Article 13 CIRCUMVENTION

13.1 General Prohibition.

  1. It is the intention of the parties that the provisions agreed to herein, including, without limitation, the rules relating to the Salary Cap, the Exceptions to the Salary Cap, and the free agency provisions, be interpreted so as to preserve the essential benefits achieved by both parties to this Agreement. Neither the parties hereto, nor any Team (or Team Affiliate) or player (or person acting with authority on behalf of such player), shall enter into any agreement, including, without limitation, any Player Contract (including any Renegotiation, Extension, or amendment of a Player Contract), or undertake any action or transaction, including, without limitation, the assignment or termination of a Player Contract, which includes any terms that are designed to serve the purpose of defeating or circumventing the intention of the parties as reflected by all of the provisions of this Agreement.
  2. It shall constitute a violation of subsection (a) above for a Team to enter into an agreement or understanding with any sponsor or business partner or third party under which such sponsor, business partner or third party pays compensation for basketball services (even if such compensation is ostensibly designated as being for non-basketball services) to a player under Contract to the Team. Such an agreement with a sponsor or business partner may be inferred where: (i) such compensation from the sponsor or business partner is substantially in excess of the fair market value of any services to be rendered by the player for such sponsor or business partner; and (ii) the compensation in the Player Contract between the player and the Team is substantially below the fair market value of such Contract.

13.2 No Undisclosed Agreements.

  1. At no time shall there be any undisclosed agreements of any kind, express or implied, oral or written, or promises, undertakings, representations, commitments, inducements, assurances of intent, or understandings of any kind, between a player (or any person acting with authority on behalf of such player) and any Team (or Team Affiliate):
    1. involving consideration of any kind to be paid, furnished or made available to the player, or any person or entity controlled by or related to the player, by the Team or Team Affiliate either during the term of the Player Contract or thereafter; or
    2. concerning any future Renegotiation, Extension, or amendment of an existing Player Contract, or entry into a new Player Contract.
  2. At the time of the assignment of any Player Contract, there shall be no undisclosed agreements of any kind, express or implied, oral or written, or promises, undertakings, representations, commitments, inducements, assurances of intent, or understandings of any kind,between the player whose Player Contract has been assigned (or any person acting with authority on behalf of such player) and any Team (or Team Affiliate), concerning any future Renegotiation, Extension, or amendment of the Player Contract that has been assigned or the entry into any new Player Contract.

13.3 Penalties.

  1. Upon a finding of a violation of Section 1 above by the System Arbitrator, but only following the conclusion of any appeal to the Appeals Panel, the Commissioner shall be authorized to:
    1. impose a fine of up to $2,000,000 (50% of which shall be payable to the NBA, and 50% of which shall be payable to the NBPA-Selected Charitable Organization) on any Team found to have committed such violation;
    2. direct the forfeiture of one first round draft pick; and/or
    3. void any Player Contract, or any Renegotiation, Extension, or amendment of a Player Contract, between any player and any Team that are both found to have committed such violation.
  2. Upon a finding of a violation of Section 2 above by the System Arbitrator, but only following the conclusion of any appeal to the Appeals Panel, the Commissioner shall be authorized to:
    1. impose a fine of up to $5,000,000 (50% of which shall be payable to the NBA, and 50% of which shall be payable to the NBPA-Selected Charitable Organization) on any Team found to have committed such violation;
    2. direct the forfeiture of draft picks;
    3. void any Player Contract, or any Renegotiation, Extension, or amendment of a Player Contract, between any player and any Team that are both found to have committed such violation; and/or
    4. suspend for up to one year any Team personnel found to have willfully engaged in such violation.
  3. If the System Arbitrator finds that a player agent has willfully committed a violation of Section 1 or 2 above, and such finding, if appealed, is affirmed by the Appeals Panel, such finding shall be referred to the Players Association’s Committee on Agent Regulation for such disciplinary action as the Committee deems appropriate. The Committee shall accept as binding and conclusive the findings of the System Arbitrator (or, in the case of an appeal, the Appeals Panel) that a violation of Section 1 or 2 has occurred. In addition, the NBA reserves any and all rights it may have to take such action and/or assert such claims as may be available to it against a player agent found to have violated Section 1 or 2. The Players Association reserves any and all rights it may have to oppose any action taken or claims asserted by the NBA against a player agent found to have violated Section 1 or 2, including any and all rights it may have to contest the authority of the NBA to take such action.

13.4 Production of Tax Materials.

In any proceeding to enforce Section 1 or 2 above, the System Arbitrator shall have the authority, upon good cause shown, to direct any Team, Team Affiliate, or player to produce any tax returns or other relevant tax materials disclosing income figures for the player (non-income figures may be redacted), or disclosing expense figures by the Team or Team Affiliate (non-expense figures may be redacted), which materials shall not be released to the general public or the media and shall be treated as strictly confidential by all parties.

13.5 Valuation Procedures.

  1. Any transaction (other than a player appearance called for by the Uniform Player Contract or Group License Agreement) between a player and a Team and/or Team Affiliate after the date of this Agreement that (i) is described as not involving playing services, and (ii) in which the player receives compensation or is being provided with an investment opportunity, shall be disclosed in writing to the League Office and the Players Association prior to or within five business days after the entering into of the transaction. The NBA shall have ten days after such disclosure in which to challenge the transaction, pursuant to the procedures set forth in subsection (c) below, on the ground that: (i) the compensation to the player is greater than a reasonable approximation of the fair market value of the non-basketball services or other consideration provided by the player in the transaction; (ii) the amount of the player’s investment is not commercially reasonable, given the relative risks and rewards of such investment; or (iii) the consideration paid to the player for performing basketball services represents less than a reasonable approximation of the fair market value of such player’s basketball services.
  2. If a Team or Team Affiliate enters into a transaction after the date of this Agreement with a retired player who played for the Team within the past five years, in which the retired player is being compensated in excess of $10,000 or is being provided with an investment opportunity, and if the compensation the retired player received from the Team when he was a player was substantially below the then fair market value for his services, then the NBA may challenge the transaction, pursuant to the procedures set forth in subsection (c) below, on the ground that: (i) the compensation to the player substantially exceeds the fair market value of the services or other consideration provided by the retired player in the business transaction; or (ii) the amount of the player’s investment is not commercially reasonable, given the relative risks and rewards of such investment.
    1. Any challenge under this Section 5 shall be filed in writing with a business valuation expert jointly selected by the NBA and the Players Association, who shall render a decision within fifteen days after the filing of the challenge. The business valuation expert shall conduct a hearing in which the player or retired player, the Team and/or Team Affiliate, the Players Association, and the NBA are afforded the opportunity to appear and participate. The NBA shall have the burden of proof in the proceeding. The business valuation expert may permit discovery of relevant documents necessary to undertake the valuation. Within ten days of any decision by the business valuation expert, any of the parties may file an appeal with the System Arbitrator, who shall conduct a hearing and render a decision within twenty days of the filing of the appeal. There shall be no right of further appeal to the Appeals Panel.
    2. If the NBA prevails in its challenge under this Section 5, the player or retired player and the Team and/or Team Affiliate shall have fifteen days after the date of such determination (or the date of the conclusion of any appeal) in which to renegotiate or terminate: (x) the business transaction, if all parties to the transaction so agree; and (y) in the case of a challenge under Section 5(a), any Player Contract entered into contemporaneously with such transaction, without regard to any time limitations in this Agreement applicable to Renegotiations. If the player or retired player and the Team and/or Team Affiliate do not renegotiate or terminate the business transaction or Player Contract by the conclusion of such fifteen-day period, then, at that time: (xx) in the case of a challenge under Section 5(a), the consideration received by the player, or the value of the investment opportunity (net of any contribution by the player), in each case as determined by the business valuation expert or the System Arbitrator, as the case may be, shall be included in the player’s Salary, subject to the Team’s Room and other Salary Cap rules, and further subject to any allocation over time that the business valuation expert or System Arbitrator determines is appropriate; and (yy) in the case of a challenge under Section 5(b), the difference between (A) the compensation received by the retired player, or the value of the investment opportunity received by the retired player (net of any contribution by the retired player), and (B) a reasonable estimate of the fair market value of the services or other consideration provided by the retired player, or a reasonable estimate of the fair market value of the investment opportunity, in each case as determined by the business valuation expert or the System Arbitrator, as the case may be, shall be included in the Team’s Team Salary, subject to the Team’s Room and other Salary Cap rules, and further subject to any allocation over time that the business valuation expert or System Arbitrator determines is appropriate.
    3. If the NBA prevails in its challenge under this Section 5, and the player or retired player and the Team and/or Team Affiliate renegotiate or terminate the business transaction or Player Contract, any revised terms of the transaction or Player Contract shall be promptly disclosed to the NBA and the Players Association, and may, at the request of the NBA, be re-subjected to the procedures of this subsection (c).
  4. Any information disclosed to the League Office and the Players Association pursuant to the procedures of this Section 5 shall be treated strictly confidential, and shall not be released to the general public or the media.

13.6 Other Undertakings.

  1. No Team shall have a financial arrangement with or offer a financial inducement to any player (not including retired players) not signed to a current Player Contract.
  2. Prior to the assignment of any Player Contract, the Team from which such Player Contract is to be assigned and the player whose Player Contract is to be assigned shall be required to divest themselves, on terms mutually agreeable to the player and the Team, of any pre-existing financial arrangements between such Team and such player. The foregoing shall not apply to Deferred Compensation obligations and loans.
  3. Nothing contained in subsections (a) and (b) above shall interfere with a Team’s obligation to pay a player Deferred Compensation earned under a prior Player Contract.