Article 13 CIRCUMVENTION

13.1 General Prohibitions.

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

13.2 No Undisclosed Agreements.

  1. At no time shall there be any undisclosed agreements (i.e., undisclosed to the NBA) of any kind, express or implied, oral or written, or promises, undertakings, representations, commitments, inducements, assurances of intent, or understandings of any kind, between a player (or any person or entity acting with authority or apparent authority on behalf of such player) and any Team (or Team Affiliate):
    1. involving consideration of any kind to be paid, furnished or made available to the player, or any person or entity controlled by or related to the player, by the Team or Team Affiliate either during the term of the Player Contract or thereafter; or
    2. concerning any future Renegotiation, Extension, or amendment of an existing Player Contract, or entry into a new Player Contract.
  2. In addition to the foregoing, it shall be a violation of this Section 2 for any Team (or Team Affiliate) or any player (or person or entity acting with authority or apparent authority on behalf of such player) to attempt to enter into or to intentionally solicit any agreement, promise, undertaking, representation, commitment, inducement, assurance of intent or understanding that would be prohibited by Section 2(a) above.
  3. A violation of Section 2(a) may be proven by direct or circumstantial evidence, including, but not limited to, evidence that a Player Contract or any term or provision thereof cannot rationally be explained in the absence of conduct violative of Section 2(a).
  4. In any proceeding brought before the System Arbitrator pursuant to this Section 2, no adverse inference shall be drawn against the party initiating such proceeding because that party, when it first suspected or believed that a violation of Section 2 may have occurred, deferred the initiation of such proceeding until it had further reason to believe that such a violation had occurred.

13.3 Penalties.

  1. Upon a finding of a violation of Section 1 above by the System Arbitrator, but only following the conclusion of any appeal to the Appeals Panel, the Commissioner shall be authorized to:
    1. impose a fine of up to $2,500,000 (50% of which shall be payable to the NBA, and 50% of which shall be payable to the NBPA-Selected Charitable Organization) on any Team found to have committed such violation for the first time;
    2. impose a fine of up to $3,000,000 (50% of which shall be payable to the NBA, and 50% of which shall be payable to the NBPA-Selected Charitable Organization) on any Team found to have committed such violation for at least the second time;
    3. direct the forfeiture of one first round draft pick; and/or
    4. void any Player Contract, or any Renegotiation, Extension, or amendment of a Player Contract, between any player and any Team when both the player (or any person or entity acting with authority or apparent authority on behalf of such player) and the Team (or Team Affiliate) are found to have committed such violation.
  2. Upon a finding of a violation of Section 2 above by the System Arbitrator, but only following the conclusion of any appeal to the Appeals Panel, the Commissioner shall be authorized to:
    1. impose a fine of up to $3,500,000 (50% of which shall be payable to the NBA, and 50% of which shall be payable to the NBPA-Selected Charitable Organization) on any Team found to have committed such violation;
    2. direct the forfeiture of draft picks;
    3. void any Player Contract, or any Renegotiation, Extension, or amendment of a Player Contract, between any player and any Team when both the player (or any person or entity acting with authority or apparent authority on behalf of such player) and the Team (or Team Affiliate) are found to have committed such violation; and/or
    4. suspend for up to one year any Team personnel found to have willfully engaged in such violation.
  3. In any proceeding before the System Arbitrator in which it is alleged that a player agent or other person or entity acting with authority or apparent authority on behalf of a player has violated Section 2 of this Article, the System Arbitrator shall make a specific determination with respect to such allegation. If the System Arbitrator finds such violation and such finding, if appealed, is affirmed by the Appeals Panel, the System Arbitrator shall refer such finding to the Players Association’s Committee on Agent Regulation. The Committee shall accept as binding and conclusive the finding(s) of the System Arbitrator (or, in the case of an appeal, the Appeals Panel) that a violation of Section 2(a) or 2(b) has occurred and shall consider such finding(s) as establishing a violation of the Players Association’s regulations applicable to such person or entity. The Players Association represents that it will impose such discipline as is appropriate under the circumstances on the person or entity found to have violated Section 2 of this Article.

13.4 Production of Tax Materials.

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

13.5 Other Transactions.

  1. After the date of this Agreement, no player may enter into any transaction or arrangement with a Team (other than as expressly set forth in a Uniform Player Contract subject to, and in accordance with, the terms of this Agreement), or, except as provided for in subsection (b) below, with a Team Affiliate, if, pursuant to such transaction or arrangement, the player is to receive compensation or to be provided with an investment opportunity.
  2. Subject to the provisions of subsections (c), (d), and (e) below, nothing in subsection (a) above shall prevent a player from entering into a transaction or arrangement with a Team Affiliate who or which holds an ownership interest in a Team, or who or which is owned or controlled by a person or entity who or which holds an ownership interest in a Team, provided that (in either or both such cases) such ownership interest does not exceed 10%, and provided further that such Team Affiliate does not control the Team and is not controlled by the person or entity who or which controls the Team.
  3. The Terms of any transaction or arrangement permitted by subsection (b) above shall be disclosed in writing to the League Office and the Players Association prior to or within five (5) business days after the entering into of the transaction or arrangement. The NBA shall have ten (10) days after such disclosure in which to challenge the transaction or arrangement, pursuant to the procedures set forth in subsection (e) below, on the ground that (x) the compensation or the investment opportunity provided to the player is greater than a reasonable approximation of the fair market value of the services or other consideration provided by the player in the transaction or arrangement, or that (y) the consideration paid to the player for performing basketball services represents less than a reasonable approximation of the fair market value of such player’s basketball services under the Salary Cap system.
  4. If (i) a Team or Team Affiliate enters into a transaction after the date of this Agreement with a retired player who played for the Team within the five-year (5) period preceding such transaction and the terms of such transaction provide for the retired player to be compensated in excess of $10,000 or to be provided with an investment opportunity, and if (ii) the compensation the retired player received from the Team when he was a player was substantially below the then fair market value for his services, then the NBA may challenge the transaction, pursuant to the procedures set forth in subsection (e) below, on the ground that: (x) the compensation to the player substantially exceeds the fair market value of the services or other consideration provided by the retired player in the business transaction; or that (y) the amount of the player’s investment is not commercially reasonable, given the relative risks and rewards of such investment.
    1. Any challenge under this Section 5 shall be filed in writing with a business valuation expert jointly selected by the NBA and the Players Association. The business valuation expert shall conduct a hearing in which the player or retired player, the Team and/or Team Affiliate, the Players Association, and the NBA are afforded the opportunity to appear and participate. The NBA shall have the burden of proof in the proceeding. The business valuation expert may permit discovery of relevant documents necessary to undertake the valuation, and shall render a decision within fifteen (15) days following the conclusion of the hearing. Within ten (10) days of any decision by the business valuation expert, any of the parties may file an appeal with the System Arbitrator, who shall conduct a hearing and render a decision within twenty (20) days of the filing of the appeal. There shall be no right of further appeal to the Appeals Panel.
    2. If the NBA prevails in its challenge under this Section 5, the player or retired player and the Team and/or Team Affiliate shall have fifteen (15) days after the date of such determination (or the date of the conclusion of any appeal) in which to renegotiate or terminate: (x) the business transaction, if all parties to the transaction so agree; and (y) in the case of a challenge under Section 5(c), any Player Contract entered into contemporaneously with such transaction, without regard to any time limitations in this Agreement applicable to Renegotiations. If the player or retired player and the Team and/or Team Affiliate do not renegotiate or terminate the business transaction or Player Contract by the conclusion of such fifteen-day (15) period, then, at that time: (xx) in the case of a challenge under Section 5(c), the consideration received by the player, or the value of the investment opportunity (net of any contribution by the player), in each case as determined by the business valuation expert or the System Arbitrator, as the case may be, shall be included in the player’s Salary, subject to the Team’s Room and other Salary Cap rules, and further subject to any allocation over time that the business valuation expert or System Arbitrator determines is appropriate; and (yy) in the case of a challenge under Section 5(d), the difference between (A) the compensation received by the retired player, or the value of the investment opportunity received by the retired player (net of any contribution by the retired player), and (B) a reasonable estimate of the fair market value of the services or other consideration provided by the retired player, or a reasonable estimate of the fair market value of the investment opportunity, in each case as determined by the business valuation expert or the System Arbitrator, as the case may be, shall be included in the Team’s Team Salary, subject to the Team’s Room and other Salary Cap rules, and further subject to any allocation over time that the business valuation expert or System Arbitrator determines is appropriate.
    3. If the NBA prevails in its challenge under this Section 5, and the player or retired player and the Team and/or Team Affiliate renegotiate or terminate the business transaction or Player Contract, any revised terms of the transaction or Player Contract shall be promptly disclosed to the NBA and the Players Association, and may, at the request of the NBA, be re-subjected to the procedures of this subsection (e).
  6. Any information disclosed to the League Office and the Players Association pursuant to the procedures of this Section 5 shall be treated strictly confidential, and shall not be released to the general public or the media.

13.6 Other Undertakings.

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