Hoops Rumors Glossary

Each year when July rolls around, we see a ton of free agent contracts signed and at least a handful of trades consummated. However, on a few occasions, these two forms of transactions are combined into something called a sign-and-trade deal. Sign-and-trades occur when a team re-signs its own free agent, only to immediately send him to another team in exchange for players, draft picks, and/or cash.

In order for a sign-and-trade deal to be completed, the following critera must be met:

• The free agent must be signed-and-traded by the team with whom he finished the season. For instance, the Jazz could sign-and-trade Paul Millsap this summer, but another team couldn't sign Millsap and immediately move him.
• If the free agent is restricted, he can't be signed-and-traded after signing an offer sheet with a rival team.
• A team acquiring a player via sign-and-trade cannot be over the tax apron ($4MM above the tax line) after the deal.
• A team acquiring a player via sign-and-trade cannot have used the taxpayer mid-level exception.
• The free agent cannot be signed-and-traded once the regular season is underway.
• The free agent can't be signed using the mid-level exception or any other exception that doesn't allow for a three-year contract.

Sign-and-trade contracts can be worth any amount up to the player's maximum salary (with 4.5% raises), and must be for either three or four years. However, only the first year of the deal has to be guaranteed. For instance, last summer, the Hawks acquired DeShawn Stevenson via sign-and-trade as part of the Joe Johnson blockbuster with the Nets. Stevenson received a three-year contract, but only the first year was guaranteed.

If a sign-and-trade contract includes a signing bonus, either team can agree to pay it, though generally the team that signs the player pays the bonus. As for trade bonuses, they would kick in upon any subsequent trades rather than as part of the sign-and-trade transaction itself.

Under previous Collective Bargaining Agreements, there was more incentive for players to work out sign-and-trade deals, since the contract restrictions weren't as strict. For example: As we've discussed numerous times, Dwight Howard can receive $30MM+ more in guaranteed money from the Lakers than from any other team this summer. If the Lakers were to sign-and-trade Howard, his contract couldn't exceed the four-year, $87.59MM max deal that another team could offer him straight-up. In previous CBAs, a sign-and-trade would have allowed Howard to earn the full $117.95MM max as well as getting to the team of his choice, but that is no longer the case.

Under the new CBA, there is less incentive for teams and players to participate in sign-and-trades. Generally, if a player wants to change teams, it makes more sense for him to sign with the new team outright, rather than making that new team give up assets to complete the acquisition. Even the player's old team may prefer to simply let the free agent walk and claim the cap space, rather than taking back unwanted assets in a sign-and-trade.

If a potential suitor is over the cap and under the tax, and wants to sign a player for more than the mid-level amount, then a sign-and-trade could make sense, particularly if they can offer the free agent's prior team something of value. But these transactions are becoming less frequent than they once were.

The Stevenson/Johnson case from last summer provides an example of a sign-and-trade benefiting both the player and the team. Atlanta needed to add more incoming salary to make the Johnson trade work under CBA rules, so acquiring Stevenson via sign-and-trade allowed the Hawks to give Stevenson the bare minimum salary required ($2,240,450) to make the trade legal. From Stevenson's perspective, that $2.24MM salary was likely higher than he would have received on the open market, so even though the final two years of his contract may not become guaranteed, he still made out well in the deal.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA's Collective Bargaining Agreement. Larry Coon's Salary Cap FAQ was used in the creation of this post.

Players eligible for restricted free agency don’t become restricted free agents by default. In order to make a player a restricted free agent, a team must extend a qualifying offer to him. The qualifying offer, which is essentially just a one-year contract offer, varies in amount depending on a player’s service time and previous contract status.

If a player has played three seasons or less in the NBA, his qualifying offer will be worth 125% of his prior salary, or his minimum salary plus $200K, whichever is greater. For instance, after making $473,604 this season, Pablo Prigioni will be eligible for a qualifying offer worth $988,872 for next year — calculated by adding $200,000 to his minimum salary for next season ($788,872). Tiago Splitter‘s 2012/13 salary, meanwhile, was $3,944,000, so his qualifying offer will be worth 125% of that figure, or $4,930,000.

The qualifying offer for a player coming off his rookie scale contract is determined by his draft position. The qualifying offer for a first overall pick is 130% of his fourth-year salary, while the QO for a 30th overall pick is 150% of his previous salary. The full first-round scale for the class of 2009, who will be hitting free agency this summer, can be found here, courtesy of RealGM.

A pair of examples for this season, based on RealGM’s chart: 2009 fourth overall pick Tyreke Evans, coming off a fourth-year salary of $5,251,825, must be extended a qualifying offer of $6,927,157 (a 31.9% increase) to become a restricted free agent. 28th overall pick Wayne Ellington will be eligible for a qualifying offer of $3,103,733, a 49.0% increase on this season’s $2,083,042 salary.

A wrinkle in the new Collective Bargaining Agreement complicates matters — as of last summer, a player’s previous performance can affect the amount of his qualifying offer. The new CBA identifies the “starter criteria” as starting 41 games or playing 2000 minutes per season, and rewards players for meeting those criteria. A player meets the starter criteria if he compiles at least 41 starts or 2,000 minutes in the season prior to his free agency, or averages at least that many starts or minutes over the two seasons before he becomes a free agent. Here’s how the starter criteria affect qualifying offers:

• A top-14 pick who does not meet the starter criteria will receive a same qualifying offer equal to 120% of the amount applicable to the 15th overall pick.
• A player picked between 10th and 30th who meets the starter criteria will receive a qualifying offer equal to 120% of the amount applicable to the ninth overall pick.
• A second-round pick or undrafted player who meets the criteria will receive a qualifying offer equal to 100% of the amount applicable to the 21st overall pick.

You can find examples of free-agents-to-be to whom these conditions apply right here.

A qualifying offer is designed to give a player’s team the right of first refusal. Because the qualifying offer acts as the first formal contract offer a free agent receives, his team then receives the option to match any offer sheet the player signs with another club.

A player can also accept his qualifying offer, if he so chooses. He then plays the following season on a one-year contract worth the amount of the QO, and becomes an unrestricted free agent at season’s end. A player can go this route if he wants to hit unrestricted free agency as early as possible, or if he feels like the QO is the best offer he’ll receive. Accepting the qualifying offer also gives a player the right to veto trades for the season.

For instance, Brandon Jennings has strongly hinted on multiple occasions that he would prefer not to sign a long-term contract with the Bucks. If he’s serious about that stance, and is concerned about the Bucks matching a long-term offer sheet from a rival club, he could accept his one-year qualifying offer from Milwaukee this summer. Because he met the starter criteria in 2012/13, his QO will be worth $4,531,459. Accepting that one-year deal would make him an unrestricted free agent in the summer of ’14.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA’s Collective Bargaining Agreement. Larry Coon’s Salary Cap FAQ and Storyteller’s Contracts were used in the creation of this post.

This post was initially published on May 3rd, 2012.

The Bird exception, named after Larry Bird, is a rule included in the NBA's Collective Bargaining Agreement that allows teams to go over the salary cap to re-sign their own players. A player who qualifies for the Bird exception, formally referred to as a Qualifying Veteran Free Agent, is said to have "Bird rights."

The most basic way for a player to earn Bird rights is to play for the same team for at least three seasons, either on a multiyear deal or separate one-year contracts. The criteria are a little more complicated than that though. A player retains his Bird rights in the following scenarios:

• He changes teams via trade, rather than being waived or signing elsewhere as a free agent. For instance, Anthony Morrow is in the third year of his contract. He has been traded twice, from the Nets to the Hawks and then to the Mavericks, but will earn Bird rights at season's end because he was never waived during those three seasons.
• He finishes a third season with a team after having only played partial seasons with the club for the first two years (without signing elsewhere in between).

However, a player sees the clock on his Bird rights reset to zero in the following scenarios:

• He changes teams via free agency.
• He is selected in an expansion draft.
• He is waived and is not claimed on waivers.
• His rights are renounced by his team.

If a player has earned Bird rights, he is eligible to sign a maximum-salary contract for up to five years with 7.5% annual raises when he becomes a free agent. The maximum salary will vary depending on how long the player has been in the league, but regardless of the amount, a team can exceed the salary cap to complete the deal.

Although the Bird exception allows teams to exceed the cap, a team cannot necessarily use free cap room to sign free agents and then re-sign its own players via Bird rights. A team with a Bird free agent is assigned a "free agent amount" or cap hold worth either 190% of his previous salary (for a player with a below-average salary) or 150% of his previous salary (for an above-average salary). For players coming off a rookie-scale contract, the amounts of those cap holds are 250% and 200%, respectively.

The Hawks, for instance, will have a $12.75MM cap hold for Devin Harris on their 2013/14 books — 150% of his $8.5MM salary this season. Atlanta could clear that $12.75MM in cap space by renouncing Harris, but then would lose his Bird rights. If the Hawks wanted to re-sign him at that point, they'd have to use either cap room or a different cap exception.

Ultimately, the Bird exception was designed to allow teams to keep their star players. The CBA ensures that teams are always able to re-sign their veteran stars to maximum contracts, assuming the player is interested in returning and his team is willing to go over the cap.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA's Collective Bargaining Agreement. Larry Coon's Salary Cap FAQ was used in the creation of this post.

This post was initially published on April 17th, 2012.

The most common method over-the-cap teams use to sign free agents from other teams is the mid-level exception, but it's not the only tool those clubs can use to squeeze an extra player onto the payroll. The bi-annual exception is a way to sign a player who commands more than the minimum salary and less than the mid-level.

As its name suggests, the bi-annual exception can only be used every other year. Even if a team uses only a portion of the exception, it becomes unavailable the following year.

The bi-annual exception is available only to a select few clubs. Teams whose player salaries and cap exceptions add up to less than the salary cap lose their bi-annual exception as well as their full mid-level exception and any trade exceptions. They must use their cap room to sign players. Additionally, teams lose access to the bi-annual exception when they go more than $4MM over the tax threshold, exceeding what's known as the tax apron. So, only teams over the cap but under the tax apron can use the bi-annual exception.

Additionally, if a team uses all or part of the bi-annual exception, it triggers a hard cap for that season. Clubs that sign a player with using the exception can't go over the tax apron at any time during the season in which the contract is signed.

The value of the bi-annual exception rises from $1.957MM in 2012/13 to $2.016MM for 2013/14, and will continue to go up by 3% each year during the current collective bargaining agreement. The contract can be for either one or two seasons, with a raise of 4.5% for the second season. The Clippers used the full bi-annual exception last summer to give Grant Hill a two-year deal worth a total of $4,002,065. Teams also have the option of splitting the exception among multiple players. The Spurs signed Nando De Colo to a two-year deal for a total of $2.863MM, but never used the remaining amount on the exception. The bi-annual exception becomes pro-rated starting on January 10th, so it's rarely used for late-season signees.

The Bulls, who gave Marco Belinelli a one-year contract for the full value of the bi-annual exception, were the only team besides the Clippers and Spurs to use it in 2012/13. So, those three clubs can't use the bi-annual in 2013/14, but any other team with a payroll above the cap and below the tax apron may.

Luke Adams contributed to this post, which was initially published on April 23rd, 2012.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA's Collective Bargaining Agreement. Larry Coon's Salary Cap FAQ was used in the creation of this post.

As its name suggests, the minimum salary exception can be used by an over-the-cap team to sign a player to a one- or two-year minimum-salary deal. The exception can also be used to acquire minimum-salary players via trade, without the players being counted for salary-matching purposes.

Players are entitled to varying minimum salaries based on how long they've been in the NBA. In 2012/13, a player with no prior NBA experience was eligible for a $473,604 minimum salary, while a player with 10+ years of experience was eligible for $1,352,181. Over the course of the current Collective Bargaining Agreement, the minimum salary will increase each season, as Larry Coon's CBA FAQ outlines. For both this season and next season, the breakdown is as follows:

Because the NBA doesn't want clubs to shy away from signing more expensive veteran players, the league reimburses teams for a portion of a minimum-salary player's cost if he has three or more years of experience, as long as the contract isn't a multiyear deal. The minimum salary for a player with two years experience is the most a team will pay, and the largest cap hit it will take, for a one-year minimum contract. For instance, when the Lakers signed 14-year veteran Antawn Jamison for 2012/13 using the minimum salary exception, he earned $1,352,181, but the team's cap hit was just $854,389. The league will be reimbursing the Lakers for the remaining $497,792.

Most salary cap exceptions can only be used once each season. When a team uses its full mid-level exception to sign one or more players, the club can no longer use that exception until the following season. Unlike the mid-level and other cap exceptions, however, the minimum salary exception can be used any number of times in a single season. The Knicks, for example, currently have six players on minimum-salary deals.

Over-the-cap teams can use the minimum salary exception to acquire players in trades without having to worry about matching salaries. That's how the Thunder were able to trade for Ronnie Brewer and give up only a second-round pick.

Chuck Myron contributed to this post, which was initially published on May 7th, 2012.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA's Collective Bargaining Agreement. Larry Coon's Salary Cap FAQ was used in the creation of this post.

When the Rockets so quickly reached an agreement to sign Aaron Brooks after the point guard was bought out by the Kings yesterday, cost-conscious management in Sacramento may have let out a sigh of relief. Unless another team snatches Brooks up by claiming him off waivers before the Rockets can sign him, the Kings will still be on the hook for whatever remaining portion of Brooks' contract they consented to pay as part of the buyout. But, if he signs with the Rockets, Sacramento may not have to pay out quite as much.

That's because of a provision in the collective bargaining agreement known as set-off rights. If a player signs with another team after he's been waived, his original team gets to reduce the amount of money it still owes him. A team may reduce the salary it owes a player by half the difference between the salary the player earns under a contract with a new team and the minimum salary for a one-year veteran. If the player is a rookie, the rookie minimum is used instead.

We don't yet know the financial details of Brooks' buyout with the Kings or his pending contract with the Rockets. The Rockets could sign Brooks for more than a prorated portion of the minimum salary, since they're under the cap, but let's say they sign him only for that amount. If they finalize the deal Monday, he would be on the team for 45 of the regular season's 170 days, so he'd receive $234,296, or 45/170 of the $885,120 minimum for a three-year veteran. The minimum salary for a player with just one year of experience is $762,195. The prorated amount of that figure is $201,758. The difference between $234,296 and $201,758 is $32,538, and half of that is $16,296 — the number the Kings could subtract from their cap and their payout to Brooks. That's a tiny amount in the world of NBA salaries, but to owners who count every penny, it's not insignificant. That figure would only increase if Brooks signed with Houston for more than the minimum.

Brooks would still benefit from signing with Houston, even if it's for the minimum, since he'd be giving back only a small portion of his new salary. Teams and players can waive the right to set-off as part of their buyout agreements, so perhaps that's what the Kings and Brooks have done in this case — though given the Kings' thriftiness of late, I wouldn't bet on it.  

Interestingly, set off applies if a waived player signs a deal with a professional team in any league while his last team is still paying off his old contract. It doesn't have to be an NBA team — it can be a D-League squad or an overseas club. In many cases, though, a player's non-NBA contract is for less than the one-year veteran's NBA minimum salary, making the set-off provision moot. 

Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA's Collective Bargaining Agreement. Larry Coon's Salary Cap FAQ was used in the creation of this post.

One of the new additions to the NBA's most recent Collective Bargaining Agreement was increased penalties for teams in the luxury tax. Those more punitive penalties haven't taken effect yet, but the rates for taxpaying teams will increase in 2013/14, with a "repeater tax" introduced starting in 2014/15.

Up until this point, teams have been required to pay an extra $1 for every dollar they spend over the tax threshold ($70.307MM in 2011/12 and 2012/13, though it figures to increase going forward). If a team is $8MM over the tax line at the end of the regular season, the club will take a penalty of $8MM, meaning that extra salary actually costs them $16MM overall. Beginning in 2013/14, however, tax penalties will be assessed as follows:

• $0-5MM above tax line: $1.50 penalty per dollar.
• $5-10MM above tax line: $1.75 penalty per dollar.
• $10-15MM above tax line: $2.50 penalty per dollar.
• $15-20MM above tax line: $3.25 penalty per dollar.
• For every additional $5MM above tax line, rates increase by $0.50 per dollar (ie. $3.75 for $20-25MM, $4.25 for $25-30MM, etc.)

Under the new system, a team $8MM over the tax line will be charged $1.50 per dollar for the first $5MM, then $1.75 per dollar for the next $3MM, for a total penalty of $12.75MM.

Penalties for taxpaying teams can also increase even more if a club has been in the tax for multiple years. These penalties will apply to teams that have been in the tax for four years in a five-year period (beginning in 2011/12). So teams who remain in the tax every year starting in '11/12 will face increased rates starting in 2014/15.

The "repeater tax" increases the rates listed above by $1 each. So the hypothetical team that's $8MM above the tax line would be charged $2.50 per dollar for the first $5MM, then $2.75 per dollar for the next $3MM. The club's total penalty would be $20.75MM, meaning it would cost $28.75MM overall to exceed the tax threshold by $8MM. Obviously, the cost would be exponentially more exorbitant for teams further above the tax line.

These looming penalties explain why we'll see teams try to avoid being in the tax over the next few seasons. The most prominent examples so far have been the Mavericks' decision to break up the 2011 champions, and the Thunder's decision to trade James Harden rather than extend him, but those are just the first of many cases. As Ian Thomsen of SI.com writes, even teams like the Heat may be in danger of having to break up their rosters within the next few years.

To retain LeBron James, Dwyane Wade, and Chris Bosh, along with a roster of lesser-paid role players in 2014/15, the Heat would likely to have to pay $140MM+ for 12 players, Thomsen estimates. That's why one rival general manager predicts that the Heat are "going to have to break up their team." Another GM thinks only three clubs will be able to afford the massive penalties that the repeater tax will bring: the Lakers, Knicks, and Nets.

2012/13 is the final year that teams will be penalized under the old CBA's rules, so it's not likely that we'll see a ton of teams manoeuvering to avoid the tax before next summer. However, going forward, it figures to be a major consideration when clubs add salary and build their rosters.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA's Collective Bargaining Agreement.

Hoops Rumors is continuing the process of creating a glossary of terms related to trades, free agency, and other areas of the NBA's Collective Bargaining Agreement. If you're confused about our use of phrases like "Bird rights," "mid-level exception," or "cap holds," this reference tool should help clear things up.

We've been adding entries to this page over the last several months, and will continue to fill it out over the next few months. The link to our glossary can be found anytime on the right sidebar under "Hoops Rumors Features." If there's a specific concept you'd like us to cover, please let us know. Here's what we have so far:

• 10-Day Contracts
• Amnesty Provision
• Bi-Annual Exception
• Bird Rights
• Cap Holds
• D-League Assignments
• Derrick Rose Rule
• Disabled Player Exception
• Draft Lottery
• Early Bird Rights
• Gilbert Arenas Provision
• July Moratorium
• Maximum Salary
• Mid-Level Exception
• Minimum Salary Exception
• Non-Bird Rights
• Poison Pill Provision
• Rookie Scale
• Roster Limits
• Qualifying Offers
• Salary Cap Exceptions
• Set-Off Rights
• Ted Stepien Rule
• Traded Player Exception
• Waivers