Bally's Corp

15. STRATEGIC PARTNERSHIP - SINCLAIR BROADCAST GROUP

In 2020, the Company and Sinclair entered into a Framework Agreement (the “Framework Agreement”) providing for a long-term strategic relationship between Sinclair and the Company. Under the Framework Agreement, the Company paid annual fees in cash, issued warrants and options and agreed to share tax benefits and received naming, integration and other rights, including access to Sinclair’s Tennis Channel, Stadium Sports Network and STIRR streaming service. Under a Commercial Agreement (the “Commercial Agreement”) contemplated by the Framework Agreement, the Company paid annual fees to Diamond Sports Group (“Diamond”), a Sinclair subsidiary, for naming rights over Diamond’s regional sports networks (“RSNs”) and other consideration.

In 2023, Diamond commenced reorganization proceedings under Chapter 11 of the Bankruptcy Code, and commenced litigation against Sinclair, Bally’s and others as part of its bankruptcy proceedings, and in 2024, agreed to settle its claims against all defendants, including Bally’s (the “Settlement Agreement”). Pursuant to the settlement terms, Diamond would receive payments from Sinclair and would reject the Commercial Agreement. Bally’s would continue to have naming rights on Diamond’s RSNs through the 2024 major league baseball season at no cost to either party (unless Diamond agrees with a new counterparty that will pay for such naming rights). Bally’s, in turn, would receive a release of all claims Diamond may have against it. Separately, Bally’s and Sinclair agreed that their relative rights and obligations under the Framework Agreement and all agreements contemplated thereby would terminate, except for rights and obligations in respect of certain local broadcast television station integrations under the Commercial Agreement, and except for their respective rights and obligations under the Option Agreement (regarding the Options referenced below), the Warrant Agreement (regarding the Penny Warrants referenced below), the Performance Warrant Agreement (regarding the Performance Warrants referenced below), the Registration Rights Agreement, the Investor Rights Agreement and the Tax Receivable Agreement. Bally’s obligation to pay Diamond for the naming rights terminated upon the bankruptcy court’s approval of the settlement terms, which the court approved on March 1, 2024 and in turn, the Company derecognized the rights fees liability against the non-cash settlement liability established as of December 31, 2023. The Company’s non-cash settlement liability reflects the effect of the termination of naming rights on its remaining commercial rights intangible asset originally recorded at the time the Framework Agreement. As of December 31, 2023, the non-cash settlement liability was $144.9 million.

The Company accounted for its relationship with Sinclair under the Framework Agreement as an asset acquisition in accordance with the “Acquisition of Assets Rather Than a Business” subsections of ASC 805-50, Business Combinations—Related Issues, using a cost accumulation model. The total intangible asset (“Commercial rights intangible asset”), prior to its derecognition in 2024, represented the present value of the naming rights fees and other consideration, including the fair value of the warrants and options, and an estimate of the tax-sharing payments, each explained below.

The present value of the naming rights fees was recorded as part of intangible assets, with a corresponding liability, which accreted through interest expense through the termination date of the Commercial Agreement. As of December 31, 2023, Commercial rights intangible asset, net of accumulated amortization, was $225.9 million. As of December 31, 2023, the short-term portion of the liability, which was $8.0 million, was recorded within “Accrued and other current liabilities”, and the long-term portion of the liability, which was $49.7 million, was reflected within “Other long-term liabilities” in our consolidated balance sheets.

Pursuant to the Settlement Agreement, in the fourth quarter of 2024, after the completion of the 2024 major league baseball season, the Company derecognized the Commercial rights intangible asset, relieving the Company’s non-cash settlement liability, and as such, there areno associated remaining balances as of December 31, 2024.

Under the Framework Agreement, the Company issued to Sinclair warrants to purchase up to 4,915,726 shares of the Company at an exercise price of $0.01 per share (“the Penny Warrants”), a warrant to purchase up to 3,279,337 shares of the Company at a price of $0.01 per share, subject to the achievement of various performance metrics (the “Performance Warrants”), and an option to purchase up to 1,639,669 additional shares, in four tranches with purchase prices ranging from $30.00 to $45.00 per share, exercisable over aseven-year period beginning in November 2024 (the “Options”). Additionally, the Company is required to share 60% of the tax benefit it realizes from the Penny Warrants, Options, Performance Warrants and other related payments. Changes in the estimate of the tax benefit to be realized and tax rates in effect at the time, among other changes, was treated as an adjustment to the intangible asset. Refer to Note 13 “Fair Value Measurements” and Note 25 “Subsequent Events” for further information on the Performance Warrants and Options.