Hoops Rumors Glossary

While the term "designated player" may evoke thoughts of baseball's designated hitter rule, there really aren't any similarities. In the NBA, a designated player isn't chosen game by game. Instead, when a team makes someone its designated player, the move can have broad, long-lasting consequences.

A designated player is a former first-round draft pick who receives a five-year extension to his rookie-scale contract. Teams are allowed to sign players to rookie-scale extensions of up to four years as often as they want, but they can only sign one player to a five-year rookie scale extension for as long as that extension is in effect. So, the Wizards, who signed John Wall to a five-year extension in July, can't sign anyone else to a rookie-scale extension of more than four years until the summer of 2019, when Wall's deal expires. The five-year deal makes Wall the team's designated player. That means the Wizards will be limited when they negotiate with Bradley Beal or any other player on the team's roster who can become eligible for a rookie-scale extension before Wall's deal is up.

There are ways the Wizards could get around this, of course. They could trade or release Wall, since he'd cease to be the Wizards' designated player if he's no longer on their roster. That's unlikely to happen. A much more plausible scenario involves the Wizards simply letting Beal hit restricted free agency in 2016, and signing him to a five-year deal then.

Wall signed for the max, and the designated player rule requires that contracts be for the max in at least the first season. The salaries can decrease by as much as 7.5% of the first-year salary each season, providing some measure of flexibility in the total value of the deal. The Bucks and Larry Sanders are closing in on a four-year, $44MM extension, a below-max deal overall. If they wanted to add a fifth year to the arrangement, front load the deal and bring the total value to $58,230,313, they could do so, triggering the designated player rule for Sanders. When I examined the prospects for a Sanders extension, I figured his agent would ask for a fifth year, particularly since the Bucks don't have any former first-round picks on their roster who figure to warrant such a long-term deal when they become extension-eligible. It looks like Sanders won't get that fifth year, perhaps because the Bucks want to retain flexibility in case they find other worthy talent in the next two drafts.

Teams that have designated players do have the option of trading for another team's designated player. So, the Wizards, in theory, could trade for Blake Griffin, the designated player of the Clippers, at some point during the life of their respective extensions. The Wizards couldn't, however, trade for both Griffin and another designated player, such as James Harden. The notion that Washington or any club could put together such a superteam is a little far-fetched, but the stipulation that no team may trade for more than one designated player is in place nonetheless.

The designated player rule doesn't apply to veteran extensions, and it doesn't apply to second-round picks or undrafted players. So, if the Rockets want to sign Chandler Parsons to a five-year extension when he becomes eligible next summer, they can do so without making him their designated player, since Parsons was a second-round pick. Nikola Pekovic's new five-year deal with the Wolves doesn't make him the team's designated player for two reasons: he signed it once his original contract expired, so it's not an extension, and that original contract was for only three seasons, which made him ineligible for an extension anyway.

Not every team has to have a designated player, and few teams do, in part because the designated player rule came into being only recently, when the new collective bargaining agreement went into effect in 2011. Here's the complete of designated players:

• Russell Westbrook, Thunder (expires 2017)*
• Derrick Rose, Bulls (expires 2017)
• James Harden, Rockets (expires 2018)
• Blake Griffin, Clippers (expires 2018)
• John Wall, Wizards (expires 2019)

*— Kevin Durant also signed a five-year extension, but he did so before the new CBA took effect, so he was exempt from the designated player rule, allowing the Thunder to sign Westbrook to his five-year 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.

Few NBA players mature as quickly as Derrick Rose did. The Bulls point guard captured the MVP award at the age of 22 in just his third NBA season, and he did so on a contract that paid him $5,546,160 that year, far below his market value. He was, in a sense, the victim of poor timing as he produced such outstanding results while still on the restrictive rookie wage scale for first-round picks, but his eligibility for an extension just as the lockout hit gave the players association an unusual chance to bargain on his behalf.

The result is a stipulation, commonly known as the Derrick Rose rule, that allows a player on a rookie-scale contract to receive an extension with a starting salary of up to 30% of the salary cap instead of the standard 25% if he hits certain benchmarks. A former first-round pick can invoke the rule if he does any of the following while his rookie-scale contract is in effect:

• Win the MVP
• Make an All-NBA team twice
• Make the All-Star Game as a starter via fan balloting twice

The rule also applies to former second-round picks and undrafted players with at least four years of service, but the odds that any of them would meet one of the required benchmarks are slim.

Rose, with his MVP award in tow, signed his lucrative five-year extension with the Bulls in December 2011, shortly after the lockout ended. Still, he wasn’t the first to benefit from the rule named after him. The league decided to apply the rule to Kevin Durant‘s extension with the Thunder, even though that deal was signed a year before the lockout began. Rookie-scale extensions don’t take effect until a year after they’re signed, so Durant’s deal kicked in for 2011/12, the season following the lockout. Naturally, the league’s decision didn’t sit well with the Thunder, and in July 2013, the NBA voted to reimburse the Thunder for a portion of the difference between what Durant’s extension would have been worth without the Rose rule and the $89MM+ he wound up with.

While the Thunder agreed to Durant’s extension without knowing that the Rose rule would take effect, teams and players are never sure of the precise terms of a maximum rookie-scale extension when they strike a deal for one. That’s because the deadline to do so is October 31st of the year before the extension would take effect. The maximum starting salary in the extension is based on numbers that are determined the summer after it’s signed, so it’s common practice for the contracts to simply state that the player will receive the maximum, rather than specify an amount.

Rose represents a rare case of a player who had already met the requirements for a 30% max by the time he signed his extension. Others, like Blake Griffin, don’t do so until their fourth season, so teams and players can leave contract language open to allow for either the 25% or 30% max, depending on whether the player meets the Rose rule requirements in his final season under the original terms of his rookie deal. The Wizards have done so with John Wall‘s extension this summer, and last year the Rockets left the door open for James Harden to qualify for the 30% max, though he failed to do so. The Thunder went the other direction, specifying just the 25% max in Russell Westbrook‘s extension, a move that wound up saving them millions when Westbrook made his second appearance on an All-NBA Team in his fourth season.

Players can receive higher salaries under the Rose rule only if they sign extensions for at least four years, but they don’t have to be a team’s “designated player” to qualify. Teams can only sign one player coming off a rookie-scale contract to a five-year extension, and that player becomes known as the club’s designated player.

So, if the Wizards want to sign Bradley Beal to an extension in 2015, and Wall remains on the roster, they can’t give Beal a fifth year, but they can give him a starting salary worth 30% of the salary cap, even in the unlikely event Wall qualifies for the 30% max this season, too. (Wall hasn’t been voted to start the All-Star Game or selected to an All-NBA team, and since you have to do one of those twice to invoke the Rose rule, his only recourse is to win the MVP this season).

Also, the league uses a different salary cap figure to determine maximum salaries. That’s why, for instance, Griffin’s $16,441,500 salary for 2013/14 isn’t precisely 30% of the $58.679MM cap applied to team salaries this season.

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.

The Mavericks centered their 2012 offseason strategy on one-year contracts, but owner Mark Cuban has said that won't be the case for 2013. Instead, Cuban pointed to the stretch provision as a tool that will prompt the team to sign free agents to long-term contracts, even if the plan isn't for those players to stick around until the end of their deals.

The stretch provision allows teams to spread the cap hit for a waived player out over several years. Under the previous collective barganing agreement, teams and players could agree to restructure the payment schedule for any money that remained on their contracts when they parted ways. If a team waived a player with two years and a total of $4MM left on his contract, the club might have a hard time convincing the player to agree to spread the payments out over a longer period of time. The player might take less total money if a significant chunk were handed out up front, but that would still leave a team with a heavy cap hit for a player it no longer had on the roster.

The current CBA solves that dilemma for teams. The post-waiver payment schedule is locked in for players who signed deals after the lockout. If a team waives a player in July or August, the team pays his remaining salary over twice the number of seasons left on the deal, plus one. So, for that player who's waived with two years and $4MM left on his deal, the team would pay him $800K each year for five years.

If a team waives a player in any other month, the team pays the salary for the current season as usual, then spreads out the remaining salary over twice the number of seasons left on the deal, plus one. So, if that same player with a two-year deal worth a total of $4MM wasn't waived until September, the team would be stuck paying him $2MM for the coming season, but the remaining $2MM would be spread out in equal payments of $667K over the following three years. This could make August 31st a key date in NBA offseasons going forward, as teams face decisions about the better method of paying off players they intend to let go.

Cuban spoke about signing free agents to four-year contracts, which would allow the payment, and the cap hit that goes with it, to be stretched over as many as nine years (though unless the team signs a player and waives him the same summer, the payment could only stretch across a total of eight years). If the Mavs were to waive Jose Calderon next summer, a year after they came to terms on to a four-year, $29MM deal, he'd only tie up about $3.1MM of next year's cap. That way, the Mavs could clear room to pursue one of the marquee summer of 2014 free agents. The danger would be in having money that lingers on the books for several years. That could add up if Cuban continues to pursue this strategy.

While the stretch provision regulates when money is paid out, it doesn't prevent teams and players from negotiating a reduced salary as part of a buyout. Non-guaranteed money isn't subject to the stretch provision either, since a team isn't obligated to pay any non-guaranteed portion of a contract once it waives a player. If another team claims a player off waivers, it inherits his contract, including the non-guaranteed portion, and his former team doesn't owe him anything.

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.

The NBA draft lottery, which is set to take place next Tuesday, is the league's way of determining the draft order and disincentivizing second-half tanking. The lottery gives each of the 14 non-playoff teams a chance to land one of the top three picks in the draft.

Although the top three picks of each draft are up for grabs via the lottery, the remaining order is determined by record, worst to best. The league's worst team isn't guaranteed a top-three spot in the draft, but has the best chance to land the first overall pick and will receive the fourth overall selection at worst.

The first three picks are determined by a draw of ping-pong balls numbered 1 through 14. Four balls are drawn, resulting in a total of 1,001 possible outcomes. 1,000 of those outcomes are assigned to the 14-non playoff teams — for instance, if balls numbered 4, 7, 8, and 13 were chosen, that combination would belong to one of the 14 lottery teams. The 1,001st combination remains unassigned, and a re-draw would occur if it were ever selected.

The team whose combination is drawn first receives the number one overall pick, and the process is repeated to determine picks two and three. The 14 teams involved in the draft lottery are all assigned a different number of combinations, as follows (worst to best):

1. 250 combinations, 25.0% chance of receiving the first overall pick
2. 199 combinations, 19.9%
3. 156 combinations, 15.6%
4. 119 combinations, 11.9%
5. 88 combinations, 8.8%
6. 63 combinations, 6.3%
7. 43 combinations, 4.3%
8. 28 combinations, 2.8%
9. 17 combinations, 1.7%
10. 11 combinations, 1.1%
11. 8 combinations, 0.8%
12. 7 combinations, 0.7%
13. 6 combinations, 0.6%
14. 5 combinations, 0.5%

If two lottery teams finish the season with identical records, each team receives an equal chance at a top-three pick by averaging the total amount of outcomes for their two positions. For instance, if two teams tie for the league's ninth-worst record, each club would receive 14 combinations and a 1.4% chance at the first overall pick — an average of the 17 and 11 combinations that the ninth- and tenth-worst teams receive.

If the average amount of combinations for two positions isn't a whole number, a coin flip determines which team receives the extra combination. For instance, if two clubs tied for the league's worst record, the team that wins the coin flip would receive 225 of 1,000 chances at the first overall pick, while the loser would receive 224. The coin flip also determines which team will draft higher in the event that neither club earns a top-three pick.

The table below displays the odds for each lottery team, rounded to one decimal place. For our purposes, the first seed is the NBA's worst team. Click to enlarge:

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.

This post was initially published on April 25th, 2012.

The July moratorium is a period at the start of each NBA season during which teams aren't permitted to make trades or sign free agents. The specific dates vary from season to season, but for 2013, the moratorium will last from July 1st to July 9th. As of July 10th, teams can resume business as usual.

Each new NBA season officially begins on July 1st, which is also the day that free agents are freed from their previous contracts. However, before players can sign with new teams, the NBA must complete its audit, which establishes figures like the salary cap, luxury tax threshold, and average salary. Free agents are allowed to negotiate with clubs during the moratorium, and can agree to terms on new contracts, but they are unable to officially sign a new deal until the moratorium ends.

There are a number of types of signings that are permitted during the July moratorium, as follows:

• A first-round draft pick can sign a standard rookie scale contract with the team that drafted him.
• A second-round draft pick can accept the required tender, which is a one-year contract offer that allows a team to retain its rights to a drafted player.
• A restricted free agent can accept a qualifying offer from his team.
• A free agent can sign a minimum-salary contract for one or two seasons.

When the July moratorium ends, all free agents can officially sign contracts. Additionally, the new salary cap figures for the year take effect, and the seven-day amnesty period begins.

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 May 16th, 2012.

The mid-level exception is the most common way for over-the-cap NBA teams to sign other teams' free agents. The exception can be used every season and can be split among multiple players, but different teams receive access to different mid-level exceptions based on their cap situations.

A team whose total player salaries, cap exceptions, and cap holds amount to less than the salary cap forfeits its full mid-level exception. A taxpaying team also doesn't have access to the full mid-level. However, both under-the-cap and taxpaying teams receive a lesser form of the MLE. Here's a breakdown of the restrictions placed on each of the three forms of the exception:

For teams with cap room:

• Called the mini mid-level, or the room exception
• Maximum two-year contract
• Maximum 4.5% annual raises
• First-year salary grows by 3% annually, beginning at $2.5MM in 2011/12.

For over-the cap teams:

• Called the full or standard mid-level exception
• Maximum four-year contract
• Maximum 4.5% annual raises
• First-year salary grows by 3% annually, beginning at $5MM in 2012/13.
• Once used, the team cannot surpass the "tax apron" ($4MM above tax line) for the remainder of the season.

For taxpaying teams:

• Called the mini mid-level, or the taxpayer mid-level exception
• Maximum three-year contract
• Maximum 4.5% annual raises
• First-year salary grows by 3% annually, beginning at $3MM in 2011/12.

In 2012/13, the room exception was worth $2,575,000, the full mid-level was worth $5,000,000, and the taxpayer mid-level was worth $3,090,000. However, those values are all set to increase by 3% for the '13/14 season. Here's the maximum contract a free agent could receive this summer using each of these three forms of mid-level exception:

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 24th, 2012.

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.