2b. Bud Selig Letter to Frank McCourt Rejecting Fox Sports Television Deal (June 2011)

7/29/2019 2b. Bud Selig Letter to Frank McCourt Rejecting Fox Sports Television Deal (June 2011)

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Office of the CommissionerMAJOR LEAGUE BASEBALL~~ALLA H. (BUD) SELIG

Comisn" of BasebalJune 20, 2011

VI EMAILAN OVERNIGHT DELIVERYMr. Fran H. McCour, Jr.Los Angeles Dodgers Baseball Clubc/o McCour Group9420 Wilshire Boulevard, Suite 300Beverly Hils, Californa 90212Dear Fran:Over the past several months, you have submitted to my Offce, for its review and approval, multiplevarations of a proposed media rights trsaction among you, Los Angeles Dodgers LLC (the "Club").lcertain of your affliated entities and Fox Sports Net, Inc. and its affiliates (collectively, "Fox"). Themost recent version of this proposed transaction is reflected in the draf documents sent by yourcounsel, Robert A. Sacks, to Rob Manfred on June 7, 2011 (as modified by the Term Sheet describedbelow, the "Proposed Trasaction").As you have recognized, all Club television agreements (including all cable and satellte televisionagreements) are subject to approval by the Office of the Commssioner pursuant to the rues andregulations of Major League Baseball, including, without limtation, my memorandum of November 9,2005 regarding control interest tranfers and the bulletin dated November 10, 2005 from JonathanMarer regarding securitization of Major League Club assets. These rules and regulations have beenpromulgated under the authority granted to the Offce of the Commissioner under Aricle XI, Section 3of the Major League Constitution. Both you and the Club have explicitly agreed in wrting to complywith and adhere to the Major League Constitution and all of the foregoing rules and regulationspursuat to, among other things, your application to acquire the Dodgers and the AssumptionAgreement dated Febru 13, 2004 among you, the Club and the Offce of the Commissioner ofBaseball.

This lettr's reference to Los Angeles Dodgers LLC as "the Club" is without prejudice to any claim, defense, argumentor other position that my Offce, Major League Baseball or the Major League Clubs may have regarding any of therights, duties or obligations of any affliate of the Club to which you have transferred, or that has otherwise acquired,any rights, assets or properties related to the Los Angeles Dodgers, including each such entity's obligation to be boundby, and to comply with, all obligations of "the Club" as such term is used in the Major League Constitution and allrules and regulations promulgated thereunder.777 E. Wisconsin AvenueSuite 3060Milwaukee, WI 53202

(414) 225-8900 / Fax (414) 225-8910

PLAINTFF'SEXHIBITCANO. 11-/~o.l 0

CONFIDENTIAL EX .NO.


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Mr. Fran H. McCour, Jr.Los Angeles Dodgers Baseball ClubJune 20, 2011Page 2

I have previously expressed to you my serious concerns about certin aspects of the ProposedTrasaction in letters dated Febru 24,2011, March 24, 2011 and April 19, 2011. Yet, over the lasttwo months, you and your attorneys have repeatedly demanded that I "immediately approve the Foxtransaction" (including with respect to multiple prior incarations that you had represented to be"final") and have asserted that my "continued delay" was hang both the Club and you personally.As you know, over this period, for several reasons, there was no tranction before me for approval.First, Fox unequivocally informed my Offce that it was not prepared to proceed with the ProposedTransaction uness and until you resolved your dispute with Ms. McCourt. Second, Ms. McCourt hadraised issues regarding your authority to cause the Club to enter into the Proposed Transaction in lightof, among other things, her position that the Superior Cour injunction that has been in place preventedyou from entering into the transaction without her consent. This issue now appears to be resolved, asths past Friday, June 17, 2011, you provided my Offce with a copy of a "Binding Term Sheet"between you and Ms. McCour (the "Term Sheet"), which, among other things, reflects tht she now"consent(s) to the proposed Fox transaction" and that the paries would tae steps to secure itsapproval. The Term Sheet also modifies, significantly, the allocation and use of the proceeds of theProposed Transaction.Despite these persistent issues and the numerous changes to the term of the Proposed Transactionover the last several months, both I and my representatives repeatedly assured you tht once there wasan actual tranction for me to consider and, fuer, after my Offce's investigation of the Dodgers'finances and operations had advanced suffciently to allow me to mae a determination, I wouldevaluate the Proposed Tranaction in light of all relevant facts and circumstances. I now have atransaction before me, and believe that I now have a suffcient understanding of those facts andcircumstances to allow me to render my decision.Accordingly, I have considered the Proposed Transaction in the form presented to my Office on June7, as modified by the terms of the Term Sheet, takng into account all of the information that isavailable to me.2 Unfortately, much of the information that I have leared about the ProposedTransaction and the extraordinar circumstaces surrounding the Dodgers is, to say the least, troubling.Whle anyone of the factors identified below would alone give me serious pause, collectively, andviewing the Proposed Transaction in the context of the Club's and your overall situation, theydemonstrate overwhelmingly that the Proposed Transaction is neither in the long-term interests of thefranchise nor consistent with the best interests of the game of BasebalL. For all of these reasons, Icanot approve the Proposed Transaction.

. Failure to Pursue All Opportities. First, as you well know, although the Club'scurent Telecast Rights Agreement with Fox does not expire until afer the 2013 season,

I note that the draft documents tht you submitted on June 7,201 I modified the terms of the trnsaction that you hadpreviously proposed (and represented to be "final"). In addition to a new letter agreement, which contains terms ofparicular relevance to my previously-stated concerns, the June 7 documents change the natue of your personalguaantee from a guarantee of collection to a guarantee of payment (and waive any right of subrogation, reimburementor other recour or defense that you may have against the RSN) in the event that the Telecast Rights Agreement isterminated for any reason other than the RSN's material breach.

CONFIDENTIAL LAD0002347


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begining on November 30,2012, you will be able to solicit offers from, and negotiatewith, other parties that indicate an interest in the Club's media rights. By entering intothe Proposed Transaction, however, you would never hear these offers. Instead,because of your desperate need for immediate cash (to address your financial problemsand the Club's liquidity crisis, and to settle your divorce), you have proposed an earlyand lengty extension to the Club's existing contract with Fox without hearng orconsidering other options.Simply put, it is clear that you ar pursuing the Proposed Transaction now, rather thanwaiting until you can "test the market," due to your own personal financial and martaissues. In fact, as your chief financial offcer told representatives of my Offce on April5,2011, you would not even be considerig a media rights transaction at ths time wereit not for the Club's "financial duress." That sitution is compounded by your need tofinance the $100 millon payment you would owe toMs. McCour should you prevail inyour divorce proceedig. This duress has caused you to put the Club in thedisadvantageous position of negotiating with a single part under signficant financialpressure and without the benefit of the leverage that sports properties typically achievewhen all potential licensees are invited to bid to acquire their rights. You had no choicebut to accept a deal with the only par with which you could negotiate.I recognize, of course, that the Proposed Transaction contemplates a meanngfulincrease in the rights fees payable to the Club - at least as compared to the arangementyou negotiated with Fox in 2003. But the Club would have substatially more leveragein its negotiations, and would likely be able to command better terms, were it to waituntil the "exclusive negotiation period" with Fox expires when it can offer those rightsto all interested paries. At that point, the Club would likely have multiple offers tochoose from and could fully maximize its rights fees though a competitive process, asthe Los Angeles Lakers recently did. Alternatively, management could potentially seekto launch the Dodgers' own (or at least a majority-owned) regional sport network, asyou had planed until recently. The Proposed Transaction forecloses all of theseopportunities. By foregoing these and other options that may be superior, you put yourpersonal needs before the Club's and failed to act in the best long-term interests of thefranchise and of BasebalL.

. Acceleration of Club Revenues. The Proposed Transaction effectively accelerateshundreds of milions of dollars of the franchise's television revenues over the next 17seasons in exchange for an up-front payment from Fox that would be received by one ofyour affliated entities. Whle other clubs have received signing bonuses and other up-front payments as par of media rights deals, the $385 milion that would be acceleratedas par of the Proposed Transaction far exceeds any up-front payment previouslyreceived by any other club. No other owner has sacrificed so much of his team's futurefor an immediate payoff.



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Mr. Fran H. McCour, Jr.Los Angeles Dodgers Baseball ClubJune 20, 201lPage 4As I have previously expressed to you in my letters, I am concerned that at some pointdurng the term of the Proposed Trasaction, the Club will be unable to adapt tounexpected circumstaces because you have accelerated such a substatial amount of itsmedia revenues. In fact, you yourself shared the same concern in 2009, as Jeff Ingramrecounted in his testimony in your divorce proceeding, when he explaied your"preference" to wait until 2013 or 2014 before opening a dialogue with Fox:

Q: What did you say to Fra McCour and what did FranMcCour say to you in substance on tht topic?A: Okay. I said, "As we look at our options to raise themoney we need to ru the business, one of those options is to doa deal with FOX." And Fran noted that FOX has very toughnegotiators, they're very smar and he's not convinced we wouldget a very good deal from FOX at this time to do a capital raise,

and that we'd hamstring the business in the future by gettingthem to do something now.Yet today "hamstrnging the business" is exactly what you are proposing, by tangsuch an up-front payment rather th waiting until the Club can fully exploit its rights.Indeed, the Dodgers are already sufferig from the effects of accelerated televisionrevenues, as the Club's 2011 media rights receipts have been reduced by the amountyou asked Fox to advance in late 2010 (without disclosure to, or approval from, myOffce). The risks arsing from the Proposed Transaction are similar, but given theunprecedented size of this advance, could have consequences that are exponentiallymore adverse and long-lasting.

. Division of Club Assets. Despite your repeated attempts to characterize the ProposedTransaction as a "capital infusion" or an "equity contrbution," that is simply not thecae. There is no new equity in ths transaction. Rather, all you are doing is selling theDodgers' media rights to an affliated entity and transferring to yourself, for noconsideration to the Club, an extraordinarily valuable Club asset - i.e., the right topursue a Dodgers-branded regional sports network. In fact, you have formed an entirelynew entity, LA Media LLC, which you apparently plan to own outside of LA HoldcoLLC, the parent of the Club, and which would receive the 35% equity interest in FoxSports Net West 2, LLC (the "RSN") and the $385 milion up-front payment. Whleother clubs have entered into transactions that share similar featues with the ProposedTransaction, the division of Club assets that you have proposed is paricularly unsettlingin light of the Club's current financial state and your previous efforts to separate key. assets from the franchise.As you know, ths is not the first time you have financed your curent cash needs bysegregating signficant revenue streams and mortgaging the future of the franchise.Indeed, as your attorneys acknowledged in a recent submission to the Superior Cour,



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Mr. Fran H. McCour Jr.Los Angeles Dodgers Baseball ClubJune 20, 2011Page 5

the monetization of futue Club income streams has been a regular and ongoing par ofthe maner in which you have operated the Dodgers business. For example, in 2005,you restrctued your enterprise to transfer the right to sell tickets to Dodgers games toa special purose vehicle, Dodger Tickets LLC. You then utilized that vehicle tosecurtize and borrow $390 milion against those ticket revenues, and applied a largepar of the proceeds of those borrowings to make distrbutions to you personally or tosatisfy your personal debts. As a result, the Club no longer collects its own ticketrevenue and must wait for an affliated entity to satisfy approximately $32 milion ofdebt service before any remaining ticket revenue can be transferred to the Club to fudbaseball operations. You have also undertaken similar transactions - dividing keyassets from the Club and borrowing againt those assets - with respect to the landadjacent to Dodger Stadium. These transactions have contributed significantly to theClub's curent financial problems.

By disapproving the Proposed Transaction, I am ensurg that Los Angeles DodgersLLC will have the opportty to fully exploit its meda rights for itself and/or retain upto 100% of the proceeds of a Dodgers-branded network. Or, alternatively, it couldpotentially parner with another media company, while retang majority control.Regardless, having already altered its rights with respect to ticket revenues, the Clubcanot afford to lose yet another valuable asset.

. Use of Proceeds for Non-Baseball Puroses. Fundamentally, the Proposed Tranactioncontinues to exacerbate your ongoing patern of using Club funds and Club-generatedrevenues to pay for your personal needs and obligations. Over the past three months,you have proffered varous (and ever-changing) explanations regarding your use of the$385 milion up-front payment from Fox. When you submitted a version of theProposed Tranaction to my Offce on March 31, 2011, you indicated that $155 milionof the proceeds would be used for a settlement payment to Ms. McCourt, another $100millon would be used to pay the debts of certin of your affiliated entities (but withoutreducing the Club's indebtedness at all), and up to $30 millon would be distrbuted toyou personally. After reviewing that proposal, my staff informed you and yourrepresentatives that I was troubled by your efforts to spend money tht rightfullybelongs to the Dodgers - and that was generated by accelerating the Club's televisionrevenues and sellng the Club's right to launch its own regional sports network - to fudyour personal expenses. This concern intensified when we leared that since 2004, youand your family members have received - though distrbutions and other payments -over $180 million from the Dodgers enterprise.When you submitted your next proposal on Apri 27, 2011, you purorted to addressthis concern by representing to my staff, the Dodger fans and the general public that thevast majority of the $385 milion would be "invested into the Dodgers." But, when yousubmitted your June 7 proposal, those documents indicated that you would be using$100 milion of the proceeds of the Proposed Tranaction to pay personal obligationsand debts of your affliated entities - much of which, I note, were incured to finance



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your lifestyle, including your purchases of varous residences and real estate in Malibu,Vail, Montaa and Cabo.And now it appears that your plan has chaged agai by fuher increasing the amountof the Fox payment that would be used by you and Ms. McCourt personally, rather thanby the Club. Under last week's proposal, as reflected in the Term Sheet, you wouldimmediately be spending at least $173.5 milion (over 45% of the total up-frontpayment) for puroses that are entirely uielated to BasebalL. These would include:

o $50 milion to Ms. McCour, assuming that you prevail at the tral that isscheduled for August 4, 2011 (notably, if you do not prevail, you and Ms.McCour would personally retain tht $50 milion);$5 milion to you, to be used "as (you) desire;"$5 milion to Ms. McCour, again, to be used "as she... desires;"$10 millon to the numerous law firms that represent (or have represented) eitheryou or Ms. McCour;$23.5 milion that would initially go to the Club, but which would apparently bedistrbuted to you personally; and$80 milion to repay indebtedness of your affiliated entities.

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Furer, while you maintain that the remainig $211.5 milion would initially be "usedfor" the Dodgers, in actuality, a large portion of that amount would be needed to satisfyexisting debts and past due payables and to fill the signficant hole in the Club'sworking capital (par of which was caused by the advance the Club received from Foxlast year). Moreover, in just two years, you could owe Ms. McCour another $45millon, for which you appear to have no other source of payment other than thesefuds. (I note that the June 7 documents contemplate that the Club would continue tomake cash distrbutions to you, so long as it can remain technically solvent.)I note that I have also received your letter of June 18,2011, in which you reiterate yourrequest that I approve the Proposed Transaction, and suggest that you and I, togetherwith Rob Manfred, meet so that we can "come to closure on a constructive path goingforward." However, after I received your letter, your counsel sent a letter to ours -which is entirely at odds with the tone of your letter - theatening to Sue me and topursue "acrimonious" and "extensive" litigation designed to embarass me and MajorLeague Baseball and to cause har to all constituents (including the Dodgers.franchise). In the first instace, putting aside the obvious fact that such a lawsuit wouldviolate both the Major League Constitution and the contractu commitments that bothyou and the Club (and all other Major League Clubs) have made, these threats clearly



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Mr. Fran H. McCour, Jr.Los Angeles Dodgers Baseball ClubJune 20, 2011

do not put things on a "constrctive path." Indeed, they are utterly contrar to the bestinterests ofBasebaii.3Second, your letter asserts, without explanation or support, that I should not tae intoaccount the Dodgers' current financial condition and operational state, and the facts thatI have leaed about the past financing and operations of the Club, in determingwhether the Proposed Transaction is in the franchise's long-term interest and the bestinterests of BasebalL Apparently you believe that I should make these decisions in avacuum, without the context of the relevant facts and circumtaces related to theDodgers. To me, that makes no sense. It is not the maner in which I have approacheddecisions concerng matters involving other clubs, each of which has tured on theunque circumstaces of the paricular club.Thrd, while you indicate that you are prepared to modif the use of the $80 millon thatis allocated in your Term Sheet to pay certin "indebtedness" or to "commit" toobtaining cert "third par equity," you do so without any specifics and with animmediate qualifier that intentionally side-steps and asks me to ignore the unquecircumstaces in which you have placed the Dodgers. I should note that, regardless ofhow you applied that $80 milion in the short-term you would continue to have anexcessive amount of personal and enterprise debt that can only be serviced and repaidout of Club fuds.4 .In sum, despite your pledge to make the Dodgers the "best franchise in baseball," youare not selling the Club's media rights and other valuable assets to improve the Club'son-field performance, renovate Dodger Stadium or enhance the fan experience. Rather,you would be continuing an eight-year pattern of exploiting the Dodgers frchise tofinance your own personal needs, which would undoubtedly risk fuer erosion ofpublic confidence in the Dodgers. Given the history of your ownership and the Club'scurent financial condition, I canot approve a transaction that would allow you toextract milions upon milions more from ths storied franchise.

. Short- Term Fix. I understad that you have provided my staff with a set of optimisticprojections. However, based on our more realistic estimates, it appear tht ther should add that you and your counsel have been urgin me for weeks to render a decision in this matter, even thoughit was clear that there was no final transaction for me to consider. In this context, now that the trnsaction finally isripe for consideration, you request that I delay making a decision so that you can meet with me personally. As youknow, I met with you in New York in April and our representatives have met many times to discuss this traction.In fact, you acknowledged in your letter that "Rob (Manfred) and his staff understad the terms of the trnsaction."Moreover, I gave you an opportunity to submit in wrting whatever additional material you wanted me to consider andyou have, in fact, sent me a letter. While i will give due consideration to everying you have submitted, under thecircumstaces, I see no need for furter delay.As to your pledge to raise equity, we have been down that road many times before. When you bought the Club in2004, you committed to raise $30 million, but failed to fulfill that commitment. Moreover, I have been asking you forsome time to raise real equity from new investors - not the intercompany transfers that you characterize as equity - toaddress the Club's financial problems. But I have seen no meaningful progress in tht effort to date.



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Mr. Fran H. McCour, Jr.Los Angeles Dodgers Baseball ClubJune 20, 2011

Proposed Tranaction would be nothig more than a short-term fix to the Club'sprecarous cash position. Once your assumptions are corrected to (i) provide forrevenue sharg on the $385 millon and the value of the 35% equity interest in theRSN, (ii) tae fuly into account the steep recent decline in the Dodgers' ticket sales and(iii) reflect the diversion of $173.5 milion of Club-generated fuds to you and yourformer wife and the repayment of your debts, there is little, if any, basis for theseprojections. In fact, we have estimated that after revenue-sharg, taes, transactioncosts, payment of your debts and satisfaction of your $45 milion obligation to Ms.McCour, the Club would require additional liquidity as early as 2013; otherwse, itwould again have difficulty paying its players, satisfying its financial obligations to theother Major League Clubs, operating a first-class baseball franchise and ensurng thatDodger Stadium provides a safe and enjoyable environment for Dodgers fans. 5 Theoperation of a Major League Baseball Club in such a maner is clearly not in the bestinterests of BasebalL.

. No Assurance of Ownership Support. Many of my concerns about the ProposedTrasaction, including the acceleration of Club revenues and the resultig risk ofoperating losses in futue seasons, are exacerbated by your persona financial situation. Irecently received a copy of your personal fincial statement6 and was shocked to seethat, other than your interests in the Dodgers and its affliated entities, you had only$264,000 of liquid assets as of December 31, 2010. If I had assurance that you had thefinancial wherewithal to solve any cash flow problems that the Club may face in thefuture by making an equity contrbution, I might be less concerned about theacceleration of the Club's television revenues. However, that is certnly not the casehere.

. Uncertainty Regarding Ownership. As you know, on August 4, 2011, under yourproposal, the Superior Court would determine the validity of Ms. McCour's claims toan interest in the Dodgers. You have agreed in the Term Sheet that should Ms.McCour prevail at this trial, the Dodgers franchise and related assets would be sold

By contrast, were you to arange for a $385 milion equity contribution, there would be no ta liabilty or revenuesharng obligation.1 note that although Rob Manfred requested a copy of your personal financial statement at the meeting that yourrepresentatives had with him on April 5, 201l, and despite the fact that Santiago Fernandez, the Club's generalcounsel, stated emphatically in a letter to Mr. Manfred dated April 14: "To be clear, Mr. McCour wil submit personalfinancial informtion as soon as it has been completed," we did not receive your financial statement until May 25,201 i- six weeks later (and, even then, without much of the information that had been requested). Moreover, the documentthat we received indicates that it was prepared on Februry 18, 20 ll, which indicates that the delay was not, as Mr.Fernandez suggested, due to a delay in completing the personal financial sttement. This is but one of a number ofmisrepresentations that you and your representatives have made to me and my stff, as have been detailed in certinletters from our counsel to yours.



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under the Cour's supervision.7 Thus, there would appea to be a meanngful chancethat the Dodgers would be sold in the next few months in your proposed scenaro.Yet, were you to enter into the Proposed Transaction prior to the sale, the next owner ofthe Dodgers would be bound by the Fox contract, but of course would not have thebenefit of the $385 milion up-front payment, as much of it wil have aleady beenspent. Virlly any potential buyer would want the opportity to negotiate his or herown media rights agreement. Under the scenaro you propose, however, the buyerwould be forced to accept a transaction in which the franchise was saddled for the next1 7 years with a contract under which the anual rights fees were agreed to in theabsence of market competition and reduced by the amount of revenues you haveaccelerated in the form of the up-front advance.In short ths transaction would not - as you have publicly asserted - enhance the valueof the Club. And, as you well know, when any franchise sells for a lower price, thevalue of each Major League franchise is potentially affected.. Lengt of Term. The lengt of your proposed telecast rights agreement also raisesconcerns. Under the Proposed Tranaction, your arangement with Fox would continuefor i 7 yeas without any mechansm to revalue the Dodgers' television rights if, in thefutue, they become more valuable. Of course, the duration of a parcular contract isnot, in and of itself, determinative; other Clubs have entered into . long-term telecastagreements. However, the lengt of the term does oblige me to closely exame howthe transaction would affect the Club, not just this season and next, but for the next 17years. As Commissioner Kuh recognzed in a bulletin to the Major League Clubsdated September 7, 1984, telecast arrangements have the potential to be disguisedcontrol transfers, paricularly where the arrangement "extends for a substatial term ofyears, since those rights would then be unvailable to prospective purchasers of thefranchise." Of course, the possibility that the frachise may soon be sold only amplifiesthis problem. Regardless of how long you continue to own the Dodgers, the franchise-and its subsequent owners - would be bound by this deal until the year 2027.

. Increase in Enterorise Debt. The Proposed Transaction also increases the overallamount of debt that is attbutable to the Dodgers' enterprise. As best we can tell, youand your affliated entities are currently responsible for over $550 milion of debt (notincluding the $60 million of credit lines on which you are a co-signor). Even thoughyou have proposed to repay $80 millon of enterprise and personal debt from theproceeds of the Fox payment, under the Proposed Trasaction, you would incur (i) anadditional $385 milion of debt to Fox pursuat to your personal guartee (whichwould be subject to immediate repayment upon an early termination of the TelecastRights Agreement, except under certin circumstaces), and 35% of which would beserviced from fuds that would otherwise be avaiable to support the frchise, and (ii)Of course, such a sale would require the approval of thee-fours of the Major League Clubs puruant to Aricle V,Section 2(b)(2) of the Major League Constitution.



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Mr. Fran H. McCour Jr.Los Angeles Dodgers Baseball ClubJune 20,2011Page 10

a $45 million debt to Ms. McCour, which would be secured by a pledge of your equityin the entities that own the Dodgers and your 35% interest in the RSN. Based on theJune 7 documents and the Term Sheet, we estimate that, afer giving effect to theProposed Transaction, you and the Dodgers enterprise (includig all of your afliatedentities) would have over $900 millon of tota indebtedness, all of which could beserviced from only one source - Club revenues. For all of the reasons that I have statedin my previous letters, this incredible amount of enterprise and personal debt theatensthe stability of the franchise and is, simply put, unacceptable.

. Increase in Your Personal Liabilities. Also disquieting is the substatial increase inyour personal liabilties that would arse from the Proposed Transaction. As I notedabove, under the Proposed Tranaction, you would be personally guanteeing $385millon of new debt and assuming a $45 millon obligation to Ms. McCour, despite thefact that your personal balance sheet calculates your net wort to be $162 milion andreflects (as noted above) only $264,000 of liquid assets. In addition, you are obligatedto pay $650,000 per month to Ms. McCour in spousal support (the timig and futueamounts of which would be affected by your future proceedings). Moreover, as alsonoted above, the June 7 documents indicate - for the first time ~ that your guantee isnot a mere guarantee of collection that exists solely for ta puroses, but a fulguantee of payment that would be trggered if the Fox contract is terminated for anyreason other than Fox's material breach. And, if the Fox contract were termated, youwould have no right of subrogation, reimbursement or other recourse agaist the RSN.In other words, you would be personally responsible for immediately repaying theentire unamortized portion of the $385 milion, without any meas of satisfying thatliability. Finally, by consumating the Proposed Transaction, you would inerit a taliability that we believe may be as high as $100 milion.8 Were any of these debts orliabilties to become due, the Club would again be subjected to crisis and chaos onaccount of your personal finances.

. Motivated by Personal Interests. Above all, it is has become apparent to me that theProposed Transaction is motivated not by the Dodgers' long-term interests, but ratherby your own personal needs at the moment. I have no doubt that were it not for yourown liquidity and marital issues and the Club's resulting state of "fiancial duress," youwould not be puruing, and would not be asking me to approve, this transaction. As theDodgers' control owner, you have the duty to manage the Club "for its own sae, in a

With regard to taes, I note that the Proposed Transaction has been designed, at least in par, to defer this substantialtax liability over a period of many years. While you have orally suggested a wilingness to modifY the strcture, youhave not suggested any potential modifications. The IRS might well challenge your tax position, especially in light ofthe fact that, as we have recently leared, the IRS is already auditing your 2006, 2007 and 2008 tax retus. I alsounderstand that neither of the two prestigious law firms representing you in connection with the Proposed Tranactionis giving you a formal ta opinion, which suggests that the risk of immediate liability is not inconsequentiaL. Ofcourse, should the IRS prevail, you could be required to pay the tax immediately, plus interest and possible penaltiesas welL. What is even more worrome to me, however, is the thought of one of our owners engaging in a prolongedpublic dispute with the lRS.



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sound fiscal maner, and not for the benefit of another business," and a contractualcommitment to operate the Dodgers "with the intention of being profitable and withrespect to all operations and control in the best interests of the Los Angeles Dodgersand Major League Baseball." Instead, you have ru the Club consistently for your ownbenefit and that of your family members, and your lifestyle, with little or no regard forthe distinction between the Club's finances and your own. In light of that track record, Icanot accept a 17-year contract that is motivated by your desire to solve your personalfinancial and marta problems, rather than by what is in the long-term interests of theDodgers and the game of BasebalL.

For all of these reasons, taen together, I canot approve the Proposed Transaction.I hope you understad the reasons for my decision. If you have any questions regarding my decisionor this letter, I will make my staff and counsel available to you and your advisors to discuss them withyou.Finally, I trust that it goes without saying, but I will remind you that any attempt or effort to proceedwith the Proposed Tranaction notwthstading my determination wil violate the rules of Baseball andconstitute a failure or refusal to comply with a "requirement of the Commissioner" withn the meaningof Arcle VII, Section 4(f) of the Major League Constitution.

cc: Rob Maned


2b. Bud Selig Letter to Frank McCourt Rejecting Fox Sports Television Deal (June 2011)

Documents

Transcript of 2b. Bud Selig Letter to Frank McCourt Rejecting Fox Sports Television Deal (June 2011)