one-half (4.5) percent of $2.3 billion, or $103.5 million.
(l) "Minimum Team Player Compensation" when used for a particular League Year shall mean the minimum amount which, for purposes of this Player Compensation Cost Redistribution System, each Club shall be presumed to have available to spend on Player Compensation (i.e., Player Salaries, Bonuses and Benefits) for that League Year. For any Club with a level of Club Gross Preseason and Regular Season Revenues in a League Year that does not support a level of spending on Player Compensation Costs that is commensurate with the Minimum Team Player Compensation for such League Year (i.e., that has an Available Team Player Compensation that is less than the Minimum Team Player Compensation), the Club nevertheless shall be deemed to have the Minimum Team Player Compensation for purposes of calculating the amount of Distribution that such Club will receive under this Player Compensation Cost Redistribution System.
The Minimum Team Player Compensation in any League Year shall be calculated as follows: The Minimum Team Player Compensation for a League Year shall bear the same proportional relationship to Actual HRR for such League Year as $20 million bears to $1.74 billion. The calculation of the Minimum Team Player Compensation may be expressed using the following formula:
$20 million
Minimum Team Player Compensation = ---------------- x Actual HRR
$1.74 billion
For example, assuming Actual HRR of $1.9 billion for a League Year, the amount of the Minimum Team Player Compensation would be $21.8 million for such League Year. For the 2005-06 League Year only, the Minimum Team Player Compensation will be $20 million, and will not be subject to adjustment.
(m) "Playoffs Funding Phase" shall mean the process for raising a portion of the League's Player Compensation Cost Redistribution commitment in a League Year, with such portion to be taken out of the gross playoff revenues earned by all Clubs that participate in the Playoffs Qualification Round (if any) and the Stanley Cup Playoffs.
(n) "Pro Rata Benefits Portion" when used for a particular League Year means the actual amount of Benefits (as set forth in Section 50.3(a) of this Agreement) paid out League-wide for such League Year, as set forth in the Final HRR Report, divided by the number of Clubs then playing in the NHL. For example, assuming thirty (30) Clubs in the NHL, if a total of $66.0 million in Benefits were paid out in a League Year, then the Pro Rata Benefits Portion for such League Year would be $2.2 million.
(o) "Recipient Club" shall mean a Club that receives a Distribution under this Player Compensation Cost Redistribution System.
(p) "Rink Capacity and Pricing Scale Report" shall mean the report generated by the NHL that sets forth, for every seat in every Club's home arena, the published regular-season ticket prices, net of applicable admission taxes and season ticket discounts, assigned to such seat.
(q) "Supplemental Funding Phase" shall mean the process for raising a portion of the League's Player Compensation Cost Redistribution commitment in a League Year, with such portion to be taken from the regular-season revenues earned by the ten (10) highest-ranking NHL Clubs, measured on the basis of Club Gross Preseason and Regular Season Revenues Net of Arena Costs.
(r) "Targeted Team Player Payroll" when used for a particular League Year shall mean the amount which, for purposes of this Player Compensation Cost Redistribution System, all NHL Clubs shall be "targeted" to have available to spend on Player payroll (i.e., Player Salaries and Bonuses only) for that League Year, following receipt of any Distributions under this Player Compensation Cost Redistribution System.
For each League Year, the amount of the Targeted Team Player Payroll shall be determined by the League in its sole discretion, provided such amount shall: (i) be not less than an amount equal to the sum of the Lower Limit for that League Year plus twenty-five (25) percent of the Payroll Range (i.e., for League Years subsequent to the 2005-06 League Year, $4 million above the Lower Limit for that League Year; and (ii) not be greater than an amount equal to the sum of the Lower Limit for that League Year plus fifty (50) percent of the Payroll Range (i.e., for League Years subsequent to the 2005-06 League Year, $8 million above the Lower Limit). The Targeted Team Player Payroll shall be determined by the League based on the total funds available and needed for distribution in a given League Year. To the extent the total funds available for the Player Compensation Cost Redistribution System in a League Year would support a Targeted Team Player Payroll that is the sum of the Lower Limit plus fifty (50) percent of the Payroll Range, the Targeted Team Player Payroll will be determined to be the sum of the Lower Limit plus fifty (50) percent of the Payroll Range, but no more.
(s) "Targeted Team Player Compensation" when used for a particular League Year shall mean the amount which, for purposes of this Player Compensation Cost Redistribution System, all NHL Clubs shall be "targeted" to have available to spend on Player Compensation (i.e., Player Salaries, Bonuses and Benefits) for that League Year, following receipt of any Distributions under this Player Compensation Cost Redistribution System. It shall be one of the stated goals of this Player Compensation Cost Redistribution System to enable all lower-revenue Clubs to have the ability to spend up to the amount of the Targeted Team Player Compensation by providing Distributions to such Clubs. For each League Year, the amount of the Targeted Team Player Compensation shall be the amount of the Targeted Team Player Payroll for such League Year, plus the Pro Rata Benefits Portion for such League Year.
Illustration: If the League set the amount of the Targeted Team Player Payroll for a League Year at $26.0 million, then assuming $66 million in total Benefits for that League Year (yielding a Pro Rata Benefits Portion of $2.2 million), the amount of the Targeted Team Player Compensation would be $28.2 million.
49.2 Determination of Totals for Player Compensation Cost Redistribution. As set forth in Article 50 of this Agreement, following the conclusion of each League Year, the Independent Accountants shall issue the Final HRR Report. Within fourteen (14) days of receipt by the League of the Final HRR Report, for purposes of this Player Compensation Cost Redistribution System, the League shall calculate the Club Gross Preseason and Regular Season Revenues for each Club (using data contained in the Final HRR Report, provided that the League shall use its own methodology for determining Club revenues for purposes of the Player Compensation Cost Redistribution System), as well as each Club's Arena Costs, each Club's Club Gross Preseason and Regular Season Revenues Net of Arena Costs, and each Club's Available Team Player Compensation. The League shall also set forth the amounts of the Minimum Team Player Compensation, the Targeted Team Player Payroll, the Pro Rata Benefits Portion, and the Targeted Team Player Compensation for that League Year. Following its calculation of the relevant figures set forth in this Section 49.2, the League shall provide a copy of such calculations to the NHLPA.
49.3 Preparation of Master List; Determination of Eligibility of Clubs to Receive Player Compensation Cost Redistribution.
(a) As part of its calculations undertaken in connection with Section 49.2 above, the League shall prepare a "Master List" ranking all of the Clubs in descending order based on their individual Club Gross Preseason and Regular Season Revenues, with Club #1 being the Club with the highest Club Gross Preseason and Regular Season Revenues for the League Year just concluded and Club #30 being the Club with the lowest Club Gross Preseason and Regular Season Revenues for the League Year just concluded.
(b) Clubs Ineligible to Receive Player Compensation Cost Redistribution Distributions. A Club shall be an Ineligible Club for a particular League Year if, for such League Year, it meets any of the following criteria:
(i) If the Club is in the top half of the Master List (i.e., the Club is among the fifteen (15) highest Clubs in terms of its Club Gross Preseason and Regular Season Revenues) for such League Year; or
(ii) If the Club is in a DMA (or the equivalent BBM market) with a value of greater than or equal to 2.5 million households; or
(iii) If the Club has Available Team Player Compensation for the League Year that exceeds the Targeted Team Player Compensation for such League Year.
Although a Club shall be an Ineligible Club, and thus not entitled to receive any Distribution in a League Year if it meets any of the criteria above, nothing in this Section 49.3 shall prevent such a Club from receiving any further funds from the Escrow Account pursuant to Section 49.7 herein, in any League Year in which such funds are available, following the disbursement of all required Distributions to the Recipient Clubs.
(c) Clubs Eligible to Receive Player Compensation Cost Redistribution Funding. For any League Year, any Club which is not an Ineligible Club under subsection (b) above may be a Recipient Club and may receive a "full share" Distribution, with such funds to be distributed in a manner consistent with Section 49.4 of this Agreement. For the 2005-06 League Year and the 2006-07 League Year, all Recipient Clubs shall be entitled to a "full share" Distribution.
(d) Revenue Performance Standards and Effect on Continued Eligibility to Receive Player Compensation Cost Redistribution Funds.
(i) Beginning in the third League Year of this Agreement (the 2007-08 League Year), the eligibility of Clubs for a "full share" Distribution shall be conditioned on Club revenue performance standards, as follows:
(A) After the 2006-07 League Year, any Club that would not qualify for a "full share" Distribution based on the Club revenue performance standards applicable in the 2007-08 League Year will be notified by the NHL of such fact, and areas of potential improvement will be identified.
(B) In the 2007-08 League Year, only those Clubs meeting the following criteria shall be eligible for a "full share" Distribution:
(1) The Club is generating a year-to-year revenue growth rate in excess of the League average revenue growth rate (i.e., the Club's revenue growth rate from 2006-07 to 2007-08 is greater than the League average revenue growth rate from 2006-07 to 2007-08); and
(2) The Club is averaging paid attendance at or exceeding a level that is the lesser of either 13,125 per game (seventy-five (75) percent of 17,500) or the average League-wide paid attendance.
(C) Beginning in the 2008-09 League Year, and for all subsequent League Years, only those Clubs meeting the following criteria shall be eligible for a "full share" Distribution:
(1) The Club is generating a year-to-year revenue growth rate in excess of the League average revenue growth rate (i.e., the Club's revenue growth rate from the previous League Year to the current League Year is greater than the League average revenue growth rate from the previous League Year to the current League Year); and
(2) The Club is averaging paid attendance at or exceeding a level that is the lesser of either 14,000 per game (eighty (80) percent of 17,500) or the average League-wide paid attendance.
(ii) For Clubs that do not meet the criteria for a "full share" Distribution as set forth in subsection (d)(i) during the 2007-08 League Year, or any subsequent League Year, such Clubs shall be subject to Distribution "reductions" as set forth below:
(A) First time "non-performers" (i.e., Clubs that do not meet the performance standards set forth above for the first time) shall have the amount of their Distribution reduced to a seventy-five (75) percent share of the full amount.
(B) Repeat, sequential "non-performers" that do not meet the performance standards in two (2) consecutive years shall have the amount of their Distribution reduced to a sixty (60) percent share of the full amount.
(C) Repeat, sequential "non-performers" that do not meet the performance standards in three (3) consecutive years shall have the amount of their Distribution reduced to a fifty (50) percent share of the full amount.
By way of example, a Club that does not meet the performance standards in Year 3, meets them in Year 4, and does not meet them in Year 5, shall receive a seventy-five (75) percent share in Year 3, a full share in Year 4 and a seventy-five (75) percent share in Year 5. A Club that meets the performance standards in Year 3, but fails to meet them in Year 4 and Year 5, shall receive a full share in Year 3, a seventy-five (75) percent share in Year 4, and a sixty (60) percent share in Year 5.
49.4 Determination of Distribution Amounts, Minimum Redistribution Commitment.
(a) Determination of Distribution Amounts for Recipient Clubs. Each Recipient Club shall be entitled to receive a Distribution in an amount to be determined as follows:
(i) For a Recipient Club whose Available Team Player Compensation exceeds the Minimum Team Player Compensation, but is less than the Targeted Team Player Compensation, such Club shall be entitled to receive a Distribution in an amount equal to the difference between the Club's Available Team Player Compensation and the Targeted Team Player Compensation.
Illustration: Club A is an eligible Recipient Club and has Club Gross Preseason and Regular Season Revenues of $42.4 million. Assuming the Applicable Percentage is fifty-four (54) percent of HRR, Club A has Available Team Player Compensation of $22.9 million (i.e., the amount that it is deemed to have "available" to spend on Player Compensation, for purposes of this Player Compensation Cost Redistribution System), which is fifty-four (54) percent of its Club Gross Preseason and Regular Season Revenues. If the Minimum Team Player Compensation were $20 million, and the Targeted Team Player Compensation were $28.2 million (i.e., assume a $26 million Targeted Team Player Payroll, plus a $2.2 million Pro Rata Benefits Portion), then Club A would receive a $5.3 million Distribution. Since Club A has an Available Team Player Compensation ($22.9 million) that is greater than the Minimum Team Player Compensation ($20 million), but less than the Targeted Team Player Compensation ($28.2 million), it receives the difference between its Available Team Player Compensation and the Targeted Team Player Compensation ($5.3 million).
(ii) For a Recipient Club with an Available Team Player Compensation that is less than the Minimum Team Player Compensation, such Club shall receive a Distribution in the amount of the Maximum Distribution.
Illustration: Club B is an eligible Recipient Club and has Club Gross Preseason and Regular Season Revenues of $33.3 million. Assuming the Applicable Percentage is fifty-four (54) percent of HRR, Club B has Available Team Player Compensation of $18 million (i.e., the amount that it is deemed to have "available" to spend on Player Compensation, for purposes of this Player Compensation Cost Redistribution System), which is fifty-four (54) percent of its Club Gross Preseason and Regular Season Revenues. If the Minimum Team Player Compensation were $20 million, and the Targeted Team Player Compensation were $28.2 million (i.e., assume a $26 million Targeted Team Player Payroll, plus a $2.2 million Pro Rata Benefits Portion), then Club B would receive an $8.2 million Distribution (i.e., the Maximum Distribution, or the difference between the Minimum Team Player Compensation and the Targeted Team Player Compensation). Since Club A has an Available Team Player Compensation ($18 million) that is less than the Minimum Team Player Compensation ($20 million), it receives the Maximum Distribution ($8.2 million), because it is "deemed" to have the Minimum Team Player Compensation, even though its Available Team Player Compensation is actually less than that.
(iii) Following the determination of which Clubs meet the criteria set forth in subsections (i) and (ii) above, and following the determination of all amounts owed to such Clubs, all such amounts shall be totaled, yielding the total amount of Player Compensation Cost Redistribution that is required for that League Year.
(iv) In no event may any Recipient Club receive a Distribution, or portion thereof, that, when added to its Club Gross Preseason and Regular Season Revenues, would cause the Club's Club Gross Preseason and Regular Season Revenues, as adjusted, when multiplied by the Applicable Percentage of HRR, to exceed the Midpoint of the Payroll Range.
(b) Minimum Redistribution Commitment. In the event that the total amount of Player Compensation Cost Redistribution required for a League Year is greater than the amount of the Minimum Redistribution Commitment for such League Year, then the League shall raise the total amount of funds required for Player Compensation Cost Redistribution, over and above the Minimum Redistribution Commitment. In the event that the total amount of the Minimum Redistribution Commitment exceeds the amount of Player Compensation Cost Redistribution required for a League Year, up to $10 million of any such "excess" shall be applied to a Joint Marketing Account for the benefit of both the NHL and the NHLPA, and the League shall then have no further Player Compensation Cost Redistribution obligations for that League Year, in accordance with Section 49.6 of this Agreement.
49.5 Sources of Funding for Player Compensation Cost Redistribution. The funds required to be collected for Player Compensation Cost Redistribution in a League Year shall be collected as follows: First, from excess centrally generated League revenues, if any; next, up to one-third (?) of the remaining balance from the Escrow Account, if there is an Overage in a League Year, provided, however, that any funds taken from the Escrow Account shall be limited to funds attributable to the Players on the ten-highest revenue Clubs that had an Actual Club Salary for such League Year in excess of the Midpoint of the Payroll Range for that League Year; and finally, any remaining amount of necessary funding to be split fifty (50) percent from the Playoff revenues of all Clubs that participate in the Playoffs Qualification Round (if any) and the Stanley Cup Playoffs, and the other fifty (50) percent from certain revenues of the ten-highest revenue Clubs, based on such Clubs' non-playoff revenues.
(a) Funding From Centrally Generated League Revenues. The first source of funding, if applicable, shall be from centrally generated League revenues. To the extent central League revenues (e.g., NHL Broadcast revenues, net revenues generated by NHL Enterprises, etc.) increase to a level of $300 million or more on account of any League Year, the League shall be entitled to use up to fifty (50) percent of such centrally generated revenue dollars in excess of $300 million to fund up to twenty-five (25) percent of the League's Player Compensation Cost Redistribution commitment for that League Year (such amounts to be taken equally from each Club's 1/30th share of such revenues).
Illustration: Assume the total required amount of Player Compensation Cost Redistribution in a League Year is $80 million and that there are centrally generated League revenues of $350 million. The League is entitled to use up to fifty (50) percent of the excess centrally generated League revenues over $300 million (i.e., fifty (50) percent of $50 million, or $25 million) to fund up to twenty-five (25) percent of the Player Compensation Cost Redistribution Commitment. Since $80 million in Player Compensation Cost Redistribution must be raised, the League may use the centrally generated League revenues to satisfy $20 million of this required amount.
(b) Escrow Funding Phase. Following the funding, if any, from centrally generated League revenues, the next source of funding shall be the Escrow Funding Phase, from which up to one-third (?) of the remaining required Player Compensation Cost Redistribution amount may be collected. In the event there is an Overage in a League Year (i.e., in the event the League, for any reason, paid more in League-wide Player Compensation than the Players' Share), as set forth in Article 50.11 of this Agreement, then the Independent Accountants shall notify the League, the NHLPA, and the Escrow Agent of such Overage, and the Escrow Agent shall cause a portion of the funds from the Escrow Account to be set aside for purposes of Player Compensation Cost Redistribution – but only as to any Escrow Account funds that are attributable to the Players on the ten highest-revenue Clubs with Actual Club Salaries for such League Year in excess of the Midpoint of the Payroll Range for the League Year. If the amount of funds in the Escrow Account due to an Overage in a League Year that is attributable to the Players on these ten Clubs comprises less than one-third (?) of the remaining required Player Compensation Cost Redistribution, then the Escrow Agent shall set aside the entire amount of such funds attributable to the Players on these top ten Clubs for purposes of Player Compensation Cost Redistribution.
Illustration: Assume that, after allowed funding from centrally generated League revenues, the remaining required amount of Player Compensation Cost Redistribution necessary in a League Year is $84 million. If there was an Overage in such League Year, up to one-third (?) of the required remaining amount of Player Compensation Cost Redistribution (i.e., $28 million) could be collected out of the Escrow Account funds attributable to the Players on the top-ten revenue Clubs with Actual Club Salaries in excess of the Midpoint of the Payroll Range for that League Year. To the extent such funds attributable to the Players on these top-ten revenue Clubs exceeded $28 million, the amount that could be collected would nevertheless be capped at $28 million for the Escrow Funding Phase. If the amount of such funds were, for example, $14 million, then the entire $14 million could be collected, and the remaining amount required to be raised would be $70 million, to be split fifty (50) percent in the Playoffs Funding Phase and fifty (50) percent in the Supplemental Funding Phase, as set forth below.
(c) Playoffs Funding Phase. To the extent any funds are collected from centrally generated League revenues and/or during the Escrow Funding Phase, the next source of funding for the required amount of Player Compensation Cost Redistribution shall be the Playoffs Funding Phase. On the other hand, in the event there is no funding from centrally funded League revenues, as well as no refund out of the Escrow Account in a League Year (i.e., there was no Overage in such League Year), then the first source of funding for the required amount of Player Compensation Cost Redistribution shall be the Playoffs Funding Phase. In all events, fifty (50) percent of the remaining amount required to be collected for Player Compensation Cost Redistribution shall be collected in the Playoffs Funding Phase. All Clubs that participate in the Playoffs Qualification Round (if any) and the Stanley Cup Playoffs shall be Contributing Clubs during the Playoffs Funding Phase, and such Clubs shall be assessed moneys for purposes of the Player Compensation Cost Redistribution System, in the following manner:
(i) For each Playoff Game that a Club hosts in its home arena during a League Year, such Club shall contribute the dollar value equivalent of [x] percent of the total ticket value, net of applicable admission taxes, for one (1) theoretical, fully-priced, sold-out regular season game in the Club's home arena for that League Year (the "Playoffs Funding Phase Assessment"), where [x] is determined in accordance with the Club's ranking on "Master List" providing each Club's Gross Preseason and Regular Season Revenues, as set forth below:
(A) For the Top 10 Clubs in the League based on Club Gross Preseason and Regular Season Revenues that make the Stanley Cup Playoffs, [x] shall be fifty (50) percent of the total ticket value, net of applicable admission taxes, for one (1) theoretical, fully-priced, sold-out regular season game in the Club's home arena for that League Year;
(B) For the Middle 10 Clubs in the League based on Club Gross Preseason and Regular Season Revenues that make the Stanley Cup Playoffs, [x] shall be forty (40) percent of the total ticket value, net of applicable admission taxes, for one (1) theoretical, fully-priced, sold-out regular season game in the Club's home arena for that League Year; and
(C) For the Bottom 10 Clubs in the League based on Club Gross Preseason and Regular Season Revenues that make the Stanley Cup Playoffs, [x] shall be thirty (30) percent of the total ticket value, net of applicable admission taxes, for one (1) theoretical, fully-priced, sold-out regular season game in the Club's home arena for that League Year;
(ii) The League shall use the Rink Capacity and Pricing Scale Report for that League Year to determine the total ticket value, net of applicable admission taxes, for a theoretical, fully-priced, sold-out regular season game for all home arenas of Clubs that are Contributing Clubs during the Playoffs Funding Phase. However, for purposes of this paragraph (c), no arena shall be deemed to have more than 17,500 seats. For arenas greater than 17,500 seats, the total ticket value, net of admission taxes, for a theoretical, fully-priced, sold-out regular season game will be multiplied by the percentage that 17,500 is to the seating capacity of such arena.
Illustration #1:
According to the Rink Capacity and Pricing Scale Report, one single, fully-priced, sold-out regular season game in Club Y's home arena would generate gross revenues of $700,000 in ticket sales, net of applicable admission taxes, for Club Y. Club Y is the 17th-highest ranked Club in terms of Club Gross Preseason and Regular Season Revenues. Therefore, Club Y is to be assessed forty (40) percent of the total ticket value, net of applicable admission taxes, of a theoretical, fully-priced, sold-out (defined as no more than 17,500 seats, as set forth above) regular season game in such Club Y's home arena for each playoff game hosted by Club Y. Club Y hosts three (3) home games during the Stanley Cup Playoffs.
Club Y shall be responsible for paying forty (40) percent of $700,000 (or $280,000), x three (3) home playoff games, or $840,000, as a Playoffs Funding Phase Assessment.
Illustration #2:
According to the Rink Capacity and Pricing Scale Report, one single, fully-priced (defined as no more than 17,500 seats, as set forth above), sold-out regular season game in Club Z's home arena would generate gross revenues of $900,000 in ticket sales, net of applicable admission taxes, for Club Z. Club Z is the 5th-highest ranked Club in terms of Club Gross Preseason and Regular Season Revenues. Therefore, Club Z is to be assessed fifty (50) percent of the total ticket value, net of applicable admission taxes, of a theoretical, fully-priced, sold-out regular season game in such Club Z's home arena for each playoff game hosted by Club Z. Club Z hosts five (5) home games during the Stanley Cup Playoffs.
Club Z shall be responsible for paying fifty (50) percent of $900,000 (or $450,000), x five (5) home playoff games, or $2.25 million, as a Playoffs Funding Phase Assessment.
(iii) If the total amount of money to be collected from all Clubs subject to a Playoffs Phase Funding Assessment under paragraph (i) above would result in more than fifty (50) percent of the remaining funds required for Player Compensation Cost Redistribution being raised, then the assessed Clubs shall each be reimbursed a portion of their assessments, on a pro rata basis, such that the required fifty (50) percent of the remaining required amount shall be collected.
(d) Supplemental Funding Phase. The last source of funding for the Player Compensation Cost Redistribution System shall be the Supplemental Funding Phase. The remaining fifty (50) percent of the amount required to be collected for Player Compensation Cost Redistribution shall be collected in the Supplemental Funding Phase. The League shall determine the total dollar amount required to be raised during the Supplemental Funding Phase and the Clubs with the ten (10) highest Club Gross Preseason and Regular Season Revenues Net of Arena Costs during a particular League Year shall be the Contributing Clubs during the Supplemental Funding Phase, with each such Club being assessed a percentage of the total remaining amount required to be raised. The Contributing Clubs shall be assessed as follows:
(i) All NHL Clubs shall be ranked according to their Club Gross Preseason and Regular Season Revenues Net of Arena Costs.
(ii) For purposes of the Supplemental Funding Phase set forth in this Section 49.5(d), the Club having the highest Club Gross Preseason and Regular Season Revenues Net of Arena Costs shall be known as "Club 1," the next-highest Club shall be "Club 2," etc.
(iii) The "top ten" Clubs in terms of Club Gross Preseason and Regular Season Revenues Net of Arena Costs shall each have their Club Gross Preseason and Regular Season Revenues Net of Arena Costs compared against the Club Gross Preseason and Regular Season Revenues Net of Arena Costs of the 11th-ranked Club, and the Club's "incremental" Gross Preseason and Regular Season Revenues Net of Arena Costs vis a vis the 11th-ranked Club shall be calculated. Then, the "incremental" revenues of all the "top ten" Clubs shall be totaled, and the percentages each Club shall be assessed shall be determined by dividing each Club's "incremental" Gross Preseason and Regular Season Revenues Net of Arena Costs over the 11th-ranked Club by the total amount of all the "incremental revenues."
Illustration: Assume the following Club Gross Preseason and Regular Season Revenues Net of Arena Costs for the highest 11 Clubs in a League Year, and "incremental" Club Gross Preseason and Regular Season Revenues Net of Arena Costs, as set forth in the following chart:
Club Gross Preseason and Regular Season Revenues Net of Arena Costs Incremental Revenues (vs. Club 11)
Club 1 $90.0 million $29.0 million
Club 2 $89.4 million $28.4 million
Club 3 $83.4 million $22.4 million
Club 4 $83.2 million $22.2 million
Club 5 $81.3 million $20.3 million
Club 6 $74.5 million $13.5 million
Club 7 $71.3 million $10.3 million
Club 8 $70.8 million $9.8 million
Club 9 $62.9 million $1.9 million
Club 10 $61.3 million $0.3 million
Club 11 $61.0 million
Total Incremental Revenues = $158.1 million
Club 1 would be assessed $29.0 million / $158.1 million, or 18.34 percent. Club 2 would be assessed $28.4 million / $158.1 million, or 17.96 percent, etc.
(iv) The percentages calculated in accordance with paragraph (iii) above shall be applied to the total remaining amount required to be collected for Player Compensation Cost Redistribution to determine the dollar amount of each Club's Supplemental Phase assessment. In no event, however, shall any Club be assessed in excess of twenty (20) percent of the total remaining amount required to be collected. To the extent paragraph (iii) above would require a Club to pay in excess of twenty (20) percent of the total remaining amount required to be collected, such Club shall nevertheless be capped at twenty (20) percent, and the excess over twenty (20) percent shall be spread pro rata among the remaining Clubs; provided, however, that no other Club shall be pushed above the twenty (20) percent threshold as a result of absorbing a portion of another Club's excess over twenty (20) percent.
(v) After each Contributing Club is assessed its appropriate share of the total remaining amount required to be collected during the Supplemental Phase, each such Club's contribution shall be subtracted from its Club Gross Preseason and Regular Season Revenues Net of Arena Costs total to yield each Club's "Adjusted Club Gross Preseason and Regular Season Revenues Net of Arena Costs."
(vi) In no event shall a Club's ranking in terms of Club Gross Preseason and Regular Season Revenues Net of Arena Costs be permitted to change following the application of subsection (iv) of this Section 49.5(d) (i.e., Club 5 for Club Gross Preseason and Regular Season Revenues Net of Arena Costs must still be Club 5 for Adjusted Club Gross Preseason and Regular Season Revenues Net of Arena Costs).
(A) To the extent the application of subsection (iv) in fact alters the ranking of a Contributing Club within the top ten, then the League Office shall adjust the amount of the contribution of the next-highest ranked Club above the Club whose ranking was altered by the process described herein, such that the original rankings are preserved. If the next-highest Club's ranking is subsequently altered, then the League Office shall follow the same procedure with the next-highest ranked Club, with the process continually repeated such that the original rankings are preserved. Notwithstanding anything in this Section 49.5 to the contrary, in order to prevent the burden from being unfairly shifted to the highest ranked Contributing Club, in no event may any Club's payment obligations in the Supplemental Funding Phase be increased by more than ten (10) percent of the Club's prescribed Supplemental Funding Phase contribution as a result of an adjustment made by the League Office pursuant to this subsection (vi).
(B) To the extent the application of subsection (iv) results in a Contributing Club dropping outside of the top ten, then the League Office shall assess the next lowest-ranked Club below the Club that was dropped out of the top ten by the process described herein with a contribution – even if such next lowest-ranked Club was not originally in the top ten Clubs based on Club Gross Preseason and Regular Season Revenues Net of Arena Costs. If the next-lowest Club's ranking is subsequently altered, then the League Office shall follow the same procedure with the next-lowest ranked Club, with the process continually repeated such that the original rankings are preserved.
(vii) No Contributing Club during the Supplemental Phase shall be required to pay any amount for purposes of Player Compensation Cost Redistribution that exceeds the total amount of: its revenues derived from the telecast of its away games; its revenues derived from its playoff games; its pro rata share of national and international broadcast revenues; its pro rata share of revenues derived from NHL Enterprises; and its pro rata share of any other national revenues.
49.6 Procedures in the Event That the Amount Required for Player Compensation Cost Redistribution Is Less Than the Minimum Redistribution Commitment. In the event that the total amount of Player Compensation Cost Redistribution required in a League Year is less than the Minimum Redistribution Commitment for such League Year, then, after the League has fulfilled its Player Compensation Cost Redistribution obligations with respect to the Recipient Clubs, up to $10 million more shall be used to fund activities of a Joint Marketing Committee composed of representatives of the NHL and NHLPA. To the extent there is less than $10 million of "excess," then the entirety of such amount shall be used to fund the activities of the Joint Marketing Committee. Once the Player Compensation Cost Redistribution obligations of the League have been satisfied, and once any "excess" up to $10 million has been set aside for the Joint Marketing Committee, then any remaining funds that may exist shall be returned pro rata to the Contributing Clubs.
49.7 Final Escrow Disbursements. Once the League has satisfied its commitment to bring all eligible Clubs up to the Targeted Team Player Compensation (which amount, as set forth above, shall be determined based upon the League's "need-based distribution formula" in each League Year), then any further remaining Escrow Account funds owed to the League (as the result of there being an Overage in the League Year), to the extent there are such remaining funds, shall be distributed as follows:
(a) First, as set forth in Section 50.11(d)(i)(B) of this Agreement, any remaining Escrow Account funds shall be distributed to any Club that had an Actual Club Salary that was less than the Midpoint of the Payroll Range (measured as of the final day of the NHL Regular Season), with the amount of funds each such Club receives being sufficient to bring it up to the Midpoint of the Payroll Range, provided, however, that no Club will receive a distribution pursuant to this subsection that would cause the Club's Club Gross Preseason and Regular Season Revenues, including moneys received from the Player Compensation Cost Redistribution System, when multiplied by the Applicable Percentage of HRR, to exceed the Midpoint of the Payroll Range; and
(b) Next, as set forth in Section 50.11(d)(i)(C) of this Agreement, any remaining Escrow Account funds to which the Clubs are entitled shall be divided equally among all NHL Clubs (including those Clubs that received a distribution under subsection (a) above).
49.8 Timing of Collections and Distributions of Player Compensation Cost Redistribution.
(a) Within seven (7) days of receipt by the League of the Final HRR Report, in addition to setting forth the calculations as described in Section 49.2 above, the League shall also prepare and disseminate to all NHL Clubs, as well as the NHLPA, a report setting forth the following information:
(i) The total required amount of Player Compensation Cost Redistribution for that League Year, and whether such amount exceeds or is less than the Minimum Redistribution Commitment;
(ii) Whether there are any centrally generated League revenues in excess of $300 million, and if so, what portion of such excess may be used to fund up to 25 percent of the League's Player Compensation Cost Redistribution requirements for that League Year;
(iii) Whether, after having consulted with the Escrow Agent pursuant to Section 49.5(b), there will be an Escrow Funding Phase, and if so, how much money shall be collected from the Escrow Account during such Escrow Funding Phase;
(iv) The amount of funds to be raised during the Playoffs Funding Phase, and the amount of the assessment for each Club participating in the Playoffs Qualification Round (if any) and the Stanley Cup Playoffs during the Playoffs Funding Phase;
(v) The amount of funds to be raised during the Supplemental Funding Phase, which Clubs shall be the Contributing Clubs during the Supplemental Funding Phase, and the amount of each Contributing Club's assessment; and
(vi) Which Clubs will be Recipient Clubs, and the amount of the Player Compensation Cost Redistribution to be received by each Recipient Club.
(b) Within seven (7) days of receipt of the report described in subsection (a), all Clubs responsible for paying an assessment under this Player Compensation Cost Redistribution System shall pay such assessment to the League. Any Club missing its required payment date shall be automatically fined $10,000 for the first day, and such amount shall be doubled for each further day that the required payment is late.
(c) Within three (3) days thereafter, the League shall send all Distributions to the Recipient Clubs and shall remit to the Joint Marketing Account any required payment (up to $10 million).
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