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ARTICLE 50: TEAM PAYROLL RANGE SYSTEM Preamble. This Article 50 creates a fixed relationship between League-wide Player Compensation and Hockey Related Revenues, and provides that League-wide Player Compensation will rise or fall in direct proportion to a rise or fall in Hockey Related Revenues, and will equal (i.e., will never exceed nor be less than) the Players' Share.
Within the context of the Players' Share, this Article 50 is also intended to permit some flexibility in spending among the individual Clubs, and therefore this Article provides for a Team Payroll Range for permissible Club SPC commitments for Player Salary and Bonuses for each League Year, not to exceed an Upper Limit or be below a Lower Limit. The Upper and Lower Limits of the Team Payroll Range will be subject to annual adjustments, as set forth herein.
The NHL and NHLPA agree that each Club may, in accordance with Section 50.11 of this Agreement, withhold a certain percentage of each Player's Player Salary and Bonus obligations throughout each League Year and that such funds, if any, shall be held in an Escrow Account, so that in the event that the NHL Clubs spend, on an aggregate basis, more or less on League-wide Player Compensation than the Players' Share in a particular League Year, then pursuant to the Reconciliation and Distribution Procedures, the funds in the Escrow Account shall be distributed to the League or the Players as described herein.
50.1 Hockey Related Revenues, Club Affiliated Entity and League Affiliated Entity.
(a) "Hockey Related Revenues." "Hockey Related Revenues" or "HRR" for each League Year means the operating revenues, including Barter (as defined below), from all sources, whether known or unknown, whether now in existence or created in the future, as expressly set forth in this Section 50.1(a), of each Club or the League, for or with respect to that League Year, as expressly set forth in this Section 50.1(a), on an accrual basis, derived or earned from, relating to or arising directly or indirectly out of the playing of NHL hockey games or NHL-related events in which current NHL Players participate or in which current NHL Players' names and likenesses are used, by each such Club or the League, or attributable directly to the Club or the League from a Club Affiliated Entity or League Affiliated Entity, as expressly set forth herein, and is subject to any inclusions or exclusions as expressly set forth in the Article 50.
The parties have described Hockey Related Revenues with a non-exhaustive list of Hockey Related Revenues (net of Direct Costs as defined herein, where specified herein), in order to permit the inclusion of new revenue streams (net of Direct Costs where agreed upon between the parties herein, or, failing agreement, by ruling of the System Arbitrator), to be included automatically, without a new or separate negotiation, subject to the provisions below.
In determining whether an item of revenue that is not listed in Section 50.1(a) (items included in HRR) or 50.1(b) (items excluded from HRR) should be included in or excluded from HRR (and, if included, whether net of Direct Costs, on a negotiated cost convention basis, or without the netting of any costs), consideration shall be given to whether the revenue item is more similar in kind or nature to the inclusions or the exclusions and to whether such inclusions or exclusions were reflected in the 2002-03 "Unified Report of Operations" (URO), as adjusted, and as reported by the NHL to the NHLPA. No inference may be drawn from the fact that such item was not included in the list of inclusions or exclusions. Any new revenue stream that is "material," that is, in excess of $10 million (gross) per revenue stream, to overall League-wide revenues, annually will be discussed by the parties to determine the basis for the accounting of such revenues (i.e., on a negotiated convention basis, net of Direct Costs, or without the netting of any costs, or, failing agreement, by ruling of the System Arbitrator). Costs associated with revenue allocations or costs, if applicable, of any new revenue stream that is not "material," will be treated by each Club similar to comparable revenue streams set forth in this Article 50.1(a).
"Barter" means to trade by exchanging one commodity, service or other non-cash item for another. However, Barter does not include media commitments for promotional time or space which is not for resale, and which is used to promote the NHL, the Clubs, the Players, the game of hockey, the broadcasts or any playing of NHL games and/or charitable causes, or to air public service announcements. Such media commitments will not be included in HRR.
"Direct Costs" shall mean any costs, including fixed and variable costs, attributable to a revenue-generating activity. For example, the salary of an individual employed by a Club or Club Affiliated Entity whose duties contribute to revenue activities specified in this Article 50 may be apportioned among such revenue activities specified in this Article 50 as a Direct Cost to the extent such netting of Direct Costs is permitted, except that no portion of the salary of an individual who, in the ordinary course, works on any non-revenue generating activity of a Club or Club Affiliated Entity, as defined herein, may be included as a Direct Cost. Further, an allocation of arena occupancy costs, and general and administration expenses, such as finance, support and general management function costs, may not be included as Direct Costs.
For purposes of a particular League Year, all revenues described herein shall be 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.
(i) HRR shall include the following non-exhaustive list of revenues:
(A) NHL Regular Season & Playoff Gate Receipts: All revenues received by a Club or a Club Affiliated Entity derived from the sale of NHL Regular Season and Playoff tickets, including, without limitation: (1) season tickets, (2) single game tickets, (3) group sales, and (4) the face ticket value of luxury box seats and club/premium seats, to the extent that the Club sells tickets to such luxury box seats and/or club/premium seats separately from the luxury box and/or club/premium seats themselves (all such revenues net of admission, GST and other provincial and state or local taxes, and any other charges imposed by government regulation). If the Club includes tickets to the luxury box and/or club/premium seats as part of the transaction involving the luxury box and/or club/premium seats, then the value of the tickets to such luxury box and/or club/premium seats shall not be included in this subcategory (a)(i)(A). The value of tickets that are part of a sponsorship and/or Barter transaction shall be included in this paragraph, but in the case of such sponsorship or Barter transaction, there shall be an offset to the revenue category in which the item Bartered for the tickets occurs (provided such offset does not exceed any applicable cost convention);
(B) Pre-season Games: All revenues received by a Club or a Club Affiliated Entity derived from the playing of pre-season games, including, without limitation, gate receipts, fees from third party promoters, governments or arena operators derived from the playing of home pre-season games and appearance fees earned from the playing of away pre-season games, net of appearance fees paid to visiting teams for home pre-season games (all such revenues net of admission, GST and other provincial and state or local taxes, and any other charges imposed by government regulation, and net of Direct Costs, including, without limitation, in the case of pre-season games, insurance costs, immigration costs, arena rent, team travel and lodging costs, provided, however, that the Direct Costs that may be netted against total revenues generated by pre-season games shall not in the aggregate exceed fifteen (15) percent per League Year on a League-wide basis);
(C) Special Games: All revenues received by Clubs or Club Affiliated Entities derived from the playing of NHL special games (e.g., International Exhibition Games), such as the Clubs' share of ticket revenues and rights fees earned from the playing of such games (all such revenues net of admission, GST and other provincial and state or local taxes, and any other charges imposed by government regulation, and net of Direct Costs, including, without limitation, in the case of special games, insurance costs, immigration costs, arena rent, appearance fees, team travel and lodging costs, provided, however, that the Direct Costs that may be netted against total revenues generated by special games shall not in the aggregate exceed fifteen (15) percent per League Year on a League-wide basis), except that with respect to the All-Star Game, all reasonable and customary expenses directly relating to the All-Star Game (including, without limitation, admission, GST and other provincial and state or local taxes, and any other charges imposed by government regulation, insurance costs, immigration costs, arena rent, appearance fees, team travel and lodging costs, parties, transportation, entertainment, Fantasy and other All-Star related events, and food) may be netted against total revenues generated by the All-Star Game, provided that revenues after the netting of such reasonable and customary expenses for the All-Star Game for each League Year are negative, the amount of HRR attributable to the All-Star Game pursuant to this subsection (a)(i)(C) for such League Year shall be deemed to be zero;
(D) NHL National, International and National Digital Broadcasts: All revenues (including, without limitation, rights fees, license fees, advertising revenues (net of agency fees paid), allocated cable subscriber fees (only to the extent each is expressly included in a broadcasting agreement), signing bonuses, negotiation fees, broadcast partner payments and other payments) received by the League or a League Affiliated Entity, as agent for the Clubs, or otherwise, from national, international or national digital broadcasting agreements for the right to broadcast or exhibit NHL pre-season, NHL Regular Season, Playoff games, special games, highlights, game portions and all other game- and non-game programming created and produced at the broadcaster's expense and not supplied, provided or created by the NHL or a League Affiliated Entity and broadcast pursuant to the NHL's broadcast agreements on television, radio, telephone, broadcaster's internet site, and any other communications media, forms of reproduction and other technologies not supplied, produced or created by the NHL or a League Affiliated Entity, whether presently existing or not, anywhere in the world, including, without limitation, network, local, regional, cable, pay-per-view or satellite (all such revenues net of Direct Costs, including, without limitation, agency commissions, announcer and other broadcasting talent salaries and fees, production and station fees, other broadcasting charges, invasion fees and direct operating expenses and other Direct Costs consistent with past practice or otherwise as necessitated by or incurred pursuant to the national, international, or national digital broadcasting agreements, provided, however, that the Direct Costs that may be netted against such revenues shall not exceed $8 million for the 2005-06 League Year, and that, commencing with the 2006-07 League Year and for each League Year thereafter, such $8 million cap will be increased by the same percentage by which the aggregate national, international and national digital broadcasting revenues increase from the prior League Year);
(E) NHL Networks: All revenues (although advertising revenues shall be net of agency fees paid) received by the League or a League Affiliated Entity, as agent for the Clubs, or otherwise, from the NHL Networks (U.S. and Canada) (all such revenues net of Direct Costs, including, without limitation, development and carriage costs in the United States, provided, however, that such Direct Costs netted against NHL Network revenues, may not exceed such revenues by more than $3.5 million per year for each of the first three League Years during the term of this Agreement ("excess Direct Costs"), and that the Players may recoup their portion of such excess Direct Costs in the event the NHL Network becomes profitable during the term of this Agreement, as follows: in the first League Year (and in each succeeding League Year during the term of this Agreement) in which the NHL's share of revenues generated by the NHL Network's operations exceeds the Direct Costs incurred by the NHL, one-half of the annual excess will be paid to the Players as directed by the NHLPA (such sums not to be included in HRR), with interest at 1-Year LIBOR plus one and one-quarter (1.25) percent until the Players' recoupable portion of Direct Costs in preceding League Years is fully repaid. The other half of the annual excess shall be included in HRR. When the Players' recoupable portion of the excess Direct Costs from the preceding League Years has been recouped, then all of the NHL Network revenues net of Direct Costs for future League Years in which the NHL Network is profitable shall be included in HRR). In no event, after the third year of this Agreement, shall NHL Networks, after netting of Direct Costs, be included in HRR as below zero;
(F) Local Cable Television Broadcasts.
(1) All revenues (including, without limitation, rights fees, license fees, invasion fees, advertising revenues, signing bonuses, negotiation fees, broadcast partner payments and other payments) received by a Club or a Club Affiliated Entity from local broadcasting agreements for the right to broadcast or exhibit that Club's NHL pre-season games, NHL Regular Season games, Playoff games, special games, highlights, game portions and any other game- and non-game programming created and produced at the broadcaster's expense and broadcast pursuant to the Club's broadcast agreements over local or regional cable television networks, and received by the Club or the Club's Club Affiliated Entity from the advertising associated with such games (all such revenues net of Direct Costs, including, without limitation, agency commissions, announcer and other broadcasting talent salaries and fees, production and station fees, other broadcasting charges, out-of-market fees and direct operating expenses and other Direct Costs consistent with past practice or otherwise as necessitated by or incurred pursuant to the local cable television broadcast agreements). The parties agree that revenues after netting of Direct Costs for local cable television broadcasts shall not be reported as a negative number (less than zero) for any individual Club;
(2) In the event that, following the execution of this Agreement, a Club enters into a local broadcasting agreement with a Club Affiliated Entity for the right to broadcast or exhibit NHL pre-season games, NHL Regular Season games, Playoff games, special games, highlights, game portions or any other game- and non-game programming over a local or regional cable network, the NHL and NHLPA agree that they shall confer in good faith regarding a method for determining the fair market value of such agreement for purposes of including revenues attributable to such agreement in HRR for such Club, and, failing agreement, shall submit the matter to arbitration;
(3) In the event that a Club enters into a broadcasting and/or sponsorship agreement (as provided in subsections (a)(i)(Q) or (R) below) with an entity that is not a Club Affiliated Entity, pursuant to which the Club's rights are bundled with the rights of one or more other sports team properties that are Club Affiliated Entities, the NHL and the NHLPA will meet and confer to determine whether a Club's rights reflect the fair market value of such rights and, failing agreement, shall submit the matter to arbitration;
(G) Local Over-the-Air Television Broadcasts: All revenues (including, without limitation, rights fees, license fees, invasion fees, advertising revenues, signing bonuses, negotiation fees, broadcast partner payments and other payments) received by a Club or a Club Affiliated Entity from local broadcasting agreements for the right to broadcast or exhibit that Club's NHL pre-season games, NHL Regular Season games, Playoff games, special games, highlights, game portions and any other game- and non-game programming created and produced at the broadcaster's expense and broadcast pursuant to the Club's broadcast agreements over local or regional over-the-air television networks, and received by the Club or the Club's Club Affiliated Entity from the advertising associated with such games (all such revenues net of Direct Costs, including, without limitation, carriage fees, agency commissions, announcer and other broadcasting talent salaries and fees, production and station fees, other broadcasting charges and direct operating expenses and other Direct Costs consistent with past practice or otherwise as necessitated by or incurred pursuant to the local over-the-air television broadcast agreements), provided, however, that if League-wide local over-the-air television broadcast revenues after the netting of Direct Costs are negative in the aggregate for any League Year, then the amount of HRR attributable to local over-the-air television broadcasts pursuant to this subsection (a)(i)(G) for such League Year shall be deemed to be zero;
(H) Local Pay-Per-View, Satellite and Other Broadcasts: All revenues (including, without limitation, rights fees, license fees, invasion fees, advertising revenues, signing bonuses, negotiation fees, broadcast partner payments and other payments) received by a Club or a Club Affiliated Entity from local broadcasting agreements for the right to broadcast or exhibit NHL pre-season games, NHL Regular Season games, Playoff games, special games, highlights, game portions and any other game- and non-game programming created and produced at the broadcaster's expense and broadcast pursuant to the Club's broadcast agreements over local pay-per-view or satellite networks or other forms of television (other than local or regional cable television networks and local or regional over-the-air television networks), telephone, broadcaster's internet site, and any other communications media, forms of reproduction and other technologies, whether presently existing or not, anywhere in the world, and received by the Club or the Club's Club Affiliated Entity from the advertising associated with such games (all such revenues net of Direct Costs, including, without limitation, carriage fees, agency commissions, announcer and other broadcasting talent salaries and fees, production and station fees, other broadcasting charges, out-of-market fees and direct operating expenses and other Direct Costs consistent with past practice or otherwise as necessitated by or incurred pursuant to the local pay-per-view, satellite and other broadcast agreements);
(I) Local Radio Broadcasts: All revenues (including, without limitation, rights fees, license fees, invasion fees, advertising revenues, signing bonuses, negotiation fees, broadcast partner payments and other payments) received by a Club or a Club Affiliated Entity from local broadcasting agreements for the right to broadcast or exhibit that Club's NHL pre-season games, NHL Regular Season games, Playoff games, special games, highlights, game portions and any other game- and non-game programming created and produced at the broadcaster's expense and broadcast pursuant to the Club's broadcast agreements over local radio networks, and received by the Club or the Club's Club Affiliated Entity from the advertising associated with such games (all such revenues net of Direct Costs, including, without limitation, carriage fees, agency commissions, announcer and other broadcasting talent salaries and fees, production and station fees, other broadcasting charges and direct operating expenses and other Direct Costs consistent with past practice or otherwise as necessitated by or incurred pursuant to the local radio broadcast agreements), provided, however, that if League-wide local radio broadcast revenues after the netting of Direct Costs are negative in the aggregate for any League Year, then the amount of HRR attributable to local radio broadcasts pursuant to this subsection (a)(i)(I) for such League Year shall be deemed to be zero;
(J) Club Internet: All revenues received by a Club or a Club Affiliated Entity from the operation of that Club's websites, including, without limitation, banner and other advertising revenue, revenue from merchandise sales, "click through" fees, profit sharing (if part of a third-party agreement), licensing fees, and sponsorship fees, provided, that, for sponsors that buy sponsorships over multiple platforms, including internet, the revenues received from such sponsors shall be allocated to internet on a comparable basis as are received from a sponsor for such Club that purchases, at arm's length, an internet-only sponsorship with such club (all such revenues net of Direct Costs, including, without limitation, salaries, access or similar fees, hosting, streaming and communications charges, the costs of merchandise or goods sold, and other internet charges), provided, however, that if League-wide Club internet revenues after the netting of Direct Costs are negative in the aggregate for any League Year, then the amount of HRR attributable to Club internet pursuant to this subsection (a)(i)(J) for such League Year shall be deemed to be zero;
(K) Publications: All revenues received by a Club or a Club Affiliated Entity derived from the sale of, advertising in, or licensing of that Club's publications, including, without limitation, game programs, calendars, books, year books, magazines and fact books (all such revenues net of Direct Costs, including, without limitation, production and labor costs, provided, however, that for Clubs that create publications in-house (as defined in the HRR Reporting Package) or through a Club Affiliated Entity, the Direct Costs relating to such publications that may be netted against total revenues generated by such publications shall not exceed forty-six (46) percent per League Year for such Clubs on an aggregated basis). The parties agree that revenues after netting of Direct Costs for publications shall not be reported as a negative number (less than zero) for any individual Club. The parties further agree that consistent with current practice, to the extent that publications are provided at no charge to season ticket-holders or as part of grassroots programs, the revenues in such cases shall continue to be reported as zero;
(L) In-Arena Novelty Sales: All revenues received by a Club or a Club Affiliated Entity derived from the sale of a Club's merchandise at stores, shops and kiosks that are either on the property of the arena or on any street that is adjacent to that Club's arena (all such revenues net of Direct Costs, including, without limitation, product, labor and other direct costs, provided, however, that for in-arena novelty sales locations operated in-house (as defined in the HRR Reporting Package) or through a Club Affiliated Entity, the Direct Costs relating to such in-arena novelty sales that may be netted against total revenues generated by in-arena novelty sales shall not exceed sixty-nine (69) percent per League Year for such Clubs on an aggregated basis). The parties agree that revenues after netting of Direct Costs for in-arena novelty sales shall not be reported as a negative number (less than zero) for any individual Club.
(1) For purposes of calculating such in-arena novelty sales revenues for any "Two-Team Arena" (i.e., an arena in which an NHL team plays its home games, and in which arena an NBA team also plays its home games), the following rules shall apply: (a) on days on which NHL hockey games or other NHL events take place, all novelty sales shall be included for the NHL hockey game or NHL event in the calculation of in-arena novelty sales; (b) on days on which National Basketball Association games or other NBA events take place, all novelty sales for the NBA basketball game or other NBA event shall be excluded from the calculation of in-arena novelty sales; and (c) for all other days, the sales shall be totaled and the revenues shall be allocated to in-arena novelty sales in the same proportion as revenues of hockey-related merchandise bears to total gross in-arena novelty sales revenues in the relevant League Year.
(2) For purposes of calculating such in-arena novelty sales revenues for any "Single-Team Arena" (i.e., an arena in which an NHL team plays its home games, and no NBA team plays its home games), the following rules shall apply: (a) on days on which NHL hockey games or NHL events take place, all novelty sales shall be included for the NHL hockey game or NHL event in the calculation of in-arena novelty sales; and (b) for all other days, the sales shall be totaled and the revenues shall be allocated to in-arena novelty sales in the same proportion as revenues of hockey-related merchandise bears to total gross in-arena novelty sales revenues in the relevant League Year.
(M) Non-Arena Novelty Sales: All revenues received by a Club or a Club Affiliated Entity derived from the sale of a Club's merchandise at stores, shops and kiosks that are neither on the property of the arena nor on any street that is adjacent to that Club's arena (all such revenues net of Direct Costs, including, without limitation, product, labor, rent and other direct costs). The parties agree that revenues after netting of Direct Costs for non-arena novelty sales shall not be reported as a negative number (less than zero) for any individual Club;
(N) Concessions: All revenues received by a Club or a Club Affiliated Entity derived from the sale of concessions, including any restaurant owned by a Club or a Club Affiliated Entity, in NHL arenas or on any street that is adjacent to the arena, on days on which that Club's NHL hockey games or NHL events take place, for such NHL game or NHL event (all such revenues net of Direct Costs, including, without limitation, product costs, and vendor and food-preparer salaries, but not including any depreciation and/or leasehold amortization expenses from in-house operations, provided, however, that for concessions sales locations operated in-house (as defined in the HRR Reporting Package) or through a Club Affiliated Entity, the Direct Costs relating to such concessions that may be netted against total revenues generated by concessions shall not exceed fifty-four (54) percent per League Year for such Clubs on an aggregated basis, provided that, in the event that the aggregate Direct Costs incurred in connection with the 2007-08 League Year for in-house and Club Affiliated Entity concessions operations League-wide have increased to 59.4 percent or greater, or have decreased to 48.6 percent or lower, from the fifty-four (54) percent permitted for the 2005-06 League Year for in-house and Club Affiliated Entity concessions operations, then the amount of the League-wide in-house and Club Affiliated Entity concessions operations percentage shall be readjusted by the actual percentage change to the new actual figure for the subsequent years of this Agreement, provided, however, that the NHLPA shall have the right to object to any such adjustment in the event that such percentage change is due to a non-recurring exceptional cost, in which case the matter shall be discussed in good faith between the NHL and NHLPA, and, failing agreement, the issue of whether the percentage change is due to a non-recurring exceptional cost shall be resolved by the Independent Accountants). The parties agree that revenues after netting of Direct Costs for concessions shall not be reported as a negative number (less than zero) for any individual Club;
(O) Luxury Boxes/Suites.
(1) As to luxury boxes/suites in an arena that is not a Club Affiliated Entity (an "Unaffiliated Arena"), all revenues received by a Club or a Club Affiliated Entity from the sale, lease, license or other conveyance of luxury boxes/suites in that Club's arena shall be included in HRR, without netting of any costs.
(2) As to luxury boxes/suites in an arena that is a Club Affiliated Entity (an "Affiliated Arena"):
(i) For luxury boxes/suites that are sold, leased, licensed or otherwise conveyed for NHL hockey events as well as non-NHL hockey events: (1) sixty-five (65) percent of the revenues received by such Club or Club Affiliated Entity derived from the sale, lease, license or other conveyance of such luxury boxes/suites (excluding the ticket revenue received for the luxury box/suite seat use included in Gate Receipts set forth in Section 50.1(a)(i)(A)) for a "Single-Team Arena" (i.e., an arena in which an NHL team plays its home games, and no NBA team plays its home games), or (2) thirty-two and one-half (32.5) percent of the revenues received by a Club or Club Affiliated Entity derived from the sale, lease, license or other conveyance of such luxury boxes/suites (excluding the ticket revenue received for the luxury box/suite seat use included in Gate Receipts set forth in Section 50.1(a)(i)(A)) for a "Two-Team Arena" (i.e., an arena in which an NHL team plays its home games, and in which arena an NBA team also plays its home games), with such allocations to be done without netting of any costs, provided, however, that to the extent an arena enters into a separate contractual arrangement with a third party (i.e., a non-Club Affiliated Entity) regarding luxury boxes/suites (e.g., the RBC Center, which is the home arena of both the Carolina Hurricanes and North Carolina State University basketball team, or the Staples Center which is the home arena of the Los Angeles Kings, Los Angeles Lakers and Los Angeles Clippers), then revenues paid pursuant to such third-party contracts shall be deducted prior to the application of the above-listed percentages, provided that the NHLPA shall have the right to object to any such separate contractual arrangement with a third party on the basis that the purpose of that arrangement is for the Club or Club Affiliated Entity to avoid including revenues derived from such separate contractual arrangement within HRR. In the case of any objection, the matter shall be discussed in good faith between the NHL and the NHLPA and, failing agreement, the issue shall be submitted to and resolved by the System Arbitrator. By way of example, the parties agree that if a Club or Club Affiliated Entity had an agreement with a non-NHL team pursuant to which the team played its home games at the Club's arena and paid no rent and received no luxury box/suite revenues, and, upon expiration of such agreement, the non-NHL team entered into a successor agreement with the Club pursuant to which the team would play its home games at the Club's arena, but would pay $5 million in rent and receive luxury box/suite revenues from the arena of $5 million, the parties agree that the $5 million in rent would be included in HRR (assuming there are no other extenuating circumstances or other relevant facts).
(ii) For luxury boxes/suites that are sold, leased, licensed or otherwise conveyed for NHL hockey events only, including individual game-day sales of such luxury boxes/suites (which luxury boxes/suites shall be excluded from calculations done under subsection (a)(i)(O)(2)(i) above): One-hundred (100) percent of the revenues received by such Club or Club Affiliated Entity derived from the sale, lease, license or other conveyance of such luxury boxes/suites (excluding the ticket revenue received for the luxury box/suite seat use included in Gate Receipts set forth in Section 50.1(a)(i)(A)), without netting of any costs;
(iii) For luxury boxes/suites that are sold, leased, licensed or otherwise conveyed for non-NHL hockey events only, any revenues derived from the sale, lease, and/or licensing of such luxury boxes/suites shall be expressly excluded from HRR.
(P) Club/Premium Seats.
(1) As to club/premium seats in an "Unaffiliated Arena," all revenues received by a Club or a Club Affiliated Entity from the sale, lease, license or other conveyance of club/premium seats in that Club's arena shall be included in HRR, all such revenues net of Direct Costs, provided, however, that for Clubs in Unaffiliated Arenas, such Direct Costs shall not exceed three and three-quarters (3.75) percent of such revenues per League Year on a League-wide basis.
(2) As to club/premium seats in a Club's "Affiliated Arena":
(i) For club/premium seats that are sold, leased, licensed or otherwise conveyed for all events (e.g., NHL hockey events, NBA basketball events, and other events): (1) Sixty-five (65) percent of the revenues received by such Club or Club Affiliated Entity derived from the sale, lease, license or other conveyance of club/premium seats (excluding the ticket revenue received for the club/premium seat use included in Gate Receipts set forth in Section 50.1(a)(i)(A)) if such club/premium seats are sold, leased, licensed or otherwise conveyed for all events in a "Single-Team Arena" (i.e., an arena in which an NHL team plays its home games, and no NBA team plays its home games), or (2) thirty-two and one-half (32.5) percent of the revenues received by such Club or Club Affiliated Entity derived from the sale, lease, license or other conveyance of club/premium seats (excluding the ticket revenue received for the club/premium seat use included in Gate Receipts set forth in Section 50.1(a)(i)(A)) if such club/premium seats are sold, leased, licensed or otherwise conveyed for all events in a "Two-Team Arena" (i.e., an arena in which an NHL team plays its home games, and in which arena an NBA team also plays its home games), all such revenues net of any Direct Costs, provided, however, that for Clubs in Affiliated Arenas, such Direct Costs shall not exceed three and three-quarters (3.75) percent of such revenues per League Year on a League-wide basis, and provided, further, that, to the extent an arena enters into a separate contractual arrangement with a third party (i.e., a non-Club Affiliated Entity such as the Los Angeles Clippers) regarding club/premium seats, then revenues paid pursuant to such third-party contracts shall be deducted prior to the application of the above-listed percentages, provided that the NHLPA shall have the right to object to any such separate contractual arrangement with a third party on the basis that the purpose of that arrangement is for the Club or Club Affiliated Entity to avoid including revenues derived from such separate contractual arrangement within HRR. In the case of any objection, the matter shall be discussed in good faith between the NHL and the NHLPA and, failing agreement, the issue shall be submitted to and resolved by the System Arbitrator;
(ii) For club/premium seats that are sold, leased, licensed or otherwise conveyed for NHL hockey events only (which club/premium seats shall be excluded from calculations done under subsection (a)(i)(P)(2)(i) above): One-hundred (100) percent of the revenues received by such Club or Club Affiliated Entity derived from the sale, lease, license or other conveyance of such club/premium seats (excluding the ticket revenue received for the club/premium seat use included in Gate Receipts set forth in Section 50.1(a)(i)(A)), all such revenues net of any Direct Costs, provided, however, that for Clubs in Affiliated Arenas, such Direct Costs shall not exceed three and three-quarters (3.75) percent of such revenues per League Year on a League-wide basis;
(iii) For club/premium seats that are sold, leased, licensed or otherwise conveyed for NHL hockey events and NBA basketball events only (which club/premium seats shall be excluded from calculations done under subsection (a)(i)(P)(2)(i) above): Fifty (50) percent of the revenues received by such Club or Club Affiliated Entity derived from the sale, lease, license or other conveyance of club/premium seats (excluding the ticket revenue received for the club/premium seat use included in Gate Receipts set forth in Section 50.1(a)(i)(A)), all such revenues net of any Direct Costs, provided, however, that for Clubs in Affiliated Arenas, such Direct Costs shall not exceed three and three-quarters (3.75) percent of such revenues per League Year on a League-wide basis;
(iv) For club/premium seats that are sold, leased, licensed or otherwise conveyed for non-NHL hockey events only, any revenues derived from the sale, lease, and/or licensing of such club/premium seats shall be expressly excluded from HRR;
(v) For any Club or Club Affiliated Entity selling permanent or personal seat licenses ("PSLs") or other similar rights at such Club's home arena, the revenues received by such Club or Club Affiliated Entity on account of such permanent or personal seat licenses or other similar rights shall be amortized over the term of the PSL (but not to exceed thirty (30) years), and, after amortizing, shall be treated in the same manner as revenues received from club/premium seats for purposes of calculating HRR.
(Q) Fixed Signage and Arena Sponsorships.
(1) As to fixed signage inside or outside of an "Unaffiliated Arena" and as to all Unaffiliated Arena sponsorships, all revenues received by a Club or a Club Affiliated Entity from the sale of advertising or fixed signage (i.e., signage that does not relate only to NHL hockey events) or sponsorships, without netting of any costs.
(2) As to fixed signage inside or outside of a Club's "Affiliated Arena" and as to all Affiliated Arena sponsorships, sixty-five (65) percent of the revenues received by such Club or Club Affiliated Entity derived from the sale of advertising or fixed signage or arena sponsorships of that Club's arena for a "Single-Team Arena" (i.e., an arena in which an NHL team plays its home games, and no NBA team plays its home games), or thirty-two and one-half (32.5) percent of the revenues received by such Club or Club Affiliated Entity derived from the sale of advertising or fixed signage or arena sponsorships in that Club's arena for a "Two-Team Arena" (i.e., an arena in which an NHL team plays its home games, and in which arena an NBA team also plays its home games), with such allocations to be done without netting of any costs, provided, however, that to the extent an arena enters into a separate contractual arrangement with a third party (i.e., a non-Club Affiliated Entity such as the Los Angeles Clippers) regarding fixed arena signage inside or outside of such arena, advertising, or arena sponsorships, then revenues paid pursuant to such third-party contracts shall be deducted prior to the application of the above-listed percentages, provided that the NHLPA shall have the right to object to any such separate contractual arrangement with a third party on the basis that the purpose of that arrangement is for the Club or Club Affiliated Entity to avoid including revenues derived from such separate contractual arrangement within HRR. In the case of any objection, the matter shall be discussed in good faith between the NHL and the NHLPA and, failing agreement, the issue shall be submitted to and resolved by the System Arbitrator.
(3) To the extent an arena sponsorship includes the receipt of the Club's hockey tickets by the sponsor, the face value of such tickets shall be deducted from the value of the sponsorship and included in Gate Receipts pursuant to Section 50.1(a)(i)(A).
(4) The sponsorship and advertising revenues earned from fixed arena signage and arena sponsorships include, without limitation, building naming rights and other similar rights. Revenues derived from any naming rights agreements and other arena sponsorships of greater than $1 million dollars shall be recognized on a straight-line basis over the term of the contract.
(R) Temporary Signage and Club Sponsorships.
(1) All revenues received by a Club or a Club Affiliated Entity from the sale of advertising or temporary arena signage (i.e., signage that relates only to NHL hockey events) or from the sale of Club sponsorships shall be included in HRR, without netting of any costs. To the extent that a Club sponsorship includes the Club's hockey tickets, such tickets and sponsorship revenue shall be treated as set forth in paragraph (a)(i)(Q)(3) above, and to the extent that a Club sponsorship includes dasherboards, the amount allocable to dasherboards shall be treated as set forth in paragraph (a)(i)(S) below.
(2) The sponsorship and advertising revenues from temporary arena signage and Club sponsorships include, without limitation, the following examples, each of which are paid for NHL hockey events only: advertising located on scoreboards, zambonis and penalty boxes, and behind-the-bench and in-ice advertising, but not dasherboards;
(S) Dasherboards: All revenues received by a Club or a Club Affiliated Entity from the sale of dasherboard advertising and/or the dasherboard portion of sponsorships in that Club's arena (all such revenues net of Direct Costs including, without limitation, commissions earned, agency fees, and other direct costs, provided, however, that such Direct Costs shall not in the aggregate exceed seven (7) percent per League Year on a League-wide basis);
(T) Parking: All revenues received by a Club or a Club Affiliated Entity from parking by NHL game attendees on days on which that Club's NHL hockey games are played, or from parking by attendees at other NHL hockey events held at that Club's arena (all such revenues net of Direct Costs, including, without limitation, salaries and fees (which Direct Costs shall include the cost of parking paid by any Club for luxury box/suite holders and club/premium seatholders), provided, however, that for Clubs that operate parking facilities directly or through a Club Affiliated Entity, the Direct Costs relating to such parking (other than the cost of parking paid by any Club for luxury box/suite holders and club/premium seatholders) that may be netted against total revenues generated by parking shall not exceed thirty (30) percent per League Year for such Clubs on an aggregated basis). The parties agree that revenues after netting of Direct Costs for parking shall not be reported as a negative number (less than zero) for any individual Club;
(U) Other Revenues: "Other Revenues" include, without limitation, Club and League revenues, and Club Affiliated Entity and League Affiliated Entity revenues received from the following, net of Direct Costs except where otherwise indicated:
(1) Club- or League-sponsored or branded events, such as: skills competitions, open practices, team mascot appearances and Player appearances;
(2) Club- or League-sponsored or branded events, such as: summer camps, ice hockey, in-line hockey and street hockey tournaments, fantasy camps, street festivals and skating parties (accounted for based on current reporting practices with respect to such revenues and the netting of costs reasonably and customarily related to such revenues);
(3) The sale or disposition of game-worn, practice-worn and other event-worn or used Player jerseys and/or equipment along with the sale of any other hockey-related items whose value is directly enhanced by an association with a Player's personality rights;
(4) The sale or other conveyance of pouring rights and other product placement inducement rights allocated consistent with the allocation used in Section 50.1(a)(i)(Q);
(5) The sale of special memberships or access rights to attendees of NHL games or NHL-sponsored events in which current NHL Players participate;
(6) The exhibition of out-of-town NHL games or NHL events in arenas, including novelty and concessions sales at such events;
(7) All ticket personalization activities and service charges or commissions earned by a Club or Club Affiliated Entity from the sale of such tickets;
(8) Club- and League-specific lotteries and other Club- and League-specific government subsidies; and
(9) Any Club or League promotions not included above.
(ii) The Independent Accountants may make revenue adjustments for the 2005-06 League Year, or any subsequent League Year, based on revenues received by any Club or the League in the 2004-05 League Year that will be earned by such Club in 2005-06, or a subsequent League Year. For example, if a Club received revenues in 2004-05 that are attributable to 2005-06 or any subsequent League Year, such revenues may be included in the 2005-06 League Year, or the applicable subsequent League Year (e.g., as per the NHL's agreement with TSN, TSN's payment to the NHL in the 2004-05 League Year will be included in NHL Broadcast revenues in the 2007-08 League Year). Similarly, for example, if a Club received money in the 2004-05 League Year from a sponsor and discounts the sponsor's fee in the 2005-06 League Year, the reduction in the 2005-06 League Year would be adjusted upward pursuant to Generally Accepted Accounting Principles. There shall be no attribution of revenues from the 2004-05 League Year for revenues received by any Club or the League in the 2004-05 League Year for which there has been no adjustment by the Independent Accountants to revenues in the 2005-06 League Year or any subsequent League Year. If a Club received revenues in 2004-05 solely on account of 2004-05, then such revenues would not be accrued to 2005-06. In addition, if a Club provided, for example, suiteholders with use of the suites for additional events in 2004-05 in lieu of NHL hockey events, and the Club retained a like value of the hockey-related suite payments made by such suiteholders, then such revenues would not be accrued to 2005-06.
(iii) The parties agree that Club transactions entered into that include a large, one-time payment (i.e., a transaction with a term of three (3) or more years, including at least one of the League Years covered by this Agreement, with a one-time payment of $100,000 or more) shall be accounted for in such a way so that the total value of the large, one-time payment is allocated evenly over the term of the transaction, consistent with the way in which the NHL apportions large, one-time payments (as in the case of The Hockey Company/Reebok agreement or the CBC Canadian broadcast agreement). Moreover, the parties agree that Club transactions that reflect advance payments made on services rendered for zero consideration shall likewise be allocated evenly over the term of the transaction. For example, a transaction with a term of four (4) years that reflected payments of $2 million in the first year, $2 million in the second year, zero in the third year, and zero in the fourth year, would be allocated at $1 million a year for each year during the term of the transaction. These allocations shall apply both retroactively and prospectively (i.e., to such payments to any Club that occurred prior to, or occur following, the effective date of this Agreement).
(iv) In the event that there is an NBA Players' strike or owners' lockout ("work stoppage") resulting in the cancellation of all or part of any NBA season in any League Year, and such work stoppage results in a refund being made to purchasers of fixed arena signage, luxury box/suite-holders, or premium/club seat holders in "Two-Team Arenas" (i.e., arenas in which an NHL team plays its home games, and in which arena an NBA team also plays its home games), then the NHL and NHLPA agree that revenues for luxury boxes/suites, premium/club seats and fixed arena signage in such Two-Team Arenas shall be determined as if such refunds were not made, and the total dollars received by the arena from the luxury box/suite, premium/club seat, and/or fixed arena signage will be what would have been received if there were no NBA work stoppage, and the applicable accounting conventions set forth above with respect to "Two Team Arenas" shall continue to apply for purposes of allocating the appropriate revenues to the NHL Club. By way of example, if a full-year NBA work stoppage results in a forty (40) percent refund on an annual suite license fee of $300,000 in a Two-Team Arena, the NHL allocation shall be thirty-two and one-half (32.5) percent of $300,000 (i.e., notwithstanding the refunded amount).
(v) If a Club or Club Affiliated Entity or the League or a League Affiliated Entity sells or transfers its right to receive any category or revenue stream included in HRR to a third party (e.g., a Club sells or securitizes the revenues it is scheduled to receive pursuant to its local broadcast agreement), such that such category or revenue stream would no longer be received by the Club or Club Affiliated Entity or the League or a League Affiliated Entity, then such category or revenue stream shall nevertheless be included in HRR pursuant to the terms of this Agreement, and the receipts of the sale or securitization shall not be so included.
(vi) The NHL acknowledges that, with respect to the list of revenues set forth in paragraph (a)(i) above, there may be additional and/or new revenue streams that may be added to HRR. No adverse inference shall be drawn against the NHLPA for the non-inclusion of any particular additional and/or new revenue stream from the list of revenue streams that are specifically included in HRR.
(b) Notwithstanding anything to the contrary in Section 50.1(a) above, HRR shall not include the following non-exhaustive list of revenues:
(i) Revenues from the Assignment (i.e., Waivers) of any SPC;
(ii) Revenues from the relocation or sale of any existing Club (or any interest therein) or the grant of any new franchise;
(iii) Revenues from the operation of teams, other than NHL Clubs, that are owned or controlled by an NHL Club or a Club Affiliated Entity;
(iv) Revenues from the sale of Club personal property, including, without limitation, Club furniture, fixtures, and equipment, other than a Player's Game-Worn, practice-worn, or NHL-event worn or used jersey and/or equipment, or the sale of any other hockey-related items whose value is directly enhanced by a Player's personality rights;
(v) Proceeds from loans or other financing transactions;
(vi) Dues, loans, advances, cash calls, or capital contributions received by the NHL or an NHL-affiliated entity (e.g., NHL Enterprises, LP, NHL Enterprises Canada, LP), or a Club, any other entity owned by a Club, or any Club Affiliated Entity, from one or more of its owners, shareholders, members or partners;
(vii) Any amounts collected by the League from any Club, Player, or other Club personnel, including, without limitation, fines or other moneys collected by the League as a result of any League-imposed disciplinary action;
(viii) Revenues received by any Club in connection with Player Compensation Cost Redistribution that is paid by the League;
(ix) Interest income;
(x) Investments in, and the proceeds from investments in, currency contracts, equities, options, and other financial derivatives;
(xi) Insurance recoveries and expense reimbursements from insurance;
(xii) Proceeds received by a Club as a result of any legal proceeding that are in excess of any amount representing actual lost revenues that would otherwise be included in HRR, less all costs and attorneys' fees incurred in connection with such proceeding;
(xiii) Revenues from the sale or leasing of real estate;
(xiv) Revenues raised for charitable organizations or purposes that have been raised by a Club with or without Player participation, for the charitable organizations or purposes for which revenues have been raised prior to the effective date of this Agreement, and all other revenues raised for charitable organizations or purposes that do not use current Player names and likenesses or make de minimis use of such names or likenesses (e.g., a silent auction with one or two Player-autographed sticks);
(xv) Any thing of value received in connection with the design or construction of a new or renovated arena or other Club facility including, without limitation, receipt of title to or a leasehold interest in real property or improvements, reimbursements of expenses related to any such project, benefits from project-related infrastructure improvements, or tax credits or abatements, so long as such things of value or other revenues are not reimbursements for any operating expenses of the Club;
(xvi) Any thing of value that induced or is intended to induce a Club either to locate or to relocate (e.g., amounts paid to enable a Club to buy-out its lease obligations or enable it to pay any relocation fee) or remain in a particular geographic location such that it will enable the Club or its Club Affiliated Entity to enhance categories or revenue streams constituting HRR, so long as such things of value or other revenues are not reimbursements for operating expenses of the Club;
Illustration #1: A Club leases the arena for its home games from a public authority. The lease provides that the public authority will construct or improve luxury suites in the arena. In lieu of making the physical improvements required by the lease, the public authority makes specific guaranteed annual payments to the Club. Such payments would be included in HRR.
Illustration #2: In order to induce a Club to stay in its current location, a public authority pays the Club a lump sum payment in the form of a loan (e.g., $20 million), part of which (e.g., $10 million) is to reimburse the Club for improvements to the locker room, construction of a practice facility and suite improvements, and part of which (e.g., $10 million) is paid to the Club to induce it to stay at the location over a stated period of time (e.g., twenty (20) years). Each year 1/20th of the loan is forgiven by the public authority so long as the Club remains in the arena and uses the latter portion of funds loaned for operation of the Club. Should the team relocate, any unpaid balance of the loan must be repaid to the public authority. The $10 million portion of the loan devoted to physical improvements of the arena and for the practice facility is excluded from HRR. The remaining portion of the loan is included in HRR (at $500,000 per year) because the funds are used for operating revenues of the Club.
and
(xvii) Reimbursements to Clubs from the Escrow Account made pursuant to Article 50.11.
The NHLPA acknowledges that, with respect to the above list of revenues, there may be additional and/or new revenue streams that may be excluded from HRR. No adverse inference shall be drawn against the NHL for the non-inclusion of any particular additional and/or new revenue streams from the list of revenue streams that are expressly excluded from HRR.
(c) "Club Affiliated Entity." "Club Affiliated Entity" means, with respect to a Club, its parent company, subsidiary company, sister company, or any other entity which shares common or family operating control with that Club, or which is controlled by a member of that Club's senior management (i.e., the Club's Chief Executive Officer, Chief Operating Officer or President), as set forth in the HRR Reporting Package, and subject to the following:
(i) Where activities directly relating to a Club's NHL hockey activities are carried on through a Club Affiliated Entity, the share of revenues and Direct Costs, as specified in this Agreement, from such operations allocable to such Club's NHL hockey activities shall be reflected in such Club's HRR Reporting Package for purposes of calculating HRR, as set forth more fully in the HRR Reporting Package.
(ii) HRR shall not include revenues of Club Affiliated Entities which are not derived from activities relating to the playing of NHL hockey games and are not related to the particular Club affiliated with the Club Affiliated Entity (e.g., car dealerships or quick-service restaurant companies, broadcasting companies and food service companies that provide services other than for the particular Club under common or family operating control with the Club Affiliated Entity).
(iii) HRR shall not include revenues earned by Club Affiliated Entities in the ordinary course of their businesses for which the Club Affiliated Entities have paid monetary consideration for the right to generate such revenues from Club activities, even if directly related to the NHL hockey activities of the Club with which the Club Affiliated Entity is under common or family operating control (e.g., advertising revenues and subscriber fees earned by a cable broadcasting company or multiple systems operator earned in the ordinary course, and attributable to the broadcasting of NHL hockey games of the Club with which the cable company is under common family or operating control for which the Club Affiliated Entity paid a license fee).
(iv) HRR shall not include revenues of a Club Affiliated Entity that does not have a direct relationship with any Club, or revenues that relate directly or indirectly to the usual activities of a Club Affiliated Entity, that are derived or earned from that Club Affiliated Entity's business, even if related to the playing of NHL hockey games or NHL- or Club-related events. However, if a Club actually is entitled to any revenues from such Club Affiliated Entity's business activities, then such revenues will be included in HRR. For example, and without limitation, if a Club's Club Affiliated Entity is owned or controlled by the same persons or entities that own or control a Club, and such Club Affiliated Entity operates a cable carrier that has no direct relationship with any Club, and the cable carrier shows the Stanley Cup Finals on a pay-per view basis (where the rights to such were not acquired from the Club), then such Club Affiliated Entity's revenues are excluded from HRR. Similarly, if a Club's Club Affiliated Entity is in the usual business of food service, and provides food services to an arena (whether or not the arena is a Club Affiliated Entity) at a tailgate party sponsored by the arena, and the Club receives no revenues therefrom, the revenues of the Club Affiliated Entity in the food services business are not included in HRR. However, pursuant to paragraph (v) below, the NHLPA reserves the right to arbitrate whether some amount of revenues should be attributed to the Club on account of the arena's sponsorship of the tailgate party (e.g., if the arena is a Club Affiliated Entity).
(v) The NHLPA reserves the right to arbitrate whether any amount of revenues (including zero revenues) received by a Club reflects the fair market value of a transaction or arrangement between a Club and a Club's Club Affiliated Entity for any rights or services provided by the Club.
(d) "League Affiliated Entity." "League Affiliated Entity" means, with respect to the NHL, its parent company, subsidiary company, sister company, or other entity which shares common operating control with the League, including NHL Enterprises.
(e) "Preliminary HRR." "Preliminary HRR" shall mean the preliminary HRR for the League Year ended June 30, calculated by the Independent Accountants and set forth in the Initial HRR Report, as provided in Section 50.12(d)(i) of this Agreement.
(f) "Actual HRR." "Actual HRR" shall mean the actual HRR for the League Year ended June 30, calculated by the Independent Accountants and set forth in the Final HRR Report, as provided in Section 50.12(d)(ii) of this Agreement.
(g) No "Double-Counting" of Any Revenues in HRR. In no event shall the same revenues be included in HRR, directly or indirectly, more than once, the purpose of this provision being to preclude the double-counting of any revenues. For example, revenues received by the League which are distributed to the Clubs shall only be counted once.
50.2 Player Salary, Bonuses and Actual Club Salary.
(a) "Player Salary." The only allowable form of compensation permitted to be paid to a Player shall be Player Salary, as set forth in this paragraph (a), and Bonuses, as set forth in paragraph (b) below. No other type of compensation, in any form (except only for "Traditional Hockey Practices" as set forth below), shall be permitted to be provided to any Player.
"Player Salary" means the following, which shall be set forth in a Player's SPC, an Offer Sheet, a Qualifying Offer, or a Buy-Out Agreement:
(i) Paragraph 1 NHL Salary, which shall only be the fixed amount of money payable on account of a particular League Year or a portion of a particular League Year;
(ii) Deferred Salary;
(A) "Deferred Salary" means any Paragraph 1 NHL Salary that is earned during the term of an SPC during which the services attributable to that Paragraph 1 NHL Salary are performed, but is not paid until after the expiration of such SPC. By definition, Deferred Salary that is earned during the term of such an SPC may not be paid until after the expiration of such SPC. Player Salary denominated as "Deferred" but payable within the term of the SPC shall be counted in the League Year in which the Player Salary is paid and shall not be treated as Deferred Salary. For purposes of calculating a Club's Upper Limit and Lower Limit, as well as the Players' Share, Deferred Salary shall be counted as Player Salary in the League Year in which the Player performs the services for which it is earned, at the Deferred Salary's present value at 1-Year LIBOR plus one and one-quarter (1.25) percent at the time the SPC is registered (unless the Deferred Salary is to be paid with interest, in which case it shall be counted in the League Year in which the Player performs the services for which it is earned, at the Deferred Salary's stated cash amount). Other than Deferred Salary or Deferred Bonuses as set forth below, any other compensation must be paid in the year that it is earned.
(B) For SPCs entered into prior to the date of execution of this Agreement:
(1) Any Deferred Salary that will be earned for services rendered during the 2005-06 League Year or any subsequent League Year shall be counted for purposes of the Players' Share and the Upper and Lower Limit at its present value at 1-Year LIBOR plus one and one-quarter (1.25) percent in the League Year for which it is earned (unless the Deferred Salary is to be paid with interest, in which case it shall be counted in the League Year in which the Player performs the services for which it is earned, at the Deferred Salary's stated cash amount), pursuant to subparagraph (A) above.
(2) Any Deferred Salary earned for services performed prior to the 2005-06 League Year and not requiring any further activity by the Player as an active NHL hockey Player for the 2005-06 League Year or for any League Year thereafter, shall not be counted for purposes of the Players' Share, Upper Limit or Lower Limit.
Illustration #1: A Player signs a two-year SPC for the 2006-07 and the 2007-08 League Years. The SPC provides for Deferred Salary payable during the 2008-09 League Year that is attributable to playing services for the 2006-07 League Year. Such Deferred Salary shall be paid to the Player in the 2008-09 League Year, but for purposes of his Club's Upper and Lower Limit and the Players' Share, the present value of such Deferred Salary (assuming it was not to be provided with interest) shall be included in the 2006-07 League Year and shall not be included in the 2008-09 League Year.
Illustration #2: An SPC entered into in the 2003-04 League Year and expiring after the 2005-06 League Year provides for Deferred Salary to a Player to be paid in 2007-08, for playing services rendered in 2005-06. Such Deferred Salary shall be paid to the Player in the 2007-08 League Year, but for purposes of his Club's Upper and Lower Limit and the Players' Share, the present value of such Deferred Salary (assuming it was not to be provided with interest) shall be included in the 2005-06 League Year and shall not be included in the 2007-08 League Year.
Illustration #3: A Player is owed Deferred Salary during the 2007-08 League Year that is attributable to playing services for the 2001-02 League Year. For purposes of the Club's Upper and Lower Limit and the Players' Share, such Deferred Salary shall not be included in the 2007-08 League Year.
(iii) Amounts paid, as paid, pursuant to "Ordinary Course" Buyout Agreements; and
(iv) For SPCs entered into prior to the execution of this Agreement, the face amount of any vested option, the face amount resultant from a salary revision, a salary or bonus guarantee, or other such compensatory provision in such 1995 Standard Player Contracts (see also Exhibit 16 to this Agreement regarding options).
Other than Player Salary as outlined in (i) through (iv) above and Bonuses as set forth in subsection (b) below, no Club may provide a Player with anything of value. In addition, a Club Affiliated Entity may not provide a Player with anything of value. To the extent that a Player receives anything of value from an entity that has a contractual relationship with any Club or Club Affiliated Entity, or with the NHL or any League Affiliated Entity, for his intellectual property rights or for rendering any services for such entity, such value must be commensurate with (i.e., not clearly in excess of) fair market value. A Player is free to enter 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. Any sponsorship or endorsement arrangement between a Player and a national sponsor shall be treated in accordance with Section 26.3(e)(i) of this Agreement.
This Article 50 does not prohibit certain "Traditional Hockey Practices," pursuant to which Clubs or Club Affiliated Entities have provided additional things of de minimis value to Players including, without limitation, parental travel to an Entry Level Player's first NHL game (not to exceed $5,000), golf outings, father-son road trips, seasonal events and seasonal gifts (e.g., picnics and Christmas parties or gifts), and milestone gifts, so long as such milestone gifts do not exceed $7,500 (U.S.) in the aggregate per Player per League Year. Such Traditional Hockey Practices shall not be counted in a Club's Upper Limit or Lower Limit, or against the Players' Share.
(b) "Bonuses."
(i) A Player may earn a bonus only for Signing, Performance, Roster or Reporting (to the extent permitted in this Agreement). "Bonuses," including "Deferred Bonuses," means the aggregate amount of all sums that may be earned by a Player pursuant to SPCs on account of such bonuses.
(A) For these purposes, "Deferred Bonuses" means any Bonuses that are earned during the term of an SPC during which the services attributable to those Bonuses are performed, but are not paid until after the expiration of such SPC. By definition, Deferred Bonuses that are earned during the term of an SPC may not be paid until after the expiration of such SPC. For purposes of calculating a Club's Upper Limit and Lower Limit, as well as the Players' Share, Deferred Bonuses shall be counted as Bonuses in the League Year in which the Player performs the services for which they are earned, at their present value at 1-Year LIBOR plus one and one-quarter (1.25) percent of the Deferred Bonuses (unless the Deferred Bonuses are to be paid with interest, in which case they shall be counted in the League Year in which the Player performs the services for which they can be earned, at the stated cash amount of the Deferred Bonuses). Bonuses denominated as "Deferred" but payable within the term of the SPC shall not be permitted.
(B) For SPCs entered into prior to the execution of this Agreement:
(1) Any Deferred Bonuses that will be earned for services rendered during the 2005-06 League Year or any subsequent League Year shall be counted for purposes of the Players' Share and the Upper and Lower Limit at their present value at 1-Year LIBOR plus one and one-quarter (1.25) percent in the year for which they are earned (unless the Deferred Bonuses are to be paid with interest, in which case they shall be at the stated cash amount of the Deferred Bonuses), pursuant to subparagraph (A) above.
(2) Any Deferred Bonuses earned for services performed prior to the 2005-06 League Year and not requiring any further activity or achievement by the Player as an active NHL hockey Player for the 2005-06 League Year or for any League Year thereafter, shall not be counted for purposes of the Players' Share, Upper Limit or Lower Limit.
(C) "Performance Bonuses."
(1) "Performance Bonuses" means any Bonuses set forth in a Player's SPC, the payment of which is contingent on the Player's achievement of some agreed-upon benchmark(s) related to his performance as a Player or his Club's performance during a particular League Year.
(2) Performance Bonuses shall be allowable under this Agreement only for:
(i) Players with Entry Level SPCs under Article 9 of this Agreement;
(ii) Players aged 35 or older as of June 30 of the League Year in which the SPC is to be effective, who have signed a one-year SPC for that League Year; and
(iii) Players who are "400-plus game Players" for pension purposes, and who: (i) in the last year of their most recent SPC, spent 100 days or more on the injured reserve list; and (ii) have signed a one-year SPC for the current or upcoming League Year.
As to paragraphs (C)(2)(ii) and (C)(2)(iii), such Players are not limited in the length of an SPC they may sign, but in the event any such Player signs an SPC with a term of longer than one (1) year, the SPC shall not be permitted to contain Performance Bonuses.
No Players other than those falling into one of the above-numerated categories set forth in this paragraph (C)(2) shall be permitted to receive Performance Bonuses of any kind.
(ii) No bonuses other than those set forth in subsection (i) above shall be permitted to be earned by or paid to any Players. No Player other than a Player listed in paragraph (C)(2) above may receive a bonus of any type other than a Signing Bonus, Reporting Bonus, or Roster Bonus.
(c) "Actual Club Salary." "Actual Club Salary" shall mean the entire aggregate amount committed by each Club in a League Year, annualized, but calculated daily, to be paid or earned as Player Salaries and Bonuses in that League Year (and which is intended to include any and all other commitments to Players as set forth below), with such Player Salaries and Bonuses calculated in accordance with this Section 50.2(c). Actual Club Salary does not include Benefits. Actual Club Salary is utilized to calculate the League-wide Player Compensation, as contrasted with Averaged Club Salary, set forth in Section 50.5(d)(i) below, which is utilized to determine a Club's Payroll Room. For purposes of calculating League-wide Player Compensation for a given League Year, as set forth in the Final HRR Report, the Actual Club Salary shall include the Players' Salaries and Bonuses and any other amounts of money paid by the Clubs (except that Deferred Salaries and Deferred Bonuses are included in Actual Club Salary in the League Year when earned, not when paid), including any amounts deposited into the Escrow Account.
For each League Year, "Actual Club Salary" for each Club shall be calculated as the sum of the following amounts:
(i) The aggregate Player Salaries and Bonuses paid or earned for that League Year for all Players on the Club's Active Roster, Injured Reserve, Injured Non Roster and Non Roster; plus
(ii) All amounts earned in that League Year by Players on account of Deferred Salary and Deferred Bonuses (in accordance with Section 50.2(a) and Section 50.2(b) respectively); plus
(iii) All Ordinary Course Buyout Amounts paid in that League Year (in accordance with Section 50.9(i)); plus
(iv) All Player Salary and Bonuses earned in a League Year by a Player who is in the second or later year of a multi-year SPC which was signed when the Player was age 35 or older (as of June 30 of the League Year in which the SPC is to be effective), regardless of whether, or where, the Player is playing, except to the extent the Player is playing under his SPC in the minor leagues, in which case only the Player Salary and Bonuses in excess of $100,000 shall count towards the calculation of Actual Club Salary; plus
(v) For SPCs entered into prior to the execution of this Agreement, the face amount of any vested option, the face amount resultant from a salary revision, a salary or bonus guarantee, or other such compensatory provision in such 1995 Standard Player Contracts (see also Exhibit 16 of this Agreement regarding options); plus
(vi) With respect to any new Player Salary or Bonus dispute between a Player and a Club arising after the execution of this Agreement (i.e., relating to Player Salary and Bonuses payable on account of the 2005-06 League Year or any subsequent League Year), any amount paid (excluding interest) in satisfaction of any award or judgment relating to, or settlement of, any such dispute, but only to the extent that such amounts have not otherwise been included in the Player's Player Salary or Bonuses.
50.3 Benefits, Preliminary Benefits.
(a) "Benefits."
(i) "Benefits" means:
(A) The aggregate amount of all sums paid by the League and/or the Clubs (including any costs associated with the administration and provision of such benefits) for, to, or on behalf of present Players and present Players who become former Players for:
(1) Pension funding (including any costs associated with its administration and provision of such benefits); plus
(2) Group insurance programs including life, medical and dental coverage and any disability plans (including any costs associated with the administration and provision of such benefits); plus
(3) Playoff Pool amounts paid by the League, provided that for each League Year, the parties have agreed that the total Playoff Pool amounts to be paid by the League shall be $6.5 million, all of which shall be included in Benefits; plus
(4) Exhibit 5-B Individual Bonuses paid by the League; plus
(5) Government Mandates and Other Programs (i.e., the aggregate amount of all sums paid by the League and/or the Clubs for, to, or on behalf of present Players and present Players who become former Players for Workers compensation (e.g., premiums), payroll, unemployment compensation, and social security taxes, as well as any other charges imposed by governmental mandate (including any costs associated with the administration and provision of such benefits), except that the $20,000 deductible for each Workers compensation claim filed by a Player who became a former Player prior to the effective date of this Agreement shall not be included in Workers compensation benefits);
less
(B) A credit in the following amount:
(1) $6.5 million in the 2005-06 League Year;
(2) $6.5 million in the 2006-07 League Year;
(3) $6.5 million in the 2007-08 League Year;
(4) $6.75 million in the 2008-09 League Year;
(5) $6.75 million in the 2009-10 League Year;
(6) $6.75 million in the 2010-11 League Year;
(7) $6.75 million in the 2011-12 League Year, in the event that the NHLPA exercises its option to extend the term of this Agreement to September 15, 2012 pursuant to Section 3.1(b) of this Agreement;
(ii) The parties agree that the amount to be spent on Benefits for the 2005-06 League Year shall not exceed $81 million. If the package of Benefits for the 2005-06 League Year is projected to be more than $81 million, then the Benefits provided either shall be reduced, or the calculations of the Upper Limit of the Payroll Range, as set forth below, shall be adjusted.
(iii) On or before June 1 of each League Year, the NHLPA shall advise the NHL as to any modifications to the Benefits that the NHLPA desires to make, effective for the following League Year, and the NHL shall have the right to consent to each proposed modification, which consent shall not be unreasonably withheld. In the event that the parties fail to agree regarding such proposed modifications, then the current League Year's Benefits shall also be used in the following League Year, and shall be figured into the calculation of the following League Year's Upper and Lower Limit accordingly. The NHLPA shall have the authority to designate the legal counsel, plan administrator and other consultants retained with respect to the Pension Benefits and Group Welfare Benefits, provided such designation shall be with the consent of the NHL, which consent shall not be unreasonably withheld.
(b) "Preliminary Benefits." In accounting for League-wide Player Compensation during any League Year, "Preliminary Benefits" shall mean the entire maximum aggregate amount of Benefits projected to be paid to all Players League-wide for such League Year.
50.4 League-wide Player Compensation, Players' Share, Escrow Account.
(a) "League-wide Player Compensation." "League-wide Player Compensation" for each League Year means the aggregate Actual Club Salaries for all Clubs, as set forth in Section 50.2(c), plus Benefits, as set forth in Section 50.3(a). For further clarity, any unearned Performance Bonuses that may be included in any Club's Actual Club Salary, as defined below, in a League Year shall not be included in League-wide Player Compensation for such League Year (i.e., Performance Bonuses are included in League-wide Player Compensation for a given League Year only as paid). Deferred Salaries and Deferred Bonuses shall be included in League-wide Player Compensation for the League Year in which they are earned, not in the League Year in which they are paid. In no event shall Actual Club Salaries or Benefits be included in League-wide Player Compensation, directly or indirectly, more than once, the purpose of this provision being to preclude the double-counting of any Player costs.
(b) "Players' Share," "Applicable Percentage." For each League Year, there shall be a Players' Share, which shall be equal to the percentage of HRR that the Players shall be entitled to earn in the aggregate as League-wide Player Compensation. The percentage applied to HRR in a League Year to determine the Players' Share shall be known as the "Applicable Percentage." The dollar amount represented by the Players' Share in a League Year (i.e., League-wide Player Compensation) shall equal (i.e., shall never exceed nor be less than) the Applicable Percentage of HRR, as calculated pursuant to this Article 50.
(i) The Players' Share shall be determined as follows:
(A) For the 2005-06 League Year, the Players' Share shall be fifty-four (54) percent of Actual HRR.
(B) For any League Year (other than the 2005-06 League Year) for which Actual HRR is below $2.2 billion, the Players' Share shall be fifty-four (54) percent of Actual HRR for such League Year.
(C) For any League Year (other than the 2005-06 League Year) for which Actual HRR is equal to or exceeds $2.2 billion, but is below $2.4 billion, the Players' Share shall be a percentage between fifty-five (55) and fifty-six (56) percent of Actual HRR, as adjusted pursuant to subsection (ii) below, for such League Year.
(D) For any League Year (other than the 2005-06 League Year) for which Actual HRR is equal to or exceeds $2.4 billion, but is below $2.7 billion, the Players' Share shall be a percentage between fifty-six (56) and fifty-seven (57) percent of Actual HRR, as adjusted pursuant to subsection (ii) below, for such League Year.
(E) For any League Year (other than the 2005-06 League Year) for which Actual HRR is equal to or exceeds $2.7 billion, the Players' Share shall be fifty-seven (57) percent of Actual HRR for such League Year.
(ii) With respect to paragraphs (i)(C) and (i)(D) above, the Applicable Percentage shall be increased or decreased proportionally in between such revenue increments, as appropriate, in the event that Preliminary HRR or Actual HRR is in between any such revenue increments. To the extent the Applicable Percentage of the Players' Share is calculated to contain decimal points, the calculation shall be carried to the fifth decimal point, which shall then be rounded based upon the sixth decimal point.
Illustrations:
• Actual HRR for a League Year is $2.3 billion; the Players' Share for such League Year will be 55.5 percent of Actual HRR.
• Actual HRR for a League Year is $2.5 billion; the Players' Share for such League Year will be 56.33333 percent of Actual HRR.
• Actual HRR for a League Year is $2.6 billion; the Players' Share for such League Year will be 56.66667 percent of Actual HRR.
(c) League-wide Player Compensation and the Players' Share.
(i) Notwithstanding any agreement, circumstance, contract, argument of fact or law, or ruling in any arbitration, litigation, or other proceeding, and notwithstanding anything in this Agreement that may indicate to the contrary, League-wide Player Compensation for a League Year shall equal (i.e., shall never exceed nor be less than) the Players' Share for that League Year. Any ambiguities in the language of, and any dispute concerning the operation or interpretation of, this Agreement, including specifically this Article 50, shall be resolved in a manner to ensure that League-wide Player Compensation for a League Year shall equal (i.e., shall never exceed nor be less than) the Players' Share for that League Year.
(ii) No agreement, circumstance, contract, argument of fact or law, or ruling in any arbitration, litigation, or other proceeding may be permitted to have the effect of increasing or decreasing League-wide Player Compensation for a particular League Year to an amount that does not equal (i.e., that either exceeds or is less than) the Players' Share for that League Year.
(d) "Escrow Account," "Escrow Percentage," "Escrow Agent." For each League Year, and for each Player, an Escrow Account, if required under the terms of this Agreement, shall be maintained and administered by an Escrow Agent, which shall initially be Citibank – subject to change by the mutual consent of the parties to this Agreement. The NHL and NHLPA shall share equally in the costs of administering the Escrow Account.
(i) Each Club shall withhold from each Player who is party to an SPC with that Club (and current Players who retire or otherwise cease playing in the NHL to the extent such Players continue to be paid under an SPC with that Club, including, without limitation, Players who were party to SPCs that have been bought out, except for Compliance Buyouts as set forth in this Agreement) an amount of each payment of the Player's Player Salary and Bonuses for that League Year. The amount of each payment to be so withheld shall be calculated by multiplying the portion of each Player's Player Salary and Bonuses to be paid during a pay period by the applicable Escrow Percentage that is then in effect during that pay period.
(ii) There shall be no withholding of escrow with respect to Deferred Salary or Deferred Bonuses in the League Year when such Deferred Salary and Deferred Bonuses are earned. However, the amount of Deferred Salary and Deferred Bonuses earned during a League Year will be adjusted upward or downward in the event of a Shortfall or Overage, as set forth in Section 50.11 of this Agreement.
(iii) The parties will jointly assess, at the commencement of the NHL Regular Season, and at the end of each quarter, the amount of withholding of Performance Bonuses that will be prudent to reserve based upon the likelihood they will be earned.
(iv) For each League Year, the Escrow Percentage shall be calculated upon the commencement of the NHL Regular Season, and shall be subject to adjustment three (3) times during the course of the NHL Regular Season, at the end of the first-quarter, second-quarter, and third-quarter of the NHL Regular Season. Subject to paragraph (iii) above, the Escrow Percentage shall be calculated as follows:
(A) Upon the commencement of the NHL Regular Season, the "first quarter" escrow withholding (i.e., for the period between the commencement of the NHL Regular Season through the end of the first quarter of the NHL Regular Season) shall be calculated. The total aggregated amount of all NHL Clubs' Actual Club Salaries at the commencement of the NHL Regular Season shall be compared to the aggregated Adjusted Midpoint of the Team Payroll Range, as calculated in accordance with Section 50.5(b) below.
(1) If the amount of aggregated Actual Club Salaries at that point is less than the amount of the aggregated Adjusted Midpoint, then there shall be no escrow withholding for the first quarter.
(2) If the amount of aggregated Actual Club Salaries at that point exceeds the amount of the aggregated Adjusted Midpoint, then the amount of the excess shall be divided by the amount of the aggregated Adjusted Midpoint plus the excess, and the resulting number shall be the amount of the Escrow Percentage for the first quarter of the NHL Regular Season.
(3) To the extent the Escrow Percentage is calculated to contain decimal points, the calculation shall be carried to the fifth decimal point, which shall then be rounded based upon the sixth decimal point.
Illustration #1: Assume the Adjusted Midpoint of the Payroll Range is $30 million. The aggregated Adjusted Midpoint for all 30 NHL Clubs would be $900 million. If the total aggregated Actual Club Salaries as of the first day of the NHL Regular Season were $890 million, then there would be no escrow withholding for the first quarter of the NHL Regular Season.
Illustration #2: Assume the Adjusted Midpoint of the Payroll Range is $30 million. The aggregated Adjusted Midpoint for all 30 NHL Clubs would be $900 million. If the total aggregated Actual Club Salaries as of the first day of the NHL Regular Season were $930 million, then the Escrow Percentage for the first quarter of the NHL Regular Season would be 3.22581 percent (or the $30 million excess divided by $930 million).
(B) At the conclusion of the first quarter of the NHL Regular Season, the total aggregated amount of all NHL Clubs' Actual Club Salaries at that point shall again be compared to the aggregated Adjusted Midpoint of the Team Payroll Range, as was done at the commencement of the NHL Regular Season, in accordance with subsection (A) above, and the amount of the Escrow Percentage for the second quarter shall be adjusted, as necessary. The calculation of the Escrow Percentage for the second quarter shall take into account any "catch-up payments" that may be necessary by taking the amount of the estimated Overage, on an annualized basis (less any amounts escrowed in the League Year to date), as a percent of the estimated Actual Club Salaries that remain to be paid for that League Year. The Escrow Percentage for the upcoming quarter shall be adjusted accordingly to take into account any such "catch-up payments" required.
Illustration: On October 1, the aggregated Actual Club Salaries are $890 million, which is $10 million below the aggregated Adjusted Midpoint of $900 million. No escrow is required for the first quarter. At the end of the first quarter, the aggregated Actual Club Salaries are $930 million, which is $30 million above the aggregated Adjusted Midpoint of $900 million. Since three-quarters (3/4) of Actual Club Salaries remain to be paid (or $697.5 million) and the Overage is $30 million, the Escrow Percentage is $30 million divided by $697.5 for the remainder of the League Year, assuming no further changes for the remainder of the League Year.
(C) At the end of the second and third quarters of the NHL Regular Season, the process described in subsection (B) above, including the determination of any "catch-up payments" as may be required, shall be repeated in order to calculate the Escrow Percentage, if any, for the next upcoming quarter of the NHL Regular Season.
(v) At the same time each Club pays its Players, before withholding of federal, state or local taxes, such Club shall transfer to the Escrow Agent, by wire, the amount withheld from its Players for that pay period, pursuant to subsections (d)(i) and (d)(ii) of this Section 50.4, which funds shall be deposited by the Escrow Agent into the Escrow Account, with a record kept of the amount withheld by each Club from each of its Players.
(vi) The funds deposited into the Escrow Account shall be invested by the Escrow Agent in an interest-bearing account selected within the sole discretion of the Escrow Agent.
(vii) The Escrow Agent shall report quarterly to the Independent Accountants, the NHL and NHLPA regarding the amount of money held in the Escrow Account. 50.5 Team Payroll Range System; Lower Limit and Upper Limit; Payroll Room; Lower Limit and Upper Limit Accounting.
(a) Overview of Operation of Team Payroll Range. The Team Payroll Range created by this Agreement consists of a Lower Limit and an Upper Limit during each League Year for permissible spending by each Club based on its Averaged Club Salary. The Team Payroll Range provisions do not permit Clubs to have Averaged Club Salary that is below the Lower Limit. Nor does the Team Payroll Range permit Clubs to have Averaged Club Salary that is above the Upper Limit, except for two (2) limited exceptions provided in this Agreement, with respect to bona fide, long-term Player injuries or illnesses, as set forth in Section 50.10(d), and with respect to the "Performance Bonus Cushion," as set forth in Section 50.5(h).
For purposes of calculating any Club's "Payroll Room" at a given point in time, the Upper Limit for such League Year shall be measured against the Club's "Averaged Club Salary," as defined below. Any Club with an Averaged Club Salary that is less than the Upper Limit has available Payroll Room in the amount of the difference between the Averaged Club Salary and the Upper Limit. As set forth below, if a Club has Payroll Room during a League Year, the Club may use such Payroll Room to contract for or otherwise acquire additional Player Salaries and Bonuses. A Club may contract for or otherwise acquire additional Player Salaries and Bonuses only to the extent of its Payroll Room, subject, however, to certain limited exceptions as set forth herein.
(b) "Lower Limit" and "Upper Limit." For each League Year there shall be a "Lower Limit" and an "Upper Limit" at or between which each Club must have an Averaged Club Salary. The range between the Lower Limit and Upper Limit shall be known as the "Team Payroll Range" (the "Payroll Range" or "Range").
(i) The Upper and Lower Limits of the Team Payroll Range shall be determined in accordance with the following formula:
Preliminary HRR for the prior League Year multiplied by [x] the Applicable Percentage (as defined in Section 50.4(b) of this Agreement), minus [-] Preliminary Benefits, divided [/] by the number of Clubs then playing in the NHL (e.g., 30), shall equal [=] the Midpoint of the Payroll Range, which shall be adjusted upward by a factor of five (5) percent in each League Year (yielding the Adjusted Midpoint) until League-wide Actual HRR equals or exceeds $2.1 billion, at which point the five (5) percent growth factor shall continue unless or until either party to this Agreement proposes a different growth factor based on actual revenue experience and/or projections, in which case the parties shall discuss and agree upon a new factor. If a significant (i.e., $20 million or more) one-time increase or decrease to League-wide revenues (e.g., by reason of the addition or loss of a national television contract or the scheduled opening of one or more new arenas which is expected to result in a significant increase in League-wide revenues) is anticipated in the next League Year, the parties will endeavor to estimate the expected increase or decrease and incorporate that estimate into the above-stated formula for calculating the Adjusted Midpoint.
After adjustment for the revenue growth factor, the Payroll Range shall be constructed by adding $8 million to the Adjusted Midpoint to establish the Upper Limit, and subtracting $8 million from the "Adjusted Midpoint" to establish the Lower Limit.
(ii) Notwithstanding paragraph (b)(i) above, in the 2005-06 League Year only, the Lower Limit of the Range shall be $21.5 million and the Upper Limit of the Range shall be $39.0 million.
(iii) For the 2006-07 League Year, and each subsequent League Year, the Lower Limit and the Upper Limit of the Range shall be calculated by the Independent Accountants no later than June 30 of the immediately preceding League Year, using Preliminary HRR and Preliminary Benefits, which shall be based upon the Initial HRR Report for the immediately preceding League Year.
(iv) In each League Year, the Lower and Upper Limit calculations set forth in paragraph (b)(iii) above shall be subject to adjustment upon the Independent Accountants' issuance of the Final HRR Report for the immediately preceding League Year, which Report shall set forth the Actual HRR and Benefits figures. If, as a result of re-calculating the Payroll Range by using the Actual HRR and Benefits figures set forth in the Final HRR Report – rather than Preliminary HRR and Preliminary Benefits figures used to calculate the Range in paragraph (b)(i) above – the Adjusted Midpoint of the Range would be either increased or decreased by $3 million or more in either direction, then the Payroll Range for such League Year shall be adjusted accordingly, effective as of the first day of the NHL Regular Season, based on the figures set forth in the Final HRR Report. The NHLPA, upon further consultation with the NHL, may elect to reduce the threshold for adjusting the Payroll Range in the manner set forth in this paragraph for future League Years to an amount lower than $3 million.
Illustration: Assume that the Initial HRR Report for Year 2 calculates Preliminary HRR for Year 2 to be $1.9 billion, and Preliminary Benefits to be $66 million. Calculating the Range for Year 3 would occur on or before the June 30 immediately preceding Year 3 as follows:
The Midpoint is (54% of $1.9 billion) - $66 million
----------------------------------------- =
30 Clubs in the NHL
($1.026 billion - $66 million) / 30 = $960 million / 30 = $32.0 million
The Adjusted Midpoint is calculated by increasing $32.0 million by five (5) percent, to $33.6 million.
Therefore, the Upper Limit would be $41.6 million ($8 million up from the Adjusted Midpoint), and the Lower Limit would be $25.6 million ($8 million down from the Adjusted Midpoint).
If, in the immediately following October, based upon the Actual HRR and Benefit calculations as set forth in the Final HRR Report, the calculation of the Adjusted Midpoint increased to $36.6 million or more, or decreased to $30.6 million or less, then the Adjusted Midpoint for that League Year would be adjusted to reflect the new Adjusted Midpoint, and the Upper and Lower Limits of the Payroll Range would be recalculated accordingly.
(v) Because the Midpoint, Upper Limit and Lower Limit of the Range each bear a direct relationship to HRR, these figures may either rise or fall from one given year to the next, in the event of either a rise or fall in HRR, respectively.
(c) Accounting Practices for Lower and Upper Limit.
(i) Lower Limit. No Club shall, after commencement of the regular season, be permitted to have an Averaged Club Salary that falls below the Lower Limit for that League Year.
(ii) Upper Limit.
(A) With the exception of the Bona-Fide Long-Term Injury/Illness Exception set forth in Section 50.10(d) below and the Performance Bonus Cushion set forth in Section 50.5(h) below, no Club shall at any point during a League Year be permitted to have an Averaged Club Salary that exceeds the Upper Limit of the Payroll Range.
(B) Nevertheless, in order to ensure that Clubs may have sufficient time and flexibility to plan their rosters during the off-season, the Upper Limit shall be temporarily raised by ten (10) percent to permit Clubs additional flexibility with their Averaged Club Salaries during the period from July 1 through September 30. On October 1, the Upper Limit shall again be lowered to the level as calculated in Section 50.5(b), and all Clubs must once again be in compliance with the Upper Limit from October 1 through June 30.
(d) Averaging of Annual Amounts of Player Salary and Bonuses for Multi-Year SPCs; "Averaged Club Salary"; "Averaged Amount." The rules set forth herein with respect to "Averaged Club Salary" and "Averaged Amount" shall apply only to the calculation of Club Payroll Room:
(i) "Averaged Club Salary." "Averaged Club Salary" shall mean the entire aggregate amount committed by each Club in a League Year, calculated daily, as Player Salaries and Bonuses in that League Year (and which is intended to include any and all other commitments to Players as set forth below), with Player Salaries and Bonuses calculated in accordance with the "Averaged Amount" as defined below. The calculation of Averaged Club Salary does not include Benefits. Actual Club Salary is utilized to calculate the League-wide Player Compensation, as contrasted with Averaged Club Salary, which is utilized to determine a Club's Payroll Room.
(A) From July 1 until and including the last day of Training Camp of each League Year, "Averaged Club Salary" for each Club for that League Year shall be calculated as the sum of the Player Salary and Bonuses for that League Year for each and every Player, from the following categories:
(1) The Averaged Amount of the Player Salary and Bonuses for that League Year for each Player under a One-Way SPC with the Club; plus
(2) All Deferred Salary and Deferred Bonuses to be earned in that League Year (in accordance with Section 50.2(a) and Section 50.2(b), respectively); plus
(3) All Ordinary Course Buyout Amounts to be paid in that League Year (in accordance with Section 50.9(i)); plus
(4) Any amount offered in that League Year by the Club in a Qualifying Offer or in an Offer Sheet to a Restricted Free Agent from the date of such offer until the earliest of the following: (A) the Restricted Free Agent signs an SPC with the Club; (B) the Restricted Free Agent signs an SPC with another Club; or (C) the Qualifying Offer expires pursuant to Article 10.2 (for purposes of Two-Way Qualifying Offers, the NHL portion of the Qualifying Offer will be counted at a rate reflective of the Player's time on an NHL Roster (including days on Injured Reserve, Injured Non Roster and Non Roster status) the prior League Year so that, for example, a Player who spent forty-six (46) days on an NHL Roster (including days on Injured Reserve, Injured Non Roster and Non Roster status) in a 184-day regular season, and receives a Qualifying Offer for $500,000 (NHL) / $50,000 (AHL), the portion of his Qualifying Offer that will count for off-season accounting purposes will be 46/184 x $500,000 = $125,000); plus
(5) For any Player under a Two-Way SPC, the NHL portion of the SPC will be counted at a rate reflective of the Player's time on an NHL Roster (including days on Injured Reserve, Injured Non Roster and Non Roster status) the prior League Year so that, for example, a Player who spent forty-six (46) days on an NHL Roster (including days on Injured Reserve, Injured Non Roster and Non Roster status) in a 184-day regular season, and has a Two-Way SPC for $500,000 (NHL) / $50,000 (AHL), the portion of his NHL Salary that will count for off-season accounting purposes will be 46/184 x $500,000 = $125,000; plus
(6) For SPCs entered into prior to the execution of this Agreement, the face amount of any vested option, the face amount resultant from a salary revision, a salary or bonus guarantee, or other such compensatory provision in such 1995 Standard Player Contracts (see also Exhibit 16 of this Agreement regarding options); plus
(7) With respect to any new Player Salary or Bonus dispute between a Player and a Club arising after the execution of this Agreement (i.e., relating to Player Salary and Bonuses payable on account of the 2005-06 League Year or any subsequent League Year), any amount paid (excluding interest) in satisfaction of any award or judgment relating to, or settlement of, any such dispute, but only to the extent that such amounts have not otherwise been included in the Player's Player Salary or Bonuses.
(B) From the day following the last day of Training Camp until and including June 30 of each League Year, "Averaged Club Salary" for each Club shall be calculated as the sum of the following amounts:
(1) The Averaged Amount of the Player Salary and Bonuses for that League Year for each Player on the Club's Active Roster, Injured Reserve, Injured Non Roster and Non Roster; plus
(2) All amounts earned in that League Year by the Players on account of Deferred Salary and Deferred Bonuses (in accordance with Section 50.2(a) and Section 50.2(b), respectively); plus
(3) All Ordinary Course Buyout Amounts paid in that League Year (in accordance with Section 50.9(i)); plus
(4) To the extent not counted in (1) above, any amount offered in that League Year by the Club in an Offer Sheet to a Restricted Free Agent from the date of such Offer Sheet until the earliest of the following: (A) the Restricted Free Agent signs an SPC with the Club; or (B) the Restricted Free Agent signs an SPC with another Club; plus
(5) All Player Salary and Bonuses earned in a League Year by a Player who is in the second or later year of a multi-year SPC which was signed when the Player was age 35 or older (as of June 30 of the League Year in which the SPC is to be effective), but which Player is not on the Club's Active Roster, Injured Reserve, Injured Non Roster or Non Roster, and regardless of whether, or where, the Player is playing, except to the extent the Player is playing under his SPC in the minor leagues, in which case only the Player Salary and Bonuses in excess of $100,000 shall count towards the calculation of Averaged Club Salary; plus
(6) For SPCs entered into prior to the execution of this Agreement, the face amount of any vested option, the face amount resultant from a salary revision, a salary or bonus guarantee, or other such compensatory provision in such 1995 Standard Player Contracts (see also Exhibit 16 of this Agreement regarding options); plus
(7) With respect to any new Player Salary or Bonus dispute between a Player and a Club arising after the execution of this Agreement (i.e., relating to Player Salary and Bonuses payable on account of the 2005-06 League Year or any subsequent League Year), any amount paid (excluding interest) in satisfaction of any award or judgment relating to, or settlement of, any such dispute, but only to the extent that such amounts have not otherwise been included in the Player's Player Salary or Bonuses.
(ii) "Averaged Amount." For any multi-year SPC, for purposes of calculating the Club's Averaged Club Salary in any League Year, the Averaged Amount of such SPC shall be used. That is, the Player Salary and Bonuses for all League Years shall be "averaged" over the length of the entire term of the SPC, using the stated amount, by dividing the aggregate stated amount of all Player Salary and Bonuses to be paid during the term of the SPC by the number of League Years in the SPC (see Illustrations #1 and #2 below).
(A) For any SPC entered into prior to the execution of this Agreement in which multiple years still remain, the Player Salary and Bonuses (except for traditional on-ice Performance Bonuses) – as well as the face amount of any vested option, the face amount resultant from a salary revision, a salary or bonus guarantee, or other such compensatory provision in such 1995 Standard Player Contract – due to be paid or earned over the remainder of such 1995 Standard Player Contract shall be averaged over the remaining length of the SPC (including any applicable vested option years, salary revisions or guarantees), for purposes of calculating the Averaged Club Salary of the Club that is party to the SPC on a going-forward basis (see Illustration #3 below).
(B) Notwithstanding the "averaging" provisions, in no League Year of an SPC entered into following the execution of this Agreement may the Player Salary and Bonuses exceed the Maximum Player Salary and Bonuses, as set forth in Section 50.6, at the time the SPC is signed (see Illustration #4 below).
Illustration #1: A Club signs a Player to a three-year SPC providing for $500,000 in Player Salary and Bonuses in Year 1, $600,000 in Year 2, and $700,000 in Year 3. The charge to the Club's Averaged Club Salary in all three years of the SPC is $600,000.
Illustration #2: A Club signs a Player to a three-year SPC providing for $800,000 in Player Salary and Bonuses in Year 1, $500,000 in Year 2, and $500,000 in Year 3. The charge to the Club's Averaged Club Salary in all three years of the SPC is $600,000.
Illustration #3: Assume an SPC signed in 2002-03 still has three (3) years remaining, running from 2005-06 through 2007-08, and the SPC provides for total Player Salary and Bonuses (following the twenty-four (24) percent rollback set forth in Exhibit 16 to this Agreement) in each of the three remaining years as follows: $500,000 in Year 1, $600,000 in Year 2, and $700,000 in Year 3. The charge to the Club's Averaged Club Salary in all three remaining years of the SPC is $600,000.
Illustration #4: Assume the Maximum Player Salary and Bonuses is $7 million in Year 1. Club A, with $7 million in Payroll Room, signs a Player to a three-year SPC, for $8 million in Year 1, $7 million in Year 2, and $6 million in Year 3. Notwithstanding that the Averaged Amount of the SPC of $7 million in all three years of the SPC is within the Club's Payroll Room, since Year 1 exceeds the Maximum Player Salary and Bonuses, the SPC will not be approved.
(iii) Treatment of Ordinary Course Buyouts for Purposes of Calculating Averaged Club Salary. As a result of the averaging rules set forth in this Agreement, the actual Player Salary and Bonuses paid to a Player in a League Year of an SPC may be either more, or less, than the Averaged Amount of such SPC included in the Club's Averaged Club Salary for such League Year. If a Club elects to buy out an SPC pursuant to the Ordinary Course Buyout provision set forth in Section 50.9(i) below, the disparity between the actual Player Salary and Bonuses paid in the earlier League Year(s) of the SPC and the Averaged Amount included in the Club's Averaged Club Salary in such League Year(s) is accounted for in how the buyout agreement is treated for purposes of averaging. For a Club that buys out an SPC pursuant to an Ordinary Course Buyout, the amount to be included in the Club's Averaged Club Salary for each League Year during the term of the buyout agreement is determined as follows:
(A) For a League Year during the term of the original SPC that was bought out, the included amount is the original Averaged Amount of the SPC for that League Year, reduced by the amount of the buyout "savings" for that League Year (with "buyout savings" defined as the actual amount of Player Salary and Bonuses that was to be paid under the SPC for such League Year minus the amount of Player Salary that is to be paid under the buyout agreement). If the amount of buyout "savings" in a League Year is more than the original Averaged Amount for such League Year, then the amount of such excess is included in the Averaged Club Salary for such League Year as a "credit."
(B) For a League Year following the term of the original SPC that was bought out, the amount included in the Club's Averaged Club Salary is the amount of Player Salary that is to be paid under the buyout agreement for that League Year.
The method for calculating the includable amounts for a Club's Averaged Club Salary is set forth in the following Illustrations. For each Illustration, assume that the Player is over age 26 and therefore is entitled to two-thirds (2/3) of his remaining Player Salary, to be paid over twice the remaining length of the SPC, in the event he is bought out pursuant to an Ordinary Course Buyout. Also, assume for all illustrations that the Player signed a three-year SPC, which is bought out after the first League Year (Year 1), and therefore, the Player is entitled to earn two-thirds (2/3) of the remaining Player Salary owed under the SPC over Years 2 through 5.

Illustration #1:
Year 1 Year 2 Year 3 Year 4 Year 5

1. Original SPC Amount $4.0M $2.5M $2.5M
2. Original Averaged Amt. $3.0M $3.0M $3.0M
3. Buyout Amount (2/3 of $5M) $1.666M $1.666M (Total = $3.333M)
4. Buyout Amt. Over twice 833,000 $833,000 $833,000 $833,000
Length of original SPC
5. Buyout "Savings" $1.666M $1.666M - -
(Line 1 minus Line 4)
6. Amt. Included in $1.333M $1.333M $833,000 $833,000
Averaged Club Salary
(Line 2 minus Line 5)
The total amount actually paid to the Player under the buyout agreement over four years is $3.3 million, but the total Averaged Amount included in the Club's Averaged Club Salary is $4.3 million. The $1 million difference reflects the $1 million that the Club saved against its Payroll Room in Year 1 (the Club paid $4 million, but the Averaged Club Salary in Year 1 only included $3 million based on the averaging).
Illustration #2:
Year 1 Year 2 Year 3 Year 4 Year 5
1. Original SPC Amount $6.0M $4.0M $2.0M
2. Original Averaged Amt. $4.0M $4.0M $4.0M
3. Buyout Amount (2/3 of $6M) $2.666M $1.333M (Total = $4.0M)
4. Buyout Amt. Over twice $1.0M $1.0M $1.0M $1.0M
Length of original SPC
5. Buyout "Savings" $3.0M $1.0M - -
(Line 1 minus Line 4)
6. Amt. Included in $1.0M $3.0M $1.0M $1.0M
Averaged Club Salary
(Line 2 minus Line 5)
The total amount actually paid to the Player under the buyout agreement over four years is $4.0 million, but the total Averaged Amount included in the Club's Averaged Club Salary is $6.0 million. The $2 million difference reflects the $2 million that the Club saved against its Payroll Room in Year 1 (the Club paid $6 million, but the Averaged Club Salary in Year 1 only included $4 million based on the averaging).
Illustration #3:
Year 1 Year 2 Year 3 Year 4 Year 5
1. Original SPC Amount $2.0M $4.0M $6.0M
2. Original Averaged Amt. $4.0M $4.0M $4.0M
3. Buyout Amount (2/3 of $10M) $2.666M $4.0M (Total = $6.666 M)
4. Buyout Amt. Over twice $1.666M $1.666M $1.666M $1.666M
Length of original SPC
5. Buyout "Savings" $2.333M $4.33M - -
(Line 1 minus Line 4)
6. Amt. Included in $1.666M (- $333K) $1.666M $1.666M
Averaged Club Salary "credit"
(Line 2 minus Line 5)
The total amount actually paid to the Player under the buyout agreement over four years is $6.66 million, but the total Averaged Amount included in the Club's Averaged Club Salary is $4.66 million. The $2 million difference reflects the extra $2 million that the Club paid in Year 1 (the Club paid $2 million, but the Averaged Club Salary in Year 1 included $4 million based on the averaging), which the Club may save against its Payroll Room over the term of the buyout agreement.
(e) "Payroll Room."
(i) A Club's Payroll Room is the amount by which the Upper Limit exceeds the Club's Averaged Club Salary. Notwithstanding anything to the contrary herein contained, no Club may enter into or assume an SPC, enter into an Offer Sheet, extend a Qualifying Offer, or engage in any other Player transaction that commits the Club to Player Salary and Bonuses for which the Club does not have Payroll Room (A) except as permitted by Section 50.5(h) below with respect to the "Performance Bonus Cushion" and Section 50.10(d) below with respect to the Bona Fide Long-Term Injury/Illness Exception; and (B) subject to the provisions set forth in Sections 50.5(e)(iv), (e)(v) and (f)(iii) below. A Club may not enter into a single year or multi-year SPC with a Player unless the Club has Payroll Room at the time the SPC is entered into equal to or in excess of the Averaged Amount of the Player Salary and Bonuses.
(ii) Creation of Payroll Room. Nothing in this Agreement shall prohibit a Club from creating Payroll Room by Assignment, Waiver, buyout, or as otherwise permitted under this Agreement.
(iii) Prohibition on Transfers of Payroll Room. A Club may not sell, assign, trade, transfer or otherwise hypothecate its Payroll Room.
(iv) Signing of Mid-Season SPCs.
(A) For a Club that wishes to sign a Restricted Free Agent to whom the Club has rights, following the commencement of a season (i.e., after the first day of the NHL Regular Season), the Club may commit to pay any such Player up to the full amount of its Payroll Room for the remaining portion of such League Year. If a Club that has Payroll Room after the commencement of a season enters into a multi-year SPC with such a Player, then the Averaged Amount of such SPC may not exceed the Payroll Room used in the first League Year. A Club that signs such a Player to a mid-season SPC pursuant to this paragraph (A) cannot, in effect, increase its Payroll Room by virtue of signing the SPC later (as opposed to earlier) in a League Year. That is, a Player who signs an SPC after the commencement of a season may not receive more in Player Salary and Bonuses over the remainder of the season in which he signs his SPC than he would have been able to receive had he signed the SPC at the beginning of the season.
Illustration #1: If, on the first day of the NHL Regular Season, the Upper Limit for a League Year is $40 million, and a Club has an Averaged Club Salary of $37 million, the Club shall, at that time, be permitted to sign a Restricted Free Agent to whom the Club has rights to a one-year SPC for up to $3 million for the remainder of that League Year (i.e., the Club has $3 million of Payroll Room).
Illustration #2: If the Upper Limit for a League Year is $40 million, and a Club has an Averaged Club Salary of $37 million at the halfway point of the NHL Regular Season, then the Club shall be permitted to sign a Restricted Free Agent to whom the Club has rights to a new one-year SPC that commits the Club to pay up to $3 million for the remainder of the League Year, but the face value of the SPC may be up to $6 million.
Illustration #3: If the Upper Limit for a League Year is $40 million, and a Club has an Averaged Club Salary of $37 million at the halfway point of the NHL Regular Season, then the Club shall be permitted to sign a Restricted Free Agent to whom the Club has rights to a new multi-year SPC that commits the Club to pay up to $3 million for the remainder of that League Year, and the Averaged Amount of Player Salary and Bonuses to be provided in any future League Year in the SPC shall be no more than $3 million as well (i.e., for this purpose the first year is treated as $3 million for the entire season – the amount actually paid). Thus, such a Player could sign a 3-year SPC midway through Year 1, and earn $3 million in Year 1, $4 million in Year 2, and $2 million in Year 3. While $4 million would be charged to the Club's Actual Club Salary in Year 2, and $2 million to the Actual Club Salary in Year 3, the Averaged Amount of $3 million would be charged to the Club's Averaged Club Salary in Years 2 and 3.
(B) For a Club that wishes to sign a Restricted Free Agent to whom the Club does not have rights, or an Unrestricted Free Agent, following the commencement of a season (i.e., after the first day of the NHL Regular Season), if the Club signs such a Player to an SPC on or before December 1, then the following rules shall apply:
(1) The Club may commit to pay any such Player up to the full amount of its Payroll Room for the remaining portion of such League Year; and
(2) If a Club that has Payroll Room after the commencement of a season enters into a multi-year SPC with such a Player, then the Club must have Payroll Room for the remaining amounts of Player Salary and Bonuses to be paid or earned for the remainder of the League Year, but need only have Payroll Room for the amount of the first year of such SPC (i.e., the Club need not "tag" any of its Payroll Room, as described in paragraph (C) below, but the Averaged Amount of the SPC may not exceed the stated amount of Player Salary and Bonuses in the first League Year of the SPC), provided, however, that the SPC must still comport with all other provisions of the Team Payroll Range System (including, without limitation, that the SPC must not put the Club over the Upper Limit, the SPC may not provide for more than the Maximum Player Salary and Bonuses in any League Year set forth in Section 50.6 below, and the SPC must comply with the "100 Percent Rule" set forth in Section 50.7 below).
Illustration #1: If the Upper Limit for a League Year is $40 million, and a Club has an Averaged Club Salary of $37 million on November 30 (approximately one-third into the regular season), then the Club shall be permitted to sign a Restricted Free Agent to whom the Club does not have rights, or an Unrestricted Free Agent, to a one-year SPC that commits the Club to pay up to $3 million for the remainder of the League Year, but the face value of the SPC may be up to $4.5 million. If the SPC were for multiple years, then the Averaged Amount of Player Salary and Bonuses in the future years would not be constrained by the $3 million amount of the Club's Payroll Room in the first year, but the Averaged Amount of the SPC could not exceed $4.5 million (the stated amount of the first League Year of the SPC), provided, however, that the SPC would still have to comply with the "100 Percent Rule," the rule governing Maximum Player Salary and Bonuses, and the Upper Limit. For example, assuming compliance with all other relevant provisions of the Team Payroll Range System, the SPC could provide for $4.5 million in Year 1, $6 million in Year 2 and $3 million in Year 3 (with an Averaged Amount of $4.5 million, which exceeds the Club's Payroll Room of $3 million in Year 1).
Illustration #2: Similarly, on the same assumptions (including signing on November 30) as stated in Illustration #1 above, the Club could sign a Restricted Free Agent to whom the Club does not have rights, or an Unrestricted Free Agent, to a multi-year SPC with a stated amount of $4 million in Year 1, a stated amount of $5 million in Year 2, and a stated amount of $4.5 million in Year 3. Such multi-year SPC would have an Averaged Amount of $4.5 million, which is the maximum stated value that the SPC could have been in Year 1, with two-thirds (2/3) of the season remaining in Year 1.
(C) For a Clu