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Breaking down the opt-out clause

Darnell Mayberry Modified: March 15, 2008 at 2:07 am •  Published: March 15, 2008
Breaking down the opt-out clause
Q: How does the opt-out clause work?

A: The letter of intent states the Sonics can terminate the arena lease, food and beverage agreement and practice facility lease at the end of the sixth year and at one or more other undetermined points in time during the duration of the lease.

But in order for the Sonics to exercise the opt-out option, their average ticket revenues during two consecutive seasons must fall below 85% of the average ticket revenue set in the team's first two years following the completion of the arena renovation.

Q: Are opt-out clauses common in NBA leases?

A: They are beginning to show up in more markets. The Charlotte Bobcats and the New Orleans Hornets are two franchises that have opt-out clauses known as economic viability benchmarks, according to Oklahoma City Manager Jim Couch. The Hornets recently renegotiated their lease with the state of Louisiana to include an opt-out clause based on average attendance.

Couch said opt-out clauses are becoming the standard in smaller markets, where teams generate fewer profits from television revenue, corporate sponsors and in some cases ticket sales.

Q: Is this a good thing for Oklahoma City?

A: Not if it comes into play. City leaders, however, don't expect that to happen. Oklahoma City Mayor Mick Cornett said that the clause addresses a worst-case scenario and would take a "complete collapse in support” to become a factor.

By Darnell Mayberry