CASE 7-4 LOCKOUT
The Celtics Basketball Holdings, L.P. and Subsidiary included the following note in its 1998 annual report:
		NoteGCommitments and Contingencies (inPart)
National Basketball Association (NBA) players, including those that play for the Boston Celtics, are covered
by a collective bargaining agreement between the NBA and the NBA Play-ers Association (theNBPA)
that was to be in effect through June 30, 2001 (theCollectiveBargainingAgreement). Under the terms of the
Collective Bargaining Agreement, the NBA had the right to terminate the Collective Bargaining Agreement after the
1997-1998 season if it ws determined that the aggregate salaries and benefits paid by all NBA teams for the 1997-
1998 season exceeded 51.8%of projected Basketball Related Income, as defined in the Collective Bargaining Agreement
(BRI). Effective June 30, 1998, the Board of Governors of the NBA voted to exercise that right and reopen
the Collective Bargaining Agreement, as it had been determined that the aggregate salaries and benefits paid
by the NBA teams for the 19971998 season would exceed 51.8%of projected BRI. Effective July1, 1998, the
NBA com-menced a lockout of NBA players in support of its attempt to reach a new collective bargaining agreement.
The NBA and the NBPA have been engaged in negotiations regarding a new collective bargaining agreement, but as of
September 18, 1998, no agreement has been reached. In the event that the lockout extends into the 19981999 season,
NBA teams, including the Boston Celtics, will refund amounts paid by season ticket holders (plusinterest) for any games that
are canceled as a result of the lockout. In addition, as a result of the lockout, NBA teams have not made any payments due to players
with respect to the 19981999 season. The NBPA has disputed the NBAs position on this matter, and both the NBA and the NBPA
have presented their cases to an independent arbitrator, who will make his ruling no later than the middle of October 1998. As of
September 18, 1998, the arbitrator has not ruled on this matter.
Although the ultimate outcome of this matter cannot be determined at this time, any loss of games as a result of the absence of a collective
bargaining agreement or the continuation of the lockout will have a material adverse effect on the Partnerships financial condition and its results
of operations. Further, if NBA teams, including the Boston Celtics, are required to honor the player contracts for the 199899 season and beyond
without agreeing to a new collective bargaining agreement or without ending the lockout, which would result in the loss of games, the Partner-
ing agreement or without ending the lockout, which would result in the loss of games, the Partnership's financial condition and results of
operations will be materially and adversely affected.
The Partnership has employment agreements with officers, coaches and players of the basketball team (Celtics Basketball). Certain of the contracts
provide for guaranteed payments which must be paid even if the employee is injured or terminated. Amounts required to be paid
under such contracts in effect as of September 18, 1998, including option years and $8,100,000 included in accrued expenses at June 30,
1998, but excluding deferred compensation commitments disclosed in Note E Deferred Compensation, are as follows:
Years ending June 30,
	1999			32,715,000
	2000			33,828,000
	2001			27,284,000
	2002			20,860,000
	2003			19,585,000
	2004	and thereafter		10,800,000
Commitments for the year ended June 30, 1999, include payments due to players under contract for the 1998-1999 season in the amount
of $18,801,000, which are currently not being paid as a result of the lockout described above.
Celtics Basketball maintains disability and life insurance policies on most of its key players. The level of insurance coverage maintained is
based on management's determination of the insurance proceeds which would be required to meet its guaranteed obligations in the
event of permanent or total disability of its key players.
Required:
Discuss how to incorporate the contingency note into an analysis of Celtics Basketball Holdings, L.P. and Subsidiary.