Sphere Entertainment Co 10-Q for FY2026 Q3
Sphere Entertainment Co. (SPHR)
10-Q
2026-11-05
For: 2026-09-30
View Original
Added on
November 06, 2026
About this 10-Q
Sphere Entertainment Co filed this 10-Q on November 5, 2026, covering the quarter ended September 30, 2026 (FY2026 Q3).
Sphere Entertainment Co. reported nine-month 2026 revenue of 974,311 (in thousands) and adjusted operating income of 200,052 (in thousands). Net impairments and other losses of 177,632 (in thousands), primarily related to MSG Networks goodwill, weighed on operating performance. AI summary
Headline figures
Quarter ended September 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $274.26M
- up 4.5% from $262.51M a year earlier
- Net loss
- $176.04M
- compared with a net loss of $125.68M a year earlier
- Diluted EPS
- -$4.84
- compared with -$3.47 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-Q
________________________
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the quarterly period ended September 30, 2026
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the transition period from ______ to ______
Commission File Number: 001-39245
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| , | |||||||||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||||||||
Registrant’s telephone number, including area code: (725 ) 258-0001
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☑ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No
Number of shares of common stock outstanding as of October 30, 2026:
| Class A Common Stock par value $0.01 per share | — | |||||||
| Class B Common Stock par value $0.01 per share | — | |||||||
SPHERE ENTERTAINMENT CO.
INDEX TO FORM 10-Q
| Page | |||||
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
SPHERE ENTERTAINMENT CO.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except per share data)
| As of | ||||||||||||||
| September 30, | December 31, | |||||||||||||
| 2026 | 2025 | |||||||||||||
| ASSETS | ||||||||||||||
| Current Assets: | ||||||||||||||
| Cash, cash equivalents, and restricted cash | $ | $ | ||||||||||||
| Accounts receivable, net | ||||||||||||||
| Related party receivables, current | ||||||||||||||
| Prepaid expenses and other current assets | ||||||||||||||
| Total current assets | ||||||||||||||
| Non-Current Assets: | ||||||||||||||
| Investments | ||||||||||||||
| Property and equipment, net | ||||||||||||||
| Right-of-use lease assets | ||||||||||||||
| Goodwill | ||||||||||||||
| Intangible assets, net | ||||||||||||||
| Other non-current assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| Current Liabilities: | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued expenses and other current liabilities | ||||||||||||||
| Related party payables, current | ||||||||||||||
| Current portion of long-term debt, net | ||||||||||||||
| Operating lease liabilities, current | ||||||||||||||
| Deferred revenue | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Non-Current Liabilities: | ||||||||||||||
| Long-term debt, net | ||||||||||||||
| Operating lease liabilities, non-current | ||||||||||||||
| Deferred tax liabilities, net | ||||||||||||||
| Other non-current liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
Commitments and contingencies (see Note 9) | ||||||||||||||
| Equity: | ||||||||||||||
Class A Common Stock (a) | ||||||||||||||
Class B Common Stock (b) | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
Treasury stock, at cost, | ( | ( | ||||||||||||
| Accumulated deficit | ( | ( | ||||||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||||||||
| Total stockholders’ equity | ||||||||||||||
| Total liabilities and equity | $ | $ | ||||||||||||
__________________
(a) Class A Common Stock, $0.01 120,000 30,457 and 29,683 shares issued, and 29,403 and 28,629 shares outstanding as of September 30, 2026 and December 31, 2025, respectively.
(b) Class B Common Stock, $0.01 30,000 6,867
See accompanying notes to the unaudited condensed consolidated financial statements.
1
SPHERE ENTERTAINMENT CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
Revenues (a) | $ | $ | $ | $ | ||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||
Direct operating expenses (a) | ||||||||||||||||||||||||||
Selling, general and administrative expenses (a) | ||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||
| Impairments and other losses, net | ||||||||||||||||||||||||||
| Restructuring charges | ||||||||||||||||||||||||||
| Operating loss | ( | ( | ( | ( | ||||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||
| (Loss) gain on extinguishment of debt | ( | |||||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | ||||||||||||||||||||||
| Other expense, net | ( | ( | ( | ( | ||||||||||||||||||||||
| (Loss) income from continuing operations before income taxes | ( | ( | ( | |||||||||||||||||||||||
| Income tax benefit (expense) | ( | |||||||||||||||||||||||||
| Net loss | ( | ( | ( | ( | ||||||||||||||||||||||
Less: Net income attributable to participating securities | ||||||||||||||||||||||||||
| Net loss attributable to Sphere Entertainment Co.’s stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Basic loss per common share attributable to Sphere Entertainment Co.’s stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Diluted loss per common share attributable to Sphere Entertainment Co.’s stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Weighted-average number of common shares outstanding: | ||||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||||
_________________
(a) See Note 14. Related Party Transactions, for further information on related party revenues and expenses.
See accompanying notes to the unaudited condensed consolidated financial statements.
2
SPHERE ENTERTAINMENT CO.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
(in thousands)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Other comprehensive (loss) income, before income taxes: | ||||||||||||||||||||||||||
| Pension plans and postretirement plans: | ||||||||||||||||||||||||||
| Amortization of net actuarial loss and prior service credit included in net periodic benefit cost, net | ||||||||||||||||||||||||||
| Net unamortized loss arising during the period | ( | ( | ( | ( | ||||||||||||||||||||||
| Cumulative translation adjustments | ( | ( | ( | |||||||||||||||||||||||
| Other comprehensive (loss) income, before income taxes | ( | ( | ( | |||||||||||||||||||||||
| Income tax benefit (expense) | ( | |||||||||||||||||||||||||
| Other comprehensive (loss) income, net of income taxes | ( | ( | ( | |||||||||||||||||||||||
| Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
3
SPHERE ENTERTAINMENT CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
| Nine Months Ended | ||||||||||||||
| September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| OPERATING ACTIVITIES: | ||||||||||||||
| Net loss | $ | ( | $ | ( | ||||||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Impairments and other losses, net | ||||||||||||||
| Amortization of debt discount and deferred financing costs | ||||||||||||||
| Amortization of deferred production content | ||||||||||||||
| Deferred income tax (benefit) expense | ( | |||||||||||||
| Share-based compensation expense | ||||||||||||||
| Net unrealized and realized loss (gain) on equity investments with readily determinable fair value and loss in nonconsolidated affiliates | ( | |||||||||||||
| Loss (gain) on extinguishment of debt | ( | |||||||||||||
| Other non-cash adjustments | ||||||||||||||
| Change in assets and liabilities: | ||||||||||||||
| Accounts receivable, net | ( | |||||||||||||
| Related party receivables and payables, net | ||||||||||||||
| Prepaid expenses and other current and non-current assets | ( | ( | ||||||||||||
| Accounts payable | ( | |||||||||||||
| Accrued and other current and non-current liabilities | ( | |||||||||||||
| Deferred revenue | ||||||||||||||
| Right-of-use lease assets and operating lease liabilities | ( | ( | ||||||||||||
| Net cash provided by operating activities | ||||||||||||||
| INVESTING ACTIVITIES: | ||||||||||||||
| Capital expenditures, net | ( | ( | ||||||||||||
| Proceeds from dispositions, net | ||||||||||||||
| Other investing activities | ( | ( | ||||||||||||
| Net cash (used in) provided by investing activities | ( | |||||||||||||
| FINANCING ACTIVITIES: | ||||||||||||||
Repayment of debt | ( | |||||||||||||
Proceeds from issuance of debt | ||||||||||||||
Principal repayments on debt | ( | ( | ||||||||||||
Taxes paid in lieu of shares issued for share-based compensation | ( | ( | ||||||||||||
Stock repurchases, inclusive of tax | ( | |||||||||||||
| Proceeds from exercise of stock options | ||||||||||||||
| Net cash used in financing activities | ( | ( | ||||||||||||
| Effect of exchange rates on cash, cash equivalents, and restricted cash | ( | |||||||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | ( | |||||||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | ||||||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | $ | ||||||||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||||||||
| Capital expenditures incurred but not yet paid | $ | $ | ||||||||||||
| Share-based compensation capitalized in property and equipment | $ | $ | ||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
4
SPHERE ENTERTAINMENT CO.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(in thousands)
| Common Stock Issued | Additional Paid-In Capital | Treasury Stock | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Equity | |||||||||||||||||||||||||||||||||
Balance as of December 31, 2025 | $ | $ | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of taxes | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
Share-based compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||
Stock options exercised | — | — | — | — | ||||||||||||||||||||||||||||||||||
Tax withholding associated with shares issued for share-based compensation | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||
Balance as of March 31, 2026 | $ | $ | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of taxes | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
Share-based compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||
Stock options exercised | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Tax withholding associated with shares issued for share-based compensation | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||
| Balance as of June 30, 2026 | $ | $ | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of taxes | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
Share-based compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||
Stock options exercised | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Tax withholding associated with shares issued for share-based compensation | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||
| Balance as of September 30, 2026 | $ | $ | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
5
| Common Stock Issued | Additional Paid-In Capital | Treasury Stock | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Equity | |||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Other comprehensive income, net of taxes | — | — | — | — | ||||||||||||||||||||||||||||||||||
Share-based compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||
Tax withholding associated with shares issued for share-based compensation | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of taxes | — | — | — | — | ||||||||||||||||||||||||||||||||||
Share-based compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Tax withholding associated with shares issued for share-based compensation | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||
| Balance as of June 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of taxes | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
Share-based compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||
Stock options exercised | — | — | — | — | ||||||||||||||||||||||||||||||||||
Repurchases of Class A common stock, inclusive of excise tax | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||
| Tax withholding associated with shares issued for share-based compensation | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||
| Balance as of September 30, 2025 | $ | $ | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
6
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
All amounts included in the following notes to condensed consolidated financial statements (unaudited) are presented in United States Dollars and in thousands, except per share data or as otherwise noted.0
Note 1. Description of Business and Basis of Presentation
Description of Business
Sphere Entertainment Co. (together with its subsidiaries, the “Company” or “Sphere Entertainment”) is a leader in immersive experiences, technology and media and is comprised of two reportable segments, Sphere and MSG Networks. Sphere® is an experiential medium powered by advanced technologies, and MSG Networks operates two regional sports and entertainment networks, as well as a direct-to-consumer (“DTC”) and authenticated streaming product.
Sphere: This segment reflects Sphere, an experiential medium powered by advanced technologies that bring storytelling to a new level. The Company’s first Sphere venue opened in Las Vegas on September 29, 2023. The entire exterior surface of Sphere, referred to as the Exosphere®, is covered with nearly 580,000 square feet of fully programmable LED lighting, creating the largest LED screen in the world and an impactful display for artistic and branded content. Inside, the venue features a 16K x 16K interior display plane – the world’s highest-resolution LED screen that wraps up, over, and around the audience creating a fully immersive visual environment. In addition, Sphere’s advanced technologies include Sphere Immersive SoundTM – Sphere’s proprietary audio system – as well as haptic seating and 4D environmental effects. The venue can accommodate up to 20,000 guests and hosts a wide variety of events year-round, including The Sphere ExperienceTM, which features original immersive productions, as well as concerts and residencies from renowned artists, and marquee sports and brand events (formerly referred to as corporate events). Production efforts for Sphere events are supported by Sphere StudiosTM, an immersive content studio dedicated to creating multi-sensory experiences exclusively for Sphere, using proprietary technology, tools and production facilities. Sphere Studios is home to a team of creative, production, technology and software engineering experts who provide full in-house creative and production services. The studio campus in Burbank includes a 68,000 -square-foot development facility, as well as Big Dome, a 28,000 -square-foot, 100 -foot high custom dome, with a quarter-sized version of the interior display plane at Sphere in Las Vegas, that serves as a specialized screening facility, production facility, and lab for content at Sphere.
The Company is focused on creating a global network of Spheres. The Company is working with the Department of Culture and Tourism – Abu Dhabi (“DCT Abu Dhabi”) to bring Sphere to Abu Dhabi, United Arab Emirates. In May 2026, Yas Island was selected as the site for Sphere Abu Dhabi. DCT Abu Dhabi is funding construction, which is expected to be completed by end of 2029. In January 2026, the Company, the State of Maryland, Prince George’s County, and Peterson Companies announced the Company’s intent to develop a new Sphere venue at National Harbor, Maryland.
MSG Networks: This segment is comprised of the Company’s regional sports and entertainment networks, MSG Network and MSG Sportsnet, as well as its DTC and authenticated streaming offering, MSG+ (which is currently available through the DAZN streaming product). MSG Networks serves the New York designated market area, as well as other portions of New York, New Jersey, Connecticut and Pennsylvania and features a wide range of sports content, including exclusive live local games and other programming of the New York Knicks of the National Basketball Association (the “NBA”) and the New York Rangers, New York Islanders, New Jersey Devils and Buffalo Sabres of the National Hockey League (the “NHL”), as well as significant coverage of the New York Giants and the Buffalo Bills of the National Football League.
The Company was originally organized under the laws of the State of Delaware and, on June 4, 2025, redomesticated to the State of Nevada by conversion. The Company conducts substantially all of its business activities presented in the accompanying condensed consolidated financial statements through Sphere Entertainment Group, LLC (“Sphere Entertainment Group”) and MSG Networks Inc. (together with its subsidiaries, “MSG Networks”), and each of their direct and indirect subsidiaries.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions of Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). The condensed consolidated financial statements herein should be read in conjunction with the consolidated financial statements and the notes thereto as of December 31, 2025 and 2024 and for the year ended December 31, 2025, the six-month transition period ended December 31, 2024 and the fiscal years ended June 30, 2024 and 2023 (the
“Audited Consolidated Annual Financial Statements”) included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2025 filed with the SEC on February 12, 2026 (the “Form 10-K”).
In the opinion of the Company, the accompanying condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the Company’s financial position as of September 30, 2026 and its results of operations for the three and nine months ended September 30, 2026 and 2025, and cash flows for the nine months ended September 30, 2026 and 2025. The condensed consolidated balance sheet as of December 31, 2025 and the accompanying notes were
7
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
derived from the Audited Consolidated Financial Statements, but do not contain all of the footnote disclosures from the Audited Consolidated Financial Statements.
The results of operations for the periods presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year. For example, our MSG Networks segment earns a higher share of its annual revenues in the first and fourth quarters as a result of MSG Networks’ advertising revenue being largely derived from the sale of inventory in its live NBA and NHL professional sports programming.
Reclassifications
For purposes of comparability, certain prior period amounts have been reclassified to conform to the current year presentation in accordance with GAAP.
8
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Correction of Previously Issued Financial Statements for Immaterial Errors
The effect of the correction of the errors noted above on the balance sheets included in the Company’s previously issued financial statements is as follows:
| As of | |||||||||||||||||||||||||||||||||||
| December 31, 2025 | September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||
| As Previously Issued | Adjustment | As Revised | As Previously Issued | Adjustment | As Revised | As Previously Issued | Adjustment | As Revised | |||||||||||||||||||||||||||
| Goodwill | $ | $ | ( | $ | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||
| Total assets | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Deferred tax liabilities, net | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Total liabilities | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Accumulated deficit | ( | ( | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||
| Total stockholders' equity | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Total liabilities and equity | ( | ( | ( | ||||||||||||||||||||||||||||||||
The effect of the correction of the errors noted above on the statements of operations included in the Company’s previously issued financial statements is as follows:
| Year Ended | Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||
| December 31, 2025 | September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||
| As Previously Issued | Adjustment | As Revised | As Previously Issued | Adjustment | As Revised | As Previously Issued | Adjustment | As Revised | |||||||||||||||||||||||||||
| Impairments and other (losses) gains, net | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||
| Operating income (loss) | ( | ( | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||
| Income tax (expense) benefit | ( | ( | |||||||||||||||||||||||||||||||||
| Net income (loss) | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||
| Basic earnings (loss) per common share attributable to Sphere Entertainment Co.’s stockholders | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||
| Diluted earnings (loss) per common share attributable to Sphere Entertainment Co.’s stockholders | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||
9
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 2. Accounting Policies
Principles of Consolidation
The condensed consolidated financial statements of the Company include the accounts of Sphere Entertainment Co. and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the provision for credit losses, valuation of investments, goodwill, intangible assets, deferred production content costs, other long-lived assets, deferred tax assets, pension and other postretirement benefit obligations and the related net periodic benefit cost, ultimate revenue, and other liabilities. In addition, estimates are used in revenue recognition, rights fees expense, performance and share-based compensation, depreciation and amortization, litigation matters and other matters. Management believes its use of estimates in the condensed consolidated financial statements to be reasonable.
Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the general economic environment and actions it may take in the future. The Company adjusts such estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time and, as such, these estimates may ultimately differ from actual results. Changes in estimates resulting from weakness in the economic environment or other factors beyond the Company’s control could be material and would be reflected in the Company’s condensed consolidated financial statements in future periods.
Recently Issued and Adopted Accounting Pronouncements
Recently Issued Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Disaggregation of Income Statement Expenses, requiring additional disclosures about specified categories of expenses included in certain expense captions presented on the face of the income statement. This standard will be effective for the Company as of and for the annual period ending December 31, 2027, and may be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to all prior periods presented in the financial statements. The Company continues to evaluate the impact of adopting this guidance on the Company’s condensed consolidated financial statements and disclosures.
In November 2024, the FASB issued ASU 2024-04, Induced Conversions of Convertible Debt Instruments, providing clarification on the requirements for determining whether certain settlements of convertible debt should be accounted for as induced conversions. This ASU will be effective for the Company as of and for the annual period ending December 31, 2026, and may be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to all prior periods presented in the financial statements. The Company does not expect the adoption of this guidance to have a material impact on the Company’s condensed consolidated financial statements and disclosures.
In September 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software, clarifying and modernizing the accounting for costs related to internal-use software. The ASU removes the consideration of software project development stages. Under the new guidance, cost capitalization would begin when (i) management has authorized and committed to funding the software project, and (ii) it is probable that the project will be completed and the software will be used to perform its intended function (referred to as the “probable-to-complete recognition threshold”). This standard will be effective for the Company in the first quarter of the annual period ending December 31, 2028 and early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance on the Company’s condensed consolidated financial statements and disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which provides a comprehensive list within Topic 270 of required interim disclosures, establishes a principle requiring disclosure of events or changes occurring after the end of the most recent annual reporting period that have a material impact on interim results and clarifies the form and content requirements applicable to interim financial statements. According to the ASU, the FASB does not intend to change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements but rather provide clarity and improve navigability of the existing interim reporting requirements. The update will be effective for the Company for interim reporting periods within the year ending December 31, 2028. The Company does not expect the adoption to have a material impact on
10
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
the Company’s condensed consolidated financial statements and disclosures.
In December 2025, the FASB issued ASU 2025-12, Codification Improvements, to (i) clarify, (ii) correct errors in, or (iii) make other minor improvements to a variety of topics in the Accounting Standards Codification (“ASC”). The amendments are intended to make the Accounting Standards Codification easier to understand and apply. The standard is effective for the Company’s year ending December 31, 2027, including interim periods within the year. The Company does not expect the adoption to have a material impact on the Company’s condensed consolidated financial statements and disclosures.
Recently Adopted Accounting Pronouncements
In July 2025, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets. This ASU provides all entities with a practical expedient that allows for the assumption that current conditions as of the balance sheet date do not change for the remaining life of the asset when estimating credit losses for such assets. This standard was effective for the Company in the first quarter of the annual period ending December 31, 2026 with early adoption permitted. The Company early adopted ASU 2025-05 as of the fourth quarter of 2025. Adoption of the ASU did not have a material impact on the Company’s consolidated financial statements.
Note 3. Revenue Recognition
Contracts with Customers
See Note 2. Summary of Significant Accounting Policies and Note 5. Revenue Recognition, to the Audited Consolidated Financial Statements included in the Form 10-K, for more information regarding the details of the Company’s revenue recognition policies. All revenue recorded in the condensed consolidated statements of operations is considered to be revenue from contracts with customers in accordance with ASC Topic 606, Revenue From Contracts with Customers, except for revenues from subleases that are accounted for in accordance with ASC Topic 842, Leases.
Disaggregation of Revenue
The following tables disaggregate the Company’s consolidated revenues by segment and type of goods or services for the three and nine months ended September 30, 2026 and 2025:
| Three Months Ended | ||||||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||
| Sphere | MSG Networks | Total | ||||||||||||||||||
Ticketing and venue license fee revenues (a) | $ | $ | $ | |||||||||||||||||
Sponsorship, signage, Exosphere advertising, and suite license revenues (b) | ||||||||||||||||||||
Food, beverage, and merchandise revenues (c) | ||||||||||||||||||||
Media networks revenues (b) | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Total revenues from contracts with customers | ||||||||||||||||||||
| Revenues from subleases | ||||||||||||||||||||
| Total revenues | $ | $ | $ | |||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| September 30, 2025 | ||||||||||||||||||||
| Sphere | MSG Networks | Total | ||||||||||||||||||
Ticketing and venue license fee revenues (a) | $ | $ | $ | |||||||||||||||||
Sponsorship, signage, Exosphere advertising, and suite license revenues (b) | ||||||||||||||||||||
Food, beverage, and merchandise revenues (c) | ||||||||||||||||||||
Media networks revenues (b) | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Total revenues from contracts with customers | ||||||||||||||||||||
| Revenues from subleases | ||||||||||||||||||||
| Total revenues | $ | $ | $ | |||||||||||||||||
11
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
| Nine Months Ended | ||||||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||
| Sphere | MSG Networks | Total | ||||||||||||||||||
Ticketing and venue license fee revenues (a) | $ | $ | $ | |||||||||||||||||
Sponsorship, signage, Exosphere advertising, and suite license revenues (b) | ||||||||||||||||||||
Food, beverage, and merchandise revenues (c) | ||||||||||||||||||||
Media networks revenues (b) | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Total revenues from contracts with customers | ||||||||||||||||||||
| Revenues from subleases | ||||||||||||||||||||
| Total revenues | $ | $ | $ | |||||||||||||||||
| Nine Months Ended | ||||||||||||||||||||
| September 30, 2025 | ||||||||||||||||||||
| Sphere | MSG Networks | Total | ||||||||||||||||||
Ticketing and venue license fee revenues (a) | $ | $ | $ | |||||||||||||||||
Sponsorship, signage, Exosphere advertising, and suite license revenues (b) | ||||||||||||||||||||
Food, beverage, and merchandise revenues (c) | ||||||||||||||||||||
Media networks revenues (b) | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Total revenues from contracts with customers | ||||||||||||||||||||
| Revenues from subleases | ||||||||||||||||||||
| Total revenues | $ | $ | $ | |||||||||||||||||
_________________
(a) Amounts include ticket sales, other ticket-related revenue, and venue license fees from the Company’s events such as (i) concerts, (ii) The Sphere Experience, (iii) brand events and (iv) other live entertainment and sporting events. These revenues are generally recognized at a point in time.
(b) Sponsorship and signage, Exosphere advertising, suite licenses, and media related revenues are generally recognized over time.
(c) Food, beverage, and merchandise revenues are generally recognized at a point in time.
Contract Balances
The following table provides information about contract balances from the Company’s contracts with customers as of September 30, 2026 and December 31, 2025:
As of | ||||||||||||||
| September 30, | December 31, | |||||||||||||
| 2026 | 2025 | |||||||||||||
Receivables from contracts with customers, net (a) | $ | $ | ||||||||||||
Contract assets, current (b) | ||||||||||||||
Deferred revenue, including non-current portion (c) | ||||||||||||||
(a) As of September 30, 2026 and December 31, 2025, the Company’s receivables from contracts with customers, net above included $129 and $1,895 , respectively, related to various related parties. See Note 14. Related Party Transactions for further details on these related party arrangements.
(b) Contract assets, current, which are reported as Prepaid expenses and other current assets, in the Company’s condensed consolidated balance sheets, primarily relate to the Company’s rights to consideration for goods or services transferred to customers, for which the Company does not have an unconditional right to bill as of the reporting date. Contract assets are transferred to accounts receivable once the Company’s right to consideration becomes unconditional.
(c) Deferred revenue primarily relates to the Company’s receipt of consideration from customers in advance of the Company’s transfer of goods or services to the customers. Deferred revenue is reduced and the related revenue is recognized once the underlying goods or services are transferred to a customer. Revenue recognized for the three and nine months ended September 30, 2026 relating to the deferred revenue balance as of December 31, 2025 was $12,306 and $182,603 , respectively.
Transaction Price Allocated to the Remaining Performance Obligations
As of September 30, 2026, the Company’s remaining performance obligations were $384,571 , of which 53 % is expected to be recognized over the next two years and the remaining 47 % is expected to be recognized thereafter. This includes performance obligations under sponsorship agreements and the Company’s agreements with DCT Abu Dhabi that have original expected durations
12
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
longer than one year and for which the respective consideration is not variable. In developing the estimated revenue, the Company applies the allowable practical expedient and does not disclose information about remaining performance obligations that have original expected durations of one year or less.
Note 4. Restructuring Charges
During the three and nine months ended September 30, 2026, the Company recognized restructuring charges of $2,466 and $6,203 , respectively, primarily related to termination benefits for certain executives and employees during the three month period and termination benefits provided as part of a voluntary exit program the Company implemented during the nine month period. These charges were recorded in Accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets. During the three and nine months ended September 30, 2025, the Company recognized restructuring charges of $5,993 and $8,781 , respectively, related to termination benefits for certain executives and employees, which were recorded in Accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets.
Changes to the Company’s restructuring liability through September 30, 2026 were as follows:
| Restructuring Liability | ||||||||
Balance as of December 31, 2025 | $ | |||||||
Restructuring charges | ||||||||
| Payments | ( | |||||||
Balance as of September 30, 2026 | $ | |||||||
Note 5. Investments
As of September 30, 2026 and December 31, 2025, the Company’s investments are included within Investments in the accompanying condensed consolidated balance sheets and consisted of the following:
| Investment As of | ||||||||||||||||||||
Ownership Percentage as of September 30, 2026 | September 30, 2026 | December 31, 2025 | ||||||||||||||||||
| Equity method investments: | ||||||||||||||||||||
SACO Technologies Inc. (“SACO”) | $ | $ | ||||||||||||||||||
| Gotham Advanced Media and Entertainment, LLC | ||||||||||||||||||||
| Equity investments without readily determinable fair values | ||||||||||||||||||||
Other equity investments with readily determinable fair values held in trust under the Company’s Executive Deferred Compensation Plan (a) | ||||||||||||||||||||
| Total investments | $ | $ | ||||||||||||||||||
_________________
The Company had unrealized (losses) gains on equity investments with and without readily determinable fair values of $(32 ) and $196 for the three and nine months ended September 30, 2026, respectively, and $160 and $400 for the three and nine months ended September 30, 2025, respectively, which are recorded in Other expense, net.
13
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 6. Property and Equipment, net
As of September 30, 2026 and December 31, 2025, Property and equipment, net consisted of the following:
| As of | ||||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||||||||
| Buildings | $ | $ | ||||||||||||
| Equipment, furniture, and fixtures | ||||||||||||||
| Leasehold improvements | ||||||||||||||
| Construction in progress | ||||||||||||||
| Total property and equipment, gross | ||||||||||||||
| Less accumulated depreciation and amortization | ( | ( | ||||||||||||
| Property and equipment, net | $ | $ | ||||||||||||
The property and equipment balances above include $84,270 and $130,061 of capital expenditure accruals (primarily related to Sphere construction) as of September 30, 2026 and December 31, 2025, respectively, which are reflected in Accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets. See Note 2. Summary of Significant Accounting Policies to the Audited Consolidated Financial Statements included in the Form 10-K for details on the Company’s estimated useful lives for each major category of property and equipment.
The Company recorded depreciation expense on property and equipment of $81,718 and $247,080 for the three and nine months ended September 30, 2026, respectively, and $82,446 and $247,326 for the three and nine months ended September 30, 2025, respectively, which is recognized in Depreciation and amortization in the accompanying condensed consolidated statements of operations.
Note 7. Original Immersive Production Content
The Company’s deferred immersive production content costs for its original immersive productions are included within Other non-current assets in the accompanying condensed consolidated balance sheets.
As of September 30, 2026 and December 31, 2025, total deferred immersive production content costs consisted of the following:
| As of | ||||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||||||||
| Immersive Production content: | ||||||||||||||
| Released, less amortization | $ | $ | ||||||||||||
| In-process | ||||||||||||||
| Total immersive production content | $ | $ | ||||||||||||
The following table summarizes the Company’s amortization of production content costs, which are reported in Direct operating expenses in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2026 and 2025 as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
Immersive production content costs (a) | $ | $ | $ | $ | ||||||||||||||||||||||
_________________
(a) For purposes of amortization and impairment, each deferred immersive production content cost is classified based on its predominant monetization strategy. The Company’s current original immersive productions are monetized individually. Refer to Note 2. Summary of Significant Accounting Policies, Production Costs for the Company’s Original Immersive Productions, to the Audited Consolidated Financial Statements included in the Form 10-K for further explanation of the monetization strategy.
14
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 8. Goodwill and Intangible Assets
The carrying amounts of goodwill as of December 31, 2025 and September 30, 2026 were as follows:
Sphere | MSG Networks | Consolidated | ||||||||||||||||||
| Gross balance at December 31, 2025 | $ | $ | $ | |||||||||||||||||
Accumulated impairment losses (a) | ( | ( | ||||||||||||||||||
| Net balance at December 31, 2025 | $ | $ | $ | |||||||||||||||||
| Changes during the period: | ||||||||||||||||||||
| Acquisitions | ||||||||||||||||||||
| Impairments | ( | ( | ||||||||||||||||||
| Gross balance at September 30, 2026 | $ | $ | $ | |||||||||||||||||
| Accumulated impairment losses | ( | ( | ||||||||||||||||||
| Net balance at September 30, 2026 | $ | $ | $ | |||||||||||||||||
(a) Accumulated impairment losses with respect to MSG Networks have been adjusted to reflect the corrections described in Note 1. Description of the Business and Basis of Presentation.
During the quarterly period ended September 30, 2026, the Company performed its annual impairment tests of goodwill. With respect to the Sphere segment, the Company performed a qualitative assessment and determined that, as of the annual impairment test date, there was no impairment of the Sphere segment’s goodwill.
With respect to the MSG Networks segment, as of the annual impairment testing date, the Company could not support the conclusion that it is not more likely than not that the fair value of the reporting unit is greater than its carrying amount and thus elected to perform a quantitative goodwill impairment test to identify potential impairment by comparing the fair value of the reporting unit with its carrying amount, including goodwill. In doing so, the Company estimated the fair value of the MSG Networks reporting unit based on a discounted cash flow model (income approach). This approach relied on numerous assumptions and judgments within the model that were subject to various risks and uncertainties. Principal assumptions utilized, all of which are considered Level III inputs under the fair value hierarchy, include the Company’s estimates of future revenue, estimates of future operating cost, margin assumptions, terminal growth rates and the discount rate applied to estimate future cash flows.
Based upon the results of the Company’s annual quantitative impairment test, the Company concluded that the carrying value of the MSG Networks reporting unit exceeded its estimated fair value as of the annual impairment testing date and recorded a goodwill impairment charge of $177,553 during the quarterly period ended September 30, 2026, as a result of projected declines in the reporting unit’s business.
The Company continues to closely monitor the performance and fair value of its MSG Networks reporting unit. An adverse change in market factors or the business outlook for the MSG Networks reporting unit could negatively impact the fair value of the MSG Networks reporting unit and result in an additional goodwill impairment charge at that time.
The Company’s intangible assets subject to amortization as of September 30, 2026 and December 31, 2025 were as follows:
| As of | ||||||||||||||||||||||||||||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
| Gross carrying amount | Accumulated amortization | Intangible assets, net | Gross carrying amount | Accumulated amortization | Intangible assets, net | |||||||||||||||||||||||||||||||||
| Affiliate relationships | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
| Technology | ( | ( | ||||||||||||||||||||||||||||||||||||
| Trade name | ( | ( | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
The Company recognized amortization expense on intangible assets of $1,656 and $4,969 for the three and nine months ended September 30, 2026, respectively, and $1,656 and $4,912 for the three and nine months ended September 30, 2025, respectively, which is recorded in Depreciation and amortization in the accompanying condensed consolidated statements of operations.
15
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 9. Commitments and Contingencies
Commitments
As of September 30, 2026, commitments of the Company in the normal course of business were as follows:
| Commitments | ||||||||||||||||||||||||||||||||||||||||||||
2026 (Remainder) | 2027 | 2028 | 2029 | 2030 | Thereafter | Total | ||||||||||||||||||||||||||||||||||||||
| Sphere | ||||||||||||||||||||||||||||||||||||||||||||
| Event-related commitments | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Total Sphere Commitments | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| MSG Networks | ||||||||||||||||||||||||||||||||||||||||||||
| Broadcast rights | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Purchase commitments | ||||||||||||||||||||||||||||||||||||||||||||
| Talent commitments | ||||||||||||||||||||||||||||||||||||||||||||
| Total MSG Networks Commitments | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Total Commitments | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
See Note 11. Leases to the Audited Consolidated Financial Statements included in the Form 10-K for more information regarding the Company’s contractually obligated minimum lease payments for operating leases having an initial noncancelable term in excess of one year.
See Note 10. Credit Facilities and Convertible Notes for details of the principal repayments required under the Company’s various credit facilities.
Legal Matters
On September 10, 2021, the Court of Chancery of the State of Delaware (the “Court”) entered an order consolidating two derivative complaints filed by purported Company stockholders. The consolidated action is captioned: In re Madison Square Garden Entertainment Corp. Stockholders Litigation, C.A. No. 2021-0468-KSJM (the “MSG Entertainment Litigation”). The consolidated plaintiffs filed their Verified Consolidated Derivative Complaint on October 11, 2021. The complaint, which named the Company as only a nominal defendant, retained all of the derivative claims and alleged that the members of the board of directors and controlling stockholders violated their fiduciary duties in the course of negotiating and approving the Networks Merger. Plaintiffs sought, among other relief, an award of damages to the Company including interest, and plaintiffs’ attorneys’ fees. Pursuant to the indemnity rights in its bylaws and Delaware law, the Company advanced the costs incurred by defendants in this action, and defendants asserted indemnification rights in respect of any adverse judgment or settlement of the action.
On March 14, 2023, the parties to the MSG Entertainment Litigation reached an agreement in principle to settle the MSG Entertainment Litigation, without admitting liability, on the terms and conditions set forth in a binding term sheet, which was incorporated into a long-form settlement agreement (the “MSGE Settlement Agreement”) that was filed with the Court on April 20, 2023. The MSGE Settlement Agreement provided for, among other things, the final dismissal of the MSG Entertainment Litigation in exchange for a settlement payment to the Company of approximately $85,000 , subject to customary reduction for attorneys’ fees and expenses, in an amount to be determined by the Court. The settlement’s amount was fully funded by the other defendants’ insurers. The MSGE Settlement Agreement was approved by the Court on August 14, 2023, which constituted the final judgment in the action.
16
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
During the quarter ended September 30, 2023, a realized gain of approximately $62,600 was recorded in Other income (expense), net on the condensed consolidated statements of operations in connection with the settlement payment to the Company.
On September 27, 2021, the Court entered an order consolidating four complaints filed by purported former stockholders of MSG Networks Inc. The consolidated action is captioned: In re MSG Networks Inc. Stockholder Class Action Litigation, C.A. No. 2021-0575-KSJM (the “MSG Networks Litigation”). The consolidated plaintiffs filed their Verified Consolidated Stockholder Class Action Complaint on October 29, 2021. The complaint asserted claims on behalf of a putative class of former MSG Networks Inc. stockholders against each member of the board of directors of MSG Networks Inc. and the controlling stockholders prior to the Networks Merger. Plaintiffs alleged that the MSG Networks Inc. board of directors and controlling stockholders breached their fiduciary duties in negotiating and approving the Networks Merger. The Company was not named as a defendant but was subpoenaed to produce documents and testimony related to the Networks Merger. Plaintiffs sought, among other relief, monetary damages for the putative class and plaintiffs’ attorneys’ fees. Pursuant to the indemnity rights in its bylaws and Delaware law, the Company advanced the costs incurred by defendants in this action, and defendants asserted indemnification rights in respect of any adverse judgment or settlement of the action.
On April 6, 2023, the parties to the MSG Networks Litigation reached an agreement in principle to settle the MSG Networks Litigation, without admitting liability, on the terms and conditions set forth in a binding term sheet, which was incorporated into a long-form settlement agreement (the “MSGN Settlement Agreement”) that was filed with the Court on May 18, 2023. The MSGN Settlement Agreement provided for, among other things, the final dismissal of the MSG Networks Litigation in exchange for a settlement payment to the plaintiffs and the class of approximately $48,500 , of which approximately $28,000 has been paid by the Company and approximately $20,500 has been paid to the plaintiffs by insurers (who agreed to advance these costs subject to final resolution of the parties’ insurance coverage dispute). The MSGN Settlement Agreement was approved by the Court on August 14, 2023, which constituted the final judgment in the action. MSG Networks Inc. has a dispute with its insurers over whether and to what extent there is insurance coverage for the settlement (and has settled with one of the insurers). The dispute between MSG Networks Inc. and the remaining insurers is in litigation. On June 24, 2026, the court found, at the summary judgment phase, in favor of the insurers, finding that the insurers were not obligated to cover the MSG Networks Inc. settlement costs. As a result of this decision, approximately $25,900 has been accrued in Accrued expenses and other current liabilities as of September 30, 2026 (compared to approximately $18,000 as of December 31, 2025). MSG Networks Inc. is appealing that decision.
The Company is a defendant in various other lawsuits. Although the outcome of these other lawsuits cannot be predicted with certainty (including the extent of available insurance, if any), management does not believe that resolution of these other lawsuits will have a material adverse effect on the Company.
Note 10. Credit Facilities and Convertible Notes
The following table summarizes the presentation of the outstanding balances under the Company’s credit agreements and convertible notes as of September 30, 2026 and December 31, 2025:
| As of | ||||||||||||||||||||||||||||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
| Principal | Unamortized Deferred Financing Costs | Net | Principal | Unamortized Deferred Financing Costs | Net | |||||||||||||||||||||||||||||||||
| Current portion | ||||||||||||||||||||||||||||||||||||||
MSG Networks term loan facility (a) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Current portion of long-term debt, net | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
_________________
(a) The September 30, 2026 carrying amount of the MSG Networks term loan facility is calculated pursuant to the troubled debt restructuring guidance as further discussed below in this Note 10.
17
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
| As of | ||||||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Principal | Debt Discount | Unamortized Deferred Financing Costs | Net | Principal | Debt Discount | Unamortized Deferred Financing Costs | Net | |||||||||||||||||||||||||||||||||||||||||||
| Non-current portion | ||||||||||||||||||||||||||||||||||||||||||||||||||
MSG Networks term loan facility (a) | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
2026 LV Sphere Term Loan Facility | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
2022 LV Sphere Term Loan Facility | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Long-term debt, net | $ | $ | ( | $ | ( | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
_________________
(a) The September 30, 2026 carrying amount of the MSG Networks term loan facility is calculated pursuant to the troubled debt restructuring guidance, as further discussed below in this Note 10.
MSG Networks Credit Facilities
General. MSGN Holdings, L.P. (“MSGN L.P.”), MSGN Eden, LLC, an indirect wholly-owned subsidiary of the Company and the general partner of MSGN L.P. (“MSGN Eden”), Regional MSGN Holdings LLC, an indirect, wholly-owned subsidiary of the Company and the limited partner of MSGN L.P. (“Regional MSGN”), and certain subsidiaries of MSGN L.P. had senior secured credit facilities pursuant to a credit agreement (as amended and restated on October 11, 2019, and as further amended from time to time prior to June 27, 2025, the “Prior MSGN Credit Agreement”) consisting of: (i) an initial $1,100,000 term loan facility (the “Prior MSGN Term Loan Facility”) and (ii) a $250,000 revolving credit facility (together, the “Prior MSGN Credit Facilities”). The outstanding principal amount under the Prior MSGN Credit Agreement of $829,125 matured without repayment on October 11, 2024, and an event of default occurred pursuant to the Prior MSGN Credit Agreement due to MSGN L.P.’s failure to make payment on the outstanding principal amount on the maturity date.
On June 27, 2025, MSG Networks, MSGN L.P., MSGN Eden, Regional MSGN, Rainbow Garden Corp., a wholly-owned subsidiary of MSG Networks (collectively with MSG Networks, MSGN Eden and Regional MSGN, the “MSGN Holdings Entities”), and certain subsidiaries of MSGN L.P. entered into a second amended and restated credit agreement (the “A&R MSGN Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (the “MSGN Lenders”). The A&R MSGN Credit Agreement amended and restated the Prior MSGN Credit Agreement in its entirety.
Pursuant to the A&R MSGN Credit Agreement, the Prior MSGN Credit Facilities were replaced with a $210,000 term loan facility (the “MSGN Term Loan Facility”), which matures on December 31, 2029. The outstanding balance under the MSGN Term Loan Facility was $105,632 as of September 30, 2026.
Interest Rates. Borrowings under the A&R MSGN Credit Agreement bear interest at a rate per annum, which at the option of MSGN L.P., may be equal to either (i) adjusted Term SOFR (i.e., Term SOFR as defined in the A&R MSGN Credit Agreement, plus 0.10 %) plus 5.00 % or (ii) Alternate Base rate, as defined in the A&R MSGN Credit Agreement, plus 4.00 %. Upon a payment default in respect of principal, interest or other amounts due and payable under the A&R MSGN Credit Agreement or related loan documents, default interest will accrue on all overdue amounts at an additional rate of 2.00 % per annum. The interest rate on the MSGN Term Loan Facility as of September 30, 2026 was 9.00 %.
Covenants. The A&R MSGN Credit Agreement and the related security agreement contain certain customary representations and warranties, and certain affirmative covenants and events of default. The A&R MSGN Credit Agreement contains significant restrictions (and in some cases prohibitions) on the ability of MSGN L.P. and the MSGN Subsidiary Guarantors (as defined below) to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the A&R MSGN Credit Agreement, including without limitation the following: (i) incurring additional indebtedness and contingent liabilities; (ii) creating or granting liens on certain assets; (iii) making investments, loans or advances in or to other persons; (iv) paying dividends and distributions or repurchasing capital stock; (v) changing its lines of business; (vi) engaging in certain transactions with affiliates; (vii) amending specified agreements; (viii) with respect to restricted subsidiaries, issuing shares of stock such that MSGN L.P.’s ownership of any such restricted subsidiary is reduced; (ix) merging, dissolving, liquidating, consolidating, or disposing of all or substantially all of its assets; (x) making certain dispositions; (xi) making certain changes to its accounting practices; (xii) entering into agreements that restrict the granting of liens; (xiii) requesting any borrowing the proceeds of which are used in violation of anti-corruption laws or sanctions; (xiv) engaging in a liability management transaction; and (xv) limiting certain operating expenses incurred by MSGN L.P.
18
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
and the MSGN Guarantors (as defined below). The MSGN Holdings Entities are subject to the restrictions described in the foregoing clauses (iv) and (xv), as well as customary passive holding company covenants.
Principal Repayments. Subject to customary notice and minimum amount conditions, MSGN L.P. may voluntarily prepay outstanding loans under the A&R MSGN Credit Agreement at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Term Benchmark (as defined in the A&R MSGN Credit Agreement) loans). The MSGN Term Loan Facility has a fixed amortization of $10,000 per quarter, which commenced on September 30, 2025. During the nine months ended September 30, 2026, MSGN L.P. made fixed amortization payments of $30,000 . MSGN L.P. is required to make mandatory prepayments pursuant to a mandatory cash sweep, determined at the end of each fiscal quarter, that requires 100 % of MSGN L.P.’s and the MSGN Subsidiary Guarantors’ excess balance sheet cash over certain thresholds (subject to certain exclusions) to be used to repay the principal amount outstanding. In October 2026, MSGN L.P. made a $862 mandatory cash sweep payment based on excess cash as of September 30, 2026. MSGN L.P. is further required to make mandatory prepayments in certain circumstances, including from the net cash proceeds of certain dispositions of assets or casualty insurance and/or condemnation awards (subject to a threshold below which payments are not required, as well as certain reinvestment, repair and replacement rights) and upon the incurrence of indebtedness (subject to certain exceptions).
In connection with the execution of the A&R MSGN Credit Agreement, the Limited Partnership Agreement of MSGN L.P. was amended to provide for the issuance of contingent interest units (the “Contingent Interest Units”) to the MSGN Lenders. Beginning with the fiscal calendar year-end following the repayment in full of the MSGN Term Loan Facility, the Contingent Interest Units entitle the MSGN Lenders to receive annual payments in an amount equal to 50 % of the difference between MSGN L.P.’s balance sheet cash (subject to certain exclusions) and certain minimum cash balances, specified with respect to the applicable measurement date, until the earlier of (i) December 31, 2029 and (ii) payment of $100,000 in the aggregate to the MSGN Lenders. The Contingent Interest Units are also entitled to receive 50 % of the proceeds of a merger and/or acquisition event related to MSG Networks and its subsidiaries occurring prior to December 31, 2029, subject to an aggregate cap of $100,000 considered together with the annual payments of excess cash described in the previous sentence.
Guarantors and Collateral. All obligations under the A&R MSGN Credit Agreement are guaranteed by the MSGN Holdings Entities and MSGN L.P.’s direct and indirect domestic subsidiaries that are not designated as unrestricted subsidiaries (the “MSGN Subsidiary Guarantors” and, together with the MSGN Holdings Entities, the “MSGN Guarantors”). All obligations under the A&R MSGN Credit Agreement, including the guarantees of those obligations, are secured by certain of the assets of MSGN L.P. and each MSGN Guarantor (collectively, “MSGN Collateral”), including, but not limited to, a pledge of the equity interests in MSGN L.P. held directly by the MSGN Holdings Entities and the equity interests in each MSGN Subsidiary Guarantor held directly or indirectly by MSGN L.P. Sphere Entertainment Co., Sphere Entertainment Group and the subsidiaries of Sphere Entertainment Group (collectively, the “Non-Credit Parties”) are not legally obligated to repay the outstanding borrowings under the MSGN Term Loan Facility, nor are the assets of the Non-Credit Parties pledged as security under the MSGN Term Loan Facility.
Based on conditions at MSGN L.P. and the terms of the A&R MSGN Credit Agreement, the entry into the A&R MSGN Credit Agreement met the criteria to be accounted for as a troubled debt restructuring. The troubled debt restructuring accounting model requires the inclusion of future principal, interest and potential contingent payments as part of the carrying amount of the modified debt to prevent recognizing a gain at the time of restructuring that may be offset by future expenses. As such, the original carrying amount of the MSGN Term Loan Facility includes the $210,000 principal amount, along with expected interest payments (based on interest rates in effect on June 27, 2025) and potential contingent payments of future excess cash flows from the Contingent Interest Units. ASC Topic 470-60 does not allow the consideration of the probability of occurrence of the contingencies when including contingent payments as part of the carrying amount. The gain on extinguishment was also further offset by fees, expenses and other direct costs incurred to effect the troubled debt restructuring.
Interest payments reduce the carrying amount of the debt. Consistent with the initial application of the troubled debt restructuring guidance, for subsequent accounting purposes, fluctuations in variable interest rate will not result in immediate gains that could be offset by future cash payments.
2026 LV Sphere Facilities
General. On January 29, 2026, MSG Las Vegas, LLC (“MSG LV”), an indirect, wholly-owned subsidiary of the Company, entered into a credit agreement with JPMorgan Chase Bank, N.A., as Administrative Agent and L/C Issuer, and the lenders party thereto, which refinanced in full the 2022 LV Sphere Term Loan Facility (as defined and described below). The new credit agreement provides for (i) a $275,000 senior secured term loan facility (the “2026 LV Sphere Term Loan Facility”), the proceeds of which were used to refinance the 2022 LV Sphere Term Loan Facility, and (ii) a senior secured revolving credit facility in the maximum principal amount of $275,000 (the “2026 LV Sphere Revolving Credit Facility” and collectively, the “2026 LV Sphere Facilities”), the proceeds of which are available to be used for working capital and general corporate purposes, including distributions to Sphere Entertainment Group. All obligations under the 2026 LV Sphere Facilities are guaranteed by Sphere Entertainment Group. None of Sphere
19
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Entertainment Co., MSG Networks, MSGN L.P. or any of the subsidiaries of MSGN L.P. are parties to the 2026 LV Sphere Facilities. As a result of the partial repayment of the 2022 LV Sphere Term Loan Facility, the Company wrote off $2,071 of deferred financing costs during the quarter ended March 31, 2026, which is presented as a loss on extinguishment on the Company’s condensed consolidated statements of operations.
Financial Covenants. The 2026 LV Sphere Facilities include financial covenants requiring MSG LV to maintain a minimum debt service coverage ratio of 2.50 :1.00 and a maximum total leverage ratio of 3.50 :1.00. Both covenants are tested quarterly based on the four consecutive fiscal quarters of MSG LV then most recently ended. As of September 30, 2026, MSG LV was in compliance with the financial covenants of the 2026 LV Sphere Facilities.
Principal Repayments. The 2026 LV Sphere Facilities will mature on January 29, 2031. Commencing with the fiscal quarter ending March 31, 2028, the principal obligations under the 2026 LV Sphere Term Loan Facility will be subject to amortization payments of 5 % per annum, paid in quarterly installments, with the remainder of the term loans due at maturity. Under certain circumstances, MSG LV is required to make mandatory prepayments on the loans, including prepayments in an amount equal to the net cash proceeds of casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights), subject to certain exceptions.
Interest Rates. Borrowings under the 2026 LV Sphere Facilities bear interest at a floating rate, which at the option of MSG LV may be either (i) Term SOFR (as defined in the 2026 LV Sphere Facilities) plus a margin that ranges from 2.50 % to 3.00 % based on MSG LV’s total leverage ratio or (ii) the Alternative Base Rate (as defined in the 2026 LV Sphere Facilities) plus a margin that ranges from 1.50 % to 2.00 % based on MSG LV’s total leverage ratio. The interest rate on the 2026 LV Sphere Term Loan Facility as of September 30, 2026 was 6.40 %.
Guarantors and Collateral. All obligations under the 2026 LV Sphere Facilities are guaranteed by Sphere Entertainment Group. All obligations under the 2026 LV Sphere Facilities, including the guarantees of those obligations, are secured by all of the assets of MSG LV, including, but not limited to, MSG LV’s leasehold interest in the land on which the Sphere in Las Vegas is located and a pledge of the equity interests in MSG LV held directly by Sphere Entertainment Group.
Covenants. In addition to the financial covenants described above, the 2026 LV Sphere Facilities and the related guaranty and security and pledge agreements contain certain customary representations and warranties, affirmative and negative covenants and events of default. The 2026 LV Sphere Facilities contain certain restrictions on the ability of MSG LV to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the 2026 LV Sphere Facilities, including the following: (i) incurring additional indebtedness; (ii) incurring liens on its assets; (iii) making investments, loans or advances in or to other persons; (iv) paying dividends and distributions to the extent a default or event of default under the 2026 LV Sphere Facilities is in effect at such time or the debt service reserve account is not funded to the extent required; (v) changing its lines of business; (vi) engaging in certain transactions with affiliates; (vii) amending organizational documents; (viii) merging or consolidating; and (ix) making certain dispositions.
2022 LV Sphere Term Loan Facility
General. On December 22, 2022, MSG LV, entered into a credit agreement with JP Morgan Chase Bank, N.A., as administrative agent and the lenders party thereto, providing for a five-year , $275,000 senior secured term loan facility (as amended, the “2022 LV Sphere Term Loan Facility”).
Interest Rates. Borrowings under the 2022 LV Sphere Term Loan Facility bore interest at a floating rate, which at the option of MSG LV may have been either (i) a base rate plus a margin of 3.375 % per annum or (ii) adjusted Term SOFR (i.e., Term SOFR plus 0.10 %) plus a margin of 4.375 % per annum. The interest rate on the 2022 LV Sphere Term Loan Facility as of December 31, 2025 was 8.19 %.
Principal Repayments. The 2022 LV Sphere Term Loan Facility would have matured on December 22, 2027.
Covenants. The 2022 LV Sphere Term Loan Facility and related guaranty by Sphere Entertainment Group included financial covenants requiring MSG LV to maintain a specified minimum debt service coverage ratio and requiring Sphere Entertainment Group to maintain a specified minimum liquidity level.
Guarantors and Collateral. All obligations under the 2022 LV Sphere Term Loan Facility were guaranteed by Sphere Entertainment Group. All obligations under the 2022 LV Sphere Term Loan Facility, including the guarantees of those obligations, were secured by all of the assets of MSG LV and certain assets of Sphere Entertainment Group including, but not limited to, MSG LV’s leasehold interest in the land on which Sphere in Las Vegas is located and a pledge of all of the equity interests held directly by Sphere Entertainment Group in MSG LV.
20
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
On December 8, 2023, the Company completed a private unregistered offering of $258,750 in aggregate principal amount of its 3.50 % Convertible Senior Notes due 2028 (the “3.50 % Convertible Senior Notes”), which amount includes the full exercise of the initial purchasers’ option to purchase additional 3.50 % Convertible Senior Notes. See Note 14. Credit Facilities and Convertible Notes to the Audited Consolidated Financial Statements included in the Form 10-K for details on the 3.50 % Convertible Senior Notes.
Debt Maturities
Debt maturities over the next five years for the outstanding principal balance under the MSGN Term Loan Facility, 2026 LV Sphere Term Loan Facility and 3.50 % Convertible Senior Notes as of September 30, 2026 were as follows:
MSGN Term Loan Facility (a) | 2026 LV Sphere Term Loan Facility | Total | ||||||||||||||||||||||||
| Year ending December 31, 2026 | $ | $ | $ | $ | ||||||||||||||||||||||
| Year ending December 31, 2027 | ||||||||||||||||||||||||||
| Year ending December 31, 2028 | ||||||||||||||||||||||||||
| Year ending December 31, 2029 | ||||||||||||||||||||||||||
| Year ending December 31, 2030 | ||||||||||||||||||||||||||
| Thereafter | ||||||||||||||||||||||||||
Total debt | $ | $ | $ | $ | ||||||||||||||||||||||
_________________
(a) The carrying amount of the MSGN Term Loan Facility, which is calculated by applying the troubled debt restructuring guidance as discussed above, was $241,656 as of September 30, 2026. Due to uncertainty in amounts payable and timing, Contingent Interest Units and undiscounted interest payments are excluded from the table above. Furthermore, the debt maturities shown above do not reflect quarterly mandatory cash sweep prepayments that may become due based on excess balance sheet cash over certain thresholds, other than the quarterly cash flow sweep payment made in October 2026.
Interest payments and loan principal repayments made by the Company under the credit agreements and convertible notes for the nine months ended September 30, 2026 and 2025 were as follows:
| Interest Payments | Loan Principal Repayments | |||||||||||||||||||||||||
| Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
MSG Networks term loan facility (a) | $ | $ | $ | $ | ||||||||||||||||||||||
| 2026 LV Sphere Term Loan Facility | ||||||||||||||||||||||||||
| 2022 LV Sphere Term Loan Facility | ||||||||||||||||||||||||||
| Total Payments | $ | $ | $ | $ | ||||||||||||||||||||||
_________________
(a) As a result of the June 27, 2025 refinancing, the MSG Networks term loan facility is accounted for under the troubled debt restructuring guidance. For purposes of this disclosure and for comparability to prior periods, interest payments and principal payments are presented based on the contractual nature of the cash flows.
21
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
The carrying value and fair value of the Company’s debt recorded in the accompanying condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025 were as follows:
As of | ||||||||||||||||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||
Carrying Value (a) | Fair Value | Carrying Value (a) | Fair Value | |||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
MSG Networks term loan facility | $ | $ | $ | $ | ||||||||||||||||||||||
2026 LV Sphere Term Loan Facility | ||||||||||||||||||||||||||
2022 LV Sphere Term Loan Facility | ||||||||||||||||||||||||||
Total debt | $ | $ | $ | $ | ||||||||||||||||||||||
_________________
(a) The total carrying value of the Company’s debt as of September 30, 2026 and December 31, 2025 is equal to the current and non-current principal payments for the Company’s debt, excluding unamortized deferred financing costs of $3,876 and $2,838 , respectively.
The Company’s debt is classified within Level II of the fair value hierarchy as it is valued using quoted indices of similar instruments for which the inputs are readily observable.
Note 11. Pension Plans and Other Postretirement Benefit Plan
The Company sponsors (i) both funded and unfunded and qualified and non-qualified pension plans, including the Networks 1212 Plan (as defined below), Networks Excess Cash Balance Plan, and the Networks Excess Retirement Plan (together, the “Networks Plans”), (ii) an excess savings plan and (iii) a postretirement benefit plan (the “Postretirement Plan”). In connection with the distribution of approximately 67 % of the outstanding common stock of MSGE Spinco, Inc. (now known as Madison Square Garden Entertainment Corp. and referred to herein as “MSG Entertainment”) to the Company’s stockholders on April 20, 2023 (the “MSGE Distribution”), the Company established an unfunded non-contributory, non-qualified frozen excess cash balance plan (the “Sphere Excess Plan”) covering certain employees who participated in the pre-MSGE Distribution cash balance plan, which was transferred to MSG Entertainment in connection with the MSGE Distribution. The Networks Plans and Sphere Excess Plan are collectively referred to as the “Pension Plans.” Prior to the MSGE Distribution, the Company sponsored two contributory welfare plans which provided certain postretirement healthcare benefits to certain employees hired prior to January 1, 2001.
The sponsorship of the Postretirement Plan covering Networks employees was retained by the Company while the postretirement plan covering MSG Entertainment employees was transferred to MSG Entertainment in connection with the MSGE Distribution. In addition, the liabilities associated with the postretirement plan for MSG Entertainment employees were transferred from the Company to MSG Entertainment in connection with the MSGE Distribution. See Note 15. Pension Plans and Other Postretirement Benefit Plan to the Audited Consolidated Financial Statements included in the Form 10-K for more information regarding these plans.
Defined Benefit Pension Plans and Postretirement Benefit Plan
The following tables present components of net periodic benefit cost for the Pension Plans and Postretirement Plan included in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2026 and 2025. Service cost is recorded in Direct operating expenses and Selling, general and administrative expenses. All other components of net periodic benefit cost are recorded in Other expense, net.
| Pension Plans | Postretirement Plan | |||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest cost | ||||||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ||||||||||||||||||||||||
Recognized actuarial loss | ||||||||||||||||||||||||||
| Net periodic benefit cost | $ | $ | $ | $ | ||||||||||||||||||||||
22
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
| Pension Plans | Postretirement Plan | |||||||||||||||||||||||||
| Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest cost | ||||||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ||||||||||||||||||||||||
Recognized actuarial loss | ||||||||||||||||||||||||||
| Net periodic benefit cost | $ | $ | $ | $ | ||||||||||||||||||||||
Contributions for Qualified Defined Benefit Plans
The Company sponsors one non-contributory, qualified defined benefit pension plan covering certain of its union employees, the “Networks 1212 Plan.” During the three and nine months ended September 30, 2026, the Company contributed $970 and $1,100 , respectively, to the Networks 1212 Plan. During the three and nine months ended September 30, 2025, the Company contributed $500
Defined Contribution Plans
The Company sponsors the MSGN Holdings, L.P. Excess Savings Plan and the Sphere Entertainment Excess Savings Plan, and participates in the Madison Square Garden 401(k) Savings Plan (collectively, the “Savings Plans”). Expenses related to the Savings Plans included in the accompanying condensed consolidated statements of operations were $2,432 and $6,721 for the three and nine months ended September 30, 2026, respectively, and $2,020 and $6,030 for the three and nine months ended September 30, 2025, respectively.
Executive Deferred Compensation
See Note 15. Pension Plans and Other Postretirement Benefit Plan to the Company’s Audited Consolidated Financial Statements included in the Form 10-K for more information regarding the Company’s Executive Deferred Compensation Plan (the “Executive Deferred Compensation Plan”). The Company recorded compensation (income) expense of $(32 ) and $196 for the three and nine months ended September 30, 2026, respectively, and $160 and $400 for the three and nine months ended September 30, 2025, respectively, within Selling, general and administrative expenses in the accompanying condensed consolidated statements of operations to reflect the remeasurement of the Executive Deferred Compensation Plan liability. In addition, the Company recorded a (loss) gain of $(32 ) and $196 for the three and nine months ended September 30, 2026, respectively, and gain of $160 and $400 for the three and nine months ended September 30, 2025, respectively, within Other expense, net in the accompanying condensed consolidated statements of operations to reflect remeasurement of the fair value of assets under the Executive Deferred Compensation Plan.
The following table summarizes amounts recognized related to the Executive Deferred Compensation Plan in the accompanying condensed consolidated balance sheets:
| As of | |||||||||||||||||||||||
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Non-current assets (included in Investments) | $ | $ | |||||||||||||||||||||
| Non-current liabilities (included in Other non-current liabilities) | $ | ( | $ | ( | |||||||||||||||||||
Note 12. Share-based Compensation
The Company has three share-based compensation plans: the 2020 Employee Stock Plan, the 2020 Stock Plan for Non-Employee Directors and the MSG Networks Inc. 2010 Employee Stock Plan, in each case as amended from time to time. See Note 16. Share-based Compensation to the Audited Consolidated Financial Statements included in the Form 10-K for more detail on these plans.
Share-based compensation expense for the Company’s restricted stock units (“RSUs”), performance stock units (“PSUs”), stock options and/or cash-settled stock appreciation rights (“SARs”) is recorded in the condensed consolidated statements of operations as a component of direct operating expenses or selling, general and administrative expenses.
23
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
The following table summarizes the Company’s share-based compensation expense:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
Share-based compensation (a) | $ | $ | $ | $ | ||||||||||||||||||||||
Fair value of awards vested | $ | $ | $ | $ | ||||||||||||||||||||||
_________________
(a) Share-based compensation excludes costs that have been capitalized of $985 and $723 for the nine months ended September 30, 2026 and 2025, respectively.
As of September 30, 2026, there was $59,442 of unrecognized compensation cost related to unvested RSUs, PSUs, stock options and SARs held by the Company’s employees. The cost is expected to be recognized over a weighted-average period of approximately 1.78 years.
For the three and nine months ended September 30, 2026 and 2025, all RSUs, PSUs and stock options were excluded from the calculation of diluted loss per share because the Company reported a net loss attributable to Sphere Entertainment Co.’s stockholders for the periods and, therefore, their impact on reported loss per share would have been anti-dilutive.
Award Activity
RSUs
During the nine months ended September 30, 2026 and 2025, approximately 160 and 465 RSUs were granted, respectively, and approximately 346 and 547 RSUs vested, respectively.
PSUs
During the nine months ended September 30, 2026 and 2025, approximately 120 and 368 PSUs were granted, respectively, and approximately 331 and 451 PSUs vested, respectively.
Stock options
During the nine months ended September 30, 2026, there were no 538 stock options were exercised. During the nine months ended September 30, 2025, there were 1,685 stock options granted and 20 stock options were exercised.
Note 13. Stockholders’ Equity
Preferred Stock
The Company is authorized to issue 15,000 0.01 no
Stock Repurchase Program
On March 31, 2020, the Company’s Board of Directors authorized a share repurchase program to repurchase up to $350,000 of the Company’s Class A Common Stock. The program was re-authorized by the Company’s Board of Directors on March 29, 2023. Under the authorization, shares of Class A Common Stock may be purchased from time to time in open market or private transactions, block trades or such other manner as the Company may determine, in accordance with applicable insider trading and other securities laws and regulations. The timing and amount of purchases will depend on market conditions and other factors. During the nine months ended September 30, 2026, the Company did not engage in any share repurchase activities under its share repurchase program. As of September 30, 2026, the Company had approximately $300,000 remaining available for repurchases of the Company’s Class A Common Stock.
Accumulated Other Comprehensive Loss
The following tables detail the components of accumulated other comprehensive loss:
24
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
| Pension Plans and Postretirement Plan | Cumulative Translation Adjustments | Accumulated Other Comprehensive Loss | |||||||||||||||
| Balance as of December 31, 2025 | $ | ( | $ | $ | ( | ||||||||||||
| Other comprehensive loss: | |||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||
Amounts reclassified from accumulated other comprehensive loss (a) | ( | ( | |||||||||||||||
| Income tax benefit | |||||||||||||||||
| Other comprehensive loss, total | ( | ( | ( | ||||||||||||||
| Balance as of March 31, 2026 | $ | ( | $ | $ | ( | ||||||||||||
| Other comprehensive loss: | |||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||
Amounts reclassified from accumulated other comprehensive loss (a) | ( | ( | |||||||||||||||
| Income tax benefit | |||||||||||||||||
| Other comprehensive loss, total | ( | ( | ( | ||||||||||||||
| Balance as of June 30, 2026 | $ | ( | $ | $ | ( | ||||||||||||
| Other comprehensive loss: | |||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||
Amounts reclassified from accumulated other comprehensive loss (a) | ( | ( | |||||||||||||||
| Income tax benefit | |||||||||||||||||
| Other comprehensive loss, total | ( | ( | ( | ||||||||||||||
| Balance as of September 30, 2026 | $ | ( | $ | $ | ( | ||||||||||||
| Pension Plans and Postretirement Plan | Cumulative Translation Adjustments | Accumulated Other Comprehensive Loss | |||||||||||||||
| Balance as of December 31, 2024 | $ | ( | $ | ( | $ | ( | |||||||||||
| Other comprehensive (loss) income: | |||||||||||||||||
| Other comprehensive income before reclassifications | |||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss (a) | ( | ( | |||||||||||||||
| Income tax benefit | |||||||||||||||||
| Other comprehensive (loss) income, total | ( | ||||||||||||||||
| Balance as of March 31, 2025 | $ | ( | $ | $ | ( | ||||||||||||
| Other comprehensive (loss) income: | |||||||||||||||||
| Other comprehensive income before reclassifications | |||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss (a) | ( | ||||||||||||||||
| Income tax benefit (expense) | ( | ( | |||||||||||||||
| Other comprehensive (loss) income, total | ( | ||||||||||||||||
| Balance as of June 30, 2025 | $ | ( | $ | $ | ( | ||||||||||||
| Other comprehensive loss: | |||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||
Amounts reclassified from accumulated other comprehensive loss (a) | ( | ( | |||||||||||||||
| Income tax benefit (expense) | ( | ||||||||||||||||
| Other comprehensive loss, total | ( | ( | ( | ||||||||||||||
| Balance as of September 30, 2025 | $ | ( | $ | $ | ( | ||||||||||||
(a) Amounts reclassified from accumulated other comprehensive loss represent the amortization of net actuarial loss and net unrecognized prior service credit included in net periodic benefit cost, which is reflected under Other expense, net in the accompanying condensed consolidated statements of operations (see Note 11. Pension Plans and Other Postretirement Benefit Plan).
25
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 14. Related Party Transactions
As of September 30, 2026, certain members of the Dolan family, including certain trusts for the benefit of members of the Dolan family (collectively, the “Dolan Family Group”), collectively beneficially owned 100 % of the Company’s outstanding Class B Common Stock, par value $0.01 per share (“Class B Common Stock”) and approximately 10.1 % of the Company’s outstanding Class A Common Stock (inclusive of options exercisable within 60 days after September 30, 2026) for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended. Such shares of the Company’s Class A Common Stock and Class B Common Stock, collectively, represent approximately 72.1 % of the aggregate voting power of the Company’s outstanding common stock. Members of the Dolan family are also the controlling stockholders of MSG Entertainment, MSG Knickerbockers Corp. (formerly Madison Square Garden Sports Corp., “MSG Knicks”), MSG Rangers Corp. (“MSG Rangers”) and AMC Global Media Inc. (formerly AMC Networks Inc., “AMC Networks”).
See Note 19. Related Party Transactions, to the Audited Consolidated Financial Statements included in the Form 10-K for a description of the Company’s related party arrangements. There were no material changes in such related party arrangements during the three and nine months ended September 30, 2026.
Accrued liabilities associated with other equity method investment nonconsolidated affiliates were $18,204
Revenues and Operating Expenses
The following table summarizes the composition and amounts of the transactions with the Company’s related parties. These amounts are reflected in revenues and operating expenses in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2026 and 2025:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
Media fees | ||||||||||||||||||||||||||
Corporate general and administrative expenses, net - MSG Entertainment Services Agreement | ||||||||||||||||||||||||||
| Origination, master control and technical services | ||||||||||||||||||||||||||
Other operating expenses, net (a) | ||||||||||||||||||||||||||
Total operating expenses, net (b) | $ | $ | $ | $ | ||||||||||||||||||||||
_________________
(a) Other operating expenses, net, includes reimbursements to MSG Entertainment for aircraft-related expenses, professional and payroll fees, and Crown Properties Collection LLC (“CPC”) commission, as well as AMC Global Media consulting service fees. In June 2025, CPC repurchased the Company’s equity interest in CPC, and as a result, CPC is no longer considered to be a related party.
(b) Of the total operating expenses, net $34,780 and $105,424 for the three and nine months ended September 30, 2026, respectively, and $34,436 and $106,134 for the three and nine months ended September 30, 2025, respectively, are included in Direct operating expenses in the accompanying condensed consolidated statements of operations. Of the total operating expenses, net, $21,505 and $64,336 for the three and nine months ended September 30, 2026, respectively, and $19,599 and $61,366 for the three and nine months ended September 30, 2025, respectively, are included in Selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.
Note 15. Segment Information
As of September 30, 2026, the Company was comprised of two reportable segments: Sphere and MSG Networks. The Company takes into account whether two or more operating segments can be aggregated together as one reportable segment as well as the type of discrete financial information that is available and regularly reviewed by its Chief Operating Decision Maker (“CODM”). The CODM is the Company’s Executive Chairman and Chief Executive Officer.
The CODM evaluates segment performance and determines how to allocate resources based on the Company’s key financial measure of adjusted operating income (“AOI”), a non-GAAP financial measure. The Company defines AOI as operating income excluding:
(i) depreciation, amortization and impairments of property and equipment, goodwill and intangible assets,
(ii) amortization for capitalized cloud computing arrangement costs,
26
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
(iii) share-based compensation expense,
(iv) restructuring charges or credits,
(v) merger, debt work-out, and acquisition-related costs, including merger-related litigation expenses, net of insurance recoveries,
(vi) gains or losses on sales or dispositions of businesses and associated settlements,
(vii) the impact of purchase accounting adjustments related to business acquisitions, and
(viii) gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan (which was established in November 2021).
The Company believes that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the Company’s business without regard to the settlement of an obligation that is not expected to be made in cash. The Company eliminates merger, debt work-out, and acquisition-related costs, including merger-related litigation expenses, net of insurance recoveries, when applicable, because the Company does not consider such costs to be indicative of the ongoing operating performance of the Company as they result from an event that is of a non-recurring nature, thereby enhancing comparability. In addition, management believes that the exclusion of gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan provides investors with a clearer picture of the Company’s operating performance given that, in accordance with GAAP, gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan are recorded in Operating (loss) income whereas gains and losses related to the remeasurement of the assets under the Company’s Executive Deferred Compensation Plan, which are equal to and therefore fully offset the gains and losses related to the remeasurement of liabilities, are recorded in Other (expense) income, net, which is not reflected in Operating (loss) income.
The CODM uses AOI for each segment predominantly throughout the annual budget and forecasting process. The CODM also considers budget-to-actual variances in AOI, at least quarterly, when making decisions about the allocation of operating and capital resources to each segment. Management believes AOI is an appropriate measure for evaluating the operating performance of its business segments and the Company on a consolidated basis. AOI and similar measures with similar titles are common performance measures used by investors and analysts to analyze the Company’s performance. The Company uses revenues and AOI measures as the most important indicators of its business performance, and evaluates management’s effectiveness with specific reference to these indicators.
Adjusted operating income (loss) should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with GAAP. Since adjusted operating income (loss) is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies. The Company has presented the components that reconcile operating income (loss), the most directly comparable GAAP financial measure, to adjusted operating income (loss).
27
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Information as to the operations of the Company’s reportable segments is set forth below.
| Three Months Ended | ||||||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||
| Sphere | MSG Networks | Total | ||||||||||||||||||
| Revenues | $ | $ | $ | |||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
Event-related expenses (a) | ||||||||||||||||||||
| Rights fee expense | ||||||||||||||||||||
| Network programming and production costs | ||||||||||||||||||||
Other direct operating expenses (a) | ||||||||||||||||||||
Overhead expenses(b) | ||||||||||||||||||||
Other segment expenses(c) | ||||||||||||||||||||
| Operating loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Other income (expense): | ||||||||||||||||||||
| Interest income | ||||||||||||||||||||
| Interest expense | ( | |||||||||||||||||||
| Other expense, net | ( | |||||||||||||||||||
| Loss from operations before income taxes | $ | ( | ||||||||||||||||||
Reconciliation of operating loss to adjusted operating income: | ||||||||||||||||||||
| Operating loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Adjustments: | ||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Restructuring charges | ||||||||||||||||||||
| Impairment and other losses, net | ||||||||||||||||||||
Merger, debt work-out, and acquisition-related costs, including merger-related litigation expenses, net of insurance recoveries | ||||||||||||||||||||
Amortization for capitalized cloud computing arrangement costs | ||||||||||||||||||||
| Remeasurement of deferred compensation plan liabilities | ( | ( | ||||||||||||||||||
| Adjusted operating income | $ | $ | $ | |||||||||||||||||
28
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
| Three Months Ended | ||||||||||||||||||||
| September 30, 2025 | ||||||||||||||||||||
| Sphere | MSG Networks | Total | ||||||||||||||||||
| Revenues | $ | $ | $ | |||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Event-related expenses (a) | ||||||||||||||||||||
| Rights fee expense | ||||||||||||||||||||
| Network programming and production costs | ||||||||||||||||||||
Other direct operating expenses (a) | ||||||||||||||||||||
Overhead expenses(b) | ||||||||||||||||||||
Other segment expenses(c) | ||||||||||||||||||||
| Operating loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
Other income (expense): | ||||||||||||||||||||
| Interest income | ||||||||||||||||||||
| Interest expense | ( | |||||||||||||||||||
| Other expense, net | ( | |||||||||||||||||||
| Loss from operations before income taxes | $ | ( | ||||||||||||||||||
Reconciliation of operating loss to adjusted operating income: | ||||||||||||||||||||
| Operating loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
Adjustments: | ||||||||||||||||||||
Share-based compensation expense | ( | |||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Restructuring charges | ||||||||||||||||||||
| Impairment and other losses, net | ||||||||||||||||||||
Merger, debt work-out, and acquisition-related costs, including merger-related litigation expenses, net of insurance recoveries | ||||||||||||||||||||
Amortization for capitalized cloud computing arrangement costs | ||||||||||||||||||||
| Remeasurement of deferred compensation plan liabilities | ||||||||||||||||||||
| Adjusted operating income | $ | $ | $ | |||||||||||||||||
29
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
| Nine Months Ended | ||||||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||
| Sphere | MSG Networks | Total | ||||||||||||||||||
| Revenues | $ | $ | $ | |||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Event-related expenses (a) | ||||||||||||||||||||
| Rights fee expense | ||||||||||||||||||||
| Network programming and production costs | ||||||||||||||||||||
Other direct operating expenses (a) | ||||||||||||||||||||
Overhead expenses(b) | ||||||||||||||||||||
Other segment expenses(c) | ||||||||||||||||||||
| Operating loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
Other income (expense): | ||||||||||||||||||||
| Loss on extinguishment of debt | ( | |||||||||||||||||||
| Interest income | ||||||||||||||||||||
| Interest expense | ( | |||||||||||||||||||
| Other expense, net | ( | |||||||||||||||||||
| Loss from operations before income taxes | $ | ( | ||||||||||||||||||
Reconciliation of operating loss to adjusted operating income: | ||||||||||||||||||||
| Operating loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
Adjustments: | ||||||||||||||||||||
Share-based compensation expense | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Restructuring charges | ||||||||||||||||||||
| Impairment and other losses, net | ||||||||||||||||||||
Merger, debt work-out, and acquisition-related costs, including merger-related litigation expenses, net of insurance recoveries | ||||||||||||||||||||
Amortization for capitalized cloud computing arrangement costs | ||||||||||||||||||||
| Remeasurement of deferred compensation plan liabilities | ||||||||||||||||||||
| Adjusted operating income | $ | $ | $ | |||||||||||||||||
30
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
| Nine Months Ended | ||||||||||||||||||||
| September 30, 2025 | ||||||||||||||||||||
| Sphere | MSG Networks | Total | ||||||||||||||||||
| Revenues | $ | $ | $ | |||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Event-related expenses (a) | ||||||||||||||||||||
| Rights fee expense | ||||||||||||||||||||
| Network programming and production costs | ||||||||||||||||||||
Other direct operating expenses (a) | ||||||||||||||||||||
Overhead expenses(b) | ||||||||||||||||||||
Other segment expenses(c) | ||||||||||||||||||||
| Operating loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
Other income (expense): | ||||||||||||||||||||
| Gain on extinguishment of debt | ||||||||||||||||||||
| Interest income | ||||||||||||||||||||
| Interest expense | ( | |||||||||||||||||||
| Other expense, net | ( | |||||||||||||||||||
| Income from operations before income taxes | $ | |||||||||||||||||||
Reconciliation of operating (loss) income to adjusted operating income: | ||||||||||||||||||||
| Operating loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
Adjustments: | ||||||||||||||||||||
Share-based compensation expense | ( | |||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Restructuring charges | ||||||||||||||||||||
| Impairment and other losses, net | ||||||||||||||||||||
Merger, debt work-out, and acquisition-related costs, including merger-related litigation expenses, net of insurance recoveries | ||||||||||||||||||||
Amortization for capitalized cloud computing arrangement costs | ||||||||||||||||||||
| Remeasurement of deferred compensation plan liabilities | ||||||||||||||||||||
| Adjusted operating income | $ | $ | $ | |||||||||||||||||
(a)Event-related expenses include, but are not limited to, day-of-event costs, direct operating expenses for The Sphere Experience, venue operating expenses, and other event-related direct operating expenses. Other direct operating expenses include, but are not limited to, expenses related to sponsorship, signage, Exosphere advertising, suite licenses, and other operating expenses. In total, these expenses when combined with MSG Networks rights fee expense and network programming and production costs represent the Company’s Direct operating expenses as presented on the accompanying condensed consolidated statements of operations.
(b)For each reportable segment, Overhead expenses currently include selling, general and administrative costs.
(c)For each reportable segment, Other segment expenses include all other expenses that do not meet the definition of other previously disclosed expenses, primarily depreciation and amortization, impairment and other losses, net and restructuring charges.
Concentration of Risk
Accounts receivable, net in the accompanying condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025 include amounts due from the following individual customers, which accounted for the noted percentages of the gross balance:
As of | ||||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||||||||
| Customer A | % | % | ||||||||||||
Customer B | % | % | ||||||||||||
Customer C | % | % | ||||||||||||
31
SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Revenues in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2026 and 2025 include amounts from the following individual customers, derived from the MSG Networks segment, which accounted for the noted percentages of the total:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Customer 1 | % | % | % | % | ||||||||||||||||||||||
Customer 2 | % | % | % | % | ||||||||||||||||||||||
Customer 3 | % | % | % | % | ||||||||||||||||||||||
Note 16. Additional Financial Information
The following table provides a summary of the amounts recorded as cash, cash equivalents and restricted cash.
| As of | ||||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Restricted cash | ||||||||||||||
Total cash, cash equivalents and restricted cash | $ | $ | ||||||||||||
The Company’s cash equivalents consist of money market accounts, time deposits and U.S. treasury bills of $505,663 and $99,433 as of September 30, 2026 and December 31, 2025, respectively. Cash, cash equivalents, and restricted cash are measured at fair value within Level I of the fair value hierarchy on a recurring basis using observable inputs that reflect quoted prices for identical assets in active markets. The Company’s restricted cash includes cash deposited in escrow accounts. The Company has deposited cash in interest-bearing escrow accounts related to collateral for its operating leases, and general liability insurance obligations.
Prepaid expenses and other current assets consisted of the following:
| As of | |||||||||||||||||||||||
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Prepaid expenses | $ | $ | |||||||||||||||||||||
Other receivables | |||||||||||||||||||||||
| Inventory | |||||||||||||||||||||||
| Deferred costs, current | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total prepaid expenses and other current assets | $ | $ | |||||||||||||||||||||
Accrued expenses and other current liabilities consisted of the following:
| As of | ||||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||||||||
| Accrued payroll and employee related liabilities | $ | $ | ||||||||||||
| Cash due to promoters | ||||||||||||||
Capital expenditure accruals | ||||||||||||||
| Accrued legal fees | ||||||||||||||
| Other accrued expenses | ||||||||||||||
| Total Accrued expenses and other current liabilities | $ | $ | ||||||||||||
Income Taxes
During the nine months ended September 30, 2026 and 2025, the Company made income tax payments, net of refunds, of $15,734 and $2,279 , respectively.
32
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
All dollar amounts included in the following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are presented in thousands, except as otherwise noted.
This MD&A contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In this MD&A, there are statements concerning the future operating and future financial performance of Sphere Entertainment Co. and its direct and indirect subsidiaries (collectively, “we,” “us,” “our,” “Sphere Entertainment,” or the “Company”), including (i) the success of Sphere and The Sphere Experience and development of new immersive productions content, (ii) our plans to bring Sphere to Abu Dhabi, United Arab Emirates, under a franchise model, and to National Harbor, Maryland, (iii) our ability to reduce or defer certain discretionary capital projects, (iv) our plans for possible additional debt financing, and (v) MSG Networks subscriber declines. Words such as “expects,” “anticipates,” “believes,” “estimates,” “may,” “will,” “should,” “could,” “potential,” “continue,” “intends,” “plans,” and similar words and terms used in the discussion of future operating and future financial performance identify forward-looking statements. Investors are cautioned that such forward-looking statements are not guarantees of future performance, results or events and involve risks and uncertainties and that actual results or developments may differ materially from the forward-looking statements as a result of various factors. Factors that may cause such differences to occur include, but are not limited to:
•the substantial amount of debt we have incurred, the ability of our subsidiaries to make payments on, or repay or refinance, such debt under their respective credit facilities (including MSG Networks’ ability to make its quarterly principal amortization payments pursuant to its term loan facility), and, if unsuccessful, the implications thereof;
•our ability to make payments on our 3.50% Convertible Senior Notes (as defined below);
•our ability to obtain additional financing, to the extent required, on terms favorable to us or at all;
•the popularity of The Sphere Experience, as well as our ability to continue to attract brands, advertisers and marketing partners, audiences to attend, and artists, entertainers and athletes to perform at, residencies, concerts and other events at Sphere in Las Vegas and other future Sphere venues;
•the successful development of The Sphere Experience and related original immersive productions and the investments associated with such development, as well as investment in personnel, content and technology for Sphere;
•our ability to successfully provide design, construction and pre- and post-opening services to Sphere partners, including the Department of Culture and Tourism – Abu Dhabi (“DCT Abu Dhabi”) in connection with Sphere Abu DhabiTM;
•DCT Abu Dhabi’s ability to complete construction of Sphere Abu Dhabi;
•our ability to negotiate and execute definitive agreements for the financing and development of a Sphere venue at National Harbor, Maryland, as well as the receipt of certain governmental incentives and approvals from Prince George’s County and the State of Maryland related to the development and construction of the venue;
•our ability to construct, finance and operate new Sphere venues, and the investments, costs and timing associated with those efforts, including obtaining financing and governmental incentives, the impact of inflation and tariffs, and any construction delays and/or cost overruns;
•general economic conditions, especially in the Las Vegas and New York City metropolitan areas where we have significant business activities, including the impact of a recession or a government shutdown on our business;
•geopolitical risks, including the direct and indirect impacts of foreign wars and conflicts, including the conflict with Iran and related unrest in the Middle East, on international, domestic and local economies;
•our ability to successfully implement cost reductions and reduce or defer certain discretionary capital projects, if necessary;
•the level of our expenses and our operational cash burn rate, including our corporate expenses;
•the demand for MSG Networks programming among cable, satellite, fiber-optic and other platforms that distribute its networks (“Distributors”) and the number of subscribers thereto, and our ability to enter into and renew affiliation agreements with Distributors, including the terms of any such renewals, as well as the impact of consolidation among Distributors;
33
•our ability to successfully execute MSG Networks’ strategy for its direct-to-consumer (“DTC”) and authenticated streaming offering, MSG+ (which is currently available through the DAZN streaming product), the success of such offering and our ability to adapt to new content distribution platforms or changes in consumer behavior resulting from emerging technologies;
•the ability of our Distributors to minimize declines in subscriber levels;
•any adverse changes in the distribution of our networks or the impact of subscribers selecting Distributors’ packages that do not include our networks or distributors that do not carry our networks at all;
•MSG Networks’ ability to renew, renegotiate or replace its media rights agreements with professional sports teams and its ability to perform its obligations thereunder;
•the relocation or insolvency of professional sports teams with which we have a media rights agreement;
•the demand for advertising and marketing partnership offerings at Sphere and advertising sales and viewer ratings for our networks;
•competition, for example, from other venues (including the construction of new competing venues) and other regional sports and entertainment offerings;
•our ability to effectively manage any impacts of future pandemics or public health emergencies, as well as renewed actions taken in response by governmental authorities or certain professional sports leagues, including ensuring compliance with rules and regulations imposed upon our venues, to the extent applicable;
•the effect of any postponements or cancellations of events by third-parties or the Company as a result of future pandemics, due to operational challenges, force majeure events and other health and safety concerns;
•the extent to which attendance at Sphere in Las Vegas or future Sphere venues may be impacted by government actions, health concerns of potential attendees or reduced tourism;
•the security of our MSG Networks program signal and electronic data;
•the on-ice and on-court performance and popularity of the professional sports teams whose games we broadcast on our networks;
•changes in laws, guidelines, bulletins, directives, policies and agreements, and regulations under which we operate;
•any economic, social or political actions, such as boycotts, protests, work stoppages or campaigns by labor organizations, including the unions representing players and officials of the National Basketball Association (the “NBA”) and the National Hockey League (the “NHL”), artists or employees involved in our productions or other work stoppages that may impact us or our business partners;
•seasonal fluctuations and other variations in our operating results and cash flow from period to period;
•business, reputational and litigation risk due to a cyber or other security incident resulting in loss, disclosure or misappropriation of stored personal information, disruption of our Sphere or MSG Networks businesses or disclosure of confidential information or other breaches of our information security;
•activities or other developments (including pandemics, such as the COVID-19 pandemic) that discourage or may discourage congregation at prominent places of public assembly, including our venue;
•the level of our capital expenditures and other investments (and any impairment charges related thereto);
•the acquisition or disposition of assets or businesses and/or the impact of, and our ability to successfully pursue, acquisitions or other strategic transactions;
•our ability to successfully integrate acquisitions, new venues or new businesses into our operations and secure intellectual property rights in territories where such businesses operate and/or conduct business;
•the operating and financial performance of our strategic acquisitions and investments, including those we do not control, and the impact of goodwill and other impairments with respect to businesses (including as a result of changes to the MSG Networks business);
34
•our internal control environment and our ability to identify and remedy any future material weaknesses;
•the costs associated with, and the outcome of, litigation and other proceedings to the extent uninsured, including litigation or other claims against companies we invest in or acquire;
•the impact of governmental regulations or laws, changes in these regulations or laws or how those regulations and laws are interpreted, as well as our ability to maintain necessary permits, licenses and easements;
•the impact of sports league rules, regulations and/or agreements and changes thereto;
•financial community perceptions of our business, operations, financial condition and the industries in which we operate;
•the performance by our affiliated entities of their obligations under various agreements with us, as well as our performance of our obligations under such agreements and ongoing commercial arrangements;
•the tax-free treatment of the distribution of Madison Square Garden Entertainment Corp. (“MSG Entertainment”) from the Company in 2023 and the distribution from MSG Knickerbockers Corp. (formerly Madison Square Garden Sports Corp., “MSG Knicks”) in 2020; and
•the additional factors described under “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (the “SEC”) on February 12, 2026 (the “Form 10-K”).
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” in the Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. We cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Form 10-Q to conform these statements to actual results or to changes in our expectations.
Introduction
This MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s unaudited condensed consolidated financial statements (the “financial statements”) and accompanying notes thereto included in “— Item 1. Financial Statements” of this Form 10-Q, as well as the Company’s audited consolidated financial statements and notes thereto as of and for the period ended December 31, 2025 (the “Audited Consolidated Financial Statements”) included in the Form 10-K to help provide an understanding of our financial condition, changes in financial condition and results of operations. The Company was originally organized under the laws of the State of Delaware and, on June 4, 2025, redomesticated to the State of Nevada by conversion. The Company conducts substantially all of its business activities presented in the financial statements through Sphere Entertainment Group, LLC (“Sphere Entertainment Group”) and MSG Networks Inc. (together with its subsidiaries, “MSG Networks”), and each of their direct and indirect subsidiaries.
Business Overview
The Company is a leader in immersive experiences, technology and media and is comprised of two reportable segments, Sphere and MSG Networks. Sphere® is an experiential medium powered by advanced technologies, and MSG Networks operates two regional sports and entertainment networks, as well as a DTC and authenticated streaming product.
Sphere: This segment reflects Sphere, an experiential medium powered by advanced technologies that bring storytelling to a new level. The Company’s first Sphere venue opened in Las Vegas on September 29, 2023. The entire exterior surface of Sphere, referred to as the Exosphere®, is covered with nearly 580,000 square feet of fully programmable LED lighting, creating the largest LED screen in the world and an impactful display for artistic and branded content. Inside, the venue features a 16K x 16K interior display plane – the world’s highest-resolution LED screen that wraps up, over, and around the audience creating a fully immersive visual environment. In addition, Sphere’s advanced technologies include Sphere Immersive SoundTM – Sphere’s proprietary audio system – as well as haptic seating and 4D environmental effects. The venue can accommodate up to 20,000 guests and hosts a wide variety of
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events year-round, including The Sphere ExperienceTM, which features original immersive productions, as well as concerts and residencies from renowned artists, and marquee sports and brand events (formerly referred to as corporate events). Production efforts for Sphere events are supported by Sphere StudiosTM, an immersive content studio dedicated to creating multi-sensory experiences exclusively for Sphere, using proprietary technology, tools and production facilities. Sphere Studios is home to a team of creative, production, technology and software engineering experts who provide full in-house creative and production services. The studio campus in Burbank includes a 68,000-square-foot development facility, as well as Big Dome, a 28,000-square-foot, 100-foot high custom dome, with a quarter-sized version of the interior display plane at Sphere in Las Vegas, that serves as a specialized screening facility, production facility, and lab for content at Sphere.
The Company is focused on creating a global network of Spheres. The Company is working with DCT Abu Dhabi to bring Sphere to Abu Dhabi, United Arab Emirates. In May 2026, Yas Island was selected as the site for Sphere Abu Dhabi. DCT Abu Dhabi is funding construction, which is expected to be completed by the end of 2029. In January 2026, the Company, the State of Maryland, Prince George’s County, and Peterson Companies announced the Company’s intent to develop a new Sphere venue at National Harbor, Maryland.
MSG Networks: This segment is comprised of the Company’s regional sports and entertainment networks, MSG Network and MSG Sportsnet, as well as its DTC and authenticated streaming offering, MSG+ (which is currently available through the DAZN streaming product). MSG Networks serves the New York designated market area, as well as other portions of New York, New Jersey, Connecticut and Pennsylvania and features a wide range of sports content, including exclusive live local games and other programming of the New York Knicks of the NBA and the New York Rangers, New York Islanders, New Jersey Devils and Buffalo Sabres of the NHL, as well as significant coverage of the New York Giants and the Buffalo Bills of the National Football League.
Our MD&A is organized as follows:
Results of Operations. This section provides an analysis of our unaudited results of operations for the three and nine months ended September 30, 2026 and 2025 on both a (i) consolidated basis and (ii) segment basis.
Liquidity and Capital Resources. This section provides a discussion of our financial condition and liquidity, an analysis of our cash flows for the nine months ended September 30, 2026 and 2025, as well as certain contractual obligations and off-balance sheet arrangements.
Seasonality of Our Business. This section discusses the seasonal performance of our business.
Recently Issued Accounting Pronouncements and Critical Accounting Policies. This section discusses accounting pronouncements that have been adopted by the Company, recently issued accounting pronouncements not yet adopted by the Company, as well as the results of the Company’s impairment testing of goodwill. This section should be read together with our critical accounting policies, which are discussed in the Form 10-K under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recently Issued Accounting Pronouncements and Critical Accounting Estimates” and in the notes to the Audited Consolidated Financial Statements included therein.
Factors Affecting Operating Results
The operating results of our Sphere segment are largely dependent on our ability to continue to attract (i) audiences to The Sphere Experience, (ii) advertisers and marketing partners, and (iii) guests to attend, and artists, entertainers and athletes, to perform at, residencies, concerts and other events at our venue. The operating results of our MSG Networks segment are largely dependent on (i) the terms of MSG Networks’ affiliation agreements with Distributors (including renewals thereof), (ii) the number of subscribers of MSG Networks’ Distributors, (iii) the terms of MSG Networks’ media rights agreements (including renewals thereof), (iv) the ability of MSG Networks to make its required debt service payments, including quarterly principal amortization payments pursuant to the terms of its term loan facility, (v) the success of MSG+, MSG Networks’ DTC and authenticated streaming offering, and (vi) the advertising rates MSG Networks charges advertisers. Certain of these factors in turn depend on the popularity and/or performance of the professional sports teams whose games MSG Networks broadcasts on its networks.
Our Company’s future performance is dependent in part on general economic conditions and the effect of these conditions on our customers. Weak economic conditions may lead to lower tourism and lower demand for our entertainment offerings (including The Sphere Experience) and programming content, which would also negatively affect concession and merchandise sales, and could lead to lower levels of advertising, sponsorship and venue signage. Higher interest rates may lead to increased costs to finance and develop new Sphere venues and lower returns on the investment in those Sphere venues. Recent developments relating to geopolitical events, including, foreign wars and conflicts, as well as tariffs and higher interest rates, have intensified concerns over the global macroeconomic environment, which has resulted in a rise in volatility across financial markets and concerns over the prospect of a U.S. recession. These conditions may also affect the number of immersive productions, concerts, residencies and other events that take place in the future. An economic downturn could adversely affect our business and results of operations. The Company continues to
36
explore additional opportunities to expand our presence in the entertainment industry, both domestically and internationally. Any new investment may not initially contribute to operating income, but is intended to contribute to the success of the Company over time. Our results will also be affected by investments in, and the success of, new immersive productions.
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Condensed Consolidated Results of Operations
Comparison of the Three and Nine Months Ended September 30, 2026 versus the Three and Nine Months Ended September 30, 2025
The tables below set forth, for the periods presented, certain historical financial information.
| Three Months Ended | ||||||||||||||||||||||||||
| September 30, | Change | |||||||||||||||||||||||||
| 2026 | 2025 | Amount | Percentage | |||||||||||||||||||||||
| Revenues | $ | 274,260 | $ | 262,511 | $ | 11,749 | 4 | % | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||
| Direct operating expenses | 143,091 | 136,984 | 6,107 | 4 | % | |||||||||||||||||||||
| Selling, general and administrative expenses | 108,347 | 99,692 | 8,655 | 9 | % | |||||||||||||||||||||
| Depreciation and amortization | 83,374 | 84,102 | (728) | (1) | % | |||||||||||||||||||||
| Impairments and other losses, net | 177,553 | 98,844 | 78,709 | 80 | % | |||||||||||||||||||||
| Restructuring charges | 2,466 | 5,993 | (3,527) | (59) | % | |||||||||||||||||||||
| Operating loss | (240,571) | (163,104) | (77,467) | 47 | % | |||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||
| Interest income | 4,851 | 2,737 | 2,114 | 77 | % | |||||||||||||||||||||
| Interest expense | (8,011) | (9,399) | 1,388 | (15) | % | |||||||||||||||||||||
| Other expense, net | (1,131) | (328) | (803) | NM | ||||||||||||||||||||||
| Loss from continuing operations before income taxes | (244,862) | (170,094) | (74,768) | 44 | % | |||||||||||||||||||||
| Income tax benefit | 68,824 | 44,412 | 24,412 | 55 | % | |||||||||||||||||||||
| Net loss attributable to Sphere Entertainment Co.'s stockholders | $ | (176,038) | $ | (125,682) | $ | (50,356) | 40 | % | ||||||||||||||||||
| Nine Months Ended | ||||||||||||||||||||||||||
| September 30, | Change | |||||||||||||||||||||||||
| 2026 | 2025 | Amount | Percentage | |||||||||||||||||||||||
| Revenues | $ | 974,311 | $ | 825,762 | $ | 148,549 | 18 | % | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||
| Direct operating expenses | 463,801 | 426,625 | 37,176 | 9 | % | |||||||||||||||||||||
| Selling, general and administrative expenses | 369,257 | 326,984 | 42,273 | 13 | % | |||||||||||||||||||||
| Depreciation and amortization | 252,049 | 252,238 | (189) | — | % | |||||||||||||||||||||
| Impairments and other losses, net | 177,632 | 103,006 | 74,626 | 72 | % | |||||||||||||||||||||
| Restructuring charges | 6,203 | 8,781 | (2,578) | (29) | % | |||||||||||||||||||||
| Operating loss | (294,631) | (291,872) | (2,759) | 1 | % | |||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||
| (Loss) gain on extinguishment of debt | (2,071) | 346,092 | (348,163) | NM | ||||||||||||||||||||||
| Interest income | 13,588 | 10,699 | 2,889 | 27 | % | |||||||||||||||||||||
| Interest expense | (24,323) | (61,467) | 37,144 | (60) | % | |||||||||||||||||||||
| Other expense, net | (3,059) | (2,068) | (991) | 48 | % | |||||||||||||||||||||
| (Loss) income from continuing operations before income taxes | (310,496) | 1,384 | (311,880) | NM | ||||||||||||||||||||||
| Income tax benefit (expense) | 100,591 | (57,204) | 157,795 | NM | ||||||||||||||||||||||
| Net loss | (209,905) | (55,820) | (154,085) | NM | ||||||||||||||||||||||
| Less: Net income attributable to participating securities | 6,514 | — | 6,514 | NM | ||||||||||||||||||||||
| Net loss attributable to Sphere Entertainment Co.'s stockholders | $ | (216,419) | $ | (55,820) | $ | (160,599) | NM | |||||||||||||||||||
_________________
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
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The following is a summary of changes in our segments’ operating results for the three and nine months ended September 30, 2026 as compared to the three and nine months ended September 30, 2025, which are discussed below under “—Business Segment Results.”
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||
| Changes attributable to | Revenues | Direct operating expenses | Selling, general and administrative expenses | Depreciation and amortization | Impairments and other losses, net | Restructuring charges | Operating income (loss) | |||||||||||||||||||||||||||||||||||||
| Sphere segment | $ | 24,766 | $ | 5,102 | $ | 5,626 | $ | (479) | $ | (57) | $ | (2,893) | $ | 17,467 | ||||||||||||||||||||||||||||||
| MSG Networks segment | (13,017) | 1,005 | 3,029 | (249) | 78,766 | (634) | (94,934) | |||||||||||||||||||||||||||||||||||||
| $ | 11,749 | $ | 6,107 | $ | 8,655 | $ | (728) | $ | 78,709 | $ | (3,527) | $ | (77,467) | |||||||||||||||||||||||||||||||
| Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||
| Changes attributable to | Revenues | Direct operating expenses | Selling, general and administrative expenses | Depreciation and amortization | Impairments and other losses, net | Restructuring charges | Operating income (loss) | |||||||||||||||||||||||||||||||||||||
| Sphere segment | $ | 183,952 | $ | 45,171 | $ | 45,019 | $ | 369 | $ | (4,140) | $ | (2,685) | $ | 100,218 | ||||||||||||||||||||||||||||||
| MSG Networks segment | (35,403) | (7,995) | (2,746) | (558) | 78,766 | 107 | (102,977) | |||||||||||||||||||||||||||||||||||||
| $ | 148,549 | $ | 37,176 | $ | 42,273 | $ | (189) | $ | 74,626 | $ | (2,578) | $ | (2,759) | |||||||||||||||||||||||||||||||
Depreciation and amortization
For the three and nine months ended September 30, 2026, depreciation and amortization decreased $728 and $189, respectively, due primarily to certain assets becoming fully depreciated during the third quarter of 2026.
Impairments and other losses, net
During the three and nine months ended September 30, 2026, the Company recognized impairments and other losses, net of $177,553 and $177,632, respectively. During the three and nine months ended September 30, 2025, the Company recognized impairments and other losses, net of $98,844 and $103,006, respectively. The current year and prior year charges primarily relate to goodwill impairment charges for the MSG Networks reporting unit.
Restructuring charges
For the three and nine months ended September 30, 2026, the Company recorded restructuring charges of $2,466 and $6,203, respectively, primarily related to termination benefits provided for certain executives and employees during the three month period and termination benefits provided as part of a voluntary exit program the Company implemented during the nine month period. The Company recorded restructuring charges of $5,993 and $8,781, in the three and nine months ended September 30, 2025, respectively, related to termination benefits provided for certain executives and employees.
(Loss) gain on extinguishment of debt
For the nine months ended September 30, 2026, the Company recorded a loss on extinguishment of debt of $2,071, related to the write-off of deferred financing costs in connection with the partial repayment of its 2022 LV Sphere Term Loan Facility.
Interest income
For the three and nine months ended September 30, 2026, interest income increased $2,114 and $2,889, respectively, as compared to the prior year periods, primarily due to higher average cash and cash equivalent balances.
Interest expense
For the three months ended September 30, 2026, interest expense decreased $1,388 as compared to the prior year period, primarily due to lower average interest rates under the LV Sphere Term Loan Facility. For the nine months ended September 30, 2026, interest expense decreased $37,144 as compared to the prior year period, primarily due to the application of troubled debt restructuring for interest expense recognition for the MSGN Term Loan Facility as described in Note 10. Credit Facilities and Convertible Notes to the condensed consolidated financial statements included in “— Item 1. Financial Statements” of this Form 10-Q.
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Other expense, net
For the three and nine months ended September 30, 2026, other expense, net increased $803 and $991, respectively, as compared to the prior year periods, primarily due to higher losses from equity method investments and foreign exchange.
Income tax expense
In general, the Company is required to use an estimated annual effective tax rate to measure the tax benefit or expense recognized in an interim period. The estimated annual effective tax rate is revised on a quarterly basis.
For U.S. income tax purposes, the Company is required to recognize cancellation of debt income (“CODI”) on the difference between the face value of debt exchanged and the fair market value of new debt issued. On June 27, 2025, in connection with the execution of the A&R MSGN Credit Agreement, the Company recognized CODI of approximately $614,000, all of which was excluded from taxable income. In the nine months ended September 30, 2026, as a result of a reassessment of the amount applicable as CODI under these provisions, we reduced the amount recognized by approximately $80,000.
Income tax benefit for the three and nine months ended September 30, 2026 of $68,824 and $100,591, respectively, reflects an effective tax rate of 28% and 32%, respectively. The effective tax rate is higher than the statutory federal tax rate of 21% primarily due to discrete income tax benefit related to the impact of CODI (recorded in the six months ended June 30, 2026), excess tax benefit related to share based award compensation, partially offset by nondeductible officers’ compensation.
Income tax benefit for the three months ended September 30, 2025 of $44,412 reflects an effective tax rate of 26%. The effective tax rate is higher than the statutory federal tax rate of 21% primarily due to state and local taxes.
Income tax expense for the nine months ended September 30, 2025 of $57,204 reflects an effective tax rate that is higher than the statutory federal tax rate of 21% primarily due to discrete income tax expense related to the impact of CODI, partially offset by discrete income tax benefits from the reversal of the GAAP gain on extinguishment of debt and income tax benefits due to a decrease in the valuation allowance and state and local taxes.
The Company was notified in January 2026 that the Internal Revenue Service was commencing an audit of the federal income tax return for the fiscal year ended June 30, 2023. The Company does not expect the examination, when finalized, to result in material changes.
Adjusted operating income
The following is a reconciliation of operating loss to adjusted operating income (as defined in Note 15. Segment Information to the condensed consolidated financial statements included in “— Item 1. Financial Statements” of this Form 10-Q) for the three and nine months ended September 30, 2026 as compared to the prior year period:
| Three Months Ended | ||||||||||||||||||||||||||
| September 30, | Change | |||||||||||||||||||||||||
| 2026 | 2025 | Amount | Percentage | |||||||||||||||||||||||
| Operating loss | $ | (240,571) | $ | (163,104) | $ | (77,467) | 47 | % | ||||||||||||||||||
| Share-based compensation | 14,703 | 8,533 | 6,170 | 72 | % | |||||||||||||||||||||
| Depreciation and amortization | 83,374 | 84,102 | (728) | (1) | % | |||||||||||||||||||||
| Restructuring charges | 2,466 | 5,993 | (3,527) | (59) | % | |||||||||||||||||||||
| Impairments and other losses, net | 177,553 | 98,844 | 78,709 | 80 | % | |||||||||||||||||||||
Merger, debt work-out, and acquisition-related costs, including merger-related litigation expenses, net of insurance recoveries | 206 | 257 | (51) | (20) | % | |||||||||||||||||||||
| Amortization for capitalized cloud computing arrangement costs | 1,453 | 1,579 | (126) | (8) | % | |||||||||||||||||||||
| Remeasurement of deferred compensation plan liabilities | (32) | 160 | (192) | NM | ||||||||||||||||||||||
| Adjusted operating income | $ | 39,152 | $ | 36,364 | $ | 2,788 | 8 | % | ||||||||||||||||||
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| Nine Months Ended | ||||||||||||||||||||||||||
| September 30, | Change | |||||||||||||||||||||||||
| 2026 | 2025 | Amount | Percentage | |||||||||||||||||||||||
| Operating loss | $ | (294,631) | $ | (291,872) | $ | (2,759) | 1 | % | ||||||||||||||||||
| Share-based compensation | 46,335 | 48,978 | (2,643) | (5) | % | |||||||||||||||||||||
| Depreciation and amortization | 252,049 | 252,238 | (189) | — | % | |||||||||||||||||||||
| Restructuring charges | 6,203 | 8,781 | (2,578) | (29) | % | |||||||||||||||||||||
| Impairments and other losses, net | 177,632 | 103,006 | 74,626 | 72 | % | |||||||||||||||||||||
Merger, debt work-out, and acquisition-related costs, including merger-related litigation expenses, net of insurance recoveries | 8,499 | 7,530 | 969 | 13 | % | |||||||||||||||||||||
| Amortization for capitalized cloud computing arrangement costs | 3,769 | 4,737 | (968) | (20) | % | |||||||||||||||||||||
| Remeasurement of deferred compensation plan liabilities | 196 | 400 | (204) | (51) | % | |||||||||||||||||||||
| Adjusted operating income | $ | 200,052 | $ | 133,798 | $ | 66,254 | 50 | % | ||||||||||||||||||
________________
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
Adjusted operating income for the three months ended September 30, 2026 increased $2,788 as compared to the prior year period to $39,152. Adjusted operating income for the nine months ended September 30, 2026 increased $66,254 as compared to the prior year period to $200,052. The changes in adjusted operating income were attributable to the Company’s segments as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||
| Changes attributable to | September 30, 2026 | September 30, 2026 | ||||||||||||
| Sphere segment | $ | 15,333 | $ | 91,436 | ||||||||||
| MSG Networks segment | (12,545) | (25,182) | ||||||||||||
| $ | 2,788 | $ | 66,254 | |||||||||||
For a discussion of these variances, see “—Business Segment Results” below.
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Business Segment Results
Sphere
The tables below set forth, for the periods presented, certain historical financial information and a reconciliation of operating loss to adjusted operating income for the Company’s Sphere segment.
| Three Months Ended | ||||||||||||||||||||||||||
| September 30, | Change | |||||||||||||||||||||||||
| 2026 | 2025 | Amount | Percentage | |||||||||||||||||||||||
| Revenues | $ | 198,856 | $ | 174,090 | $ | 24,766 | 14 | % | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||
| Direct operating expenses | 83,835 | 78,733 | 5,102 | 6 | % | |||||||||||||||||||||
| Selling, general and administrative expenses | 98,323 | 92,697 | 5,626 | 6 | % | |||||||||||||||||||||
| Depreciation and amortization | 81,517 | 81,996 | (479) | (1) | % | |||||||||||||||||||||
| Impairments and other losses, net | — | 57 | (57) | NM | ||||||||||||||||||||||
| Restructuring charges | 2,148 | 5,041 | (2,893) | (57) | % | |||||||||||||||||||||
| Operating loss | $ | (66,967) | $ | (84,434) | $ | 17,467 | (21) | % | ||||||||||||||||||
| Reconciliation to adjusted operating income: | ||||||||||||||||||||||||||
| Share-based compensation | 14,073 | 12,409 | 1,664 | 13 | % | |||||||||||||||||||||
| Depreciation and amortization | 81,517 | 81,996 | (479) | (1) | % | |||||||||||||||||||||
| Restructuring charges | 2,148 | 5,041 | (2,893) | (57) | % | |||||||||||||||||||||
| Impairments and other losses, net | — | 57 | (57) | NM | ||||||||||||||||||||||
Merger, debt work-out, and acquisition-related costs, including merger-related litigation expenses, net of insurance recoveries | 206 | 257 | (51) | (20) | % | |||||||||||||||||||||
| Amortization for capitalized cloud computing arrangement costs | 1,453 | 1,579 | (126) | (8) | % | |||||||||||||||||||||
| Remeasurement of deferred compensation plan liabilities | (32) | 160 | (192) | NM | ||||||||||||||||||||||
| Adjusted operating income | $ | 32,398 | $ | 17,065 | $ | 15,333 | 90 | % | ||||||||||||||||||
| Nine Months Ended | ||||||||||||||||||||||||||
| September 30, | Change | |||||||||||||||||||||||||
| 2026 | 2025 | Amount | Percentage | |||||||||||||||||||||||
| Revenues | $ | 691,174 | $ | 507,222 | $ | 183,952 | 36 | % | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||
| Direct operating expenses | 270,791 | 225,620 | 45,171 | 20 | % | |||||||||||||||||||||
| Selling, general and administrative expenses | 330,509 | 285,490 | 45,019 | 16 | % | |||||||||||||||||||||
| Depreciation and amortization | 246,077 | 245,708 | 369 | — | % | |||||||||||||||||||||
| Impairments and other losses, net | 79 | 4,219 | (4,140) | (98) | % | |||||||||||||||||||||
| Restructuring charges | 5,144 | 7,829 | (2,685) | (34) | % | |||||||||||||||||||||
| Operating loss | $ | (161,426) | $ | (261,644) | $ | 100,218 | (38) | % | ||||||||||||||||||
| Reconciliation to adjusted operating income: | ||||||||||||||||||||||||||
| Share-based compensation | 44,259 | 50,316 | (6,057) | (12) | % | |||||||||||||||||||||
| Depreciation and amortization | 246,077 | 245,708 | 369 | — | % | |||||||||||||||||||||
| Restructuring charges | 5,144 | 7,829 | (2,685) | (34) | % | |||||||||||||||||||||
| Impairments and other losses, net | 79 | 4,219 | (4,140) | (98) | % | |||||||||||||||||||||
Merger, debt work-out, and acquisition-related costs, including merger-related litigation expenses, net of insurance recoveries | 8,499 | 3,596 | 4,903 | 136 | % | |||||||||||||||||||||
| Amortization for capitalized cloud computing arrangement costs | 3,769 | 4,737 | (968) | (20) | % | |||||||||||||||||||||
| Remeasurement of deferred compensation plan liabilities | 196 | 400 | (204) | (51) | % | |||||||||||||||||||||
| Adjusted operating income | $ | 146,597 | $ | 55,161 | $ | 91,436 | 166 | % | ||||||||||||||||||
________________
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NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
Revenues
For the three and nine months ended September 30, 2026, revenues increased $24,766 and $183,952, respectively, as compared to the prior year periods. The change in revenues was attributable to the following:
| Three Months Ended | Nine Months Ended | ||||||||||
| September 30, 2026 | September 30, 2026 | ||||||||||
| Increase in revenues from The Sphere Experience | $ | 13,071 | $ | 148,510 | |||||||
Increase in revenues from sponsorship, signage, Exosphere advertising and suite license fee revenues | 6,175 | 18,294 | |||||||||
| Increase in event-related revenues | 6,136 | 18,902 | |||||||||
| Other net decreases | (616) | (1,754) | |||||||||
| $ | 24,766 | $ | 183,952 | ||||||||
For the three months ended September 30, 2026, the increase in revenues for The Sphere Experience reflects an increase in the number of overall performances and, to a lesser extent, higher per-show revenue as compared to the prior year period due to a full quarter of the The Wizard of Oz at Sphere, which debuted on August 28, 2025. For the nine months ended September 30, 2026, the increase in revenues for The Sphere Experience primarily reflects higher per-show revenue as compared to the prior year period due to the impact of The Wizard of Oz at Sphere. In the current year period, The Sphere Experience reflected 241 and 670 performances of The Wizard of Oz at Sphere (which generated per-show revenue of approximately $469 and $583) for the three and nine months ended September 30, 2026, respectively. For the three months ended September 30, 2025, The Sphere Experience reflected 220 total performances, comprised of 130 performances of Postcard From Earth, 8 performances of V-U2 An Immersive Concert Film, and 82 performances of The Wizard of Oz at Sphere (with combined average per-show revenue of approximately $454). For the nine months ended September 30, 2025, The Sphere Experience reflected 635 performances, comprised of 494 performances of Postcard From Earth, 59 performances of V-U2 An Immersive Concert Film, and 82 performances of The Wizard of Oz at Sphere (with combined average per-show revenue of approximately $381).
For the three and nine months ended September 30, 2026, the increase in revenues from sponsorship, signage, Exosphere advertising and suite license fees reflects higher Exosphere advertising revenue and, to a lesser extent, higher sponsorship revenues (due to increased sales of existing sponsorship inventory) and suite license fee revenues.
For the three months ended September 30, 2026, the increase in event-related revenues mainly reflects higher revenues from concerts, primarily due to the impact of three additional concert residency shows held at Sphere in Las Vegas as compared to the prior year period.
For the nine months ended September 30, 2026, the increase in event-related revenues reflects (i) higher revenues from concerts due to the impact of fifteen additional concert residency shows held at Sphere in Las Vegas as compared to the prior year period, partially offset by lower per-concert revenue due to the mix of concerts as compared to the prior year period, and (ii) lower revenues from brand events due to one fewer brand event as compared to the prior year period, partially offset by higher per-event revenue.
Direct operating expenses
For the three and nine months ended September 30, 2026, direct operating expenses increased by $5,102 and $45,171, respectively, as compared to the prior year periods. The change in direct operating expenses was attributable to the following:
| Three Months Ended | Nine Months Ended | |||||||||||||
| September 30, 2026 | September 30, 2026 | |||||||||||||
| Increase in direct operating expenses for The Sphere Experience | $ | 7,646 | $ | 45,507 | ||||||||||
| Increase in expenses from sponsorship, signage, Exosphere advertising, and suite license fees | 897 | (683) | ||||||||||||
| Increase in venue operating expenses | 181 | 3,408 | ||||||||||||
| Decrease in Holoplot expenses | (2,628) | (7,435) | ||||||||||||
| (Decrease) increase in event-related direct operating expenses | (626) | 6,048 | ||||||||||||
| Other net decreases | (368) | (1,674) | ||||||||||||
| $ | 5,102 | $ | 45,171 | |||||||||||
For the three and nine months ended September 30, 2026, the increase in direct operating expenses for The Sphere Experience was
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primarily due to higher per-show expenses as compared to the prior year period due to the impact of The Wizard of Oz at Sphere, which debuted on August 28, 2025. In addition, for the three months ended September 30, 2026, the increase in direct operating expenses for The Sphere Experience was due to an increase in the overall number of performances. In the current year period, The Sphere Experience reflected 241 and 670 performances of The Wizard of Oz at Sphere (which incurred per-show direct operating expenses of approximately $176 and $193) for the three and nine months ended September 30, 2026, respectively. For the three months ended September 30, 2025, The Sphere Experience reflected 220 total performances, comprised of 130 performances of Postcard From Earth, 8 performances of V-U2 An Immersive Concert Film, and 82 performances of The Wizard of Oz at Sphere (with combined average direct operating expenses of $158 per show). For the nine months ended September 30, 2025, The Sphere Experience reflected 635 performances, comprised of 494 performances of Postcard From Earth, 59 performances of V-U2 An Immersive Concert Film, and 82 performances of The Wizard of Oz at Sphere (with combined average direct operating expenses of $132 per show).
For the nine months ended September 30, 2026, the increase in venue operating expenses was primarily related to an increase in employee compensation and benefits and repairs and maintenance expenses.
For the three months ended September 30, 2026, the decrease in event-related direct operating expenses primarily reflects lower per-concert expenses, partially offset by the impact of three additional residency shows held at Sphere in Las Vegas as compared to the prior year period. For the nine months ended September 30, 2026, the increase in event-related direct operating expenses reflects (i) higher expenses from concerts, due to fifteen additional concert residency shows held at Sphere in Las Vegas as compared to the prior year period, partially offset by lower per-concert expenses and (ii) higher expenses from brand events due to higher per-event expenses, partially offset by one fewer brand event as compared to the prior year period.
Selling, general and administrative expenses
For the three months ended September 30, 2026, selling, general, and administrative expenses increased $5,626 as compared to the prior year period, primarily due to (i) higher employee compensation and related benefits and (ii) other cost increases, partially offset by (iii) the impact of mark-to-market adjustments on certain share-based compensation awards as a result of the decrease in the Company’s stock price during the current year period. For the nine months ended September 30, 2026, selling, general, and administrative expenses increased $45,019 primarily due to (i) higher employee compensation and related benefits, (ii) the impact of mark-to-market adjustments on certain share-based compensation awards as a result of the appreciation in the Company’s stock price during the current year period, and (iii) an increase in litigation-related expenses associated with the Networks Merger in the current year period compared to the absence of costs associated with pursuing a work-out of the Prior MSGN Credit Facilities in the prior year period.
Impairments and other losses, net
During the nine months ended September 30, 2026, the Company recognized Impairments and other losses, net of $79. During the three and nine months ended September 30, 2025, the Company recognized Impairments and other losses, net of $57 and $4,219, respectively, primarily due to the recorded losses of $3,741 from the sale of the Company’s land in Stratford, London and fixed assets at Sphere in Las Vegas that were removed from the venue and were impaired.
Depreciation and amortization
For the three months ended September 30, 2026, depreciation and amortization decreased $479 as compared to the prior year period due to certain assets becoming fully depreciated. For the nine months ended September 30, 2026, depreciation and amortization increased $369 as compared to the prior year period primarily due to additional assets placed into service, which resulted in an increase in total property and equipment, gross, partially offset due to certain assets becoming fully depreciated in the current quarter.
Restructuring charges
For the three and nine months ended September 30, 2026, the Company recorded restructuring charges of $2,148 and $5,144, respectively, primarily related to termination benefits for certain executive and employees during the three month period and termination benefits provided as part of a voluntary exit program the Company implemented during the nine month period. The Company recorded restructuring charges of $5,041 and $7,829, in the three and nine months ended September 30, 2025, respectively, related to termination benefits provided for certain executives and employees.
Operating loss
For the three and nine months ended September 30, 2026, operating loss improved by $17,467 and $100,218, respectively, as compared to the prior year periods, primarily due to an increase in revenues, partially offset by an increase in selling, general and administrative expenses and direct operating expenses.
Adjusted operating income
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For the three and nine months ended September 30, 2026, adjusted operating income improved by $15,333 and $91,436, respectively, as compared to the prior year periods, primarily due to an increase in revenue, partially offset by an increase in direct operating expenses and selling, general and administrative expenses.
MSG Networks
The tables below set forth, for the periods presented, certain historical financial information and a reconciliation of operating loss to adjusted operating income for the Company’s MSG Networks segment.
| Three Months Ended | ||||||||||||||||||||||||||
| September 30, | Change | |||||||||||||||||||||||||
| 2026 | 2025 | Amount | Percentage | |||||||||||||||||||||||
| Revenues | $ | 75,404 | $ | 88,421 | $ | (13,017) | (15) | % | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||
| Direct operating expenses | 59,256 | 58,251 | 1,005 | 2 | % | |||||||||||||||||||||
| Selling, general and administrative expenses | 10,024 | 6,995 | 3,029 | 43 | % | |||||||||||||||||||||
| Depreciation and amortization | 1,857 | 2,106 | (249) | (12) | % | |||||||||||||||||||||
| Impairments and other losses, net | 177,553 | 98,787 | 78,766 | 80 | % | |||||||||||||||||||||
| Restructuring charges | 318 | 952 | (634) | (67) | % | |||||||||||||||||||||
| Operating loss | $ | (173,604) | $ | (78,670) | $ | (94,934) | 121 | % | ||||||||||||||||||
| Reconciliation to adjusted operating income: | ||||||||||||||||||||||||||
| Share-based compensation | 630 | (3,876) | 4,506 | NM | ||||||||||||||||||||||
| Depreciation and amortization | 1,857 | 2,106 | (249) | (12) | % | |||||||||||||||||||||
| Restructuring charges | 318 | 952 | (634) | (67) | % | |||||||||||||||||||||
| Impairments and other losses, net | 177,553 | 98,787 | 78,766 | 80 | % | |||||||||||||||||||||
| Adjusted operating income | $ | 6,754 | $ | 19,299 | $ | (12,545) | (65) | % | ||||||||||||||||||
| Nine Months Ended | ||||||||||||||||||||||||||
| September 30, | Change | |||||||||||||||||||||||||
| 2026 | 2025 | Amount | Percentage | |||||||||||||||||||||||
| Revenues | $ | 283,137 | $ | 318,540 | $ | (35,403) | (11) | % | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||
| Direct operating expenses | 193,010 | 201,005 | (7,995) | (4) | % | |||||||||||||||||||||
| Selling, general and administrative expenses | 38,748 | 41,494 | (2,746) | (7) | % | |||||||||||||||||||||
| Depreciation and amortization | 5,972 | 6,530 | (558) | (9) | % | |||||||||||||||||||||
| Impairments and other losses, net | 177,553 | 98,787 | 78,766 | 80 | % | |||||||||||||||||||||
| Restructuring charges | 1,059 | 952 | 107 | 11 | % | |||||||||||||||||||||
| Operating loss | $ | (133,205) | $ | (30,228) | $ | (102,977) | NM | |||||||||||||||||||
| Reconciliation to adjusted operating income: | ||||||||||||||||||||||||||
| Share-based compensation | 2,076 | (1,338) | 3,414 | NM | ||||||||||||||||||||||
| Depreciation and amortization | 5,972 | 6,530 | (558) | (9) | % | |||||||||||||||||||||
| Restructuring charges | 1,059 | 952 | 107 | 11 | % | |||||||||||||||||||||
| Impairments and other losses, net | 177,553 | 98,787 | 78,766 | 80 | % | |||||||||||||||||||||
Merger, debt work-out, and acquisition-related costs, including merger-related litigation expenses, net of insurance recoveries | — | 3,934 | (3,934) | NM | ||||||||||||||||||||||
| Adjusted operating income | $ | 53,455 | $ | 78,637 | $ | (25,182) | (32) | % | ||||||||||||||||||
________________
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
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Revenues
For the three and nine months ended September 30, 2026, revenues decreased $13,017 and $35,403, respectively, as compared to the prior year periods. The change in revenues was attributable to the following:
| Three Months Ended | Nine Months Ended | ||||||||||
| September 30, 2026 | September 30, 2026 | ||||||||||
| Decrease in distribution revenue | $ | (12,794) | $ | (24,716) | |||||||
| Decrease in advertising revenue | (302) | (11,173) | |||||||||
| Other net increases | 79 | 486 | |||||||||
| $ | (13,017) | $ | (35,403) | ||||||||
On December 31, 2024, MSG Networks’ affiliation agreement with Altice expired, subsequent to which the Company’s programming networks were not carried by Altice from January 1, 2025 through February 21, 2025. On February 22, 2025, MSG Networks reached a multi-year renewal of the affiliation agreement and Altice resumed carriage of the Company’s programming networks. Furthermore, MSG Networks has experienced significant ongoing subscriber declines and is expected to continue to experience significant subscriber declines in the future, which is expected to negatively impact MSG Networks’ revenue, operating income and AOI in future periods.
For the three and nine months ended September 30, 2026, distribution revenue decreased $12,794 and $24,716, respectively, primarily due to a decrease in total subscribers of approximately 15.5% and 16.0%, respectively (excluding the impact of the Altice non-carriage period in the prior year nine month period). In addition, the decrease in distribution revenue for the nine months ended September 30, 2026 was partially offset by the absence of revenues from Altice during the non-carriage period in the prior year period.
For the nine months ended September 30, 2026, advertising revenue decreased $11,173, primarily due to a lower number of live regular season and postseason professional sports telecasts.
Direct operating expenses
For the three months ended September 30, 2026, direct operating expenses increased by $1,005 and for the nine months ended September 30, 2026 direct operating expenses decreased by $7,995, as compared to the prior year periods. The change in direct operating expenses was attributable to the following:
| Three Months Ended | Nine Months Ended | |||||||||||||
| September 30, 2026 | September 30, 2026 | |||||||||||||
| Increase (decrease) in other programming and production content costs | $ | 984 | $ | (753) | ||||||||||
| Increase (decrease) in rights fees expense | 21 | (7,242) | ||||||||||||
| $ | 1,005 | $ | (7,995) | |||||||||||
On June 27, 2025, MSG Networks completed the restructuring of its credit facilities and amended certain of its media rights agreements to, among other things, effect a reduction in the annual media rights fees payable under such agreements effective as of January 1, 2025, discussed in further detail in Note 10. Credit Facilities and Convertible Notes and Note 14. Related Party Transactions to the condensed consolidated financial statements included in Part I of this Form 10-Q.
For the nine months ended September 30, 2026, rights fees expense decreased by $7,242, primarily attributable to reductions resulting from fewer NBA and NHL games made available to MSG Networks for exclusive broadcast and other cost decreases.
Selling, general and administrative expenses
For the three months ended September 30, 2026, selling, general and administrative expenses increased $3,029 as compared to the prior year period, primarily due to (i) higher employee compensation and related benefits of $3,500, (ii) higher professional fees of $662, and (iii) other cost increases, partially offset by (iv) lower advertising and marketing costs of $1,586.
For the nine months ended September 30, 2026, selling, general and administrative expenses decreased $2,746 as compared to the prior year period primarily due to lower professional fees of $2,629, mainly due to the absence of costs associated with pursuing a work-out of the Prior MSGN Credit Facilities with its syndicate of lenders recorded in the prior year period, partially offset by an increase in employee compensation and related benefits of $643.
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Impairments and other losses, net
During the three and nine months ended September 30, 2026, the Company recognized impairments and other losses, net of $177,553. During the three and nine months ended September 30, 2025, the Company recognized impairments and other losses, net of $98,787. The current year and prior year charges primarily relate to goodwill impairment charges for the MSG Networks reporting unit.
Operating loss
For the three months ended September 30, 2026, operating loss increased by $94,934 as compared to the prior year period, primarily due to an increase in Impairments and other losses, net, and to a lesser extent, due to a decrease in revenues.
For the nine months ended September 30, 2026, operating loss increased by $102,977 as compared to the prior year period, primarily due to an increase in Impairments and other losses, net, and to a lesser extent due to a decrease in revenues, partially offset by lower direct operating expenses, and lower selling, general and administrative expenses.
Adjusted operating income
For the three months ended September 30, 2026, adjusted operating income decreased by $12,545 as compared to the prior year period, primarily due to a decrease in revenues.
For the nine months ended September 30, 2026, adjusted operating income decreased by $25,182 as compared to the prior year period, due to a decrease in revenues, partially offset by lower direct operating expenses and lower selling, general and administrative expenses.
Liquidity and Capital Resources
Sources and Uses of Liquidity
The Company’s primary sources of liquidity are cash and cash equivalents, cash flows from the operations of our businesses and available borrowings under the 2026 LV Sphere Revolving Credit Facility (as defined and described below). The Company’s uses of cash over the next 12 months and thereafter are expected to be substantial and include working capital-related items (including funding its operations and satisfying its accounts payable and accrued liabilities), capital spending (including the creation of additional original content for Sphere and costs to develop a new Sphere venue at National Harbor, Maryland, as described below, and new Sphere venues), required debt service payments (including principal amortization payments and excess cash flow payments pursuant to the MSGN Term Loan Facility), and investments, including in connection with its Sphere initiative, and related loans and advances that the Company may fund from time to time. The Company may also use cash to repurchase its common stock. The Company’s decisions as to the use of its available liquidity will be based upon the ongoing review of the funding needs of its businesses, the optimal allocation of cash resources, and the timing of cash flow generation. To the extent that the Company desires to access alternative sources of funding through the capital and credit markets, market conditions could adversely impact its ability to do so at that time.
As of September 30, 2026, the Company’s unrestricted cash and cash equivalents balance was $527,197, as compared to $550,974 as of June 30, 2026. Included in unrestricted cash and cash equivalents as of September 30, 2026 was (1) $218,773 in advance cash proceeds primarily from ticket sales, a portion of which the Company expects to pay to artists and promoters, and (2) $26,100 of cash and cash equivalents at MSG Networks, which were not available for distribution to the Company pursuant to the terms of the A&R MSGN Credit Agreement. In addition, as of September 30, 2026, the Company had $36,384 of Accounts payable and $372,543 of Accrued expenses and other current liabilities, including $84,270 of capital expenditure accruals primarily related to Sphere construction (a significant portion of which is in dispute). The balance of the Company’s total debt outstanding as of September 30, 2026 was $768,430. We believe we have sufficient liquidity from cash and cash equivalents, cash flows from operations and available borrowings under the 2026 LV Sphere Revolving Credit Facility to fund our operations and service debt payments under our credit facilities for the foreseeable future.
The Company’s ability to have sufficient liquidity to fund its operations, refinance its indebtedness, fund capital spending and make investments, including in connection with its Sphere initiative, is dependent on the ability of Sphere to generate significant positive cash flow. Although Sphere has been embraced by guests, artists, promoters, advertisers and marketing partners, and the Company anticipates that Sphere will generate substantial revenue and adjusted operating income on an annual basis over time, there can be no assurance that guests, artists, promoters, advertisers and marketing partners will continue to embrace this platform. Original immersive productions, such as Postcard From Earth, V-U2 An Immersive Concert Film and The Wizard of Oz at Sphere, have not been previously pursued on the scale of Sphere, which increases the uncertainty of our operating expectations. To the extent that the Company’s efforts do not result in viable shows, or to the extent that any such productions do not achieve expected levels of popularity among audiences, the Company may not generate the cash flows from operations necessary to fund its operations. To the
47
extent the Company does not realize expected cash flows from operations from Sphere, it would have to take several actions to improve its financial flexibility and preserve liquidity, including significant reductions in both labor and non-labor expenses as well as reductions and/or deferrals in capital spending and investments, including in connection with its Sphere initiative. Therefore, while the Company currently believes it will have sufficient liquidity from cash and cash equivalents, cash flows from operations (including expected cash flows from operations from Sphere) and available borrowings under the 2026 LV Sphere Revolving Credit Facility to fund its operations, no assurance can be provided that its liquidity will be sufficient in the event any of the preceding uncertainties facing Sphere are realized over the next 12 months. See “Part I —Item 1A. Risk Factors — Risks Related to Our Indebtedness, Financial Condition, and Internal Control — We Have Substantial Indebtedness and Are Highly Leveraged, Which Could Adversely Affect Our Business” in the Form 10-K.
For additional information regarding the Company’s capital expenditures, including those related to Sphere in Las Vegas, see the Company’s statements of cash flows included in the condensed consolidated financial statements in Part I — Item 1. of this Form 10-Q.
On March 31, 2020, the Company’s Board of Directors authorized a share repurchase program to repurchase up to $350,000 of the Company’s Class A Common Stock. The program was re-authorized by the Company’s Board of Directors on March 29, 2023. Under the authorization, shares of Class A Common Stock may be purchased from time to time in open market or private transactions, block trades or such other manner as the Company may determine, in accordance with applicable insider trading and other securities laws and regulations. The timing and amount of purchases will depend on market conditions and other factors. During the nine months ended September 30, 2026, the Company did not engage in any share repurchase activities under its share repurchase program. As of September 30, 2026, the Company had approximately $300,000 remaining available for repurchases of the Company’s Class A Common Stock.
Sphere
The Company opened Sphere in Las Vegas in September 2023. See “Part I — Item 1. Our Business — Sphere” in the Form 10-K. The venue has a number of revenue streams, including The Sphere Experience (which includes original immersive productions), advertising and marketing partnerships, concert residencies, brand events and marquee sporting events, each of which the Company expects to become significant over time. As a result, we anticipate that Sphere in Las Vegas will generate substantial revenue and adjusted operating income on an annual basis over time.
On October 15, 2024, the Company and DCT Abu Dhabi announced that they would work together to bring Sphere to Abu Dhabi, United Arab Emirates. On July 25, 2025, Sphere Entertainment Group and DCT Abu Dhabi finalized and entered into a Franchise Agreement, a Joint Development and Partnership Agreement and a Pre-Opening Services Agreement relating to the construction, development and operation of Sphere Abu Dhabi. Under the terms of the Franchise Agreement, DCT Abu Dhabi has agreed to pay Sphere Entertainment Group a franchise initiation fee (a portion of which has been received) and royalties in connection with DCT Abu Dhabi’s use of Sphere Entertainment Group’s intellectual property (including The Sphere Experience content and other creative content). Pursuant to the terms of the Pre-Opening Services Agreement, Sphere Entertainment Group is providing pre-construction and construction related services to DCT Abu Dhabi. Following the venue’s opening, the Company will receive annual royalty fees for creative and artistic content licensed by Sphere Entertainment Group, such as The Sphere Experience content, and use of Sphere’s intellectual property and other ancillary content. In addition, prior to the opening of Sphere Abu Dhabi, Sphere Entertainment Group and DCT Abu Dhabi expect to enter into an Operational Services Agreement, pursuant to which Sphere Entertainment Group will provide to be agreed upon operational services to DCT Abu Dhabi prior to and following the opening of Sphere Abu Dhabi. In May 2026, Yas Island was selected as the site for Sphere Abu Dhabi. DCT Abu Dhabi is funding construction, which is expected to be completed by end of 2029.
In January 2026, the Company, the State of Maryland, Prince George’s County, and Peterson Companies announced the intent to develop a new Sphere venue at National Harbor, Maryland. Any construction, development, financing and operation of a Sphere venue at National Harbor is contingent upon, among other things, negotiation and execution of definitive agreements, as well as receipt of certain governmental incentives and approvals from Prince George’s County and the State of Maryland.
The Company will continue to explore additional domestic and international markets where it believes Sphere venues can be successful. The Company’s intention for any future venues is to utilize several options, such as joint ventures, equity partners, a managed venue or franchise model, sale-leaseback arrangements, build-to-suit ground lease financing or similar arrangements and
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debt financing, which are expected to include guarantees thereof by Sphere Entertainment Co. or its subsidiaries.
Financing Agreements
See Note 10. Credit Facilities and Convertible Notes to the condensed consolidated financial statements included in Part I — Item 1. of this Form 10-Q for discussions of the Company’s debt obligations and various financing arrangements.
MSGN Term Loan Facility
General. MSGN Holdings, L.P. (“MSGN L.P.”), MSGN Eden, LLC (“MSGN Eden”), Regional MSGN Holdings LLC (“Regional MSGN”), and certain subsidiaries of MSGN L.P. had senior secured credit facilities pursuant to a credit agreement (as amended and restated on October 11, 2019, and as further amended from time to time prior to June 27, 2025, the “Prior MSGN Credit Agreement”) consisting of (i) an initial $1,100,000 term loan facility and (ii) a $250,000 revolving credit facility (together, the “Prior MSGN Credit Facilities”). The outstanding principal amount under the Prior MSGN Credit Agreement of $829,125 matured without repayment on October 11, 2024, and an event of default occurred pursuant to the Prior MSGN Credit Agreement due to MSGN L.P.’s failure to make payment on the outstanding principal amount on the maturity date.
On June 27, 2025, MSG Networks, MSGN L.P., MSGN Eden, Regional MSGN, Rainbow Garden Corp. and certain subsidiaries of MSGN L.P. entered into a second amended and restated credit agreement (the “A&R MSGN Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (the “MSGN Lenders”). The A&R MSGN Credit Agreement amended and restated the Prior MSGN Credit Agreement in its entirety.
Pursuant to the A&R MSGN Credit Agreement, the Prior MSGN Credit Facilities were replaced with the MSGN Term Loan Facility, which had an original principal amount of $210,000 and matures on December 31, 2029. The outstanding balance under the MSGN Term Loan Facility was $105,632 as of September 30, 2026 (the carrying amount of the debt under the trouble debt restructuring guidance is $241,656).
Interest Rates. Borrowings under the A&R MSGN Credit Agreement bear interest at a rate per annum, which at the option of MSGN L.P., may be equal to either (i) adjusted Term SOFR (i.e., Term SOFR as defined in the A&R MSGN Credit Agreement, plus 0.10%) plus 5.00% or (ii) Alternate Base rate, as defined in the A&R MSGN Credit Agreement, plus 4.00%. Upon a payment default in respect of principal, interest or other amounts due and payable under the A&R MSGN Credit Agreement or related loan documents, default interest will accrue on all overdue amounts at an additional rate of 2.00% per annum. The interest rate on the MSGN Term Loan Facility as of September 30, 2026 was 9.00%.
Covenants. The A&R MSGN Credit Agreement and the related security agreement contain certain customary representations and warranties, and certain affirmative covenants and events of default. The A&R MSGN Credit Agreement contains significant restrictions (and in some cases prohibitions) on the ability of MSGN L.P. and the MSGN Subsidiary Guarantors (as defined below) to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the A&R MSGN Credit Agreement, including without limitation the following: (i) incurring additional indebtedness and contingent liabilities; (ii) creating or granting liens on certain assets; (iii) making investments, loans or advances in or to other persons; (iv) paying dividends and distributions or repurchasing capital stock; (v) changing its lines of business; (vi) engaging in certain transactions with affiliates; (vii) amending specified agreements; (viii) with respect to restricted subsidiaries, issuing shares of stock such that MSGN L.P.’s ownership of any such restricted subsidiary is reduced; (ix) merging, dissolving, liquidating, consolidating, or disposing of all or substantially all of its assets; (x) making certain dispositions; (xi) making certain changes to its accounting practices; (xii) entering into agreements that restrict the granting of liens; (xiii) requesting any borrowing the proceeds of which are used in violation of anti-corruption laws or sanctions; (xiv) engaging in a liability management transaction; and (xv) limiting certain operating expenses incurred by MSGN L.P. and the MSGN Guarantors (as defined below). The MSGN Holdings Entities are subject to the restrictions described in the foregoing clauses (iv) and (xv), as well as customary passive holding company covenants.
Principal Repayments. Subject to customary notice and minimum amount conditions, MSGN L.P. may voluntarily prepay outstanding loans under the A&R MSGN Credit Agreement at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Term Benchmark (as defined in the A&R MSGN Credit Agreement) loans). The MSGN Term Loan Facility has a fixed amortization of $10,000 per quarter, which commenced on September 30, 2025. During the nine months ended September 30, 2026, MSGN L.P. made fixed amortization payments of $30,000. MSGN L.P. is required to make mandatory prepayments pursuant to a mandatory cash sweep, determined at the end of each fiscal quarter, that requires 100% of MSGN L.P.’s and the MSGN Subsidiary Guarantors’ excess balance sheet cash over certain thresholds (subject to certain exclusions) to be used to repay the principal amount outstanding. In October 2026, MSGN L.P. made a $862 mandatory cash sweep payment based on excess cash as of September 30, 2026. MSGN L.P. is further required to make mandatory prepayments in certain circumstances, including from the net cash proceeds of certain dispositions of assets or casualty insurance and/or condemnation awards (subject to a threshold
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below which payments are not required, as well as certain reinvestment, repair and replacement rights) and upon the incurrence of indebtedness (subject to certain exceptions).
In connection with the execution of the A&R MSGN Credit Agreement, the Limited Partnership Agreement of MSGN L.P. was amended to provide for the issuance of contingent interest units (the “Contingent Interest Units”) to the MSGN Lenders. Beginning with the fiscal calendar year-end following the repayment in full of the MSGN Term Loan Facility, the Contingent Interest Units entitle the MSGN Lenders to receive annual payments in an amount equal to 50% of the difference between MSGN L.P.’s balance sheet cash (subject to certain exclusions) and certain minimum cash balances, specified with respect to the applicable measurement date, until the earlier of (i) December 31, 2029 and (ii) payment of $100,000 in the aggregate to the MSGN Lenders. The Contingent Interest Units are also entitled to receive 50% of the proceeds of a merger and/or acquisition event related to MSG Networks and its subsidiaries occurring prior to December 31, 2029, subject to an aggregate cap of $100,000 considered together with the annual payments of excess cash described in the previous sentence.
Guarantors and Collateral. All obligations under the A&R MSGN Credit Agreement are guaranteed by the MSGN Holdings Entities and MSGN L.P.’s direct and indirect domestic subsidiaries that are not designated as unrestricted subsidiaries (the “MSGN Subsidiary Guarantors” and, together with the MSGN Holdings Entities, the “MSGN Guarantors”). All obligations under the A&R MSGN Credit Agreement, including the guarantees of those obligations, are secured by certain of the assets of MSGN L.P. and each MSGN Guarantor (collectively, “MSGN Collateral”), including, but not limited to, a pledge of the equity interests in MSGN L.P. held directly by the MSGN Holdings Entities and the equity interests in each MSGN Subsidiary Guarantor held directly or indirectly by MSGN L.P. Sphere Entertainment Co., Sphere Entertainment Group and the subsidiaries of Sphere Entertainment Group (collectively, the “Non-Credit Parties”) are not legally obligated to repay the outstanding borrowings under the MSGN Term Loan Facility, nor are the assets of the Non-Credit Parties pledged as security under the MSGN Term Loan Facility.
2026 LV Sphere Facilities
General. On January 29, 2026, MSG Las Vegas, LLC (“MSG LV”) entered into a credit agreement with JPMorgan Chase Bank, N.A., as Administrative Agent and L/C Issuer, and the lenders party thereto, which refinanced in full the 2022 LV Sphere Term Loan Facility (as defined and described in Note 10. Credit Facilities and Convertible Notes to the condensed consolidated financial statements included in Part I — Item 1. of this Form 10-Q). The new credit agreement provides for (i) a $275,000 senior secured term loan facility (the “2026 LV Sphere Term Loan Facility”), the proceeds of which were used to refinance the 2022 LV Sphere Term Loan Facility, and (ii) a senior secured revolving credit facility in the maximum principal amount of $275,000 (the “2026 LV Sphere Revolving Credit Facility” and collectively, the “2026 LV Sphere Facilities”), the proceeds of which are available to be used for working capital and general corporate purposes, including distributions to Sphere Entertainment Group. All obligations under the 2026 LV Sphere Facilities are guaranteed by Sphere Entertainment Group. None of Sphere Entertainment Co., MSG Networks, MSGN L.P. or any of the subsidiaries of MSGN L.P. are parties to the 2026 LV Sphere Facilities.
Financial Covenants. The 2026 LV Sphere Facilities include financial covenants requiring MSG LV to maintain a minimum debt service coverage ratio of 2.50:1.00 and a maximum total leverage ratio of 3.50:1.00. Both covenants are tested quarterly based on the four consecutive fiscal quarters of MSG LV then most recently ended. As of September 30, 2026, MSG LV was in compliance with the financial covenants of the 2026 LV Sphere Facilities.
Principal Repayments. The 2026 LV Sphere Facilities will mature on January 29, 2031. Commencing with the fiscal quarter ending March 31, 2028, the principal obligations under the 2026 LV Sphere Term Loan Facility will be subject to amortization payments of 5% per annum, paid in quarterly installments, with the remainder of the term loans due at maturity. Under certain circumstances, MSG LV is required to make mandatory prepayments on the loans, including prepayments in an amount equal to the net cash proceeds of casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights), subject to certain exceptions.
Interest Rates. Borrowings under the 2026 LV Sphere Facilities bear interest at a floating rate, which at the option of MSG LV may be either (i) Term SOFR (as defined in the 2026 LV Sphere Facilities) plus a margin that ranges from 2.50% to 3.00% based on MSG LV’s total leverage ratio or (ii) the Alternative Base Rate (as defined in the 2026 LV Sphere Facilities) plus a margin that ranges from 1.50% to 2.00% based on MSG LV’s total leverage ratio. The interest rate on the 2026 LV Sphere Term Loan Facility as of September 30, 2026 was 6.40%.
Guarantors and Collateral. All obligations under the 2026 LV Sphere Facilities are guaranteed by Sphere Entertainment Group. All obligations under the 2026 LV Sphere Facilities, including the guarantees of those obligations, are secured by all of the assets of MSG LV, including, but not limited to, MSG LV’s leasehold interest in the land on which the Sphere in Las Vegas is located and a pledge of the equity interests in MSG LV held directly by Sphere Entertainment Group.
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Covenants. In addition to the financial covenants described above, the 2026 LV Sphere Facilities and the related guaranty and security and pledge agreements contain certain customary representations and warranties, affirmative and negative covenants and events of default. The 2026 LV Sphere Facilities contain certain restrictions on the ability of MSG LV to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the 2026 LV Sphere Facilities, including the following: (i) incurring additional indebtedness; (ii) incurring liens on its assets; (iii) making investments, loans or advances in or to other persons; (iv) paying dividends and distributions to the extent a default or event of default under the 2026 LV Sphere Facilities is in effect at such time or the debt service reserve account is not funded to the extent required; (v) changing its lines of business; (vi) engaging in certain transactions with affiliates; (vii) amending organizational documents; (viii) merging or consolidating; and (ix) making certain dispositions.
3.50% Convertible Senior Notes
On December 8, 2023, the Company completed a private unregistered offering of $258,750 in aggregate principal amount of its 3.50% Convertible Senior Notes due 2028 (the “3.50% Convertible Senior Notes”), which amount includes the full exercise of the initial purchasers’ option to purchase additional 3.50% Convertible Senior Notes. See Note 14. Credit Facilities and Convertible Notes to the Audited Consolidated Financial Statements included in the Form 10-K, for details on the 3.50% Convertible Senior Notes.
Letters of Credit
The Company uses letters of credit to support its business operations. The Company has letters of credit relating to operating leases which are supported by cash and cash equivalents that are classified as restricted.
Contractual Obligations
See Note 9. Commitments and Contingencies to the condensed consolidated financial statements included in “— Item 1. Financial Statements” of this Form 10-Q.
Cash Flow Discussion
As of September 30, 2026, cash, cash equivalents and restricted cash totaled $527,324, as compared to $521,264 as of December 31, 2025. The following table summarizes the Company’s cash flow activities for the nine months ended September 30, 2026 and 2025:
| Nine Months Ended | ||||||||||||||
| September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Net cash provided by operating activities | $ | 159,468 | $ | 63,127 | ||||||||||
| Net cash (used in) provided by investing activities | (63,152) | 11,382 | ||||||||||||
| Net cash used in financing activities | (90,034) | (192,080) | ||||||||||||
| Effect of exchange rates on cash, cash equivalents and restricted cash | (222) | 192 | ||||||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | $ | 6,060 | $ | (117,379) | ||||||||||
Operating Activities
Net cash provided by operating activities for the nine months ended September 30, 2026 increased by $96,341 as compared to the prior year primarily due to changes in the Company’s operating results increasing by $126,463 being partially offset by cash used in operating activities as a result of changes in assets and liabilities of $30,122.
The Company generated a net loss of $209,905 in the current year period, compared to a net loss of $55,820 in the prior year period, as adjusted by non-cash net inflows of $405,398 in the current year period, compared to $124,850 in non-cash net inflows in the prior year period. Refer to “— Business Segment Results” for further detail pertaining to the Company’s operating results.
Net cash used in operating activities attributable to changes in assets and liabilities for the nine months ended September 30, 2026 and 2025 equaled $36,025 and $5,903, respectively, a net increase of $30,122.
The primary drivers of this net increase in cash used in operating activities were related to (i) Deferred revenue of $72,914, primarily due to cash proceeds from the debut of The Wizard of Oz at Sphere in August 2025, with no prior Experiences compared with the normalization of deferred revenue in the current year period, (ii) Accrued and other current and non-current liabilities of $27,864, primarily due to the settlement of capital expenditure accruals and (iii) Related party receivables and payables, net of $13,433 due to the timing of related party settlements.
These increases in cash used in operating activities were partially offset by cash provided by operating activities related to (i) Prepaid expenses and other current and non-current assets of $42,022, primarily due lower deferred production cost spending related to
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Experiences, and the amortization of deferred production costs related to residencies and brand events (ii) Accounts receivable of $29,053, primarily due to the timing of billings and cash collections and (iii) Accounts payable of $14,610 due to the timing of payments to vendors.
Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2026 increased by $74,534 as compared to the prior year period primarily due to the $48,757 in cash received from the sale of land in Stratford, London in the prior period and higher capital expenditures in the current year period of $25,619.
Financing Activities
Net cash used in financing activities for the nine months ended September 30, 2026 decreased by $102,046 as compared to the prior year period, primarily due to (i) a $58,064 decrease in principal repayments of debt in the current year period, (ii) a $50,040 decrease due to a stock repurchase that occurred in the prior year, (iii) $10,881 increase in cash proceeds from the exercise of stock options, partially offset by (iv) $16,939 increase of taxes paid in lieu of shares issued for equity based compensation awards.
Seasonality of Our Business
Our MSG Networks segment generally earns a higher share of its annual revenues in the first and fourth quarters of the year as a result of MSG Networks’ advertising revenue being largely derived from the sale of inventory in its live NBA and NHL professional sports programming.
Recently Issued Accounting Pronouncements and Critical Accounting Estimates
Recently Issued and Adopted Accounting Pronouncements
See Note 2. Accounting Policies to the condensed consolidated financial statements included in “— Item 1. Financial Statements” of this Form 10-Q, for discussion of recently issued and adopted accounting pronouncements.
Critical Accounting Estimates
There have been no material changes to the Company’s critical accounting policies. The following discussion has been included to provide the results of our annual impairment testing of goodwill performed during the quarterly period ended September 30, 2026.
Impairment of Goodwill
Goodwill is tested annually for impairment as of August 31 and at any time upon the occurrence of certain events or substantive changes in circumstances. The Company performs its goodwill impairment test at the reporting unit level. At the time of the annual impairment test and as of September 30, 2026, the Company had two reportable segments and two reporting units, Sphere and MSG Networks, consistent with the way management makes decisions and allocates resources to the business.
The goodwill balance reported on the Company’s condensed consolidated balance sheets as of September 30, 2026 by reporting unit was as follows:
| As of | |||||
| September 30, 2026 | |||||
| Sphere | $ | 46,864 | |||
| MSG Networks | 33,705 | ||||
| Total Goodwill | $ | 80,569 | |||
The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If the Company can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company would not need to perform a quantitative impairment test for that reporting unit. If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, a quantitative goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The estimates of the fair value of the Company’s reporting units are primarily determined using discounted cash flows, comparable market transactions or other acceptable valuation techniques, including the cost approach. These valuations are based on estimates and assumptions including projected future cash flows, discount rates, cost-based assumptions, determination of appropriate market comparables and the determination of whether a premium or discount should be applied to comparables.
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Significant judgments inherent in a discounted cash flow analysis include the selection of the appropriate discount rate, the estimate of the amount and timing of projected future cash flows and identification of appropriate continuing growth rate assumptions. The discount rates used in the analysis are intended to reflect the risk inherent in the projected future cash flows.
In the event a quantitative goodwill impairment assessment is performed, the reporting unit’s amortizable intangible assets and other long-lived assets are first tested for impairment. In doing so, amortizable intangible assets and other long-lived assets are grouped and evaluated for impairment at the lowest level for which there are identifiable cash flows that are independent from cash flows from other assets and liabilities. In determining whether an impairment of long-lived assets has occurred, the Company considers both qualitative and quantitative factors. The quantitative analysis involves estimating the undiscounted future cash flows directly related to that asset group and comparing the resulting value against the carrying value of the asset group. If the carrying value of the asset group is greater than the sum of the undiscounted future cash flows, an impairment loss is recognized for the difference between the carrying value of the asset group and its estimated fair value, before recording any impairment of goodwill. The amount of any remaining goodwill impairment loss is subsequently measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.
The Company elected to perform the qualitative assessment of impairment for its Sphere reporting unit during the quarterly period ended September 30, 2026. This assessment considered qualitative factors such as:
•macroeconomic conditions;
•industry and market considerations;
•cost factors;
•overall financial performance of the reporting units;
•other relevant company-specific factors such as changes in management, strategy or customers; and
•relevant reporting unit specific events such as changes in the carrying amount of net assets.]
No impairment of Sphere’s goodwill was identified as a result of this assessment as the Company concluded that the reporting unit had a sufficient safety margin, representing the excess of the estimated fair value of the reporting unit, derived from the most recent quantitative assessments, less its respective carrying value (including goodwill). The Company believes that if the fair value of the reporting unit exceeds its carrying value by greater than 10%, a sufficient safety margin has been realized.
For the Company’s MSG Networks reporting unit, the Company performed a quantitative assessment of impairment. In doing so, the Company estimated the fair value of the MSG Networks reporting unit based on a discounted cash flow model (income approach). This approach relied on numerous assumptions and judgments within the model that were subject to various risks and uncertainties. Principal assumptions utilized, all of which are considered Level III inputs under the fair value hierarchy, include the Company’s estimates of future revenue, estimates of future operating cost, margin assumptions, terminal growth rates and the discount rate applied to estimate future cash flows. The assumptions utilized were subject to a high degree of judgment and complexity, particularly in light of economic and operational uncertainty relating to the MSG Networks business.
Based upon the results of the Company’s annual quantitative impairment test, the Company concluded that the carrying value of the MSG Networks reporting unit exceeded its estimated fair value as of the annual impairment testing date. Based on the evaluation of amortizable intangible assets and other long-lived assets performed as of the annual impairment testing date, the Company did not record any impairments of such assets. The Company did however record a goodwill impairment charge of $177,553, during the quarterly period ended September 30, 2026, for the MSG Networks reporting unit as a result of the projected declines in the reporting unit’s business. The goodwill impairment charge was calculated as the amount that the carrying value of the reporting unit, including any goodwill, exceeded its fair value as of the annual impairment testing date. No additional indicators of impairment were identified through September 30, 2026. See Note 1. Description of Business and Basis of Presentation: Correction of Previously Issued Financial Statements for Immaterial Errors to the condensed consolidated financial statements, for discussion of the accounting errors that resulted in the understatement of goodwill impairment charges.
The Company continues to closely monitor the performance and fair value of its MSG Networks reporting unit. An adverse change in market factors or the business outlook for the MSG Networks reporting unit could negatively impact the fair value of the MSG Networks reporting unit and result in an additional goodwill impairment charge at that time.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes to the disclosures regarding market risks in connection with our pension and postretirement plans. See Item 7A “Quantitative and Qualitative Disclosures About Market Risk” of the Form 10-K.
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Potential Interest Rate Risk Exposure
The Company, through its subsidiaries, MSG Networks and MSG LV, is subject to potential interest rate risk exposure related to borrowings incurred under their respective credit facilities. Changes in interest rates may increase interest expense payments with respect to any borrowings incurred under these credit facilities. The effect of a hypothetical 200 basis point increase in floating interest rate prevailing as of September 30, 2026 and continuing for a full year would increase the Company’s interest payments on the outstanding amounts under the credit facilities by $10,333.
Foreign Currency Exchange Rate Exposure
We are exposed to market risk resulting from foreign currency fluctuations primarily related to our activities in the United Kingdom and Germany conducted in British pound sterling and Euros, respectively.
British pound sterling exposure was as a result of our net investment position initiated with our acquisition of land in Stratford, London in November 2017, which we expected would become home to a future Sphere, and through cash and invested funds which we expected would be deployed in the construction of our London venue prior to the Company’s decision in November 2023 to no longer pursue the development of a Sphere in London and the subsequent sale of the land during the three months ended June 30, 2025. Subsequent to the sale of the Stratford land, the Company’s activities in the United Kingdom primarily relate to entities supporting Sphere expansion efforts. During the twelve months ended September 30, 2026, the GBP/USD exchange rate ranged from 1.3023 to 1.3854 as compared to GBP/USD exchange rate of 1.3267 on September 30, 2026, a fluctuation range of approximately 3.15%. As of September 30, 2026, a uniform hypothetical 10% fluctuation in the GBP/USD exchange rate would have resulted in a change of approximately $80 in the Company’s net asset value.
Following the acquisition of Holoplot on April 25, 2024, which is based in Berlin, Germany, we are also exposed to market risk resulting from foreign currency fluctuations related to the Euro. During the twelve months ended September 30, 2026, the EUR/USD exchange rate ranged from 1.1330 to 1.2043 as compared to EUR/USD exchange rate of 1.1330 on September 30, 2026, a fluctuation range of approximately 3.15%. As of September 30, 2026, a uniform hypothetical 10% fluctuation in the EUR/USD exchange rate would have resulted in a change of approximately $720 in the Company’s net asset value.
We may evaluate and decide, to the extent reasonable and practical, to reduce the translation risk of foreign currency fluctuations by entering into foreign currency forward exchange contracts with financial institutions. If we were to enter into such hedging transactions, the market risk resulting from foreign currency fluctuations is unlikely to be entirely eliminated. We do not plan to enter into derivative financial instrument transactions for foreign currency speculative purposes.
Item 4. Controls and Procedures
Our management, with the participation of our Executive Chairman and Chief Executive Officer and our Executive Vice President, Chief Financial Officer and Treasurer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our Executive Chairman and Chief Executive Officer and our Executive Vice President, Chief Financial Officer and Treasurer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2026.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
Fifteen complaints were filed in connection with the Networks Merger by purported stockholders of the Company and MSG Networks Inc.
Nine of these complaints involved allegations of materially incomplete and misleading information set forth in the joint proxy statement/prospectus filed by the Company and MSG Networks Inc. in connection with the Networks Merger. As a result of supplemental disclosures made by the Company and MSG Networks Inc. on July 1, 2021, all of the disclosure actions were voluntarily dismissed with prejudice prior to or shortly following the consummation of the Networks Merger.
Six complaints involved allegations of fiduciary breaches in connection with the negotiation and approval of the Networks Merger and were consolidated into two remaining litigations.
On September 10, 2021, the Court of Chancery of the State of Delaware (the “Court”) entered an order consolidating two derivative complaints filed by purported Company stockholders. The consolidated action is captioned: In re Madison Square Garden Entertainment Corp. Stockholders Litigation, C.A. No. 2021-0468-KSJM (the “MSG Entertainment Litigation”). The consolidated plaintiffs filed their Verified Consolidated Derivative Complaint on October 11, 2021. The complaint, which named the Company as only a nominal defendant, retained all of the derivative claims and alleged that the members of the board of directors and controlling stockholders violated their fiduciary duties in the course of negotiating and approving the Networks Merger. Plaintiffs sought, among other relief, an award of damages to the Company including interest, and plaintiffs’ attorneys’ fees. Pursuant to the indemnity rights in its bylaws and Delaware law, the Company advanced the costs incurred by defendants in this action, and defendants asserted indemnification rights in respect of any adverse judgment or settlement of the action.
On March 14, 2023, the parties to the MSG Entertainment Litigation reached an agreement in principle to settle the MSG Entertainment Litigation, without admitting liability, on the terms and conditions set forth in a binding term sheet, which was incorporated into a long-form settlement agreement (the “MSGE Settlement Agreement”) that was filed with the Court on April 20, 2023. The MSGE Settlement Agreement provided for, among other things, the final dismissal of the MSG Entertainment Litigation in exchange for a settlement payment to the Company of approximately $85 million, subject to customary reduction for attorneys’ fees and expenses, in an amount to be determined by the Court. The settlement’s amount was fully funded by the other defendants’ insurers. The MSGE Settlement Agreement was approved by the Court on August 14, 2023, which constituted the final judgment in the action.
On September 27, 2021, the Court entered an order consolidating four complaints filed by purported former stockholders of MSG Networks Inc. The consolidated action is captioned: In re MSG Networks Inc. Stockholder Class Action Litigation, C.A. No. 2021-0575-KSJM (the “MSG Networks Litigation”). The consolidated plaintiffs filed their Verified Consolidated Stockholder Class Action Complaint on October 29, 2021. The complaint asserted claims on behalf of a putative class of former MSG Networks Inc. stockholders against each member of the board of directors of MSG Networks Inc. and the controlling stockholders prior to the Networks Merger. Plaintiffs alleged that the MSG Networks Inc. board of directors and controlling stockholders breached their fiduciary duties in negotiating and approving the Networks Merger. The Company was not named as a defendant but was subpoenaed to produce documents and testimony related to the Networks Merger. Plaintiffs sought, among other relief, monetary damages for the putative class and plaintiffs’ attorneys’ fees. Pursuant to the indemnity rights in its bylaws and Delaware law, the Company advanced the costs incurred by defendants in this action, and defendants asserted indemnification rights in respect of any adverse judgment or settlement of the action.
On April 6, 2023, the parties to the MSG Networks Litigation reached an agreement in principle to settle the MSG Networks Litigation, without admitting liability, on the terms and conditions set forth in a binding term sheet, which was incorporated into a long-form settlement agreement (the “MSGN Settlement Agreement”) that was filed with the Court on May 18, 2023. The MSGN Settlement Agreement provided for, among other things, the final dismissal of the MSG Networks Litigation in exchange for a settlement payment to the plaintiffs and the class of approximately $48.5 million, of which approximately $28 million has been paid by the Company and approximately $20.5 million has been paid to the plaintiffs by insurers (who agreed to advance these costs subject to final resolution of the parties’ insurance coverage dispute). The MSGN Settlement Agreement was approved by the Court on August 14, 2023, which constituted the final judgment in the action. MSG Networks Inc. has a dispute with its insurers over whether and to what extent there is insurance coverage for the settlement (and has settled with one of the insurers). The dispute between MSG Networks Inc. and the remaining insurers is in litigation. On June 24, 2026, the court found, at the summary judgment phase, in favor of the insurers, finding that the insurers were not obligated to cover the MSG Networks Inc. settlement costs. As a result of this decision, approximately $25.9 million has been accrued in Accrued expenses and other current liabilities as of September 30, 2026 (compared to approximately $18 million as of December 31, 2025). MSG Networks Inc. is appealing that decision.
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The Company is a defendant in various other lawsuits. Although the outcome of these other lawsuits cannot be predicted with certainty (including the extent of available insurance, if any), management does not believe that resolution of these other lawsuits will have a material adverse effect on the Company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On March 31, 2020, the Company’s Board of Directors authorized a share repurchase program to repurchase up to $350 million of the Company’s Class A Common Stock. The program was re-authorized by the Company’s Board of Directors on March 29, 2023. Under the authorization, shares of Class A Common Stock may be purchased from time to time in open market or private transactions, block trades or such other manner as the Company may determine, in accordance with applicable insider trading and other securities laws and regulations. The timing and amount of purchases will depend on market conditions and other factors. During the nine months ended September 30, 2026, the Company did not engage in any share repurchase activities under its share repurchase program. As of September 30, 2026, the Company had approximately $300 million remaining available for repurchases of the Company’s Class A Common Stock.
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Item 6. Exhibits
(a)Index to Exhibits
| EXHIBIT NO. | DESCRIPTION | ||||||||||
| 101 | The following materials from Sphere Entertainment Co. Quarterly Report on Form 10-Q for the quarter ended September 30, 2026, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of operations, (iii) condensed consolidated statements of comprehensive loss, (iv) condensed consolidated statements of cash flows, (v) condensed consolidated statements of stockholders’ equity, and (vi) notes to condensed consolidated financial statements. | ||||||||||
| 104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2026 formatted in Inline XBRL and contained in Exhibit 101. | ||||||||||
† This exhibit is a management contract or a compensatory plan or arrangement.
* Furnished herewith. These exhibits shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibits shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 5th day of November 2026.
| Sphere Entertainment Co. | ||||||||
| By: | /S/ ROBERT LANGER | |||||||
| Name: | Robert Langer | |||||||
| Title: | Executive Vice President, Chief Financial Officer and Treasurer | |||||||
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EXHIBIT 10.1
Form of SPHR Non-Employee Director Award
FORM OF NON-EMPLOYEE DIRECTOR AWARD AGREEMENT
[Grant Date]
Dear [Participant Name]:
Pursuant to the 2020 Stock Plan for Non-Employee Directors, as amended (the “Plan”) of Sphere Entertainment Co. (the “Company”), you have been granted, effective as of [Grant Date], [Quantity Granted] restricted stock units (“Units”) (such grant, the “Award”). The Units are granted subject to the terms and conditions set forth below and in the Plan.
Capitalized terms used but not defined in this agreement (this “Agreement”) have the meanings given to them in the Plan.
1.RESTRICTED STOCK UNITS:
1.1Each Unit shall represent a fully vested unfunded, unsecured promise by the Company to deliver to you (or, if applicable, to an Approved Transferee (as defined below) in accordance with Section 2 below) one share of the Company’s Class A Common Stock, par value $.01 per share (“Share”) or, in the sole discretion of the Committee pursuant to Section 6.2.2 of the Plan, cash equal to the Fair Market Value of a Share, on the first business day after the expiration of 90 days following the date on which you terminate your service as a member of the Board of Directors (the “Delivery Date”).
1.2Notwithstanding any other provision to the contrary, if you die prior to the Delivery Date, the Shares (or cash in lieu of all or any portion thereof) corresponding to your outstanding Units shall be delivered as soon as practicable thereafter to your estate (or, if applicable, to an Approved Transferee in accordance with Section 2 below).
1.3Prior to the Delivery Date, at or promptly after the time of distribution of any ordinary cash dividend paid by the Company in respect of the Shares, the record date for which occurs on or after the date hereof, you (or, if applicable, an Approved Transferee in accordance with Section 2 below) shall be entitled to receive an amount in cash equal to such ordinary cash dividend payment that would have been made in respect of the Shares underlying the Units, as if the Shares had been actually delivered.
1.4Any recapitalization, change in control or going private transaction of the Company shall be treated as a “similar corporate transaction” for purposes of Section 5.2 of the Plan.
2.The Units (or any rights and obligations thereunder) granted to you may not be sold, exchanged, transferred, assigned, pledged, hypothecated or otherwise disposed of, whether voluntarily or involuntarily, other than by will or by the laws of descent and distribution, and all
such Units (and any rights thereunder) shall be exercisable during your lifetime only by you or your legal representative. Notwithstanding the immediately preceding sentence, (a) the Units may be transferred to a trust or similar vehicle for the benefit of a member of your immediate family, so long as (1) you remain a trustee or co-trustee of the trust, and (2) you provide the Company with at least three (3) business days advanced written notice of any such transfer (an “Approved Transferee”), and (b) the Committee may permit, under such terms and conditions that it deems appropriate in its sole discretion, you to transfer any Unit to any other person or entity that the Committee so determines. Any assignment in violation of the provisions of this Section or Section 11 of the Plan shall be void.
3.It is the Company’s intent that the Award granted comply in all respects with Rule 16b-3 of the Exchange Act. All actions with respect to Units under the Plan shall be executed in accordance with the requirements of Section 16 of the Exchange Act, as amended, and any regulations promulgated thereunder. To the extent that any of the provisions contained herein do not conform with Rule 16b-3 of the Exchange Act or any amendments thereto or any successor regulation, then the Committee may make such modifications so as to conform the Units granted thereunder to the requirements of Rule 16b-3 of the Exchange Act.
4.If the Company shall be required to withhold any amounts by reason of any federal, state or local tax laws, rules or regulations in respect of the Units, you shall make available to the Company, promptly when requested by the Company, sufficient funds to meet the requirements of such withholding and the Company shall be entitled to take and authorize such steps as it may deem advisable in order to have such funds available to the Company out of any funds or property to become due to you.
5.It is the Company’s intent that the Award comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and that the Award be administered and interpreted accordingly. If and to the extent that any payment or benefit under the Award is determined by the Company to constitute “non-qualified deferred compensation” subject to Section 409A and is payable to you by reason of your termination of service, then (a) such payment or benefit shall be made or provided to you only upon a “separation from service” as defined for purposes of Section 409A under applicable regulations, provided that the service recipient and the employer for this purpose shall be the service recipient as defined by Treasury Regulation Section 1.409A-1(g), and (b) if you are a “specified employee” (within the meaning of Section 409A and as determined by the Company), such payment or benefit shall not be made or provided before the date that is six months after the date of your separation from service (or earlier death). Notwithstanding any provision of Sections 3.2, 7 or 9 of the Plan to the contrary, any amendment to the terms of any outstanding Award or any delay in the issuance or delivery of Shares shall comply with Section 409A.
6.The Units granted by this Award are being issued pursuant and subject to the Plan. Capitalized terms used herein without definition shall have the meanings given to such terms that are defined in the Plan.
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7.Execution of this Agreement by the Company and/or by you may be in the form of an electronic, manual or similar signature, and such signature shall be treated as an original signature for all purposes.
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| SPHERE ENTERTAINMENT CO. | |||||||||||
| By: | |||||||||||
| Name: | |||||||||||
| Title: | |||||||||||
By your electronic acknowledgement of acceptance, you (i) acknowledge that a complete copy of the Plan and an executed original of this Agreement have been made available to you and (ii) agree to all of the terms and conditions set forth in the Plan and this Agreement.
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EXHIBIT 10.2
Form of SPHR Employee Plan RSU
FORM OF RESTRICTED STOCK UNITS AGREEMENT
Dear [Participant Name]:
Pursuant to the 2020 Employee Stock Plan, as amended (the “Plan”), you have been selected by the Compensation Committee of the Board of Directors (as more fully described in Section 11, the “Committee”) of Sphere Entertainment Co. (the “Company”), effective as of [Date] (the “Grant Date”) to receive [#RSUs] restricted stock units (“Units”). The Units are granted subject to the terms and conditions set forth below and in the Plan.
Capitalized terms used but not defined in this agreement (this “Agreement”) have the meanings given to them in the Plan.
1.Awards. Each Unit shall represent an unfunded, unsecured promise by the Company to deliver to you one share of the Company’s Class A Common Stock, par value $.01 per share (“Share”) on the Delivery Date. In accordance with Section 10(b) of the Plan, in the discretion of the Committee, in lieu of all or any portion of the Shares otherwise deliverable in respect of your Units, the Company may deliver a cash amount equal to the number of such Shares multiplied by the Fair Market Value of a Share on the date when Shares would otherwise have been issued, as determined by the Committee.
2.Vesting. [One-third of your Units will vest on each of March 15, [year], [year] and [year] (or the immediately preceding business day, if such date is not a business day) (each, a “Vesting Date”)];1 provided that you have remained in the continuous employ of the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group (each as defined below) through the applicable Vesting Date; provided further that fractional Units eligible to vest on each of the first two Vesting Dates will be rounded down to the nearest whole Unit. Subject to Sections 3 and 4, you will forfeit any unvested Units if you do not remain continuously employed with the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group from the Grant Date through any Vesting Date.
For purposes of this Agreement, the “Sphere Entertainment Group” means the Company and any of its Subsidiaries. The “MSG Entertainment Group” means Madison Square Garden Entertainment Corp. (“MSG Entertainment”) and any of its Subsidiaries, so long as MSG Entertainment remains an Affiliate. The “MSG Knickerbockers Group” means MSG Knickerbockers Corp. (formerly known as Madison Square Garden Sports Corp.) (“MSG Knickerbockers”) and any of its Subsidiaries, so long as MSG Knickerbockers remains an Affiliate. The “MSG Rangers Group” means MSG Rangers Corp. (formerly known as MSGS Spinco, Inc.) (“MSG Rangers”) and any of its Subsidiaries, so long as MSG Rangers remains an Affiliate. For purposes of this Agreement, the “Affiliated Group” means the Sphere
1 A different vesting schedule may be provided on a case-by-case basis as determined by the Committee in its sole discretion, subject to the terms and conditions of the Plan.
Entertainment Group and, for so long as they remain Affiliates, the MSG Entertainment Group, the MSG Knickerbockers Group and the MSG Rangers Group.
For purposes of this Agreement, if you are employed by the Sphere Entertainment Group, your “Employer” means the Company; if you are employed by the MSG Entertainment Group, your “Employer” means MSG Entertainment; if you are employed by the MSG Knickerbockers Group, your “Employer” means MSG Knickerbockers; and if you are employed by the MSG Rangers Group, your “Employer” means MSG Rangers. If you are employed by the MSG Entertainment Group and any of the Sphere Entertainment Group, the MSG Knickerbockers Group and/or the MSG Rangers Group, your “Employer” means MSG Entertainment. If you are employed by the Sphere Entertainment Group and any of the MSG Knickerbockers Group and/or the MSG Rangers Group, your “Employer” means the Company. If you are employed by both the MSG Knickerbockers Group and the MSG Rangers Group, your “Employer” means MSG Knickerbockers.
3.Vesting in the Event of Death, Disability[, Retirement] 2 and Other Circumstances.
(A)If you cease to be employed by the Affiliated Group as a result of your death, and Cause does not then exist, all of the unvested Units will vest as of the cessation date.
(B)If you cease to be employed by the Affiliated Group while you are Disabled, and Cause does not then exist, your unvested Units will immediately vest, and will become payable at such times as they would have otherwise vested pursuant to Section 2.
(C)[If you cease to be employed by the Affiliated Group on or after the date that you achieve Retirement Eligibility, and Cause does not then exist, then so long as you enter into your Employer’s then-current form of separation agreement (which shall include, without limitation, a covenant not to compete), you will vest in your Units and such Units will become payable at such times as they would have otherwise vested pursuant to Section 2 as if you had remained employed by the Affiliated Group on such dates; provided, however, that if Cause then exists, you will forfeit all Units that had not yet been paid.]3
(D)If you cease to be employed by the Affiliated Group for other reasons, the Committee may, in its sole discretion determine to vest all or a portion of the unvested Units (but shall be under no obligation to consider doing so).
2 To be included on a case-by-case basis as determined by the Committee in its sole discretion.
3 See footnote 2.
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(E)For purposes of this Agreement:
(i)“Disabled” means that you received short term disability income replacement payments for six (6) months, and thereafter (A) have been determined to be disabled in accordance with your Employer’s long term disability plan in which employees of your Employer are generally able to participate, if one is in effect at such time or (B) to the extent no such long term disability plan exists, have been determined to have a medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months as determined by the department or vendor directed by your Employer to determine eligibility for unpaid medical leave.
(ii)“Cause” means, as determined by the compensation committee of your Employer, in its sole discretion, your (A) commission of an act of fraud, embezzlement, misappropriation, willful misconduct, gross negligence or breach of fiduciary duty against your Employer or an Affiliate thereof or (B) commission of any act or omission that results in a conviction, plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any crime involving moral turpitude or any felony.
(iii)[“Retirement Eligibility” means that you are either (A) at least fifty-five (55) years old with at least ten (10) years of continuous service with the Affiliated Group or (B) at least sixty (60) years old with at least five (5) years of continuous service with the Affiliated Group.]4
4.Change of Control/Going-Private Transaction. As set forth in Appendix 1 attached hereto, your entitlement to the Units may be affected in the event of a MSG Entertainment Change of Control, a Sphere Entertainment Change of Control, a MSG Knickerbockers Change of Control, a MSG Rangers Change of Control or a going-private transaction with respect to the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers (each as defined in Appendix 1 attached hereto).
5.Transfer Restrictions. You may not transfer, assign, pledge or otherwise encumber the Units, other than to the extent provided in the Plan.
6.Right to Vote and Receive Dividends. You shall not be deemed to be the holder of, or have any of the rights of a stockholder with respect to, any Units unless and until the Company shall have issued and delivered Shares to you and your name shall have been
4 See footnote 2.
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entered as a stockholder of record on the books of the Company. Pursuant to Section 10(c) of the Plan, all ordinary (as determined by the Committee in its sole discretion) cash dividends that would have been paid upon any Shares underlying your Units had such Shares been issued will be retained by the Company for your account until your Units vest and such dividends will be paid to you (without interest) on the applicable Delivery Date to the extent that your Units vest.
7.Tax Representations and Tax Withholding. You hereby acknowledge that you have reviewed with your own tax advisors the federal, state and local tax consequences of receiving the Units. You hereby represent to MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers and each of their respective Subsidiaries that you are relying solely on such advisors and not on any statements or representations of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers, any of their respective Subsidiaries or affiliates or any of their respective agents. If, in connection with the Units, your Employer is required to withhold any amounts by reason of any federal, state or local tax, such withholding shall be effected in accordance with Section 16 of the Plan. If your Units vest prior to payment in accordance with Section 3(B)[ or][,] (C)[ or (D)]5, then you agree to cooperate with your Employer to satisfy any tax withholding obligations, in such manner as determined by the Committee in its sole discretion.
8.Section 409A. It is the intent that payments under this Agreement shall comply with Section 409A of the Internal Revenue Code (“Section 409A”) to the extent applicable, and that the Agreement be administered accordingly. Notwithstanding anything to the contrary contained in this Agreement or any employment agreement you have entered into with your Employer, to the extent that any payment or benefit under this Agreement is determined by your Employer to constitute “non-qualified deferred compensation” subject to Section 409A and is payable to you by reason of termination of your employment, then (a) such payment or benefit shall be made or provided to you only upon a “separation from service” as defined for purposes of Section 409A under applicable regulations and (b) if you are a “specified employee” (within the meaning of Section 409A and as determined by your Employer), such payment or benefit shall not be made or provided before the date that is six (6) months after the date of your separation from service (or your earlier death). Each payment under this Agreement shall be treated as a separate payment under Section 409A.
9.Delivery. Subject to Sections 7, 10 and 13 and except as otherwise provided in this Agreement, the Shares will be delivered in respect of vested Units (if any) on the first to occur of the following events: (i) to you on or promptly after the applicable Vesting Date (but in no case more than fifteen (15) days after such date), (ii) in the event of your death to your estate after your death and during the calendar year in which your death occurs (or such later date as may be permitted under Section 409A) and (iii) in the event of any other cessation of your employment with the Affiliated Group (including pursuant to the provisions of Appendix 1) to you on the ninetieth (90th) day following the cessation date (the “Delivery Date”). Unless otherwise determined by the Committee, delivery of the Shares at the Delivery Date will be by
5 See footnote 2.
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book-entry credit to an account in your name that the Company has established at a custody agent (the “custodian”). The Company’s transfer agent, EQ Shareowner Services, shall act as the custodian of the Shares; however, the Company may in its sole discretion appoint another custodian to replace EQ Shareowner Services. On the Delivery Date, if you have complied with your obligations under this Agreement and provided that your tax obligations with respect to the vested Units are appropriately satisfied, we will instruct the custodian to electronically transfer your Shares to a brokerage or other account on your behalf (or make such other arrangements for the delivery of the Shares to you as we reasonably determine).
10.Right of Offset. You hereby agree that the Company shall have the right to offset against its obligation to deliver shares of Class A Common Stock, cash or other property under this Agreement to the extent that it does not constitute “non-qualified deferred compensation” pursuant to Section 409A, any outstanding amounts of whatever nature that you then owe to the Company or any of its Subsidiaries.
11.The Committee. For purposes of this Agreement, the term “Committee” means the Compensation Committee of the Board of Directors of the Company or any replacement committee established under, and as more fully defined in, the Plan.
12.Committee Discretion. The Committee has full discretion with respect to any actions to be taken or determinations to be made in connection with this Agreement, and its determinations shall be final, binding and conclusive.
13.Amendment. The Committee reserves the right at any time to amend the terms and conditions set forth in this Agreement, except that the Committee shall not make any amendment or revision in a manner unfavorable to you (other than if immaterial), without your consent. No consent shall be required for amendments made pursuant to Section 12 of the Plan, except that, for purposes of Section 19 of the Plan, Section 4 and Appendix 1 of this Agreement are deemed to be “terms of an Award Agreement expressly refer[ring] to an Adjustment Event.” Any amendment of this Agreement shall be in writing and signed by an authorized member of the Committee or a person or persons designated by the Committee.
14.Units Subject to the Plan. The Units covered by this Agreement are subject to the Plan.
15.Subsidiaries. For purposes of this Agreement, “Subsidiaries” means any entities that are controlled, directly or indirectly, by the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable, or in which the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable, owns, directly or indirectly, more than 50% of the equity interests.
16.Entire Agreement. Except for any employment agreement between you and the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group in effect as of the date of the grant hereof (as such employment agreement may be modified, renewed or replaced), this Agreement and the Plan
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constitute the entire understanding and agreement of you and the Company with respect to the Units covered hereby and supersede all prior understandings and agreements. Except as provided in Sections 8 and 15, in the event of a conflict among the documents with respect to the terms and conditions of the Units covered hereby, the documents will be accorded the following order of authority: the terms and conditions of the Plan will have highest authority followed by the terms and conditions of your employment agreement, if any, followed by the terms and conditions of this Agreement.
17.Successors and Assigns. The terms and conditions of this Agreement shall be binding upon, and shall inure to the benefit of, the Company and its successors and assigns.
18.Governing Law. This Agreement shall be deemed to be made under, and in all respects be interpreted, construed and governed by and in accordance with, the laws of the State of New York without regard to conflict of law principles.
19.Jurisdiction and Venue. You irrevocably submit to the jurisdiction of the courts of the State of New York and the Federal courts of the United States located in the Southern District of the State of New York in respect of the interpretation and enforcement of the provisions of this Agreement, and hereby waive, and agree not to assert, as a defense that you are not subject thereto or that the venue thereof may not be appropriate. You agree that the mailing of process or other papers in connection with any action or proceeding in any manner permitted by law shall be valid and sufficient service.
20.Waiver. No waiver by the Company at any time of any breach by you of, or compliance with, any term or condition of this Agreement or the Plan to be performed by you shall be deemed a waiver of the same term or condition, or of any similar or any dissimilar term or condition, whether at the same time or at any prior or subsequent time.
21.Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any term or condition hereof shall not affect the validity or enforceability of the other terms and conditions set forth herein.
22.Exclusion from Compensation Calculation. By acceptance of this Agreement, you shall be deemed to be in agreement that the Units covered hereby shall be considered special incentive compensation and will be exempt from inclusion as “wages” or “salary” in pension, retirement, life insurance and other employee benefits arrangements of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries, except as determined otherwise by MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries. In addition, each of your beneficiaries shall be deemed to be in agreement that all such shares be exempt from inclusion in “wages” or “salary” for purposes of calculating benefits of any life insurance coverage sponsored by MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries.
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23.No Right to Continued Employment. Nothing contained in this Agreement or the Plan shall be construed to confer on you any right to continue in the employ of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries, or derogate from the right of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries, as applicable, to retire, request the resignation of, or discharge you, at any time, with or without cause.
24.Headings. The headings in this Agreement are for purposes of convenience only and are not intended to define or limit the construction of the terms and conditions of this Agreement.
25.Effective Date. Upon execution by you, this Agreement shall be effective from and as of the Grant Date.
26.Signatures. Execution of this Agreement by the Company may be in the form of an electronic, manual or similar signature (including, without limitation, an electronic acknowledgement of acceptance), and such signature shall be treated as an original signature for all purposes.
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| SPHERE ENTERTAINMENT CO. | |||||||||||
| By: | |||||||||||
| Name: | |||||||||||
| Title: | |||||||||||
By your electronic acknowledgement of acceptance, you (i) acknowledge that a complete copy of the Plan and an executed original of this Agreement have been made available to you and (ii) agree to all of the terms and conditions set forth in the Plan and this Agreement.
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Appendix 1
RESTRICTED STOCK UNITS AGREEMENT
RESTRICTED STOCK UNITS AGREEMENT
1.In the event of a “Sphere Entertainment Change of Control” or a “going-private transaction” with respect to the Company, each as defined below, your entitlement to Units shall be as follows:
(A)If the Company or the “Sphere Entertainment Surviving Entity,” as defined below, has shares of common stock (or partnership units) traded on a national stock exchange or on the over-the-counter market as reported on the New York Stock Exchange or any other stock exchange, the Committee shall, no later than the effective date of the transaction which results in a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company, either (i) convert your unvested Units into an amount of cash equal to (a) the number of your unvested Units multiplied by (b) the “offer price per share,” the “acquisition price per share” or the “merger price per share,” each as defined below, whichever of such amounts is applicable or (ii) arrange to have the Sphere Entertainment Surviving Entity grant to you an award of restricted stock units (or partnership units) for shares of the Sphere Entertainment Surviving Entity on the same terms and with a value equivalent to your unvested Units which will, in the good faith determination of the Committee, provide you with an equivalent profit potential.
(B)If the Company or the Sphere Entertainment Surviving Entity does not have shares of common stock (or partnership units) traded on a national stock exchange or on the over-the-counter market as reported on the New York Stock Exchange or any other stock exchange, the Committee shall convert your unvested Units into an amount of cash equal to the amount calculated as per Paragraph 1(A)(i) above.
(C)Provided that you remain continuously employed with the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group, the MSG Rangers Group or the Sphere Entertainment Surviving Entity through the date of the earliest event described in any of (i), (ii) or (iii) below, any award provided for in Paragraph 1(A)(i) or 1(B) shall become payable to you (or your estate), and any substitute restricted stock unit award of the Sphere Entertainment Surviving Entity provided for in Paragraph 1(A)(ii) shall vest, at the earlier of (i) each applicable date on which your Units would otherwise have vested had they continued in effect, (ii) the date of your death, or (iii) if, immediately prior to termination you were an employee of the Sphere Entertainment Group, the date on which your employment with the Sphere Entertainment Group or the Sphere Entertainment Surviving Entity is terminated (a) by the Company, one of its Subsidiaries or the Sphere Entertainment Surviving Entity other than for Cause, (b) by you for “good reason,” as defined below or (c) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company, in each case so long as Cause does not then exist; provided that clause (c) herein shall not apply in the event that your rights in the Units are converted into a right
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to receive an amount of cash in accordance with Paragraph 1(A)(i). The amount payable in cash shall be payable together with interest from the effective date of the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company until the date of payment at (i) the weighted average cost of capital of the Company immediately prior to the effectiveness of the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company or (ii) if the Company (or the Sphere Entertainment Surviving Entity) sets aside the funds in a trust or other funding arrangement, the actual earnings of such trust or other funding arrangement.
2.In the event of a “MSG Entertainment Change of Control” or a “going-private transaction” with respect to MSG Entertainment, each as defined below, and if (1) immediately prior to such MSG Entertainment Change of Control or going-private transaction with respect to MSG Entertainment you were an employee of the MSG Entertainment Group and (2) at the time of such MSG Entertainment Change of Control or going-private transaction with respect to MSG Entertainment you are not an employee of the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group, your entitlement to the Units shall be as follows:
Your Units shall vest at the earlier of (A) the date on which your Units would otherwise have vested had they continued in effect, (B) the date of your death or (C) the date on which your employment with the MSG Entertainment Group or the “MSG Entertainment Surviving Entity,” as defined below, is terminated (i) by MSG Entertainment, one of its Subsidiaries or the MSG Entertainment Surviving Entity other than for Cause, (ii) by you for “good reason” or (iii) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the MSG Entertainment Change of Control or the going-private transaction with respect to MSG Entertainment, in each case so long as Cause does not then exist.
3.In the event of a “MSG Knickerbockers Change of Control” or a “going-private transaction” with respect to MSG Knickerbockers, each as defined below, and if (1) immediately prior to such MSG Knickerbockers Change of Control or going-private transaction with respect to MSG Knickerbockers you were an employee of the MSG Knickerbockers Group and (2) at the time of such MSG Knickerbockers Change of Control or going-private transaction with respect to MSG Knickerbockers you are not an employee of the Sphere Entertainment Group, the MSG Entertainment Group or the MSG Rangers Group, your entitlement to the Units shall be as follows:
Your Units shall vest at the earlier of (A) the date on which your Units would otherwise have vested had they continued in effect, (B) the date of your death or (C) the date on which your employment with the MSG Knickerbockers Group or the “MSG Knickerbockers Surviving Entity,” as defined below, is terminated (i) by MSG Knickerbockers, one of its Subsidiaries or the MSG Knickerbockers Surviving Entity other than for Cause, (ii) by you for “good reason” or (iii) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the MSG
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Knickerbockers Change of Control or the going-private transaction with respect to MSG Knickerbockers, in each case so long as Cause does not then exist.
4.In the event of a “MSG Rangers Change of Control” or a “going-private transaction” with respect to MSG Rangers, each as defined below, and if (1) immediately prior to such MSG Rangers Change of Control or going-private transaction with respect to MSG Rangers you were an employee of the MSG Rangers Group and (2) at the time of such MSG Rangers Change of Control or going-private transaction with respect to MSG Rangers you are not an employee of the Sphere Entertainment Group, the MSG Entertainment Group or the MSG Knickerbockers Group, your entitlement to the Units shall be as follows:
Your Units shall vest at the earlier of (A) the date on which your Units would otherwise have vested had they continued in effect, (B) the date of your death or (C) the date on which your employment with the MSG Rangers Group or the “MSG Rangers Surviving Entity,” as defined below, is terminated (i) by MSG Rangers, one of its Subsidiaries or the MSG Rangers Surviving Entity other than for Cause, (ii) by you for “good reason” or (iii) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the MSG Rangers Change of Control or the going-private transaction with respect to MSG Rangers, in each case so long as Cause does not then exist.
5.As used herein,
“Acquisition price per share” means the greater of (i) the highest price per share stated on the Schedule 13D or any amendment thereto filed by the holder of twenty percent (20%) or more of the Company’s voting power which gives rise to the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company and (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of such Sphere Entertainment Change of Control or going-private transaction with respect to the Company.
“Cause” means your (i) commission of an act of fraud, embezzlement, misappropriation, willful misconduct, gross negligence or breach of fiduciary duty against your Employer or an Affiliate thereof or (ii) commission of any act or omission that results in a conviction, plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any crime involving moral turpitude or any felony.
“Going-private transaction” means a transaction involving the purchase of Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable, securities described in Rule 13e-3 to the Exchange Act.
“Good reason” means
a. without your express written consent any reduction in your base salary or target bonus opportunity, or any material impairment or material adverse change in your working conditions (as the same may from time to time have been improved or, with your written consent, otherwise altered, in each case, after the
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Grant Date) at any time after or within ninety (90) days prior to the MSG Entertainment Change of Control, the Sphere Entertainment Change of Control, the MSG Knickerbockers Change of Control or the MSG Rangers Change of Control, as applicable, including, without limitation, any material reduction of your other compensation, executive perquisites or other employee benefits (measured, where applicable, by level or participation or percentage of award under any plans of the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable), or material impairment or material adverse change of your level of responsibility, authority, autonomy or title, or to your scope of duties;
b. any failure by your Employer to comply with any of the provisions of this Agreement, other than an insubstantial or inadvertent failure remedied by your Employer promptly after receipt of notice thereof given by you;
c. your Employer’s requiring you to be based at any office or location more than thirty-five (35) miles from your location immediately prior to such event except for travel reasonably required in the performance of your responsibilities; or
d. with respect to the Company only, any failure by the Company to obtain the assumption and agreement to perform this Agreement by a successor as contemplated by Paragraph 1.
“Merger price per share” means, in the case of a merger, consolidation, sale, exchange or other disposition of assets that results in a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company (a “Merger”), the greater of (i) the fixed or formula price for the acquisition of shares of common stock occurring pursuant to the Merger and (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of such Sphere Entertainment Change of Control or going-private transaction with respect to the Company. Any securities or property which are part or all of the consideration paid for shares of common stock pursuant to the Merger shall be valued in determining the merger price per share at the higher of (A) the valuation placed on such securities or property by the Company, person or other entity which is a party with the Company to the Merger or (B) the valuation placed on such securities or property by the Committee.
“MSG Entertainment Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Entertainment, of the power to direct the management of MSG Entertainment or substantially all its assets (as constituted immediately prior to such transaction or transactions).
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“Sphere Entertainment Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by the Company, of the power to direct the management of the Company or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“MSG Knickerbockers Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Knickerbockers, of the power to direct the management of MSG Knickerbockers or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“MSG Rangers Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Rangers, of the power to direct the management of MSG Rangers or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“MSG Entertainment Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Entertainment’s assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Entertainment Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Entertainment’s assets shall be deemed to be the MSG Entertainment Surviving Entity.
“Sphere Entertainment Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of the Company’s assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the Sphere Entertainment Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of the Company’s assets shall be deemed to be the Sphere Entertainment Surviving Entity.
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“MSG Knickerbockers Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Knickerbockers’ assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Knickerbockers Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Knickerbockers’ assets shall be deemed to be the MSG Knickerbockers Surviving Entity.
“MSG Rangers Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Rangers’ assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Rangers Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Rangers’ assets shall be deemed to be the MSG Rangers Surviving Entity.
“Offer price per share” means, in the case of a tender offer or exchange offer which results in a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company (an “Offer”), the greater of (i) the highest price per share of common stock paid pursuant to the Offer or (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company. Any securities or property which are part or all of the consideration paid for shares of common stock in the Offer shall be valued in determining the offer price per share at the higher of (A) the valuation placed on such securities or property by the Company, person or other entity making such offer or (B) the valuation placed on such securities or property by the Committee.
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EXHIBIT 10.3
Form of SPHR Employee Plan PSU
FORM OF PERFORMANCE RESTRICTED STOCK UNITS AGREEMENT
Dear [Participant Name]:
Pursuant to the 2020 Employee Stock Plan, as amended (the “Plan”), you have been selected by the Compensation Committee of the Board of Directors (as more fully described in Section 12, the “Committee”) of Sphere Entertainment Co. (the “Company”), effective as of [Date] (the “Grant Date”) to receive performance restricted stock units (the “Units”). The Units are granted subject to the terms and conditions set forth below and in the Plan.
Capitalized terms used but not defined in this agreement (this “Agreement”) have the meanings given to them in the Plan.
1.Awards. In accordance with the terms of this Agreement, the target amount of your contingent Units is [#RSUs] restricted stock units (the “Target Award”), which number of Units may be increased or decreased to the extent the performance criteria (the “Objectives”) set forth in Appendix 2 attached hereto have been attained in respect of the period from January 1, [year] through December 31, [year] (the “Performance Period”). Each Unit shall represent an unfunded, unsecured promise by the Company to deliver to you one share of the Company’s Class A Common Stock, par value $.01 per share (“Share”) on the Delivery Date. [The Units, calculated in accordance with Appendix 2 attached hereto, will vest upon the later of (i) March 15, [year] (or the immediately preceding business day, if such date is not a business day) and (ii) the date on which the Committee (as defined in Section 12 below) determines the Company’s performance against the Objectives (the “Vesting Date”);]1 provided that you have remained in the continuous employ of the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group (each as defined below) from the Grant Date through the Vesting Date. In accordance with Section 10(b) of the Plan, in the discretion of the Committee, in lieu of all or any portion of the Shares otherwise deliverable in respect of your Units, the Company may deliver a cash amount equal to the number of such Shares multiplied by the Fair Market Value of a Share on the date when Shares would otherwise have been issued, as determined by the Committee.
2.Vesting. Subject to Sections 3 and 4, you will automatically forfeit all of your rights and interest in the Units if you do not remain continuously employed with the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group from the Grant Date through the Vesting Date, regardless of whether the Objectives are attained.
For purposes of this Agreement, the “Sphere Entertainment Group” means the Company and any of its Subsidiaries. The “MSG Entertainment Group” means Madison Square Garden Entertainment Corp. (“MSG Entertainment”) and any of its Subsidiaries, so long as MSG
1 A different vesting schedule may be provided on a case-by-case basis as determined by the Committee in its sole discretion, subject to the terms and conditions of the Plan.
Entertainment remains an Affiliate. The “MSG Knickerbockers Group” means MSG Knickerbockers Corp. (formerly known as Madison Square Garden Sports Corp.) (“MSG Knickerbockers”) and any of its Subsidiaries, so long as MSG Knickerbockers remains an Affiliate. The “MSG Rangers Group” means MSG Rangers Corp. (formerly known as MSGS Spinco, Inc.) (“MSG Rangers”) and any of its Subsidiaries, so long as MSG Rangers remains an Affiliate. For purposes of this Agreement, the “Affiliated Group” means the Sphere Entertainment Group and, for so long as they remain Affiliates, the MSG Entertainment Group, the MSG Knickerbockers Group and the MSG Rangers Group.
For purposes of this Agreement, if you are employed by the Sphere Entertainment Group, your “Employer” means the Company; if you are employed by the MSG Entertainment Group, your “Employer” means MSG Entertainment; if you are employed by the MSG Knickerbockers Group, your “Employer” means MSG Knickerbockers; and if you are employed by the MSG Rangers Group, your “Employer” means MSG Rangers. If you are employed by the MSG Entertainment Group and any of the Sphere Entertainment Group, the MSG Knickerbockers Group and/or the MSG Rangers Group, your “Employer” means MSG Entertainment. If you are employed by the Sphere Entertainment Group and any of the MSG Knickerbockers Group and/or the MSG Rangers Group, your “Employer” means the Company. If you are employed by both the MSG Knickerbockers Group and the MSG Rangers Group, your “Employer” means MSG Knickerbockers.
3.Vesting in the Event of Death [or][,] Disability[, or Retirement].2
(A)If you cease to be employed by the Affiliated Group as a result of your death on or prior to the Vesting Date, and Cause does not then exist, the Target Award will vest as of the cessation date. If, after December 31, [year] but prior to the Vesting Date, you cease to be employed by the Affiliated Group as a result of your death, and Cause does not then exist, your estate will receive the Units, if any, to which you would have been entitled on the Vesting Date had your employment not been so terminated.
(B)If you cease to be employed by the Affiliated Group while you are Disabled, and Cause does not then exist, the Units will remain subject to vesting on the Vesting Date in accordance with Section 1.
(C)[If you cease to be employed by the Affiliated Group on or after the date that you achieve Retirement Eligibility, and Cause does not then exist, and you enter into your Employer’s then-current form of separation agreement (which shall include, without limitation, a covenant not to compete), the Units will remain subject to vesting on the Vesting Date in accordance with Section 1.]3
(D)For purposes of this Agreement:
2 To be included on a case-by-case basis as determined by the Committee in its sole discretion.
3 See footnote 2.
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(i)“Disabled” means that you received short term disability income replacement payments for six (6) months, and thereafter (A) have been determined to be disabled in accordance with your Employer’s long term disability plan in which employees of your Employer are generally able to participate, if one is in effect at such time or (B) to the extent no such long term disability plan exists, have been determined to have a medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months as determined by the department or vendor directed by your Employer to determine eligibility for unpaid medical leave.
(ii)“Cause” means, as determined by the compensation committee of your Employer, in its sole discretion, your (A) commission of an act of fraud, embezzlement, misappropriation, willful misconduct, gross negligence or breach of fiduciary duty against your Employer or an Affiliate thereof or (B) commission of any act or omission that results in a conviction, plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any crime involving moral turpitude or any felony.
(iii)[“Retirement Eligibility” means that you are either (A) at least fifty-five (55) years old with at least ten (10) years of continuous service with the Affiliated Group or (B) at least sixty (60) years old with at least five (5) years of continuous service with the Affiliated Group.]4
4.Change of Control/Going-Private Transaction. As set forth in Appendix 1 attached hereto, your entitlement to the Units may be affected in the event of a MSG Entertainment Change of Control, a Sphere Entertainment Change of Control, a MSG Knickerbockers Change of Control, a MSG Rangers Change of Control or a going-private transaction with respect to the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers (each as defined in Appendix 1 attached hereto).
5.Transfer Restrictions. You may not transfer, assign, pledge or otherwise encumber the Units, other than to the extent provided in the Plan.
6.Unfunded Obligation. The Plan will at all times be unfunded and, except as set forth in Appendix 1 attached hereto, no provision will at any time be required to be made with respect to segregating any assets of the Company or any of its Subsidiaries for payment of any benefits under the Plan, including, without limitation, those covered by this Agreement. Your right or that of your estate to receive delivery or payment under this Agreement shall be an
4 See footnote 2.
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unsecured claim against the general assets of the Company, including any rabbi trust established pursuant to Appendix 1. Neither you nor your estate shall have any rights in or against any specific assets of the Company other than the assets held by the rabbi trust established pursuant to Appendix 1.
7.Right to Vote and Receive Dividends. You shall not be deemed to be the holder of, or have any of the rights of a stockholder with respect to, any Units unless and until the Company shall have issued and delivered Shares to you and your name shall have been entered as a stockholder of record on the books of the Company. Pursuant to Section 10(c) of the Plan, all ordinary (as determined by the Committee in its sole discretion) cash dividends that would have been paid upon any Shares underlying your Units had such Shares been issued will be retained by the Company for your account until your Units vest and such dividends will be paid to you (without interest) on the Delivery Date to the extent that your Units vest.
8.Tax Representations and Tax Withholding. You hereby acknowledge that you have reviewed with your own tax advisors the federal, state and local tax consequences of receiving the Units. You hereby represent to MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers and each of their respective Subsidiaries that you are relying solely on such advisors and not on any statements or representations of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers, any of their respective Subsidiaries or affiliates or any of their respective agents. If, in connection with the Units, your Employer is required to withhold any amounts by reason of any federal, state or local tax, such withholding shall be effected in accordance with Section 16 of the Plan. If your Units vest prior to payment in accordance with Section 3(B)[ or (C)]5, then you agree to cooperate with your Employer to satisfy any tax withholding obligations, in such manner as determined by the Committee in its sole discretion.
9.Section 409A. It is the intent that payments under this Agreement shall comply with Section 409A of the Internal Revenue Code (“Section 409A”) to the extent applicable, and that the Agreement be administered accordingly. Notwithstanding anything to the contrary contained in this Agreement or any employment agreement you have entered into with your Employer, to the extent that any payment or benefit under this Agreement is determined by your Employer to constitute “non-qualified deferred compensation” subject to Section 409A and is payable to you by reason of termination of your employment, then (a) such payment or benefit shall be made or provided to you only upon a “separation from service” as defined for purposes of Section 409A under applicable regulations and (b) if you are a “specified employee” (within the meaning of Section 409A and as determined by your Employer), such payment or benefit shall not be made or provided before the date that is six (6) months after the date of your separation from service (or your earlier death). Each payment under this Agreement shall be treated as a separate payment under Section 409A.
10.Delivery. Subject to Sections 8, 11 and 14 and Appendix 1 and except as otherwise provided in this Agreement, the Shares will be delivered in respect of vested Units (if
5 See footnote 2.
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any) on the first to occur of the following events: (i) to you on or promptly after the Vesting Date (but in no case more than fifteen (15) days after such date) and (ii) in the event of your death to your estate after your death and during the calendar year in which your death occurs (or such later date as may be permitted under Section 409A) (the “Delivery Date”). Unless otherwise determined by the Committee, delivery of the Shares at the Delivery Date will be by book-entry credit to an account in your name that the Company has established at a custody agent (the “custodian”). The Company’s transfer agent, EQ Shareowner Services, shall act as the custodian of the Shares; however, the Company may in its sole discretion appoint another custodian to replace EQ Shareowner Services. On the Delivery Date, if you have complied with your obligations under this Agreement and provided that your tax obligations with respect to the vested Units are appropriately satisfied, we will instruct the custodian to electronically transfer your Shares to a brokerage or other account on your behalf (or make such other arrangements for the delivery of the Shares to you as we reasonably determine).
11.Right of Offset. You hereby agree that the Company shall have the right to offset against its obligation to deliver shares of Class A Common Stock, cash or other property under this Agreement to the extent that it does not constitute “non-qualified deferred compensation” pursuant to Section 409A, any outstanding amounts of whatever nature that you then owe to the Company or any of its Subsidiaries.
12.The Committee. For purposes of this Agreement, the term “Committee” means the Compensation Committee of the Board of Directors of the Company or any replacement committee established under, and as more fully defined in, the Plan.
13.Committee Discretion. The Committee has full discretion with respect to any actions to be taken or determinations to be made in connection with this Agreement, and its determinations shall be final, binding and conclusive.
14.Amendment. The Committee reserves the right at any time to amend the terms and conditions set forth in this Agreement, except that the Committee shall not make any amendment or revision in a manner unfavorable to you (other than if immaterial), without your consent. No consent shall be required for amendments made pursuant to Section 12 of the Plan, except that, for purposes of Section 19 of the Plan, Section 4 and Appendix 1 of this Agreement are deemed to be “terms of an Award Agreement expressly refer[ring] to an Adjustment Event.” Any amendment of this Agreement shall be in writing and signed by an authorized member of the Committee or a person or persons designated by the Committee.
15.Units Subject to the Plan. The Units covered by this Agreement are subject to the Plan.
16.Subsidiaries. For purposes of this Agreement, “Subsidiaries” means any entities that are controlled, directly or indirectly, by the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable, or in which the Company, MSG Entertainment,
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MSG Knickerbockers or MSG Rangers, as applicable, owns, directly or indirectly, more than 50% of the equity interests.
17.Entire Agreement. Except for any employment agreement between you and the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group in effect as of the date of the grant hereof (as such employment agreement may be modified, renewed or replaced), this Agreement and the Plan constitute the entire understanding and agreement of you and the Company with respect to the Units covered hereby and supersede all prior understandings and agreements. Except as provided in Sections 9 and 16, in the event of a conflict among the documents with respect to the terms and conditions of the Units covered hereby, the documents will be accorded the following order of authority: the terms and conditions of the Plan will have highest authority followed by the terms and conditions of your employment agreement, if any, followed by the terms and conditions of this Agreement.
18.Successors and Assigns. The terms and conditions of this Agreement shall be binding upon, and shall inure to the benefit of, the Company and its successors and assigns.
19.Governing Law. This Agreement shall be deemed to be made under, and in all respects be interpreted, construed and governed by and in accordance with, the laws of the State of New York without regard to conflict of law principles.
20.Jurisdiction and Venue. You irrevocably submit to the jurisdiction of the courts of the State of New York and the Federal courts of the United States located in the Southern District of the State of New York in respect of the interpretation and enforcement of the provisions of this Agreement, and hereby waive, and agree not to assert, as a defense that you are not subject thereto or that the venue thereof may not be appropriate. You agree that the mailing of process or other papers in connection with any action or proceeding in any manner permitted by law shall be valid and sufficient service.
21.Waiver. No waiver by the Company at any time of any breach by you of, or compliance with, any term or condition of this Agreement or the Plan to be performed by you shall be deemed a waiver of the same term or condition, or of any similar or any dissimilar term or condition, whether at the same time or at any prior or subsequent time.
22.Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any term or condition hereof shall not affect the validity or enforceability of the other terms and conditions set forth herein.
23.Exclusion from Compensation Calculation. By acceptance of this Agreement, you shall be deemed to be in agreement that the Units covered hereby shall be considered special incentive compensation and will be exempt from inclusion as “wages” or “salary” in pension, retirement, life insurance and other employee benefits arrangements of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective
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Subsidiaries, except as determined otherwise by MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries. In addition, each of your beneficiaries shall be deemed to be in agreement that all such shares be exempt from inclusion in “wages” or “salary” for purposes of calculating benefits of any life insurance coverage sponsored by MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries.
24.No Right to Continued Employment. Nothing contained in this Agreement or the Plan shall be construed to confer on you any right to continue in the employ of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries, or derogate from the right of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries, as applicable, to retire, request the resignation of, or discharge you, at any time, with or without cause.
25.Headings. The headings in this Agreement are for purposes of convenience only and are not intended to define or limit the construction of the terms and conditions of this Agreement.
26.Effective Date. Upon execution by you, this Agreement shall be effective from and as of the Grant Date.
27.Signatures. Execution of this Agreement by the Company may be in the form of an electronic, manual or similar signature (including, without limitation, an electronic acknowledgement of acceptance), and such signature shall be treated as an original signature for all purposes.
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| SPHERE ENTERTAINMENT CO. | ||||||||
| By: | ||||||||
| Name: | ||||||||
| Title: | ||||||||
By your electronic acknowledgement of acceptance, you (i) acknowledge that a complete copy of the Plan and an executed original of this Agreement have been made available to you and (ii) agree to all of the terms and conditions set forth in the Plan and this Agreement.
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Appendix 1
PERFORMANCE RESTRICTED STOCK UNITS AGREEMENT
PERFORMANCE RESTRICTED STOCK UNITS AGREEMENT
1.In the event of a “going-private transaction” with respect to the Company, as defined below, your entitlement to the Units shall be as follows:
(A)The Committee shall, no later than the effective date of the transaction which results in a going-private transaction with respect to the Company, deem the Objectives to be satisfied at the target level and convert your Target Award into an amount of cash equal to (i) the number of your unvested Units multiplied by (ii) the “offer price per share,” the “acquisition price per share” or the “merger price per share,” each as defined below, whichever of such amounts is applicable.
(B)Provided that you remain continuously employed with the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group, the MSG Rangers Group or the “Sphere Entertainment Surviving Entity,” as defined below, through the date of the earliest event described in any of (i), (ii) or (iii) below, any award provided for in Paragraph 1(A) shall become payable to you (or your estate) at or promptly after (but in no event more than fifteen (15) days after) the earlier of (i) the date on which your Units would otherwise have vested had it continued in effect, (ii) the date of your death or (iii) if, immediately prior to termination you were an employee of the Sphere Entertainment Group, the date on which your employment with the Sphere Entertainment Group or the Sphere Entertainment Surviving Entity is terminated (a) by the Company, one of its Subsidiaries or the Sphere Entertainment Surviving Entity other than for Cause (as defined below) or (b) by you for “good reason” (as defined below), in each case so long as Cause does not then exist. Notwithstanding the foregoing, if you become entitled to payment of an award by virtue of a termination in accordance with (iii)(a) or (iii)(b) of this Paragraph 1(B) and are determined by the Company to be a “specified employee” within the meaning of Section 409A, the award shall be paid to you on the earlier of: (i) January 1, [year], (ii) the date that is six (6) months from your date of employment termination and (iii) any other date on which such payment or any portion thereof would be a permissible distribution under Section 409A. In the event of such a determination, the Company shall promptly following the date of your employment termination set aside such amount for your benefit in a “rabbi trust” that satisfies the requirements of Revenue Procedure 92-64, and on a monthly basis shall deposit into such trust interest in arrears (compounded quarterly at the rate provided below) until such time as such amount, together with all accrued interest thereon, is paid to you in full pursuant to the previous sentence; provided, that no payment will be made to such rabbi trust if it would be contrary to law or cause you to incur additional tax under Section 409A. The initial interest rate shall be the average of the one-year SOFR fixed rate equivalent for the ten (10) business days prior to the date of your employment termination.
2.In the event of a “Sphere Entertainment Change of Control,” as defined below, provided that you have remained continuously employed with the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group
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through the effective date of the transaction that results in the Sphere Entertainment Change of Control, you will be entitled to the payment of the Target Award whether or not the Objectives have been attained.
(A)If the actual Sphere Entertainment Change of Control:
(i)is a permissible distribution event under Section 409A or payment of the Units promptly upon such event is otherwise permissible under Section 409A (including, for the avoidance of doubt, by reason of the inapplicability of Section 409A to the Units), then the Target Award shall be paid to you by the Company promptly following the Sphere Entertainment Change of Control; or
(ii)is not a permissible distribution event under Section 409A and payment of the Units promptly upon such event is not otherwise permissible under Section 409A, then:
(a)(1) if the Company or the Sphere Entertainment Surviving Entity has shares of common stock (or partnership units) traded on a national stock exchange or on the over-the-counter market as reported on the New York Stock Exchange or any other stock exchange, the Committee shall, no later than the effective date of the Sphere Entertainment Change of Control, either (i) convert your Target Award into an amount of cash equal to (a) the number of your unvested Units multiplied by (b) the “offer price per share,” the “acquisition price per share” or the “merger price per share,” each as defined below, whichever of such amounts is applicable or (ii) arrange to have the Sphere Entertainment Surviving Entity grant to you an award of restricted stock units (or partnership units) for shares of the Sphere Entertainment Surviving Entity on the same terms and with a value equivalent to your Target Award which will, in the good faith determination of the Committee, provide you with an equivalent profit potential; or
(2) if the Company or the Sphere Entertainment Surviving Entity does not have shares of common stock (or partnership units) traded on a national stock exchange or on the over-the-counter market as reported on the New York Stock Exchange or any other stock exchange, the Units will be treated in accordance with Paragraph 1(A) above.
(2) if the Company or the Sphere Entertainment Surviving Entity does not have shares of common stock (or partnership units) traded on a national stock exchange or on the over-the-counter market as reported on the New York Stock Exchange or any other stock exchange, the Units will be treated in accordance with Paragraph 1(A) above.
(b)Any cash award or substitute restricted stock unit award of the Sphere Entertainment Surviving Entity provided for in Paragraph 2(A)(ii)(a) will be fully vested and will be paid to you (or your estate), at the earliest to occur of: (1) if, immediately prior to termination you were an employee of the Sphere Entertainment
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Group, the date on which your employment with the Sphere Entertainment Group or the Sphere Entertainment Surviving Entity terminates for any reason other than termination of your employment by one of such entities for Cause (provided that if you are determined by the Company to be a “specified employee” within the meaning of Section 409A, six (6) months from such date), (2) the date of your death, (3) any other date on which such payment or any portion thereof would be a permissible distribution under Section 409A or (4) January 1, [year], in each case so long as Cause does not then exist.
(c)The Company shall promptly following the Sphere Entertainment Change of Control set aside cash (or shares in the event a substitute restricted stock unit award is made) for your benefit in a “rabbi trust” that satisfies the requirements of Revenue Procedure 92-64, and on a monthly basis shall deposit into such trust interest in arrears (compounded quarterly at the rate provided below) until such time as such amount, together with all accrued interest thereon, is paid to you in full pursuant to Paragraph 2(A)(ii)(b) above); provided, that no payment will be made to such rabbi trust if it would be contrary to law or cause you to incur additional tax under Section 409A. The initial interest rate shall be the average of the one-year SOFR fixed rate equivalent for the ten (10) business days prior to the date of the Sphere Entertainment Change of Control and shall adjust annually based on the average of such rate for the ten (10) business days prior to each anniversary of the Sphere Entertainment Change of Control.
3.In the event of a “MSG Entertainment Change of Control” or a “going-private transaction” with respect to MSG Entertainment, each as defined below, and if (1) immediately prior to such MSG Entertainment Change of Control or going-private transaction with respect to MSG Entertainment you were an employee of the MSG Entertainment Group and (2) at the time of such MSG Entertainment Change of Control or going-private transaction with respect to MSG Entertainment you are not an employee of the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group, your entitlement to the Units shall be as follows:
Your Units shall vest at the earlier of (A) the date on which your Units would otherwise have vested had they continued in effect, (B) the date of your death (in which case the Target Award shall vest) or (C) the date on which your employment with the MSG Entertainment Group or the “MSG Entertainment Surviving Entity,” as defined below, is terminated (i) by MSG Entertainment, one of its Subsidiaries or the MSG Entertainment Surviving Entity other than for Cause, (ii) by you for “good reason” or (iii) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the MSG Entertainment Change of Control or the going-private transaction with
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respect to MSG Entertainment (in which case the Target Award shall vest), in each case so long as Cause does not then exist.
4.In the event of a “MSG Knickerbockers Change of Control” or a “going-private transaction” with respect to MSG Knickerbockers, each as defined below, and if (1) immediately prior to such MSG Knickerbockers Change of Control or going-private transaction with respect to MSG Knickerbockers you were an employee of the MSG Knickerbockers Group and (2) at the time of such MSG Knickerbockers Change of Control or going-private transaction with respect to MSG Knickerbockers you are not an employee of the Sphere Entertainment Group, the MSG Entertainment Group or the MSG Rangers Group, your entitlement to the Units shall be as follows:
Your Units shall vest at the earlier of (A) the date on which your Units would otherwise have vested had they continued in effect, (B) the date of your death (in which case the Target Award shall vest) or (C) the date on which your employment with the MSG Knickerbockers Group or the “MSG Knickerbockers Surviving Entity,” as defined below, is terminated (i) by MSG Knickerbockers, one of its Subsidiaries or the MSG Knickerbockers Surviving Entity other than for Cause, (ii) by you for “good reason” or (iii) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the MSG Knickerbockers Change of Control or the going-private transaction with respect to MSG Knickerbockers (in which case the Target Award shall vest), in each case so long as Cause does not then exist.
5.In the event of a “MSG Rangers Change of Control” or a “going-private transaction” with respect to MSG Rangers, each as defined below, and if (1) immediately prior to such MSG Rangers Change of Control or going-private transaction with respect to MSG Rangers you were an employee of the MSG Rangers Group and (2) at the time of such MSG Rangers Change of Control or going-private transaction with respect to MSG Rangers you are not an employee of the Sphere Entertainment Group, the MSG Entertainment Group or the MSG Knickerbockers Group, your entitlement to the Units shall be as follows:
Your Units shall vest at the earlier of (A) the date on which your Units would otherwise have vested had they continued in effect, (B) the date of your death (in which case the Target Award shall vest) or (C) the date on which your employment with the MSG Rangers Group or the “MSG Rangers Surviving Entity,” as defined below, is terminated (i) by MSG Rangers, one of its Subsidiaries or the MSG Rangers Surviving Entity other than for Cause, (ii) by you for “good reason” or (iii) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the MSG Rangers Change of Control or the going-private transaction with respect to MSG Rangers (in which case the Target Award shall vest), in each case so long as Cause does not then exist.
6.As used herein,
“Acquisition price per share” means the greater of (i) the highest price per share stated on the Schedule 13D or any amendment thereto filed by the holder of twenty
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percent (20%) or more of the Company’s voting power which gives rise to the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company and (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of such Sphere Entertainment Change of Control or going-private transaction with respect to the Company.
“Cause” means your (i) commission of an act of fraud, embezzlement, misappropriation, willful misconduct, gross negligence or breach of fiduciary duty against your Employer or an Affiliate thereof or (ii) commission of any act or omission that results in a conviction, plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any crime involving moral turpitude or any felony.
“Going-private transaction” means a transaction involving the purchase of Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable, securities described in Rule 13e-3 to the Exchange Act.
“Good reason” means
a. without your express written consent any reduction in your base salary or target bonus opportunity, or any material impairment or material adverse change in your working conditions (as the same may from time to time have been improved or, with your written consent, otherwise altered, in each case, after the Grant Date) at any time after or within ninety (90) days prior to the MSG Entertainment Change of Control, the Sphere Entertainment Change of Control, the MSG Knickerbockers Change of Control or the MSG Rangers Change of Control, as applicable, including, without limitation, any material reduction of your other compensation, executive perquisites or other employee benefits (measured, where applicable, by level or participation or percentage of award under any plans of the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable), or material impairment or material adverse change of your level of responsibility, authority, autonomy or title, or to your scope of duties;
b. any failure by your Employer to comply with any of the provisions of this Agreement, other than an insubstantial or inadvertent failure remedied by your Employer promptly after receipt of notice thereof given by you;
c. your Employer’s requiring you to be based at any office or location more than thirty-five (35) miles from your location immediately prior to such event except for travel reasonably required in the performance of your responsibilities; or
d. with respect to the Company only, any failure by the Company to obtain the assumption and agreement to perform this Agreement by a successor as contemplated by Paragraph 1 or Paragraph 2(A)(ii)(a).
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“Merger price per share” means, in the case of a merger, consolidation, sale, exchange or other disposition of assets that results in a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company (a “Merger”), the greater of (i) the fixed or formula price for the acquisition of shares of common stock occurring pursuant to the Merger and (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of such Sphere Entertainment Change of Control or going-private transaction with respect to the Company. Any securities or property which are part or all of the consideration paid for shares of common stock pursuant to the Merger shall be valued in determining the merger price per share at the higher of (A) the valuation placed on such securities or property by the Company, person or other entity which is a party with the Company to the Merger or (B) the valuation placed on such securities or property by the Committee.
“MSG Entertainment Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Entertainment, of the power to direct the management of MSG Entertainment or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“Sphere Entertainment Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by the Company, of the power to direct the management of the Company or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“MSG Knickerbockers Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Knickerbockers, of the power to direct the management of MSG Knickerbockers or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“MSG Rangers Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Rangers, of the power to direct the management of MSG Rangers or substantially all its assets (as constituted immediately prior to such transaction or transactions).
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“MSG Entertainment Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Entertainment’s assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Entertainment Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Entertainment’s assets shall be deemed to be the MSG Entertainment Surviving Entity.
“Sphere Entertainment Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of the Company’s assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the Sphere Entertainment Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of the Company’s assets shall be deemed to be the Sphere Entertainment Surviving Entity.
“MSG Knickerbockers Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Knickerbockers’ assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Knickerbockers Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Knickerbockers’ assets shall be deemed to be the MSG Knickerbockers Surviving Entity.
“MSG Rangers Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Rangers’ assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Rangers Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Rangers’ assets shall be deemed to be the MSG Rangers Surviving Entity.
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“Offer price per share” means, in the case of a tender offer or exchange offer which results in a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company (an “Offer”), the greater of (i) the highest price per share of common stock paid pursuant to the Offer or (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company. Any securities or property which are part or all of the consideration paid for shares of common stock in the Offer shall be valued in determining the offer price per share at the higher of (A) the valuation placed on such securities or property by the Company, person or other entity making such offer or (B) the valuation placed on such securities or property by the Committee.
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Appendix 2
Sphere Entertainment Co. Objectives
Sphere Entertainment Co. Objectives
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EXHIBIT 10.4
Form of Networks Employee Plan RSU
FORM OF RESTRICTED STOCK UNITS AGREEMENT
Dear [Participant Name]:
Pursuant to the MSG Networks Inc. 2010 Employee Stock Plan, as amended and assumed by Sphere Entertainment Co. (the “Plan”), you have been selected by the Compensation Committee of the Board of Directors (as more fully described in Section 11, the “Committee”) of Sphere Entertainment Co. (the “Company”), effective as of [Date] (the “Grant Date”) to receive [#RSUs] restricted stock units (“Units”). The Units are granted subject to the terms and conditions set forth below and in the Plan.
Capitalized terms used but not defined in this agreement (this “Agreement”) have the meanings given to them in the Plan.
1.Awards. Each Unit shall represent an unfunded, unsecured promise by the Company to deliver to you one share of the Company’s Class A Common Stock, par value $.01 per share (“Share”) on the Delivery Date. In accordance with Section 10(b) of the Plan, in the discretion of the Committee, in lieu of all or any portion of the Shares otherwise deliverable in respect of your Units, the Company may deliver a cash amount equal to the number of such Shares multiplied by the Fair Market Value of a Share on the date when Shares would otherwise have been issued, as determined by the Committee.
2.Vesting. [One-third of your Units will vest on each of March 15, [year], [year] and [year] (or the immediately preceding business day, if such date is not a business day) (each, a “Vesting Date”)];1 provided that you have remained in the continuous employ of the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group (each as defined below) through the applicable Vesting Date; provided further that fractional Units eligible to vest on each of the first two Vesting Dates will be rounded down to the nearest whole Unit. Subject to Sections 3 and 4, you will forfeit any unvested Units if you do not remain continuously employed with the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group from the Grant Date through any Vesting Date.
For purposes of this Agreement, the “Sphere Entertainment Group” means the Company and any of its Subsidiaries. The “MSG Entertainment Group” means Madison Square Garden Entertainment Corp. (“MSG Entertainment”) and any of its Subsidiaries, so long as MSG Entertainment remains an Affiliate. The “MSG Knickerbockers Group” means MSG Knickerbockers Corp. (formerly known as Madison Square Garden Sports Corp.) (“MSG Knickerbockers”) and any of its Subsidiaries, so long as MSG Knickerbockers remains an Affiliate. The “MSG Rangers Group” means MSG Rangers Corp. (formerly known as MSGS Spinco, Inc.) (“MSG Rangers”) and any of its Subsidiaries, so long as MSG Rangers remains an Affiliate. For purposes of this Agreement, the “Affiliated Group” means the Sphere
1 A different vesting schedule may be provided on a case-by-case basis as determined by the Committee in its sole discretion, subject to the terms and conditions of the Plan.
Entertainment Group and, for so long as they remain Affiliates, the MSG Entertainment Group, the MSG Knickerbockers Group and the MSG Rangers Group.
For purposes of this Agreement, if you are employed by the Sphere Entertainment Group, your “Employer” means the Company; if you are employed by the MSG Entertainment Group, your “Employer” means MSG Entertainment; if you are employed by the MSG Knickerbockers Group, your “Employer” means MSG Knickerbockers; and if you are employed by the MSG Rangers Group, your “Employer” means MSG Rangers. If you are employed by the MSG Entertainment Group and any of the Sphere Entertainment Group, the MSG Knickerbockers Group and/or the MSG Rangers Group, your “Employer” means MSG Entertainment. If you are employed by the Sphere Entertainment Group and any of the MSG Knickerbockers Group and/or the MSG Rangers Group, your “Employer” means the Company. If you are employed by both the MSG Knickerbockers Group and the MSG Rangers Group, your “Employer” means MSG Knickerbockers.
3.Vesting in the Event of Death, Disability[, Retirement] 2 and Other Circumstances.
(A)If you cease to be employed by the Affiliated Group as a result of your death, and Cause does not then exist, all of the unvested Units will vest as of the cessation date.
(B)If you cease to be employed by the Affiliated Group while you are Disabled, and Cause does not then exist, your unvested Units will immediately vest, and will become payable at such times as they would have otherwise vested pursuant to Section 2.
(C)[If you cease to be employed by the Affiliated Group on or after the date that you achieve Retirement Eligibility, and Cause does not then exist, then so long as you enter into your Employer’s then-current form of separation agreement (which shall include, without limitation, a covenant not to compete), you will vest in your Units and such Units will become payable at such times as they would have otherwise vested pursuant to Section 2 as if you had remained employed by the Affiliated Group on such
2 To be included on a case-by-case basis as determined by the Committee in its sole discretion.
2
dates; provided, however, that if Cause then exists, you will forfeit all Units that had not yet been paid.]3
(D)If you cease to be employed by the Affiliated Group for other reasons, the Committee may, in its sole discretion determine to vest all or a portion of the unvested Units (but shall be under no obligation to consider doing so).
(E)For purposes of this Agreement:
(i)“Disabled” means that you received short term disability income replacement payments for six (6) months, and thereafter (A) have been determined to be disabled in accordance with your Employer’s long term disability plan in which employees of your Employer are generally able to participate, if one is in effect at such time or (B) to the extent no such long term disability plan exists, have been determined to have a medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months as determined by the department or vendor directed by your Employer to determine eligibility for unpaid medical leave.
(ii)“Cause” means, as determined by the compensation committee of your Employer, in its sole discretion, your (A) commission of an act of fraud, embezzlement, misappropriation, willful misconduct, gross negligence or breach of fiduciary duty against your Employer or an Affiliate thereof or (B) commission of any act or omission that results in a conviction, plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any crime involving moral turpitude or any felony.
(iii)[“Retirement Eligibility” means that you are either (A) at least fifty-five (55) years old with at least ten (10) years of continuous service with the Affiliated Group or (B) at least sixty (60) years old with at least five (5) years of continuous service with the Affiliated Group.]4
4.Change of Control/Going-Private Transaction. As set forth in Appendix 1 attached hereto, your entitlement to the Units may be affected in the event of a MSG Entertainment Change of Control, a Sphere Entertainment Change of Control, a MSG Knickerbockers Change of Control, a MSG Rangers Change of Control or a going-private
3 See footnote 1.
4 See footnote 1.
3
transaction with respect to the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers (each as defined in Appendix 1 attached hereto).
5.Transfer Restrictions. You may not transfer, assign, pledge or otherwise encumber the Units, other than to the extent provided in the Plan.
6.Right to Vote and Receive Dividends. You shall not be deemed to be the holder of, or have any of the rights of a stockholder with respect to, any Units unless and until the Company shall have issued and delivered Shares to you and your name shall have been entered as a stockholder of record on the books of the Company. Pursuant to Section 10(c) of the Plan, all ordinary (as determined by the Committee in its sole discretion) cash dividends that would have been paid upon any Shares underlying your Units had such Shares been issued will be retained by the Company for your account until your Units vest and such dividends will be paid to you (without interest) on the applicable Delivery Date to the extent that your Units vest.
7.Tax Representations and Tax Withholding. You hereby acknowledge that you have reviewed with your own tax advisors the federal, state and local tax consequences of receiving the Units. You hereby represent to MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers and each of their respective Subsidiaries that you are relying solely on such advisors and not on any statements or representations of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers, any of their respective Subsidiaries or affiliates or any of their respective agents. If, in connection with the Units, your Employer is required to withhold any amounts by reason of any federal, state or local tax, such withholding shall be effected in accordance with Section 16 of the Plan. If your Units vest prior to payment in accordance with Section 3(B)[ or][,] (C)[ or (D)]5, then you agree to cooperate with your Employer to satisfy any tax withholding obligations, in such manner as determined by the Committee in its sole discretion.
8.Section 409A. It is the intent that payments under this Agreement shall comply with Section 409A of the Internal Revenue Code (“Section 409A”) to the extent applicable, and that the Agreement be administered accordingly. Notwithstanding anything to the contrary contained in this Agreement or any employment agreement you have entered into with your Employer, to the extent that any payment or benefit under this Agreement is determined by your Employer to constitute “non-qualified deferred compensation” subject to Section 409A and is payable to you by reason of termination of your employment, then (a) such payment or benefit shall be made or provided to you only upon a “separation from service” as defined for purposes of Section 409A under applicable regulations and (b) if you are a “specified employee” (within the meaning of Section 409A and as determined by your Employer), such payment or benefit shall not be made or provided before the date that is six (6) months after the date of your
5 See footnote 1.
4
separation from service (or your earlier death). Each payment under this Agreement shall be treated as a separate payment under Section 409A.
9.Delivery. Subject to Sections 7, 10 and 13 and except as otherwise provided in this Agreement, the Shares will be delivered in respect of vested Units (if any) on the first to occur of the following events: (i) to you on or promptly after the applicable Vesting Date (but in no case more than fifteen (15) days after such date), (ii) in the event of your death to your estate after your death and during the calendar year in which your death occurs (or such later date as may be permitted under Section 409A) and (iii) in the event of any other cessation of your employment with the Affiliated Group (including pursuant to the provisions of Appendix 1) to you on the ninetieth (90th) day following the cessation date (the “Delivery Date”). Unless otherwise determined by the Committee, delivery of the Shares at the Delivery Date will be by book-entry credit to an account in your name that the Company has established at a custody agent (the “custodian”). The Company’s transfer agent, EQ Shareowner Services, shall act as the custodian of the Shares; however, the Company may in its sole discretion appoint another custodian to replace EQ Shareowner Services. On the Delivery Date, if you have complied with your obligations under this Agreement and provided that your tax obligations with respect to the vested Units are appropriately satisfied, we will instruct the custodian to electronically transfer your Shares to a brokerage or other account on your behalf (or make such other arrangements for the delivery of the Shares to you as we reasonably determine).
10.Right of Offset. You hereby agree that the Company shall have the right to offset against its obligation to deliver shares of Class A Common Stock, cash or other property under this Agreement to the extent that it does not constitute “non-qualified deferred compensation” pursuant to Section 409A, any outstanding amounts of whatever nature that you then owe to the Company or any of its Subsidiaries.
11.The Committee. For purposes of this Agreement, the term “Committee” means the Compensation Committee of the Board of Directors of the Company or any replacement committee established under, and as more fully defined in, the Plan.
12.Committee Discretion. The Committee has full discretion with respect to any actions to be taken or determinations to be made in connection with this Agreement, and its determinations shall be final, binding and conclusive.
13.Amendment. The Committee reserves the right at any time to amend the terms and conditions set forth in this Agreement, except that the Committee shall not make any amendment or revision in a manner unfavorable to you (other than if immaterial), without your consent. No consent shall be required for amendments made pursuant to Section 12 of the Plan, except that, for purposes of Section 19 of the Plan, Section 4 and Appendix 1 of this Agreement are deemed to be “terms of an Award Agreement expressly refer[ring] to an Adjustment Event.”
5
Any amendment of this Agreement shall be in writing and signed by an authorized member of the Committee or a person or persons designated by the Committee.
14.Units Subject to the Plan. The Units covered by this Agreement are subject to the Plan.
15.Subsidiaries. For purposes of this Agreement, “Subsidiaries” means any entities that are controlled, directly or indirectly, by the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable, or in which the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable, owns, directly or indirectly, more than 50% of the equity interests.
16.Entire Agreement. Except for any employment agreement between you and the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group in effect as of the date of the grant hereof (as such employment agreement may be modified, renewed or replaced), this Agreement and the Plan constitute the entire understanding and agreement of you and the Company with respect to the Units covered hereby and supersede all prior understandings and agreements. Except as provided in Sections 8 and 15, in the event of a conflict among the documents with respect to the terms and conditions of the Units covered hereby, the documents will be accorded the following order of authority: the terms and conditions of the Plan will have highest authority followed by the terms and conditions of your employment agreement, if any, followed by the terms and conditions of this Agreement.
17.Successors and Assigns. The terms and conditions of this Agreement shall be binding upon, and shall inure to the benefit of, the Company and its successors and assigns.
18.Governing Law. This Agreement shall be deemed to be made under, and in all respects be interpreted, construed and governed by and in accordance with, the laws of the State of New York without regard to conflict of law principles.
19.Jurisdiction and Venue. You irrevocably submit to the jurisdiction of the courts of the State of New York and the Federal courts of the United States located in the Southern District of the State of New York in respect of the interpretation and enforcement of the provisions of this Agreement, and hereby waive, and agree not to assert, as a defense that you are not subject thereto or that the venue thereof may not be appropriate. You agree that the mailing of process or other papers in connection with any action or proceeding in any manner permitted by law shall be valid and sufficient service.
20.Waiver. No waiver by the Company at any time of any breach by you of, or compliance with, any term or condition of this Agreement or the Plan to be performed by you
6
shall be deemed a waiver of the same term or condition, or of any similar or any dissimilar term or condition, whether at the same time or at any prior or subsequent time.
21.Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any term or condition hereof shall not affect the validity or enforceability of the other terms and conditions set forth herein.
22.Exclusion from Compensation Calculation. By acceptance of this Agreement, you shall be deemed to be in agreement that the Units covered hereby shall be considered special incentive compensation and will be exempt from inclusion as “wages” or “salary” in pension, retirement, life insurance and other employee benefits arrangements of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries, except as determined otherwise by MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries. In addition, each of your beneficiaries shall be deemed to be in agreement that all such shares be exempt from inclusion in “wages” or “salary” for purposes of calculating benefits of any life insurance coverage sponsored by MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries.
23.No Right to Continued Employment. Nothing contained in this Agreement or the Plan shall be construed to confer on you any right to continue in the employ of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries, or derogate from the right of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries, as applicable, to retire, request the resignation of, or discharge you, at any time, with or without cause.
24.Headings. The headings in this Agreement are for purposes of convenience only and are not intended to define or limit the construction of the terms and conditions of this Agreement.
25.Effective Date. Upon execution by you, this Agreement shall be effective from and as of the Grant Date.
26.Signatures. Execution of this Agreement by the Company may be in the form of an electronic, manual or similar signature (including, without limitation, an electronic acknowledgement of acceptance), and such signature shall be treated as an original signature for all purposes.
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| SPHERE ENTERTAINMENT CO. | |||||||||||
| By: | |||||||||||
| Name: | |||||||||||
| Title: | |||||||||||
By your electronic acknowledgement of acceptance, you (i) acknowledge that a complete copy of the Plan and an executed original of this Agreement have been made available to you and (ii) agree to all of the terms and conditions set forth in the Plan and this Agreement.
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Appendix 1
RESTRICTED STOCK UNITS AGREEMENT
RESTRICTED STOCK UNITS AGREEMENT
1.In the event of a “Sphere Entertainment Change of Control” or a “going-private transaction” with respect to the Company, each as defined below, your entitlement to Units shall be as follows:
(A)If the Company or the “Sphere Entertainment Surviving Entity,” as defined below, has shares of common stock (or partnership units) traded on a national stock exchange or on the over-the-counter market as reported on the New York Stock Exchange or any other stock exchange, the Committee shall, no later than the effective date of the transaction which results in a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company, either (i) convert your unvested Units into an amount of cash equal to (a) the number of your unvested Units multiplied by (b) the “offer price per share,” the “acquisition price per share” or the “merger price per share,” each as defined below, whichever of such amounts is applicable or (ii) arrange to have the Sphere Entertainment Surviving Entity grant to you an award of restricted stock units (or partnership units) for shares of the Sphere Entertainment Surviving Entity on the same terms and with a value equivalent to your unvested Units which will, in the good faith determination of the Committee, provide you with an equivalent profit potential.
(B)If the Company or the Sphere Entertainment Surviving Entity does not have shares of common stock (or partnership units) traded on a national stock exchange or on the over-the-counter market as reported on the New York Stock Exchange or any other stock exchange, the Committee shall convert your unvested Units into an amount of cash equal to the amount calculated as per Paragraph 1(A)(i) above.
(C)Provided that you remain continuously employed with the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group, the MSG Rangers Group or the Sphere Entertainment Surviving Entity through the date of the earliest event described in any of (i), (ii) or (iii) below, any award provided for in Paragraph 1(A)(i) or 1(B) shall become payable to you (or your estate), and any substitute restricted stock unit award of the Sphere Entertainment Surviving Entity provided for in Paragraph 1(A)(ii) shall vest, at the earlier of (i) each applicable date on which your Units would otherwise have vested had they continued in effect, (ii) the date of your death, or (iii) if, immediately prior to termination you were an employee of the Sphere Entertainment Group, the date on which your employment with the Sphere Entertainment Group or the Sphere Entertainment Surviving Entity is terminated (a) by the Company, one of its Subsidiaries or the Sphere Entertainment Surviving Entity other than for Cause, (b) by you for “good reason,” as defined below or (c) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company, in each case so long as Cause does not then exist; provided that clause (c) herein shall not apply in the event that your rights in the Units are converted into a right
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to receive an amount of cash in accordance with Paragraph 1(A)(i). The amount payable in cash shall be payable together with interest from the effective date of the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company until the date of payment at (i) the weighted average cost of capital of the Company immediately prior to the effectiveness of the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company or (ii) if the Company (or the Sphere Entertainment Surviving Entity) sets aside the funds in a trust or other funding arrangement, the actual earnings of such trust or other funding arrangement.
2.In the event of a “MSG Entertainment Change of Control” or a “going-private transaction” with respect to MSG Entertainment, each as defined below, and if (1) immediately prior to such MSG Entertainment Change of Control or going-private transaction with respect to MSG Entertainment you were an employee of the MSG Entertainment Group and (2) at the time of such MSG Entertainment Change of Control or going-private transaction with respect to MSG Entertainment you are not an employee of the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group, your entitlement to the Units shall be as follows:
Your Units shall vest at the earlier of (A) the date on which your Units would otherwise have vested had they continued in effect, (B) the date of your death or (C) the date on which your employment with the MSG Entertainment Group or the “MSG Entertainment Surviving Entity,” as defined below, is terminated (i) by MSG Entertainment, one of its Subsidiaries or the MSG Entertainment Surviving Entity other than for Cause, (ii) by you for “good reason” or (iii) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the MSG Entertainment Change of Control or the going-private transaction with respect to MSG Entertainment, in each case so long as Cause does not then exist.
3.In the event of a “MSG Knickerbockers Change of Control” or a “going-private transaction” with respect to MSG Knickerbockers, each as defined below, and if (1) immediately prior to such MSG Knickerbockers Change of Control or going-private transaction with respect to MSG Knickerbockers you were an employee of the MSG Knickerbockers Group and (2) at the time of such MSG Knickerbockers Change of Control or going-private transaction with respect to MSG Knickerbockers you are not an employee of the Sphere Entertainment Group, the MSG Entertainment Group or the MSG Rangers Group, your entitlement to the Units shall be as follows:
Your Units shall vest at the earlier of (A) the date on which your Units would otherwise have vested had they continued in effect, (B) the date of your death or (C) the date on which your employment with the MSG Knickerbockers Group or the “MSG Knickerbockers Surviving Entity,” as defined below, is terminated (i) by MSG Knickerbockers, one of its Subsidiaries or the MSG Knickerbockers Surviving Entity other than for Cause, (ii) by you for “good reason” or (iii) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the MSG
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Knickerbockers Change of Control or the going-private transaction with respect to MSG Knickerbockers, in each case so long as Cause does not then exist.
4.In the event of a “MSG Rangers Change of Control” or a “going-private transaction” with respect to MSG Rangers, each as defined below, and if (1) immediately prior to such MSG Rangers Change of Control or going-private transaction with respect to MSG Rangers you were an employee of the MSG Rangers Group and (2) at the time of such MSG Rangers Change of Control or going-private transaction with respect to MSG Rangers you are not an employee of the Sphere Entertainment Group, the MSG Entertainment Group or the MSG Knickerbockers Group, your entitlement to the Units shall be as follows:
Your Units shall vest at the earlier of (A) the date on which your Units would otherwise have vested had they continued in effect, (B) the date of your death or (C) the date on which your employment with the MSG Rangers Group or the “MSG Rangers Surviving Entity,” as defined below, is terminated (i) by MSG Rangers, one of its Subsidiaries or the MSG Rangers Surviving Entity other than for Cause, (ii) by you for “good reason” or (iii) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the MSG Rangers Change of Control or the going-private transaction with respect to MSG Rangers, in each case so long as Cause does not then exist.
5.As used herein,
“Acquisition price per share” means the greater of (i) the highest price per share stated on the Schedule 13D or any amendment thereto filed by the holder of twenty percent (20%) or more of the Company’s voting power which gives rise to the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company and (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of such Sphere Entertainment Change of Control or going-private transaction with respect to the Company.
“Cause” means your (i) commission of an act of fraud, embezzlement, misappropriation, willful misconduct, gross negligence or breach of fiduciary duty against your Employer or an Affiliate thereof or (ii) commission of any act or omission that results in a conviction, plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any crime involving moral turpitude or any felony.
“Going-private transaction” means a transaction involving the purchase of Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable, securities described in Rule 13e-3 to the Exchange Act.
“Good reason” means
a. without your express written consent any reduction in your base salary or target bonus opportunity, or any material impairment or material adverse change in your working conditions (as the same may from time to time have been improved or, with your written consent, otherwise altered, in each case, after the
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Grant Date) at any time after or within ninety (90) days prior to the MSG Entertainment Change of Control, the Sphere Entertainment Change of Control, the MSG Knickerbockers Change of Control or the MSG Rangers Change of Control, as applicable, including, without limitation, any material reduction of your other compensation, executive perquisites or other employee benefits (measured, where applicable, by level or participation or percentage of award under any plans of the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable), or material impairment or material adverse change of your level of responsibility, authority, autonomy or title, or to your scope of duties;
b. any failure by your Employer to comply with any of the provisions of this Agreement, other than an insubstantial or inadvertent failure remedied by your Employer promptly after receipt of notice thereof given by you;
c. your Employer’s requiring you to be based at any office or location more than thirty-five (35) miles from your location immediately prior to such event except for travel reasonably required in the performance of your responsibilities; or
d. with respect to the Company only, any failure by the Company to obtain the assumption and agreement to perform this Agreement by a successor as contemplated by Paragraph 1.
“Merger price per share” means, in the case of a merger, consolidation, sale, exchange or other disposition of assets that results in a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company (a “Merger”), the greater of (i) the fixed or formula price for the acquisition of shares of common stock occurring pursuant to the Merger and (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of such Sphere Entertainment Change of Control or going-private transaction with respect to the Company. Any securities or property which are part or all of the consideration paid for shares of common stock pursuant to the Merger shall be valued in determining the merger price per share at the higher of (A) the valuation placed on such securities or property by the Company, person or other entity which is a party with the Company to the Merger or (B) the valuation placed on such securities or property by the Committee.
“MSG Entertainment Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Entertainment, of the power to direct the management of MSG Entertainment or substantially all its assets (as constituted immediately prior to such transaction or transactions).
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“Sphere Entertainment Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by the Company, of the power to direct the management of the Company or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“MSG Knickerbockers Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Knickerbockers, of the power to direct the management of MSG Knickerbockers or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“MSG Rangers Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Rangers, of the power to direct the management of MSG Rangers or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“MSG Entertainment Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Entertainment’s assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Entertainment Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Entertainment’s assets shall be deemed to be the MSG Entertainment Surviving Entity.
“Sphere Entertainment Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of the Company’s assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the Sphere Entertainment Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of the Company’s assets shall be deemed to be the Sphere Entertainment Surviving Entity.
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“MSG Knickerbockers Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Knickerbockers’ assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Knickerbockers Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Knickerbockers’ assets shall be deemed to be the MSG Knickerbockers Surviving Entity.
“MSG Rangers Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Rangers’ assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Rangers Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Rangers’ assets shall be deemed to be the MSG Rangers Surviving Entity.
“Offer price per share” means, in the case of a tender offer or exchange offer which results in a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company (an “Offer”), the greater of (i) the highest price per share of common stock paid pursuant to the Offer or (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company. Any securities or property which are part or all of the consideration paid for shares of common stock in the Offer shall be valued in determining the offer price per share at the higher of (A) the valuation placed on such securities or property by the Company, person or other entity making such offer or (B) the valuation placed on such securities or property by the Committee.
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EXHIBIT 10.5
Form of Networks Employee Plan PSU
FORM OF PERFORMANCE RESTRICTED STOCK UNITS AGREEMENT
Dear [Participant Name]:
Pursuant to the MSG Networks Inc. 2010 Employee Stock Plan, as amended and assumed by Sphere Entertainment Co. (the “Plan”), you have been selected by the Compensation Committee of the Board of Directors (as more fully described in Section 12, the “Committee”) of Sphere Entertainment Co. (the “Company”), effective as of [Date] (the “Grant Date”) to receive performance restricted stock units (the “Units”). The Units are granted subject to the terms and conditions set forth below and in the Plan.
Capitalized terms used but not defined in this agreement (this “Agreement”) have the meanings given to them in the Plan.
1.Awards. In accordance with the terms of this Agreement, the target amount of your contingent Units is [#RSUs] restricted stock units (the “Target Award”), which number of Units may be increased or decreased to the extent the performance criteria (the “Objectives”) set forth in Appendix 2 attached hereto have been attained in respect of the period from January 1, [year] through December 31, [year] (the “Performance Period”). Each Unit shall represent an unfunded, unsecured promise by the Company to deliver to you one share of the Company’s Class A Common Stock, par value $.01 per share (“Share”) on the Delivery Date. [The Units, calculated in accordance with Appendix 2 attached hereto, will vest upon the later of (i) March 15, [year] (or the immediately preceding business day, if such date is not a business day) and (ii) the date on which the Committee (as defined in Section 12 below) determines the Company’s performance against the Objectives (the “Vesting Date”);]1 provided that you have remained in the continuous employ of the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group (each as defined below) from the Grant Date through the Vesting Date. In accordance with Section 10(b) of the Plan, in the discretion of the Committee, in lieu of all or any portion of the Shares otherwise deliverable in respect of your Units, the Company may deliver a cash amount equal to the number of such Shares multiplied by the Fair Market Value of a Share on the date when Shares would otherwise have been issued, as determined by the Committee.
2.Vesting. Subject to Sections 3 and 4, you will automatically forfeit all of your rights and interest in the Units if you do not remain continuously employed with the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group from the Grant Date through the Vesting Date, regardless of whether the Objectives are attained.
For purposes of this Agreement, the “Sphere Entertainment Group” means the Company and any of its Subsidiaries. The “MSG Entertainment Group” means Madison Square Garden Entertainment Corp. (“MSG Entertainment”) and any of its Subsidiaries, so long as MSG
1 A different vesting schedule may be provided on a case-by-case basis as determined by the Committee in its sole discretion, subject to the terms and conditions of the Plan.
Entertainment remains an Affiliate. The “MSG Knickerbockers Group” means MSG Knickerbockers Corp. (formerly known as Madison Square Garden Sports Corp.) (“MSG Knickerbockers”) and any of its Subsidiaries, so long as MSG Knickerbockers remains an Affiliate. The “MSG Rangers Group” means MSG Rangers Corp. (formerly known as MSGS Spinco, Inc.) (“MSG Rangers”) and any of its Subsidiaries, so long as MSG Rangers remains an Affiliate. For purposes of this Agreement, the “Affiliated Group” means the Sphere Entertainment Group and, for so long as they remain Affiliates, the MSG Entertainment Group, the MSG Knickerbockers Group and the MSG Rangers Group.
For purposes of this Agreement, if you are employed by the Sphere Entertainment Group, your “Employer” means the Company; if you are employed by the MSG Entertainment Group, your “Employer” means MSG Entertainment; if you are employed by the MSG Knickerbockers Group, your “Employer” means MSG Knickerbockers; and if you are employed by the MSG Rangers Group, your “Employer” means MSG Rangers. If you are employed by the MSG Entertainment Group and any of the Sphere Entertainment Group, the MSG Knickerbockers Group and/or the MSG Rangers Group, your “Employer” means MSG Entertainment. If you are employed by the Sphere Entertainment Group and any of the MSG Knickerbockers Group and/or the MSG Rangers Group, your “Employer” means the Company. If you are employed by both the MSG Knickerbockers Group and the MSG Rangers Group, your “Employer” means MSG Knickerbockers.
3.Vesting in the Event of Death [or][,] Disability[, or Retirement].2
(A)If you cease to be employed by the Affiliated Group as a result of your death on or prior to the Vesting Date, and Cause does not then exist, the Target Award will vest as of the cessation date. If, after December 31, [year] but prior to the Vesting Date, you cease to be employed by the Affiliated Group as a result of your death, and Cause does not then exist, your estate will receive the Units, if any, to which you would have been entitled on the Vesting Date had your employment not been so terminated.
(B)If you cease to be employed by the Affiliated Group while you are Disabled, and Cause does not then exist, the Units will remain subject to vesting on the Vesting Date in accordance with Section 1.
(C)[If you cease to be employed by the Affiliated Group on or after the date that you achieve Retirement Eligibility, and Cause does not then exist, and you enter into your Employer’s then-current form of separation agreement (which shall include, without limitation, a covenant not to compete), the Units will remain subject to vesting on the Vesting Date in accordance with Section 1.]3
(D)For purposes of this Agreement:
2 To be included on a case-by-case basis as determined by the Committee in its sole discretion.
3 See footnote 2.
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(i)“Disabled” means that you received short term disability income replacement payments for six (6) months, and thereafter (A) have been determined to be disabled in accordance with your Employer’s long term disability plan in which employees of your Employer are generally able to participate, if one is in effect at such time or (B) to the extent no such long term disability plan exists, have been determined to have a medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months as determined by the department or vendor directed by your Employer to determine eligibility for unpaid medical leave.
(ii)“Cause” means, as determined by the compensation committee of your Employer, in its sole discretion, your (A) commission of an act of fraud, embezzlement, misappropriation, willful misconduct, gross negligence or breach of fiduciary duty against your Employer or an Affiliate thereof or (B) commission of any act or omission that results in a conviction, plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any crime involving moral turpitude or any felony.
(iii)[“Retirement Eligibility” means that you are either (A) at least fifty-five (55) years old with at least ten (10) years of continuous service with the Affiliated Group or (B) at least sixty (60) years old with at least five (5) years of continuous service with the Affiliated Group.]4
4.Change of Control/Going-Private Transaction. As set forth in Appendix 1 attached hereto, your entitlement to the Units may be affected in the event of a MSG Entertainment Change of Control, a Sphere Entertainment Change of Control, a MSG Knickerbockers Change of Control, a MSG Rangers Change of Control or a going-private transaction with respect to the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers (each as defined in Appendix 1 attached hereto).
5.Transfer Restrictions. You may not transfer, assign, pledge or otherwise encumber the Units, other than to the extent provided in the Plan.
6.Unfunded Obligation. The Plan will at all times be unfunded and, except as set forth in Appendix 1 attached hereto, no provision will at any time be required to be made with respect to segregating any assets of the Company or any of its Subsidiaries for payment of any benefits under the Plan, including, without limitation, those covered by this Agreement. Your right or that of your estate to receive delivery or payment under this Agreement shall be an
4 See footnote 2.
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unsecured claim against the general assets of the Company, including any rabbi trust established pursuant to Appendix 1. Neither you nor your estate shall have any rights in or against any specific assets of the Company other than the assets held by the rabbi trust established pursuant to Appendix 1.
7.Right to Vote and Receive Dividends. You shall not be deemed to be the holder of, or have any of the rights of a stockholder with respect to, any Units unless and until the Company shall have issued and delivered Shares to you and your name shall have been entered as a stockholder of record on the books of the Company. Pursuant to Section 10(c) of the Plan, all ordinary (as determined by the Committee in its sole discretion) cash dividends that would have been paid upon any Shares underlying your Units had such Shares been issued will be retained by the Company for your account until your Units vest and such dividends will be paid to you (without interest) on the Delivery Date to the extent that your Units vest.
8.Tax Representations and Tax Withholding. You hereby acknowledge that you have reviewed with your own tax advisors the federal, state and local tax consequences of receiving the Units. You hereby represent to MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers and each of their respective Subsidiaries that you are relying solely on such advisors and not on any statements or representations of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers, any of their respective Subsidiaries or affiliates or any of their respective agents. If, in connection with the Units, your Employer is required to withhold any amounts by reason of any federal, state or local tax, such withholding shall be effected in accordance with Section 16 of the Plan. If your Units vest prior to payment in accordance with Section 3(B)[ or (C)]5, then you agree to cooperate with your Employer to satisfy any tax withholding obligations, in such manner as determined by the Committee in its sole discretion.
9.Section 409A. It is the intent that payments under this Agreement shall comply with Section 409A of the Internal Revenue Code (“Section 409A”) to the extent applicable, and that the Agreement be administered accordingly. Notwithstanding anything to the contrary contained in this Agreement or any employment agreement you have entered into with your Employer, to the extent that any payment or benefit under this Agreement is determined by your Employer to constitute “non-qualified deferred compensation” subject to Section 409A and is payable to you by reason of termination of your employment, then (a) such payment or benefit shall be made or provided to you only upon a “separation from service” as defined for purposes of Section 409A under applicable regulations and (b) if you are a “specified employee” (within the meaning of Section 409A and as determined by your Employer), such payment or benefit shall not be made or provided before the date that is six (6) months after the date of your separation from service (or your earlier death). Each payment under this Agreement shall be treated as a separate payment under Section 409A.
10.Delivery. Subject to Sections 8, 11 and 14 and Appendix 1 and except as otherwise provided in this Agreement, the Shares will be delivered in respect of vested Units (if
5 See footnote 2.
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any) on the first to occur of the following events: (i) to you on or promptly after the Vesting Date (but in no case more than fifteen (15) days after such date) and (ii) in the event of your death to your estate after your death and during the calendar year in which your death occurs (or such later date as may be permitted under Section 409A) (the “Delivery Date”). Unless otherwise determined by the Committee, delivery of the Shares at the Delivery Date will be by book-entry credit to an account in your name that the Company has established at a custody agent (the “custodian”). The Company’s transfer agent, EQ Shareowner Services, shall act as the custodian of the Shares; however, the Company may in its sole discretion appoint another custodian to replace EQ Shareowner Services. On the Delivery Date, if you have complied with your obligations under this Agreement and provided that your tax obligations with respect to the vested Units are appropriately satisfied, we will instruct the custodian to electronically transfer your Shares to a brokerage or other account on your behalf (or make such other arrangements for the delivery of the Shares to you as we reasonably determine).
11.Right of Offset. You hereby agree that the Company shall have the right to offset against its obligation to deliver shares of Class A Common Stock, cash or other property under this Agreement to the extent that it does not constitute “non-qualified deferred compensation” pursuant to Section 409A, any outstanding amounts of whatever nature that you then owe to the Company or any of its Subsidiaries.
12.The Committee. For purposes of this Agreement, the term “Committee” means the Compensation Committee of the Board of Directors of the Company or any replacement committee established under, and as more fully defined in, the Plan.
13.Committee Discretion. The Committee has full discretion with respect to any actions to be taken or determinations to be made in connection with this Agreement, and its determinations shall be final, binding and conclusive.
14.Amendment. The Committee reserves the right at any time to amend the terms and conditions set forth in this Agreement, except that the Committee shall not make any amendment or revision in a manner unfavorable to you (other than if immaterial), without your consent. No consent shall be required for amendments made pursuant to Section 12 of the Plan, except that, for purposes of Section 19 of the Plan, Section 4 and Appendix 1 of this Agreement are deemed to be “terms of an Award Agreement expressly refer[ring] to an Adjustment Event.” Any amendment of this Agreement shall be in writing and signed by an authorized member of the Committee or a person or persons designated by the Committee.
15.Units Subject to the Plan. The Units covered by this Agreement are subject to the Plan.
16.Subsidiaries. For purposes of this Agreement, “Subsidiaries” means any entities that are controlled, directly or indirectly, by the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable, or in which the Company, MSG Entertainment,
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MSG Knickerbockers or MSG Rangers, as applicable, owns, directly or indirectly, more than 50% of the equity interests.
17.Entire Agreement. Except for any employment agreement between you and the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group in effect as of the date of the grant hereof (as such employment agreement may be modified, renewed or replaced), this Agreement and the Plan constitute the entire understanding and agreement of you and the Company with respect to the Units covered hereby and supersede all prior understandings and agreements. Except as provided in Sections 9 and 16, in the event of a conflict among the documents with respect to the terms and conditions of the Units covered hereby, the documents will be accorded the following order of authority: the terms and conditions of the Plan will have highest authority followed by the terms and conditions of your employment agreement, if any, followed by the terms and conditions of this Agreement.
18.Successors and Assigns. The terms and conditions of this Agreement shall be binding upon, and shall inure to the benefit of, the Company and its successors and assigns.
19.Governing Law. This Agreement shall be deemed to be made under, and in all respects be interpreted, construed and governed by and in accordance with, the laws of the State of New York without regard to conflict of law principles.
20.Jurisdiction and Venue. You irrevocably submit to the jurisdiction of the courts of the State of New York and the Federal courts of the United States located in the Southern District of the State of New York in respect of the interpretation and enforcement of the provisions of this Agreement, and hereby waive, and agree not to assert, as a defense that you are not subject thereto or that the venue thereof may not be appropriate. You agree that the mailing of process or other papers in connection with any action or proceeding in any manner permitted by law shall be valid and sufficient service.
21.Waiver. No waiver by the Company at any time of any breach by you of, or compliance with, any term or condition of this Agreement or the Plan to be performed by you shall be deemed a waiver of the same term or condition, or of any similar or any dissimilar term or condition, whether at the same time or at any prior or subsequent time.
22.Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any term or condition hereof shall not affect the validity or enforceability of the other terms and conditions set forth herein.
23.Exclusion from Compensation Calculation. By acceptance of this Agreement, you shall be deemed to be in agreement that the Units covered hereby shall be considered special incentive compensation and will be exempt from inclusion as “wages” or “salary” in pension, retirement, life insurance and other employee benefits arrangements of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective
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Subsidiaries, except as determined otherwise by MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries. In addition, each of your beneficiaries shall be deemed to be in agreement that all such shares be exempt from inclusion in “wages” or “salary” for purposes of calculating benefits of any life insurance coverage sponsored by MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries.
24.No Right to Continued Employment. Nothing contained in this Agreement or the Plan shall be construed to confer on you any right to continue in the employ of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries, or derogate from the right of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries, as applicable, to retire, request the resignation of, or discharge you, at any time, with or without cause.
25.Headings. The headings in this Agreement are for purposes of convenience only and are not intended to define or limit the construction of the terms and conditions of this Agreement.
26.Effective Date. Upon execution by you, this Agreement shall be effective from and as of the Grant Date.
27.Signatures. Execution of this Agreement by the Company may be in the form of an electronic, manual or similar signature (including, without limitation, an electronic acknowledgement of acceptance), and such signature shall be treated as an original signature for all purposes.
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| SPHERE ENTERTAINMENT CO. | ||||||||
| By: | ||||||||
| Name: | ||||||||
| Title: | ||||||||
By your electronic acknowledgement of acceptance, you (i) acknowledge that a complete copy of the Plan and an executed original of this Agreement have been made available to you and (ii) agree to all of the terms and conditions set forth in the Plan and this Agreement.
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Appendix 1
PERFORMANCE RESTRICTED STOCK UNITS AGREEMENT
PERFORMANCE RESTRICTED STOCK UNITS AGREEMENT
1.In the event of a “going-private transaction” with respect to the Company, as defined below, your entitlement to the Units shall be as follows:
(A)The Committee shall, no later than the effective date of the transaction which results in a going-private transaction with respect to the Company, deem the Objectives to be satisfied at the target level and convert your Target Award into an amount of cash equal to (i) the number of your unvested Units multiplied by (ii) the “offer price per share,” the “acquisition price per share” or the “merger price per share,” each as defined below, whichever of such amounts is applicable.
(B)Provided that you remain continuously employed with the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group, the MSG Rangers Group or the “Sphere Entertainment Surviving Entity,” as defined below, through the date of the earliest event described in any of (i), (ii) or (iii) below, any award provided for in Paragraph 1(A) shall become payable to you (or your estate) at or promptly after (but in no event more than fifteen (15) days after) the earlier of (i) the date on which your Units would otherwise have vested had it continued in effect, (ii) the date of your death or (iii) if, immediately prior to termination you were an employee of the Sphere Entertainment Group, the date on which your employment with the Sphere Entertainment Group or the Sphere Entertainment Surviving Entity is terminated (a) by the Company, one of its Subsidiaries or the Sphere Entertainment Surviving Entity other than for Cause (as defined below) or (b) by you for “good reason” (as defined below), in each case so long as Cause does not then exist. Notwithstanding the foregoing, if you become entitled to payment of an award by virtue of a termination in accordance with (iii)(a) or (iii)(b) of this Paragraph 1(B) and are determined by the Company to be a “specified employee” within the meaning of Section 409A, the award shall be paid to you on the earlier of: (i) January 1, [year], (ii) the date that is six (6) months from your date of employment termination and (iii) any other date on which such payment or any portion thereof would be a permissible distribution under Section 409A. In the event of such a determination, the Company shall promptly following the date of your employment termination set aside such amount for your benefit in a “rabbi trust” that satisfies the requirements of Revenue Procedure 92-64, and on a monthly basis shall deposit into such trust interest in arrears (compounded quarterly at the rate provided below) until such time as such amount, together with all accrued interest thereon, is paid to you in full pursuant to the previous sentence; provided, that no payment will be made to such rabbi trust if it would be contrary to law or cause you to incur additional tax under Section 409A. The initial interest rate shall be the average of the one-year SOFR fixed rate equivalent for the ten (10) business days prior to the date of your employment termination.
2.In the event of a “Sphere Entertainment Change of Control,” as defined below, provided that you have remained continuously employed with the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group
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through the effective date of the transaction that results in the Sphere Entertainment Change of Control, you will be entitled to the payment of the Target Award whether or not the Objectives have been attained.
(A)If the actual Sphere Entertainment Change of Control:
(i)is a permissible distribution event under Section 409A or payment of the Units promptly upon such event is otherwise permissible under Section 409A (including, for the avoidance of doubt, by reason of the inapplicability of Section 409A to the Units), then the Target Award shall be paid to you by the Company promptly following the Sphere Entertainment Change of Control; or
(ii)is not a permissible distribution event under Section 409A and payment of the Units promptly upon such event is not otherwise permissible under Section 409A, then:
(a)(1) if the Company or the Sphere Entertainment Surviving Entity has shares of common stock (or partnership units) traded on a national stock exchange or on the over-the-counter market as reported on the New York Stock Exchange or any other stock exchange, the Committee shall, no later than the effective date of the Sphere Entertainment Change of Control, either (i) convert your Target Award into an amount of cash equal to (a) the number of your unvested Units multiplied by (b) the “offer price per share,” the “acquisition price per share” or the “merger price per share,” each as defined below, whichever of such amounts is applicable or (ii) arrange to have the Sphere Entertainment Surviving Entity grant to you an award of restricted stock units (or partnership units) for shares of the Sphere Entertainment Surviving Entity on the same terms and with a value equivalent to your Target Award which will, in the good faith determination of the Committee, provide you with an equivalent profit potential; or
(2) if the Company or the Sphere Entertainment Surviving Entity does not have shares of common stock (or partnership units) traded on a national stock exchange or on the over-the-counter market as reported on the New York Stock Exchange or any other stock exchange, the Units will be treated in accordance with Paragraph 1(A) above.
(2) if the Company or the Sphere Entertainment Surviving Entity does not have shares of common stock (or partnership units) traded on a national stock exchange or on the over-the-counter market as reported on the New York Stock Exchange or any other stock exchange, the Units will be treated in accordance with Paragraph 1(A) above.
(b)Any cash award or substitute restricted stock unit award of the Sphere Entertainment Surviving Entity provided for in Paragraph 2(A)(ii)(a) will be fully vested and will be paid to you (or your estate), at the earliest to occur of: (1) if, immediately prior to termination you were an employee of the Sphere Entertainment
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Group, the date on which your employment with the Sphere Entertainment Group or the Sphere Entertainment Surviving Entity terminates for any reason other than termination of your employment by one of such entities for Cause (provided that if you are determined by the Company to be a “specified employee” within the meaning of Section 409A, six (6) months from such date), (2) the date of your death, (3) any other date on which such payment or any portion thereof would be a permissible distribution under Section 409A or (4) January 1, [year], in each case so long as Cause does not then exist.
(c)The Company shall promptly following the Sphere Entertainment Change of Control set aside cash (or shares in the event a substitute restricted stock unit award is made) for your benefit in a “rabbi trust” that satisfies the requirements of Revenue Procedure 92-64, and on a monthly basis shall deposit into such trust interest in arrears (compounded quarterly at the rate provided below) until such time as such amount, together with all accrued interest thereon, is paid to you in full pursuant to Paragraph 2(A)(ii)(b) above); provided, that no payment will be made to such rabbi trust if it would be contrary to law or cause you to incur additional tax under Section 409A. The initial interest rate shall be the average of the one-year SOFR fixed rate equivalent for the ten (10) business days prior to the date of the Sphere Entertainment Change of Control and shall adjust annually based on the average of such rate for the ten (10) business days prior to each anniversary of the Sphere Entertainment Change of Control.
3.In the event of a “MSG Entertainment Change of Control” or a “going-private transaction” with respect to MSG Entertainment, each as defined below, and if (1) immediately prior to such MSG Entertainment Change of Control or going-private transaction with respect to MSG Entertainment you were an employee of the MSG Entertainment Group and (2) at the time of such MSG Entertainment Change of Control or going-private transaction with respect to MSG Entertainment you are not an employee of the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group, your entitlement to the Units shall be as follows:
Your Units shall vest at the earlier of (A) the date on which your Units would otherwise have vested had they continued in effect, (B) the date of your death (in which case the Target Award shall vest) or (C) the date on which your employment with the MSG Entertainment Group or the “MSG Entertainment Surviving Entity,” as defined below, is terminated (i) by MSG Entertainment, one of its Subsidiaries or the MSG Entertainment Surviving Entity other than for Cause, (ii) by you for “good reason” or (iii) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the MSG Entertainment Change of Control or the going-private transaction with
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respect to MSG Entertainment (in which case the Target Award shall vest), in each case so long as Cause does not then exist.
4.In the event of a “MSG Knickerbockers Change of Control” or a “going-private transaction” with respect to MSG Knickerbockers, each as defined below, and if (1) immediately prior to such MSG Knickerbockers Change of Control or going-private transaction with respect to MSG Knickerbockers you were an employee of the MSG Knickerbockers Group and (2) at the time of such MSG Knickerbockers Change of Control or going-private transaction with respect to MSG Knickerbockers you are not an employee of the Sphere Entertainment Group, the MSG Entertainment Group or the MSG Rangers Group, your entitlement to the Units shall be as follows:
Your Units shall vest at the earlier of (A) the date on which your Units would otherwise have vested had they continued in effect, (B) the date of your death (in which case the Target Award shall vest) or (C) the date on which your employment with the MSG Knickerbockers Group or the “MSG Knickerbockers Surviving Entity,” as defined below, is terminated (i) by MSG Knickerbockers, one of its Subsidiaries or the MSG Knickerbockers Surviving Entity other than for Cause, (ii) by you for “good reason” or (iii) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the MSG Knickerbockers Change of Control or the going-private transaction with respect to MSG Knickerbockers (in which case the Target Award shall vest), in each case so long as Cause does not then exist.
5.In the event of a “MSG Rangers Change of Control” or a “going-private transaction” with respect to MSG Rangers, each as defined below, and if (1) immediately prior to such MSG Rangers Change of Control or going-private transaction with respect to MSG Rangers you were an employee of the MSG Rangers Group and (2) at the time of such MSG Rangers Change of Control or going-private transaction with respect to MSG Rangers you are not an employee of the Sphere Entertainment Group, the MSG Entertainment Group or the MSG Knickerbockers Group, your entitlement to the Units shall be as follows:
Your Units shall vest at the earlier of (A) the date on which your Units would otherwise have vested had they continued in effect, (B) the date of your death (in which case the Target Award shall vest) or (C) the date on which your employment with the MSG Rangers Group or the “MSG Rangers Surviving Entity,” as defined below, is terminated (i) by MSG Rangers, one of its Subsidiaries or the MSG Rangers Surviving Entity other than for Cause, (ii) by you for “good reason” or (iii) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the MSG Rangers Change of Control or the going-private transaction with respect to MSG Rangers (in which case the Target Award shall vest), in each case so long as Cause does not then exist.
6.As used herein,
“Acquisition price per share” means the greater of (i) the highest price per share stated on the Schedule 13D or any amendment thereto filed by the holder of twenty
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percent (20%) or more of the Company’s voting power which gives rise to the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company and (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of such Sphere Entertainment Change of Control or going-private transaction with respect to the Company.
“Cause” means your (i) commission of an act of fraud, embezzlement, misappropriation, willful misconduct, gross negligence or breach of fiduciary duty against your Employer or an Affiliate thereof or (ii) commission of any act or omission that results in a conviction, plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any crime involving moral turpitude or any felony.
“Going-private transaction” means a transaction involving the purchase of Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable, securities described in Rule 13e-3 to the Exchange Act.
“Good reason” means
a. without your express written consent any reduction in your base salary or target bonus opportunity, or any material impairment or material adverse change in your working conditions (as the same may from time to time have been improved or, with your written consent, otherwise altered, in each case, after the Grant Date) at any time after or within ninety (90) days prior to the MSG Entertainment Change of Control, the Sphere Entertainment Change of Control, the MSG Knickerbockers Change of Control or the MSG Rangers Change of Control, as applicable, including, without limitation, any material reduction of your other compensation, executive perquisites or other employee benefits (measured, where applicable, by level or participation or percentage of award under any plans of the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable), or material impairment or material adverse change of your level of responsibility, authority, autonomy or title, or to your scope of duties;
b. any failure by your Employer to comply with any of the provisions of this Agreement, other than an insubstantial or inadvertent failure remedied by your Employer promptly after receipt of notice thereof given by you;
c. your Employer’s requiring you to be based at any office or location more than thirty-five (35) miles from your location immediately prior to such event except for travel reasonably required in the performance of your responsibilities; or
d. with respect to the Company only, any failure by the Company to obtain the assumption and agreement to perform this Agreement by a successor as contemplated by Paragraph 1 or Paragraph 2(A)(ii)(a).
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“Merger price per share” means, in the case of a merger, consolidation, sale, exchange or other disposition of assets that results in a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company (a “Merger”), the greater of (i) the fixed or formula price for the acquisition of shares of common stock occurring pursuant to the Merger and (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of such Sphere Entertainment Change of Control or going-private transaction with respect to the Company. Any securities or property which are part or all of the consideration paid for shares of common stock pursuant to the Merger shall be valued in determining the merger price per share at the higher of (A) the valuation placed on such securities or property by the Company, person or other entity which is a party with the Company to the Merger or (B) the valuation placed on such securities or property by the Committee.
“MSG Entertainment Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Entertainment, of the power to direct the management of MSG Entertainment or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“Sphere Entertainment Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by the Company, of the power to direct the management of the Company or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“MSG Knickerbockers Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Knickerbockers, of the power to direct the management of MSG Knickerbockers or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“MSG Rangers Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Rangers, of the power to direct the management of MSG Rangers or substantially all its assets (as constituted immediately prior to such transaction or transactions).
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“MSG Entertainment Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Entertainment’s assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Entertainment Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Entertainment’s assets shall be deemed to be the MSG Entertainment Surviving Entity.
“Sphere Entertainment Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of the Company’s assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the Sphere Entertainment Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of the Company’s assets shall be deemed to be the Sphere Entertainment Surviving Entity.
“MSG Knickerbockers Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Knickerbockers’ assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Knickerbockers Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Knickerbockers’ assets shall be deemed to be the MSG Knickerbockers Surviving Entity.
“MSG Rangers Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Rangers’ assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Rangers Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Rangers’ assets shall be deemed to be the MSG Rangers Surviving Entity.
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“Offer price per share” means, in the case of a tender offer or exchange offer which results in a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company (an “Offer”), the greater of (i) the highest price per share of common stock paid pursuant to the Offer or (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company. Any securities or property which are part or all of the consideration paid for shares of common stock in the Offer shall be valued in determining the offer price per share at the higher of (A) the valuation placed on such securities or property by the Company, person or other entity making such offer or (B) the valuation placed on such securities or property by the Committee.
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Appendix 2
Sphere Entertainment Co. Objectives
Sphere Entertainment Co. Objectives
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EXHIBIT 10.6
Form of SPHR Time Vested Options
FORM OF OPTION AGREEMENT
Dear [Participant Name]:
Pursuant to the 2020 Employee Stock Plan, as amended (the “Plan”) of Sphere Entertainment Co. (the “Company”), on [Date] (the “Effective Date”) you have been awarded nonqualified options (the “Options”) to purchase [#shares] shares of the Company’s Class A Common Stock, par value $.01 per share (“Class A Common Stock”) at a price of $[Dollars] per share. The Options are granted subject to the terms and conditions set forth below and in the Plan.
Capitalized terms used but not defined in this agreement (this “Agreement”) have the meanings given to them in the Plan.
1.Vesting. Your Options will vest and become exercisable in accordance with Appendix 1; provided that you have remained in the continuous employ of the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group, or the MSG Rangers Group (each as defined below) from the Effective Date through the applicable vesting date(s).
For purposes of this Agreement, the “Sphere Entertainment Group” means the Company and any of its Subsidiaries. The “MSG Entertainment Group” means Madison Square Garden Entertainment Corp. (“MSG Entertainment”) and any of its Subsidiaries, so long as MSG Entertainment remains an Affiliate. The “MSG Knickerbockers Group” means MSG Knickerbockers Corp. (formerly known as Madison Square Garden Sports Corp.) (“MSG Knickerbockers”) and any of its Subsidiaries, so long as MSG Knickerbockers remains an Affiliate. The “MSG Rangers Group” means MSG Rangers Corp. (formerly known as MSGS Spinco, Inc.) (“MSG Rangers”) and any of its Subsidiaries, so long as MSG Rangers remains an Affiliate. For purposes of this Agreement, the “Affiliated Group” means the Sphere Entertainment Group and, for so long as they remain Affiliates, the MSG Entertainment Group, the MSG Knickerbockers Group and the MSG Rangers Group.
For purposes of this Agreement, if you are employed by the Sphere Entertainment Group, your “Employer” means the Company; if you are employed by the MSG Entertainment Group, your “Employer” means MSG Entertainment; if you are employed by the MSG Knickerbockers Group, your “Employer” means MSG Knickerbockers; and if you are employed by the MSG Rangers Group, your “Employer” means MSG Rangers. If you are employed by the MSG Entertainment Group and any of the Sphere Entertainment Group, the MSG Knickerbockers Group and/or the MSG Rangers Group, your “Employer” means MSG Entertainment. If you are employed by the Sphere Entertainment Group and any of the MSG Knickerbockers Group and/or the MSG Rangers Group, your “Employer” means the Company. If you are employed by both the MSG Knickerbockers Group and the MSG Rangers Group, your “Employer” means MSG Knickerbockers.
2.Exercise. You may exercise the Options that become vested and exercisable by following such procedures as established by the Company, specifying the number of shares of Class A Common Stock as to which the Options are being exercised (the “Exercise Notice”). Unless the Compensation Committee of the Board of Directors of the Company (as more fully described in Section 15, the “Committee”) chooses to settle such exercise in cash, shares of Class A Common Stock, or a combination thereof pursuant to Section 3, you will be required to deliver to the Company, or such person as the Company may designate, within such time period as the Company may require, payment in full of the exercise price and any taxes due on account of such exercise.
3.Option Spread. Upon receipt of the Exercise Notice, the Committee may elect, in lieu of issuing shares of Class A Common Stock, to settle the exercise covered by such notice by paying you an amount equal to the product obtained by multiplying (i) the excess of the Fair Market Value of one (1) share of Class A Common Stock on the date of exercise over the per share exercise price of the Options (the “Option Spread”) by (ii) the number of shares of Class A Common Stock specified in the Exercise Notice. The amount payable to you in these circumstances may be paid by the Company either in cash or in shares of Class A Common Stock having a Fair Market Value equal to the Option Spread, or a combination thereof, as the Company shall determine. Class A Common Stock used to pay the Option Spread pursuant to this Section 3 will be valued at the Fair Market Value as of the day the Exercise Notice is received by the Company.
4.Expiration. The Options will terminate automatically and without further notice on [Date], or at any of the following dates, if earlier:
(A)with respect to those Options which are then unexercisable, the date upon which you cease to be employed by the Affiliated Group, unless as a result of your death, in which case, if Cause does not then exist and subject to execution and non-revocation of a release of claims if required pursuant to the terms of an applicable employment agreement between you and your Employer, all of your Options granted under this Agreement shall become immediately exercisable;
with respect to those Options which are then exercisable, (1) in the event you cease to be employed by the Affiliated Group (other than [due to Retirement, in which case the Options will remain exercisable until [Date], or]1 as a result of your death or while you are Disabled, in which case the Options will be treated as described below), and Cause does not then exist, ninety (90) days following the cessation date or (2) in the event you cease to be employed by the Affiliated Group as a result of your death or while you are Disabled, and Cause does not then exist, the first anniversary of the cessation date; or
1 To be included on a case-by-case basis as determined by the Committee in its sole discretion.
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(B)with respect to all your then outstanding Options, whether exercisable or unexercisable, the date upon which you cease to be employed by the Affiliated Group and Cause then exists.
5.Definitions. For purposes of this Agreement:
(A)“Disabled” means that you received short term disability income replacement payments for six (6) months, and thereafter (A) have been determined to be disabled in accordance with your Employer’s long term disability plan in which employees of your Employer are generally able to participate, if one is in effect at such time or (B) to the extent no such long term disability plan exists, have been determined to have a medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months as determined by the department or vendor directed by your Employer to determine eligibility for unpaid medical leave.
(B)“Cause” means, as determined by the compensation committee of your Employer, in its sole discretion, your (i) commission of an act of fraud, embezzlement, misappropriation, willful misconduct, gross negligence or breach of fiduciary duty against your Employer or an Affiliate thereof or (ii) commission of any act or omission that results in a conviction, plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any crime involving moral turpitude or any felony.
(C)[“Retirement” means the voluntary termination by you of your employment with the Affiliated Group at such time as (i) you have attained at least the age of fifty-five (55) and (ii) you have been employed by the Affiliated Group for at least five (5) years in the aggregate; provided that your Employer may nevertheless decide, in its sole discretion, not to treat your termination of employment as a “Retirement” hereunder. Treatment of your termination of employment as a “Retirement” hereunder shall be further subject to your execution (and the effectiveness) of a “retirement agreement” to your Employer’s satisfaction, including, without limitation (to the extent desired by your Employer), non-compete, non-disparagement, non-solicitation, confidentiality and further cooperation obligations/restrictions on you as well as a general release by you of the Affiliated Group. The above definition of “Retirement” is solely for purposes of this Agreement and shall not, in any way, create or imply any obligations of the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group (under any other agreement or otherwise) with respect to any such termination of your employment.]2
6.Change of Control/Going-Private Transaction. As set forth in Appendix 2 attached hereto, the Options may be affected in the event of a MSG Entertainment Change of Control, a Sphere Entertainment Change of Control, a MSG Knickerbockers Change of Control, a MSG Rangers Change of Control or a going-private transaction with respect to the
2 See footnote 1.
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Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers (each as defined in Appendix 2 attached hereto).
7.Tax Representations and Tax Withholding. You hereby acknowledge that you have reviewed with your own tax advisors the federal, state and local tax consequences of exercising the Options and receiving shares of Class A Common Stock and cash. You hereby represent to MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers and each of their respective Subsidiaries that you are relying solely on such advisors and not on any statements or representations of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers, any of their respective Subsidiaries or affiliates or any of their respective agents. If, in connection with the exercise of the Options, your Employer is required to withhold any amounts by reason of any federal, state or local tax, such withholding shall be effected in accordance with Section 16 of the Plan.
8.Section 409A. It is the intent that payments under this Agreement are exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and that the Agreement be administered accordingly. Notwithstanding anything to the contrary contained in this Agreement, if and to the extent that any payment or benefit under this Agreement is determined by your Employer to constitute “non-qualified deferred compensation” subject to Section 409A of the Code (“Section 409A”) and is payable to you by reason of termination of your employment, then (a) such payment or benefit shall be made or provided to you only upon a “separation from service” as defined for purposes of Section 409A under applicable regulations and (b) if you are a “specified employee” (within the meaning of Section 409A and as determined by your Employer), such payment or benefit shall not be made or provided before the date that is six (6) months after the date of your separation from service (or your earlier death).
9.Transfer Restrictions. You may not transfer, assign, pledge or otherwise encumber the Options, other than to the extent provided in the Plan.
10.Non-Qualification as ISO. The Options are not intended to qualify as “incentive stock options” within the meaning of Section 422A of the Code.
11.Securities Law Acknowledgments. You hereby acknowledge and confirm to MSG Entertainment, the Company, MSG Knickerbockers and MSG Rangers that (i) you are aware that the shares of Class A Common Stock are publicly-traded securities and (ii) the shares of Class A Common Stock issuable upon exercise of the Options may not be sold or otherwise transferred unless such sale or transfer is registered under the Securities Act of 1933, as amended, and the securities laws of any applicable state or other jurisdiction, or is exempt from such registration.
12.Governing Law. This Agreement shall be deemed to be made under, and in all respects shall be interpreted, construed and governed by and in accordance with, the laws of the State of New York.
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13.Jurisdiction and Venue. You hereby irrevocably submit to the jurisdiction of the courts of the State of New York and the Federal courts of the United States of America located in the Southern District and Eastern District of the State of New York in respect of the interpretation and enforcement of the provisions of this Agreement, and hereby waive, and agree not to assert, as a defense that you are not subject thereto or that the venue thereof may not be appropriate. You hereby agree that mailing of process or other papers in connection with any such action or proceeding in any manner as may be permitted by law shall be valid and sufficient service thereof.
14.Right of Offset. You hereby agree that the Company shall have the right to offset against its obligation to deliver shares of Class A Common Stock, cash or other property under this Agreement to the extent that it does not constitute “non-qualified deferred compensation” pursuant to Section 409A, any outstanding amounts of whatever nature that you then owe to the Company or any of its Subsidiaries.
15.The Committee. For purposes of this Agreement, the term “Committee” means the Compensation Committee of the Board of Directors of the Company or any replacement committee established under, and as more fully defined in, the Plan.
16.Committee Discretion. The Committee has full discretion with respect to any actions to be taken or determinations to be made in connection with this Agreement, and its determinations shall be final, binding and conclusive.
17.Amendment. The Committee reserves the right at any time to amend the terms and conditions set forth in this Agreement, except that the Committee shall not make any amendment or revision in a manner unfavorable to you (other than if immaterial), without your consent. No consent shall be required for amendments made pursuant to Section 12 of the Plan, except that, for purposes of Section 19 of the Plan, Section 6 and Appendix 2 of this Agreement are deemed to be “terms of an Award Agreement expressly refer[ring] to an Adjustment Event.” Any amendment of this Agreement shall be in writing and signed by an authorized member of the Committee or a person or persons designated by the Committee.
18.Options Subject to the Plan. The Options granted by this Agreement are subject to the Plan.
19.Entire Agreement. Except for any employment agreement between you and the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group in effect as of the date of the grant hereof (as such employment agreement may be modified, renewed or replaced; provided that such modification, renewal or replacement shall not extend the time any Options may be exercised beyond the time provided herein or in such original employment agreement), this Agreement and the Plan constitute the entire understanding and agreement of you and the Company with respect to the Options covered hereby and supersede all prior understandings and agreements. Except as provided in Sections 8 and 25, in the event of a conflict among the documents with respect to the
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terms and conditions of the Options covered hereby, the documents will be accorded the following order of authority: the terms and conditions of the Plan will have highest authority followed by the terms and conditions of your employment agreement, if any, followed by the terms and conditions of this Agreement.
20.Successors and Assigns. The terms and conditions of this Agreement shall be binding upon, and shall inure to the benefit of, the Company and its successors and assigns.
21.Waiver. No waiver by the Company at any time of any breach by you of, or compliance with, any term or condition of this Agreement or the Plan to be performed by you shall be deemed a waiver of the same term or condition, or of any similar or any dissimilar term or condition, whether at the same time or at any prior or subsequent time.
22.Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any term or condition hereof shall not affect the validity or enforceability of the other terms and conditions set forth herein.
23.Exclusion from Compensation Calculation. By acceptance of this Agreement, you shall be deemed to be in agreement that all shares of Class A Common Stock and cash received upon each exercise of the Options shall be considered special incentive compensation and will be exempt from inclusion as “wages” or “salary” in pension, retirement, life insurance and other employee benefits arrangements of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries, except as determined otherwise by MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries. In addition, each of your beneficiaries shall be deemed to be in agreement that all such shares of Class A Common Stock and cash will be exempt from inclusion in “wages” or “salary” for purposes of calculating benefits of any life insurance coverage sponsored by MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries.
24.No Right to Continued Employment. Nothing contained in this Agreement or the Plan shall be construed to confer on you any right to continue in the employ of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries, or derogate from the right of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries, as applicable, to retire, request the resignation of, or discharge you, at any time, with or without cause.
25.Subsidiaries. For purposes of this Agreement, “Subsidiaries” means any entities that are controlled, directly or indirectly, by the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable, or in which the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable, owns, directly or indirectly, more than 50% of the equity interests.
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26.Headings. The headings in this Agreement are for purposes of convenience only and are not intended to define or limit the construction of the terms and conditions of this Agreement.
27.Effective Date. Upon execution by you, this Agreement shall be effective from and as of the Effective Date.
28.Signatures. Execution of this Agreement by the Company may be in the form of an electronic, manual or similar signature (including, without limitation, an electronic acknowledgement of acceptance), and such signature shall be treated as an original signature for all purposes.
[Remainder of the page intentionally left blank]
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| SPHERE ENTERTAINMENT CO. | |||||
| By | |||||
| Name: | |||||
| Title: | |||||
By your electronic acknowledgement of acceptance, you (i) acknowledge that a complete copy of the Plan and an executed original of this Agreement have been made available to you and (ii) agree to all of the terms and conditions set forth in the Plan and this Agreement.
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Appendix 1
OPTION AGREEMENT
OPTION AGREEMENT
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Appendix 2
OPTION AGREEMENT
OPTION AGREEMENT
1.In the event of a “Sphere Entertainment Change of Control” or a “going-private transaction” with respect to the Company, each as defined below, your entitlement to exercise the Options shall be as follows:
(A)If the Company or the “Sphere Entertainment Surviving Entity,” as defined below, has shares of common stock (or partnership units) traded on a national stock exchange or on the over-the-counter market as reported on the New York Stock Exchange or any other stock exchange, the Committee shall, to the extent that the Options have not been exercised and have not expired (the “Outstanding Options”), no later than the effective date of the transaction which results in a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company, either (i) convert your rights in the Outstanding Options into a right to receive an amount of cash equal to (a) the number of common shares subject or relating to the Outstanding Options multiplied by (b) the excess of (x) the “offer price per share,” the “acquisition price per share” or the “merger price per share,” each as defined below, whichever of such amounts is applicable, over (y) the exercise price of the shares subject or relating to the Outstanding Options, or (ii) arrange to have the Sphere Entertainment Surviving Entity grant to you in substitution for your Outstanding Options an award of options for shares of common stock (or partnership units) of the Sphere Entertainment Surviving Entity on the same terms with a value equivalent to the Outstanding Options and which will, in the good faith determination of the Committee, provide you with an equivalent profit potential, as determined in a manner compliant with Section 409A.
(B)If the Company or the Sphere Entertainment Surviving Entity does not have shares of common stock (or partnership units) traded on a national stock exchange or on the over-the-counter market as reported on the New York Stock Exchange or any other stock exchange, the Committee shall convert your rights in the Outstanding Options into a right to receive an amount of cash equal to the amount calculated as per Paragraph 1(A)(i) above.
(C)The cash award provided for in Paragraph 1(A)(i) or 1(B) shall become payable to you, and the substitute options of the Sphere Entertainment Surviving Entity provided for in Paragraph 1(A)(ii) will become exercisable (1) with respect to the Outstanding Options that were not exercisable on the effective date of the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company, as the case may be, at the earlier of (i) the date on which the Outstanding Options would otherwise have become exercisable hereunder had they continued in effect or (ii) if, immediately prior to termination you were an employee of the Sphere Entertainment Group, the date on which your employment with the Sphere Entertainment Group or the Sphere Entertainment Surviving Entity is terminated (a) by the Company, one of its Subsidiaries or the Sphere Entertainment Surviving Entity other than for Cause, if such termination occurs within three (3) years of the Sphere Entertainment Change of
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Control or the going-private transaction with respect to the Company, (b) by you for “good reason,” as defined below, if such termination occurs within three (3) years of the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company or (c) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company, in each case so long as Cause does not then exist; provided that clause (c) herein shall not apply in the event that your rights in the Outstanding Options are converted into a right to receive an amount of cash in accordance with Paragraph 1(A)(i), or (2) with respect to the Outstanding Options that were exercisable on the effective date of the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company, the substitute options shall become exercisable immediately and the cash awards shall become payable promptly. The amount payable in cash shall be payable together with interest from the effective date of the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company until the date of payment at (i) the weighted average cost of capital of the Company immediately prior to the effectiveness of the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company or (ii) if the Company (or the Sphere Entertainment Surviving Entity) sets aside the funds in a trust or other funding arrangement, the actual earnings of such trust or other funding arrangement.
For the avoidance of doubt, any Options that are “underwater” as of a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company (i.e., the exercise price equals or exceeds the “offer price per share,” the “acquisition price per share” or the “merger price per share,” as applicable), may be cancelled for no consideration as of the consummation of the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company.
2.In the event of a “MSG Entertainment Change of Control” or a “going-private transaction” with respect to MSG Entertainment, each as defined below, and if (1) immediately prior to such MSG Entertainment Change of Control or going-private transaction with respect to MSG Entertainment you were an employee of the MSG Entertainment Group and (2) at the time of such MSG Entertainment Change of Control or going-private transaction with respect to MSG Entertainment you are not an employee of the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group, your entitlement to exercise the Options shall be as follows:
Your Outstanding Options shall become exercisable at the earlier of (A) the date on which the Outstanding Options would otherwise have become exercisable hereunder, (B) the date of your death or (C) the date on which your employment with the MSG Entertainment Group or the “MSG Entertainment Surviving Entity,” as defined below, is terminated (i) by MSG Entertainment, one of its Subsidiaries or the MSG Entertainment Surviving Entity other than for Cause, if such termination occurs within three (3) years of
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the MSG Entertainment Change of Control or the going-private transaction with respect to MSG Entertainment, (ii) by you for “good reason,” if such termination occurs within three (3) years of the MSG Entertainment Change of Control or the going-private transaction with respect to MSG Entertainment or (iii) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the MSG Entertainment Change of Control or the going-private transaction with respect to MSG Entertainment, in each case so long as Cause does not then exist.
3.In the event of a “MSG Knickerbockers Change of Control” or a “going-private transaction” with respect to MSG Knickerbockers each as defined below, and if (1) immediately prior to such MSG Knickerbockers Change of Control or going-private transaction with respect to MSG Knickerbockers you were an employee of the MSG Knickerbockers Group and (2) at the time of such MSG Knickerbockers Change of Control or going-private transaction with respect to MSG Knickerbockers you are not an employee of the Sphere Entertainment Group, the MSG Entertainment Group or the MSG Rangers Group, your entitlement to exercise the Options shall be as follows:
Your Outstanding Options shall become exercisable at the earlier of (A) the date on which the Outstanding Options would otherwise have become exercisable hereunder, (B) the date of your death or (C) the date on which your employment with the MSG Knickerbockers Group or the “MSG Knickerbockers Surviving Entity,” as defined below, is terminated (i) by MSG Knickerbockers, one of its Subsidiaries or the MSG Knickerbockers Surviving Entity other than for Cause, if such termination occurs within three (3) years of the MSG Knickerbockers Change of Control or the going-private transaction with respect to MSG Knickerbockers, (ii) by you for “good reason,” if such termination occurs within three (3) years of the MSG Knickerbockers Change of Control or the going-private transaction with respect to MSG Knickerbockers or (iii) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the MSG Knickerbockers Change of Control or the going-private transaction with respect to MSG Knickerbockers, in each case so long as Cause does not then exist.
4.In the event of a “MSG Rangers Change of Control” or a “going-private transaction” with respect to MSG Rangers, each as defined below, and if (1) immediately prior to such MSG Rangers Change of Control or going-private transaction with respect to MSG Rangers you were an employee of the MSG Rangers Group and (2) at the time of such MSG Rangers Change of Control or going-private transaction with respect to MSG Rangers you are not an employee of the Sphere Entertainment Group, the MSG Entertainment Group or the MSG Knickerbockers Group, your entitlement to exercise the Options shall be as follows:
Your Outstanding Options shall become exercisable at the earlier of (A) the date on which the Outstanding Options would otherwise have become exercisable hereunder, (B) the date of your death or (C) the date on which your employment with the MSG Rangers Group or the “MSG Rangers Surviving Entity,” as defined below, is terminated (i) by MSG Rangers, one of its Subsidiaries or the MSG Rangers Surviving Entity other than for Cause, if such termination occurs within three (3) years of the MSG Rangers Change
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of Control or the going-private transaction with respect to MSG Rangers, (ii) by you for “good reason,” if such termination occurs within three (3) years of the MSG Rangers Change of Control or the going-private transaction with respect to MSG Rangers or (iii) by you for any reason at least six (6) months, but not more than nine (9) months after the effective date of the MSG Rangers Change of Control or the going-private transaction with respect to MSG Rangers, in each case so long as Cause does not then exist.
5.As used herein,
“Acquisition price per share” means the greater of (i) the highest price per share stated on the Schedule 13D or any amendment thereto filed by the holder of twenty percent (20%) or more of the Company’s voting power which gives rise to the Sphere Entertainment Change of Control or the going-private transaction with respect to the Company and (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of such Sphere Entertainment Change of Control or going-private transaction with respect to the Company.
“Cause” means your (i) commission of an act of fraud, embezzlement, misappropriation, willful misconduct, gross negligence or breach of fiduciary duty against your Employer or an Affiliate thereof or (ii) commission of any act or omission that results in a conviction, plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any crime involving moral turpitude or any felony.
“Going-private transaction” means a transaction involving the purchase of Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable, securities described in Rule 13e-3 to the Exchange Act.
“Good reason” means
a. without your express written consent any reduction in your base salary or target bonus opportunity, or any material impairment or material adverse change in your working conditions (as the same may from time to time have been improved or, with your written consent, otherwise altered, in each case, after the Effective Date) at any time after or within ninety (90) days prior to the MSG Entertainment Change of Control, the Sphere Entertainment Change of Control, the MSG Knickerbockers Change of Control or the MSG Rangers Change of Control, as applicable, including, without limitation, any material reduction of your other compensation, executive perquisites or other employee benefits (measured, where applicable, by level or participation or percentage of award under any plans of the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable), or material impairment or material adverse change of your level of responsibility, authority, autonomy or title, or to your scope of duties;
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b. any failure by your Employer to comply with any of the provisions of this Agreement, other than an insubstantial or inadvertent failure remedied by your Employer promptly after receipt of notice thereof given by you;
c. your Employer’s requiring you to be based at any office or location more than thirty-five (35) miles from your location immediately prior to such event except for travel reasonably required in the performance of your responsibilities; or
d. with respect to the Company only, any failure by the Company to obtain the assumption and agreement to perform this Agreement by a successor as contemplated by Paragraph 1.
“Merger price per share” means, in the case of a merger, consolidation, sale, exchange or other disposition of assets that results in a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company (a “Merger”), the greater of (i) the fixed or formula price for the acquisition of shares of common stock occurring pursuant to the Merger and (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of such Sphere Entertainment Change of Control or going-private transaction with respect to the Company. Any securities or property which are part or all of the consideration paid for shares of common stock pursuant to the Merger shall be valued in determining the merger price per share at the higher of (A) the valuation placed on such securities or property by the Company, person or other entity which is a party with the Company to the Merger or (B) the valuation placed on such securities or property by the Committee.
“MSG Entertainment Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Entertainment, of the power to direct the management of MSG Entertainment or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“Sphere Entertainment Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by the Company, of the power to direct the management of the Company or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“MSG Knickerbockers Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them)
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or any employee benefit plan sponsored or maintained by MSG Knickerbockers, of the power to direct the management of MSG Knickerbockers or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“MSG Rangers Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Rangers, of the power to direct the management of MSG Rangers or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“MSG Entertainment Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Entertainment’s assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Entertainment Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Entertainment’s assets shall be deemed to be the MSG Entertainment Surviving Entity.
“Sphere Entertainment Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of the Company’s assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the Sphere Entertainment Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of the Company’s assets shall be deemed to be the Sphere Entertainment Surviving Entity.
“MSG Knickerbockers Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Knickerbockers’ assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Knickerbockers Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Knickerbockers’ assets shall be deemed to be the MSG Knickerbockers Surviving Entity.
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“MSG Rangers Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Rangers’ assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Rangers Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Rangers’ assets shall be deemed to be the MSG Rangers Surviving Entity.
“Offer price per share” means, in the case of a tender offer or exchange offer which results in a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company (an “Offer”), the greater of (i) the highest price per share of common stock paid pursuant to the Offer or (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company. Any securities or property which are part or all of the consideration paid for shares of common stock in the Offer shall be valued in determining the offer price per share at the higher of (A) the valuation placed on such securities or property by the Company, person or other entity making such offer or (B) the valuation placed on such securities or property by the Committee.
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EXHIBIT 10.7
Form of SPHR Performance Vested Options
FORM OF PERFORMANCE OPTION AGREEMENT
Dear [Participant Name]:
Pursuant to the 2020 Employee Stock Plan, as amended (the “Plan”) of Sphere Entertainment Co. (the “Company”), on [Date] (the “Effective Date”) you have been awarded nonqualified options (the “Options”) to purchase [#shares] shares of the Company’s Class A Common Stock, par value $.01 per share (“Class A Common Stock”) at a price of $[Dollars] per share. The Options are granted subject to the terms and conditions set forth below and in the Plan.
Capitalized terms used but not defined in this agreement (this “Agreement”) have the meanings given to them in the Plan.
1.Vesting. In accordance with the terms of this Agreement, a target of [#Options] Options (the “Target Award”), and a maximum of [#Options] Options, will vest and become exercisable, which number of Options will be determined based on the extent to which the performance criteria (the “Objectives”) set forth in Appendix 1 to this Agreement have been attained in respect of the period from July 1, [year] to June 30, [year] (the “Performance Period”). The Options, calculated in accordance with Appendix 1, will vest [on [Date] (or the immediately preceding business day, if such date is not a business day), subject to the determination by the Compensation Committee of the Board of Directors of the Company (as more fully described in Section 15, the “Committee”) of the Company’s performance against the Objectives][upon the date on which the Compensation Committee of the Board of Directors of the Company (as more fully described in Section 15, the “Committee”) determines the Company’s performance against the Objectives] (the “Vesting Date”), and any Options that do not so vest shall be immediately and automatically forfeited as of the Vesting Date; provided that you have remained in the continuous employ of the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group (each as defined below) from the Effective Date through the Vesting Date.
For purposes of this Agreement, the “Sphere Entertainment Group” means the Company and any of its Subsidiaries. The “MSG Entertainment Group” means Madison Square Garden Entertainment Corp. (“MSG Entertainment”) and any of its Subsidiaries, so long as MSG Entertainment remains an Affiliate. The “MSG Knickerbockers Group” means MSG Knickerbockers Corp. (formerly known as Madison Square Garden Sports Corp.) (“MSG Knickerbockers”) and any of its Subsidiaries, so long as MSG Knickerbockers remains an Affiliate. The “MSG Rangers Group” means MSG Rangers Corp. (formerly known as MSGS Spinco, Inc.) (“MSG Rangers”) and any of its Subsidiaries, so long as MSG Rangers remains an Affiliate. For purposes of this Agreement, the “Affiliated Group” means the Sphere Entertainment Group and, for so long as they remain Affiliates, the MSG Entertainment Group, the MSG Knickerbockers Group and the MSG Rangers Group.
For purposes of this Agreement, if you are employed by the Sphere Entertainment Group, your “Employer” means the Company; if you are employed by the MSG Entertainment Group, your “Employer” means MSG Entertainment; if you are employed by the MSG Knickerbockers Group, your “Employer” means MSG Knickerbockers; and if you are employed by the MSG Rangers Group, your “Employer” means MSG Rangers. If you are employed by the MSG Entertainment Group and any of the Sphere Entertainment Group, the MSG Knickerbockers Group and/or the MSG Rangers Group, your “Employer” means MSG Entertainment. If you are employed by the Sphere Entertainment Group and any of the MSG Knickerbockers Group and/or the MSG Rangers Group, your “Employer” means the Company. If you are employed by both the MSG Knickerbockers Group and the MSG Rangers Group, your “Employer” means MSG Knickerbockers.
2.Exercise. You may exercise the Options that become vested and exercisable by following such procedures as established by the Company, specifying the number of shares of Class A Common Stock as to which the Options are being exercised (the “Exercise Notice”). Unless the Compensation Committee of the Board of Directors of the Company (as more fully described in Section 15, the “Committee”) chooses to settle such exercise in cash, shares of Class A Common Stock, or a combination thereof pursuant to Section 3, you will be required to deliver to the Company, or such person as the Company may designate, within such time period as the Company may require, payment in full of the exercise price and any taxes due on account of such exercise.
3.Option Spread. Upon receipt of the Exercise Notice, the Committee may elect, in lieu of issuing shares of Class A Common Stock, to settle the exercise covered by such notice by paying you an amount equal to the product obtained by multiplying (i) the excess of the Fair Market Value of one (1) share of Class A Common Stock on the date of exercise over the per share exercise price of the Options (the “Option Spread”) by (ii) the number of shares of Class A Common Stock specified in the Exercise Notice. The amount payable to you in these circumstances may be paid by the Company either in cash or in shares of Class A Common Stock having a Fair Market Value equal to the Option Spread, or a combination thereof, as the Company shall determine. Class A Common Stock used to pay the Option Spread pursuant to this Section 3 will be valued at the Fair Market Value as of the day the Exercise Notice is received by the Company.
4.Expiration. The Options will terminate automatically and without further notice on [Date], or at any of the following dates, if earlier:
(A)with respect to those Options which are then unexercisable, the date upon which you cease to be employed by the Affiliated Group, unless as a result of your death, in which case, if Cause does not then exist and subject to execution and non-revocation of a release of claims if required pursuant to the terms of an applicable employment agreement between you and your Employer, a number of your Options granted under this Agreement shall become immediately exercisable as follows:[ (i)] if your employment terminates due to your death prior to [Date], then a portion of the Target Award,
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determined based on the number of months of your employment completed prior to such termination during the period commencing on [Date] and ending on [Date], will vest as of the termination date[ or (ii) if your employment terminates due to your death after [Date] but prior to the Vesting Date, then the number of Options that would have vested on the Vesting Date had your employment not been so terminated shall vest as of the termination date];
(B)with respect to those Options which are then exercisable, (1) in the event you cease to be employed by the Affiliated Group (other than [due to Retirement, in which case the Options will remain exercisable until [Date], or]1 as a result of your death or while you are Disabled, in which case the Options will be treated as described below), and Cause does not then exist, ninety (90) days following the cessation date or (2) in the event you cease to be employed by the Affiliated Group as a result of your death or while you are Disabled, and Cause does not then exist, the first anniversary of the cessation date; or
(C)with respect to all your then outstanding Options, whether exercisable or unexercisable, the date upon which you cease to be employed by the Affiliated Group and Cause then exists.
5.Definitions. For purposes of this Agreement:
(A)“Disabled” means that you received short term disability income replacement payments for six (6) months, and thereafter (A) have been determined to be disabled in accordance with your Employer’s long term disability plan in which employees of your Employer are generally able to participate, if one is in effect at such time or (B) to the extent no such long term disability plan exists, have been determined to have a medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months as determined by the department or vendor directed by your Employer to determine eligibility for unpaid medical leave.
(B)“Cause” means, as determined by the compensation committee of your Employer, in its sole discretion, your (i) commission of an act of fraud, embezzlement, misappropriation, willful misconduct, gross negligence or breach of fiduciary duty against your Employer or an Affiliate thereof or (ii) commission of any act or omission that results in a conviction, plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any crime involving moral turpitude or any felony.
(C)[“Retirement” means the voluntary termination by you of your employment with the Affiliated Group at such time as (i) you have attained at least the age of fifty-five (55) and (ii) you have been employed by the Affiliated Group for at least five (5) years in the aggregate; provided that your Employer may nevertheless decide, in
1 To be included on a case-by-case basis as determined by the Committee in its sole discretion.
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its sole discretion, not to treat your termination of employment as a “Retirement” hereunder. Treatment of your termination of employment as a “Retirement” hereunder shall be further subject to your execution (and the effectiveness) of a “retirement agreement” to your Employer’s satisfaction, including, without limitation (to the extent desired by your Employer), non-compete, non-disparagement, non-solicitation, confidentiality and further cooperation obligations/restrictions on you as well as a general release by you of the Affiliated Group. The above definition of “Retirement” is solely for purposes of this Agreement and shall not, in any way, create or imply any obligations of the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group (under any other agreement or otherwise) with respect to any such termination of your employment.]2
6.Change of Control/Going-Private Transaction. As set forth in Appendix 2 attached hereto, the Options may be affected in the event of a MSG Entertainment Change of Control, a Sphere Entertainment Change of Control, a MSG Knickerbockers Change of Control, a MSG Rangers Change of Control or a going-private transaction with respect to the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers (each as defined in Appendix 2 attached hereto).
7.Tax Representations and Tax Withholding. You hereby acknowledge that you have reviewed with your own tax advisors the federal, state and local tax consequences of exercising the Options and receiving shares of Class A Common Stock and cash. You hereby represent to MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers and each of their respective Subsidiaries that you are relying solely on such advisors and not on any statements or representations of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers, any of their respective Subsidiaries or affiliates or any of their respective agents. If, in connection with the exercise of the Options, your Employer is required to withhold any amounts by reason of any federal, state or local tax, such withholding shall be effected in accordance with Section 16 of the Plan.
8.Section 409A. It is the intent that payments under this Agreement are exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and that the Agreement be administered accordingly. Notwithstanding anything to the contrary contained in this Agreement, if and to the extent that any payment or benefit under this Agreement is determined by your Employer to constitute “non-qualified deferred compensation” subject to Section 409A of the Code (“Section 409A”) and is payable to you by reason of termination of your employment, then (a) such payment or benefit shall be made or provided to you only upon a “separation from service” as defined for purposes of Section 409A under applicable regulations and (b) if you are a “specified employee” (within the meaning of Section 409A and as determined by your Employer), such payment or benefit shall not be made or provided before the date that is six (6) months after the date of your separation from service (or your earlier death).
2 See footnote 1.
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9.Transfer Restrictions. You may not transfer, assign, pledge or otherwise encumber the Options, other than to the extent provided in the Plan.
10.Non-Qualification as ISO. The Options are not intended to qualify as “incentive stock options” within the meaning of Section 422A of the Code.
11.Securities Law Acknowledgments. You hereby acknowledge and confirm to MSG Entertainment, the Company, MSG Knickerbockers and MSG Rangers that (i) you are aware that the shares of Class A Common Stock are publicly-traded securities and (ii) the shares of Class A Common Stock issuable upon exercise of the Options may not be sold or otherwise transferred unless such sale or transfer is registered under the Securities Act of 1933, as amended, and the securities laws of any applicable state or other jurisdiction, or is exempt from such registration.
12.Governing Law. This Agreement shall be deemed to be made under, and in all respects shall be interpreted, construed and governed by and in accordance with, the laws of the State of New York.
13.Jurisdiction and Venue. You hereby irrevocably submit to the jurisdiction of the courts of the State of New York and the Federal courts of the United States of America located in the Southern District and Eastern District of the State of New York in respect of the interpretation and enforcement of the provisions of this Agreement, and hereby waive, and agree not to assert, as a defense that you are not subject thereto or that the venue thereof may not be appropriate. You hereby agree that mailing of process or other papers in connection with any such action or proceeding in any manner as may be permitted by law shall be valid and sufficient service thereof.
14.Right of Offset. You hereby agree that the Company shall have the right to offset against its obligation to deliver shares of Class A Common Stock, cash or other property under this Agreement to the extent that it does not constitute “non-qualified deferred compensation” pursuant to Section 409A, any outstanding amounts of whatever nature that you then owe to the Company or any of its Subsidiaries.
15.The Committee. For purposes of this Agreement, the term “Committee” means the Compensation Committee of the Board of Directors of the Company or any replacement committee established under, and as more fully defined in, the Plan.
16.Committee Discretion. The Committee has full discretion with respect to any actions to be taken or determinations to be made in connection with this Agreement, and its determinations shall be final, binding and conclusive.
17.Amendment. The Committee reserves the right at any time to amend the terms and conditions set forth in this Agreement, except that the Committee shall not make any amendment or revision in a manner unfavorable to you (other than if immaterial), without your consent. No consent shall be required for amendments made pursuant to Section 12 of the Plan,
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except that, for purposes of Section 19 of the Plan, Section 6 and Appendix 2 of this Agreement are deemed to be “terms of an Award Agreement expressly refer[ring] to an Adjustment Event.” Any amendment of this Agreement shall be in writing and signed by an authorized member of the Committee or a person or persons designated by the Committee.
18.Options Subject to the Plan. The Options granted by this Agreement are subject to the Plan.
19.Entire Agreement. Except for any employment agreement between you and the MSG Entertainment Group, the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group in effect as of the date of the grant hereof (as such employment agreement may be modified, renewed or replaced; provided that such modification, renewal or replacement shall not extend the time any Options may be exercised beyond the time provided herein or in such original employment agreement), this Agreement and the Plan constitute the entire understanding and agreement of you and the Company with respect to the Options covered hereby and supersede all prior understandings and agreements. Except as provided in Sections 8 and 25, in the event of a conflict among the documents with respect to the terms and conditions of the Options covered hereby, the documents will be accorded the following order of authority: the terms and conditions of the Plan will have highest authority followed by the terms and conditions of your employment agreement, if any, followed by the terms and conditions of this Agreement.
20.Successors and Assigns. The terms and conditions of this Agreement shall be binding upon, and shall inure to the benefit of, the Company and its successors and assigns.
21.Waiver. No waiver by the Company at any time of any breach by you of, or compliance with, any term or condition of this Agreement or the Plan to be performed by you shall be deemed a waiver of the same term or condition, or of any similar or any dissimilar term or condition, whether at the same time or at any prior or subsequent time.
22.Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any term or condition hereof shall not affect the validity or enforceability of the other terms and conditions set forth herein.
23.Exclusion from Compensation Calculation. By acceptance of this Agreement, you shall be deemed to be in agreement that all shares of Class A Common Stock and cash received upon each exercise of the Options shall be considered special incentive compensation and will be exempt from inclusion as “wages” or “salary” in pension, retirement, life insurance and other employee benefits arrangements of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries, except as determined otherwise by MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries. In addition, each of your beneficiaries shall be deemed to be in agreement that all such shares of Class A Common Stock and cash will be
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exempt from inclusion in “wages” or “salary” for purposes of calculating benefits of any life insurance coverage sponsored by MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries.
24.No Right to Continued Employment. Nothing contained in this Agreement or the Plan shall be construed to confer on you any right to continue in the employ of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries, or derogate from the right of MSG Entertainment, the Company, MSG Knickerbockers, MSG Rangers or any of their respective Subsidiaries, as applicable, to retire, request the resignation of, or discharge you, at any time, with or without cause.
25.Subsidiaries. For purposes of this Agreement, “Subsidiaries” means any entities that are controlled, directly or indirectly, by the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable, or in which the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable, owns, directly or indirectly, more than 50% of the equity interests.
26.Headings. The headings in this Agreement are for purposes of convenience only and are not intended to define or limit the construction of the terms and conditions of this Agreement.
27.Effective Date. Upon execution by you, this Agreement shall be effective from and as of the Effective Date.
28.Signatures. Execution of this Agreement by the Company may be in the form of an electronic, manual or similar signature (including, without limitation, an electronic acknowledgement of acceptance), and such signature shall be treated as an original signature for all purposes.
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| SPHERE ENTERTAINMENT CO. | |||||
| By | |||||
| Name: | |||||
| Title: | |||||
By your electronic acknowledgement of acceptance, you (i) acknowledge that a complete copy of the Plan and an executed original of this Agreement have been made available to you and (ii) agree to all of the terms and conditions set forth in the Plan and this Agreement.
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Appendix 1
PERFORMANCE OPTION AGREEMENT
PERFORMANCE OPTION AGREEMENT
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Appendix 2
PERFORMANCE OPTION AGREEMENT
PERFORMANCE OPTION AGREEMENT
1.In the event of a “going-private transaction” with respect to the Company, as defined below, your entitlement to exercise the Options shall be as follows:
(A)The Committee shall, no later than the effective date of the transaction which results in a going-private transaction with respect to the Company, (i) if your Options are outstanding and not exercisable as of the date of the going-private transaction with respect to the Company, either (a) if the effective date of the going-private transaction with respect to the Company is before the end of the Performance Period, deem the Objectives to be satisfied at the target level or (b) if the effective date of the going-private transaction with respect to the Company is on or after the last day of the Performance Period, determine the Company’s performance against the Objectives, and (ii) convert your Options, calculated in accordance with Appendix 1 and this Paragraph 1(A), as applicable, into a right to receive an amount of cash equal to (a) the number of common shares subject or relating to such Options multiplied by (b) the excess of (x) the “offer price per share,” the “acquisition price per share” or the “merger price per share,” each as defined below, whichever of such amounts is applicable, over (y) the exercise price of the shares subject or relating to such Options. For the avoidance of doubt, Options for which the applicable amount in (x) exceeds the exercise price in (y) (i.e., Options which are “underwater”) may be cancelled for no consideration as of the effective date of the going-private transaction with respect to the Company.
(B)The cash award provided for in Paragraph 1(A)(i)(a) or 1(A)(i)(b) shall become payable to you as follows: (1) if the Options are not exercisable on the effective date of the going-private transaction with respect to the Company, then the cash award shall become payable at the earlier of (i) the date on which such Options would otherwise have become exercisable hereunder had they continued in effect or (ii) if, immediately prior to termination you were an employee of the Sphere Entertainment Group, the date on which your employment with the Sphere Entertainment Group or the “Sphere Entertainment Surviving Entity,” as defined below, is terminated (a) by the Company, one of its Subsidiaries or the Sphere Entertainment Surviving Entity other than for Cause, if such termination occurs within three (3) years of the going-private transaction with respect to the Company or (b) by you for “good reason,” as defined below, if such termination occurs within three (3) years of the going-private transaction with respect to the Company, in each case so long as Cause does not then exist, or (2) if the Options are exercisable on the effective date of the going-private transaction with respect to the Company, then the cash award shall become payable promptly. The amount payable in cash shall be payable together with interest from the effective date of the going-private transaction with respect to the Company until the date of payment at (i) the weighted average cost of capital of the Company immediately prior to the effectiveness of the going-private transaction with respect to the Company or (ii) if the Company (or the Sphere Entertainment Surviving Entity) sets aside the funds in a trust or other funding arrangement, the actual earnings of such trust or other funding arrangement.
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2.In the event of a “Sphere Entertainment Change of Control,” as defined below, (A) if your Options are outstanding and not exercisable as of the date of the Sphere Entertainment Change of Control, the Target Award will immediately vest, whether or not the Objectives have been attained, and (B) your vested Options will either (i) be cancelled and you will be entitled to prompt payment of an amount of cash determined in accordance with Section 1(A) above or (ii) if the Company or the Sphere Entertainment Surviving Entity has shares of common stock (or partnership units) traded on a national stock exchange or on the over-the-counter market as reported on the New York Stock Exchange or any other stock exchange, then the Committee may (in its discretion) arrange to have the Sphere Entertainment Surviving Entity grant to you in substitution for such Options an award of options for shares of common stock (or partnership units) of the Sphere Entertainment Surviving Entity on the same terms with a value equivalent to such Options and which will, in the good faith determination of the Committee, provide you with an equivalent profit potential, as determined in a manner compliant with Section 409A. For the avoidance of doubt, Options which are “underwater” may be cancelled for no consideration as of the consummation of the Sphere Entertainment Change of Control.
3.In the event of a “MSG Entertainment Change of Control” or a “going-private transaction” with respect to MSG Entertainment, each as defined below, and if (1) immediately prior to such MSG Entertainment Change of Control or going-private transaction with respect to MSG Entertainment you were an employee of the MSG Entertainment Group and (2) at the time of such MSG Entertainment Change of Control or going-private transaction with respect to MSG Entertainment you are not an employee of the Sphere Entertainment Group, the MSG Knickerbockers Group or the MSG Rangers Group, your entitlement to exercise the Options shall be as follows:
The Options shall become exercisable at the earlier of (A) the date on which the Options would otherwise have become exercisable hereunder, (B) the date of your death (in which case, if the death is before the end of the Performance Period, the Objectives will be deemed to be satisfied at the target level) or (C) the date on which your employment with the MSG Entertainment Group or the “MSG Entertainment Surviving Entity,” as defined below, is terminated (i) by MSG Entertainment, one of its Subsidiaries or the MSG Entertainment Surviving Entity other than for Cause, if such termination occurs within three (3) years of the MSG Entertainment Change of Control or the going-private transaction with respect to MSG Entertainment or (ii) by you for “good reason,” if such termination occurs within three (3) years of the MSG Entertainment Change of Control or the going-private transaction with respect to MSG Entertainment (in which case, if the termination is before the end of the Performance Period, the Objectives will be deemed to be satisfied at the target level), in each case so long as Cause does not then exist.
4.In the event of a “MSG Knickerbockers Change of Control” or a “going-private transaction” with respect to MSG Knickerbockers, each as defined below, and if (1) immediately prior to such MSG Knickerbockers Change of Control or going-private transaction with respect to MSG Knickerbockers you were an employee of the MSG Knickerbockers Group and (2) at the time of such MSG Knickerbockers Change of Control or going-private transaction with respect to MSG Knickerbockers you are not an employee of the Sphere Entertainment Group, the MSG
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Entertainment Group or the MSG Rangers Group, your entitlement to exercise the Options shall be as follows:
The Options shall become exercisable at the earlier of (A) the date on which the Options would otherwise have become exercisable hereunder, (B) the date of your death (in which case, if the death is before the end of the Performance Period, the Objectives will be deemed to be satisfied at the target level) or (C) the date on which your employment with the MSG Knickerbockers Group or the “MSG Knickerbockers Surviving Entity,” as defined below, is terminated (i) by MSG Knickerbockers, one of its Subsidiaries or the MSG Knickerbockers Surviving Entity other than for Cause, if such termination occurs within three (3) years of the MSG Knickerbockers Change of Control or the going-private transaction with respect to MSG Knickerbockers or (ii) by you for “good reason,” if such termination occurs within three (3) years of the MSG Knickerbockers Change of Control or the going-private transaction with respect to MSG Knickerbockers (in which case, if the termination is before the end of the Performance Period, the Objectives will be deemed to be satisfied at the target level), in each case so long as Cause does not then exist.
5.In the event of a “MSG Rangers Change of Control” or a “going-private transaction” with respect to MSG Rangers, each as defined below, and if (1) immediately prior to such MSG Rangers Change of Control or going-private transaction with respect to MSG Rangers you were an employee of the MSG Rangers Group and (2) at the time of such MSG Rangers Change of Control or going-private transaction with respect to MSG Rangers you are not an employee of the Sphere Entertainment Group, the MSG Entertainment Group or the MSG Knickerbockers Group, your entitlement to exercise the Options shall be as follows:
The Options shall become exercisable at the earlier of (A) the date on which the Options would otherwise have become exercisable hereunder, (B) the date of your death (in which case, if the death is before the end of the Performance Period, the Objectives will be deemed to be satisfied at the target level) or (C) the date on which your employment with the MSG Rangers Group or the “MSG Rangers Surviving Entity,” as defined below, is terminated (i) by MSG Rangers, one of its Subsidiaries or the MSG Rangers Surviving Entity other than for Cause, if such termination occurs within three (3) years of the MSG Rangers Change of Control or the going-private transaction with respect to MSG Rangers or (ii) by you for “good reason,” if such termination occurs within three (3) years of the MSG Rangers Change of Control or the going-private transaction with respect to MSG Rangers (in which case, if the termination is before the end of the Performance Period, the Objectives will be deemed to be satisfied at the target level), in each case so long as Cause does not then exist.
6.As used herein,
“Acquisition price per share” means the greater of (i) the highest price per share stated on the Schedule 13D or any amendment thereto filed by the holder of twenty percent (20%) or more of the Company’s voting power which gives rise to the Sphere Entertainment Change of Control or the going-private transaction with respect to the
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Company and (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of such Sphere Entertainment Change of Control or going-private transaction with respect to the Company.
“Cause” means your (i) commission of an act of fraud, embezzlement, misappropriation, willful misconduct, gross negligence or breach of fiduciary duty against your Employer or an Affiliate thereof or (ii) commission of any act or omission that results in a conviction, plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any crime involving moral turpitude or any felony.
“Going-private transaction” means a transaction involving the purchase of Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable, securities described in Rule 13e-3 to the Exchange Act.
“Good reason” means
a. without your express written consent any reduction in your base salary or target bonus opportunity, or any material impairment or material adverse change in your working conditions (as the same may from time to time have been improved or, with your written consent, otherwise altered, in each case, after the Effective Date) at any time after or within ninety (90) days prior to the MSG Entertainment Change of Control, the Sphere Entertainment Change of Control, the MSG Knickerbockers Change of Control or the MSG Rangers Change of Control, as applicable, including, without limitation, any material reduction of your other compensation, executive perquisites or other employee benefits (measured, where applicable, by level or participation or percentage of award under any plans of the Company, MSG Entertainment, MSG Knickerbockers or MSG Rangers, as applicable), or material impairment or material adverse change of your level of responsibility, authority, autonomy or title, or to your scope of duties;
b. any failure by your Employer to comply with any of the provisions of this Agreement, other than an insubstantial or inadvertent failure remedied by your Employer promptly after receipt of notice thereof given by you;
c. your Employer’s requiring you to be based at any office or location more than thirty-five (35) miles from your location immediately prior to such event except for travel reasonably required in the performance of your responsibilities; or
d. with respect to the Company only, any failure by the Company to obtain the assumption and agreement to perform this Agreement by a successor as contemplated by Paragraph 1.
“Merger price per share” means, in the case of a merger, consolidation, sale, exchange or other disposition of assets that results in a Sphere Entertainment Change of
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Control or a going-private transaction with respect to the Company (a “Merger”), the greater of (i) the fixed or formula price for the acquisition of shares of common stock occurring pursuant to the Merger and (ii) the highest fair market value per share of common stock during the ninety (90)-day period ending on the date of such Sphere Entertainment Change of Control or going-private transaction with respect to the Company. Any securities or property which are part or all of the consideration paid for shares of common stock pursuant to the Merger shall be valued in determining the merger price per share at the higher of (A) the valuation placed on such securities or property by the Company, person or other entity which is a party with the Company to the Merger or (B) the valuation placed on such securities or property by the Committee.
“MSG Entertainment Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Entertainment, of the power to direct the management of MSG Entertainment or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“Sphere Entertainment Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by the Company, of the power to direct the management of the Company or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“MSG Knickerbockers Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Knickerbockers, of the power to direct the management of MSG Knickerbockers or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“MSG Rangers Change of Control” means the acquisition, in a transaction or a series of related transactions, by any person or group, other than members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by MSG Rangers, of the power to direct the management of MSG Rangers or substantially all its assets (as constituted immediately prior to such transaction or transactions).
“MSG Entertainment Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Entertainment’s assets (as constituted immediately prior to such transaction). If any such
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entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Entertainment Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Entertainment’s assets shall be deemed to be the MSG Entertainment Surviving Entity.
“Sphere Entertainment Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of the Company’s assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the Sphere Entertainment Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of the Company’s assets shall be deemed to be the Sphere Entertainment Surviving Entity.
“MSG Knickerbockers Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Knickerbockers’ assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Knickerbockers Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Knickerbockers’ assets shall be deemed to be the MSG Knickerbockers Surviving Entity.
“MSG Rangers Surviving Entity” means the entity that owns, directly or indirectly, after consummation of any transaction, substantially all of MSG Rangers’ assets (as constituted immediately prior to such transaction). If any such entity is at least majority-owned, directly or indirectly, by any entity (a “parent entity”) which has shares of common stock (or partnership units) traded on a national stock exchange or the over-the-counter market, as reported on the New York Stock Exchange or any other stock exchange, then such parent entity shall be deemed to be the MSG Rangers Surviving Entity; provided that if there shall be more than one such parent entity, the parent entity closest to ownership of MSG Rangers’ assets shall be deemed to be the MSG Rangers Surviving Entity.
“Offer price per share” means, in the case of a tender offer or exchange offer which results in a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company (an “Offer”), the greater of (i) the highest price per share of common stock paid pursuant to the Offer or (ii) the highest fair market value per share of
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common stock during the ninety (90)-day period ending on the date of a Sphere Entertainment Change of Control or a going-private transaction with respect to the Company. Any securities or property which are part or all of the consideration paid for shares of common stock in the Offer shall be valued in determining the offer price per share at the higher of (A) the valuation placed on such securities or property by the Company, person or other entity making such offer or (B) the valuation placed on such securities or property by the Committee.
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EXHIBIT 10.8
SPHERE ENTERTAINMENT CO.
Executive Deferred Compensation Plan
Sphere Entertainment Co. previously established the Sphere Entertainment Co. Executive Deferred Compensation Plan for the purpose of permitting a select group of highly-compensated employees to defer the employee’s annual base salary and bonus into the Plan with returns on such deferrals tracking the performance of certain investments. The Company hereby amends and restates the Plan as of the Effective Date.
Article 1. Definitions
Whenever the following words and phrases are used in the Plan, with the first letter capitalized, they shall have the meanings specified below.
1.1Administrator means the Sphere Entertainment Co. Investment and Benefits Committee or any other committee of at least three members appointed by the Compensation Committee of the Board. The administration of the Plan, the exclusive power to interpret it and the responsibility for carrying out its provisions are vested in the Administrator.
1.2Affiliate means any entity that is, or would be, aggregated and treated as a single employer with the Company under Sections 414(b) or (c) of the Code; provided, however, that an ownership threshold of at least 50% shall be used hereunder instead of the 80% minimum ownership threshold that would otherwise apply under such sections of the Code.
1.3Annual Enrollment Letter means the letter provided prior to the Deferral Deadline by the Administrator to an Eligible Employee for each Plan Year in which an employee is an Eligible Employee setting forth the Eligible Employee’s eligibility to defer compensation under the Plan, the maximum amount that the Eligible Employee is eligible to defer under the Plan and such other terms as the Administrator may determine.
1.4Board means the Board of Directors of the Company.
1.5Change in Control means a change in ownership or effective control of the Company or in the ownership of a substantial portion of its assets, in each case within the meaning of Section 409A(a)(2)(A)(v) of the Code, other than the acquisition, in a transaction or a series of related transactions by members of the immediate family, including descendants, of Charles F. Dolan or trusts for the benefit of Charles F. Dolan’s immediate family (or an entity or entities controlled by any of them) or any employee benefit plan sponsored or maintained by the Company, of the power to direct the management of the Company or substantially all of its assets (as constituted immediately prior to such transaction or transactions).
1.6Code means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute. Any reference to any section of the Code shall also be a reference to any successor provision and any Treasury Regulation promulgated thereunder.
1.7Company means Sphere Entertainment Co. and any successor company thereto.
1.8Deferral Deadline means the date by which the Participation Agreement must be completed.
1.9Deferred Compensation Account means the account, which may be by book-keeping entry, maintained by the Employer for each Participant that reflects the sum of the amounts in the Participant’s Deferred Compensation Principal Account and the Deferred Compensation Earnings Account (including any negative amount as a result of any net losses). The Deferred Compensation Account may be divided into subaccounts (based on the source of the Deferred Compensation Amount, on a Plan Year basis, or such other basis determined by the Administrator).
1.10Deferred Compensation Amount means the amount voluntarily deferred under Article 2.
1.11Deferred Compensation Earnings Account means the account, which may be by book-keeping entry, maintained by the Employer for each Participant that reflects the earnings, if any, with respect to such Participant’s Deferred Compensation Amount debited by amounts equal to all distributions to the Participant. The Deferred Compensation Earnings Account may be divided into subaccounts (based on a Plan Year basis or such other basis determined by the Administrator).
1.12Deferred Compensation Principal Account means the account, which may be by book-keeping entry, maintained by the Employer for each Participant that reflects such Participant’s Deferred Compensation Amount adjusted by amounts equal to all distributions to the Participant. The Deferred Compensation Principal Account may be divided into subaccounts (based on a Plan Year basis or such other basis determined by the Administrator).
1.13Disability means that the Participant received short term disability income replacement payments for six months, and thereafter (A) has been determined to be disabled in accordance with the Company’s long term disability plan in which employees of the Company are generally able to participate, if one is in effect at such time, or (B) to the extent no such long term disability plan exists, has been determined to have a medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months as determined by the department or vendor directed by the Company to determine eligibility for unpaid medical leave.
1.14Eligible Employee means a full-time employee of the Employer at a manager level of Senior Vice President or above, who otherwise has been designated as eligible to participate in the Plan in accordance with the parameters established by the Administrator.
1.15Employer means the Company and any Participating Affiliate. All acts required of the Employers under the Plan may be performed by the Company for itself and its Participating Affiliates.
1.16ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor statute. Any reference to any section of ERISA shall also be a reference to any successor provision and any Department of Labor regulation promulgated thereunder.
1.17Investments means one or more investment alternatives as may be determined from time to time by the Administrator.
1.18Participant means an Eligible Employee who has become a Participant in accordance with the provisions of Article 2 and who has not received a complete distribution of all amounts credited to his or her Deferred Compensation Account.
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1.19Participating Affiliate means an Affiliate that the Administrator has designated as a Participating Affiliate. At such times and under such conditions as the Administrator may direct, one or more other Affiliates may become Participating Affiliates or a Participating Affiliate may be withdrawn from the Plan. An initial list of the Participating Affiliates is set forth in Appendix A to the Plan.
1.20Participation Agreement means the agreement, in a form prescribed by the Administrator, filed by a Participant on a Plan Year basis on or prior to December 31 of the calendar year prior to the calendar year during which services for which the Eligible Compensation is paid are performed.
1.21Person means any natural person, corporation, business trust, limited liability company, joint venture, association, company, partnership or government, or any agency or political subdivision thereof.
1.22Plan means the Sphere Entertainment Co. Executive Deferred Compensation Plan, as it may be amended from time to time.
1.23Plan Year means the calendar year or any other 12-consecutive-month period that may be designated by the Company as the plan year of the Plan.
1.24Scheduled Withdrawal Date means the date elected by the Participant for an in-service withdrawal, if any, as set forth on the applicable Participation Agreement executed by the Participant.
1.25Subsidiary means with respect to any specified Person, any corporation or other legal entity of which such Person or any of its Subsidiaries controls or owns, directly or indirectly, more than 50% of the stock or other equity interests entitled to vote on the election of members to the board of directors or similar governing body or, in the case of a Person with no governing body, more than 50% of the equity interests.
1.26Termination or Termination of Employment means that a Participant shall have incurred a “separation from service” within the meaning of Section 409A of the Code and the Treasury Regulations and other applicable guidance issued thereunder. Whether a Termination has occurred, including as a result of military leave, sick leave or other bona fide leave of absence, shall be determined in accordance with Section 409A of the Code. In the event of any dispute as to whether a Participant has separated from service, the Administrator shall make the final determination in accordance with the Treasury Regulations and other guidance issued under Section 409A of the Code.
1.27Treasury Regulations means the regulations promulgated under the Code by the United States Internal Revenue Service, as they may be from time to time amended.
Article 2. Deferred Amounts
2.1General. For each Plan Year, on or prior to the Deferral Deadline, an Eligible Employee may elect to participate in the Plan by filing a Participation Agreement with the Company. An employee who is newly eligible to participate in the Plan after a Deferral Deadline may elect to participate in the Plan by filing a Participation Agreement with the Company within 30 days after becoming an Eligible Employee. A Participation Agreement must be filed in the manner specified by the Administrator. A new Participation Agreement shall be filed by the Eligible Employee for each Plan Year in which he or she is permitted to elect to make a deferral election. After the Deferral Deadline (or, for a newly eligible Participant, the applicable 30-day period, subject to
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Section 6.2 and Section 6.3), an Eligible Employee’s election to defer Eligible Compensation shall be irrevocable. An Eligible Employee’s eligibility to participate in the Plan in any Plan Year shall not be a guarantee of the Eligible Employee’s eligibility to participate in the Plan for future Plan Years.
2.2Eligible Deferrals. Each Eligible Employee may elect to defer receipt of one or more of the following to his or her Deferred Compensation Account (the “Eligible Compensation”):
•up to a maximum of 75% of his or her annual base salary, in increments of 5%; and
•all or any portion of his or her earned award, if any, under the Management Performance Incentive Plan (the “MPIP”), in increments of 25%.
For a newly eligible Participant, Eligible Compensation only includes such portions of salary and MPIP awards earned with respect to service after the date on which the Participation Agreement becomes irrevocable as determined by the Administrator in accordance with Section 409A of the Code.
If an Eligible Employee is also eligible to participate in a deferred compensation plan sponsored by a Participating Affiliate, the Company and such Participating Affiliate shall coordinate so as to ensure any Eligible Compensation is not double counted.
2.3Allocation of Deferred Compensation Amounts. A Participant’s Deferred Compensation Amount shall be credited to his or her Deferred Compensation Principal Account as soon as administratively practicable following the time the Participant is paid the Eligible Compensation for that Plan Year (or, if all of the Eligible Compensation is deferred, at the time such Eligible Compensation would otherwise have been paid). The amount initially credited to the Participant’s Deferred Compensation Principal Account shall equal the amount deferred.
Article 3. Vesting
3.1Deferred Compensation Principal Account. A Participant shall at all times be fully vested in his or her Deferred Compensation Principal Account.
3.2Deferred Compensation Earnings Account. A Participant shall at all times be fully vested in his or her Deferred Compensation Earnings Account.
Article 4. [Reserved]
Article 5. Investments
5.1The Administrator shall have the sole discretion to determine the Investments in which the Deferred Compensation Amounts will be invested and may change, limit or eliminate an Investment from time to time.
5.2In the manner specified by the Administrator, Participants may elect one or more Investments in which the funds in their Deferred Compensation Earnings Account are invested and may elect to change the Investment allocations of the Deferred
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Compensation Account by filing an election on a form or in the manner provided by the Administrator. Except as provided below, Participants may prospectively change their Investment elections once each calendar month, and the new investment allocations will be effective on the first day of the next month.
Article 6. Timing and Form of Benefit Distributions
6.1Form and Timing. Subject to the provisions of this Article 6, the Deferred Compensation Account for a Participant for each Plan Year shall be distributed to the Participant in a lump sum, cash payment, or up to five annual cash installments, in each case on or beginning 90 days following the first to occur of: (i) the Scheduled Withdrawal Date, (ii) a Termination of Employment, (iii) the Participant’s Disability and (iv) a Change in Control. Participants must file such payment timing elections on or prior to the Deferral Deadline for the applicable Plan Year. For those Participants who fail to file a timely election, payment will be made in the form of a lump sum payment. Subject to the provisions of this Article 6, the Deferred Compensation Account for a Participant for each Plan Year shall be distributed to the Participant’s estate in a lump sum, cash payment, on the 90th day following the Participant’s death.
6.2Domestic Relations Orders. To the extent permitted by Section 409A of the Code, and notwithstanding any provision of the Plan to the contrary, the Administrator, in its sole discretion, may elect to accelerate the time or form of payment of a benefit owed to a Participant hereunder in accordance with the terms and subject to the conditions of Treasury Regulation 1.409A-3(j)(4)(ii).
6.3Unforeseeable Emergency. In the event the Administrator, upon written request of a Participant, determines in its sole discretion that the Participant has suffered an unforeseeable emergency, consistent with the guidance contained in Section 1.409A-3(i)(3) of the Treasury Regulations, the Administrator may (i) revoke the Participant’s deferral election with respect to future Eligible Compensation in accordance with Section 1.409A-3(j)(4)(viii) of the Treasury Regulations and/or (ii) pay to a Participant as soon as practicable following such determination, an amount from a Participant’s Deferred Compensation Account that shall not exceed the minimum amount necessary to satisfy the emergency, including payment of applicable taxes, consistent with the guidance in Section 1.409A-3(i)(3)(ii) of the Treasury Regulations. A Participant who receives a hardship distribution pursuant to this Section 6.3 shall be ineligible to make any additional deferrals under the Plan for the balance of the Plan Year in which the hardship distribution occurs and for the immediately following Plan Year.
6.4Subsequent Elections. With respect to any Deferred Compensation Account for a Plan Year that a Participant elected to receive in a lump sum, in the event of a distribution pursuant to Section 6.1(i), the Participant may delay the distribution of such Deferred Compensation Amount subject to the following requirements: (A) the new election may not take effect until at least 12 months after the date on which the new election is made; (B) the new election must provide for the deferral of the distribution for a period of at least five years from the date such distribution otherwise would have been made and (C) the new election must be made at least 12 months prior to the date such distribution otherwise would have been made.
Article 7. Administration
7.1Administration by the Committee. The Administrator shall be responsible for the general operation and administration of the Plan and for carrying out the provisions thereof.
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7.2General Powers of Administration. The Administrator shall have all the authority that may be necessary or helpful to enable it to discharge its responsibilities with respect to the Plan. The Administrator may, subject to the provisions of the Plan, establish such rules and regulations as it deems necessary or advisable for the proper administration of the Plan, and may make determinations and may take such other action in connection with or in relation to the Plan as it deems necessary or advisable. Each determination or other action made or taken pursuant to the Plan, including interpretation of the Plan, shall be final and conclusive for all purposes and persons. The Administrator shall be entitled to rely conclusively upon all certificates, opinions, and information furnished by any counsel, or other person employed or engaged by the Administrator with respect to the Plan.
7.3Indemnification. In addition to such other rights of indemnification as they may have as members of the Sphere Entertainment Co. Investment and Benefits Committee, or as its delegatees, the members of the Sphere Entertainment Co. Investment and Benefits Committee and its delegatees shall be indemnified by the Company against (a) the reasonable expenses (as such expenses are incurred), including attorneys’ fees actually and necessarily incurred in connection with the defense of any action, suit or proceeding (or in connection with any appeal therein), to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan; and (b) against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such member or delegatee is liable for gross negligence or misconduct in the performance of his duties; provided that within 60 days after institution of any such action, suit or proceeding a member or delegatee shall in writing the Company offer the opportunity, at its own expense, to handle and defend the same.
7.4Section 409A of the Code. It is intended that the payments and benefits under the Plan comply with the provisions of Section 409A of the Code. The Plan will be administered and interpreted in a manner consistent with this intent, and any provision that would cause the Plan to fail to satisfy Section 409A of the Code will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Section 409A of the Code). In addition, for purposes of the Plan, each amount to be paid or benefit to be provided to the Participant pursuant to the Plan, which constitutes deferred compensation subject to Section 409A of the Code, shall be construed as a separate identified payment for purposes of Section 409A of the Code. The Company shall have no liability to any Participant, beneficiary or otherwise if the Plan or any amounts paid or payable hereunder are subject to the additional taxes and penalties under Section 409A of the Code.
7.5To the extent that any amount payable to the Participant pursuant to the Plan is determined by the Company to constitute “non-qualified deferred compensation” subject to Section 409A of the Code and is payable to the Participant by reason of the Participant’s termination of employment (other than death), then if the Participant is a “specified employee” (within the meaning of Section 409A of the Code as determined by the Company), such payment shall not be made before the date that is six months after the date of the Participant’s termination of employment (or, if earlier than the expiration of such six month period, the date of death). Any amount not paid at the end of such six-month period shall be paid to the Participant in a lump sum on the expiration of such six-month period.
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Article 8. Claims Appeal Procedure
8.1Initial Claims. After first discussing any claims a Participant (or anyone claiming through a Participant) may have under the Plan with the Company’s Vice President, Benefits, the Participant may then make a claim under the Plan in writing to the Administrator. The Administrator shall make all determinations concerning such claim. Any decision by the Administrator denying such claim shall be in writing and shall be delivered to the Participant, or if applicable, anyone who makes claim in respect of the Participant. Such decision shall set forth the reasons for denial in plain language. Pertinent provisions of the Plan shall be cited and, where appropriate, an explanation as to how the claimant can perfect the claim will be provided. This notice of denial of benefits will be provided within 90 days of the Administrator’s receipt of the claimant’s claim for benefits (or within 180 days if special circumstances require an extension of time for processing the claim and if written notice of such extension and special circumstances is given to the claimant within the initial 90-day period). If the Administrator fails to notify the claimant of its decision regarding the claim within such period, the claim shall be considered denied as of the last day of such period, and the claimant shall then be permitted to proceed with the appeal as provided in Section 8.2.
8.2Appeals. A claimant who has been completely or partially denied a benefit shall be entitled to appeal this denial of his/her claim by filing a written statement of his/her position with the Administrator no later than 60 days after receipt of the written notification of such claim denial. If the claimant does not request a review within such 60-day or 180-day period, he or she shall be barred and estopped from challenging the Administrator’s determination.
The Administrator shall schedule an opportunity for a full and fair review of the issue within 30 days of receipt of the appeal. The decision on review shall set forth specific reasons for the decision, and shall cite specific references to the pertinent Plan provisions on which the decision is based. Following the review of any additional information submitted by the claimant, either through the hearing process or otherwise, the Administrator shall render a decision on the review of the denied claim. The Administrator shall make its decision regarding the merits of the denied claim within 60 days following receipt of the request for review (or within 120 days after such receipt, in a case where there are special circumstances requiring extension of time for reviewing the appealed claim). The Administrator shall deliver the decision to the claimant in writing. If an extension of time for reviewing the appealed claim is required because of special circumstances, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. If the decision on review is not furnished within the prescribed time, the claim shall be deemed denied on review.
8.3General. The Administrator may at any time alter the claims procedure set forth above. The claims procedure set forth in this Article 8 is intended to comply with United States Department of Labor Regulation §2560.503-1 and should be construed in accordance with such regulation. In no event shall the claims procedure be interpreted as expanding the rights of claimants beyond what is required by United States Department of Labor Regulation §2560.503-1. A claimant must exhaust all administrative remedies under the Plan prior to bringing an action. No such action may be brought later than three years from the date the claim arose. The Administrator’s interpretations, determinations and decisions with respect to any claim shall be made in its sole discretion based on the Plan and other relevant documents and shall be final and binding on all persons.
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Article 9. Amendment and Termination of Plan
9.1Amendment or Termination. The Company intends the Plan to be permanent but reserves the right to amend or terminate the Plan when, in the sole opinion of the Company, such amendment or termination is advisable. Any such amendment or termination shall be made pursuant to a resolution of the Board or the Compensation Committee of the Board. To the extent the Company has delegated the authority to amend the Plan to the Committee, any such amendment by the Administrator shall be made by resolution of the Administrator.
9.2Effect of Amendment or Termination. No amendment or termination of the Plan shall directly or indirectly reduce the balance of any account held hereunder as of the effective date of such amendment or termination. No amendment, modification, suspension or termination will accelerate distributions unless such acceleration is approved by the Company and permitted under Section 409A of the Code and the Treasury Regulations and other applicable guidance issued thereunder. A Participant’s Deferred Compensation Account shall continue to be credited with gains and losses pursuant to Article 3 of the Plan until the balance of such Deferred Compensation Account has been fully distributed to the Participant or such Participant’s beneficiary.
9.3Employer’s Right to Terminate Plan. Any Employer may, at any time, by resolution of the Board or the Compensation Committee of the Board, terminate participation in the Plan with respect to its employees, in accordance with Section 9.2. If the Plan is terminated by fewer than all Employers, the Plan shall continue in effect for employees of the remaining Employers. In the event that an Employer shall, for any reason, cease to exist, the Plan shall terminate with respect to the employees of such Employer, unless a successor organization adopts the Plan and thereby continues their participation.
Article 10. Miscellaneous
10.1Participant’s Rights Unsecured. Except as set forth in Section 10.2, the Plan at all times shall be entirely unfunded and no provision shall at any time be made with respect to segregating any assets of the Company for payment of any distributions hereunder. The right of a Participant or his or her beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company and the Employer, and neither a Participant nor a beneficiary shall have any rights in or against any specific assets of the Company. All amounts credited to Deferred Compensation Accounts of Participants shall constitute general assets of the Company and may be disposed of by the Company at such time and for such purposes as it may deem appropriate.
10.2Trust Agreement. Notwithstanding the provisions of Section 10.1, an Employer may, at its discretion, enter into a trust agreement (“Trust Agreement”) with a bank or trust company located in the continental United States as trustee, whereby the Employer may at its discretion contribute deferrals under the Plan to a trust (“Trust”). Such Trust Agreement shall be substantially in the form of the model trust agreement set forth in Internal Revenue Service Revenue Procedure 92-64, or any subsequent Internal Revenue Service Revenue Procedure, and shall include provisions required in such model trust agreement that all assets of the Trust shall be subject to creditors of the Employer in the event of insolvency. To the extent any benefits provided under the Plan are paid from the Trust, the Employer shall have no further obligation to pay them. If not paid from the Trust, such benefits shall remain the obligation of the Employer or the Company. Notwithstanding the foregoing, no Employer contributions shall be made to the Trust if doing so would violate the provisions of Section 409A of the Code.
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10.3No Guarantee of Benefits. Nothing contained in the Plan shall constitute a guaranty by the Company or any other person or entity that the assets of the Company shall be sufficient to pay any benefit hereunder.
10.4No Enlargement of Employee Rights. No Participant or Beneficiary shall have any right to receive a distribution of contributions made under the Plan except in accordance with the terms of the Plan. Establishment of the Plan shall not be construed to give any Participant the right to be retained in the service of the Company or any Employer.
10.5Spendthrift Provision. No interest of any person or entity in, or right to receive a distribution under, the Plan shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind, nor may such interest or right to receive a distribution be taken, either voluntarily or involuntarily for the satisfaction of the debts of, or other obligations or claims against, such person or entity, except with respect to claims for alimony, support or separate maintenance.
10.6Applicable Law. The Plan shall be construed and administered under the laws of the State of New York, except to the extent preempted by applicable federal law.
10.7Incapacity of Recipient. If any person entitled to a distribution under the Plan is deemed by the Administrator to be incapable of personally receiving and giving a valid receipt for such payment, then, unless and until claim therefor shall have been made by a duly appointed guardian or other legal representative of such person, the Administrator may provide for such payment or any part thereof to be made to any other person or institution then contributing toward, or providing for the care and maintenance of, such person. Any such payment shall be a payment for the account of such person and a complete discharge of any liability of the Administrator, the Company, Participating Affiliates and the Plan therefor.
10.8Corporate Successors. The Plan shall not be automatically terminated by a transfer or sale of assets of the Company or by the merger or consolidation of the Company into or with any other corporation or other entity, but the Plan shall be continued after such sale, merger or consolidation only if and to the extent that the transferee, purchaser or successor entity agrees to continue the Plan. In the event that the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall terminate subject to the provisions of Section 10.2.
10.9Unclaimed Benefit. Each Participant shall keep the Administrator informed of his or her current address and the current address of his or her beneficiary. The Administrator shall not be obligated to search for the whereabouts of any person. If the location of a Participant is not made known to the Administrator within three years after the date on which payment of the Administrator’s Deferred Compensation Account may first be made, payment may be made as though the Participant had died at the end of the three-year period. If, within one additional year after such three-year period has elapsed, or, within three years after the actual death of a Participant, the Administrator is unable to locate any beneficiary of the Participant, then the Administrator shall have no further obligation to pay any benefit hereunder to such Participant or beneficiary and such benefit shall be irrevocably forfeited.
10.10Limitations on Liability. Notwithstanding any of the preceding provisions of the Plan, neither the Company and Participating Affiliates, nor any individual acting as employee or agent of the Company or Participating Affiliates shall be liable to any Participant,
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former Participant, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan.
10.11Withholding Taxes. An Employer shall have the right to deduct from each payment to be made under the Plan any required withholding taxes.
10.12Top-Hat Plan. It is the intention of the Company that, to the extent the Plan is determined to be an employee pension benefit plan subject to ERISA, it shall be considered and interpreted in all respects as an unfunded “top-hat” plan maintained primarily to provide deferred compensation benefits for “a select group of management or highly compensated employees” within the meaning of Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA.
10.13Electronic Election. Any reference herein to an election, designation or other action by a Participant in writing shall be deemed to include an electronic election, designation or act made on the Internet to the maximum extent permitted by applicable law.
IN WITNESS WHEREOF, Sphere Entertainment Co. has caused this amendment and restatement of the Plan to be executed in its name, by its duly authorized officer, on this 26th day of October, 2026 (the “Effective Date”).
SPHERE ENTERTAINMENT CO. | ||||||||
By: | /s/ Christopher J. Winters | |||||||
Name: | Christopher J. Winters | |||||||
Title: | SVP, Controller & Principal Accounting Officer | |||||||
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APPENDIX A
PARTICIPATING AFFILIATES
As of the Effective Date
As of the Effective Date
1.Madison Square Garden Entertainment Corp. and its Subsidiaries
2.MSG Knickerbockers Corp. and its Subsidiaries
3.MSG Rangers Corp. and its Subsidiaries
4.Subsidiaries of the Company
EXHIBIT 10.9October 26, 2026
David Granville-Smith
Sphere Entertainment Co.
Two Pennsylvania Plaza
New York, NY 10121
Sphere Entertainment Co.
Two Pennsylvania Plaza
New York, NY 10121
Dear David:
Reference is made to the letter agreement, dated June 15, 2023, between you and Sphere Entertainment Co. (the “Company”) governing the terms of your employment with the Company (the “Employment Agreement”). This letter agreement (the “Acknowledgement”) sets forth certain amendments to the Employment Agreement, in each case effective as of the closing of the spin-off of MSGS Spinco, Inc. (to be renamed MSG Rangers Corp., “MSGR”) from Madison Square Garden Sports Corp. (to be renamed MSG Knickerbockers Corp., “MSGK”) (the “Effective Date”). This Acknowledgement pertains solely to the terms of your employment with the Company, and any terms of your employment with MSGR and MSGK will be separately provided. All defined terms used in this Acknowledgement and not otherwise defined herein shall have the meaning ascribed thereto in the Employment Agreement.
By signing this Acknowledgement, you hereby agree to and acknowledge the following:
1.Section 2 of the Employment Agreement is hereby amended and restated as follows:
“The Company acknowledges that, in addition to your services pursuant to this Agreement, you will simultaneously be employed by, and are expected to devote a portion of your business time and attention to, each of MSG Knickerbockers Corp. (“MSGK”), MSG Rangers Corp. (“MSGR”) and AMC Global Media Inc. (“AMC”). The Company understands that you have entered into employment agreements with MSGK, MSGR and AMC and recognizes and agrees that your responsibilities to MSGK, MSGR and AMC will preclude you from devoting substantially all of your time and attention to the Company’s affairs, but apart from your arrangements with MSGK, MSGR and AMC you will not undertake any outside business commitments without the Company’s consent and you will, upon request, cooperate with the Company in reviewing your obligations under Section (1) above. In addition, as recognized in Article Tenth of the Company’s Articles of Incorporation and the Policy Concerning Certain Matters Relating to Madison Square Garden Entertainment Corp., MSG Knickerbockers Corp. (formerly known as Madison Square Garden Sports Corp.), MSG Rangers Corp. (formerly MSGS Spinco, Inc.) and AMC Global Media Inc., Including Responsibilities of Overlapping Directors and Officers (together, the “Overlap Policy”), there may be certain potential conflicts of interest and fiduciary duty issues associated with your roles at the Company, MSGK, MSGR and AMC. The Company recognizes and agrees that none of (i) your multiple responsibilities at the Company, MSGK, MSGR and AMC, (ii) your inability to devote substantially all of your time and attention to the Company’s affairs, (iii) the
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actual or potential conflicts of interest and fiduciary duty issues that are waived in the Overlap Policy, or (iv) any actions taken, or omitted to be taken, by you in good faith to comply with your duties and responsibilities to the Company in light of your multiple responsibilities to the Company, MSGK, MSGR and AMC, shall be deemed to be a breach by you of your obligations under this Agreement (including your obligations under Annex A) nor shall any of the foregoing constitute “Cause” as such term is defined in Section 13 hereof.”
2.Section 8 of the Employment Agreement is hereby amended and restated as follows:
“While you are employed by MSGK and/or MSGR, you will not be eligible to participate in the Company’s benefits program except as provided below. If your employment with both MSGK and MSGR terminates while you remain employed by the Company, you will be eligible to participate in our standard benefits program subject to meeting the relevant eligibility requirements, payment of the required premiums, and the terms of the plans themselves. Notwithstanding the first sentence of this Section 8, you will also be eligible to participate in the Company’s standard life insurance program, Excess Savings Plan and Executive Deferred Compensation Plan and your full Company base salary will be used to determine the applicable benefits under the Company’s Excess Savings Plan. To the extent required by the Company’s insurance provider, any payout under the Company’s life insurance program will be aggregated with similar payouts under AMC’s, MSGK’s and/or MSGR’s life insurance programs with respect to any applicable maximum coverage. You will be eligible for flexible time off in accordance with Company policy.”
3.Section 9(d) of the Employment Agreement is hereby amended to (i) replace “shall be made on the 90th day after the termination of your employment” with “shall be made as soon as reasonably practicable after your execution and delivery of the Separation Agreement (and the expiration of any applicable revocation period),” (ii) replace “shall be made on the 90th day after the applicable performance criteria is certified by the Compensation Committee as having been satisfied” with “shall be made at the same time and to the extent that other similarly situated executives receive payment as determined by the Compensation Committee (subject to satisfaction of the applicable performance criteria)” and (iii) include the following at the end thereof: “, provided however, that to the extent any previously granted award (or award issued in respect of a previously granted award) provides for “deferred compensation” subject to Section 409A, then payment pursuant to this clause (d) will not be made prior to the earliest date permitted under Section 409A.”
4.Section 10 of the Employment Agreement is hereby amended to (i) replace “shall be payable on the 90th day after the termination of your employment” with “shall be payable as soon as reasonably practicable after your execution and delivery of the Separation Agreement (and the expiration of any applicable revocation period)” and (ii) include the following at the end thereof: “and to the extent any previously granted award (or award issued in respect of a previously granted award) provides for “deferred compensation” subject to Section 409A, then the payment pursuant to this Section 10 will not be made prior to the earliest date permitted under Section 409A.”
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5.Section 11 of the Employment Agreement is hereby amended to replace “shall not extend to MSGS or AMC” with “shall not extend to MSGK, MSGR or AMC.”
6.The final sentence of Section 11 of the Employment Agreement is hereby amended and restated as follows: “For avoidance of doubt, your rights of indemnification under the Company’s Amended and Restated Articles of Incorporation, under your indemnification agreement with the Company, and under any insurance policy, or under any other resolution of the Board of Directors of the Company, shall not be released, diminished or affected by any Separation Agreement or release or any termination of your employment.”
7.Section 16 of the Employment Agreement is hereby amended to (i) replace “separation from services” with “separation from service,” (ii) replace “LIBOR” with “SOFR” and (iii) include the following after the fourth sentence thereof: “In the event that the timing of any payment hereunder is determined by reference to, or subject to, your execution and nonrevocation of the Separation Agreement and the period in which the Separation Agreement may become effective and irrevocable spans two calendar years, then such payment will be made in the second year.”
8.The first sentence of Section 24 of the Employment Agreement is hereby amended and restated as follows: “This Agreement (and exhibits), your indemnification agreement and the letter agreement dated as of October 26, 2026 reflect the entire understanding and agreement of you and the Company with respect to the subject matter hereof and supersede all prior understandings or agreements relating thereto.”
9.The definition of “Competitive Entity” in the Employment Agreement is hereby amended and restated as follows: “A “Competitive Entity” shall mean any person or entity (other than MSGK, MSGR, AMC, and their respective subsidiaries) that (1) is engaged in the business then conducted by the Company or its subsidiaries, which, as of the date of this Agreement, is anticipated to include, without limitation, any arena, stadium, concert venue, concert promoter, theatrical producer, or similar or related business (e.g., Internet sites in connection therewith) within the United States or within any other country in which the Company has any competing business or from which such business, person or entity competes with any of the Company’s domestic businesses, or any regional sports network (that operates primarily in New York, New Jersey or Connecticut), or (2) is an affiliate of a person or entity described in clause (1).”
10.Section 2 of Annex A of the Employment Agreement is hereby amended to include the following at the end thereof: “If you remain continuously employed with the Company through the Scheduled Expiration Date, then this agreement not to compete will expire on the Scheduled Expiration Date.”
11.Section 4 of Annex A of the Employment Agreement is hereby amended to replace “any of the Company, MSGS and AMC” with “any of the Company, MSGK, MSGR and AMC.”
12.For the avoidance of doubt, nothing herein (a) constitutes a transfer, termination or resignation of your employment, (b) entitles you to any benefits under Section 9 of the Employment Agreement, (c) results in the forfeiture of any rights that you have under arrangements of the Company or its affiliates or (d) constitutes Good Reason for purposes of any arrangement between you and the Company or its affiliates.
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13.Except as set forth in this Acknowledgement, the Employment Agreement shall remain in full force and effect in accordance with its terms.
Sincerely,
SPHERE ENTERTAINMENT CO.
/s/ James L. Dolan
By: James L. Dolan
Title: Executive Chairman and Chief Executive Officer
By: James L. Dolan
Title: Executive Chairman and Chief Executive Officer
Accepted and Agreed
/s/ David Granville-Smith
David Granville-Smith
David Granville-Smith
EXHIBIT 10.10
Sphere Entertainment Co.
Policy Concerning Certain Matters Relating to Madison Square Garden Entertainment Corp., MSG Knickerbockers Corp. (formerly Madison Square Garden Sports Corp.), MSG Rangers Corp. (formerly MSGS Spinco, Inc.) and AMC Global Media Inc., Including Responsibilities of Overlapping Directors and Officers
A. Certain Acknowledgements; Definitions.
Sphere Entertainment Co. (the “Corporation”) recognizes that (a) certain directors and officers of the Corporation and its subsidiaries (the “Overlap Persons”) have served and may serve as directors, officers, employees and agents of Madison Square Garden Entertainment Corp. (“MSG Entertainment”), MSG Knickerbockers Corp. (formerly Madison Square Garden Sports Corp. and referred to herein as “MSG Knickerbockers”), MSG Rangers Corp. (formerly MSGS Spinco, Inc.) and AMC Global Media Inc., and their respective subsidiaries and successors (each of the foregoing, including its subsidiaries and successors, is an “Other Entity”), (b) the Corporation and its subsidiaries, directly or indirectly, may engage in the same, similar or related lines of business as those engaged in by any Other Entity and other business activities that overlap with or compete with those in which such Other Entity may engage, (c) the Corporation or its subsidiaries may have an interest in the same areas of business opportunity as an Other Entity, (d) the Corporation will derive substantial benefits from the service as directors or officers of the Corporation and its subsidiaries of Overlap Persons, and (e) it is in the best interests of the Corporation that the rights of the Corporation, and the duties of any Overlap Persons, be determined and delineated as provided in this Policy in respect of any Potential Business Opportunities (as defined below) and in respect of the agreements and transactions referred to herein. The provisions of this Policy will, to the fullest extent permitted by law, regulate and define the conduct of the business and affairs of the Corporation and its officers and directors who are Overlap Persons in connection with any Potential Business Opportunities and in connection with any agreements and transactions referred to herein. Any person purchasing or otherwise acquiring any shares of capital stock of the Corporation, or any interest therein, will be deemed to have notice of and to have consented to the provisions of this Policy. References in this Policy to “directors,” “officers,” “employees” and “agents” of any person will be deemed to include those persons who hold similar positions or exercise similar powers and authority with respect to any other entity that is a limited liability company, partnership, joint venture or other non-corporate entity.
B. Duties of Directors and Officers Regarding Potential Business Opportunities; Renunciation of Interest in Potential Business Opportunities.
The Corporation hereby renounces, on behalf of itself and its subsidiaries, to the fullest extent permitted by law, any interest or expectancy in any Potential Business Opportunity that is not a Restricted Potential Business Opportunity. If a director or officer of the Corporation who is an Overlap Person is presented or offered, or otherwise acquires knowledge of, a potential transaction or matter that may constitute or present a business opportunity for the Corporation or any of its subsidiaries, in which the Corporation or any of its subsidiaries could, but for the provisions of this Policy, have an interest or expectancy (any such transaction or matter, and any such actual or potential business opportunity, a “Potential Business Opportunity”), (i) such Overlap Person will, to the fullest extent permitted by law, have no duty or obligation to refrain from referring such Potential Business Opportunity to any Other Entity and, if such Overlap Person refers such Potential Business Opportunity to an Other Entity, such Overlap Person shall have no duty or obligation to refer such Potential Business Opportunity to the Corporation or to any of its subsidiaries or to give any notice to the Corporation or to any of its subsidiaries regarding such Potential Business Opportunity (or any matter related thereto), (ii) if such
Overlap Person refers a Potential Business Opportunity to an Other Entity, such Overlap Person, to the fullest extent permitted by law, will not be liable to the Corporation as a director, officer, stockholder or otherwise, for any failure to refer such Potential Business Opportunity to the Corporation, or for referring such Potential Business Opportunity to any Other Entity, or for any failure to give any notice to the Corporation regarding such Potential Business Opportunity or any matter relating thereto, (iii) any Other Entity may participate, engage or invest in any such Potential Business Opportunity notwithstanding that such Potential Business Opportunity may have been referred to such Other Entity by an Overlap Person, and (iv) if a director or officer who is an Overlap Person refers a Potential Business Opportunity to an Other Entity, then, as between the Corporation and/or its subsidiaries, on the one hand, and such Other Entity, on the other hand, the Corporation and its subsidiaries shall be deemed to have renounced any interest, expectancy or right in or to such Potential Business Opportunity or to receive any income or proceeds derived therefrom solely as a result of such Overlap Person having been presented or offered, or otherwise acquiring knowledge of, such Potential Business Opportunity, unless in each case referred to in clause (i), (ii), (iii) or (iv), such Potential Business Opportunity satisfies all of the following conditions (any Potential Business Opportunity that satisfies all of such conditions, a “Restricted Potential Business Opportunity”): (A) such Potential Business Opportunity was expressly presented or offered to the Overlap Person in his or her capacity as a director or officer of the Corporation; (B) the Overlap Person believed that the Corporation possessed, or would reasonably be expected to be able to possess, the resources necessary to exploit such Potential Business Opportunity; and (C) such opportunity relates (x) primarily to a theatrical or arena venue; provided, that if the conditions in clauses (A) and (B) and the following proviso also are satisfied with respect to MSG Entertainment and such opportunity relates primarily to a theatrical or arena venue in the United States, then the Overlap Person shall alternate referring such opportunity to the Corporation and MSG Entertainment (with the first opportunity after the date hereof being referred to the Corporation), or (y) exclusively to the business of owning and operating a regional professional sports programming service that features the live carriage of games of teams that compete in the National Hockey League, the National Basketball Association or Major League Baseball and that is targeted to, and made available to, multichannel video programming distributors in the New York, New Jersey and Connecticut tri-state area; provided further, that in the case of each of clauses (x) and (y), the Corporation or any of its subsidiaries is directly engaged in such business at the time the Potential Business Opportunity is presented or offered to the Overlap Person. In the event the Corporation’s board of directors, or a committee thereof, declines to pursue a Restricted Potential Business Opportunity, Overlap Persons shall be free to refer such Restricted Potential Business Opportunity to an Other Entity.
C. Certain Agreements and Transactions Permitted.
No contract, agreement, arrangement or transaction (or any amendment, modification or termination thereof) entered into between the Corporation and/or any of its subsidiaries, on the one hand, and an Other Entity, on the other hand, before the Corporation ceased to be a direct, wholly-owned subsidiary of MSG Knickerbockers, before MSG Networks became a direct, wholly-owned subsidiary of the Corporation, or before MSG Entertainment ceased to be a direct, wholly-owned subsidiary of the Corporation shall be void or voidable or be considered unfair to the Corporation or any of its subsidiaries solely because such Other Entity is a party thereto, or because any directors, officers or employees of such Other Entity were present at or participated in any meeting of the board of directors, or a committee thereof, of the Corporation, or the board of directors, or committee thereof, of any subsidiary of the Corporation, that authorized the contract, agreement, arrangement or transaction (or any amendment, modification or termination thereof), or because his, her or their votes were counted for such purpose. The Corporation may from time to time enter into and perform, and cause or permit any of its subsidiaries to enter into and perform, one or more contracts, agreements, arrangements or transactions (or amendments, modifications or supplements thereto) with an Other Entity. To the fullest extent permitted by law, no
such contract, agreement, arrangement or transaction (nor any such amendments, modifications or supplements), nor the performance thereof by the Corporation, any subsidiary of the Corporation or an Other Entity, shall be considered contrary to any fiduciary duty owed to the Corporation (or to any subsidiary of the Corporation, or to any stockholder of the Corporation or any of its subsidiaries) by any director or officer of the Corporation (or by any director or officer of any subsidiary of the Corporation) who is an Overlap Person. To the fullest extent permitted by law, no director or officer of the Corporation or any subsidiary of the Corporation who is an Overlap Person thereof shall have or be under any fiduciary duty to the Corporation (or to any subsidiary of the Corporation, or to any stockholder of the Corporation or any of its subsidiaries) to refrain from acting on behalf of the Corporation, any subsidiary of the Corporation or an Other Entity in respect of any such contract, agreement, arrangement or transaction or performing any such contract, agreement, arrangement or transaction in accordance with its terms and each such director or officer of the Corporation or any subsidiary of the Corporation who is an Overlap Person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation and its subsidiaries, and shall be deemed not to have breached his or her duties (including, without limitation, the duty of loyalty) to the Corporation or any of its subsidiaries or any of their respective stockholders, and not to have derived an improper personal benefit therefrom.
D. Amendment of this Policy.
No alteration, amendment or repeal of, or adoption of any provision inconsistent with, any provision of this Policy will have any effect upon (a) any agreement between the Corporation or a subsidiary thereof and any Other Entity, that was entered into before the time of such alteration, amendment or repeal or adoption of any such inconsistent provision (the “Amendment Time”), or any transaction entered into in connection with the performance of any such agreement, whether such transaction is entered into before or after the Amendment Time, (b) any transaction entered into between the Corporation or a subsidiary thereof and any Other Entity, before the Amendment Time, (c) the allocation of any business opportunity between the Corporation or any subsidiary thereof and any Other Entity before the Amendment Time, or (d) any duty or obligation owed by any director or officer of the Corporation or any subsidiary of the Corporation (or the absence of any such duty or obligation) with respect to any Potential Business Opportunity which such director or officer was offered, or of which such director or officer otherwise became aware, before the Amendment Time (regardless of whether any proceeding relating to any of the above is commenced before or after the Amendment Time).
Exhibit 31.1
Certification
I, James L. Dolan, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Sphere Entertainment Co.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 5, 2026
| /s/ JAMES L. DOLAN | ||
| James L. Dolan | ||
| Executive Chairman and Chief Executive Officer | ||
Exhibit 31.2
Certification
I, Robert H. Langer, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Sphere Entertainment Co.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 5, 2026
| /s/ ROBERT H. LANGER | ||
| Robert H. Langer | ||
| Executive Vice President, Chief Financial Officer and Treasurer | ||
Exhibit 32.1
Certification
Pursuant to 18 U.S.C. §1350, the undersigned officer of Sphere Entertainment Co. (the “Company”), hereby certifies, to such officer’s knowledge, that the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2026 (the “Report”) fully complies with the requirements of §13(a) or §15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 5, 2026
| /s/ JAMES L. DOLAN | ||
| James L. Dolan | ||
| Executive Chairman and Chief Executive Officer | ||
The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.
Exhibit 32.2
Certification
Pursuant to 18 U.S.C. §1350, the undersigned officer of Sphere Entertainment Co. (the “Company”), hereby certifies, to such officer’s knowledge, that the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2026 (the “Report”) fully complies with the requirements of §13(a) or §15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 5, 2026
| /s/ ROBERT H. LANGER | ||
| Robert H. Langer | ||
| Executive Vice President, Chief Financial Officer and Treasurer | ||
The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.