Article 7 TEAM SALARY, SALARY CAP, AND MINIMUM TEAM SALARY

7.1 Basketball Related Income.

For purposes of this Agreement, the following terms shall have the meanings set forth below:
1. “Basketball Related Income” (“BRI”) means the aggregate revenues (including the value of any property or services received in any barter transactions) received or to be received on an accrual basis, for or with respect to each Salary Cap Year during the term of this Agreement, by the NBA, NBA Properties, Inc., including any of its subsidiaries whether now in existence or created in the future (hereinafter “Properties”), the Market Extension Partnership, and all NBA Teams other than Expansion Teams during their first two Seasons (but including the Expansion Teams’ shares of national television, radio, cable and other broadcast revenues, and any other League-wide revenues shared by the Expansion Teams, provided such revenues are otherwise included in BRI), from all sources, whether known or unknown, whether now in existence or created in the future, derived from, relating to or arising directly or indirectly out of the performance of Players in NBA basketball games or in NBA-related activities. For purposes of this definition of BRI, “Player” means a person: who is under contract to an NBA Team; who completed the playing services called for under a contract with an NBA Team at the conclusion of the prior Season; or who was under contract with an NBA Team during (but not at the conclusion of) the prior playing Season, but only with respect to the period for which he was under such contract. BRI shall include, but not be limited to, the following:
  1. Regular Season gate receipts, net of applicable taxes, (including, without limitation, gate receipts received or to be received on an accrual basis by any entity related to an NBA Team in accordance with subsection (a)(4)(i) below) including: (A) the value (determined on the basis of the price of the ticket) of all tickets traded by a Team for goods or services; and (B) the value (determined on the basis of the League-wide average ticket price for non-Season tickets) of all tickets for NBA Regular Season games provided by a Team on a complimentary basis, without monetary or other compensation to a Team, provided, however, that (x) the value of the first 1.2 million of such complimentary tickets for all NBA Regular Season games in an NBA Season shall be excluded from BRI, and (y) in addition, tickets provided as part of sponsorships and other transactions, where the proceeds from such transactions have been included in BRI, shall not be included in determining the number of complimentary tickets in any NBA Season;
  2. all proceeds of any kind from the broadcast or exhibition of, or the sale, license or other conveyance or exploitation of the right to broadcast or exhibit, NBA Pre-Season, Regular Season and Playoff games, highlights or portions of such games, and non-game NBA programming, on any and all forms of radio, television, telephone, internet, and any other communications media, forms of reproduction and other technologies, whether presently existing or not, anywhere in the world, whether live or on any form of delay, including, without limitation, network, local, cable, direct broadcast satellite and any form of pay television, and all other means of distribution and exploitation, whether presently existing or not and whether now known or hereafter developed, including, without limitation, such proceeds received or to be received on an accrual basis by any entity related to an NBA Team in accordance with subsection (a)(4)(i) below, net of reasonable and customary expenses related thereto, but not including the value of any broadcast time or cablecast time provided as part of any such transaction that is used solely to promote the NBA, its Teams and its players;
  3. all Exhibition game proceeds of any kind, net of applicable taxes and all customary and reasonable game, pre-Season and training camp expenses, including, without limitation, such proceeds received or to be received on an accrual basis by any entity related to an NBA Team in accordance with subsection (a)(4)(i) below;
  4. all playoff gate receipts of any kind, net of admission taxes, arena rentals to the extent reasonable and customary, and all other reasonable and customary expenses, except the player playoff pool, including, without limitation, such proceeds received or to be received on an accrual basis by any entity related to an NBA Team in accordance with subsection (a)(4)(i) below;
  5. all proceeds of any kind from in-arena sales of novelties and concessions, sales of novelties in team-identified stores within a 75-miles radius of the arena, NBA game parking and programs, Team sponsorships and promotions, temporary arena signage, and arena club revenues, in each case, to the extent that such proceeds are related to the performance of Players in NBA basketball games, including, without limitation, such proceeds received or to be received on an accrual basis by any entity related to an NBA Team in accordance with subsection (a)( 4 )(i) below, net of reasonable and customary expenses related thereto, subject to the provisions of subsection (a)(3) below;
  6. forty percent of the gross proceeds from fixed arena signage present in arenas in which an NBA Team plays more than one-half of its Regular Season home games, including, without limitation, such proceeds received or to be received on an accrual basis by any entity related to an NBA Team in accordance with subsection (a)(4)(i) below;
  7. forty percent of all the gross proceeds of any kind, net of all applicable taxes, from the sale, lease or licensing of luxury suites calculated on the basis of the actual proceeds received or to be received on an accrual basis by the entity, including, without limitation, proceeds received or to be received on an accrual basis by any entity related to an NBA Team in accordance with subsection (a)(4)(i) below, that sold, leased, or licensed such luxury suites; provided, however, that, other than the additional amounts paid by luxury suite holders to the Team for tickets, if any, this amount shall be the only amount included in BRI for the sale, lease or licensing of luxury suites and that, to the extent that the sale, lease or licensing of the luxury suite grants rights to the luxury suite for a period of more than one year, for purposes of calculating the amount includable in BRI for any NBA Season, the proceeds shall be determined on the basis of the annual fee or charge provided for in any such transaction and, if payments are made in addition to or in the absence of such an annual fee or charge, the value of such payments shall be amortized over the period of the sale, lease or license, unless such period exceeds twenty years, in which event an amortization period of twenty years shall be used;
  8. except as provided in subsection (a)(2) below, proceeds received by Properties, net of actual expenses that are directly attributable to the generation of such proceeds, as long as those expenses are consistent with the types and categories of expenses incurred by Properties reflected in the audited financial reports for Properties for the year ended July 31, 1994 (or, in the case of new sources of revenues, as long as the expenses are reasonable and customary, in the opinion of the Accountants), including proceeds derived from the following categories (defined in the same manner as was used in those audited financial reports): (A) international television; (B) sponsorships; (C) NBA-related revenues from NBA Entertainment; (D) the All-Star Game and McDonald’s Championship; (E) other NBA special events; and (F) all other sources of revenue received by Properties other than those specifically excluded under subsection (a)(2) below; and
  9. proceeds from premium seat licenses (other than licenses of luxury suites, which are governed by subsection (a)(l)(vii) above) attributable to NBA-related events amortized over the period of the license (including, without limitation, such proceeds received or to be received on an accrual basis ,by any entity related to an NBA Team, in accordance with subsection (a)( 4 )(i) below), unless such period exceeds twenty years, in which event an amortization period of twenty years shall be used,
2. It is understood that the following is a non-exclusive list of examples of revenues received by the NBA, Properties, NBA Teams and each of their related entities that are not derived from, and do not relate to or arise out of, the performance of Players in NBA basketball games or in NBA-related activities or are otherwise expressly excluded from the definition of BRI: proceeds from the assignment, sale or trade of Player Contracts, proceeds from the sale of any existing NBA franchise (or any interest therein) or the grant of NBA expansion franchises, dues or capital contributions received by the NBA, fines, revenue sharing (by reason of revenue transfers or otherwise) among Teams, interest income, insurance recoveries, sales of interest in real estate and other property, and proceeds received by Properties (i) pursuant to the Group License Agreement; (ii) pursuant to the Events Agreement; and (iii) relating to the following categories (defined in the same manner as was used in the audited financial reports for Properties for the year ended July 31, 1994): (A) licensing; and/or (B) the representation by Properties of third parties. For purposes of the foregoing sentence, “third parties” refers to persons or entities that are not owned or controlled by persons or entities that own or control an NBA team or, if such third party is “an entity related to an NBA team” (as defined below), NBA Properties’ representation does not relate either to such entity’s NBA ownership or NBA players.
3. Subject to Article VII, Section 9 (Players Association Audit Rights), with respect to expenses incurred in connection with all proceeds coming within subsections (a)(l)(v) and (viii) above, all reported expenses shall be conclusively presumed to be reasonable and customary (other than expenses related to sources of revenues that were not reflected in the audited financial report for Properties for the year ended July 31, 1994), and such expenses shall not be the subject of the accounting procedures set forth in Article VII, Section 8 of this Agreement. Such expenses shall be disallowed, however, to the extent that they exceed the ratio of League-wide reported expenses to League-wide reported revenues (the “Expense Ratio”) for that category of revenues set forth in Exhibit C hereto.
4. It is acknowledged by the parties hereto that for purposes of determining BRI:
  1. Some NBA Teams have engaged or may engage in transactions with third parties that are owned or controlled, directly or indirectly, by the persons or entities owning or controlling the NBA Team (such third parties are referred to in this Agreement as “an entity related to an NBA Team”). As provided in subsections (a)(l)(i)-(vii) and (ix) above, the relevant proceeds received or to be received on an accrual basis by any entity related to an NBA Team that come within those paragraphs and that relate to such entity’s related NBA Team shall be included in BRI. To the extent, however, that such net proceeds cannot reasonably be determined for transactions entered into with an entity related to an NBA Team after the date of this Agreement, the Accountants retained pursuant to the provisions of Article VII, Section 8 of this Agreement shall determine a reasonable value which shall be included in BRI for the first NBA Season to which the transaction pertains. For each Season thereafter in which the transaction remains in effect, the same amount - or an equivalent annualized amount if the transaction pertained to less than a full Season - will be included in BRI increased (or decreased, as the case may be) by the amount the League-wide per-Team average for such net proceeds increased (or decreased) over the previous Season.
  2. With respect to transactions with an entity related to an NBA Team pertaining to proceeds that come within subsections (a)(1)(ii), (a)(1)(v) and (a)(l)(vi) above that are in effect as of June 21, 1995, the parties agree that the projected amounts to be earned by the entity related to the NBA Team for the 1995-96 NBA Season as reflected in Exhibit D hereto are reasonable and that the methodology employed to determine these amounts, including all allocations of revenues and expenses, so long as the transaction between the NBA Team and the related third party remains unchanged, shall be conclusively presumed to be reasonable. This methodology will be used to determine the applicable amounts for NBA Seasons subsequent to the 1995-96 NBA Season.
  3. With respect to the transactions listed below in this subsection (a)(4)(iii) between an NBA Team and an entity related to the Team, the parties agree that, because the proceeds attributable to these transactions cannot be accurately ascertained, the following procedures shall be used for each NBA Season in which these transactions remain in effect: (A) New York Knicks transaction with MSG Network regarding the sale of local media rights (the “MSG Network Transaction”): BRI for the Knicks for the 1995-96 NBA Season shall include an amount equal to the net proceeds included in BRI attributable to the Los Angeles Lakers’ sale, license or other conveyance of all local media rights (including, but not limited to, broadcast and cable television and radio). In each subsequent Season covered by this Agreement, this amount shall be increased (or decreased, as the case may be), for each category of local media rights, by the average of the League-wide average percentage increase (or decrease) for each such category. (B) New York Knicks transactions with related parties involving signage: BRI for the Knicks for the 1995-96 NBA Season shall include $3,000,000 for signage. In each subsequent Season covered by this Agreement, this amount shall be increased (or decreased, as the case may be) by the League-wide average percentage increase (or decrease) in signage as determined in such subsections (a)(1)(v) and (a)(1)(vi),
5. Pursuant to the NBA’s national broadcast and network cable television agreements with NBC and TBS in effect as of the execution date of this Agreement, NBA Teams might receive revenue sharing proceeds in the 1997-98 NBA Season that are attributable, at least in part, to NBA game telecasts in that and prior NBA Seasons (referred to hereinafter as “Revenue Sharing Proceeds”), An amount up to $36 million of Revenue Sharing Proceeds shall be included in BRI for the 1997-98 NBA Season, In addition, Revenue Sharing Proceeds in excess of $36 million (the “Excess Revenue Sharing Proceeds”), if any, shall be included in BRI for the 1997-98 NBA Season to the extent of (i) 50% of the Excess Revenue Sharing Proceeds, plus (ii) the amount, if any, determined by the following calculation:
  - Step 1: add 50% of the Excess Revenue Sharing Proceeds (the “1996-97 Rollback Amount”) to 1996-97 BRI (the “1996-97 Adjusted BRI”);
  - Step 2: multiply 1996-97 Adjusted BRI by .5013;
  - Step 3: subtract from the result in Step 2 Total Salaries and Benefits for the 1996-97 Season;
  - Step 4: if the result in Step 3 is a positive amount, divide such amount by .5013, then include the result in 1997-98 BRI, up to the amount of the 1996-97 Rollback Amount.
  With respect to revenue sharing proceeds or other contingent payments attributable to NBA Seasons during the term of this Agreement, if any, that are provided for in national broadcast or network cable television agreements that succeed the present NBA/NBC and NBA/TBS agreements (the “Successor Agreements”), such proceeds or contingent payments, if any, shall be included in BRI in a manner to be determined by agreement of the parties, or if the parties do not reach an agreement, in a manner to be determined by the Accountants.
6. “Projected BRI” means the sum of amounts determined in accordance with the following:
  1. With respect to BRI sources other than national broadcast or network cable television contracts, Projected BRI shall include BRI for the preceding Salary Cap Year, increased by 8%.
  2. With respect to national broadcast or network, cable television contracts, Projected BRI shall include (in addition to amounts determined in accordance with subsection (a)(6)(iii) and (iv) below) the following: (A) for the 1996-97 Season, $200,000,000 shall be included in Projected BRI with respect to the NBA/NBC agreement, and $90,000,000 shall be included in Projected BRI with respect to the NBA/TBS agreement; (B) for the 1997-98 Season, $180,000,000 shall be included in Projected BRI with respect to the NBA/NBC agreement, and $94,000,000 shall be included in Projected BRI with respect to the NBA/TBS agreement; and (C) for the 1998-99, 1999-2000 and 2000-01 Seasons, Projected BRI for a Season shall include an amount equal to the greater of: (i) 108% of the prior Season’s national broadcast and network cable television revenues; or (ii) the actual revenues stated in the Successor Agreements for such Season plus the Revenue Sharing Forecast (as defined in subsection (a)(6)(iv) below). Except with respect to clause (C)(ii) in the prior sentence, the foregoing shall exclude for all purposes any revenue sharing proceeds that are or may be received by the NBA pursuant to such contracts (including the Revenue Sharing Proceeds), which proceeds shall be treated for Projected BRI purposes solely in accordance with subsection (a)(6)(iii) and (iv) below.
  3. With respect to the Revenue Sharing Proceeds: (A) $50 million shall be included in Projected BRI for the 1997-98 Salary Cap Year. (B) Additional amounts in respect of the Revenue Sharing Proceeds may be included in Projected BRI for the 1998-99 through 2000-01 Salary Cap Years to the extent determined by the following calculation (which shall be made no later than August 15, 1997):
    - Step 1: Subtract $36 million from the Revenue Sharing Estimate (as defined below);
    - Step 2: Multiply the result in Step 1 by 0.5 (the “Adjusted Rollback Amount”);
    - Step 3: Add the result in Step 2 to 1996-97 BRI;
    - Step 4: Multiply the result in Step 3 by .5013;
    - Step 5: Subtract from the result in Step 4 Total Salaries and Benefits for the 1996-97 Season;
    - Step 6: If the result in Step 5 is a positive amount, divide such amount by .5013, then add the result, up to the amount of the Adjusted Rollback Amount, to the result in Step 2;
    - Step 7: Subtract from the result in Step 6 $14 million (the “Adjusted Revenue Sharing Estimate”);
    - Step 8: The Adjusted Revenue Sharing Estimate, if any, shall be included in Projected BRI for the 1998-99 through 2000-2001 Seasons as follows:
      1. Any amount of the Adjusted Revenue Sharing Estimate, up to an amount that would result in a Salary Cap increase of $250,000, shall be included in Projected BRI for the 1998-99 Season;
      2. Any amount of the Adjusted Revenue Sharing Estimate that remains after application of (x) above, up to an amount that would result in a Salary Cap increase of $250,000, shall be included in Projected BRI for the 1999-2000 Season;
      3. Any amount of the Adjusted Revenue Sharing Estimate that remains after application of (x) and (y) above, up to an amount that would result in a Salary Cap increase of $250,000, shall be included in Projected BRI for the 2000-01 Season.
    For purposes of this subsection (a)(6)(iii), Revenue Sharing Estimate means an estimate of the total amount of Revenue Sharing Proceeds that the NBA Teams are entitled to receive pursuant to the NBA/NBC and NBA/TBS agreements assuming that the advertising revenues that will be received by NBC and TBS for NBA game telecasts during the 1997-98 Season will equal the average of the advertising revenues received by NBC and TBS, respectively, for NBA game telecasts during the 1994-95 through 1996-97 Seasons. The Revenue Sharing Estimate shall be mutually agreed upon by the NBA and the Players Association on or before August 1, 1997. In the event that the parties are unable to reach agreement on the Revenue Sharing Estimate, such amount shall be determined by the Accountants.
  4. With respect to any revenue sharing proceeds or other contingent payments that are provided for in a Successor Agreement with respect to the 1998-99, 1999-2000 and 2000-2001 Seasons, the parties shall mutually agree upon an estimate of the amount of such revenue sharing proceeds or contingent payments, if any, includable in Projected BRI for a Season on or before the August 1 prior to such Season (the “Revenue Sharing Forecast”). In the event that the parties are unable to reach agreement on a Revenue Sharing Forecast, such amount, if any, shall be determined by the Accountants.
7. “Local Expansion Team BRI” means the BRI of the Expansion Teams during their first two Seasons, but not including the Expansion Teams’ share of League-wide revenues that are otherwise included in BRI (including, but not limited to, their share of national television, cable, radio and other broadcast revenues).
8. “Projected Local Expansion Team BRI” means Local Expansion Team BRI for the immediately preceding Season, increased by 8%.
9. “Interim Projected BRI” means a projection of BRI for a Salary Cap Year based upon the Interim Audit Report provided for in Article VII, Section 8.
The NBA and each NBA Team shall in good faith act and use their best efforts so as to maximize Basketball Related Income for each Season during the term of this Agreement.

7.2 Calculation of Salary Cap and Minimum Team Salary.

Salary Cap.
1. For each Season during the term of this Agreement, there shall be a Salary Cap. The Salary Cap for each Season will equal the greater of:
  1. 1996-97: $24.3 million
    
    1997-98: $25.0 million
    
    1998-99: $26.0 million
    
    1999-00: $27.0 million
    
    2000-01: $28.0 million
    
    (the “Guaranteed Minimum Salary Caps”); or
  2. 48.04% of Projected BRI, less Projected Benefits (as defined in Article IV, Section 2(a), plus or minus any Salary Cap adjustments (pursuant to subsection (d) below), divided by (A) 27 with respect to the 1996-1997 Season, and (B) 29 with respect to each remaining Season of the Agreement (the “Calculated Salary Cap”).
2. Notwithstanding subsection (1) above, in the event that Projected BRI for the 1996-97 Season, plus Projected Local Expansion Team BRI for the 1996-97 Season, less Projected Benefits (including for the Expansion Teams), plus or minus any Salary Cap adjustments (pursuant to subsection (d) below) divided by 29 (the “Expansion Adjusted 1996-97 Salary Cap”), exceeds the Calculated Salary Cap for 1996-97, the Expansion Adjusted 1996-97 Salary Cap will apply for purposes of subsection (a)(1)(ii) above.
3. The Salary Cap for the 1995-96 Season is $23.0 million. In the event that, based upon the calculation of BRI for the 1995-96 Season, the Calculated Salary Cap for the 1995-96 Season would have exceeded $23.0 million, the difference will be added to the Salary Cap for the 1996-97 Season. For purposes of the foregoing calculation only, the Calculated Salary Cap for the 1995-96 Season will equal 48.04% of actual 1995-96 BRI, less Benefits, divided by 27.
4. Commencing on the first day of each Salary Cap Year, the Salary Cap shall be the greater of (i) the Guaranteed Minimum Salary Cap for such Salary Cap Year, or (ii) the Salary Cap for the prior Salary Cap Year (the “July 1 Salary Cap”). The July 1 Salary Cap will remain in effect until August 15, at which time the Salary Cap will be the amount calculated pursuant to subsections (a)(1)-(3) above.
5. Notwithstanding subsection (4) above, in the event that the Audit Report for a Salary Cap Year, beginning with the 1996-97 Salary Cap Year, has not been completed as of the following August 15, then, beginning on August 16 and continuing until the Audit Report is completed, the Salary Cap shall be the greater of (i) the July 1 Salary Cap or (ii) an amount calculated pursuant to subsections (a)(1)- (3) above, except that Interim Projected BRI shall be utilized instead of Projected BRI.The Salary Cap calculated pursuant to this subsection (5) (the “Interim Salary Cap”) will remain in effect until the Audit Report is completed, at which time the Salary Cap will be the amount calculated pursuant to subsections (a)(I)-(3) above.
Minimum Team Salary.
1. For each Season during the term of this Agreement, there shall be a Minimum Team Salary equal to 75% of the Salary Cap for such Season.
2. In the event that, by the conclusion of the Salary Cap Year for a Season, a Team has failed to make aggregate Salary payments and/or incur aggregate Salary obligations equal to or greater than the applicable Minimum Team Salary for that Season, the NBA shall cause such Team to make such payments (to be disbursed to the players on such Team pro rata or in accordance with such other formula as may be reasonably determined by the Players Association).
3. Nothing contained herein shall preclude a Team from having a Team Salary in excess of the Minimum Team Salary, provided that the Team’s Team Salary does not exceed the Salary Cap plus any additional amounts authorized pursuant to the Exceptions set forth in this Article VII.
Expansion Team Salary Caps and Minimum Team Salaries. The Expansion Teams shall have the same Salary Caps and Minimum Team Salaries as the other 27 teams, except as follows:
1. 1995-96 Season: Salary Cap: 66 and 2/3% of the Salary Cap determined in accordance with Section 2(a) above for the 1995-96 Season (“1995 Expansion Team Salary Cap”) Minimum Team Salary: 75% of 1995 Expansion Team Salary Cap
2. 1996-97 Season: Salary Cap: 75% of the Salary Cap determined in accordance with Section 2(a) above for the 1996-97 Season (“1996 Expansion Team Salary Cap”) Minimum Team Salary: 75% of 1996 Expansion Team Salary Cap
Adjustments to Salary Cap and Minimum Team Salary.
1. 1. Beginning in the 1997-98 Season, in the event that Total Salaries and Benefits paid with respect to any Season is greater than 50.13% of BRI for such Season, then for purposes of calculating the Calculated Salary Cap for the subsequent Season, the amount of such overage shall be deducted from 48.04% of Projected BRI for such subsequent Season less Projected Benefits (the “Overage Deduction”); provided, however, that in no event shall the Overage Deduction reduce the Calculated Salary Cap for the subsequent Season by more than $500,000. In the event that an Overage Deduction for any Season exceeds $500,000, there shall be no carry forward of any such excess to a subsequent Season.
  2. In the event that 48.04% of actual BRI for a Season is less than 48.04% of Projected BRI for that Season, then for purposes of calculating the Calculated Salary Cap for the subsequent Season, the difference shall be deducted from 48.04% of Projected BRI for such subsequent Season less Projected Benefits. In the event that, in any Season, adjustments to 48.04% of Projected BRI less Projected Benefits are called for pursuant to both this subsection (d)(1)(ii) and the preceding subsection (d)(1)(i), the maximum adjustment to 48.04% of Projected BRI shall equal the greater of the adjustments called for under such subsections.
  3. In the event Total Salaries and Benefits paid with respect to any Season is less than 48.04% of BRI for such Season (plus, if applicable, any shortfall against 48.04% of BRI for the prior Season), then for purposes Of calculating the Calculated Salary Cap for the subsequent Season, the amount of such shortfall shall be added to 48.04% of Projected BRI for the subsequent Season less Projected Benefits; provided, however, that in the event there is a shortfall with respect to the 2000-01 Season, the amount of such shortfall shall be paid by the NBA to the Players Association for distribution to all NBA players who were on an NBA roster during the 2000-01 Season no later than September 1, 2001 on such proportional basis as may be reasonably determined by the Players Association.
  4. In the event that actual Benefits for any Season exceeds Projected Benefits for such Season, the difference shall be added to Projected Benefits for the Subsequent Season.
  5. In the event that actual Benefits for any Season are less than Projected Benefits for such Season, the difference shall be deducted from Projected Benefits for the subsequent Season; provided, however, that in the event there is a shortfall with respect to the 2000-01 Season, the amount of such shortfall shall be paid by the NBA to the Players Association for distribution to all NBA players who were on an NBA roster during the 2000-01 Season no later than September 1, 2001 on such proportional basis as may be reasonably determined by the Players Association.
  6. In the event that the Interim Salary Cap for a Season exceeds the Salary Cap for such Season, the difference shall be deducted from the Salary Cap (and, when applicable, the Interim Salary Cap) for the following Season.

7.3 Determination of Salary.

For the purposes of determining a player’s Salary with respect to an NBA Season, the following rules shall apply:

Deferred Compensation.
1. General Rules:
  1. All Player Contracts entered into or extended after the date hereof shall specify the Season(s) in which any Deferred Compensation is earned. Deferred Compensation shall be included in a player’s Salary in the Season in which such compensation is earned.
  2. Notwithstanding subsection (1)(i) above, for purposes of an annuity compensation arrangement included in a Player Contract in accordance with Article XXV, Section 3 of this Agreement only, Deferred Compensation shall include only the portion of the cost of the annuity instrument to be paid by the Team after the playing term covered by the Contract, if any, and shall not include any compensation that the player is scheduled to receive after the term of the Contract pursuant to such annuity compensation arrangement. The portion of the cost of the annuity paid by the Team while the player is required to render playing services under the Player Contract shall be included in Salary for the year in which such cost is paid.
2. Over 35 Rule: Notwithstanding any provision in a Player Contract to the contrary, the following provisions are applicable to any Player Contract entered into or extended that, going forward, covers four or more NBA Seasons, including one or more Seasons commencing after such player will reach or has reached age 35 (an “Over 35 Contract”);
  1. Except as provided in subsections (ii)-(iv) below, the aggregate Salaries in an Over 35 Contract for Seasons commencing with the fourth Season or the first Season following the player’s 35th birthday, whichever is later, shall be attributed to the prior Seasons pro rata on the basis of the Salaries for such prior Seasons.
  2. If a player who is age 32, 33 or 34 enters into an Over 35 Contract covering more than four NBA Seasons, the aggregate Salaries in such Over 35 Contract for Seasons commencing with the fifth Season shall be’ attributed to the prior Seasons pro rata on the basis of the Salaries for such prior Seasons.
  3. If a player who has played for his current Team for at least ten consecutive Seasons enters into an Over 35 Contract that is an Extension and that, beginning with the date the Extension is signed, covers more than five NBA Seasons, the aggregate Salaries in such Over 35 Contract for Seasons commencing with the sixth Season shall be attributed to the prior Seasons pro rata on the basis of the Salaries for such prior Seasons.
  4. For each Season of an Over 35 Contract beginning with the third Season prior to the First Zero Year (as defined in subsection (vii) below), if the player plays in such Season, then the Salaries of the player for the subsequent three or fewer Seasons covered by the Contract (including any Zero Year) shall, on the July 1 of the first subsequent Season, be aggregated and attributed in equal shares to each of such three or fewer Seasons.
  5. Notwithstanding subsection (2)(i) above, there shall be no re-allocation of Salaries pursuant to this Section 3(a)(2) for:
    1. any Contract or Extension covering four or fewer NBA Seasons entered into by a player at age 32, 33 or 34; and
    2. any Extension that, beginning with the date the Extension is signed, covers five or fewer NBA Seasons and is entered into by a player who has played for his current Team for at least ten consecutive Seasons.
  6. For purposes of this Section 3(a)(2) (governing Over 35 Contracts) only, NBA Seasons shall be deemed to commence on October 1 and conclude on the last day of the Salary Cap Year.
  7. “Zero Year” means, with respect to an Over 35 Contract, any Season in which the Salary called for under the Contract has been attributed, in accordance with subsection (2)(i), (2)(ii) or (2)(iii) above, to prior Seasons of the Contract. “First Zero Year” means, with respect to an Over 35 Contract, the earliest Season in which the Salary called for under the Contract has been attributed, in accordance with subsection (2)(i), (2)(ii) or (2)(iii) above, to prior Seasons of the Contract.
Signing Bonuses.
1. Amounts Treated as Signing Bonuses: For purposes of determining a player’s Salary, the term “signing bonus” shall include:
  1. any amount specifically described in a Player Contract as a signing bonus;
  2. any Option Buy-Out Amount;
  3. at the time of an assignment of a Player Contract, any amount other than increases in remaining payments to be made pursuant to paragraph 3 of the Contract that, under the terms of the Contract, is earned in the form of a bonus upon assignment of the Contract; and
  4. payments in excess of $250,000 with respect to foreign players, in accordance with subsection (f) below.
2. Proration: Any signing bonus contained in a Player Contract shall be allocated in equal parts over the number of Seasons (or remaining Seasons in the case of a signing bonus described in subsection (l)(iii) above) covered by such Contract that are fully protected for skill, provided, however, that no portion of a signing bonus contained in a Player Contract that provides for an Early Termination Option shall be allocated to any Season following the Effective Date of such option. In the event that no Season covered by a Player Contract is fully protected for skill, then the entire amount of the signing bonus shall be allocated to the first Season of the Contract or, in the case of a signing bonus described in subsection (l)(iii) above, the Season during which the player’s Contract is assigned.
3. Signing Bonus Credits: Upon the occurrence of an event that determines that a player shall not be entitled to receive an Option Buy-Out Amount (the “non-payment determination”):
  1. all amounts that were included in the player’s Salary pursuant to subsection (l)(ii) above for Seasons up to and including the Season in which the non-payment determination is made (the “unpaid amounts”) shall be deducted from the calculation of Total Salaries and Benefits for the Season in which the non-payment determination is made;
  2. all amounts that were included in the player’s Salary pursuant to subsection (l)(ii) above for Seasons following the Season in which the non-payment determination is made shall be deducted from the player’s Salary for such Seasons; and
  3. the unpaid amounts shall be deducted from the Team’s Team Salary, in accordance with the following: (A) The total amount available to be deducted from the Team’s Team Salary (the “credit amount”) will equal the aggregate of the unpaid amounts less, for each Season in which a portion of the unpaid amounts was included in the player’s Salary and in which his Team’s Team Salary did not fall below the Salary Cap, the smallest amount by which his Team’s Team Salary exceeded the Salary Cap during such Salary Cap Year. (B) The credit amount shall be allocated, in equal parts, over the same number of Seasons over which the unpaid amounts were allocated, beginning with the first Season following the non-payment determination, plus, for each Season following the first Season of such allocation, 10% of the amount allocated to the first Season. (C) If, during the course of any Salary Cap Year in which a credit allocation has been made, the Team’s Team Salary does not fall below the Salary Cap, the full credit allocation for such Salary Cap Year will be carried forward to a subsequent Salary Cap Year. If, during the course of a Salary Cap Year in which a credit allocation has been made, the Team’s Team Salary does fall below the Salary Cap, the amount carried forward, if any, will equal the amount of the credit allocation for such Season less the largest amount by which the Team’s Team Salary fell below the Salary Cap during such Salary Cap Year. In the event a credit allocation is carried forward pursuant to this subsection, such amount shall be deducted from Team Salary in the Season immediately following the last Season in which a portion of the credit amount is then currently being allocated, subject to the terms of this subsection (iii)(C).
4. Extensions:
  1. In the event that a Team with a Team Salary at or over the Salary Cap enters into an Extension that calls for or contains a signing bonus, such signing bonus shall be paid no sooner than the first day of the Salary Cap Year covered by the extended term and shall be allocated, in equal parts, over the number of Seasons covered by the extended term that are fully protected for skill. In the event that no Season in the extended term is fully protected for skill, then the entire amount of the signing bonus shall be allocated to the first Season of the extended term.
  2. A Team with a Team Salary below the Salary Cap may enter into an Extension that calls for or contains a signing bonus to be paid at any time during the Contract’s original or extended term. In the event that a Team with a Team Salary below the Salary Cap enters into an Extension that calls for or contains a signing bonus to be paid no sooner than the first day of the Salary Cap Year covered by such extended term, the bonus shall be allocated in accordance with the proration rules set forth in subsection (4)(i) above. In the event a Team with a Team Salary below the Salary Cap enters into an Extension that calls for or contains a signing bonus to be paid prior to the first day of the Salary Cap Year covered by the extended term, the following rules shall apply: (A) The signing bonus shall be allocated in equal parts over the Seasons remaining under the original term of the Contract and the extended term that are fully protected for skill; and (B) The Extension shall be deemed a Renegotiation and shall be subject to the rules governing Renegotiations set forth in Section 7 below.
Loans to Players. The following rules shall apply to any loan made by any Team to or at the direction of a player:
1. If any such loan bears no interest (or interest at an effective rate lower than 9% per annum), then an amount equal to 9% per annum of the outstanding balance (or an amount equal to the difference between 9% per annum of the outstanding balance and the actual rate of interest to be paid by the player) shall be included in the player’s Salary.
2. No loan made to a player after July 1, 1996 may (along with other outstanding loans to the player) exceed the amount of the player’s Salary for the then-current Season that is fully protected for skill. All loans must be repaid through deductions from the player’s remaining compensation over the term of the Contract (prior to the Effective Date of any Early Termination Option) in equal annual amounts (the “annual allocable repayment amounts”). If a loan is made at a time when the remaining Salary due for the then-current Season that is fully protected for skill is less than the annual allocable repayment amount that would be owed on a loan for the full amount of the player’s Salary that is, fully protected for skill for the then-current Season (the “maximum annual allocable repayment amount”), the maximum loan amount for that Season shall be reduced by the amount by which the maximum annual allocable repayment amount exceeds the amount of remaining Salary that is fully protected for skill. (For example, if a Player has $1 million in Salary in the first Season of a five-year Contract, and a loan is made during that Season at a time when the Player has already received his Salary for that Season, the loan may not exceed $800,000.)
3. Any forgiveness by a Team of a loan to a player shall be deemed a Renegotiation in the Salary Cap Year of such forgiveness and shall be subject to the rules governing Renegotiations set forth in Section 7 below.
Performance Bonuses.
1. For purposes of determining a player’s Salary each Season, except as provided in subsections (2) through (4) below, any amounts that may be earned as a bonus based upon the performance of an individual player or a Team (provided such bonus may be included in a Player Contract in accordance with Section 5(f) below), shall be included in Salary only if such bonus would be earned if the Team’s or player’s performance were identical to the performance in the immediately preceding Season.
2. Notwithstanding subsection (1) above, in the event that, with respect to the first Season covered by a Contract or Renegotiation, or the first Season of an extended term, the NBA or the Players Association believes that the performance of a player and/or his team during the immediately preceding Season does not fairly predict the likelihood of the player earning a performance bonus during the current Season, the NBA or the Players Association may request that a jointly selected basketball expert (“Expert”) determine whether (i) in the case of an NBA challenge, it is very likely that the bonus will be earned, or (ii) in the case of a Players Association challenge, it is very likely that the bonus will not be earned. The party initiating a proceeding before the Expert shall carry the burden of proof. The Expert shall render his determination within two weeks of the initiation of the proceeding. Notwithstanding anything to the contrary in this subsection (2), no party may, in connection with any proceeding before the Expert, refer to the facts that, absent a challenge pursuant to this subsection (2), a bonus would or would not be included in a player’s Salary pursuant to subsection (1) above, or would be termed “Likely” or “Unlikely” pursuant to Article I, Section l(z) or (bg). If, following an NBA challenge, the Expert determines that a performance bonus is very likely to be earned, the bonus shall be included in the player’s Salary. If, following a Players Association challenge, the Expert determines that a performance bonus is very likely not to be earned, the bonus shall be excluded from the Player’s Salary. The Expert’s determination that a bonus is very likely to be earned or very likely not to be earned shall be final, binding and unappealable. The fees and costs of the Expert in connection with any proceeding brought pursuant to this subsection (2) shall be borne equally by the parties.
3. In the case of a Rookie or a Veteran who did not play during the immediately preceding Season, a performance bonus will be included in Salary if it is likely to be earned. In the event that the NBA and the Players Association cannot agree as to whether a bonus is likely to be earned, such dispute will be referred to the Expert, who will determine whether the bonus is likely to be earned or not likely to be earned. The Expert shall render his determination within two weeks of the initiation of the proceeding. The Expert’s determination that a bonus is likely to be earned or not likely to be earned shall be final, binding and unappealable. The fees and costs of the Expert in connection with any proceeding brought pursuant to this subsection (3) shall be borne equally by the parties.
4. In the event that either party initiates a proceeding pursuant to subsection (2) or (3) above, the player’s Salary plus the full amount of any disputed bonuses shall be included in Team Salary during the pendency of the proceeding.
5. In the event the NBA and the Players Association cannot agree on an Expert, any challenge pursuant to subsections (2) and (3) above may be filed with the Grievance Arbitrator in accordance with Article XXXI, Sections 2- 6.
6. Notwithstanding anything to the contrary in this Section 3(d), bonuses and other compensation that are within the sole discretion of the player or unrelated to the performance of skilled basketball (such as weight bonuses, bonuses based upon academic achievement or compensation for off-Season workouts) shall be included in Salary.
Averaging. In accordance with the rules set forth in Section 5(e) below, a player’s Salary for each of two or more Seasons shall be deemed in certain circumstances to be the average of the aggregate Salaries payable for such Seasons.
Foreign Player Payments.
1. Any amount in excess of $250,000 paid or to be paid by or at the direction of any NBA Team to (i) any basketball team other than an NBA Team, or (ii) any other entity, organization, representative or person, for the purpose of inducing a foreign player to enter into a Player Contract or in connection with securing the right to enter into a Player Contract with a foreign player (as defined in Article X, Section 6) shall be deemed Salary (in the form of a signing bonus) to the player.
2. Subject to Article XIII, any payment of $250,000 or less paid by or at the direction of any NBA Team pursuant to subsection (1) above (the “$250,000 exclusion”), shall not be deemed Salary to the player.
3. The $250,000 exclusion may be paid in a single installment or in multiple installments. The $250,000 exclusion, whether used in whole or in part, may be used by an NBA Team whenever it signs a foreign player to a new Player Contract, except that the $250,000 exclusion may not be used, in whole or in part, more than once in any three-Season period with respect to the same foreign player.
4. The $250,000 exclusion, or any part of it, shall be deemed to have been used as of the date of the Player Contract to which it applies, regardless of when it is actually paid. A schedule of payments relating to the $250,000 exclusion, or any part of it, agreed upon at the time of the signing of the Player Contract to which it applies, shall not be deemed a multiple use of the $250,000 exclusion.
5. Notwithstanding subsection (1) above, no amount paid or to be paid pursuant to this subsection (f) shall be counted toward the Minimum Team Salary obligation of such Team in accordance with Section 2(b) or (c) above.

7.4 Determination of Team Salary.

Computation. For purposes of computing Team Salary under this Agreement, all of the following amounts shall be included:
1. Subject to the rules set forth in this Article VII, the aggregate Salaries of all active players (and former players to the extent provided by the terms of this Agreement) attributable to a particular Salary Cap Year, including, without limitation:
  1. Salaries payable to players whose Player Contracts have been terminated pursuant to the NBA’s waiver procedure (without regard to any revised payment schedule that might be provided for in the terminated Player Contracts).
  2. Any amount paid to a retired player in accordance with the player’s Player Contract.
  3. Amounts paid pursuant to awards or judgments for, or settlements of, disputes between a Player and a Team concerning Salary obligations under a Player Contract (as allocated over time, where appropriate, in accordance with the terms of the judgment or settlement), except to the extent that such amounts were previously included in a player’s Salary.
2. The aggregate Free Agent Amounts (as defined in subsection (d) below) attributable to Veteran Free Agents that last played for the Team.
3. An amount with respect to a Team’s unsigned First Round Pick, if any, as determined in accordance with subsection (e) below.
4. Value or consideration received by retired players that is determined to be includable in Team Salary in accordance with Article XIII, Section 5(b).
5. The amount of any Salary Cap Exception that is deemed included in Team Salary in accordance with Section 6(j)(2) below.
Expansion. The Salary of any player selected by an Expansion Team in an expansion draft and terminated in accordance with the NBA waiver procedure before the first day of the Expansion Team’s first Season shall not be included in the Expansion Team’s Team Salary, except, to the extent such Salary is paid, for purposes of determining whether the Expansion Team has satisfied its Minimum Team Salary obligation for such Season.
Assigned Contracts. For purposes of calculating Team Salary, with respect to any Player Contract that is assigned, the assignee Team shall, upon assignment, be deemed to be paying the entire Salary for the then-current Season and all future Seasons.
Free Agents. Until a Team’s Veteran Free Agent resigns with his Team, signs with another NBA Team, or is renounced, he will be included in his prior Team’s Team Salary at one of the following amounts (“Free Agent Amounts”):
1. A Qualifying Veteran Free Agent will be included at 150% of his prior Salary if it was equal to or greater than the Estimated Average Player Salary, and 200% of his prior Salary if it was less than the Estimated Average Player Salary.
2. An Early Qualifying Veteran Free Agent will be included at 130% of his prior Salary; provided, however, that the player’s prior Team may, by written notice to the NBA, renounce its rights to sign the player pursuant to the Early Qualifying Veteran Free Agent Exception, in which case the player will be deemed a Non-Qualifying Veteran Free Agent for purposes of this Section 4(d) and Section 6(b) below.
3. A Non-Qualifying Veteran Free Agent will be included at 120% of his prior Salary.
4. Notwithstanding subsections (1)-(3) above, if the player’s prior Salary was equal to or less than the Minimum Annual Salary, he will be included at the then-current Season’s Minimum Annual Salary.
5. For purposes of this subsection (d) only, a player’s “prior Salary” means his Regular Salary for the prior Season plus any signing bonus allocation and the amount of any performance bonuses actually earned for such Season.
6. For purposes of this Section 4(d) only, in the event that a Veteran Free Agent’s prior Contract provides for an increase or decrease in Salary between the second-to-last and last Seasons covered by the Contract of greater than $4 million, such player’s prior Salary shall be deemed to be equal to the average of the Salaries for the last two Seasons of the Contract.
First Round Picks.
1. Beginning with the 1995 Draft, a First Round Pick, immediately upon selection in the Draft, shall be included in the Team Salary of the Team that holds his draft rights at 100% of his applicable Rookie Scale Amount, and, subject to subsection (2) below, shall continue to be included in the Team Salary of any Team that holds his draft rights (including any Team to which the player’s draft rights are assigned) until such time as the player signs with such Team or until the Team loses or assigns its exclusive draft rights to the player.
2. In the event that a First Round Pick signs with a non-NBA team, the player’s applicable Rookie Scale Amount shall be excluded from the Team Salary of the Team that holds his draft rights, beginning on the date he signs such non-NBA contract or the first day of the Regular Season, whichever is later, and shall be included again in his Team’s Team Salary at the applicable Rookie Scale Amount on the following July 1 or the date the player’s contract ends (or the player is released from his non-NBA contractual obligations), whichever is earlier, unless the Team relinquishes its exclusive rights to the player in accordance with Article X, Section 3(f). If, after such following July 1, or any subsequent July 1, the player signs another, or remains under, contract with a non-NBA team, the player’s applicable Rookie Scale Amount will again be excluded from Team Salary beginning on the date of the contract signing or the first day of the Regular Season commencing after such July 1, whichever is later, and will again be included in Team Salary at the applicable Rookie Scale Amount on the following July I or the date the player’s contract ends (or the player is released from his non-NBA contractual obligations), whichever is earlier, unless the Team relinquishes its exclusive rights to the player in accordance with Article X, Section 3(f).
3. For purposes of this Section 4(e), the “applicable Rookie Scale Amount” for a First Round Pick means, with respect to any Salary Cap Year, the Rookie Scale Amount that would apply if the player were drafted in the Draft immediately preceding such Salary Cap Year at the same draft position at which he was actually selected.
Renouncing. To renounce a Veteran Free Agent, a Team can, at any time, provide the NBA with an express, written statement renouncing its right to re-sign the player, effective no earlier than the July 1 following the last Season covered by the Contract. (The NBA shall notify the Players Association of any such renunciation by fax within two business days following receipt of notice of such renunciation.) In the event of a renunciation, the player’s Prior Team (i) may not resign such player for 56 days after the first game of the following Season (or for 56 days after the first game of the then-current Season in the event such renunciation occurs after the start of the Season, but prior to the 56th day after the first game of such Season), and (ii) thereafter may re-sign such player only to the extent of the Team’s then-current Room (i.e., the Team cannot sign such player pursuant to Section 6(b) below).
Long-Term Injuries. Any player who suffers a career-ending injury or illness, and whose contract is terminated by the Team in accordance with the NBA waiver procedure, will be excluded from his team’s Team Salary as follows:
1. If the injury or illness occurs on or after July 1, but prior to January 1 of any Season, then, beginning on the second July 1 following the injury or illness, the Team may apply to the NBA to have the player’s Salary for each remaining Season of the Contract excluded from Team Salary. (For example, if the career-ending injury or illness occurs on August 1, 1996, the Team may apply to have the player’s Salary excluded from Team Salary beginning on July 1, 1998.)
2. If the injury or illness occurs on or after January 1 but prior to July 1 of any Season, then, beginning on the second anniversary of the injury or illness, the Team may apply to the NBA to have the player’s Salary for each remaining Season of the Contract excluded from Team Salary.
3. The determination of whether a player has suffered a career-ending injury or illness shall be made by a physician selected jointly by the NBA and the Players Association.
4. Notwithstanding subsections (1) through (3) above, a player’s Salary shall not be excluded from Team Salary if, after the date on which a career-ending injury or illness is alleged to have occurred but before his Salary is excluded from Team Salary, the player played in more than ten NBA games in anyone Season or in a total of 15 games over two Seasons.
5. Notwithstanding subsections (1) through (3) above, if, after a player’s Salary is excluded from Team Salary in accordance with this Section 4(g), the player plays in 10 NBA games in anyone Season, the excluded Salary for that Season and each subsequent Season shall thereupon be included in Team Salary. If, after a player’s Salary is excluded from Team Salary in accordance with this Section 4(g), the player plays in 15 or more NBA games over two Seasons but did not play in ten games in the first of such two Seasons, the excluded Salary for the second Season and each subsequent Season shall thereupon be included in Team Salary. After a player’s Salary for one or more Seasons has been included in Team Salary in accordance with this subsection (5), the player’s Team shall be permitted at the appropriate time to re-apply to have the player’s Salary (for each Season remaining at the time of the re-application) excluded from Team Salary in accordance with the rules set forth in this subsection (g).
Summer Contracts.
1. Except as provided in subsection (2) below, from the day following the last day of a Season until the day prior to the first day of the next Regular Season, a Team may enter into Player Contracts that will not be included in computing Team Salary, provided that such Contracts satisfy the requirements of this Section 4(h) (a “Summer Contract”). Except as set forth in the following sentence, no Summer Contract may provide for (i) any compensation of any kind, including a signing bonus, performance bonus or salary advance, that is or may be paid or earned prior to the first day of the next Regular Season, or (ii) salary protection or insurance of any kind. The only consideration that may be provided to a player signed to a Summer Contract, prior to the start of the Regular Season, is per diem, lodging, transportation, compensation in accordance with paragraph 3(b) of the Uniform Player Contract, and a disability insurance policy covering disabilities incurred while such player participates in summer leagues or rookie camps for the Team. No later than the day prior to the first day of a Regular Season, a Team that has entered into one or more Summer Contracts must terminate such Contracts except to the extent the Team has Room for such Contracts.
2. A Team may not enter into a Summer Contract with a Veteran Free Agent who last played for the Team unless the Contract is for one Season only and provides for a Salary of no more than the Minimum Annual Salary applicable to such Veteran Free Agent.
Team Salary Summaries.
1. The NBA shall provide the Players Association with Team Salary summaries and a list of current Exceptions and Base Year Compensations once a month during the Regular Season and once every two weeks during the off-season.
2. In the event that the NBA fails to provide the Players Association with any Team Salary summary or list of Exceptions or Base Year Compensations as provided for in subsection (1) above, the Players Association shall notify the NBA of such failure, and the NBA, upon receipt of such notice, shall, as soon as reasonably possible, but in no event later than two business days following receipt of such notice, provide the Players Association with any such summary or list that should have been provided pursuant to subsection (1) above.

7.5 Operation of Salary Cap

Basic Rule. A Team’s Team Salary may not exceed the Salary Cap at any time unless the Team is using one of the Exceptions set forth in Section 6 below.
Room. Subject to the provisions of this Section 5, any Team with Room may enter into a Player Contract that calls for a Salary in the first Season of such Contract that would not exceed the Team’s then-current Room.
20% Rule.
1. Except as provided in Sections 5(d) (Banked Room), 6(b)(1) (Qualifying Veteran Free Agent Exception), and 7(b) (Rookie Scale Extensions) below, for each Season of a Player Contract after the first Season, and for each Season of an Extension after the first Season of the extended term (including, in either case, any Season following the Effective Date of an Option or an Early Termination Option), the player’s Salary, excluding performance bonuses, may increase over the previous Season’s Salary, excluding performance bonuses, by no more than (i) 20% of the Regular Salary for the first Season of the Contract, or (ii) in the case of an Extension, 20% of the Regular Salary for the last Season of the original term of the Contract.
2. In the event that the first Season of a Contract provides for performance bonuses, the total amount of Likely Bonuses in each subsequent Season of the Contract may increase by up to 20% of the amount of Likely Bonuses in the first Season, and the total amount of Unlikely Bonuses in each subsequent Season may increase by up to 20% of the amount of Unlikely Bonuses in the first Season. With respect to an Extension, in the event that the last Season of the original term of the Contract provides for performance bonuses, the amount of Likely Bonuses and Unlikely Bonuses in each Season of the Extension after the first Season of the extended term may increase by up to 20% of the amount of Likely Bonuses and Unlikely Bonuses, respectively, in the last Season of the original term.
Banked Room. In the event that the first Season of a Player Contract results in Banked Room, the unused portion of such Banked Room may be used in any subsequent Season to provide for an increase in Salary and Unlikely Bonuses over the previous Season’s Salary in excess of that permitted by the 20% Rule.
Averaging.
1. If, in accordance with Article VII, Section 5(d) (Banked Room), 6(b)(1) (Qualifying Veteran Free Agent Exception), or 7(b) (Rookie Scale Extensions), the Salary in any Season of a Player Contract after the first Season (or, in any Season of an Extension, after the first Season of the extended term), including any Season following the Effective Date of an Option or an Early Termination Option, increases or decreases over the previous Season’s Salary by more than 20% of Regular Salary in the first Season of the Contract (or, in the case of an Extension, by more than 20% of the Regular Salary in the last Season of the original term of the Contract), the player shall be deemed to have a Salary for each Season of the Contract (or extended term) equal to the average of the aggregate Salaries for each such Season.
2. If, in accordance with subsection (1) above, a Contract (or Extension) with an Early Termination Option would be subject to averaging but the average of the Salaries in the Seasons preceding the Effective Date of the Early Termination Option exceed the average of the Salaries in the Seasons following the Effective Date of the Early Termination Option, then, notwithstanding subsection (1) above, only the Seasons preceding the Effective Date of the Early Termination Option shall be averaged; provided, however, that if the player fails to exercise the Early Termination Option and his Salary increases or decreases in any Season following the Effective Date of the Early Termination Option by more than 20% of the Regular Salary in the first Season of the Contract, the player shall be deemed to have a Salary for each Season following the Effective Date of the Early Termination Option equal to the average of the aggregate Salaries for the Seasons following the Effective Date of the Early Termination Option.
3. In the event a Rookie Scale Contract is extended pursuant to Section 7(b) below, and the Contract is assigned to another Team prior to the subsequent July 1, the player subject to such Contract shall be deemed to have a Salary for the last Season of the original term of the Contract and the extended term equal to the average of the aggregate Salaries for such Seasons.
4. A Contract that is not subject to averaging at the time it is entered into shall not later be subject to averaging, other than as a result of a Renegotiation or Extension. An Averaged Contract shall not later be de-averaged notwithstanding any subsequent renegotiation of such Contract.
Performance Bonuses.
1. No Team may enter into a Player Contract containing a performance bonus for the first Season of the Contract that, if earned or paid during the first Season covered by such Contract, would result in the Team’s Team Salary exceeding the Room under which it is signing the Contract. For the sole purpose of determining whether a Team has Room for a new Unlikely Bonus, the Team’s Room shall be deemed reduced by all Unlikely Bonuses in Contracts approved by the Commissioner that may be paid to all of the Team’s players that entered into Player Contracts (including Renegotiations) during that Salary Cap Year.
2. The following provisions shall apply to any Averaged Contract containing a performance bonus:
  1. In the event that at the end of any Season, a performance bonus that is included in a player’s Salary for a subsequent Season is determined to be no longer includable in Salary for that subsequent Season, the player’s Salary for such subsequent Season shall be reduced by the amount of such bonus.
  2. In the event that, at the end of any Season, a performance bonus that is not included in a player’s Salary for a subsequent Season is determined to be includable in Salary for that subsequent Season, the player’s Salary for such subsequent Season shall be increased by the amount of such bonus.
No Futures Contracts. A Team may only enter into a Player Contract with a player that covers at least the then-current Season, unless such Team and player already are parties to a Player Contract covering the then-current Season.

7.6 Exceptions to the Salary Cap

There shall be the following exceptions to the rule that a Team’s Team Salary may not exceed the Salary Cap:

Existing Contracts. A Team may exceed the Salary Cap to the extent of its current contractual commitments, provided that such contracts satisfied the provisions of this Article VII when entered into or were entered into prior to the execution date of this Agreement in accordance with the rules then in effect.
Veteran Free Agent Exception. Beginning on the July 1 following the last Season covered by a Veteran Free Agent’s Player Contract, such player may enter into a new Player Contract with his Prior Team (or, in the case of a player selected in an Expansion Draft that year, with the Team that selected such player in an Expansion Draft) as follows:
1. If the player is a Qualifying Veteran Free Agent, the new Player Contract may provide for Salary of any amount for any Season of the Contract.
2. If the player is a Non-Qualifying Veteran Free Agent, the new Player Contract may provide for a Salary for the first Season of up to the greater of (i) 120% of the Regular Salary for the final Season of the player’s prior Contract, plus 120% of any Likely Bonuses and Unlikely Bonuses, respectively, called for in the final Season covered by the player’s prior Contract, or (ii) 120% of the Minimum Annual Salary for the then-current Season. Salary increases and increases in Unlikely Bonuses in subsequent Seasons shall be governed by the 20% Rule.
3. If the player is an Early Qualifying Veteran Free Agent, the new Player Contract must cover at least two Seasons and may provide for a Salary for the first Season of up to the greater of (i) 175% of the Regular Salary for the final Season covered by his prior Contract, plus 175% of any Likely Bonuses and Unlikely Bonuses, respectively, called for in the final Season covered by the player’s prior Contract, or (ii) 108% of the Average Player Salary for the prior Season (or if the prior Season’s Average Player Salary has not been determined, 108% of the Estimated Average Player Salary for the prior Season). Salary increases and increases in Unlikely Bonuses in subsequent Seasons shall be governed by the 20% Rule.
Disabled Player Exception.
1. Subject to the rules set forth in subsection (j) below, a Team may, in accordance with the rules set forth in this subsection (c), sign or acquire one Replacement Player to replace a player who, as a result of a Disabling Injury or Illness (as defined below), is unable to render playing services (the “Disabled Player”). Such Replacement Player’s Contract may provide a Salary for the first Season of up to the lesser of (i) 50% of the Disabled Player’s Salary at the time the Disabling Injury or Illness occurred, or (ii) 108% of the Average Player Salary for the prior Season (or, if the prior Season’s Average Player Salary has not been determined, 108% of the Estimated Average Player Salary for the prior Season). Salary increases and increases in Unlikely Bonuses for subsequent Seasons shall be governed by the 20% Rule.
2. For purposes of this subsection (c), Disabling Injury or Illness means:
  1. for the period July 1 through the immediately following November 30, any injury or illness that will render a player unable to play all (or the remainder) of the then-current (or upcoming) Season; and
  2. for the period December 1 through the immediately following June 30, any injury or illness that will render a player unable to play all of the following Season.
3. The Exception for a Disabling Injury or Illness that occurs during the period July 1 through the immediately following November 30 shall arise on the date the Team knew or reasonably should have known that the injury or illness would cause the player to miss the then-current (or upcoming) Season, and shall expire 45 days from the date the Exception arises.
4. The Exception for a Disabling Injury or Illness that occurs during the period December 1 through the immediately following June 30 shall arise on the date the Team knew or reasonably should have known that the injury or illness would cause the player to miss all of the following Season; provided, however, that if the Team knew or reasonably should have known prior to the July 1 immediately following the injury or illness that the injury or illness would cause the player to miss all of the following Season, and if the Team does not use the Exception prior to such July 1, then the Exception shall be deemed to arise on July 1. The Exception for a Disabling Injury or Illness that occurs during the period December 1 through the immediately following June 30 shall expire-on the October 1 immediately following the date on which the Exception arises.
5. The determination of whether a player has suffered a Disabling Injury or Illness shall be made by a physician designated by the NBA. The NBA shall advise the Players Association of the determination of its physician within one business day of such determination. In the event the Players Association disputes the NBA physician’s determination, the parties will immediately refer the matter to a neutral physician (to be selected by the parties at the commencement of each Salary Cap Year) to review the relevant medical information and, if requested, examine the player and render, within three business days of his receipt of such information, a final determination, which will be final, binding and unappealable. The cost of the NBA physician will be borne by the NBA. The cost of the neutral physician will be borne jointly by the NBA and the Players Association.
6. Notwithstanding a determination by a physician designated by the NBA that a player has suffered a Disabling Injury or Illness, such player, upon recovering from his injury or illness, may be restored to his Team’s active list, without affecting any right the Team may have to sign a Replacement Player.
7. In no event may a Team enter into a Contract with a Replacement Player pursuant to subsection (c)(4), unless the Disabled Player’s Contract covers the Season following the Season in which the Disabling Injury or Illness occurs.
8. The Disabled Player Exception is available only to the Team with which the player was under Contract at the time his Disabling Injury or Illness occurred.
$1 Million Exception. Subject to the rules set forth in subsection (j) below, a Team may sign one or more Player Contracts not to exceed two Seasons (including partial Seasons) in length that, in the aggregate, provide for first-year Salaries and Unlikely Bonuses totalling up to $1 million; in accordance with, and subject to, the following:
1. A Team may use all or any portion of the $1 Million Exception during no more than three separate Salary Cap Years during the term of this Agreement; provided, however, that the $1 Million Exception or any portion thereof may not be used in any two consecutive Salary Cap Years.
2. Player Contracts signed pursuant to the $1 Million Exception may provide for an increase in Regular Salary for the second Season of up to 15% of the Regular Salary provided for in the first Season, and an increase in Likely Bonuses and Unlikely Bonuses of up to 15% of the Likely Bonuses and Unlikely Bonuses, respectively, provided for in the first Season.
3. A Team may not use the $1 Million Exception to sign its own Free Agent.
4. The $1 Million Exception, if applicable, arises on July 1 of each Salary Cap Year.
Rookie Exception. A Team may enter into a Rookie Scale Contract in accordance with Article VIII.
Minimum Annual Salary Exception. A Team may sign a player to a one-year Player Contract at the Minimum Annual Salary applicable to that player (or, if the Contract is signed during the Regular Season, a prorated portion of such Minimum Annual Salary based on the number of remaining Regular Season days covered by the Contract).
Assigned Player Exception.
1. Subject to the rules set forth in subsection (j) below, a Team may, for a period of one year following the date of the assignment of a Player Contract to another Team, replace the Traded Player with one or more players acquired by assignment as follows:
  1. a Team may replace a Traded Player with one or more Replacement Players whose Player Contracts are acquired simultaneously and whose post-assignment Salaries for the then-current Season, in the aggregate, are no more than an amount equal to 115% of the pre-assignment Salary (or Base Year Compensation, if applicable) of the Traded Player, plus $100,000.
  2. If a Team’s assignment of a Traded Player and acquisition of one or more Replacement Players do not occur simultaneously, then the post-assignment Salary or aggregate Salaries of the Replacement Player(s) for the Salary Cap Year in which the Replacement Player(s) are acquired may not exceed 100% of the pre-assignment Salary (or Base Year Compensation, if applicable) of the Traded Player at the time the Traded Player’s Contract was assigned, plus $100,000.
  3. A Team may aggregate the pre-assignment Salaries in two or more Player Contracts for the purpose of acquiring in a simultaneous trade one or more Replacement Players whose post-assignment Salaries, in the aggregate, are no more than an amount equal to 115% of the pre-assignment aggregated Salaries (or Base Year Compensations, if applicable) of the Traded Players, plus $100,000. Notwithstanding the preceding sentence, no Player Contract signed or acquired pursuant to an Exception, other than the Veteran Free Agent Exception set forth in Section 6(b) above, may give rise to an aggregated trade exception for a period of two months from the date the Player Contract is signed or acquired.
2. Except as provided in subsection (3) below, and notwithstanding subsection (j) below, a Team with a Team Salary below the Salary Cap may acquire one or more players by assignment whose post-assignment Salaries, in the aggregate, are no more than an amount equal to the Team’s Room plus $100,000.
3. In lieu of conducting a trade in accordance with subsection (2) above, and notwithstanding subsection (j) below, a Team with a Team Salary below the Salary Cap may (i) replace a Traded Player with one or more Replacement Players whose Player Contracts are acquired simultaneously and whose post-assignment Salaries for the then-current Season, in the aggregate, are no more than an amount equal to 115% of the pre-assignment Salary of the Traded Player, plus $100,000, or (ii) aggregate the pre-assignment Salaries in two or more Player Contracts for the purpose of acquiring in a simultaneous trade one or more Replacement Players whose post-assignment Salaries, in the aggregate, are no more than an amount equal to 115% of the pre-assignment aggregated Salaries of the Traded Players, plus $100,000. Notwithstanding the preceding sentence, no Player Contract signed or acquired pursuant to an Exception, other than the Veteran Free Agent Exception set forth in Section 6(b) above, may be assigned by a Team in accordance with this subsection (3) for a period of two months from the date the Player Contract is signed or acquired.
4. 1. For purposes of the Assigned Player Exception, a player shall be subject to a Base Year Compensation in the event that the Team Salary of the player’s Team is at or above the Salary Cap and the player:
  1. is a Qualifying Veteran Free Agent or Early Qualifying Veteran Free Agent who, in accordance with subsection (b) above, enters into a new Player Contract with his prior Team that provides for a Salary for the first Season of such new Contract greater than 120% of the Salary for the last Season of the player’s immediately prior Contract;
  2. is a First Round Pick who, in accordance with Section 7(b), enters into an extension of his Contract between July 1 and October 1 following his second Season that provides for a Salary for the first year of the extended term greater than 120% of the Salary for the last Season of the original term of the Contract;
  3. is subject to a Base Year Compensation on the effective date of this Agreement that has not been extinguished pursuant to subsection (4)(ii)(D) below; or
  4. will be subject to a Base Year Compensation on some future date based upon an Extension entered into prior to the effective date of this Agreement.
1. A player’s Base Year Compensation shall be computed as follows: (A) During the first 365 days from the date a player’s Base Year Compensation goes into effect (“Year One”), his Base Year Compensation will equal the greater of (1) the Salary for the last Season of his preceding Contract or, in the case of an Extension, the last Season of the original term of the Contract (the preceding amount hereinafter referred to as the “Base Year Salary”), or (2) one-third of the Salary for Year One of his new Contract (or extended term, if applicable). (B) During the second 365 days from the date the player’s Base Year Compensation goes into effect (“Year Two”), his Base Year Compensation will equal the greater of (1) 120% of his Base Year Salary, or (2) two-thirds of the Salary for Year Two of his new Contract (or extended term, if applicable). (C) A player’s Base Year Compensation will expire and be of no further effect on the 731st day of his new Contract (or extended term, if applicable). (D) A player subject to a Base Year Compensation as of the effective date of this Agreement in accordance with subsection (4)(i)(C) above shall be treated as if the phase-out rule set forth above was in effect when such Base Year Compensation came into effect.
2. In the event a player who is subject to a Base Year Compensation during the last Season of his Contract signs an Extension or a new Player Contract with his Prior Team, the player shall continue to be subject to a Base Year Compensation in his new Contract or Extension through (A) in the case of a new Contract, the 730th day from the date the player’s Base Year Compensation went into effect or the 365th day from the date the new Contract is signed, whichever is later, and (B) in the case of an Extension, the 730th day from the date the player’s Base Year Compensation went into effect; provided, however, that in the event the player is a Qualifying Veteran Free Agent or an Early Qualifying Veteran Free Agent, and the new Contract would itself subject the player to a Base Year Compensation in accordance with subsection (4)(i)(A) above, then the player shall be subject to a new Base Year Compensation for a period of 730 days from the date the new Contract is signed in accordance with subsection (4 )(ii) above. For purposes of computing such Base Year Compensation pursuant to subsection (4)(ii), the player’s Base Year Salary shall equal the Base Year Compensation applicable in the last Season of his prior Contract or, in the case of an Extension, the last Season of the original term of the Contract.
3. A player’s Base Year Compensation shall be extinguished upon any of the following: (A) The Team Salary of the player’s Team falls below the Salary Cap, unless this occurs prior to the beginning of an extended term that gives rise to the Base Year described in subsection (4 )(i)(D) above; (B) The player signs a Contract with a Team other than his prior Team; or (C) The player is traded, unless the trade occurs prior to the beginning of an extended term described in subsection 4(i)(D) above.
Reinstatement. If a player who has been disqualified from further association with the NBA in accordance with Section 1 of the NBA/NBPA Anti-Drug Agreement is later reinstated pursuant to Section 9 of that Agreement, the Team for which the player last played may enter into a Player Contract, in accordance with the rules set forth in Section 9 of the NBA/NBPA Anti-Drug Agreement, with such player that provides for a Salary for the first Season of up to the player’s Salary for the Salary Cap Year in which he was disqualified, even if the Team has a Team Salary at or above the Salary Cap or such Player Contract causes the Team to have a Team Salary above the Salary Cap. If, in accordance with the preceding sentence, a Team and a player enter into a Player Contract and such Contract covers more than one Season, increases in Salary for Seasons following the first Season shall be governed by the 20% Rule.
Non-Aggregation. Other than in accordance with subsection (g) above, a Team may not aggregate or combine any of the Exceptions set forth above in order to sign one or more players at Salaries greater than that permitted by anyone of the Exceptions. If a Team has more than one Exception available at the same time, the Team shall have the right to choose which Exception it wishes to use to sign a player.
Other Rules.
1. A Team shall be entitled to use the Disabled Player, $1 Million, and Assigned Player Exceptions set forth in subsections (c), (d) and (g) above, respectively, except as set forth in subsections (g)(2) and (3) above, only if, at the time any such Exception arises and at all times until it is used, (i) the Team’s Team Salary is at or above the Salary Cap, or (ii) the amount by which the Team’s Team Salary is below the Salary Cap is less than the amount that would be available to the Team in accordance with the Exception.
2. In the event that, when a Disabled Player Exception, $1 Million Exception or Assigned Player Exception arises, the Team’s Team Salary is below the Salary Cap (or in the event that, prior to the expiration of any such Exception, the Team’s Team Salary falls below the Salary Cap) by less than the amount of such Exception, then (i) the Team’s Team Salary shall include, until the Exception is actually used or until the Team no longer is entitled to use the Exception, the amount of the Exception (or any unused portion of the Exception), and (ii) the amount by which the Team’s Team Salary is less than the Salary Cap shall thereby be extinguished. When the Disabled Player Exception is used to sign or acquire a player, the Replacement Player’s Salary for the first Season of his Contract, instead of the amount of the Exception, shall be included in Team Salary. When a $1 Million Exception or an Assigned Player Exception is used to sign or acquire a player, respectively, the Salary for the first Season of the signed or acquired Contract plus any unused portion of the Exception, instead of the full amount of the Exception, shall be included in Team Salary. A Team may at any time renounce its rights to use an Exception, in which case the Exception (or any unused portion of the Exception) no longer will be included in Team Salary.

7.7 Renegotiations and Extensions.

Veteran Extensions. No Player Contract, other than a Rookie Scale Contract, may be extended except in accordance with the following:
1. Subject to the rules set forth in subsection (2) below, a Player Contract covering a term of six or seven Seasons may be extended beginning on the fourth anniversary of the signing of the Contract, and a Player Contract with a term of four or five years may be extended beginning on the third anniversary of the signing of the Contract.
2. A Player Contract that has been extended, or that has been renegotiated to provide for an increase in Salary or performance bonuses in any Season of the Contract of more than 10%, may not subsequently be extended until the third anniversary of such Extension or Renegotiation. Any Player Contract in effect on the effective date of this Agreement may be extended beginning on the third anniversary of the later of:
  1. the signing of the Contract, or (ii) the signing of any Extension, or of any Renegotiation providing for an increase in Salary or performance bonuses in any Season of more than 10%, entered into prior to the date of this Agreement.
3. A Player Contract extended in accordance with subsection (1) or (2) above may, in the first Season of the extended term, provide for a Salary of up to 120% of the Regular Salary in the last Season of the original term of the Contract. In the event that the last Season of the original term of the Contract provides for performance bonuses, the first Season of the extended term may provide for Likely Bonuses and Unlikely Bonuses of up to 120% of the Likely Bonuses and Unlikely Bonuses, respectively, in the last year of the original term. The permissible increases in Salary and performance bonuses in the subsequent Seasons of the extended term shall be governed by the 20% Rule.
4. Notwithstanding subsection (3) above:
  1. any Player Contract that, pursuant to the Salary Cap rules, has been averaged as of the effective date of this Agreement (including Contracts that begin with the 1995-1996 Season) may, in the first Season of an extended term, provide for a Salary of up to the greater of (A) 120% of the averaged Regular Salary in the last Season of the original term of the Contract, or (B) 120% of what the Regular Salary would have been in the last Season of the original term had the Contract not been averaged, plus, in either case, 120% of any performance bonuses provided for in the last Season of such Contract in accordance with subsection (3) above; and
  2. any Player Contract of a player who has played for his current Team for at least ten Seasons and whose Salary in the last Season of the original term of the Contract is less than the Salary in the second-to-last Season of such Contract may, in the first Season of an extended term, provide for a Salary equal to 120% of the greater of (1) the average of the Regular Salaries for each Season covered by the original Contract beginning with the Season in which such ’Contract was entered into, or previously extended, as the case may be, or (2) the Regular Salary in the last Season covered by his original Contract, plus, in either case and subject to the foregoing limitations, 120% of any performance bonuses called for in the last Season of such Contract in accordance with subsection (3) above.
Rookie Scale Extensions. A First Round Pick may enter into an extension of a Rookie Scale Contract during the period July 1 to October 1 following the second Season of such Contract. Such an Extension may provide for any amount of Salary in each Season of the extended term.
Renegotiations. No Player Contract may be renegotiated except in accordance with the following:
1. Subject to subsections (2) and (3) below, a Player Contract covering a term of four or more Seasons may be renegotiated beginning on the third anniversary of the signing of the Contract.
2. Subject to subsection (3) below, any Player Contract that has been renegotiated in accordance with subsection (1) above to provide for an increase in Salary or performance bonuses in any Season of the Contract of more than 10%, or extended in accordance with subsections (a) and (b) above, may not subsequently be renegotiated until the third anniversary of such Extension or Renegotiation.
3. Assuming subsections (1) or (2) above are satisfied, a Team with a Team Salary below the Salary Cap may renegotiate a Player Contract by increasing the player’s Regular Salary or providing Likely Bonuses or Unlikely Bonuses in an amount not to exceed, in the aggregate, the Team’s Room in the then-current Season and, for each subsequent Season, increasing the player’s Regular Salary, Likely Bonuses and Unlikely Bonuses by the amount of the increase in Salary, Likely Bonuses and Unlikely Bonuses, respectively, for the then-current Season, plus, for each such subsequent Season, 20% of the increase in Regular Salary, Likely Bonuses and Unlikely Bonuses, respectively, in the then-current Season.
4. In no event may a Team with a Team Salary at or above the Salary Cap renegotiate a Player Contract.
Other.
1. In no event shall a Team and player negotiate a decrease in Salary for the then-current Season or for any remaining Season of a Player Contract.
2. A Player Contract that is extended pursuant to subsection (a) above may be renegotiated simultaneously, but only in accordance with the rules set forth in subsection (c) above.
3. For the sole purpose of enabling an assignee Team to acquire a Player Contract by trade, the player and the assignor Team may agree to waive all or any portion of an assignment bonus, but only to the extent necessary to make the trade permissible in accordance with the rules set forth in Section 6(g) above. In the event that, in connection with a trade, a player’s Contract is amended in accordance with this subsection (3), such Contract may not be subsequently extended or renegotiated until the later of (i) six months from the date of the assignment, or (ii) the first date on which the Contract could otherwise be extended or renegotiated pursuant to this Section 7.
4. A Team and a player may at any time agree to amend a Player Contract to provide that, in exchange for reducing the amount of (or eliminating) the player’s salary protection, the Team will terminate the Contract in accordance with the NBA waiver procedure.
5. In no event shall a Team and player amend a Contract for the purpose of terminating or shortening the term of the Contract, except in accordance with the NBA waiver procedure or Article XII, Section 2.
6. Except to the extent a Team’s Team Salary is below the Salary Cap, no Salary for any Season covered by the extended term of a Contract may be paid during the original term, including, without limitation, signing bonuses.
7. For purposes of this Section 7, if a Player Contract is signed after the beginning of a Season, the Season in which the Contract is signed shall be counted as one full Season covered by the Contract.

7.8 Accounting Procedures.

1. The NBA and the Players Association shall jointly engage an independent auditor (the “Accountants”) to provide the parties with an “Audit Report” setting forth BRI, Team Salary and Benefits of each NBA team for the immediately preceding Season. The Audit Report is to be prepared in accordance with the provisions and definitions contained in this Agreement. The engagement of the Accountants shall be deemed to be renewed annually unless they are discharged by either party during the period from the submission of an Audit Report up to January 1 of the following year. The parties agree to share equally the costs incurred by the Accountants in preparing the Audit Report.
2. The Accountants shall submit a draft Audit Report to the NBA and the Players Association, along with relevant supporting documentation, on or before the July 31 following the conclusion of each Salary Cap Year. The final Audit Report shall be submitted by the Accountants to the parties on or before the following August 15. The NBA, the Players Association and the Teams shall use their best efforts to facilitate the Accountants’ timely completion of the Audit Report. Beginning with the Audit Report for the 1996-97 Salary Cap Year, in the event that, for any reason, the Accountants fail to submit to the parties a final Audit Report by August 15, the Accountants shall prepare an interim Audit Report (the “Interim Audit Report”) by such date setting forth the Accountants’ best estimate of BRI and Total Salaries and Benefits for such Salary Cap Year. Such Interim Audit Report shall include:
  1. All amounts of BRI and Total Salaries and Benefits for such Salary Cap Year as to which the Accountants have completed their review and, by written agreement of the Players Association and the NBA (waiving their respective rights to dispute such amounts), are not in dispute.
  2. With respect to any amounts that are in dispute (whether such dispute would be for the Accountants or the System Arbitrator to decide under this Agreement), the NBA’s good faith proposal as to the proper amount that should be included in the Audit Report.
  3. With respect to any amounts as to which the Accountants have not yet completed their review, the portion of such amount, if any, as to which the Accountants have completed their review and, by written agreement of the Players Association and the NBA (waiving their respective rights to challenge such portion), are not in dispute.
  4. A projected amount for national broadcast and network cable television revenues, as determined in accordance with Article VII, Section l(a)(6).
    As soon as practicable after the Interim Audit Report is submitted to the parties, the Accountants shall submit the final Audit Report, including a description of the differences, if any, from the Interim Audit Report.
For purposes of determining BRI and Total Salaries and Benefits, the Accountants shall perform at least such review procedures as shall be agreed upon by the parties. In connection with the preparation of Audit Reports for each Salary Cap Year, each Team and the NBA shall submit a report to the Accountants, the NBA and the Players Association setting forth BRI, Team Salaries and Benefits information for such Salary Cap Year on forms agreed upon by the NBA, the Players Association and the Accountants (the “BRI Reports”).
The Accountants shall review the reasonableness of any estimates of revenues or expenses for a Season included in any Team’s and the NBA’s BRI Reports for such Season and may make such adjustments in such estimates as they deem appropriate. To the extent the actual amounts of revenues received or expenses incurred for a Season differ from such estimates, adjustments shall be made in BRI for the following Salary Cap Year in accordance with the provisions of subsection (g) below.
With respect to expenses deducted by the NBA or the Teams, the NBA and the Teams shall report in BRI Reports only those expenses that are reasonable and customary in accordance with the provisions of Article VII, Section l(a)(l). Subject to the terms of Article VII, Section 1(a)(3) (Expense Ratios) and Section 9 (Players Association Audit Rights), all categories of expenses deducted in a BRI Report completed by the NBA or a Team shall be reviewed by the Accountants, but such categories shall be presumed to be reasonable and customary and the amount of the expenses deducted by the NBA or a Team that come within such expense categories shall also be presumed to be reasonable and customary, unless such categories or amounts are found by the Accountants to be either unrelated to the revenues involved or grossly excessive.
The Accountants shall notify designated representatives of the NBA and the Players Association: (i) if the Accountants have any questions concerning the amounts of revenues or expenses reported by the Teams and the NBA or any other information contained in the BRI Reports; or (ii) if the Accountants propose that any adjustments be made to any revenue or expense item or any other information contained in the BRI Reports.
In the event of any dispute concerning the amounts (as opposed to includability or the interpretation, validity or application of this Agreement) of any revenues or expenses to be included in the BRI Reports that cannot be resolved among the parties (hereinafter referred to as “Disputed Adjustments”), such dispute shall be resolved by the Accountants after consulting and meeting with representatives of both parties. Notwithstanding the foregoing, either party shall have the right to contest, by commencing a proceeding before the System Arbitrator pursuant to the provisions of Article XXXII of this Agreement, any Disputed Adjustments made by the Accountants whenever such Disputed Adjustments for all Teams are adverse to the party commencing the proceeding in an aggregate amount of $5 million or more for any Season covered by this Agreement. If the Disputed Adjustments for all Teams are adverse to the party commencing the proceeding in an aggregate amount of $5 million or more but less than $10 million for any Season of the Agreement, the parties agree that: (i) the hearing will take place on an expedited basis and will not last longer than one full day, provided, however, that if, despite the reasonable efforts of the parties, the hearing cannot be completed in one day, the hearing shall continue, unless the parties otherwise agree, day-to-day until concluded; and (ii) if the party that brings the proceeding does not prevail after the hearing, then that party shall pay the reasonable costs and expenses, including attorneys’ fees, of the other party for its defense of the proceeding. The immediately preceding sentence shall have no application to proceedings in which the Disputed Adjustments for all Teams adverse to the party bringing the proceeding equal or exceed $10 million in the aggregate. All other disputes among the parties as to the interpretation, validity, or application of this Agreement, or with respect to any Salary or Benefits amount included in a BRI Report, shall be resolved exclusively pursuant to the dispute resolution procedures of Article XXXII.
The Accountants shall indicate which amounts included in BRI for a Season, if any, represent estimates of revenues. With respect to any such estimated revenues, the Accountants shall, in preparing the Audit Report for the immediately succeeding Season (“Subsequent Audit Report”), determine the actual revenues received for the prior Season and include in such Subsequent Audit Report the amount of the aggregate difference, if any, between all such estimated revenues for the prior Season and the actual revenues received for such Season (the “Estimated Revenue Adjustment”).

7.9 Players Association Audit Rights.

Team Audits. The Players Association shall have the right as part of the annual review of BRI Reports to retain its own accountants (the “Players Association’s Accountants”), at its own expense, after the submission of each Audit Report under this Agreement (the “First Audit”), to audit the books and records of at least five NBA teams (of its choosing) and shall also have the right to review the books and records of the NBA League Office, provided, however, that such review shall be limited to (i) revenue items, and (ii) expense items that appear in the BRI Reports. In the event that, in the opinion of the Players Association’s Accountants, such audit indicates misallocations or miscategorizations of revenues or expenses (other than with respect to matters that constituted Disputed Adjustments in connection with the prior Audit Report) resulting in an understatement of BRI in excess of $1.5 million, they shall submit to the NBA proposed adjustments to BRI consistent with their findings. In the event that the NBA disputes such proposed adjustments, such proposed adjustments shall be deemed to be “Disputed Adjustments” and shall be resolved in accordance with the procedures of Section 8(f) above. In addition, in the event that First Audit Disputed Adjustments in excess of $1.5 million are resolved in favor of the Players Association, the Players Association shall then have the right, that Season, to have the Players Association’s Accountants audit an additional five NBA teams, in accordance with the foregoing procedures (the “Second Audit”). If, as a result of the Second Audit, additional Disputed Adjustments in excess of $1.5 million are resolved in favor of the Players Association, the Players Association shall then have the right, that Season, to have the Players Association’s Accountants audit all remaining NBA Teams. The amount of any and all Disputed Adjustments that are ultimately resolved in favor of the Players Association in accordance with this Section 9(a) shall be added to BRI in the Season in which such resolution is reached.
Expense Audit. The Players Association shall have the right to retain the Players Association’s Accountants to conduct one audit, at its own expense, of the expenses incurred in connection with the proceeds that come within Article VII, Section l(a)(l)(viii) regardless of whether such expenses exceed the applicable Expense Ratios set forth in Exhibit C. In the event that in the opinion of the Players Association’s Accountants, such audit indicates a misallocation or miscategorization of expenses resulting in an understatement of BRI, they shall submit proposed adjustments to the NBA consistent with their findings. In the event the NBA disputes such proposed adjustments, such proposed adjustments shall be deemed to be Disputed Adjustments and resolved in accordance with the procedures of Section 8(f) above. The amount of any and all such Disputed Adjustments that are resolved in the Players Association’s favor shall be included in BRI in the year in which such resolution is reached. In addition, in the event that any such Disputed Adjustments are resolved in the Players Association’s favor, the Accountants shall be directed to correct such expense misallocations and/or miscategorizations in the remaining Seasons of the Agreement.
System Arbitrator Review. Notwithstanding the foregoing procedures, in the event that any of the Disputed Adjustments set forth in this Section 9 concern the includability or the interpretation, validity or application of this Agreement, such Disputed Adjustments shall be resolved by the System Arbitrator.

1996-97:	$24.3 million
1997-98:	$25.0 million
1998-99:	$26.0 million
1999-00:	$27.0 million
2000-01:	$28.0 million