Hoops Rumors Glossary

While salary cap workarounds like the mid-level exception can be used annually, the disabled player exception is only available under certain circumstances. Like other salary cap exceptions though, the DPE allows a team to sign a player without using cap space.

If a player is injured and ruled out for the rest of the season, his team can apply for the disabled player exception. It allows a club to sign a replacement player for 50% of the injured player’s salary, or for the amount of the non-taxpayer mid-level exception, whichever is lesser. So if the non-taxpayer MLE were worth $5MM, a team could replace a disabled $7MM player for up to $3.5MM (50%) or a disabled $13MM player for up to $5MM (MLE amount).

A team must formally apply for a disabled player exception and it requires the approval of the league. The cutoff to apply for a DPE each season is January 15th. If a team has a player go down with a season-ending injury after that date, it cannot obtain a DPE to replace him. For instance, the Clippers were ineligible for the exception this year when Chauncey Billups was injured in early February. A team must also use its DPE by March 10th of the current season, or it will expire.

Unlike the mid-level and bi-annual exceptions, the disabled player exception can only be used on a single player. However, a team can use it to either sign a free agent or acquire a player in a trade. If a team uses its exception to take on salary in a trade, it can acquire a player making up to 100% of the DPE amount, plus $100K. For example, a $4MM DPE could be used to trade for a player making $4.1MM. A free agent signed using the DPE can be offered a maximum of one year, while a player acquired via trade using the DPE must be in the final year of his contract.

The disabled player exception is rarely exercised, but it does give teams a backup plan of sorts, providing the means to replace seriously injured players.

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 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.

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 situation.

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 $2.5MM first-year salary
• Maximum 4.5% annual raises
• First-year salary grows by 3% annually

For over-the cap teams:

• Called the full or standard mid-level exception
• Maximum four-year contract
• Maximum $5MM first-year salary
• Maximum 4.5% annual raises
• First-year salary grows by 3% annually starting in 2013/14

For taxpaying teams:

• Called the mini mid-level, or the taxpayer mid-level exception
• Maximum three-year contract
• Maximum $3MM first-year salary
• Maximum 4.5% annual raises
• First-year salary grows by 3% annually

For a practical example of how the restrictions on the mid-level exception work, let's say the Heat and Knicks were competing for a free agent this coming summer. The Heat have $76MM+ on their books for 2012/13, making them a taxpayer, while the Knicks have $60MM+, putting them over the cap but not over the tax threshold. If both teams offered the full MLE, the player would receive an offer of four years and $21.35MM from the Knicks, or three years and about $9.69MM from the Heat.

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.

Last week, we looked at what it means for an NBA player to earn Bird rights, Early Bird rights, or Non-Bird rights. The Bird exceptions allow teams to sign their own free agents, but they can't be used to sign other teams' free agents. If an over-the-cap team wants to sign a free agent, one cap exception available to them is the bi-annual exception.

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 BAE amount, 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 ($58.04MM this season) 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, taxpaying teams lose access to the bi-annual exception. Only teams over the cap but under the tax line can use the BAE.

For the 2011/12 season, the amount of the bi-annual exception was capped at $1.9MM. The largest contract a player could receive using the BAE was for two years, with a raise of 4.5%, adding up to a total of about $3.89MM for two seasons. Teams also have the option of splitting the exception among multiple players, perhaps signing one player for $1MM and another for $900K.

The starting salary for the bi-annual exception will grow 3% annually, so next year it will be worth $1.957MM. The BAE also becomes pro-rated starting on January 10th, so a team wouldn't be able to offer the full amount after that date.

While the bi-annual exception isn't worth a significant amount, it provides over-the-cap teams a way of offering players a salary above the minimum without dipping into their 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.

We've outlined how teams can use Bird or Early Bird exceptions to re-sign players who have been on their roster for multiple seasons. The third related cap exception in the group is the Non-Bird exception, for players who are considered Non-Qualifying Veteran Free Agents. Non-Bird rights are earned when a player spends just a single season with his team after having signed as a free agent or being claimed off waivers.

Because a partial season is generally considered a full year for Bird purposes, every veteran player who finishes the season on an NBA roster should qualify for at least the Non-Bird exception. Even if a player is waived halfway through the season and signs a rest-of-season contract with another team, he'll earn Non-Bird rights at the end of the year.

Teams are permitted to sign their own free agents using the Non-Bird exception for a salary starting at 120% of the player's previous salary, 120% of the minimum salary, or the amount of a qualifying offer (if the player is a restricted free agent), whichever is greater. Contracts can be for up to four years, with 4.5% annual raises.

Because the amount a team can offer its Non-Bird free agent is so limited, the exception may not be enough to retain an impact player. For instance, Jeremy Lin will be a Non-Bird player for the Knicks at the end of this season — he was claimed off waivers by the team in December, so he'll only have one year on his Bird clock. The amount of Lin's qualifying offer will only be about $1.03MM, which other suitors will easily be able to top. As such, the Knicks will have to use another cap exception (likely the mid-level) if they want to re-sign Lin.

Kwame Brown is another example of a player who would have Non-Bird rights at season's end. He signed a one-year deal with a new team last December, so his Bird clock will be at just a single year at season's end. Using the Non-Bird exception, the Bucks could offer him a salary starting at up to $8.1MM, 120% of his 2011/12 salary, though of course there's no chance they'll do so.

The cap hold for a Non-Bird player is 120% of his previous salary.

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.

Ideally, if a team is interested in re-signing its own free agent at any cost, the player will have earned Bird rights, allowing his club to offer up to the maximum salary to retain him. However, there are also salary cap exceptions available for signing players who have yet to earn full Bird rights. One lesser exception is the Early Bird, available for players formally known as Early Qualifying Veteran Free Agents.

Whereas the Bird exception requires a player to spend three seasons with his club without being waived or changing teams as a free agent, Early Bird rights are earned after just two such seasons. Virtually all of the same rules that apply to Bird rights apply to Early Bird rights, with the requirements condensed to two years rather than three. Players still see their Bird clocks restart by being claimed off waivers, changing teams via free agency, being claimed in an expansion draft, or having their rights renounced.

The crucial difference between Bird rights and Early Bird rights involves limits on contract offers. While Bird players can receive maximum salary deals for up to five years, the Early Bird exception cannot be used to offer a max deal. The most a team can offer an Early Bird free agent is 175% of his previous salary or the league-average salary, whichever is greater. These offers are also capped at four years rather than five.

One example of a player who will earn Early Bird rights after this season is the Knicks' Landry Fields. Fields is in his second season in New York without having being waived, and isn't on a rookie contract. As such, the Knicks could use the Early Bird exception this summer to offer up to the league-average salary to keep Fields in New York for up to four more years. While Fields likely won't receive an offer that large, having the ability to use this exception means the Knicks won't have to dip into their mid-level to retain the 23-year-old.

The cap hold for an Early Bird player is 130% of his previous salary.

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 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, Ramon Sessions is in the third year of his contract. He has been traded twice, from the Timberwolves to the Cavs and then to the Lakers, 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 waived and claimed by another team on waivers.
• He is selected in an expansion draft.
• 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 Celtics, for instance, will have a $15MM cap hold for Ray Allen on their 2012/13 books — 150% of his $10MM salary this season. Boston could clear that $15MM in cap space by renouncing Allen, but then would lose his Bird rights. If the Celtics 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.

There are a number of ways that teams without salary cap space are able to add players. These players' salaries still count against the team's cap figure and are taken into account for tax purposes. However, teams can use these exceptions in lieu of available cap room to acquire players.

When we discuss trades and free agency at Hoops Rumors, we'll often refer to these salary cap exceptions. In case you're wondering what we mean when we mention a "mini mid-level exception" or a "bi-annual exception," we've compiled a brief glossary for reference. The NBA's salary cap exceptions under the latest Collective Bargaining Agreement are listed below:

• Bird Exception: If a player has been on the same team for three years (not necessarily full seasons), his team can re-sign him for up to the player's maximum salary. A player who changes teams via trade retains his Bird rights, but he loses them if he signs with a new team as a free agent. A Bird player can sign for up to five years with maximum annual raises of 7.5%.
• Early Bird Exception: If a player has been on the same team for two years (not necessarily full seasons), his team can re-sign him for up to 175% of his previous salary or the average player salary, whichever is greater. Early Bird contracts must be for at least two seasons (no more than four), with maximum annual raises of 7.5%.
• Non-Bird Exception: If a player has earned neither Bird or Early Bird rights, his team can re-sign him for 120% of his previous salary, 120% of the applicable minimum salary, or, if he's a restricted free agent, the amount of his qualifying offer. A non-Bird player can sign for up to four years with maximum annual raises of 4.5%.
• Mid-Level Exception: A non-taxpaying team can offer a player a contract for up to four years, starting at $5MM with maximum annual raises of 4.5%. This exception can be used on one or multiple players, and the max first-year salary will grow by 3% annually starting in 2013/14.
• Taxpayer Mid-Level Exception: A taxpaying team can offer a player a contract for up to three years, starting at $3MM with maximum annual raises of 4.5%. This exception can be used on one or multiple players, and the max first-year salary will grow by 3% annually starting in 2012/13.
• Bi-Annual Exception: A non-taxpaying team can offer a player a contract for up to two years, starting at $1.9MM with a maximum raise of 4.5%. This exception can be used on one or multiple players, and the max first-year salary will grow by 3% annually starting in 2012/13. As its name suggests, this exception, which isn't available to taxpaying teams, can only be used every other year.
• Mini Mid-Level Exception: If a team uses room under the cap to sign players, it forfeits its mid-level and bi-annual exceptions. In that case, the team receives this exception, which isn't available to teams above the cap. After using its cap room, a team can offer a player a contract for up to two years, starting at $2.5MM with a maximum raise of 4.5%. This exception can be used on one or multiple players, and the max first-year salary will grow by 3% annually starting in 2012/13.
• Minimum Salary Exception: A team can offer a player a contract for up to two years worth the applicable minimum salary. A team can also use this exception to trade for minimum-salary players. There is no limit to the number of players a team can acquire using this exception.
• Rookie Exception: A team can sign its first-round draft picks for up to 120% of the rookie salary scale amount.
• Disabled Player Exception: If a player suffers an injury that will sideline him for the season, a team can be granted this exception by the league. It can be used to sign a replacement player for one year, and is worth 50% of the disabled player's salary or the amount of the non-taxpayer mid-level exception, whichever is lesser. This exception, which must be applied for between July 1st and January 15th, can also be used to acquire a player via trade, and is forfeited if not used within 45 days.
• Traded Player Exception: A non-taxpaying team can replace a traded player simultaneously (in the same transaction) with one or more players whose total salaries amount to no more than 150% of the traded player's salary or the traded player's salary plus $5MM, whichever is lesser. A taxpaying team can replace a traded player simultaneously with one or more players whose total salaries amount to no more than 125% of the traded player's salary. Alternately, both non-taxpaying and taxpaying teams can replace a traded player non-simultaneously (within one year) with one or more players whose total salaries amount to no more than 100% of the traded player's salary. In each case, this exception, which cannot be used to sign a free agent, includes an additional $100,000 of wiggle room.

For further clarification on salary cap exceptions, please visit Larry Coon's invaluable NBA Salary Cap FAQ or check out more detailed explanations in our glossary.