Salary Cap and BRI

BASKETBALL RELATED INCOME, SALARY CAP, MINIMUM TEAM SALARY, & ESCROW ARRANGEMENT

  1. Definitions:
    1. Basketball Related Income:
      1. Definition of of BRI:  Definition of basketball related income encompasses what could be included as basketball related income.  Accordingly, basketball related income includes Proceeds from the following [§1 a]:
        1. Gate Receipts and Governmental Charges:
        2. Broadcasts:
          1. Medium:
          2. Subject Matter of Broadcasts:
        3. Exhibition games:
        4. Playoff games and Arena Rentals:
        5. Novelties, Concessions, and Parking:
        6. Arena Signage:
        7. Luxury Suites:
        8. Arena naming rights:
        9. League related entities:
        10. Premium seat licenses:
        11. Practice facilities naming rights:
        12. Ghost proceeds:  [having sold the right to name].
        13. Activities that do not relate or arise from players’ performance in NBA games:  [VII §1, subsection a(2)].
          1. Assignment of player contracts:
          2. Sale of assets or property of ownership interest:
          3. Grant of expansion team and relocation fees:
          4. Dues:
          5. Owners’ capital contributions:
          6. Suspensions:
          7. Revenue Sharing:
          8. Interest income:
          9. Insurance recovery:
          10. Sale or rental of real estate:
          11. Anything connected to a New or renovated arena, facility, or team building:
          12. Induced Relocation Value:
          13. Escrow and Tax payments to the NBA or Teams:
          14. Distributions etc. paid Owners, Members, and Partners:
          15. Expressly identified categories or sources of BRI revenue:
          16. Group licensing agreements:
          17. Team-Related Fundraising:
          18. NBADL and other leagues:
          19. Leasing of Team Assets:
          20. Value from 3rd Parties:
      2. Formula to Evaluate Whether a Category or Source of Revenue is BRI: [§ 1 (a) (3)]
      3. With Respect to any Lease related to an arena:
      4. Can’t count BRI streams twice in two separate categories: . . . (i) – (ii)
      5. Subject to § 11 (below) Player Association Audit Rights: . . . (i-Iv)
      6. Local Broadcasts & Determining BRI: § 1, subsection a (7) (i) –
        1. Proceeds from Related Parties Doing Business with Team Owners.[§ 1, a, 7, i]
        2. Procedure Teams that Enter into Local or Regional Telecast Agreements:[§ 1, a, 7, ii]:
        3. Procedures for the NYKs and media:  [§ 1, a, 7, iii]
      7. National Broadcasts & BRI:  [§ 1, a, 8,]
      8. Duty of using Commercially Reasonable Efforts to Increase BRI:[§ 1, a, 9,]:  [act with reasonable business judgment]
      9. Penalties Failing to Provide Material Information to An Accountant for an Audit Report for the BRI [Underestimation]  – – ?[§ 1, a, 10,]
      10. Limits on provisions in entering into accountants agreements. . .[§ 1, a, 11,]
      11. Deducting Insurance. . .[§ 1, a, 12,]
      12. Equity Transactions (securities that are included in BRI) [§ 1, a, 13,(i)]:  Related provision is [§ 1, a, 2,],  include value of securities received by nba-related entities in entities that were not NBA-related entities to such receipt of the securities, to the extent otherwise constituting BRI under the agreement
        • Publicly Traded Securities:  [§ 1, a, 13,i,A]:
          • Definition of Publicly Tradable § 1, a, 13,ii]
          • If Not Publicly tradable at the time of receipt: § 1, a, 13,i,C]
          • Options, Warrants, Convertible Securities: § 1, a, 13,i,B]
          • Contingent securities that Become Publicly Tradable after Receipt:  § 1, a, 13,i,D]
      13. LIMITS:  Do not Include Anything that could cause Doubt: § 1, a, 13,ii
    2. Accounting Methods/Lump Sum Payments:  .
      1. Amortizing:
        1. Signing Bonus for Local Telecast Contract: [§ 1, subsection b(1)].  Accounting should be calculated exclusively pursuant to the accrual method of financial accounting accounting
        2. Luxury Seat Licenses and PSLs:  [§ 1, subsection b(2)]
      2. Contingencies and Repayments:  [§ 1, subsection b(3)]:
      3. Projections and Estimations of BRI:
        1. Projections:  Made during moratorium period With Agreement: If there is no agreement, then following will formula will be used below.
        2. Without Agreement:  When there has been no agreement, the BRI will be created through a formula:  (Preceding Year’s BRI x 1.045%).
          • Limit:  The only sources not receive the 1.045% increase will be national broadcast or national telecast or network cable television contacts.
          • What to Include from the Media Broadcast Contracts of ABC and TNT:  [§ 1, subsection c(2)]
        3. Projections:
          1. Interim Projected BRI:[§ 1, subsection f) using an Estimated BRI for a projected salary cap year.
        4. Estimations of:
          • Total Benefits:[§ 1, subsection h) An interim audit report’s estimate of the total benefits for a salary cap year.
          • Total Salaries:[§ 1, subsection i)
          • Total Salaries and Benefits:  [§ 1, subsection j) set-forth in the interim audit report.
          • Basketball Related Income:  [§ 1, subsection k)  As set forth in the interim audit report for such a salary cap year.
      4. With Respect to Expansion Teams:
        • Local Expansion Team BRI: [§ 1, subsection d()] – – first two seasons of expansion.
        • Projected Local Expansion Team BRI: (Local Expansion Team BRI of immediately preceding season x 1.045%)
    3. Misc:
      • Barter:([§ 1, subsection f)  means to trade by exchanging one commodity, service, or other non-cash item for another.
  2. CALCULATION OF SALRY CAP & MINIMUM TEAM SALARY: [§ 2]
    1. SALARY [§2, a, 1]:
      1. CAP FORMULA:
        • 2011-12:  Shall Equal $ 58.044 Million.
        • 2012-13:  Shall equal the greater of either:
          1. [((the Projected BRI for the 2012-2013 Salary Cap Year) x (.4474))   (Projected Benefits for the 2012-2013 Salary Cap Year pursuant to IV § 9)] / (29, which is the number of teams scheduled to play in the NBA during the 2012-2013, other than Expansion Teams during their first two Salary Cap Years in the NBA); OR
          2. 58.044 Million, which is the previous year’s salary cap.
        • 2013-14:  [((the Projected BRI for the 2012-2013 Salary Cap Year) x (.4474))   (Projected Benefits for the 2012-2013 Salary Cap Year pursuant to IV § 9)] / (29, which is the number of teams scheduled to play in the NBA during the 2012-2013, other than Expansion Teams during their first two Salary Cap Years in the NBA);
          1. Limits:
            1. This year is subject to adjustments set forth in VII, § 2, subsection d.
            2. Expansion Teams + BRI:
              1. [§ 2, subsection a(2)].
        • 2014-15:  Same formula as 2013-14
        • 2015-16:  Same formula as 2013-14
          • Mandatory use 2013-14 formula: [§ 2, subsection a(4)] (1) No completion of Audit Report for Salary Cap Year beginning on day after moratorium period, and (2) no agreement b/t NBA + Players’ Association as to Projected BRI and Projected Benefits pursuant to Article VII, § 1 + article IV, § 9 . . .fill-in later.
            • Differences:  Use interim, not projected,  /
      2. Timing:  The Salary Cap for a Salary Cap year begins on the day after the moratorium period ends–e.g., if the moratorium ends December 31, the new salary cap begins on january 1st. § 2, subsection a (3).
    2. Minimum Team Salary: § 2 (b).
      1. 2014-15:  Minimum Team Salary = 90% of Salary Cap for Such Salary Cap Year.
      2. 2015-16:  Minimum Team Salary = 90% of Salary Cap for Such Salary Cap Year.
      3. Formula to Calculate whether a Team has met its Minimum Team Salary:
        1. Include in Calculating Team Salary for Purposes of meeting the minimum salary any Salary in respect of such Salary Cap Year that is excluded from the Team’s Team Salary in
          1. §4(h) and
          2. §12(f)(b) [below].
      4. Formula to Calculate Team Salary in this Section use the same calculation formulate that the accountants use to compute Total Salaries and Benefits in the Audit Report (Audit Report defined in § 10)
        • Limit:  § 2 (b)(4) subjected to.
      5. LImits:
        1. Pelnalties:§ 2 (b)(2)
          • Below Minimum Team Salary at Last Regular season game:  In general, must pay the difference pro-rata to the players on the team.
          • Other options:  It appears there are other opbiotns.
        2. No Limits:  Nothing should be limiting as to a team getting the minimum team salary. § 2 (b)(3)
    3. Expansion Team Salary Caps & Minimum Team Salary: § 2 c1-2.  Expansion teams shall have the same Salary Caps and Minimum Team Salaries as all other Teams.
      1. limits/exceptions:
        1. Salary cap  in year 1 of expansion:
        2. Salary Cap in year 2 of expansion:
    4. Adjustments to Salary Cap and Minimum Team Salary:
      1. Increase in Salary Cap Next Year [§2, subsection d(1)]:  In any Salary Cap year pursuant to this agreement that the Total Salaries and Benefits Fall Below the Designated Share, then Salary Cap shall be increased by the formula bel
        1. Formula: (the amount of the shortfall) / (# of Teams in the NBA during such subsequent Salary Cap Year.
          1. # of teams:  Exclude Expansion teams within their first two years of expansion when calculating # of teams
        2. Designated Share: As defined pursuant to 12(b)(3).
      2. Overages:  Overages are defined in 12(a)(14) below . . What is the Overage of the year we want?
        1. Overage is 6 % or Less:  No Adjustment:  Overage in Salary Cap Year is equal to or less than 6% of Total Salaries and Benefits
        2. Overage is Greater than 6%:  Reduce next year’s salary by the following through following the series of 7 steps
          1. Overage = Overage – (6% of Total Salaries & Benefits) = x.
          2. Question?
            • Does projected BRI exceed last season’s BRI by 8%?; OR
              • If Yes: (Step 1 Result) / (# of NBA teams during the subsequent Salary Cap Year)
              • If No:
            • Does the Overage Exceed 9% of Total Salaries and Benefits?
              • If Yes: (Step 1 Result) / (# of NBA teams during the subsequent Salary Cap Year)
              • If No:
            • LIMITS:  # of teams do not include expansion team in first two years.
          3. STEP 3 Figure:  (Projected BRI for Salary Cap Year) – (BRI for the prior Salary Cap Year) =
          4. Step 4 Figure:  (Step 3 Figure) – (8% of BRI for the prior Salary Cap Year)
          5. Step 5 Figure: (step 4 figure) x (.4474 (aka 44.74%)
          6. Step 6 Figure:  (Step 1 Figure) – (Step 5 Figure)
          7. Question:
            1. Is Step Step 6 Figure less than zero?
              1. yes? Then stop. no adjustments shlla be made to the Salary Cap for the Subsequet Year, and no further steps are needed.
              2. No?  (Step 6 Figure) / (# of NBA teams during the subsequent Salary Cap Year)
                1. Results:  The Result of this is the amount of the reduction in the Salary Cap for such subsequent Salary Cap Year.
                2. LIMITS:  # of teams do not include expansion team in first two years.
    5. DETERMINATION OF SALARY:   A player’s salary with respect to a Salary Cap Year is calculated pursuant to the following rules:
      1. Deferred Compensation (DC):
        1. General Rule:   Any Deferred Compensation in a contract must be specified as to the year it is being deferred.
          1. Effect on Players’ Salary:  DC is added to the players salary in the salary cap year that the deferred compensation is set to be paid out.
            1. Example:
          2. Applicability:  To those contracts either entered into or extended or renegotiated after the date of this Agreement.
        2. Over 36 k/Rule:
          1. Applicability:  To any Player Contract either entered into or extended or renegotiated that, (i) beginning with the date such Contract, Extension or Renegotiation is signed, (2) the contract covers four or more Season (3) At least one of the seasons of the contracts has to commence after the player turns 36.
            1. Policy:  To dis-incentive owners from signing players who retire who have a good chance of retiring before their contract runs out, resulting in the players’ salary in those years of his retirement not affecting the teams’ salary (e.i., allowing a team to pay  the remains of a player’s contract while the salary does not affect the teams’ salary).
            2. Applicability:  4 Year Contracts VS. The First Salary Cap Year That Covers a Season that Follows the Player’s 36th Birthday:  Pick whichever is later.
              1. 36th Birthday:
              2. Distributing FOURT Salary Cap Year’s Salary/ Zero Year:  Any players salary in year 4 is evenly distributed among the players’ first three years, proportionally adding the dividends to each year of the team’s salary, creating zero team salary spent on that player in the fourth year of the contract (i.e., zero year).
                1. Distinguish effect on Team vs. Player Salary:  The player does not get the benefit of more money in the front-end of his contract; he continues to get what the contract is worth every year.  The effect of this rule is really to keep teams in check by limiting their TEAM-SALARY.
              3. Distributing the Salary Cap Years that follow Players’ 36th Birthday:    Any players salary in the years commencing in the season after that the players’ 36th birthday is evenly distributed among the players’ first three years, proportionally adding the dividends to each year of the team’s salary, creating zero team salary spent on that player in the fourth year of the contract (i.e., zero year).
            3. 5 Year Contracts vs. The First Salary Cap Year That Covers a Season that Follows the Player’s 36th Birthday:
              1. Distributing FIFTH Salary Cap Year’s Salary/Zero Years: Any players salary in year 4 and 5 is summed up, and evenly distributed among the players’ first three years, proportionally adding the dividends to each year of the team’s salary, creating zero team salary spent on that player in the fourth year of the contract (i.e., zero year).
                1. Distinguish effect on Team vs. Player Salary:  The player does not get the benefit of more money in the front-end of his contract; he continues to get what the contract is worth every year.  The effect of this rule is really to keep teams in check by limiting their TEAM-SALARY.
              2. QVFA Applicability:   The qvfa is (1) 33 or 34, (2) enters the Over 36 Contract with his previous team for FIVE seasons.
                1. Limits:
                  1. Deemed 33 Years of Age:  (1) entered into this K with prior team before Oct. 1, (2) is 32 years of age at that time of entry, (3) will turn 33 on or before such OCto 1.
            4. Seasons:  Pursuant to this rule:  season commence on October 1 and conclude on the last day of the Salary Cap Year.
            5. Zero Years:  Are either fourth or fifth years.
            6. Limits:
              1. Calculating the salary when 2 years before the first zero year:   Take the players’ salary for the two seasons before the zero year and the zero year and ad them together before dividing them in equal shares over the remaining 3  seasons, affecting only the team salary.
                1. Example:   Wade sings a deal for 12 million for four years.  His fourth year year is a zero year, worth 3 million in actual money.  Before he begins his first year, that zero year is divided equally among the first three years, resulting in an extra million of team salary in the first three years.   4 / 4 / 4.  After year 1, there are two more seasons before the first zero year (Season 2 and 3).  In actual salary, he is due 9 million (3 / 3 /3 /3 – the aggregated amount for three seasons), so divide that 9 million by three (year two, year 3), and attribute the result (3 mill per year) to each of those years as they remain to team salary.
                2. Note:  if this example were with a five year contract, then the same would still hold true, making year two, three, and four reflect 3 million in the zero year), and the fifth year would still be zero.  Repeat this process in year two when all that is left is year 3, 4, and 5.
              2. Reallocations:  No re-allocation of Salaries for any contract between a QVFA and his Prior Team covering FOUR (4) or fewer season entered into by a player at age 33 or 34.
              3. Birthdays:  Those birthdays that take place during the Moratorium Period shall be treated as if his birthday did not occur during the Moratorium Period (the age before the moratorium period) as long as he signs an over-36 contract the day before the period.
      2. Signing Bonuses:
        1. SCOPE INCLUDED:  Include amounts provided for either (1) in the contract that a player may earn via (i) the signing of the k or (ii) being traded or (2) for exceeding the Excluded International Player Payment Amount with respect to foreign players in accordance with Section 3(e) below.
        2. Proration:  3b3i.  Any signing bonuses is allocated and prorated over the number of years covered by the contract.
          1. Shall be Allocated:  Apportion the amount of money distributed such that it is in proportion to the base the percentage of compensation of that salary cap year to the rest of the contract.
            1. Traded Ks and Bonuses:  Distribute such a bonus to the then current contract and any remaining Salary Cap Years left at the trade.
            2. The years that are given a bonus to must be protected for lake of skill.
            3. Limits:
              1. Early Termination Option Exception:  Any K that has an ETO, the bonus is not distributed on the Early Termination Year–It is distributed up until the year immediately preceding that.
              2. None of the base compensation provided for by a player contract is protected for lack of skill at time of allocation:  The entire signing bonus shall be allocated to the first Salary Cap Year of the Contract.
                1. Signing bonus for trade:  The salary cap year during which the player’s contract is traded.
                2. Applicable to Traded Player’s Base Compensation:  The then current or remaining Base Compensation in the case of a signing bonus for a traded player does not provide for such.
          2. Is Protected for Lack of Skill:  Any signing bonus contained in a Player Contract is protected for lack of skill;
            1. Early Termination Option Exception:   Provided, however
        3. Extensions:
          1. When a Team w/ a Team Salary is at or Over the Salary Cap:  Entering into an extension that calls for signing bonuses requires that bonus is paid no sooner than the first day of the first Salary Cap Year covered by the extended term  and (2) shall be allocated, in equal parts, over the number of Salary Cap years covered by the extended term in proportion to the percentage of Base Compensation in each such Salary Cap Year that, at the time of allocation,  is protected for lack of skill.
            1. No Base Compensation provided during the extended term is protected for lack of skill, At the Time of Allocation:  All of the signing bonus shall be allocated to the first Salary Cap Year of the extended term.
          2. When a Team w/ a Team Salary is at or Over the Salary Cap:
            1. May enter into an Extension that calls for or contains a signing bonus to be paid at any time during the Contract’s original or extended term.
            2. Provides the bonus to be paid at earliest/no sooner than first day of Salary Cap Year covered by such extension:  Bonus distributed pursuant to “proration rules” (3b3i).
            3. Provides the bonus to be paid before the first day of Salary Cap Year covered by such extension, there are rules:
              1. Allocation:  Bonus allocated over remaining Salary Cap Years and Extended terms via proportion to % of Base Compensation in each such Saalry Cap Year that, at the time of allocation, is protected for lack of skills.
                1. Includes:  The then-current Salary Cap Year.
            4. Considered a Renegotiation:  Extensions are renegotiations pursuant to Renegotiations (§7 below).
          3. Loans To Players:
            1. Applicability:  To all loans made by any Team to a player.
            2. Loans bearing Interest:  Loans that do not bear an interest shall be imputed upon the outstanding balance at a rate equal to the difference between the Target Rate and the actual rate of interest to be paid by the player and such imputed interest shall be included in the player’s salary.
              1. Scope:  Includes no annual interest at an effective rate lower than the “Target Rate.”
              1. Target Rate:  Is the Prime Rate + 1%.
                1. Timing:  1% as of the date the loan is agreed upon.
                2. Limits of Target Rate:  Shall be neither lower than 7% nor greater than 9%.
              2. Prime Rate:  Is the “Money Rates” column (or any successor column) of the Wall Street Journal.
            3. Limits / Restrictions:
              1. Loans not to exceed a player’s Salary:  No loan made to a player may exceed the amount of the player’s Salary for the then-current Salary Cap year that is protected for lack of skill
                1. Includes along with other outstanding loans to the player.
              2. Repayment:   All loans must be repaid through deductions from the player’s remaining Current Base Compensation over the years of the Contract that, at the time the loan is agreed upon, provide for the Base Compensation that is fully protected for lack of skill (prior to the Effective Season of any ETO) in equal annual amounts (the “annual allocable repayment amounts”).
              3. Maximum Loan Amount:
                1. When the Remaining Current Base Compensation due for the relevant Season is (1) fully protected for lack of skill, (2) less than the annual allocable repayment amount that would be owed on a loan for the full amount of the player’s Current Base compensation that is, also, fully protected for the lack of skill for the relevant Season (the “maximum annual allocable repayment amount”):  For that season, the maximum loan amount shall be reduced by the amount by which the maximum annual allocable repayment amount exceeds the remaining Current Base Compensation that is fully protected by lack of skill.
                  1. Example:  [See §3 (c)(2)  Remaining Current Base Compensation that s fully protected for lack of skill in the first year of five year contract is worth 1 million.  If the player has already received the million in that season, the player can only receive up to 80%  for a loan that season ($800,000).
              4. Violations;
                1. Article II, Loans cannot be made that violate Article II, §2(e); and
                2. Minimum compensation players can’t get loans:  Loans may not be made to a player whose contract provides for Base Compensation equal to the Minimum Player Salary.
              5. Loan forgiveness:  Any forgiveness of a loan will be deemed a Renegotiation in the Salary Cap Year of such forgiveness and shall be subject to the rule governing Renegotiations set forth in §7 below.
            4. Incentive Compensation (D):
              1. Including Performance Bonus in Salary:  Include the PB in the salary when (1) the PB is earned if the player or the team’s performance is identical to the player’s or the Team’s performance of the precededing salary cap year, and (2) this provision is provided for in the K.  (3D1)
                1. Performance Bonuses that may be included in a Player Contract (5d):
              2. Restrictions on Incentive Compensation 3d2-4:
                1. Selecting a Basketball Expert:
                  1. Who may select:  NBA or Players Associatoin
                  2. Circumstance:  Preceding Salary Cap Year’s Performance is not a fair predictor of performance for any of the years in the new K/Renegotiation/Extension
                  3. Timing of selection:  At the time of signing a K, Renegotiation, or Extension.
                  4. Expert’s Duties:
                    1. If an NBA challenge:  Expert must determine it is very likely the bonus will be earned.
                      1. Effect on Salary:  include bonus in the player’s salary.
                    2. If a Player’s challenge:  Expert must determine it is very unlikely the bonus will not be earned.
                      1. Effect on Salary:  Excluded from player’s salary.
                    3. Note:  Burden of proof is carried by the party initiating the challenge.
                    4. Procedure:  Hearing conducted by Expert within five days of the initiation of the proceeding; determination made five days after the hearing (business days).
                    5. Effect of Determination:   Final, binding, and unappealable.
                    6. Costs:  Born equally by both parties.
                    7. Failure to Agree on an Expert:  Challenge may be filed with a a Grievance Arbitrator in accordance with Article XXXI, §2-7 and 15.
                2. Rookies / Veterans / Not playing in immediately preceding team salary cap year:
                  1. Include PB in Salary if it is likely to be earned.
                  2. Use of Expert to determine likely to be earned:  May call upon an Expert, who will conduct a hearing (same standards from above), and he/she will determine whether the bonus is likely/unlikely to be earned.
                3. Effect on Team Salary:
                  1. During the pendency of the proceedings (when initiated by either party), the full player’s salary and the full bonuses shall affect TEAM Salary. (3d4).
              3. Incentive Compensation described in Article II, §3B(iii) and 3 (C):  All such Incentive Compensation shall be described in salary.
            5. International Player Payments:  Any TEAM that pays any money to any player or entity (etc.) over the amounts listed below are going to be considered part of the player’s salary.  Basically, the players have a minimum amount of Salary he can.
              1. Excluded international player Payments (and amounts):  in excess of the amounts below to gain contractual release of an international player are not considered salary:
                1. $525,000 (2011-12)
                2. $550,000 (2012-13)
                3. $575,000 (2013-14)
                4. $600,000 (2014-15)
                5. $625,000 (2015-16)
                6. $650,000 (2016-17)
                7. $675,000 (2017-18)
                8. $700,000 (2018-19)
                9. $725,000 (2019-20)
                10. $750,000 (2020-21)
              2. Not Salary to a Player:  Any payment to an international club to secure the contractual release of a player shall not be deemed Salary to the player.
              3. How to Pay:  in single or in multiple installments.
              4. How much:  Can be used in whole or in part.
              5. When to use this International Player Payment Amount:
                1. Used whenever it signs a player to a new Player Contract (the date of the contract).  Note, that the payments scheduled through the multiple years will not be deemed a multiple use of the exception.
                2. May only use it once in a three-Season period, including in whole or in part, with respect to the same player?  [Example:  may use 75K, 75K, and 400k].
              6.  Effect on Salary Cap:
                1. Minimum Team Salary:  Any payments made under the exception shall not count toward the minimum team salary obligation pursuant to §2b or c.
              7. Notice:  NBAPA gets notice of any payments within two days of making such payments.
            6. One-Year (or less) Minimum Contracts:
              1. Formula:  Salary shall be the lesser of either (1) the Minimum Player Salary or (2) the portion of such Minimum Player salary that is not reimbursed out of the League-wide benefits fund.
                1. Applicability:  Players who sign for minimum salary in 10 day, rest of year, or 1 year contracts.
                2. League Wide Benefits fund:  Reimbursement for described in Article IV, § 6 (k)(2).
            7. Insurance Premium Reimbursement:  Not included in the computation of a the player’s Salary.
              1. Sometimes, a Team may reimburse a player for a life insurance premium pursuant to II § 4 (j)(ii).
            8. Averaging:  A player’s Salary for each Salary Cap Year covered by his Contract shall be deemed to be the average of the aggregate Salaries for each Salary Cap Year.
              1. Applicability:  Only in certain circumstances.
              2. Pursuant to:  XI, § 5 (c)(iii).
            9. Existing Contracts:  old rules govern.  Old rules do not apply to any Contract, Extension, or Renegotiation, transaction.
  3. DETERMINATION OF SALARY (§4)
    1. COMPUTATION:   (a) Aggregate Salaries of all active players attributable to a particular salary cap year, the Free Agent Amount, (b) Salaries called for on Outstanding Offer Sheets, (c) First Round Picks, (d) Retired Players, (e) Fewer than 12 Players, (f) Salary Cap Exceptions.
      1. Aggregate Salaries of all Active Players attributable to a particular salary cap year:
        • Types of Salaries Included in Player Contracts that:
          • TERMINATED Payer Contracts via Waiver:  Players that have been terminated pursuant to the NBA’s Waiver Procedure:  Include those salaries paid or to be paid to those players whose contracts have been terminated pursuant to the NBA’s Waiver Procedure.
            • Exception:  Stretched Salaries:   A team may choose to “STRETCH” the salary pursuant to 7(d)(5).  If a team wants to stretch the player’s salary, then the TEAM’s SALARY for a particular season will reflect the the “STRETCHED SALARY AMOUNTS,” as calculated pursuant to 7(d)(5).
            • applicability:  those contracts entered into or extended since the date of the CBA.
          • RETIRED Player Contracts:  All amounts called for in a retired player’s Player Contract (either paid or to be paid).
            • Formula to distribute:  Remaining unearned protected Compensation is to be taken in aggregate and dispersed pro-rata over the then-current and remaining Salary Cap Year covered by the K.
          • ANTICIPATED Player Contracts:
            • Scope, without limitation:  Any executed Player Contract whose validity is conditional on the passage of a physical examination by the player or on the assignment of the Contract.
            • Pursuant to:  II §12(a)(i).
            • limitations:  No need to report anticipated or included player salaries is less than the Free Agent Amount.
          • AWARDS and SETTLEMENTS for GRIEVANCES:   amounts paid or to be paid between a grievance between a player and a team.
            • Salary Concerned:  The Compensation obligations under the Player K for that particular SEASON in which there is a dispute (not
            • Pursuant to the following rules:
              • Player Initiates Grievance for current or future year  (pursuant to XXXI) for owed compensation (current or future):  Team does not feel compensation is owed.
                • Effect:  50% of disputed compensation is calculated toward TEAM SALARY.  If the dispute is resolved during or before the grievance, then any money over the 50% shall be added to the team; if the settlement or award is less than 50%, then that money shall be subtracted from the TEAM’s salary.
                • Dispute resolved after year in question:  Dispute Resolved in Salary Cap Year after the year in which the dispute relates:  Add the excess of 50% of subtract the excess of 50% to the next salary cap year.
                • Additional Payment or Refund of Tax:  A Team must pay an additional tax to the NBA if the team ends up saving money on tax by carrying over the grievance for two years; the team will get refund if the team ends up paying more tax in the first year of the dispute (the 50% year) if there is less money paid out.
              • Player Initiates Grievance for a PRIOR SALARY CAP YEAR:  
                • Effect:  The award / settlement shall be included (to the extent that it has been previously excluded from the Team Salary) in the Salary Cap Year for which the result was resolved to the
                • Additional Payment or Refund of Tax:  Same policies as above tax (this time, however, the years included are the two years that are involved (the year the salary owed and resolved).
          • Multiple Seasons of Salary Owed:  After resolution, the aggregate amounts payable to the player for all seasons pursuant to the resolution of the grievance shall be allocated to each such Season in proportion to the amount of Compensation that was in dispute for such Season.   With awards, a grievance arbitrator may allocate the amounts payable to the player to specific Seasons.
          • Pursuant to Rules:  Those set forth in Article VII, including, without limitation, the amnesty rules set forth in § 12 (f)(5).
          • Players:  Includes all active Players, including former players to the extent provided by the terms of this Agreement).
          • Procedure for Teams:  4(a)(i)(D):  ARTICLE XIII – – cannot delay in notifying the NBA.  Cannot, delay for the purposes of creating or increasing its Room in any Salary Cap year (or for deferring tax payment).
        • Free Agent Amount:  Unrestricted or Restricted Amounts
          • Include the Free Agent amount attributable the Veteran Free Agent who last played for a Team and who is either:
            • an Unrestricted Free Agent.
              • Free Agent Amount:  defined below.  (See §4 (d)).
            • a Restricted Free Agent:  innclude the greater of
              • The Free Agent Amount (See §4 (d) attributal to such a Veteran Free Agent,
              • The Salary called for in an outstanding Qualifying Offer tendered to such Veteran Free Agent, OR
              • the Salary called for in any First Refusal Exercise Notice (as defined in Article XI, § 5(e) issued with respect to such Veteran Free Agent.
        • OUTSTANDING Offer sheets:  Include the aggregate Salaries called for under all outstanding Offer Sheets (as defined in Article XI, § 5 (b).
        • UNSIGNED FIRST ROUND PICK:  With respect to a Team’s unsigned First Round Pick, if any, as determined in accordance with §4 (e).
        • FEWER THAN 12 Players:   As determined in accordance with §4 (f), a team will have to include in the Team’s Salary an amount with respect to the number of players fewer than 12.
        • RETIRED PLAYERS:   Any value or consideration received by retired players in accordance with XIII § 5.
        • SALARY CAP EXCEPTIONS:  Must include any amount of a Salary Cap Exception that is deemed included in a Team Salary in accordance with § 6 (m) (2) below.
    2. Expansion:
    3. Assigned Contracts:  An assignee TEAM must include the contract’s Salary upon assignment for that Year and all other Salary Cap Years.
    4. Free Agents (4d)
      1. j j j. j.
  4. DETERMINATION OF TEAM SALARY
  5. OPERATION OF SALARY CAP
  6. EXCEPTIONS TO THE SALARY CAP
  7. EXTENSIONS, RENEGOTIATIONS, AND OTHER AMENDMENTS
  8. TRADE RULES
  9. MISCELLANEOUS
  10. ACCOUNTING PROCEDURES
  11. PLAYERS ASSOCIATION AUDIT RIGHTS
  12. ESCROW AND TAX ARRANGEMENT

BASKETBALL RELATED INCOME, SALARY CAP, MINIMUM TEAM SALARY, & ESCROW ARRANGEMENT

  1. Definitions:
    1. Basketball Related Income:
      1. Definition of of BRI:  Definition of basketball related income encompasses what could be included as basketball related income.  Accordingly, basketball related income includes Proceeds from the following [§1 a]:
        1. Gate Receipts and Governmental Charges:
        2. Broadcasts:
          1. Medium:
          2. Subject Matter of Broadcasts:
        3. Exhibition games:
        4. Playoff games and Arena Rentals:
        5. Novelties, Concessions, and Parking:
        6. Arena Signage:
        7. Luxury Suites:
        8. Arena naming rights:
        9. League related entities:
        10. Premium seat licenses:
        11. Practice facilities naming rights:
        12. Ghost proceeds:  [having sold the right to name].
        13. Activities that do not relate or arise from players’ performance in NBA games:  [VII §1, subsection a(2)].
          1. Assignment of player contracts:
          2. Sale of assets or property of ownership interest:
          3. Grant of expansion team and relocation fees:
          4. Dues:
          5. Owners’ capital contributions:
          6. Suspensions:
          7. Revenue Sharing:
          8. Interest income:
          9. Insurance recovery:
          10. Sale or rental of real estate:
          11. Anything connected to a New or renovated arena, facility, or team building:
          12. Induced Relocation Value:
          13. Escrow and Tax payments to the NBA or Teams:
          14. Distributions etc. paid Owners, Members, and Partners:
          15. Expressly identified categories or sources of BRI revenue:
          16. Group licensing agreements:
          17. Team-Related Fundraising:
          18. NBADL and other leagues:
          19. Leasing of Team Assets:
          20. Value from 3rd Parties:
      2. Formula to Evaluate Whether a Category or Source of Revenue is BRI: [§ 1 (a) (3)]
      3. With Respect to any Lease related to an arena:
      4. Can’t count BRI streams twice in two separate categories: . . . (i) – (ii)
      5. Subject to § 11 (below) Player Association Audit Rights: . . . (i-Iv)
      6. Local Broadcasts & Determining BRI: § 1, subsection a (7) (i) –
        1. Proceeds from Related Parties Doing Business with Team Owners.[§ 1, a, 7, i]
        2. Procedure Teams that Enter into Local or Regional Telecast Agreements:[§ 1, a, 7, ii]:
        3. Procedures for the NYKs and media:  [§ 1, a, 7, iii]
      7. National Broadcasts & BRI:  [§ 1, a, 8,]
      8. Duty of using Commercially Reasonable Efforts to Increase BRI:[§ 1, a, 9,]:  [act with reasonable business judgment]
      9. Penalties Failing to Provide Material Information to An Accountant for an Audit Report for the BRI [Underestimation]  – – ?[§ 1, a, 10,]
      10. Limits on provisions in entering into accountants agreements. . .[§ 1, a, 11,]
      11. Deducting Insurance. . .[§ 1, a, 12,]
      12. Equity Transactions (securities that are included in BRI) [§ 1, a, 13,(i)]:  Related provision is [§ 1, a, 2,],  include value of securities received by nba-related entities in entities that were not NBA-related entities to such receipt of the securities, to the extent otherwise constituting BRI under the agreement
        • Publicly Traded Securities:  [§ 1, a, 13,i,A]:
          • Definition of Publicly Tradable § 1, a, 13,ii]
          • If Not Publicly tradable at the time of receipt: § 1, a, 13,i,C]
          • Options, Warrants, Convertible Securities: § 1, a, 13,i,B]
          • Contingent securities that Become Publicly Tradable after Receipt:  § 1, a, 13,i,D]
      13. LIMITS:  Do not Include Anything that could cause Doubt: § 1, a, 13,ii
    2. Accounting Methods/Lump Sum Payments:  .
      1. Amortizing:
        1. Signing Bonus for Local Telecast Contract: [§ 1, subsection b(1)].  Accounting should be calculated exclusively pursuant to the accrual method of financial accounting accounting
        2. Luxury Seat Licenses and PSLs:  [§ 1, subsection b(2)]
      2. Contingencies and Repayments:  [§ 1, subsection b(3)]:
      3. Projections and Estimations of BRI:
        1. Projections:  Made during moratorium period With Agreement: If there is no agreement, then following will formula will be used below.
        2. Without Agreement:  When there has been no agreement, the BRI will be created through a formula:  (Preceding Year’s BRI x 1.045%).
          • Limit:  The only sources not receive the 1.045% increase will be national broadcast or national telecast or network cable television contacts.
          • What to Include from the Media Broadcast Contracts of ABC and TNT:  [§ 1, subsection c(2)]
        3. Projections:
          1. Interim Projected BRI:[§ 1, subsection f) using an Estimated BRI for a projected salary cap year.
        4. Estimations of:
          • Total Benefits:[§ 1, subsection h) An interim audit report’s estimate of the total benefits for a salary cap year.
          • Total Salaries:[§ 1, subsection i)
          • Total Salaries and Benefits:  [§ 1, subsection j) set-forth in the interim audit report.
          • Basketball Related Income:  [§ 1, subsection k)  As set forth in the interim audit report for such a salary cap year.
      4. With Respect to Expansion Teams:
        • Local Expansion Team BRI: [§ 1, subsection d()] – – first two seasons of expansion.
        • Projected Local Expansion Team BRI: (Local Expansion Team BRI of immediately preceding season x 1.045%)
    3. Misc:
      • Barter:([§ 1, subsection f)  means to trade by exchanging one commodity, service, or other non-cash item for another.
  2. CALCULATION OF SALRY CAP & MINIMUM TEAM SALARY: [§ 2]
    1. SALARY [§2, a, 1]:
      1. CAP FORMULA:
        • 2011-12:  Shall Equal $ 58.044 Million.
        • 2012-13:  Shall equal the greater of either:
          1. [((the Projected BRI for the 2012-2013 Salary Cap Year) x (.4474))   (Projected Benefits for the 2012-2013 Salary Cap Year pursuant to IV § 9)] / (29, which is the number of teams scheduled to play in the NBA during the 2012-2013, other than Expansion Teams during their first two Salary Cap Years in the NBA); OR
          2. 58.044 Million, which is the previous year’s salary cap.
        • 2013-14:  [((the Projected BRI for the 2012-2013 Salary Cap Year) x (.4474))   (Projected Benefits for the 2012-2013 Salary Cap Year pursuant to IV § 9)] / (29, which is the number of teams scheduled to play in the NBA during the 2012-2013, other than Expansion Teams during their first two Salary Cap Years in the NBA);
          1. Limits:
            1. This year is subject to adjustments set forth in VII, § 2, subsection d.
            2. Expansion Teams + BRI:
              1. [§ 2, subsection a(2)].
        • 2014-15:  Same formula as 2013-14
        • 2015-16:  Same formula as 2013-14
          • Mandatory use 2013-14 formula: [§ 2, subsection a(4)] (1) No completion of Audit Report for Salary Cap Year beginning on day after moratorium period, and (2) no agreement b/t NBA + Players’ Association as to Projected BRI and Projected Benefits pursuant to Article VII, § 1 + article IV, § 9 . . .fill-in later.
            • Differences:  Use interim, not projected,  /
      2. Timing:  The Salary Cap for a Salary Cap year begins on the day after the moratorium period ends–e.g., if the moratorium ends December 31, the new salary cap begins on january 1st. § 2, subsection a (3).
    2. Minimum Team Salary: § 2 (b).
      1. 2014-15:  Minimum Team Salary = 90% of Salary Cap for Such Salary Cap Year.
      2. 2015-16:  Minimum Team Salary = 90% of Salary Cap for Such Salary Cap Year.
      3. Formula to Calculate whether a Team has met its Minimum Team Salary:
        1. Include in Calculating Team Salary for Purposes of meeting the minimum salary any Salary in respect of such Salary Cap Year that is excluded from the Team’s Team Salary in
          1. §4(h) and
          2. §12(f)(b) [below].
      4. Formula to Calculate Team Salary in this Section use the same calculation formulate that the accountants use to compute Total Salaries and Benefits in the Audit Report (Audit Report defined in § 10)
        • Limit:  § 2 (b)(4) subjected to.
      5. LImits:
        1. Pelnalties:§ 2 (b)(2)
          • Below Minimum Team Salary at Last Regular season game:  In general, must pay the difference pro-rata to the players on the team.
          • Other options:  It appears there are other opbiotns.
        2. No Limits:  Nothing should be limiting as to a team getting the minimum team salary. § 2 (b)(3)
    3. Expansion Team Salary Caps & Minimum Team Salary: § 2 c1-2.  Expansion teams shall have the same Salary Caps and Minimum Team Salaries as all other Teams.
      1. limits/exceptions:
        1. Salary cap  in year 1 of expansion:
        2. Salary Cap in year 2 of expansion:
    4. Adjustments to Salary Cap and Minimum Team Salary:
      1. Increase in Salary Cap Next Year [§2, subsection d(1)]:  In any Salary Cap year pursuant to this agreement that the Total Salaries and Benefits Fall Below the Designated Share, then Salary Cap shall be increased by the formula bel
        1. Formula: (the amount of the shortfall) / (# of Teams in the NBA during such subsequent Salary Cap Year.
          1. # of teams:  Exclude Expansion teams within their first two years of expansion when calculating # of teams
        2. Designated Share: As defined pursuant to 12(b)(3).
      2. Overages:  Overages are defined in 12(a)(14) below . . What is the Overage of the year we want?
        1. Overage is 6 % or Less:  No Adjustment:  Overage in Salary Cap Year is equal to or less than 6% of Total Salaries and Benefits
        2. Overage is Greater than 6%:  Reduce next year’s salary by the following through following the series of 7 steps
          1. Overage = Overage – (6% of Total Salaries & Benefits) = x.
          2. Question?
            • Does projected BRI exceed last season’s BRI by 8%?; OR
              • If Yes: (Step 1 Result) / (# of NBA teams during the subsequent Salary Cap Year)
              • If No:
            • Does the Overage Exceed 9% of Total Salaries and Benefits?
              • If Yes: (Step 1 Result) / (# of NBA teams during the subsequent Salary Cap Year)
              • If No:
            • LIMITS:  # of teams do not include expansion team in first two years.
          3. STEP 3 Figure:  (Projected BRI for Salary Cap Year) – (BRI for the prior Salary Cap Year) =
          4. Step 4 Figure:  (Step 3 Figure) – (8% of BRI for the prior Salary Cap Year)
          5. Step 5 Figure: (step 4 figure) x (.4474 (aka 44.74%)
          6. Step 6 Figure:  (Step 1 Figure) – (Step 5 Figure)
          7. Question:
            1. Is Step Step 6 Figure less than zero?
              1. yes? Then stop. no adjustments shlla be made to the Salary Cap for the Subsequet Year, and no further steps are needed.
              2. No?  (Step 6 Figure) / (# of NBA teams during the subsequent Salary Cap Year)
                1. Results:  The Result of this is the amount of the reduction in the Salary Cap for such subsequent Salary Cap Year.
                2. LIMITS:  # of teams do not include expansion team in first two years.
    5. DETERMINATION OF SALARY:   A player’s salary with respect to a Salary Cap Year is calculated pursuant to the following rules:
      1. Deferred Compensation (DC):
        1. General Rule:   Any Deferred Compensation in a contract must be specified as to the year it is being deferred.
          1. Effect on Players’ Salary:  DC is added to the players salary in the salary cap year that the deferred compensation is set to be paid out.
            1. Example:
          2. Applicability:  To those contracts either entered into or extended or renegotiated after the date of this Agreement.
        2. Over 36 k/Rule:
          1. Applicability:  To any Player Contract either entered into or extended or renegotiated that, (i) beginning with the date such Contract, Extension or Renegotiation is signed, (2) the contract covers four or more Season (3) At least one of the seasons of the contracts has to commence after the player turns 36.
            1. Policy:  To dis-incentive owners from signing players who retire who have a good chance of retiring before their contract runs out, resulting in the players’ salary in those years of his retirement not affecting the teams’ salary (e.i., allowing a team to pay  the remains of a player’s contract while the salary does not affect the teams’ salary).
            2. Applicability:  4 Year Contracts VS. The First Salary Cap Year That Covers a Season that Follows the Player’s 36th Birthday:  Pick whichever is later.
              1. 36th Birthday:
              2. Distributing FOURT Salary Cap Year’s Salary/ Zero Year:  Any players salary in year 4 is evenly distributed among the players’ first three years, proportionally adding the dividends to each year of the team’s salary, creating zero team salary spent on that player in the fourth year of the contract (i.e., zero year).
                1. Distinguish effect on Team vs. Player Salary:  The player does not get the benefit of more money in the front-end of his contract; he continues to get what the contract is worth every year.  The effect of this rule is really to keep teams in check by limiting their TEAM-SALARY.
              3. Distributing the Salary Cap Years that follow Players’ 36th Birthday:    Any players salary in the years commencing in the season after that the players’ 36th birthday is evenly distributed among the players’ first three years, proportionally adding the dividends to each year of the team’s salary, creating zero team salary spent on that player in the fourth year of the contract (i.e., zero year).
            3. 5 Year Contracts vs. The First Salary Cap Year That Covers a Season that Follows the Player’s 36th Birthday:
              1. Distributing FIFTH Salary Cap Year’s Salary/Zero Years: Any players salary in year 4 and 5 is summed up, and evenly distributed among the players’ first three years, proportionally adding the dividends to each year of the team’s salary, creating zero team salary spent on that player in the fourth year of the contract (i.e., zero year).
                1. Distinguish effect on Team vs. Player Salary:  The player does not get the benefit of more money in the front-end of his contract; he continues to get what the contract is worth every year.  The effect of this rule is really to keep teams in check by limiting their TEAM-SALARY.
              2. QVFA Applicability:   The qvfa is (1) 33 or 34, (2) enters the Over 36 Contract with his previous team for FIVE seasons.
                1. Limits:
                  1. Deemed 33 Years of Age:  (1) entered into this K with prior team before Oct. 1, (2) is 32 years of age at that time of entry, (3) will turn 33 on or before such OCto 1.
            4. Seasons:  Pursuant to this rule:  season commence on October 1 and conclude on the last day of the Salary Cap Year.
            5. Zero Years:  Are either fourth or fifth years.
            6. Limits:
              1. Calculating the salary when 2 years before the first zero year:   Take the players’ salary for the two seasons before the zero year and the zero year and ad them together before dividing them in equal shares over the remaining 3  seasons, affecting only the team salary.
                1. Example:   Wade sings a deal for 12 million for four years.  His fourth year year is a zero year, worth 3 million in actual money.  Before he begins his first year, that zero year is divided equally among the first three years, resulting in an extra million of team salary in the first three years.   4 / 4 / 4.  After year 1, there are two more seasons before the first zero year (Season 2 and 3).  In actual salary, he is due 9 million (3 / 3 /3 /3 – the aggregated amount for three seasons), so divide that 9 million by three (year two, year 3), and attribute the result (3 mill per year) to each of those years as they remain to team salary.
                2. Note:  if this example were with a five year contract, then the same would still hold true, making year two, three, and four reflect 3 million in the zero year), and the fifth year would still be zero.  Repeat this process in year two when all that is left is year 3, 4, and 5.
              2. Reallocations:  No re-allocation of Salaries for any contract between a QVFA and his Prior Team covering FOUR (4) or fewer season entered into by a player at age 33 or 34.
              3. Birthdays:  Those birthdays that take place during the Moratorium Period shall be treated as if his birthday did not occur during the Moratorium Period (the age before the moratorium period) as long as he signs an over-36 contract the day before the period.
      2. Signing Bonuses:
        1. SCOPE INCLUDED:  Include amounts provided for either (1) in the contract that a player may earn via (i) the signing of the k or (ii) being traded or (2) for exceeding the Excluded International Player Payment Amount with respect to foreign players in accordance with Section 3(e) below.
        2. Proration:  3b3i.  Any signing bonuses is allocated and prorated over the number of years covered by the contract.
          1. Shall be Allocated:  Apportion the amount of money distributed such that it is in proportion to the base the percentage of compensation of that salary cap year to the rest of the contract.
            1. Traded Ks and Bonuses:  Distribute such a bonus to the then current contract and any remaining Salary Cap Years left at the trade.
            2. The years that are given a bonus to must be protected for lake of skill.
            3. Limits:
              1. Early Termination Option Exception:  Any K that has an ETO, the bonus is not distributed on the Early Termination Year–It is distributed up until the year immediately preceding that.
              2. None of the base compensation provided for by a player contract is protected for lack of skill at time of allocation:  The entire signing bonus shall be allocated to the first Salary Cap Year of the Contract.
                1. Signing bonus for trade:  The salary cap year during which the player’s contract is traded.
                2. Applicable to Traded Player’s Base Compensation:  The then current or remaining Base Compensation in the case of a signing bonus for a traded player does not provide for such.
          2. Is Protected for Lack of Skill:  Any signing bonus contained in a Player Contract is protected for lack of skill;
            1. Early Termination Option Exception:   Provided, however
        3. Extensions:
          1. When a Team w/ a Team Salary is at or Over the Salary Cap:  Entering into an extension that calls for signing bonuses requires that bonus is paid no sooner than the first day of the first Salary Cap Year covered by the extended term  and (2) shall be allocated, in equal parts, over the number of Salary Cap years covered by the extended term in proportion to the percentage of Base Compensation in each such Salary Cap Year that, at the time of allocation,  is protected for lack of skill.
            1. No Base Compensation provided during the extended term is protected for lack of skill, At the Time of Allocation:  All of the signing bonus shall be allocated to the first Salary Cap Year of the extended term.
          2. When a Team w/ a Team Salary is at or Over the Salary Cap:
            1. May enter into an Extension that calls for or contains a signing bonus to be paid at any time during the Contract’s original or extended term.
            2. Provides the bonus to be paid at earliest/no sooner than first day of Salary Cap Year covered by such extension:  Bonus distributed pursuant to “proration rules” (3b3i).
            3. Provides the bonus to be paid before the first day of Salary Cap Year covered by such extension, there are rules:
              1. Allocation:  Bonus allocated over remaining Salary Cap Years and Extended terms via proportion to % of Base Compensation in each such Saalry Cap Year that, at the time of allocation, is protected for lack of skills.
                1. Includes:  The then-current Salary Cap Year
              2. Considered a Renegotiation:  Extensions are renegotiations pursuant to Renegotiations (§7 below).
          3. Loans To Players:
            • Applicability:  To all loans made by any Team to a player.
            • Loans bearing Interest:  Loans that do not bear an interest shall be imputed upon the outstanding balance at a rate equal to the difference between the Target Rate and the actual rate of interest to be paid by the player and such imputed interest shall be included in the player’s salary.
              • Scope:  Includes no annual interest at an effective rate lower than the “Target Rate.”
              • Target Rate:  Is the Prime Rate + 1%.
                1. Timing:  1% as of the date the loan is agreed upon.
                2. Limits of Target Rate:  Shall be neither lower than 7% nor greater than 9%.
              • Prime Rate:  Is the “Money Rates” column (or any successor column) of the Wall Street Journal.
            • Limits / Restrictions:
              1. Loans not to exceed a player’s Salary:  No loan made to a player may exceed the amount of the player’s Salary for the then-current Salary Cap year that is protected for lack of skill
                1. Includes along with other outstanding loans to the player.
              2. Repayment:   All loans must be repaid through deductions from the player’s remaining Current Base Compensation over the years of the Contract that, at the time the loan is agreed upon, provide for the Base Compensation that is fully protected for lack of skill (prior to the Effective Season of any ETO) in equal annual amounts (the “annual allocable repayment amounts”).
              3. Maximum Loan Amount:
                1. When the Remaining Current Base Compensation due for the relevant Season is (1) fully protected for lack of skill, (2) less than the annual allocable repayment amount that wouldbe owed on a loan for the full amount of the player’s Current Base compensation that is, also, fully protected for the lack of skill for the relevant Season (the “maximum annual allocable repayment amount”):  For that season, the maximum loan amount shall be reduced by the amount by which the maximum annual allocable repayment amount exceeds the remaining Current Base Compensation that is fully protected by lack of skill.
                  1. Example:  [See §3 (c)(2)  Remaining Current Base Compensation that s fully protected for lack of skill in the first year of five year contract is worth 1 million.  If the player has already received the million in that season, the player can only receive up to 80%  for a loan that season ($800,000).
                2. Violations;
                  1. Article II, Loans cannot be made that violate Article II, §2(e); and
                  2. Minimum compensation players can’t get loans:  Loans may not be made to a player whose contract provides for Base Compensation equal to the Minimum Player Salary.
                3. Loan forgiveness:  Any forgiveness of a loan will be deemed a Renegotiation in the Salary Cap Year of such forgiveness and shall be subject to the rule governing Renegotiations set forth in §7 below.
              4. Incentive Compensation (D):
                1. Including Performance Bonus in Salary:  Include the PB in the salary when (1) the PB is earned if the player or the team’s performance is identical to the player’s or the Team’s performance of the precededing salary cap year, and (2) this provision is provided for in the K.  (3D1)
                  1. Performance Bonuses that may be included in a Player Contract(5d):
                2. Restrictions on Incentive Compensation  3d2-4:
                  1. Selecting a Basketball Expert:
                    1. Who may select:  NBA or Players Associatoin
                    2. Circumstance:  Preceding Salary Cap Year’s Performance is not a fair predictor of performance for any of the years in the new K/Renegotiation/Extension
                    3. Timing of selection:  At the time of signing a K, Renegotiation, or Extension.
                    4. Expert’s Duties:
                  2. If an NBA challenge:  Expert must determine it is very likely the bonus will be earned.
                    • Effect on Salary:  include bonus in the player’s salary.
                  3. If a Player’s challenge:  Expert must determine it is very unlikely the bonus will not be earned.
                    • Effect on Salary:  Excluded from player’s salary.
                  4. Note:  Burden of proof is carried by the party initiating the challenge.
                  5. Procedure:  Hearing conducted by Expert within five days of the initiation of the proceeding; determination made five days after the hearing (business days).
                  6. Effect of Determination: Final, binding, and unappealable.
                  7. Costs:  Born equally by both parties.
                  8. Failure to Agree on an Expert:  Challenge may be filed with a a Grievance Arbitrator in accordance with Article XXXI, §2-7 and 15.
                3. Rookies / Veterans / Not playing in immediately preceding team salary cap year:
                  1. Include PB in Salary if it is likely to be earned.
                  2. Use of Expert to determine likely to be earned:  May call upon an Expert, who will conduct a hearing (same standards from above), and he/she will determine whether the bonus is likely/unlikely to be earned.
                4. Effect on Team Salary:
                  1. During the pendency of the proceedings (when initiated by either party), the full player’s salary and the full bonuses shall affect TEAM Salary. (3d4).
              5. Incentive Compensation described in Article II, §3B(iii) and 3 (C):  All such Incentive Compensation shall be described in salary.
              6. International Player Payments:  Any TEAM that pays any money to any player or entity (etc.) over the amounts listed below are going to be considered part of the player’s salary.  Basically, the players have a minimum amount of Salary he can.
                1. Excluded international player Payments (and amounts):  in excess of the amounts below to gain contractual release of an international player are not considered salary:
                  1. $525,000 (2011-12)
                  2. $550,000 (2012-13)
                  3. $575,000 (2013-14)
                  4. $600,000 (2014-15)
                  5. $625,000 (2015-16)
                  6. $650,000 (2016-17)
                  7. $675,000 (2017-18)
                  8. $700,000 (2018-19)
                  9. $725,000 (2019-20)
                  10. $750,000 (2020-21)
                2. Not Salary to a Player: Any payment to an international club to secure the contractual release of a player shall not be deemed Salary to the player.
                3. How to Pay:  in single or in multiple installments.
                4. How much:Can be used in whole or in part.
                5. When to use this International Player Payment Amount:
                  1. Used whenever it signs a player to a new Player Contract (the date of the contract).  Note, that the payments scheduled through the multiple years will not be deemed a multiple use of the exception.
                  2. May only use it once in a three-Season period, including in whole or in part, with respect to the same player?  [Example:  may use 75K, 75K, and 400k].
                6. Effect on Salary Cap:
                  1. Minimum Team Salary:  Any payments made under the exception shall not count toward the minimum team salary obligation pursuant to §2b or c.
                7. Notice: NBAPA gets notice of any payments within two days of making such payments.
              7. One-Year (or less) Minimum Contracts:
                1. Formula: Salary shall be the lesser of either (1) the Minimum Player Salary or (2) the portion of such Minimum Player salary that is not reimbursed out of the League-wide benefits fund.
                  1. Applicability:  Players who sign for minimum salary in 10 day, rest of year, or 1 year contracts.
                  2. League Wide Benefits fund:  Reimbursement for described in Article IV, § 6 (k)(2).
              8. Insurance Premium Reimbursement:Not included in the computation of a the player’s Salary.
                1. Sometimes, a Team may reimburse a player for a life insurance premium pursuant to II § 4 (j)(ii).
              9. Averaging:A player’s Salary for each Salary Cap Year covered by his Contract shall be deemed to be the average of the aggregate Salaries for each Salary Cap Year.
                1. Applicability:  Only in certain circumstances.
                2. Pursuant to:  XI, § 5 (c)(iii).
              10. Existing Contracts:  old rules govern.  Old rules do not apply to any Contract, Extension, or Renegotiation, transaction.
      3. DETERMINATION OF SALARY (§4)
        1. COMPUTATION:   (a) Aggregate Salaries of all active players attributable to a particular salary cap year, the Free Agent Amount, (b) Salaries called for on Outstanding Offer Sheets, (c) First Round Picks, (d) Retired Players, (e) Fewer than 12 Players, (f) Salary Cap Exceptions.
          1. Aggregate Salaries of all Active Players attributable to a particular salary cap year:
            • Types of Salaries Included in Player Contracts that:
              • TERMINATED Payer Contracts via Waiver:  Players that have been terminated pursuant to the NBA’s Waiver Procedure:  Include those salaries paid or to be paid to those players whose contracts have been terminated pursuant to the NBA’s Waiver Procedure.
                • Exception:  Stretched Salaries:  A team may choose to “STRETCH” the salary pursuant to 7(d)(5).  If a team wants to stretch the player’s salary, then the TEAM’s SALARY for a particular season will reflect the the “STRETCHED SALARY AMOUNTS,” as calculated pursuant to 7(d)(5).
                • applicability:  those contracts entered into or extended since the date of the CBA.
              • RETIRED Player Contracts:All amounts called for in a retired player’s Player Contract (either paid or to be paid).
                • Formula to distribute:  Remaining unearned protected Compensation is to be taken in aggregate and dispersed pro-rata over the then-current and remaining Salary Cap Year covered by the K.
              • ANTICIPATED Player Contracts:
                • Scope, without limitation:Any executed Player Contract whose validity is conditional on the passage of a physical examination by the player or on the assignment of the Contract.
                • Pursuant to:II §12(a)(i).
                • limitations:  No need to report anticipated or included player salaries is less than the Free Agent Amount.
              • AWARDS and SETTLEMENTS for GRIEVANCES:   amounts paid or to be paid between a grievance between a player and a team.
                • Salary Concerned:The Compensation obligations under the Player K for that particular SEASON in which there is a dispute (not
                • Pursuant to the following rules:
                  • Player Initiates Grievance for current or future year (pursuant to XXXI) for owed compensation (current or future):  Team does not feel compensation is owed.
                    • Effect:  50% of disputed compensation is calculated toward TEAM SALARY.  If the dispute is resolved during or before the grievance, then any money over the 50% shall be added to the team; if the settlement or award is less than 50%, then that money shall be subtracted from the TEAM’s salary.
                    • Dispute resolved after year in question:Dispute Resolved in Salary Cap Year after the year in which the dispute relates:  Add the excess of 50% of subtract the excess of 50% to the next salary cap year.
                    • Additional Payment or Refund of Tax:A Team must pay an additional tax to the NBA if the team ends up saving money on tax by carrying over the grievance for two years; the team will get refund if the team ends up paying more tax in the first year of the dispute (the 50% year) if there is less money paid out.
                  • Player Initiates Grievance for a PRIOR SALARY CAP YEAR: 
                    • Effect:The award / settlement shall be included (to the extent that it has been previously excluded from the Team Salary) in the Salary Cap Year for which the result was resolved to the
                    • Additional Payment or Refund of Tax:  Same policies as above tax (this time, however, the years included are the two years that are involved (the year the salary owed and resolved).
                  • Multiple Seasons of Salary Owed:After resolution, the aggregate amounts payable to the player for all seasons pursuant to the resolution of the grievance shall be allocated to each such Season in proportion to the amount of Compensation that was in dispute for such Season.   With awards, a grievance arbitrator may allocate the amounts payable to the player to specific Seasons.
                  • Pursuant to Rules:  Those set forth in Article VII, including, without limitation, the amnesty rules set forth in § 12 (f)(5).
                  • Players:  Includes all active Players, including former players to the extent provided by the terms of this Agreement).
                  • Procedure for Teams:  4(a)(i)(D):  ARTICLE XIII – – cannot delay in notifying the NBA.  Cannot, delay for the purposes of creating or increasing its Room in any Salary Cap year (or for deferring tax payment).
            • Free Agent Amount:  Unrestricted or Restricted Amounts
              • Include the Free Agent amount attributable the Veteran Free Agent who last played for a Team and who is either:
                • an Unrestricted Free Agent.
                  • Free Agent Amount:  defined below.  (See §4 (d)).
                • a Restricted Free Agent:  include the greater of
                  • The Free Agent Amount (See §4 (d) attributable to such a Veteran Free Agent,
                  • The Salary called for in an outstanding Qualifying Offer tendered to such Veteran Free Agent, OR
                  • the Salary called for in any First Refusal Exercise Notice (as defined in Article XI, § 5(e) issued with respect to such Veteran Free Agent.
                • A Qualifying Veteran Free Agent:
                  • Regulst: Was his previous salary greater or lesser than the Estimated Average Player Salary? Effect on Cap: Slot 150% if equal or greater that EAPS, and Slot 190% if the prior salary was less than the EAPS
                  • Following 2nd Option Year of his Rookie Scales Contract: Was his previous salary greater or lesser than the Estimated Average Player Salary? Effect on Cap: Slot 200% if equal or greater that EAPS, and Slot 250% if the prior salary was less than the EAPS
                  • Following 1st Option Year of his Rookie Scales Contract: Effect: an amount equal to the Maximum Salary that the Team may pay the player using the Qualifying Veteran Free Agent Exception in § 6(m)(4).
                • An Early Qualifying Veteran Free Agent:
                  • Regular: 130% of his prior Salary.
                  • Following 2nd Option Year of his Rookie Scales Contract: Include at an amount Equal to the maximum Salary that the Team may pay the player using the EQVFA exception pursuant to § 6(m)(4).
                  • Requirements: Such a player’s Prior Team must (1) renounce its rights to sign the player pursuant to the EQVFA player’s right, creating a Non-QVFA for purposes of this § 4(d), 6 (b), and 6 (j)(4).
                • Non-Qualifying Veteran Free Agent: Include at an amount: 120% his former salary.
                • Minimum Salary player: Immediately preceeding salary was equal or less than the then-current minimum salary, then the salary will be accounted for as the then-current minimum salary less any amount the League-wide benefits will fund.
            • OUTSTANDING Offer sheets:Include the aggregate Salaries called for under all outstanding Offer Sheets (as defined in Article XI,  5 (b).
            • UNSIGNED FIRST ROUND PICK:With respect to a Team’s unsigned First Round Pick, if any, as determined in accordance with §4 (e).
            • FEWER THAN 12 Players: As determined in accordance with 4 (f), a team will have to include in the Team’s Salary an amount with respect to the number of players fewer than 12.
            • RETIRED PLAYERS: Any value or consideration received by retired players in accordance with XIII § 5.
            • SALARY CAP EXCEPTIONS:Must include any amount of a Salary Cap Exception that is deemed included in a Team Salary in accordance with  6 (m) (2) below.
      4. Expansion:
      5. Assigned Contracts:  An assignee TEAM must include the contract’s Salary upon assignment for that Year and all other Salary Cap Years.
      6. Free Agents (4d)Guarantee:
  3. DETERMINATION OF TEAM SALARY
  4. OPERATION OF SALARY CAP
  5. EXCEPTIONS TO THE SALARY CAP
  6. EXTENSIONS, RENEGOTIATIONS, AND OTHER AMENDMENTS
  7. TRADE RULES
  8. MISCELLANEOUS
  9. ACCOUNTING PROCEDURES
  10. PLAYERS ASSOCIATION AUDIT RIGHTS
  11. ESCROW AND TAX ARRANGEMENT

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