1. What is a salary cap? Why have one?
   
 
2. What is a soft cap? What is the difference between a soft cap and a hard cap? Which does the NBA have?
   
 
3. Why have a soft cap?
   
 
4. What is the Collective Bargaining Agreement?
   
 
5. How long has the current CBA been in effect? When will it expire? What happens then?
   
 
6. Why was it so hard to arrive at the current CBA?
   
 
7. What percentage of revenues do the players receive?  How is the salary cap set?
   
 
8. So there are two kinds of salary restrictions, one on players, and the other on teams?
   
 
9. What are the players' salary restrictions?
   
 
10. Are there exceptions to the maximum salary?
    
 
11. What is the team salary cap? Has there always been one? Who sets it? Does it change from season to season?
    
 
12. What is included in Basketball Related Income (BRI)?
    
 
13. Exactly what is included when computing total team salaries?
    
 
14. How does the escrow system work?  What is it for?
    
 
15. What is the "luxury tax?"  Why does it exist?  How is it determined?  Who pays it?  
    
    
16. Who gets the escrow and luxury tax money?
    
 
17. Are there exceptions to the salary cap?
    
 
18. How do exceptions count against the cap?  Does being under the cap always mean that a team has room to sign free agents?  Do teams ever lose their exceptions?
    
 
19. If a team has more than one exception available to sign a particular player, are there any rules regarding which one it has to use?
    
 
20. Can a team circumvent the salary cap by paying a player less but arranging for an affiliated company to also pay him, perhaps by way of an endorsement contract?
    
 
21. Do players and teams ever have under-the-table agreements?  What happens when the league finds out about them?  Is this what happened with the Timberwolves and Joe Smith?
    
 
22. How is "average salary" defined?
    
 
23. How long must a player be with one team before the Larry Bird exception can be used?
    
 
24. Why a three-year wait before gaining Bird rights?
    
 
25. Does the Larry Bird exception mean that free agents can be signed and not count against the cap?
    
 
26. I just saw that a team signed a player for more money than it has under the cap. It was another team's free agent, so the Larry Bird exception wasn't used. What gives?
    
 
27. Can a team sign all the free agents it wants (up to the cap limit) and THEN re-sign its own free agents using the Bird exception?
    
 
28. How much do free agents count against their team's salary cap?
    
 
29. Why do free agents continue to count against a team's cap?
    
 
30. When do free agents stop counting against the team's cap?
    
 
31. What does renouncing a player mean?
    
 
32. Can the renouncement be renounced?  In other words, can a team decide to un-renounce a player and then sign him using a Bird exception?
    
 
33. Let's say a team arranges for all of its players to become free agents at the same time. If they renounce everybody, do they then have a salary total of $0 and a full cap under which to work?
    
 
34. What is restricted free agency?  
    
    
35. Haven't some restricted free agents gotten away anyway?  How did this happen?
    
    
36. What if a restricted free agent has no interest in staying with his original team?  How can he force the issue?
    
 
37. Does a team receive compensation when another team signs their free agent, like in some other sports?
    
 
38. First round draft picks operate under a different set of rules?
    
 
39. Has the salary scale for first round draft picks been successful?
    
 
40. What if the team and player can't agree to a contract? What options does the player have?  How long does the team keep his draft rights?
    
 
41. Do draft picks count against the team's salary cap? If so, how much?
    
 
42. What if a team likes its first round pick and wants to sign him, but either feels he isn't worth the set salary or doesn't want to commit to a long contract?
    
 
43. If a first round draft pick is renounced, is he still bound to the salary scale for a first round pick?
    
 
44. How about for the other players? Is there a limit to the length of a contract or the raise a player can receive?
    
 
45. Are the raises compounded? In other words, is each raise a percentage of the previous season's salary?
    
 
46. Are there restrictions based on a player's age?  
    
    
47. What is the Over-36 Rule?
    
 
48. What are option clauses? What kind of option clauses are there?
    
 
49. Can existing contracts be extended?
    
 
50. Can existing contracts be renegotiated?
    
 
51. How do retired players count against the cap?
    
 
52. Do released players count against the cap?
    
 
53. What are waivers?
    
 
54. Do injured players count against the cap?
    
 
55. What about suspended players?  How do they count against the cap?  Can teams suspend players for any reason?
    
 
56. How do players who die while under contract (Reggie Lewis, Drazen Petrovic, Nick Vanos, Bobby Phills) count against the cap?
    
 
57. What is a contract buy-out?
    
 
58. How do buy-outs affect a team's salary cap?
    
 
59. Can incentives be built into a contract? How do they count against the cap?
    
 
60. How about signing bonuses? Are they allowed? How do they count against the cap?
    
 
61. Are teams really competing on a level playing field? Since the tax rate is different in the different states and Canada, don't the teams in a more "tax friendly" state have an advantage over the other teams?
    
 
62. What is injured reserve?
    
 
63. What is a 10-day contract?
    
 
64. Can teams carry fewer than 12 players on the roster? What is the minimum number of players a team must suit up?
    
 
65. What is a salary slot?
    
 
66. What are the rules regarding trades?  
    
    
67. What is the assigned player exception?
    
    
68. What is the traded player exception?
    
   
69. How are minimum-salary players handled in trades?  
    
    
70. How are draft picks handled in trades?
    
 
71. Can exceptions be combined when making trades?
    
 
72. What is "Base Year Compensation?"  How does base year compensation affect trades?  Why does it exist?


73. How does a base year player's salary count against the team's salary cap?
    
 
74. Whenever I read about prospective trades involving base year players, they always say a third team must get involved.  Why?  Can't a base year player be traded in a two-team trade?
    
 
75. Can a free agent be signed and immediately traded?
    
 
76. Can a team sign a player using the sign-and-trade rule and then say, "Ha ha, we fooled you. We're not trading you!"?
    
 
77. Why would teams or players want to do a sign-and-trade?
    
 
78. Sign-and-trade looks like a win-win proposition. But some players have signed smaller contracts as free agents, rather than do a sign-and-trade.  Why?
    
 
79. If a sign-and-trade is not used, when can a team trade a free agent it signs? Do they have to keep him forever?
    
 
80. Can a team trade the rights to a free agent, so the other team will inherit his Larry Bird rights?
    
 
81. Can cash be included as part of a trade package?
    
 
82. Can players be given a bonus when they are traded?
    
 
83. How do trade kickers affect the salary cap and trades?
    
 
84. When can't a player be traded?  Can players be given "no-trade" clauses in their contracts?
    
 
85. I keep hearing about teams wanting to acquire "ending contracts" in trades.  What are they, and why are they so valuable?
    
 
86. Can teams find loopholes in the CBA and make trades that were never intended to be allowed?
    
 
87. What is an "averaged contract?"
    
 
88. What is the trading deadline?
    
 
89. What is the July Moratorium?
    
 
90. Are contracts always guaranteed?
    
 
91. What is tampering? 
    
    
92. What happens to the money from fines and suspensions?
     
    
93. How does it work when the league expands?
    
 
94. How do I find out the salary for a specific player?
    
 
95. How do I find out when a specific player's contract expires?
    
 
96. What are the important CBA-related dates each season?
    
 
97. Can I get a copy of the actual Collective Bargaining Agreement?
    
 
98. I see reports in the newspaper or on the Internet that would be impossible if everything you say here is true. Is this FAQ wrong?
    
    
99. What if this FAQ really is wrong? How authoritative is this FAQ?
    
 
100. Can I e-mail you with other CBA-related questions?
     
 
101. Can this FAQ be reproduced or distributed?  Can I link my web page to it?  
     
     
102. Can you translate this FAQ into (name of language).  I'll even translate it for you!
     
     
103. How should this FAQ be cited?
     
     
104. Where can this FAQ be downloaded?
     

Copyright Notice

Index

Revision History

A salary cap is a limit on the amount teams can spend on player contracts, which helps to maintain competitive balance in the league. Without a salary cap, teams with deeper pockets can simply outspend the remaining teams for the better free agents. The basic idea is that a team can only sign a free agent if the total payroll for the team will not exceed the salary cap. So a team with deep pockets is playing on a level playing field with every other team.

The evidence bears this out: For the 01-02 NBA season, the correlation between team payroll and regular season wins was about 0.13.  In other words, there as nearly no correlation between salary and wins.  By comparison, MLB (with no salary cap) had a much stronger correlation of 0.43 for its 2002 season.

The NBA has a soft cap. A hard cap doesn't allow the cap to be exceeded for any reason. A soft cap, which the NBA has, contains exceptions which allow teams to exceed the cap under certian conditions. In fact, historically very few teams are ever under the cap during a season.

The basic idea is to try to promote players' ability to stay with their current teams. Nobody likes it when a player plays with a team his entire career, the fans love him, he wants to stay and the team wants to keep him, but he has to leave because the team is unable to offer him a large enough contract. The exceptions under a soft cap allow teams to keep players under these kinds of circumstances.

It's the contract between the league and the Players Association that sets up the rules by which they all operate. (It's commonly abbreviated as "CBA," which is not to be confused with the Continental Basketball Association.  The abbreviation CBA will be used in the remainder of this document.)

The CBA defines the salary cap, the procedures for determining how it is set, the minimum and maximum salaries, the rules for trades, the procedures for the NBA draft, and a hundred other things that need to be defined in order for a league like the NBA to function.

Incidentally, the CBA is also what prevents the NBA from being in violation of antitrust laws. Many of the NBA's practices (salary cap, draft, etc.) would violate the Sherman act were the CBA not arrived at through collective bargaining.

The current CBA has been in effect since January 1999, and was arrived at after a long and bitter "lockout" which cost half of the 1998-99 season. It lasts for seven years, or until the end of the 04-05 season.  It was the league's option to continue the agreement for the 04-05 season, and this option was exercised in December 2003.  Sometime prior to the 05-06 season the league and players union will negotiate either a new agreement or an extension to the current agreement. If they're lucky, it won't cost them part of a season again.

The Players Association has the right to terminate the CBA early if any of the following occur:

• Certain types of collusion.
• The average NBA player salary becomes less than the average NFL, NHL or MLB salary.
• Certain provisions of the CBA are struck down in court (the owners can also terminate if this happens).

It mainly hinged on the percentage of league revenues that are guaranteed for the players. The previous CBA set up the salary structure, but didn't define what percentage the players got. It did, however, contain an "out" clause for the league -- if the players' salaries exceeded 53% of revenues, then the league had the right to terminate the old CBA. It did (it was up to 58%) and they did. The league tried to put more severe salary restrictions in place. The players fought against any salary restrictions. The two sides eventually reached a compromise, agreeing to a new CBA just days before the "drop dead date" for canceling the season entirely, and a compacted 50-game season was played.

Two figures control this amount: the salary cap and the escrow tax threshold. Here are both for all years of the agreement (BRI = Basketball Related Income):
 

Season	Defined salary cap	Actual salary cap	Escrow %
98-99	$30 million	$30 million	None
99-00	$34 million	$34 million	None
00-01	48.04% of BRI* (see note below)	$35.5 million (see note below)	None
01-02	48.04% of BRI*	$42.5 million	55% of BRI
02-03	48.04% of BRI*	$40,271,000	55% of BRI
03-04	48.04% of BRI*	$43,840,000	55% of BRI
04-05	48.04% of BRI*	$43,870,000**	57% of BRI

*From the BRI percentage, they subtract benefits (about $71 million in 99-00) and then divide by the number of NBA teams to arrive at the cap.  Note that they use projected BRI and benefits when computing the salary cap.

**The 04-05 salary cap for the Charlotte Bobcats is $29,250,000.

NOTE:    A special rule for the 00-01 season reduced the cap if the 99-00 salaries & benefits exceeded 55% of BRI.  If 55% of BRI was exceeded, then the excess was subtracted from the cap in 00-01.  Salaries & benefits did exceed 55% of BRI -- in fact, they were 61.14% according to the league's audit report.  Therefore, the difference (about $138.5 million, or $4.8 million per team) was subtracted from the defined 48.04% of BRI to calculate the cap.  But since this would have set the cap below the guaranteed minimum of $35.5 million, the 00-01 salary cap was set at the minimum $35.5 million.

The escrow system is a sort of guarantee that total salaries won't exceed the designated percentage.  See question number 14 for more information.

At the other end of the spectrum there is a minimum team salary, which is defined as 75% of the salary cap.  Any team that doesn't spend at least that much is surcharged at the end of the season, and that money is given to the players.  In practice, most teams' salaries will be higher than the salary cap amount.

Right. The maximum player salaries are intended to keep costs in line with revenues. The team salary caps help ensure competitive balance.

There are both minimum and maximum salaries, and both are based on how long the player has been in the league.  The minimum salaries scale upward each season.  Here are the minimum salaries:
 

Years in NBA	98-99	99-00	00-01	01-02	02-03	03-04	04-05
0	287,500	301,875	316,969	332,817	349,458	366,931	385,277
1	350,000	385,000	423,500	465,850	512,435	563,679	620,046
2	425,000	460,000	498,500	540,850	587,435	638,679	695,046
3	450,000	485,000	523,500	565,850	612,435	663,679	720,046
4	475,000	510,000	548,500	590,850	637,435	688,679	745,046
5	537,500	572,500	611,000	653,350	699,935	751,179	807,546
6	600,000	635,000	673,500	715,850	762,435	813,679	870,046
7	662,500	697,500	736,000	778,350	824,935	876,179	932,546
8	725,000	760,000	798,500	840,850	887,435	938,679	995,046
9	850,000	885,000	923,500	965,850	1,000,000	1,000,000	1,000,000
10+	1,000,000	1,000,000	1,000,000	1,000,000	1,030,000	1,070,000	1,100,000

And here are the maximum salaries:
 

Years in NBA	Defined maximum salary	98-99	99-00	00-01	01-02	02-03	03-04	04-05
0	$9,000,000 or 25%*	$9,000,000	$9,000,000	$9,658,000	$10,625,000	$10,067,750	$10,960,000	$10,968,000
1	$9,000,000 or 25%*	$9,000,000	$9,000,000	$9,658,000	$10,625,000	$10,067,750	$10,960,000	$10,968,000
2	$9,000,000 or 25%*	$9,000,000	$9,000,000	$9,658,000	$10,625,000	$10,067,750	$10,960,000	$10,968,000
3	$9,000,000 or 25%*	$9,000,000	$9,000,000	$9,658,000	$10,625,000	$10,067,750	$10,960,000	$10,968,000
4	$9,000,000 or 25%*	$9,000,000	$9,000,000	$9,658,000	$10,625,000	$10,067,750	$10,960,000	$10,968,000
5	$9,000,000 or 25%*	$9,000,000	$9,000,000	$9,658,000	$10,625,000	$10,067,750	$10,960,000	$10,968,000
6	$9,000,000 or 25%*	$9,000,000	$9,000,000	$9,658,000	$10,625,000	$10,067,750	$10,960,000	$10,968,000
7	$11,000,000 or 30%*	$11,000,000	$11,000,000	$11,589,000	$12,750,000	$12,081,300	$13,152,000	$13,161,000
8	$11,000,000 or 30%*	$11,000,000	$11,000,000	$11,589,000	$12,750,000	$12,081,300	$13,152,000	$13,161,000
9	$11,000,000 or 30%*	$11,000,000	$11,000,000	$11,589,000	$12,750,000	$12,081,300	$13,152,000	$13,161,000
10+	$14,000,000 or 35%*	$14,000,000	$14,000,000	$14,000,000	$14,875,000	$14,094,850	$15,344,000	$15,355,000

* whichever is greater.  The percentage refers to the percentage of the team's salary cap.

Note that in the 00-01 season, the salary cap was adjusted downward because the players' salaries in 99-00 exceeded 55% of BRI (see question 7 ).  The maximum salaries were not affected by this adjustment.  The maximum salaries are based on 25%, 30% or 35% (per the chart above) of the salary cap before the adjustment..

In addition, up to 30% of a player's compensation can be deferred.  Deferred compensation is included in team salary in the season in which it is earned , not the season in which it is paid .

One interesting thing about minimum-salary contracts is that for certain players, the league office actually pays part of their salary.  This happens with players who have been in the NBA for five or more seasons and are playing under a one-year, ten-day or rest-of-season contract at the minimum salary.  In these cases, the team pays the player at the minimum salary level for a four-year veteran, and the league pays the remainder.  For example, in 99-00 the minimum salary for a four-year veteran is $510,000, so a ten-year veteran, with a minimum salary of $1,000,000, would be paid $510,000 by his team and $490,000 by the league.  Only the four-year minimum is included in the team salary, not the player's full salary.  The reason for doing this is so teams won't shy away from signing older veterans simply because they are more expensive.

First round draft picks have a more restrictive salary scale, based on their draft position (see question number 38 for more information).

Yes. In multi-year contracts, only the first season's salary is subject to the maximum (but there are restrictions about how big raises can be from year to year). Also, free agents whose salary for the previous season was higher than the maximum can sign for 105% of their salary in the previous season.  So if Michael Jordan hadn't retired prior to the 98-99 season, he could have signed in 98-99 for 105% of his $30 million 97-98 salary, or $31.5 million.  A free agent does not need to remain with the same team in order to qualify for this 105% exception, although the team that signs him is subject to the same salary cap restrictions as with any other free agent.

It may surprise you to learn that the NBA first had a salary cap in 1946-47, its first season.  The cap that season was $55,000, with most players earning between $4,000 and $5,000 (star player Joe Fulks earned $8,000, and Tom King earned a league-highest $16,500 for his combined duties as player, publicity director and business manager for the Detroit Falcons).

The "modern" NBA salary cap began in 1984-85, at $3.6 million. It made steady but gradual increases of around $1-2 million each season until 1994-95, when it was at $15.964 million. Armed with a big TV contract from NBC, the salary cap jumped to $23.0 million in 95-96, and increased to $26.9 million in 97-98, the last season of the previous CBA (a 747% increase in 13 years).  The ABC/ESPN TV contract which took effect with the 02-03 season provides $4.6 billion over six seasons, but less in 02-03 than NBC paid in 01-02.  As a result, the salary cap went down for the first time ever in 02-03.

As detailed in question number 7 , the current CBA defines the salary cap as follows (BRI = Basketball Related Income):
 

98-99	$30 million
99-00	$34 million
00-01	48.04% of BRI (but not less than $35.5 million)
01-02	48.04% of Projected BRI
02-03	48.04% of Projected BRI
03-04	48.04% of Projected BRI
04-05	48.04% of Projected BRI

From the 48.04% of projected BRI they subtract benefits and then divide by 29 (the number of teams in the NBA) to arrive at the cap amount.

The salary cap adjusts each year on the first day following the July Moratorium.  See question number 89 .

Basketball Related Income (BRI) includes:

• Regular season gate receipts
• Broadcast rights
• Exhibition game proceeds
• Playoff gate receipts
• Novelty, program and concession sales (at the arena and in team-identified stores within a 75-mile radius)
• Parking
• Proceeds from team sponsorships
• Proceeds from team promotions
• Arena club revenues
• Proceeds from summer camps
• Proceeds from  non-NBA basketball tournaments
• Proceeds from mascot and dance team appearances
• Proceeds from beverage sale rights
• 40% of proceeds from arena signage
• 40% of proceeds from luxury suites
• Proceeds received by Properties, including international television, sponsorships, revenues from NBA Entertainment, the All-Star Game, the McDonald's Championship and other NBA special events.

When determining team salaries (for example, to determine whether a team is over the salary cap), the following are included:

• Salaries of all active players and players on injured reserve, including likely bonuses.
  
• Salary paid or payable to waived players, minus any set-off amounts (see question numbers 52 , 58 and 90 ).
• Any salary still being paid to retired players (see question number 51 ).
• A percentage of the previous salary of unrenounced free agents (see question number 28 ).
• Salaries offered in offer sheets (see question number 34 ).
• The "scale" amount for the team's unsigned first-round draft pick(s) (see question number 41 ).  This amount begins applying to the team's team salary immediately upon selection in the draft.  However, this is not the same as his trade value (see question number 70 ).
• A roster charge if the team has fewer than 11 players (see question number 33 ).
• The combined amount of any mid-level, $1 million, disabled player (see question number 17 ) or traded player exceptions (see question number 68 ) available to the team (see question number 18 ), if the team is under the salary cap.  (Teams may renounce these exceptions, in which case they no longer are included in team salary.)

The biggest factor behind the 1998 lockout was the amount of revenue that went to player salaries.  The owners did not want salaries to exceed 53% of BRI, but by the 97-98 season salaries had risen to 58%, which triggered an "out" clause allowing the owners to terminate the previous CBA.  With the new agreement, they put in the escrow system to ensure that salaries & benefits did not exceed a designated percentage of BRI.  As described in question number 7 , the designated percentage of BRI that salaries & benefits cannot exceed is as follows:
 

Season	Designated Percentage
01-02*	55% of BRI
02-03	55% of BRI
03-04	55% of BRI
04-05	57% of BRI

* Escrow did not exist prior to the 01-02 season.

In order to keep salaries & benefits at or below the designated percentage, beginning in 01-02 money is withheld from players' paychecks and deposited into an escrow account.  At the end of each season they compare the league-wide salaries to the designated percentage of BRI to see if there was an overage.  If there was not an overage, then all of the money in escrow is given to the players.  But if there was an overage, then the overage amount is returned to the owners (which lowers salaries back to the designated percentage), and the players get the rest.  The amount withheld is the projected overage amount, not to exceed 10% of salaries & benefits.

Here is an estimate of what actually happened, starting with the 01-02 season:

Season:	01-02	02-03	03-04	04-05
BRI:	$2.667 billion	$2.662 billion	$2.756 billion	$3.037 billion
Designated percentage:	$1.467 billion	$1.464 billion	$1.516 billion	$1.731 billion
Salaries and benefits:	$1.598 billion	$1.744 billion	$1.748 billion	$1.834 billion
Held in escrow (projected overage, not to exceed 10% of salaries & benefits):	$153 million	$174.4 million	$165.4 million	$183 million
Overage (amount salaries & benefits exceeded designated percentage):	$131 million	$280 million	$232 million	$103 million
Returned to owners:	$131 million	$174.4 million	$165.4 million	$93 million
Given to players (remainder of escrow):	$22 million	$0	$0	$90 million

Since $131 million was returned to the owners in 01-02, the net effect was to reduce the total salaries & benefits to $1.467 billion, or back to 55% of BRI.  In other words, the money held in escrow was sufficient to cover the overage.  This was not the case in 02-03 or 03-04.  The players can have a maximum of 10% withheld, and when this is insufficient, then some teams will pay a tax.  Question number 15 details the team tax, which is often referred to as the "luxury tax."

Note also that what is written here reflects the escrow process as it is defined, but in practice it is somewhat more complicated.  For instance, one effect of reducing salaries through escrow is to reduce the amount teams otherwise would have been required to spend on benefits.

Escrow money that is returned to the teams is not distributed evenly.  Question number 16 describes how the escrow money is distributed.

As detailed in question number 14 , the escrow system helps to ensure that total salaries do not exceed a designated percentage of BRI.  If the players are paid more than the designated percentage, then part of their salary (not to exceed 10%) is returned to the owners.  However, if the players are paid so much that the maximum escrow withholding isn't enough to lower the league-wide salaries to the designated percentage, then some teams pay a tax.  This is often referred to as a "luxury tax," but the CBA simply calls it a "tax" or a "team payment."

The tax is triggered when the league-wide salaries and benefits exceed approximately 61.1% of BRI (technically, it's 61.111...%, a repeating decimal.  Also, it's 63.333...% in 04-05).  If the league-wide salaries & benefits are less than this amount, then no team pays a tax, no matter how high their payroll.  If the tax is triggered, then it is paid by all teams that are over the luxury tax threshold (called the "team escrow limit" in the CBA), in the amount by which their team salary exceeds the tax threshold (see below).

In 01-02, salaries and benefits were approximately 59.8% of BRI (and the escrow withholding was sufficient to return salaries to 55% of BRI), so the team tax was not triggered.  A similar thing happened in 04-05, when salaries & benefits were 60.4% and the tax trigger was 63.333%.  The salaries and benefits were 65.5% in 02-03 and 63.4% in 03-04, and the tax was triggered in those years.
 

Season:	02-03	03-04	04-05
BRI:	$2.662 billion	$2.756 billion	$3.037 billion
Salaries + Benefits	$1.744 billion	$1.748 billion	$1.834 billion
Percentage of BRI	65.5%	63.4%	60.4%

In 02-03 there was a $2.662 billion BRI and the designated percentage (55%) was $1.464 billion, so the overage (salaries and benefits minus the designated percentage) was $280 million.  However, the maximum that can be withheld in escrow is 10% of salaries and benefits, or $174.4 million.  This corroborates the idea that the tax is triggered when the maximum escrow withholding isn't enough to lower the league-wide salaries to the designated percentage.   So the entire $174.4 million escrow withholding was returned to the teams, and the teams over the tax threshold paid the tax.  The idea is that since the high-spending teams are the ones most responsible for the players' salaries being so high, they should be the ones making up the difference.

The tax threshold (team escrow limit) is 61.1% of BRI, minus benefits, divided by the number of teams in the NBA.  Since 02-03 benefits were $93.4 million, the 02-03 tax threshold was $52.88 million.  Teams with payrolls (based on their team salary as of the last day of the regular season, see question number 13 ) over the tax threshold pay a tax equal to the amount they are over.  So a team with a $60.0 million team salary paid a tax of $7.12 million.  Teams with payrolls below the tax threshold do not pay any tax.

Again, no team, no matter how high their payroll, pays any tax unless the tax is triggered league-wide.  For example, in 01-02 New York's team salary was approximately $85.5 million.  But since the tax was not triggered in 01-02, New York did not pay any tax.
 
There was a desire among some of the owners to exclude contracts that existed prior to the signing of the CBA (contracts from 97-98 and earlier) from the computation of the team tax.  The owners decided that all contracts would apply, no matter when they were signed.

The league did decide to credit teams that pay luxury tax for players who have been ruled permanently disabled.  There is a one-year waiting period following the player's injury or illness.  The credit is in the amount of the Disabled Player Exception (half the player's salary, or the average salary, whichever is less -- see question 22 for the definition of "average salary") and is subtracted from the team's luxury tax payment.  This prevents a form of double jeopardy, where a team would otherwise have to pay tax on an injured player's salary, and also on his replacement's.  Interestingly, if the injured player is traded before he is deemed permanently disabled, then neither team receives the credit.  This credit is subject to readoption on a year-to-year basis.

Where does the tax money go?  This is described in question number 16 .

As described in question number 14 , if the salaries and benefits exceed a designated percentage of income for that season, then some of the players' salary is returned to the teams.  Also, as described in question number 15 , if the salaries and benefits are sufficiently high, then some teams will pay additional money to the league, which is known as the "luxury tax."

The CBA does not specify how this money is to be distributed to the teams.  It simply says that such money is the exclusive property of the NBA, and that its use and/or distribution is at the league's sole discretion.  The NBA's Board of Governors met during the 02-03 season to determine the rules for the distribution of this money.  Note that these details have been relayed by a number of reliable sources, but may not be 100% accurate.  In addition, the NBA Board of Governors could decide to change these rules at any time.

A "cliff provision" was established to protect teams that end up slightly over the tax threshold (essentially protecting them from "falling off a cliff:").  This is important because the tax threshold isn't determined until many months after teams make their personnel decisions.  A "cliff threshold" is designated at 65% of BRI.    Teams above the tax threshold (approximately 61.1% of BRI) but below the cliff threshold (65% of BRI) are penalized less severely than teams above the cliff threshold.

Also note that every team receives at least some of the escrow & tax money.  In many cases, the money received more than offsets any luxury tax they pay.  In addition, all teams benefit from a reduction in the amount of benefits they are required to pay.  The following rules govern the distribution of the tax and escrow money:

Tax money:

• Teams under the tax threshold receive a full share (1/29) of the tax money.
  
  
• Teams over the cliff threshold do not receive any of the tax money.
  
  
• Teams between the tax threshold and cliff threshold receive a pro-rated amount between $0 and a full share, based on where they are between the two thresholds.  For example, a team midway between the tax threshold and cliff threshold in 02-03 receives 50% of a share of tax money.
  
  
• Not all tax money is distributed under this formula.  See "Surplus," below.
  

Escrow money:

• If there is no luxury tax, then all teams get an equal share of the escrow money.
  
  
• If there is a luxuy tax, then all teams receive at least a minimum share of the escrow money.  In 02-03, a minimum share is 70% of a full share.  In 03-04 it is 40%, and in 04-05 it is 0% (so in 04-05, teams over the cliff threshold receive no money from escrow).  The money each team receives is this minimum share, or their tax share, whichever is greater.  For example, in 02-03 a team that gets an 80% tax share also gets an 80% escrow share, and a team that gets a 50% tax share gets a (minimum) 70% escrow share.
  
  
• Not all escrow money is distributed under this formula.  See "Surplus," below.
  

Surplus:

The above formulas do not result in all of the tax and escrow money being distributed (for example, in 02-03 $106.9 million was left over).  Some of this money (about $3 million in 02-03, but $0 in 03-04) goes to the Toronto Raptors to help account for currency differences.  Some (about $24.2 million in 02-03) goes to teams with permanently disabled players (see question number 15).  The rest (about $79.7 million in 02-03, $86.0 million in 03-04) is divided evenly among all NBA teams.

So once teams cross the tax threshold, they start forfeiting both luxury tax and escrow distributions.  They stop losing escrow distributions 30% (60% in 03-04) of the way to the cliff threshold.  They lose tax distributions in the entire range between the tax threshold and cliff threshold.

Here is what happened in each season for which there was a tax:

Here is an example (using the 02-03 numbers from the above table) to illustrate how changes in team salary affect their net payout.  This example includes four teams: Team A is below the tax threshold, Team B is midway between the tax threshold and cliff threshold, Team C is moderately above the cliff threshold, and Team D is far above the cliff threshold.

Yes. Here is what they are:

LARRY BIRD EXCEPTION -- This is the best known one.  Players who qualify for this exception are called "Qualifying Veteran Free Agents" in the CBA.  This exception allows teams to exceed the salary cap to re-sign their own free agents, up to the player's maximum salary. The free agent in question must have played for three seasons without being waived or changing teams as a free agent. This means a player can obtain "Bird rights" by playing under three one-year contracts, a single contract of at least three years, or any combination. It also means that when a player is traded, his Bird rights are traded with him, and his new team can use the Bird exception to re-sign him.  These contracts can be up to seven years in length.  A player can receive 12.5% raises using this exception.  This exception is known as the Larry Bird exception because the Celtics were the first team allowed to exceed the cap to keep their own free agent, and the player happened to be Bird.

There is one more limit to the maximum salary that can be given using the Larry Bird exception.  If the player was a first round draft pick and just completed his three-year rookie scale contract, but his team did not exercise their option to extend the contract for the fourth season (see question number 38 ), then this exception cannot be used to give him a salary greater than he would have received had the team exercised their fourth year option.  For example Devean George was selected by the Lakers with the 23rd pick in the 1999 draft.  He finished his three-year rookie scale contract in 2002.  The Lakers had the option to extend him for the 02-03 season for $1,415,722 until October31, 2001, but did not do so.  So while the Lakers were allowed to use the Larry Bird exception to re-sign George, they were limited to a first-year salary (using this exception) of $1,415,722.  They instead used their mid-level exception to re-sign him, which allowed them to give him more money.

EARLY BIRD EXCEPTION -- This is a weaker form of the Larry Bird exception.  Players who qualify for this exception are called "Early Qualifying Veteran Free Agents" in the CBA.  A player qualifies for this exception after just two seasons without being waived or changing teams as a free agent. Using this exception, a team may re-sign its own free agent for 175% of his salary the previous season or the average player salary, whichever is greater (see question number 22 for the definition of "average salary").  Early Bird contracts must be for at least two seasons (which limits this exception's usefulness -- it's often better to take a lower salary for one more season and then have the full Bird exception available the next season) and no longer than six seasons.  A player can receive 12.5% raises using this exception.

NON-BIRD EXCEPTION -- Players who qualify for this exception are called "Non-Qualifying Veteran Free Agents" in the CBA.  They are defined as veteran free agents who are neither Qualifying Veteran Free Agents nor Early Qualifying Veteran Free Agents.  This exception allows a team to re-sign its own free agent to a salary starting at 120% of the player's salary in the previous season or 120% of the minimum salary, whichever is greater, even if they are over the cap.  Raises are limited to 10% and contracts are limited to six years when this exception is used.

MID-LEVEL SALARY EXCEPTION --   This exception is also called the "Middle Class Exception."  This exception says that a team can offer any player a contract equal to the average NBA salary every year, even if they are over the cap.  This exception is new to the current CBA, and was "ramped up" to the average salary over a period of four years (see question number 22 for the definition of "average salary"). Here is the value of the mid-level salary exception for each year of the CBA:
 

98-99	$1.75 million
99-00	$2.00 million
00-01	$2.25 million
01-02	$4,538,000
02-03	$4,546,000
03-04	$4,917,000
04-05	$4,903,000

This exception may be split and given to multiple players. It may be used for contracts of up to six years in length.  Signing a player to a multi-year contract does not affect a team's ability to use this exception every year.  For example, a team can sign a player to a six-year contract using this exception and still use the exception the following year to sign another player.  Also see question number 18 for more information on the availability and use of this exception.

$1 MILLION EXCEPTION -- This exception carries over from the previous CBA.  Like the mid-level salary exception, it ramps up over several years:
 

98-99	$1.00 million
99-00	$1.10 million
00-01	$1.20 million
01-02	$1.30 million
02-03	$1.40 million
03-04	$1.50 million
04-05	$1.60 million

This exception may not be used two years in a row.  It may also be split and given to more than one player, and can be used to sign players for up to two years.  Also see question number 18 for more information on the availability and use of this exception.

ROOKIE EXCEPTION -- Teams may sign their first round draft picks to rookie "scale" contracts even if they will be over the cap as a result.

MINIMUM PLAYER SALARY EXCEPTION -- Teams can offer players minimum-salary contracts even if they are over the cap.  Contracts can be up to two years in length.  For two year contracts, the second season salary is the minimum salary for that season.  For example, when the capped-out Lakers signed Dennis Rodman in the middle of the 98-99 season, they used this exception to give Rodman the minimum salary, which was $1 million for the 10+ year veteran.  This exception also allows minimum-salary players to be acquired via trade.  See question number 69 for more information.

TRADED PLAYER EXCEPTION -- This is a "credit" teams can use to replace the salary of a player traded to another team. This credit cannot be used to sign free agents -- it is only available for trades.  This exception is discussed in detail in question number 68 .  Also see question number 18 for more information on the availability and use of this exception.

DISABLED PLAYER EXCEPTION -- This exception allows a team which is over the cap to acquire a replacement for a disabled player who will be out for the remainder of the season. This exception can also be granted in the event of a player's death.  This exception can only be used to acquire one player.  The maximum salary for the replacement player is 50% of the injured player's salary, or the average salary, whichever is less (see question number 22 for the definition of "average salary").  Approval from the league (based on a determination by an NBA-designated physician) is required for this exception to be used.  This exception can be used to sign a free agent, or to create room to accept a salary in trade.  When used for trade, it is treated in a similar fashion to the traded player exception (see question number 68 ).  If a team is under the salary cap by more than the combined amount of their exceptions, or drops below the cap by more than the combined amount of their exceptions after receiving this exception, then they lose this exception.  If a team is under the salary cap and has this exception available to use, then it is included in their team salary.

If a player is disabled between July 1 and November 30, the team must acquire the replacement player within 45 days.  If the player is disabled between December 1 and June 30, and the physician determines that the player will be out the entire following season as well, then the team has until October 1 to sign a replacement.  If the disabled player comes back sooner than expected, then he may be activated immediately, and the replacement player (or exception, if it hasn't been used yet) is not affected.

Teams sometimes have had difficulty getting the NBA to approve an injury exception. For example, Danny Manning tore an ACL toward the end of the 97-98 season, yet the NBA would not approve the Suns for an injury exception.  More recently, the Magic did not receive this exception in 2003 for Grant Hill.  However, this exception was granted in the 1999 offseason to San Antonio, so they could replace Sean Elliott, who was disabled due to kidney problems.  This exception was also granted to Charlotte soon after Bobby Phills was killed.  A vote of the NBA Board of Governors is actually required for this exception to be granted.  Also see question number 18 for more information on the availability and use of this exception.

Don't confuse this exception with the salary cap relief teams can apply for two years after losing a player to a career-ending injury or death (see question number 51 ).  This exception allows a team to acquire a replacement player.  The salary cap relief removes a contract from the books.

QUALIFYING OFFER -- Certain players become restricted free agents at the end of their contract if their team submits a qualifying offer (see question number 34 ).  For players who entered the NBA in 98-99 or later, through their third year in the league, the qualifying offer must be for 125% of the player's previous salary, or the player's minimum salary (see question number 9 ) plus $150,000, whichever is greater.  Teams are given an exception in this amount for the purpose of making a qualifying offer.  This exception is not necessary for players finishing the fourth year of their rookie scale contracts, because teams may use the Larry Bird exception for these players. 
 

Summary of Salary Cap Exceptions
 

Note:    The Traded Player Exception is not listed because it cannot be used to sign free agents.

If a team has Disabled Player, $1 Million, Mid-Level and/or Traded Player Exceptions, and they are below the cap, then these exceptions are added to the team's team salary, and the league treats the team as though they are over the cap.  This is to prevent a loophole.  The concept is the same as the one behind free agent amounts (see question numbers 27 , 28 , 29 , 30 ).  The idea is that the order in which exceptions are used should not matter.  Free agent amounts keep teams from taking advantage of temporarily being under the cap by signing other teams' free agents using their cap room, and then re-signing their own free agents using a Bird exception.  Because of free agent amounts, there's no difference between signing their free agents first and other teams' free agents second, or the other way around, signing other teams' free agents first and their own free agents second.  Similarly, a team can't act like they're under the cap and sign free agents using cap room, and then use their Disabled Player, $1 Million, Mid-Level and/or Traded Player exceptions.  Consequently, the exceptions are added to the team salary (putting the team over the cap) if the team is under the cap and adding the exceptions puts them over the cap.  If a team is already over the cap, then the exceptions are not added to their team salary.  There would be no point in doing this, since there is no cap room for signing free agents.

So it is not true that being under the cap necessarily means a team has room to sign free agents.  For example, assume the cap is $42.5 million, and a team has $36 million committed to salaries.  They also have a mid-level exception for $4.5 million and a traded player exception for $5 million.  Even though their salaries put them $6.5 million under the cap, their exceptions are added to their salaries, putting them at $45.5 million, or $3 million over the cap.  So they actually have no cap room to sign free agents, and must instead use an exception.

Teams have the option of renouncing their exceptions in order to claim the cap room.  So in the example above, if the team renounced their traded player and mid-level exceptions, then the $9.5 million is taken off their team salary, which then totals $36 million, leaving them with $6.5 million of cap room which can then be used to sign free agent(s).

A team may lose their exceptions (Disabled Player, $1 Million, Mid-Level and/or Traded Player), or never receive them to begin with.  This happens when their team salary is so low that when the exceptions are added to the team salary, the sum is still below the salary cap.  If the team salary is below this level when the exception arises, then teams don't get the exception.  If the team salary ever drops below this level during the year, then any exceptions they still have are lost.

For example, with a $42.5 million salary cap, assume it's the offseason, and a team has $34 million committed to salaries, along with a mid-level exception for $4.5 million, a traded player exception for $3 million, and an unrenounced free agent whose free agent amount is $2 million.  Their salaries and exceptions total $43.5 million, or $1 million over the cap.  What if their free agent signs with another team?  Their salaries drop to $34 million, so their salaries and exceptions now total $41.5 million.  This total is below the cap so the team loses their mid-level and traded player exceptions.

There is logic behind this.  The whole idea behind an "exception" is that it is an exception to the rule which says a team has to be below the salary cap.  In other words, an exception is a mechanism which allows a team to function above the cap.  However, if a team salary is ever so low that they're not going to be over the cap even if they use all their exceptions, then the concept of an exception which allows them to function above the cap is moot.  Therefore, if a team's team salary ever drops this far, its exceptions go away.

The team has the right to choose which of its available exceptions to use to sign a player.  However, teams may not combine exceptions, or combine an exception with cap room, in order to sign a player.  For example, a team with a $2.25 million mid-level exception and a $1 million in cap room may not combine them to sign a player for $3.25 million.

In certain situations, exceptions may be combined in order to acquire players via trade.  This is discussed in question number 71 .

I suppose it could happen, but the NBA will investigate if it suspects that an outside person or organization is paying a player on behalf or at the request of a team.  If they find out that such an event has occurred, they will penalize the team.  For the first offense by a team, the fine can be up to $2,500,000, forfeiture of a first round draft pick, and/or voiding the player's contract.  The penalties increase for subsequent violations.

Incidentally, with the new CBA they did away with the ability for players to become player-coaches.  This is because it would be possible to circumvent the cap by signing a player as a player-coach, and paying him less as a player but overpaying him as a coach.

If a team makes a direct agreement with a player that is not reported to the league, the penalties can be even harsher than those described in question number 20 .  Such a violation is considered by the league to be among the most serious a team can commit.  Again, the league will investigate any allegations of wrongdoing.  A violation can result in a fine up to $3,500,000, forfeiture of draft picks, voiding the player's contract(s), and/or the suspension for up to one year of any team personnel who were involved.

This is exactly what happened in 2000 with Joe Smith and the Minnesota Timberwolves.  Smith left the Philadelphia 76ers in 1999 (following the lockout) to sign with the Minnesota Timberwolves for their $1.75 million mid-level exception.  They made an under-the-table agreement that Smith would play under three consecutive one-year contracts at below market value, and the Timberwolves would reward him by using their Bird rights to sign him to a huge contract beginning with the 2001-02 season.  Unfortunately, they reduced this agreement to writing, and the written agreement eventally found its way into the league's hands.

It had long been rumored that such under-the-table agreements existed, but this was the first time the league had hard evidence in the form of a signed contract.  The league responded by fining the team the maximum $3.5 million, taking away their next five draft picks (two were later returned), and voiding Smith's current contract.  Owner Glen Taylor and GM Kevin McHale also agreed to leaves of absence (in lieu of suspensions, at which time the fifth draft pick was returned).  Most interestingly, the league also voided Smith's two previous, already-completed contracts.  This essentially stripped the Timberwolves of any Bird rights to Smith, preventing them from re-signing Smith for any salary above the minimum (they had already used their other exceptions).  Smith then left Minnesota and signed with the Detroit Pistons, but returned to Minnesota in 2001.

The league computes the average salary by taking the total salaries paid during the previous season, dividing by 362.5 (29 teams, times 12.5 players per team) and then adding eight percent.  This average salary figure is used when determining the salaries payable using the Early-Bird, Disabled Player and Mid-Level exceptions; and when determining an unsigned free agent's affect on team salary.

Note that they do not count expansion teams in their first two seasons when computing the average salary.  So when a 30th team is added in 03-04, the divisor will still be 362.5.  It will change to 375 in the 05-06 season.

Theoretically, a player with Bird rights can be traded right before becoming a free agent and his new team can use the Bird exception to re-sign him. There is no specific tenure requirement with one team.  The only rule is that the player can't have been waived or changed teams as a free agent for three years.   However, if a team renounces a player (see question number 31 ), they can't use the Bird exception to re-sign him for one year.

It closed a salary cap loophole. There used to be no waiting period, but this was abused by Portland with Chris Dudley and Phoenix with Danny Manning. Both teams signed these players to one-year deals at small salaries, and the next year, Bird rights in hand, signed new contracts for far in excess of the cap. The three year rule prevents these types of cap circumventions.

All salaries are included in team salary (and count against the cap). The Bird exception simply says a team can exceed the cap to sign certain players. The new salary applies toward the team salary just like the salaries of the team's other players.  So if a team is over the cap and uses the Bird exception to re-sign its own free agent, it will end up farther over the cap.

If one of the other exceptions wasn't used, it may just be the way the deal was reported. Only the first season's salary must fit under the cap, but signings are often reported using the total salary for the entire contract. For example, if a team is $10 million under the cap, they can sign a player to, say, a five-year contract for $10, $11, $12, $13 and $14 million in each of the five seasons. The deal then gets reported as five years for $60 million.  But the first year salary is what counts, and it fits perfectly.

Yes, but there's a restriction. A team's free agents continue to count as team salary (against the salary cap).  This charge is called the "free agent amount."  So there may not be enough money under the cap to sign another team's free agent, because the team's own free agents are taking up all the cap room.

The free agent amount depends on the player's previous salary and what kind of free agent he is:
 

Kind of free agent	Previous salary	Percentage of previous salary
Larry Bird, except when coming off rookie "scale" contract	At least the average salary	150%*
Larry Bird, except when coming off rookie "scale" contract	Below the average salary	200%*
Larry Bird, coming off rookie "scale" contract	At least the average salary	200% in 98-99* 225% in 99-00* 250% in the remaining seasons*
Larry Bird, coming off rookie "scale" contract	Below the average salary	300%*
Early Bird	Any	130%*
Non-Bird	Any	120%*

*Not to exceed the player's maximum salary, based on years of service (see question number 9 ).  Also, if the difference in salary between the last two seasons of the player's contract exceeded $4 million, then the percentage is based on the average salary in the last two seasons of the contract.

See question number 38 for more information on rookie "scale" contracts.

Here's an example of how to use this chart:  Let's say a player who made $5 million during the previous season becomes an Early-Bird free agent.  According to this chart, the player's free agent amount is 130% of his previous salary.  So $6.5 million is included in his team's team salary while he is a free agent.

Also see question number 31 for information on renouncing players.

It closes another loophole. Teams otherwise would have been able to do exactly what was described -- sign other teams' free agents, and then turn their attention to their own free agents. This rule restricts their ability to do that.

When any one of the following three things happen:

• The player signs a new contract with the same team.  When this happens, the player's affect on his team's team salary is based on his new salary.
  
  
• The player signs with a different team. As soon as this happens, the player becomes the new team's problem, and his salary no longer counts against his old team.
  
  
• The team renounces the player.  (See question number 31 .)

As detailed in question number 28 , free agents continue to be included in team salary.  By renouncing a player, a team gives up its right until the following June 30 to use the Larry Bird, Early Bird, or Non-Bird exceptions (see question number 17 ) to re-sign that player.  A renounced player no longer counts toward team salary, so teams use renouncement to gain additional cap room.  After renouncing a player, the team is still permitted to re-sign that player (the previous CBA prevented teams from re-signing a renounced player until 55 days into the regular season), but they must either have enough cap room to fit the salary, or sign the player without using one of the three "Bird" exceptions.

For example, in August 1999 Charles Oakley was renounced by the Toronto Raptors.  Had they not renounced him, the Raptors could have re-signed Oakley for any amount up to the maximum $14 million using the Larry Bird exception.  Following the renouncement, they were only allowed to give him up to the $6 million they had available under the cap.

After renouncing a player, a team can still trade the player in a sign-and-trade agreement (see question number 75 ).

Only in one specific circumstance -- when they renounce one or more of their players in order to create enough cap room to sign another team's restricted free agent, but the restricted free agent's original team matches the offer sheet and keeps him.  If that happens, the team can un-renounce their own free agent(s).  See question number 34 for more information on restricted free agency.

No. The scale amount for first round draft picks are included in team salary (unless they are renounced, see question number 31 ).  In addition, if a team has fewer than 11 contracted players, unrenounced free agents, and unsigned first-round draft picks, then an amount equal to the rookie minimum salary is charged for each empty roster spot fewer than 11.  For example, if a team has three players under contract, two unrenounced free agents, and one first-round draft pick, the total number of players is six. Their team salary is charged for the five remaining roster spots to bring the total to 11.  In the 99-00 season, with a rookie minimum salary of $301,875, their team salary would include an extra $1,509,375.

There are two types of free agency: restricted and unrestricted. An unrestricted free agent is free to sign with any other team, and there's nothing the player's original team can do to prevent it.  Restricted free agency gives the player's original team the right to match an offer sheet the player signs with another team and keep the player. One example is from August 2002, when Minnesota signed Ricky Davis, but Cleveland matched the contract and retained him.

Restricted free agency was an option for all contracts two CBA's ago. The previous CBA eliminated restricted free agency altogether (and reclassified all restricted free agents as unrestricted. This is how Orlando lost Shaquille O'Neal, whose contract called for restricted, not unrestricted free agency).

The current CBA provides restricted free agency on a limited basis.  It is allowed following the fourth year of rookie "scale" contracts for first-round draft picks (see question number 38 ).  It is also allowed for all veteran free agents who entered the NBA in 98-99 or later, who have been in the league three or fewer seasons (however, first round draft picks are unrestricted free agents following their third season if their team does not exercise their option to extend their rookie scale contract for the fourth season).  All other free agency is limited to unrestricted free agency.

In order to make their free agent a restricted free agent, a team must submit a qualifying offer to the player by June 30.  The amount of the qualifying offer for players on rookie "scale" contracts is based on the player's draft position (see question number 38 ).  The qualifying offer for all other players must be for 125% of the player's previous salary, or the player's minimum salary (see question number 9 ) plus $150,000, whichever is greater.  The qualifying offer must be for one season.  The team automatically gets an exception in the amount necessary to make this qualifying offer if they are over the salary cap.

When another team wants to sign a restricted free agent, it signs the player to an offer sheet, the principal terms of which the original team is given 15 days to match.  The offer sheet must be for at least three seasons.  The principal terms of the offer sheet cannot include non-cash forms of compensation.  For example, it doesn't work to offer Denver's free agent a house on the beach within 15 minutes of the arena, knowing that it's impossible for Denver to match those terms.  If the player's original team exercises its right of first refusal by matching the principal terms of the offer sheet, the player is then under contract to his original team and is no longer a free agent.  If the player's original team does not exercise its right of first refusal within 15 days, the offer sheet becomes an official contract with the new team, and the player is no longer a free agent.

There can be no compensation given to a team in return for their not matching an offer to a restricted free agent.  For example, Houston could not sign Golden State's restricted free agent, then send Golden State a draft pick in exchange for their not matching the offer and retaining the player.

Teams can rescind their qualifying offer to a restricted free agent, in which case the player becomes unrestricted.  This happened with Toronto and Keon Clark in 2002.

A signed offer sheet can be rescinded within the 15 day waiting period if all three parties (the player and the two teams) agree.  However, they could not do this in order to engineer a better deal (such as a sign-and-trade arrangement) between the teams.

35. Haven't some restricted free agents gotten away anyway?  How did this happen?

For one, the team can simply decide not to match the offer sheet.  If this happens, the offer sheet becomes an official contract with the new team after 15 days.  This is how Wang Zhi-Zhi went from Dallas to the LA Clippers prior to the 02-03 season.

It may also have been that the original team was incapable of matching the offer sheet.  The NBA has a limited right of first refusal for restricted free agents.  A team gets an exception big enough to make a qualifying offer, but the team must use its cap room (if it has any) or a different exception to match another team's offer.  If a new team signs the player to a very large offer sheet, the player's original team may not be able to match it.  If this happens, the original team has no choice but to lose the free agent.  This is how Chicago was able to sign Brad Miller in 2000 -- Miller was Charlotte's restricted free agent, but the most Charlotte could give him was $3.9 million (using the Early Bird exception).  Chicago signed Miller to an offer sheet with a first-year salary just over Charlotte's limit, and Charlotte was unable to match.

Note that for first-round draft picks following their fourth (option) season, there is no way to make an offer the original team cannot match.  The teams have full Bird rights to these players, so they can re-sign them (or match another team's offer sheet) for any amount up to the maximum salary.

If the player is a first-round draft pick who just finished his fourth (option) season, his original team can use their Bird rights to match any offer.  For other players, it may be possible for another team to make an offer that the original team cannot match (see question number 35 ).

Most teams won't even bother signing first round picks coming off their fourth season to offer sheets, because it is often a given that the offer will be matched by the original team.  So if the player really wants to leave, he can accept his original team's qualifying offer, which constitutes a one-year contract at a scale salary.  The player must play with his original team for one more season, but following that season he will be an unrestricted free agent, and can then sign with any other team.  For example, Michael Olowokandi accepted the LA Clippers' qualifying offer prior to the 02-03 season.  He was then an unrestricted free agent in 2003, and signed with Minnesota

No.  A team that loses a free agent does not receive anything.  It used to be the case in the NBA a long time ago, but not any more. The most famous example of this is when Gail Goodrich signed as a free agent with the New Orleans Jazz.  The Lakers, Goodrich's previous team, received a draft pick as compensation.  That draft pick turned out to be Magic Johnson.

Yes. There's actually a very strict salary scale for first round draft picks and their first contracts. They do this because it was previously common for rookies to hold out, not signing with their team until they got the contract they wanted. In addition, there was backlash from the veteran players who saw rookies with no NBA experience getting contracts that were bigger than theirs. The last year without a salary scale was 1994, when it was rumored that first overall pick Glenn Robinson was going to hold out for a $100 million contract, and he eventually signed a 10-year, $68.15 million contract.

Beginning in 1995, salaries for first round picks were set according to a very strict scale, determined by their exact draft position.  In the previous CBA, this was calculated using a weighted average of the first year salary of the same pick in the previous seven drafts. In the first year of the current CBA (98-99), salaries were computed using this same weighted average.  In subsequent years of the current CBA (99-00 through 04-05), it simply goes up by 5% each year (a simple 5% of the 98-99 figure, not a compounded percentage).  For example, the following chart lists the salary figure for the #1 overall draft pick in each season from 98-99 through 04-05, along with the raise allowed in the 4th (option) year.
 

Season	1st year salary	2nd year salary	3rd year salary	4th year option (% raise over 3rd year salary)
98-99	$2,679,300	$2,880,200	$3,081,200	26.1%
99-00	$2,813,300	$3,024,300	$3,235,300	26.1%
00-01	$2,947,200	$3,168,300	$3,389,300	26.1%
01-02	$3,081,200	$3,312,300	$3,543,400	26.1%
02-03	$3,215,200	$3,456,300	$3,697,400	26.1%
03-04	$3,349,100	$3,600,300	$3,851,500	26.1%
04-05	$3,483,100	$3,744,300	$4,005,600	26.1%

By comparison, the 29th and last pick in the draft has a first-year salary figure of $535,600 in 98-99 and $696,300 in 04-05.  A listing of the salary figures for all draft picks and all years can be found by clicking here .

A team may actually sign a player for as little as 80% or as much as 120% of the scale salary figure.  For example, the 1st year salary for the #1 overall pick drafted in 99-00 can be as little as $2,250,640 or as much as $3,375,960.  In most cases, the contract that is actually signed is for the maximum 120% figure.  Annual raises are limited to 10%, and also can't exceed 120% of the scale amount for that season.

The exact percentage increase for the fourth (option) year varies by the player's draft position.  It is 26.1% for the first pick, scaling up (almost evenly) to 80.5% for the 29th pick.

There are also restrictions to the contract length. Under the previous CBA, these contracts must be for three years, after which the player was a free agent. With the current CBA, contracts were changed from three years to three with a team option for a fourth year (this option must be exercised by October 31 after the player's second season).  After the fourth year, players become restricted free agents rather than unrestricted (provided the team picked up the fourth-year option).  These contracts can also be extended between August 1 and October 31 after the player's third season.

Since the rule for first round picks was implemented, there has never been a holdout. There has also been less grumbling from veterans about rookies who make more than they do. So in that respect, the rookie salary scale has worked great.

The player's options are limited.  What happens depends on a number of factors:

• If the player is already under contract, or signs a contract with a non-NBA team, the team retains the player's draft rights for one year after the player's obligation to the non-NBA team ends.  Essentially, the clock stops as long as the player plays pro ball outside the NBA.  Players are not included in the team's team salary while the player is under contract with a non-NBA team.
  
  
• If the player was still eligible to play in college before he was drafted, the team retains the player's draft rights until the draft the player would have entered had he not left college early.  For example, if a team drafts a college sophomore in 2001, they retain his draft rights until the date of the 2003 draft.  Note that the current NCAA rules state that players lose their NCAA eligibility if they are drafted, so the player could not return or go on to play college ball.
  
  
• For all other players, the team retains the player's draft rights until the date of the next draft.
  

In any of the above cases, if the team does not sign the player in the allotted time, the player can enter the next draft.  If the team that selects the player in the next draft doesn't sign him either, he beomes a rookie free agent.

When a team signs a first round draft pick in a year other than the year in which he was drafted, the player is signed using the salary scale for the year in which he is signed, not the year he was drafted.

Unsigned first round picks are included in team salary immediately upon their selection in the draft.  They count as 100% of the scale salary for that pick, unless there is a verbal agreement for a higher salary.  An incident occurred prior to the 97-98 season when Vancouver's first round pick, Antonio Daniels, revealed in an interview that he and the team had verbally agreed to a contract starting at the maximum salary.  The league, which maintains that verbal agreements apply to the salary cap, then changed the team's cap figure from the scale amount to the maximum for Daniels.

Once a first round pick signs a contract, his actual salary is included in the team salary, of course.

Unsigned second round picks are not included in team salary.  This is a loophole that Houston once tried to use by trading a first round pick for a second round pick in order to clear cap room.

As described in question number 70 , the trade value of unsigned first or second round draft picks is always $0.

They're stuck. In essence, this makes late first round picks less valuable, because it forces teams to make long-term commitments to marginal players.  In 1996, rather than give their first round pick Travis Knight (29th overall) a three-year deal, the Bulls renounced him, making him a free agent.

No. The salary scale only applies to the team that drafts the player or the team to which the player's draft rights are traded.  When Chicago renounced first round pick Travis Knight in 1996, he then signed with the Lakers for one year at the league minimum salary.

Note that this might actually work to the player's advantage.  If he becomes an outstanding NBA player, then he would be eligible for a non-scale contract (and potentially a big payday), much sooner than if he had played under a scale contract.  The same is true for second round draft picks, whose first contracts are usually for two seasons (with the second season at the team's option).

Yes. When the Larry Bird exception is used, a player can sign for a maximum of seven years with a maximum increase or decrease of 12.5% per year. For contracts signed using the Early Bird exception, it's a maximum of six years with 12.5% increases or decreases.  For most other contracts, the limit is six years with a maximum 10% increase or decrease each year.  A few exceptions have a shorter maximum length.  See question number 17 for more information.

Also, if the same contract covers the 2000-01 season and any later season, then the salary in any season after 2000-01 can't be less than the 2000-01 salary.

Incidentally, raises take effect July 1 of each year.

No. The raise is always a percentage of the first year salary. So if a team signs another team's player (10% maximum raise) to a six year contract starting at $10 million, the maximum raise is $1 million each year. So this player's six-year salary would be:
 

Year 1	$10 million
Year 2	$11 million
Year 3	$12 million
Year 4	$13 million
Year 5	$14 million
Year 6	$15 million

• How are the amounts in the “Deferred” column calculated?  The fifth season’s salary ($7,000,000) is treated as deferred compensation earned in the first four seasons.  The total (non-deferred) amount earned in the first four seasons is $23 million.  In the first season the player earns 21.74% of the $23 million.  Therefore, 21.74% of the $7 million deferred amount, or $1,521,739, is charged against the cap in the first season.
  
  
• The total cap amount is still $30 million – the fifth season’s salary was simply shifted to the first four seasons.
  
  
• The fifth season now has a cap amount of $0 (because the salary cap amount was shifted to the earlier seasons).  The CBA calls this a “zero year.”

• The chart for Qualifying Veteran Free Agents only applies when the player is re-signed by his prior team.  If the player signs with a different team, use the "Other Free Agents" chart instead.
  
  
• The Over-36 rule also applies to extensions and renegotiations.  They always start counting from the date the extension or renegotiaion is signed.  For example, if a contract with two years remaining is extended by three years, it's counted as a five-year contract.  For extensions, a little leeway is given for players who have played ten or more seasons for the team signing the extension.
  
  
• For a season to count as a zero year, the player must reach age 36 by October 1 of that year.

An option clause allows a contract to be extended for one additional season after the date it is scheduled to end.  For example, a six-year contract with an option for the seventh year means that if the option is exercised, the contract extends through the seventh season, but if the option is not exercised, the contract ends after the sixth season and the player becomes a free agent.  Options must be exercised by the July 1 that precedes the option year.  Once exercised, an option cannot be revoked (for example, a player cannot invoke an option on June 20th and change his mind on June 25th).

There are various types of options:

• Team Options give the team the right to invoke the option year.  There can be only one option year, and the option year can't be for a lower salary than the previous season.
  
  
• Player Options give the player the right to invoke the option year.  There can be only one option year, and the option year can't be for a lower salary than the previous season.
  
  
• Player Early Termination Options (ETO's) give the player the right to terminate the contract early.  An ETO can't occur prior to the end of the fifth season of the contract (so the contract must be for six or seven seasons), and may be made contingent on player or team performance benchmarks.

Rookie "scale" contracts for first round draft picks contain a team option for the fourth season.

Here's a summary of the differences between an option and an ETO:

• Options can occur only when one season remains on the contract, while ETO's can occur when two seasons remain if the contract is for seven seasons.
  
  
• Options can be included in any multiyear contract, but ETO's are allowed only with six or seven year contracts.
  
  
• ETO's can be based on performance benchmarks, but options can't.
  
  
• Only a player can be given an ETO, but an option can be given to the player or to the team.
  
  
• Option years may not have a lower salary than the previous season.  ETO's have no such restriction.
  

A six or seven year contract can be extended when at least four years have passed since the signing of the contract. A four or five year contract can be extended when at least three years have passed since the signing of the contract.  Contracts for fewer than four seasons may not be extended.  A contract which has already been extended can be extended again after three years.

A rookie scale contract for a first round draft pick (see question number 38) may be extended from August 1 to October 31 of the player's fourth (option) season, provided the team had previously picked up the option for that season.  Rookie scale contracts may be extended for up to six seasons beyond the player's fourth (option) season, bringing the total contract length to seven seasons.  All other extensions are limited to six seasons minus the seasons remaining on the current contract.  For example, a contract with two seasons remaining may be extended for up to four additional seasons.

The salary in the first year of an extension to a rookie scale contract may be any amount up to the player's maximum.  For all other extensions, the salary in the first year of the extension is limited to 112.5% of the salary in the last year of the existing contract.  However, it also can't exceed the maximum salary the player can receive if he were to sign a new contract that year as a free agent (see question numbers 9 and 10).

This poses an interesting problem -- if an extension takes effect three years from now, how do they set the salary if the maximum salary (and therefore the maximum amount for the extension) won't be known for three years?  What they do is write the extension for the maximum 12.5% (assuming the team agrees to give the player that much).  Then when the extension takes effect, and the maximum salary for that season is known, the extension salary is amended if necessary.

An example is in order.  Shaquille O'Neal's contract was extended prior to the 2000-01 season.  His original contract ran through the 02-03 season, in which he made $23,571,429.20.  The first year of his extension, 03-04, was originally written for 112.5% of this amount, or $26,517,857.85.  As a 10+ year veteran, O'Neal's salary can't exceed 105% of $23,571,429.20, or the 03-04 maximum salary for a 10+ year veteran (which turned out to be $15,344,000), whichever is greater.  That means O'Neal's 03-04 salary could not exceed 105% of $23,571,429.20, or $24,750,000.66 (using 105% of his previous salary, since that is the greater of the two).  O'Neal's extension was therefore amended downward to the maximum ($24,750,000.66) once the 03-04 maximum salary was determined.

Raises in each year of an extension are limited to 12.5% of the salary in the last year of the existing contract.  For example, since O'Neal will earn $23,571,429.20 in 02-03, he can receive a raise of $2,946,428.65 in each year of the extension.  If the salary in the first year of the extension is amended downward as described above, then the salary in the remaining years of the extension are amended at the same time, if necessary.

A contract for four or more seasons can be renegotiated when at least three years have passed since the signing of the contract.  Contracts for fewer than four seasons cannot be renegotiated.  A contract cannot be renegotiated until after the third anniversary of the signing of the contract, any later renegotiations, or any later extensions.  A contract cannot be renegotiated between March 1 and June 30 of any year.  The salary in the first year of the renegotiation is limited to 112.5% of the salary in the last year of the existing contract, with maximum 12.5% raises each year after that.  The renegotiation may not contain a signing bonus.  Contracts cannot be renegotiated downward (players can't take a "pay cut" in order to create salary cap room for the team).  Contracts cannot be renegotiated to contain fewer seasons.

Salaries can be renegotiated only to the extent that the team has room under the cap.  A team over the salary cap cannot renegotiate a contract.  An interesting case of this was Shawn Kemp with the Sonics. Kemp, who was unhappy with his contract and wanted to renegotiate, could not get a larger contract from the Sonics because they were over the cap. Kemp forced a trade to Cleveland, who was far enough under the cap at the time to give him the large contract he wanted. Kemp's contract was renegotiated soon after the trade.

Any money paid to a player is included in team salary, even if the player has retired.  For example, James Worthy retired in 1994, two years before his contract ended.  He continued to receive his salary for the 94-95 and 95-96 seasons, so his salary was included in the Lakers' team salary in those seasons.  It is at the team's discretion (or as the result of an agreement between the team and player) whether to continue to pay the player after he has retired.

There is one exception whereby a player can continue to receive his salary, but the salary is not included in the team's team salary.  This is when a player is forced to retire for medical reasons and a league-appointed physician confirms that he is medically unfit to continue playing.  There is a waiting period of  two years (if the injury or illness occurred between January 1 and July 1) or until the second July 1 following the injury or illness (if it occurred between July 1 and January 1) before a team can apply for this salary cap relief.  If the waiting period expires mid-season (on any date prior to the last day of the regular season), then his entire salary for that season is removed from the team's team salary.  For example, Luc Longley suffered a career-ending injury in March 2001.  In March 2003, the Knicks were allowed to remove his entire 02-03 salary from their books (and since the luxury tax is based on the team salary as of the last day of the regular season, the Knicks avoid paying any tax on Longley's salary).  There is also some luxury tax relief associated with disabled players -- see question number 15 .

If a player retires, even for medical reasons, his team does not receive a salary cap exception to acquire a replacement player.

Released (waived) players with guaranteed contracts continue to be included in the team salary.  Players whose contracts are not guaranteed, including training camp invitees who do not make the opening day roster, are included in team salary in the amount they made while they were with the team.

If another team signs a released player who had a guaranteed contract (as long as the player has cleared waivers -- see  question number 53 ), the player's original team is allowed to reduce the amount of money they still owe the player (and lower their team salary) by a commensurate amount (this is called the right of set-off).  This is true if the player signs with any professional team -- it doesn't even have to be an NBA team.  The amount the original team gets to set off is limited to one-half the difference between the player's new salary and the minimum salary for a one-year veteran (if the player is a rookie, then the rookie minimum is used instead).

For example, suppose a fifth-year player is waived during the 2003 offseason, with one guaranteed season remaining on his contract.  If this player signs a $1 million contract with another NBA team for the 03-04 season, his original team gets to set off $1 million minus $563,679 (the minimum for a one-year veteran in 03-04), divided by two, or $218,160.50.  If this player had a $5 million salary with his prior team, then his prior team would be responsible for the remaining $4,781,839.50.  Note that between his prior team and new team the player will earn a combined $5,781,839.50, which was more than he made prior to being waived.

There was some controversy about what happens to player options (see question number 48 ) if the player is released before the option can be exercised.  Newer contracts contain specific language that details exactly what happens to option years when a player is waived.  But older contracts still exist which are ambiguous about this point.  For example, it was rumored that the Heat would waive Anthony Carter (whose contract contains the older, ambiguous language) in 2003, before Carter could exercise his option for the 03-04 season.  Any such action would likely be greived, but so far every team that has found itself in this situation has instead agreed to a buyout with the player, so this situation has yet to be tested.

It's a temporary status for players who are released by their team.  A player released between August 15th and the end of the regular season stays on waivers for 48 hours.  A player released at any other time stays on waivers for 10 days.  During the waiver period other teams may claim a waived player.  If more than one team tries to claim the player, the team with the worst record gets him.  If a player on waivers is claimed, the new team acquires his existing contract and pays the remainder of his salary.  There is also a fee of $1,000, payable to the league office, for claiming a waived player.

A team can claim a waived player only if one of the following is true:

• The team is far enough under the salary cap to fit the player's entire salary.
  
  
• The team has a disabled player exception for at least the player's salary (see question number 17 ).
  
  
• The team has a trade exception for at least the player's salary (see question number 68 ).
  
  
• The player's contract is for one or two seasons and he is paid the minimum salary.

Injured players are included in team salary.  However, in certain cases, teams can gain an exception which allows them to exceed the cap to sign a replacement. See question number 17 for more information on the disabled player exception.

The CBA does not give a complete list of reasons for which a player can be suspended.  A few reasons are specified, such as for prohibited substances and disciplinary reasons.  Teams sometimes suspend players for other reasons, but those suspensions are often grieved.  For example, Toronto once suspended Oliver Miller for being too heavy, and the LA Clippers once suspended Keith Closs for being too light!  Also, players will generally be suspended if they are found guilty, plead guilty, or come to a settlement in a legal court.

Suspended players are included in team salary, but players are not paid while they are suspended.  The CBA does not specify the length of suspensions except in the cases of:

• Missing the rookie transition program: Five games.
• Unlawful violence: 10 games minimum.
• Marijuana: No suspension for the first two violations, five games for the third & subsequent violations.
• Steroids: Five games for the first violation, 10 games for the second violation, 25 games for the third & subsequent violations.
• Drugs other than marijuana and steroids: There are different "stages" of this program, and the penalties vary by stage, and could include a six month suspension or disqualfication from the NBA.

A player who dies or who suffers a career-ending injury or illness, and whose contract is terminated, may be excluded from his team's team salary.  If the death, injury, or illness occurs between July 1 and December 31, the salary can be excluded beginning on the second July 1 following the death, injury, or illness. If the termination occurs between January 1 and June 30, the salary can be excluded beginning two years after the death, injury, or illness. However, a team may decide not to terminate the contract and continue to pay the player.  For example, the Lakers continued to pay Magic Johnson after he was forced to retire because of his HIV status, so his salary was included in the Lakers' team salary.

Teams do not receive an exception to acquire a replacement player if a player's contract is terminated for medical reasons.  However, a disabled player exception (see question number 17 ) may be granted by the league in the event of a player's death.  For example, the league granted Charlotte a disabled player exception when Bobby Phills died, and Charotte used this exception to acquire Dale Ellis.

Sometimes players and teams mutually decide to divorce each other.  They do this by mutually agreeing that:

• The team will waive the player;
  
 
• If the player clears waivers, the compensation protection for lack of skill (see question 90 ) will be reduced or eliminated

But there's a twist, which needed an arbitrator's ruling during the 99-00 season to resolve.  As detailed in question 90 , on January 10 all contracts become guaranteed for the rest of the season.  Compensation protection insures the player against loss of salary after being being waived for lack of skill.  But if he is waived after January 10, then he doesn't lose his salary, so the compensation protection does not kick in.  Even though the team & player can mutually agree to reduce or eliminate the player's compensation protection, he is still owed his full salary if waived after January 10.

This was challenged by John Starks during the 99-00 season.  Starks had been traded to the Bulls, and wanted to sever ties with the team after January 10.  The arbitrator ruled that in the last season of a player's contract, the team and player could choose to eliminate the contract guarantee that kicked in on January 10.  Starks and the Bulls where therefore free to agree to a divorce (with no money owed to Starks) as described above.

There is one other type of buyout described in the CBA.  When a contract contains an option year, a buyout amount for the option year can be written into the contract.  The buyout amount may be up to 50% of the salary for the option year.

The agreed-upon buy-out amount (see question number 57 ) is included in the team salary instead of the salary called for in the contract.  If the player had more than one season left on his contract, then the buy-out money is distributed among the seasons in proportion to the original salary.  For example, say a player had three seasons remaining on his contract, with salaries of $10 million, $11 million and $12 million.  The player and team agree to a buyout of $15 million.  The $15 million is therefore charged to the team salary over the three seasons.  Since the original contract had $33 million left to be paid, and $10 million is 30.3% of $33 million, 30.3% of the $15 million buyout, or $4.545 million, is included in the team salary in the first season following the buyout.  Likewise, 33.33% of $15 million, or $5 million, is included in the team salary in the second season, and 36.36% of $15 million, or $5.455 million, is included in the team salary in the third season.  Note that this is true even if the player is paid all of his buy-out money in a lump sum.  The distribution of the buy-out money itself is a matter of individual negotiation.

Performance bonuses (incentives) are allowed, but they are limited to 25% of the value of the contract. This removes yet another loophole that teams tried to use in the past.

Incentives are included in team salary if they are "likely to be achieved." They do not count if they are not likely to be achieved. (Except in the first year of the contract, where the salary, likely bonuses and unlikely bonuses must all fit within the salary cap or exception.)  The league office determines what is likely and what is not.  Their general guideline is whether the criteria was achieved in the previous year.  For example, if a player had seven assists per game the previous season, then an incentive based on seven assists per game would probably be classified as "likely to be achieved," but an incentive based on eight assists per game would probably be classified as "not likely to be achieved."

If a player is traded, his incentives are re-evaluated. For example, a bad team may have a player with an incentive based on the team winning 41 games, that the league classifies as "not likely to be achieved." If that player is traded to a contending team, the league may reclassify the incentive as "likely to be achieved" and include the incentive in the new team's team salary.  An interesting case of this happened when Miami tried to sign Juwan Howard. Tim Hardaway had some incentive clauses in his contract that were classified as "not likely to be achieved," and hence wasn't included in the Heat's team salary.  However, the league ruled that if Juwan Howard joined the team, then Hardaway's incentives would be "likely to be achieved," and therefore, when computing the amount of cap room Miami had available to offer Howard, they must count Hardaway's incentives as likely.

Teams are allowed to offer the players they sign a bonus worth as much as 25% of the total compensation, and may do so whether or not the team is over the cap.  If a player has a signing bonus, that bonus is averaged among the guaranteed years of the contract (not including any option years) and added to the team salary during those years.  This can create a problem if the player is signed to an exception or to the maximum salary.  For instance, if the Mid-Level exception is $5 million, then a team could sign a player to a five-year contract with 10% rasises, as follows:

• Payments in excess of $350,000 that are made to non-NBA teams or federations to release rights to a player.
  
  
• Option buy-out amounts .

Yes they do. For example, when Shaquille O'Neal became a free agent in 1996, the Magic and Lakers competed for his services. Since Florida has no state income tax, Orlando's offer, which was lower, was actually higher in terms of net income. LA overcame this disadvantage by offering an accelerated payment schedule for the salary in the first three seasons of his contract (lump sum in seasons one & three, 50/50 in season two).

The new CBA closed the loophole that LA used to sign Shaq. Now, at least 30% of a player's salary must be paid bi-weekly throughout the season. They also added an extra regulation to help neutralize the tax disadvantage of Canadian teams. All teams are permitted to offer a bonus of up to 25% (see the previous question).  The key point is that for U.S. residents in Canada, this bonus is taxed at just 15%. Using this bonus, Canadian teams can nearly achieve tax neutrality.

Injured reserve (IR), also referred to as the injured list (IL), is the status for players who are injured and unable to play. IR allows teams to keep their full complement of 12 players while waiting for injured players to recover.  Teams may have a maximum of three players on IR at one time.  A player usually must spend at least five games (or until the end of the season if fewer than five games remain) on IR before being activated.  However, a player can be activated before five games have passed as long as his spot on the active roster has not been filled (for example, Vancouver did this with Bryant Reeves in December 1999).

If a special hardship exists (such as when three players are already out for the season with serious injuries) teams can get special permission from the league to temporarily add a 13th player to their roster.

IR is often seen as a convenient place to "stash" players when teams have more than 12 players but don't want to let any of them go. While the cause for players to be put on IR must be legitimate, the league does not insist on an independent physician confirming the diagnosis. Thus it is common for a seemingly healthy player to suddenly develop "back spasms" right before rosters are cut to 12 players, and spend the entire season on IR as a result.

A 10-day contract is just that, a player contract which lasts ten days (or three games, whichever comes later). These contracts are used to replace players who are on injured reserve.  A team may sign a player to two 10-day contracts in one season (they may or may not be consecutive).  After the second 10-day contract, the team can only retain the player by signing him for the remainder of the season.

Ten-day contracts are available to be used starting January 5 (or the first business day thereafter) each season.

If a player is waived or put on injured reserve, the team has two weeks to get back to 12 players. A team must suit up eight players for each game.

Salary slots existed two CBA's ago, but are not a part of the current CBA. They no longer exist.

Teams under the salary cap may make trades as they please, as long as they don't end up more than $100,000 above the salary cap following a trade.  But if a team is over the cap, or they are under the cap and a trade would take them over by more than $100,000, then an exception is required.  An exception is the mechanism that allows a team to make trades or sign free agents and be over the salary cap.  Since teams are usually over the salary cap, trades are usually accomplished using exceptions.

Some exceptions are available only for signing free agents, and those exceptions are covered in question number 17 .  The exceptions available for making trades are as follows:

• The Assigned Player Exception is the principal means through which most trades are made.  It is described in question number 67 .
  
 
• The Traded Player Exception is actually a component of the Assigned Player Exception.  It is a credit teams receive for one year after making certain trades in which they receive less salary than they trade.  The Traded Player Exception is described completely in question number 68 .
  
 
• The Minimum Salary Exception can be used for either trades or signing free agents.  It allows teams to acquire minimum-salary players.  See question number 69 for more information.
  
 
• The Disabled Player Exception can also be used for either trades or signing free agents.  It allows teams to acquire replacements for certain injured players (see question number 17 for more information).

As described in question number 66 , exceptions are the mechanisms that allow teams to function above the salary cap.  Any trade which results in the team ending up over the salary cap requires an exception.  This is true even if the team is moving downward in salary.  For example, if the salary cap is $42.5 million, a team has a team salary of $50 million, and they want to trade a $5 million player for a $4 million player, they still have to use an exception,  Even though their team salary would be decreasing by $1 million, the fact that they would still be over the salary cap ($49 million) means that an exception is required.

The assigned player exception is the primary means used by teams over the cap for completing trades.  It allows teams to make trades that leave them over the cap, but it places several restrctions on those trades.  Mainly, a team cannot use the assigned player exception to acquire in trade more than 115% plus $100,000 of the salaries they are trading.  For example, a team using the assigned player exception to trade a player who earns $5 million can receive one or more players whose salary is no more than 115% of $5 million, plus $100,000, or $5.85 million in return.

There are several additional restrictions, which are described in other questions in this FAQ.  These include Base Year Compensation (questions 72 , 73 and 74 ), non-simultaneous trades (the "traded player excepton" -- question number 68 ), sign-and-trade (questions 75 , 76 , 77 , 78 and 79 ), including cash in trades (question number 81 ), trading draft picks (question number 70 ), trade kickers (questions 82 and 83 ), and no-trade provisions (question number 85 ).

Trades are typically completed all at once.  Such trades are dubbed simultaneous trades.  However, teams actually have up to one year to acquire the replacement player(s) to complete a trade.  These are considered non-simultaneous trades.  In a non-simultaneous trade, a team can only acquire up to 100% plus $100,000 of the salary it gives up (as opposed to 115% plus $100,000 in a simultaneous trade).  A trade in which more than one player is traded away can only be simultaneous; non-simultaneous trades are allowed only when a single player is traded away (although teams can sometimes find ways to configure multi-player trades as multiple single-player trades and gain a trade excpetion).

Here is an example of a non-simultaneous trade: a team trades away a $2 million player for a $1 million player.  Sometime in the next year, they trade a draft pick (with zero trade value itself) for a $1.1 million player to complete the earlier trade.  They ended up acquiring $2.1 million in salary for their $2 million player -- they just didn't do it all at once, or even necessarily with the same trading partner.

In the above example, after the initial trade of the $2 million player for the $1 million player, it was like the team had a "credit" for one year, with which they could aquire up to $1.1 million in salaries without having to send out salaries to match.  This credit is often referred to as a traded player exception or simply a trade exception , although the CBA doesn't actually use either of these terms -- it is simply a component of the assigned player exception.

There are some common misconceptions about this exception.  For one, teams cannot use this exception to sign free agents; it can be used only to acquire existing contracts from other teams.  For another, teams cannot combine this exception with the 115% plus $100,000 margin from the assigned player exception in order to trade for a more expensive player.  For example, while a $2 million player can be traded for a $2.4 million player using the assigned player exception, a team with a $1 million trade exception cannot combine the two together and trade their $2 million player for a $3.4 million player (see question number 71 for more information on combining exceptions).

Here is a more complicated example of a legal trade using the traded player exception: A team has a $4 million trade exception from an earlier trade, and a $10 million player it currently wants to trade.  Another team has three players making $4 million, $5 million and $6 million, and the two teams want to do a three-for-one trade with these players.  This is legal -- the $5 million and $6 million players together make less than the 115% plus $100,000 allowed for the $10 million player ($11,600,000), and the $4 million player exactly fits within the $4 million trade exception.  So the $4 million player actually completes the previous trade, leaving the two teams trading a $10 million player for a $5 million and a $6 million player.

Let's say a team trades a $6 million player for a $4 million player and a minimum-salary player (assume he's a 10-year veteran making $1 million).  They will use two exceptions for this trade -- the assigned player exception for the $4 million player, and the minimum-salary exception for the minimum-salary player.  Only the players traded using the assigned player exception count toward the traded player exception, so a traded player exception will be created for $6 million minus $4 million, or $2 million (plus $100,000, for $2.1 million total).  The minimum-salary player doesn't factor in at all.

Again, non-simultaneous trades are not available when a team trades away multiple players (aggregates) using the assigned player exception.  Let's say a team has a $4 million player and a $5 million player, and uses the assigned player exception to trade for an $8 million player.  Even though they trade away more salary ($9 million) than they receive ($8 million), the fact that they aggregated the two players using the assigned player exception means they do not gain a traded player exception.  However, it is sometimes possible to reorganize trades so that players technically are not aggregated, and therefore teams do gain a trade exception.  A good example of this occurred in 2004 when Houston traded Steve Francis, Cuttino Mobley and Kelvin Cato to Orlando for Tracy McGrady, Juwan Howard, Tyronn Lue and Reece Gaines.  As a single trade, this would not have netted a trade exception since multiple players were moving each way.  However, Houston was able to reorganize the trade into three separate, simultaneous trades.  In one trade, they acquired McGrady and Gaines for Mobley and Cato.  In another trade, they acquired Howard and Lue with an existing trade exception from their earlier Glen Rice trade.  That left them trading Francis essentially by himself for nothing, which generated a trade exception in the amount of Francis' base year value.  From Orlando's perspective, it was a single three-for-four trade.

Teams can consume only part of a traded player exception, in which case they can still use the remainder in a future trade.  For example, if a team trades a $4 million player for a $2 million player, they gain a $2.1 million trade exception.  If they later trade a draft pick for a $1 million player, they still have $1.1 million remaining to acquire more players and complete the trade (until one year from the date of the original trade).

Also see question number 18 for more information on the availability and use of this exception.

69.  How are minimum-salary players handled in trades?

The "minimum salary exception" allows teams to acquire minimum-salary players without regard to salary matching under the assigned player exception (see question number 67 ).  For example, a team over the cap can trade a second round draft pick to another team in exchange for a minimum-salary player, even a 10-year veteran earning $1 million.

When a team acquires multiple players in the same trade, it essentially ignores the incoming salary for all minimum-salary players, as they fall under the minimum salary exception.  For example, a team is over the cap and trades a $5 million player, receiving in return a $5.5 million player and two 10-year veterans earning $1 million each on minimum-salary contracts.  The team trading the $5 million player can accept only $5.85 million in return (115% plus $100,000 of $5 million), and the three incoming players combine for $7.5 million in salary.  However, the two $1 million players are covered by the minimum salary exception, so only the $5.5 million player counts against the assigned player exception.  Since $5.5 million is within the team's $5.85 million limit using the assigned player exception, the trade is allowed.

Teams trading away minimum-salary players do count their salaries (the portion not paid by the league -- see question number 9 ) as outgoing salary when comparing salaries for trade.

In addition, teams are restricted from trading away future first round draft picks in consecutive years.  This is called the "Ted Stepien Rule."  Stepien owned the Cavs from 1980-83, and made a series of bad trades that cost the Cavs several years' first round picks.  The trades, as columnist Chris Young put it, "amounted to giving up Manhattan for a bag of beads."  As a result of Stepien's ineptitude, teams are now prevented from making trades which might leave them without a future first-round draft pick in consecutive years.

This rule applies only to future first round picks.  For example, if this is the 99-00 season, then teams can trade their 2000 first round pick without regard to whether they had a 1999 pick, since their 1999 pick is no longer a future pick.  But they can't trade away both their 2000 and 2001 picks, since both are future picks.  Teams sometimes work around this rule by trading first round picks in alternate years.

In addition, teams are required to have only a first round pick, and not necessarily their first round pick.  So teams may trade away their own future picks in consecutive years if they have another team's first round pick in one of those years.

To a certain extent.  Teams can use different exceptions to acquire multiple players in the same trade if those players could also have been acquired individually using those exceptions.  For example, a team may trade a $5 million player for a $5.5 million player and two 10-year veterans earning $1 million each on minimum-salary contracts.  The minimum salary exception is used for the two minimum-salary players, and the $5.5 million player is acquired using the assigned player exception ($5.5 million is within 115% plus $100,000 of $5 million).  This is allowed, since those players could have been acquired separately using those same exceptions.

What is not allowed is using two different exceptions for the same player.  For example, a team cannot combine a traded player exception with the 115% plus $100,000 margin created by the assigned player exception to acquire a high-salaried player.  Here is something that is not allowed: A team has a $5 million player and a $1 million traded player exception, and wants to add the $1 million trade exception to the 115% plus $100,000 margin from their $5 million player ($5,850,000), in order to trade for a player making $6,850,000.  This cannot be done.  The exception to this rule is that teams may combine multiple traded player exceptions together to form one larger traded player exception if the traded player exceptions are generated and consummated in the same trade.

(See question number 68 for more information on the traded player exception.  See question number 69 for more information on the minimum salary exception.)

The legal combining of exceptions sometimes creates the appearance of teams getting away with illegal trades.  For example, as detailed in question number 84 ), when a team is over the cap and acquires a player in trade, they cannot re-trade that player in combination with other players for two months.  Technically, however, this applies only to players traded together using the same exception.  For example, Orlando acquired Danny Manning from Phoenix (as part of a package for Penny Hardaway) on 8/5/99.  They then traded Manning and Dale Ellis to Milwaukee on 8/19/99.  This trade did not violate the two-month rule because they used the assigned player exception for Manning and a traded player exception for Ellis.  Since the two players were traded using different exceptions it was not a technical case of aggregation to which the two-month restriction applied, and therefore the trade was legal.

Base year compensation (BYC) prevents another salary cap loophole. Without BYC, a team over the salary cap that wants to trade a player, but can't because of the assigned player exception (which says teams can receive no more than 115% of the salary they trade away), could just sign the player to a new contract that fits within the desired range, then do the trade.  BYC says "if you re-sign a player and give him a big raise, then for a period of time his trade value will be lower than his actual salary."

BYC defines the salary that's used to compare players for compliance under the assigned player exception (see question number 67 for more information about the assigned player exception). Usually, the salary used for comparison is the player's actual salary.  But under either of the following circumstances, a different salary is used when comparing salaries for trading purposes:

• The team is over the salary cap, used theLarry Bird or Early Bird exception to re-sign the player, and the player received a raise greater than 20%.
  
 
• The team is over the salary cap, it extended the rookie scale contract of the player, and the player received a raise greater than 20%.

*Whichever is greater

Here is an example of a BYC calculation:  A player earned $2 million in 99-00, after which he became a free agent. Prior to the start of the 00-01 season, he signs a new contract (re-signing with his previous team, which is over the salary cap) starting at $9 million.  This player qualifies for BYC, so his trade value is the greater of his previous salary ($2 million) or 50% of his new salary ($4.5 million), or $4.5 million. So this player, who actually earns $9 million, is worth $4.5 million for trading purposes.

When comparing salaries for trade, teams use their own player's BYC value and the other player's full salary, even if the other player is also BYC.  Here is a simple example -- two $5 million players, both of whom are re-signed (by teams over the cap) for $10 million.  Both players become base year players whose base year amount is $5 million (50% of the new salary).  If the teams want to trade these players for each other they compare their player's base year amount to the other player's full salary.  So each team can take back a maximum of 115% plus $100,000 of their player's $5 million base year amount, or $5.85 million.  They compare $5.85 million to the other player's full $10 million.  $10 million is way too high, so this trade can't be done, even though the players' actual salaries match exactly.

If one of the teams in the above example was below the cap, the trade still couldn't be done.  For the team under the cap, their player would NOT be BYC, so they would be comparing $10 million to $10 million. But since the other team is over the cap, their player is BYC, and they'd still be comparing $5.85 million to $10 million, which prevents the trade from working.  (See question number 74 for more information about trading BYC players.)

For Larry Bird or Early Bird players, the player's BYC begins on the date he signs his contract.  For extended rookie scale contracts, the player's BYC begins on the July 1 preceding the first season of the extension.  For example, if an extension of a rookie scale contract is signed on 10/30/99, his BYC begins on 7/1/00, because the first season of the extension is 00-01.  If a team tries to trade an extended rookie between the date his extension is signed and the date it takes effect, his "trade value" for the receiving team is the average of the salaries in the last year of the scale contract and each year of the extension.  This is called the "poison pill provision."

A player's BYC goes away if the team falls below the salary cap, the player signs with a different team, or the player is traded.

There was an interesting twist to base year compensation caused by the 1998 lockout.  Since the start of the 98-99 season was delayed, contracts signed prior to the 98-99 season were signed in February 1999.  The duration of BYC is specified in calendar years and not seasons, so for contracts signed in February 1999, the BYC amount changed in February 2000, which is in the middle of the 99-00 season.  It then expired in February 2001, which was in the middle of the 00-01 season.  So for these players, in addition to the mid-season change, BYC lasted into the third season of their contracts.

His actual salary is included in the team salary.  BYC is used only when comparing salaries for trades.

There's no specific rule that prohibits trading base year players in a two-team deal.  But the way the numbers work, it's not always possible unless one of the teams dumps additional salary onto a third team.

As an example, let's say Player A plays for Washington.  He earned $3 million last season and re-signed as a free agent for $10 million.  That makes him a base year player whose BYC value is $5 million (see question number 72 ).  Player B plays for Seattle and also earns $10 million, but is not a base year player.  Both Seattle and Washington are over the salary cap.

Now suppose Seattle and Washington want to trade Player A and Player B for each other.  Seattle can take back 115% plus $100,000 of Player B's $10 million salary, or $11.6 million.  Player A's $10 million salary easily fits within that limit.  But Washington can only take back as much as 115% plus $100,000 of Player A's $5 million BYC value, or $5.85 million.  Player B's $10 million salary is too high by $4.15 million.

This means, if the two teams want to complete this trade, that Washington must rid themselves of an additional $3.61 million in salary (I'll show why this is the correct amount a little later).  Let's say that Player C plays for Washington, is not a base year player, and earns exactly $3.61 million.  What happens if they want to trade Player A plus Player C for Player B?  Player A plus Player C total $13.61 million, which is greater than Seattle's $11.6 million maximum.  So Washington can't give the additional $3.61 million to Seattle.

This is where a third team must get involved.  This team must be far enough under the cap, or has a trade exception (see question number 68 ) to absorb the additional $3.61 million in salary.  Let's say Chicago (a team way under the salary cap) gets involved.  Here is an example three-team trade:

Washington sends Seattle Player A
Seattle sends Washington Player B
Washington sends Chicago Player C
Chicago sends Washington a future second round draft pick

Washington trades $5 million BYC plus $3.61 million salary, or $8.61 million.  They can receive 115% plus $100,000 of $8.61 million, or exactly $10 million, in return (this is why $3.61 million was correct above).  Washington receives Player B's $10 million salary, along with a draft pick that has zero trade value (see question number 70 ) for a total of $10 million.  The numbers exactly match.

Seattle trades $10 million in salary, and recives $10 million in salary, so they're fine.

Chicago trades $0 and receives $3.61 million, but since they're more than $3.61 million under the salary cap, they can absorb the increase.

However, not all trades involving base year players require a third team.  Let's say Player D plays for Washington.  He earned $8 million last season and re-signed as a free agent for $10 million, so his BYC amount is $8 million (see question number 72 ).  Washington can take back as much as 115% plus $100,000 of $8 million in trade, or $9.3 million.  Player E plays for Seattle, is not a base year player, and earns $9 million.  So Seattle can take back as much as 115% plus $100,000 of $9 million, or $10.45 million.

Player D and Player E can be traded for each other directly, even though Player D is a base year player.  Player E's $9 million salary is less than Washington's $9.3 million maximum, and Player D's $10 million salary is less than Seattle's $10.45 million maximum.  The teams have even more flexibility if one or both have a trade exception (see question number 68 ) or disabled player exception (see question number 17 ).

So a trade involving a base year player doesn't necessarily require a third team.

Under no circumstances can a team sign and then trade another team's free agent.  But there is a special rule that allows teams to re-sign their own free agents for trading purposes, called the sign-and-trade rule. Under the sign-and-trade rule, the player is re-signed and immediately traded to another team.  This is done by adding a clause to the contract which stipulates that the contract is invalid if the player's rights are not traded to the specific team within 48 hours.

A sign-and-trade deal can be made even with players that have been renounced.  However, a sign-and-trade deal cannot be made when the player was signed using the Mid-Level, $1 Million or Disabled Player exception.  Sign-and-trade deals are only allowed if the contract is for three years or longer (however, only the first season of the contract must be guaranteed).

One complication with sign-and-trade deals is that the signed player can immediately become a BYC player (see question number 72 for more information on BYC), so it's the player's BYC value that must be used when determining whether the trade is allowed.

See question number 79 for more information on how long a team must wait after signing a contract before they can trade a player.

No. A sign-and-trade is treated like a single, atomic transaction, not two separate transactions between which one party can change its mind.  The sign-and-trade clause makes the contract invalid if the trade does not take place within 48 hours.

Teams benefit because it allows them to get something in return for players they would otherwise lose to free agency. Players benefit because they can earn more money and perhaps play for a team they wouldn't otherwise be able to play for. This is because teams can use the Larry Bird exception (as long as the player qualifies) when re-signing players for a sign-and-trade deal. So they can probably offer more money than other teams, which are constrained by the salary cap. And even if the other team can offer the maximum salary to the player, they can only offer 10% raises, while the original team, using the Bird exception, can offer 12.5% raises. So the player makes more money. Also, the sign-and-trade can be made with a team that's capped-out and wouldn't otherwise be able to sign the player.

This last point is very important -- the sign-and-trade rule is a useful tool for teams that are capped-out and unable to offer players large contracts, but want to obtain specific high-priced free agents.

Yes, it's happened. Both Antonio McDyess with Denver and Tom Gugliotta with Phoenix signed free agent contracts and lost a significant amount of money that they could have earned had a sign-and-trade been done. This is because they could not reach a satisfactory agreement with their original teams (Phoenix and Minnesota, respectively). It takes two to tango, or in the case of a sign-and-trade, three.

A player cannot be traded until three months after signing a contract or December 15th of that season, whichever is later.  If the player is playing under a one-year contract and will have Larry Bird or Early Bird rights at the end of the contract, he can't be traded at all.

Once a player becomes a free agent, he cannot be traded, except in a sign-and-trade deal.

Players can be traded for cash, and cash can be included in trade packages.  The amount of cash is limited to $3 million.  The cash is NOT considered when matching salaries under the assigned player exception.

Teams are permitted to write a bonus called an "assignment bonus," or more conventionally a "trade kicker," into contracts.  This bonus is paid to the player when he is traded (within 30 days following the trade), but only upon his first trade and not upon subsequent trades.  The trade kicker is for a specific dollar amount, but this amount is limited to 15% of the remaining value of the contract.  For example, assume a player has a seven-year contract that pays $1 million per year.  This player also has a $500,000 trade kicker.  Since the trade kicker is limited to 15% of the remaining value of the contract, the actual value of the kicker varies from year to year, as follows:
 

Year	Remaining value of the contract	15% of the remaining value of the contract	Actual value of $500,000 trade kicker
1	$7,000,000	$1,050,000	$500,000
2	$6,000,000	$900,000	$500,000
3	$5,000,000	$750,000	$500,000
4	$4,000,000	$600,000	$500,000
5	$3,000,000	$450,000	$450,000
6	$2,000,000	$300,000	$300,000
7	$1,000,000	$150,000	$150,000

However, a trade kicker may never cause a player's salary to exceed the maximum salary, based on his years of service.

The value of a trade kicker is calculated only once each season, at the beginning of the season.  It does not decrease during the season as salary is earned.

For the salary cap, the value of an assignment bonus (trade kicker) is applied evenly to team salary among the remaining years of the contract, excluding non-guaranteed years (see question number 90 ) and years following an Early Termination Option (see question number 48 ).  For example, suppose the player from question number 82 is traded during the fifth season of his contract.  Per the chart in that question, the actual value of his trade kicker that season is $450,000.  If every season of the contract is guaranteed, and there is no Early Termination Option, then the $450,000 is spread evenly among the final three seasons of the player's contract, for $150,000 per season.  Since the player earns $1 million per season, $1,150,000 is included in the team salary in each of those seasons.

Now suppose the player has an Early Termination Option following the fifth season of his contract.  In this event, the entire trade kicker will be allocated to the fifth season of the contract.  The player will therefore count $1,450,000 as team salary during that season.  If the Early Termination Option is not exercised, $1,000,000 will be included in the team salary during the sixth and seventh seasons.
 

For trades, these kickers can be a nuisance.  When a team trades for a player with a trade kicker, it must count the portion of the kicker that applies to that season as incoming salary.  Let's say a team wants to trade their $900,000 player for the player used in the example above.  Using the first case above, where there is not an Early Termination Option or non-guaranteed season, the kicker counts $150,000 in the current season, so the trade cannot be made.  The team trading the $900,000 player can accept $1,135,000 in return (see question number 67 ), but the player with the trade kicker counts as $1,150,000 in incoming salary.

Fortunately, the CBA allows the player to waive part of his trade kicker, if necessary, in order to complete a trade.  To make the above trade work, the player would need to waive $45,000 of his $450,000 trade kicker.  The kicker would then be worth $405,000, and one-third of that, or $135,000 would be allocated to the current season.  The player would therefore count $1,135,000 as incoming salary, which exactly matches the maximum the other team can accept in return for their $900,000 player.  The player is not allowed to waive more than the amount necessary to make the trade work.

Another potential difficulty is that a team trading a player with a trade kicker uses the player's original salary, before the kicker, when comparing salaries for trade.  Here is another example, using the same player as before.  This time, let's assume our player has an Early Termination Option following the fifth season of his contract, so if he is traded during the fifth season, the entire kicker is allocated to that season.  This means that following a trade, $1,450,000 is included in his new team's team salary.  Suppose a team wants to trade their $1,300,000 player for this player.  The other team can accept $1,595,000 for their player, and our player counts $1,450,000 as incoming salary.  So it works from their end.  But our player counts $1 million as outgoing salary, so the most we can accept in return is $1,250,000.  This means the trade doesn't work from our end.  And in this case, waiving a portion of the trade kicker will not expedite matters.

A "no-trade" clause can be negotiated into an individual contract if the player has been in the NBA for at least eight seasons, and has played for the team with which he is signing for at least four seasons.  They don't have to be the immediately prior four seasons -- for example, Horace Grant got a no-trade clause from Orlando when he signed with them in 2001.  He had played for Orlando for four seasons, but had played for Seattle and Los Angeles in the interim.  Very few players actually have one of these no-trade provisions.  Otherwise, individually negotiated contracts may not contain no-trade clauses.  The no-trade clause prevents the team from making a trade involving the player without the player's consent.

In addition, teams cannot trade players under the following circumstances:

• For two months after receiving the player in trade, if the player is being traded in combination with other players.  However, the team is free to trade the player by himself (not packaged with other players) immediately.  This two-month restriction applies only to teams over the salary cap.  (Also see question number 71 for a special case where players can be traded together in less than two months.)
  
 
• When the trading deadline has passed.  Teams are free to make trades again once their season has ended, but cannot trade players whose contracts are ending or could end due to an option.
  
 
• For three months or until December 15th of that season (whichever is later) after signing a contract as a free agent or draft rookie.  (Note: This does not apply to players who sign contract extensions or who renegotiate their existing contracts.  These players may be traded immediately.)
  
 
• When the player is playing under a one-year contract and will have Larry Bird or Early Bird rights at the end of the contract.  Note: This includes first round draft picks following their fourth (option) season, who accept their team's qualifying offer for their fifth season.
  
 
• For one year after exercising the right of first refusal to keep a restricted free agent (however, the player can consent to a trade to any team except the team that tried to sign him).
  
 
• After claiming a player on waivers, for 30 days if the player was claimed during a season, or until the first day of the next season if the player was claimed during the offseason.
  
  
• A team cannot reacquire a player they traded away during that season (a season being July 1 - June 30) unless the player has been waived.
  

The fourth bullet item above (players with one-year contracts can't be traded if they will be a Bird or Early Bird free agent) has an interesting implication.  If a player has a two-year contract, but the second year is an option year, then the league treats it like a one-year contract and does not allow the player to be traded.  If the option is exercised and the contract becomes a true two-year contract, then the player is tradeable.  The Phoenix Suns had to exercise their team option on Corrie Blount before trading him to Golden State on 1/26/01.

Sometimes teams get locked into long-term financial commitments from which they later want to extricate themselves.  Typically this is when they have high-priced and long-term contracts, but have no real hope of competing for a title before those contracts run out.  These teams are usually left wthout any hope of having cap room with which to sign free agents, and may be facing large luxury tax payments as well (see question number 15 ).  But if such a team were to trade a high-salaried player for a player with a similar salary but in the last year of his contract, then they would be able to rid themselves of that financial obligation the following summer.  This could get the team below the luxury tax threshold, or possibly create enough cap room with which to sign a productive free agent.

This means that some players who aren't necessarily trade-worthy from a basketball standpoint become a valuable trade commodity because their contract is ending.  For example, a number of teams were interested in acquiring Miami's Alonzo Mourning prior to the 02-03 trade deadline, even though Mourning was out for the  year and therefore had little value to an NBA team as a player.  But his $20.6 million salary and ending contract made him a hot trade commodity (and Miami, wanting to create cap room for themselves, wasn't about to trade him).

The CBA has a general prohibition on circumvention which states that the rules exist to preserve the benefit derived by the teams and players, and that nobody shall do anything to defeat or circumvent the intent of the agreeement.  The league can use this prohibition to disallow a trade that they feel circumvents the CBA, even though that trade is not specifically prohibited by the agreement.

An example is something referred to as "stepping up the basis."  Let's say Team A has Player X who makes $5 million.  Team B has Player Y making $6.5 million, and Player Z making $5.75 million.  The teams want to trade Player X for Player Y, but can't because Team A can only take back $5.85 million for Player X, and Player Y's $6.5 million salary is too high.  To get around this, the teams trade Player X for Player Z, whose salary is within Team A's $5.85 million limit.  As soon as this trade is approved, Team A trades Player Z back to team B for Player Y.  Since Team A can now take back 115% plus $100,000 of Player Y's $5.75 million, which is $6.7 million, Player Y's salary is now within their limit.  By staging this as two separate trades, the teams effectively trade two players who cannot directly be traded for each other.  Although not specifically prohibited by the CBA, this is something the league would view as circumvention and disallow under the general prohibition.

Averaged contracts were part of the previous CBA, but were eliminated in the current CBA.  However, players whose contracts were signed under the previous CBA might still be affected by averaging.

The 1995 CBA limited yearly salary increases to 20% of the first-year salary (as opposed to the current 10%/12.5%), and there was no maximum decrease.  An exception called "banked room" also existed, which under certain circumstances permitted the yearly increase to exceed 20%.

For contracts signed using the Larry Bird Exception, rookie "scale" extensions or banked room under the 1995 CBA, if the salary ever increased or decreased from one year to the next by more than 20% of the first-year salary, then contract averaging was triggered.  In an averaged contract, the amount counted as team salary cap (and hence the player's trade value) in each season of the contract is the average salary for the contract (minus any option years).

For example, suppose a player was re-signed using the Larry Bird Exception in 1998 (before the current CBA), and they gave him a five-year contract.  Suppose they front-loaded the contract, giving him $15 million in the first season, and $5 million in each of the remaining seasons.  Since this player was re-signed using the Larry Bird Exception, and his salary decreased by more than 20% between years one and two, contract averaging was triggered.  His salary for each season of the contract (for team salary and trade purposes) is $7 million.

Since contract averaging was eliminated with the current CBA, contracts signed January 1999 or later are never averaged.

It is the date during the season after which trades are prohibited. It is defined as the 16th Thursday of the season.

It is a period during the month of July in which teams may not sign most free agents or make trades.  Free agents become free on July 1, but the salary cap is not set until the audit report is completed later in the month.  Teams and players must wait for the salary cap to be set before trades and most free agent signings can commence.  Teams may negotiate with free agents beginning July 1, and may even agree to terms, but they have to wait until the moratorium ends before signing a contract.

When the CBA was signed, the July Moratorium was intended to last the entire month of July in every season.  However, in 2001 the NBA and Players Union agreed to shorten the moratorium, in order to allow contract issues and personnel matters to be resolved sooner.  The dates for the July Moratorium are now as follows:
 

Season	July Moratorium	Players may be signed beginning
01-02	July 1, 2001 through July 17, 2001	July 18, 2001
02-03	July 1, 2002 through July 16, 2002	July 17, 2002
03-04	July 1, 2003 through July 15, 2003	July 16, 2003
04-05	July 1, 2004 through July 13, 2004	July 14, 2004

The exception to the moratorium is when a player accepts a required tender or qualifying offer.  A required tender is an offer that must be made by a team to its draft pick.  A qualifying offer is the offer the team must provide in order to make their free agent a restricted free agent (see question 34 ).  These signings are allowed because they do not depend on the salary cap.

So during the July Moratorium, you may see:

• Teams signing their first round draft picks (to a standard rookie "scale" contract -- see question 38 )
  
 
• Teams signing their second round draft picks (for one season at the minimum salary, or one season plus an option year at the minimum salary).
  
 
• Teams re-signing players who have finished the fourth season of their rookie "scale" contract (for the raise specified in the scale -- see the salary scale )
  
 
• Teams re-signing players who are subject to the right of first refusal (for 125% of their previous salary, or the minimum salary plus $150,000, whichever is greater, see question 34 )

Not necessarily.  There are a few specific types of contracts that must be guaranteed.  All other guarantees are a matter of individual negotiation between the player and team when the contract is signed.

There are actually several types of guarantees: lack of skill, death (insured or non-insured), injury/illness (insured or non-insured), mental disability (insured or non-insured), and non-insured basketball-related injury.  So, for example, a contract might be fully guaranteed for any injury or illness, but not for lack of skill.

The required guarantees are as follows:

• For sign-and-trade contracts, the first season must be protected for lack of skill.
  
 
• For rookie "scale" contracts, all seasons must be protected for skill and non-insured injury/illness for at least 80% of the rookie scale amount.

• The player is released prior to January 10 and the player is unfit to play because of a basketball-related injury, OR
  
 
• The player is terminated on or after January 10.

Tampering is when a player or team directly or indirectly entices, induces or persuades anybody (player, general manager, etc.) who is under contract with another team to negotiate for their services.  The NBA takes tampering very seriously and may impose stiff penalties if it is discovered, however the league will not investigate unless another team files tampering charges.  Here are some recent examples:

• The Miami Heat were discovered to have tampered with Pat Riley in 1995 by negotiating with Riley while he was still head coach of the New York Knicks.  The Heat "settled," and avoided league-imposed penalties, by compensating the Knicks  with $1 million and their first round draft pick in 1996.
  
 
• After Will Perdue left San Antionio in the 1999 offseason to sign with Chicago, he commented to the press about the possibility of the Bulls signing Tim Duncan and/or Grant Hill in 2000.  The league considered this to be tampering, and issued Perdue a warning.

The NBA does not publish player salaries.  However, there are a number of unofficial sources for salaries. One of the best is Patricia Bender's:

http://www.dfw.net/~patricia/index.html

Patricia maintains salary information for every season back through 93-94.

The league does not publish this information either. But again, Patricia Bender maintains this information in her "Player Contracts" file at:

http://www.dfw.net/~patricia/index.html

Patricia includes signing dates, free agency year, and opt-out years, although she describes her information in this area as "not complete or necessarily accurate."

Incidentally, free agents become free agents on July 1 of the year in which their contract expires, although teams may not sign free agents until the July moratorium ends (see question 89 ).

The following dates are referenced in the CBA:
 

January 5	Ten-day contracts can be signed (see question 63 )
January 10	Contracts guaranteed for rest of season (see question 90 )
February 28/29	Last day contracts can be renegotiated (see question 50 )
March 1	Players waived after this date are ineligible for the playoffs
June 30	Option years (except scale contracts) must be exercised (see question 48 )
	Deadline for qualifying offers (see question 34 )
July 1	Salary cap year begins
	July moratorium begins (see question 89 )
	Raises take effect
	Free agents become free (see question 95 )
	Base year compensation for extended scale contracts begins (see question 72 )
July 18*	Free agent contracts can be signed (see question 89 )
	Salary cap adjusts (see question 11 )
	Contracts can be renegotiated (see question 50 )
	Contracts can be extended (see questions 49 )
August 15	Players waived on or after this date remain on waivers for 48 hours (see question 53 )
October 1	Last day to sign replacement player with disabled player exception if the player was injured December 1 - June 30 and will be out for the season (see question 17 )
October 31	Last day to exercise 4th year option on scale contracts (see question 38 )
	Last day contracts can be extended (see question 49 )
December 15	Players who signed a contract on or before September 15 can be traded (see question 79 , 84 )
*	The July18 date is for 2001 only.  It is July 17 in 2002, July 16 in 2003 and July 14 in 2004.

The Collective Bargaining Agreement is a 380-page legal contract between the league and the Players Association, and consequently is written in dense legalese.  It is my hope that this FAQ answers all your questions.  However, if you really want the CBA, it is available both online and in PDF format from the Players Association's web site at http://www.nbpa.com/cba .  (The Adobe Acrobat reader is required to view documents in PDF format.)  The CBA is also available directly from the league office by calling (212) 407-8000 during normal business hours and asking for the legal department.  Requests to the league office for the CBA require a letter stating who you are and why you want a copy, along with a fee of $15.00 (subject to change without notice).

Unfortunately, the CBA doesn't answer every question.  The NBA, like most organizations, has by-laws, which are separate and apart from whatever contracts it may make with other entities such as the Players Association.  Many of the rules are contained in the NBA By-Laws, and in a third document, the NBA Constitution.  While it is possible for the public to obtain copies of the CBA,  the league office says the By-Laws and Constitution are absolutely off-limits.

The media often gets it wrong. Some media writers simply don't pay enough attention to the rules (they -are- pretty complicated, after all). Sadly, this is especially true of media writers who like to write about rumors. Many of the rumors they write about are simply not possible.

This FAQ has been fact-checked against the actual CBA, and I'm pretty confident about its accuracy.  Still, this FAQ isn't necessarily 100% accurate. If you find any errors, please contact me at lmcoon@cox.net (please include the source of your information, if possible). You may also contact me if there are additional questions you would like to see added to this FAQ, or if you find any of the answers confusing and in need of clarification.

The author of this FAQ is not connected to the NBA, any of its teams or the Players Association.

Absolutely!  Just don't rely on a prompt answer -- this isn't my job, it's a hobby, and I'm only able to answer e-mail as time permits.  I get a *lot* of e-mail, and sometimes people's mail gets backed up.  In addition, some responses are delayed until I can verify facts with others, or batched together so I can answer a set of related mesages all at once.  Unfortunately, questions that are longer and involve a lot of thought, research and/or detail on my part tend to be delayed more than simple ones that I can answer off the top of my head.  I do ask that you make a reasonable effort to make sure the information you're looking for isn't already covered in the FAQ before e-mailing me.

I also recognize that some of you (media writers, etc.) need this information as part of your job, and not simply because you're curious.  I try to give these questions the highest priority.  Apologies in advance to anybody who gets put on the back burner as a result.

This FAQ is copyrighted, and the copyright notice appears at the end.  The intent of the copyright is only to restrict the following:

• For-profit use.  The author didn't make any money from this FAQ, and doesn't want anybody else profiting from his hard work.
  
  
• Posting a copy of this FAQ on another web site.  This only leads to different versions of the FAQ being on-line and becoming out of sync.  Rather than post a copy of this FAQ on your web site, please post a link to this page.  That way, you won't have to worry about your copy needing to change when this master copy changes.

• Permission is not granted to make or distribute English copies of this FAQ, whether as a mirror, paraphrase, modified for a specific audience, etc.  The English language remains my exlcusive purview for this FAQ.  See the copyright notice for additional information.
  
  
• Permission is granted for readers to create translations of this FAQ in languages other than English, provided the translator and/or host of the translation agrees to all the terms of this policy.
  
  
• I will not create or host your translation.  You must do both.
  
  
• I will not be able to assist you by verifying the correctness of your translation. 
  
  
• You must state very clearly and prominently in your translation that it is a translation of an original, copyrighted English document, with a link to this FAQ.  You must clearly indicate the date of your translation, and the date of the latest revision to this FAQ (which can be found in the revision history).  This gives readers some indication that your translation may not be up to date.
  
  
• You must agree to keep your translation up to date with changes to this FAQ.  If you cannot continue to meet this requirement, you must find someone else who is able to do so, or delete your translation.
  
  
• You must e-mail me with the URL for your translation, the language in which it is written, and an indication that you agree to comply with the terms of this policy.
  
  
• I will provide a link to your translation in this FAQ.
  
  
• I will check links to translations on a periodic basis, and will remove any links I find to be dead.

The latest version of this FAQ can be found at:  http://members.cox.net/lmcoon/salarycap.htm

The original NBA Salary Cap FAQ was written by Tony Minkoff and covered the '95 CBA.  If you're curious, Tony's original FAQ can be found by clicking here .  This version of the FAQ was based on Tony's original FAQ, and on several articles written by Garret Okamoto for "Top of the Key. "

Tony and Garret participated with me on the research and draft review process, along with Patricia Bender, Josh Frankel, Jon Hamm, Jonathan Richards and Gary S. Simon.

I am responsible for the ongoing maintenance and upkeep of this FAQ.  Josh Frankel is responsible for calling people incessantly and politely harassing them until they talk to us.

The revision history acknowledges several other people whose contributions found their way directly into the FAQ, and Tony's original FAQ lists several people who contributed to the original.
 

Note: This web page will NOT accept advertisements, so don't even ask.
 

Larry Coon
lmcoon@cox.net

8/99

Copyright 1999 by Larry Coon.  All rights reserved.  No person may (a) re-produce more than any one question and answer contained in this FAQ;  or (b) re-produce for profit any portion of this FAQ, in any form (including electronic), without the express, prior written (including e-mail) consent of the copyright holder.  Links to the original copy of this FAQ may be  posted without restriction.  It is the intent of the copyright holder to prevent for-profit use and version proliferation of this FAQ, and to grant consent for any other use.