Article 7 BASKETBALL RELATED INCOME, SALARY CAP, MINIMUM TEAM SALARY, TAX LEVEL, APRON LEVELS, AND DESIGNATED SHARE ARRANGEMENT

7.1 Definitions.

For purposes of this Agreement, the following terms shall have the meanings set forth below:

Basketball Related Income.
1. “Basketball Related Income” (“BRI”) for a Salary Cap Year means the aggregate operating revenues (including the value of any property or services received in any barter transactions), accounted for in accordance with Section 1(b)(1) below, received or to be received for or with respect to such Salary Cap Year by the NBA, NBA Properties, Inc., including any of its subsidiaries whether now in existence or created in the future (hereinafter, “Properties”), NBA Media Ventures LLC (“Media Ventures”), any other entity which is controlled, or in which at least fifty percent (50%) of the issued and outstanding ownership interests are owned, by the NBA, Properties, Media Ventures, and/or a group of NBA Teams (hereinafter, “League-related entity”) (but excluding the amount of such League-related entity’s revenues equal to the portion of its total revenues that is proportionate to the share of the entity’s profits to which ownership interests not owned by the NBA, Properties, Media Ventures and/or a group of NBA Teams are entitled), all NBA Teams other than Expansion Teams during their first two (2) Salary Cap Years (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) and Related Parties (in accordance with Section 1(a)(7)(i) below), from all sources, whether known or unknown, whether now in existence or created in the future, to the extent 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: (x) “operating revenues” shall include, but not be limited to, any type of revenue included in BRI for the 1995-96 and 1996-97 Salary Cap Years (without regard to whether such type of revenue is received on a lump-sum, non-recurring or extraordinary basis, but subject to any specific rules set forth in this Article VII relating to the recognition or amortization of such amounts); and (y) “Player” means a person: who is under a Player Contract to an NBA Team; who completed the playing services called for under a Player Contract with an NBA Team at the conclusion of the prior Season; or who was under a Player Contract with an NBA Team during (but not at the conclusion of) the prior Season, but only with respect to the period for which he was under such Contract. Subject to the foregoing, BRI shall include, but not be limited to, the following revenues:
  1. Regular Season gate receipts (or practice facility NBA-event receipts), net of applicable taxes, surcharges, imposts, facility fees, and other charges (including, without limitation, charges related to arena financings) imposed by governmental or quasi-governmental agencies other than income taxes (collectively, “Taxes”), and net of all reasonable and customary Team and Related Party ticket-related expenses and premium seating ticket expenses related thereto, subject to the provisions of Section 1(a)(6) below, including, without limitation, gate receipts received or to be received by a Related Party in accordance with Section 1(a)(7)(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 Regular Season games provided by a Team on a complimentary basis, without monetary or other compensation to a Team including complimentary admission to luxury suites (including standing room only tickets and tickets provided to Team employees other than Players); provided, however, that (x) the value of the “Excluded Complimentary Tickets” with respect to all Regular Season games in a 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 Season. For purposes of the foregoing, (1) “Non-Season Tickets” shall mean only single-game tickets and tickets sold in packages covering fewer than fifty percent (50%) of a Team’s Regular Season home games and (2) “Excluded Complimentary Tickets” shall mean (a) 2.1 million tickets for each Season during the term of the Agreement, subject to increase pursuant to the following sentence, and (b) any tickets provided on a complimentary basis to or on behalf of Players. If, in any Salary Cap Year after the 2023-24 Season, the ratio of tickets sold to Regular Season home games (including contractually delivered sponsorship and trade tickets) is less than eighty percent (80%) of the seating capacity for those Regular Season home games, then the number of Excluded Complimentary Tickets for that Salary Cap Year shall be increased by a number equal to (x) the difference between eighty percent (80%) and the actual ratio of tickets sold to seating capacity, multiplied by (y) 2.1 million tickets. By way of example, if the actual ratio of tickets sold to seating capacity in the 2024-25 Season were seventy-nine percent (79%), then Excluded Complimentary Tickets would increase by 21,000 tickets (i.e., (80% - 79%) * 2.1 million) for the 2024-25 Salary Cap Year;
  2. All proceeds of any kind, net of reasonable and customary expenses related thereto, subject to the provisions of Section 1(a)(6) below, from the broadcast or exhibition of, or the sale, license or other conveyance or exploitation of the right to broadcast or exhibit, NBA preseason, Regular Season and Playoff games and summer league and other NBA-related off-season games involving Players, 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 by a Related Party (in accordance with Section 1(a)(7)(i) below), but not including the value of any broadcast, cablecast or telecast time provided as part of any such transaction that is used solely: (A) to promote or advertise the NBA, its Teams, League-related entities that generate BRI, Players, the NBA G League (the “NBAGL”) (except to the extent the value of such time for the NBAGL exceeds $5 million), the Women’s National Basketball Association (the “WNBA”) (it being agreed that the value of such time used to promote or advertise the WNBA shall not be less than $2.5 million each Salary Cap Year), or the sport of basketball; (B) to promote or advertise products, programming, merchandise, services or events that (1) produce revenues that are includable in BRI or (2) are jointly licensed or otherwise agreed upon by the NBA and the Players Association; (C) to promote or advertise charitable, not-for-profit or governmental organizations or agencies; or (D) for public service announcements;
  3. All proceeds of any kind from Exhibition games including at least one NBA Team, net of Taxes and all reasonable and customary game, pre-season and training camp expenses (including summer league expenses), subject to the provisions of Section 1(a)(6) below, including, without limitation, such proceeds received or to be received by a Related Party (in accordance with Section 1(a)(7)(i) below);
  4. All playoff gate receipts of any kind, net of 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 by a Related Party (in accordance with Section 1(a)(7)(i) below);
  5. All proceeds of any kind, net of reasonable and customary expenses (including Taxes) related thereto, subject to the provisions of Section 1(a)(6) below, from: (A) in-arena (or in practice facility) sales of novelties and concessions (including revenues derived from the sale of novelties and concessions: (1) during (and immediately preceding or after) the Team’s games or other public Team events at the arena (or practice facility), from carts and kiosks or other similar sales locations that are only operated on an intermittent basis (i.e., principally when an NBA, NHL, or other public event is being held at the arena (or, respectively, the practice facility)) or from restaurants that are only operated on an intermittent basis (i.e., principally when an NBA, NHL, or other public event is being held at the arena (or, respectively, the practice facility)), in (i) the arena plaza or elsewhere on the immediate perimeter of the arena (or, respectively, the practice facility), or (ii) directly across the street from the arena (or, respectively, the practice facility); and (2) from Team-organized viewing parties of NBA games held in any location), (B) sales of novelties and concessions in Team-identified stores located within such radius of the Team’s home arena as is permitted by the NBA, (C) NBA game (or practice facility NBA-event) parking and programs, (D) Team sponsorships (whether or not the proceeds are directly or indirectly donated to charity), (E) Team promotions, (F) temporary arena signage (as defined in Section 1(a)(1)(vi) below), (G) arena club revenues, (H) summer camps, (I) non-NBA basketball tournaments, (J) mascot and dance team appearances, (K) the sale of the right to pour beverages or (except as provided in Section 1(a)(2)(xx) below) to provide concessions, (L) sales of jersey patch rights, and (M) other practice facility events to the extent such proceeds would be included in BRI if the event occurred in the Team’s home arena, in each case, to the extent that such proceeds are related to the performance of Players in NBA basketball games or NBA-related activities, including, without limitation, such proceeds received or to be received by a Related Party (in accordance with Sections 1(a)(1)(vi) and 1(a)(7)(i) below). For the purposes of clarity, “Team-identified stores” includes stores owned by Teams or Related Parties that sell predominately Team-branded merchandise, whether or not the store is Team-identified;
  6. Fifty percent (50%) of the gross proceeds, net of fifty percent (50%) of Taxes, and net of fifty percent (50%) of all reasonable and customary Team and Related Party expenses related thereto, subject to the provisions of Section 1(a)(6) below, from the sale of fixed arena signage within or outside of the arena 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 by a Related Party (in accordance with this Section and Section 1(a)(7)(i) below). “Fixed” arena signage means signs (including, without limitation, electronic signs) that are displayed during all Regular Season NBA games and at least (A) seventy-five percent (75%) of non-NBA paid ticketed events at the arena during the Regular Season and (B) ten (10) non-NBA paid ticketed events at the arena during the Regular Season (in each case prorated to reflect contracts in effect beginning in-season), with all other signs being treated as “temporary” signage (for clarity, subject to applicable allocations). Fixed arena signage also includes “sponsorship entitlement areas” that are accessible or visible during all Regular Season NBA games and at least (1) seventy-five percent (75%) of non-NBA paid ticketed events at the arena during the Regular Season and (2) ten (10) non-NBA paid ticketed events at the arena during the Regular Season (in each case prorated to reflect contracts in effect beginning in-season). Revenues from sponsorship entitlement areas that do not qualify under the preceding sentence shall be treated as temporary signage. Revenues from signage outside the arena shall be included in BRI as fixed arena or temporary signage, as applicable, if: (a) the signage is attached to the arena or a physically connected parking facility; (b) the right to the signage revenues is conveyed in the Team’s arena lease or other agreement, if applicable, governing a Team’s use of an arena entered into by or on behalf of the Team (for clarity, in circumstances where the Team has a lease or similar agreement with a Related Party arena company, the foregoing is not intended to apply to any lease or similar agreement provisions, if any, between the Related Party arena company and the property owner governing the arena company’s use of any property other than the arena itself); (c) only in the case of revenues received by the Team (and not by any Related Party), the signage is Team-identified (i.e., contains Team name, marks, logo, intellectual property); or (d) the signage is (x) in the area immediately proximate to the arena in an arena plaza in front of a main arena entrance or (y) attached to a standalone parking facility that is directly across the street from the arena (except that for fixed signage that falls within BRI solely under this subsection (d), twenty-five percent (25%) of the gross proceeds (net of twenty-five percent (25%) of Taxes, and net of twenty-five percent (25%) of all reasonable and customary expenses related thereto subject to the provisions of this Section 1(a)(1)(vi) and Section 1(a)(6) below) shall be included as BRI revenues). Revenues from signage outside a Team’s practice facility shall be included in BRI as fixed arena or temporary signage, as applicable, to the same extent, and subject to the same inclusion percentages, as signage outside the arena described in the preceding sentence. Other revenues received by a Team or Related Party from signage outside the arena or practice facility shall be excluded from BRI;
  7. Fifty percent (50%) of the gross proceeds of any kind, net of fifty percent (50%) of Taxes, and net of fifty percent (50%) of all reasonable and customary Team and Related Party expenses related thereto, subject to the provisions of Section 1(a)(6) below, from the sale, lease or licensing of luxury suites calculated on the basis of the actual proceeds received by the entity, including, without limitation, proceeds received or to be received by a Related Party (in accordance with Section 1(a)(7)(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 pursuant to arrangements in which admission to games is not part of the agreement to buy, lease or license the luxury suite, thereby requiring the luxury suiteholder to make a separate payment for such admission, 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 (1) year, for purposes of calculating the amount includable in BRI for any Salary Cap Year, 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 (20) years, in which event an amortization period of twenty (20) years shall be used;
  8. Fifty percent (50%) of the gross proceeds, net of fifty percent (50%) of Taxes, and net of fifty percent (50%) of all reasonable and customary Team and Related Party expenses related thereto, subject to the provisions of Section 1(a)(6) below, from arena naming rights agreements with respect to 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 by a Related Party (in accordance with Section 1(a)(7)(i) below);
  9. Except as provided in Section 1(a)(2) below, proceeds received by Properties or any other League-related entity, net of reasonable and customary expenses (including Taxes) related thereto, subject to the provisions of Section 1(a)(6) below, from the following: (A) international television (“ITV”); (B) sponsorships; (C) NBA-related revenues from NBA Entertainment (“NBAE”); (D) the All-Star Game; (E) other NBA special events; and (F) all other sources of revenue received by Properties or any other League-related entity, in each case under (A)-(F), to the extent that such proceeds are related to the performance of Players in NBA basketball games or NBA-related activities. Without limiting what constitutes reasonable and customary expenses in the applicable BRI categories, the revenues and expenses to be included in NBAE and ITV will be recorded consistent with the revenues and expenses recorded in NBAE and ITV as reflected in the Audit Report for the 2021-22 Salary Cap Year. For the avoidance of doubt, ITV shall be limited to revenues and related expenses from international linear telecast licensing fees, advertising revenues from such telecasts, satellite reimbursements, and international NBA TV affiliate fees;
  10. Proceeds from premium seat licenses (other than licenses of luxury suites, which are governed by Section 1(a)(1)(vii) above), net of Taxes, and all reasonable and customary Team and Related Party expenses related thereto, subject to the provisions of Section 1(a)(6) below, attributable to NBA-related events amortized over the period of the license (including, without limitation, such proceeds received or to be received by a Related Party (in accordance with Section 1(a)(7)(i) below), unless such period exceeds twenty (20) years, in which event an amortization period of twenty (20) years shall be used;
  11. Fifty percent (50%) of the gross proceeds, net of fifty percent (50%) of Taxes, and fifty percent (50%) of reasonable and customary Team and Related Party expenses related thereto, subject to the provisions of Section 1(a)(6) below, from the sale of naming rights with respect to practice facilities used by NBA Teams, including, without limitation, such proceeds received or to be received by a Related Party (in accordance with Section 1(a)(7)(i) below);
  12. If the right to receive revenues included in BRI is sold or transferred to an entity other than an entity referred to in Section 1(a)(1) above (such that those revenues would not be included in BRI pursuant to that subsection), then BRI shall be deemed to include the amount of revenues that would have been received by the seller or transferor and would have been included in BRI in such Salary Cap Year (subject to any applicable allocations provided for above), absent such sale or transfer, provided that a pledge, hypothecation, collateral assignment or other similar transaction involving such revenues, shall not be considered a sale or transfer within the meaning of this Section 1(a)(1)(xii). The NBA will work in good faith to secure access to appropriate third-party books and records in the event the parties agree, or it is determined by an arbitrator, that a sale/transfer of BRI has occurred or been agreed to in accordance with this Section 1(a)(1)(xii). In any dispute over the value of BRI sold/transferred, subject to an arbitrator’s determinations of admissibility and relevance, neither party shall be barred from seeking to rely on the terms of the underlying transaction;
  13. All proceeds, net of Taxes, less reasonable and customary expenses (which expenses shall be subject to New Venture treatment, if applicable, under Section 1(a)(6)(iii) below), subject to the provisions of Section 1(a)(6) below, from gambling on NBA games or any aspect of NBA games, subject to appropriate treatment of categories of excluded revenues or other amounts, if applicable, under Section 1(a)(2) below and allocations for multi-element deals. BRI shall exclude revenues from gambling on NBA games or any aspect of NBA games generated by casinos or other gambling businesses, owned or operated by a Team, Related Party, or a League-related entity, whose total revenues are not predominantly from gambling on NBA games or any aspect of NBA games;
  14. All proceeds, net of Taxes and reasonable and customary expenses related thereto, subject to Section 1(a)(6) below, from a Team’s championship parade, provided, however, that in no event shall such expenses cause the amount included in BRI relating to the championship parade to be less than zero (0) for any Salary Cap Year;
  15. Fifty percent (50%) of the gross proceeds, net of fifty percent (50%) of reasonable and customary expenses (including Taxes) related thereto, subject to Section 1(a)(6) below, from (A) tours of the Team’s home arena, and (B) fees from ATMs in the Team’s home arena;
  16. Player income or “privilege” tax payments to Teams or Related Parties, provided that such payments will continue to be excluded from BRI for any Team or Related Party that received such payments in the 2015-16 Salary Cap Year (e.g., Memphis, New Orleans);
  17. Consistent with the parties’ practice under the 2017 CBA, payments from the NBA to Teams for participation in international Regular Season games will be included in miscellaneous BRI at the Team level, with the NBA recording its expenses (including such payments to Teams) at the League level in Special Events;
  18. Licensing revenues from League and Team licensed products that are not co-licensed by current or retired players, net of applicable sales or similar taxes (e.g., VAT, HST), and all reasonable and customary expenses related thereto (“Net Licensing Revenues”), for an amount equal to, for each Salary Cap Year, the lesser of: (A) Net Licensing Revenues in such Salary Cap Year, or (B) the Incremental Content Expenses for such Salary Cap Year (as defined below). For purposes of this Article VII, Section 1, Incremental Content Expenses means, for each Salary Cap Year, an amount determined by the following calculation: (1) total deductible Team Content Expenses for that Salary Cap Year, less (2) an amount equal to the total deductible Team Content Expenses for the 2021-22 Salary Cap Year (i.e., $78,862,052), growing at a rate of three percent (3%) per Salary Cap Year, compounded.
  For example, if Net Licensing Revenues for the 2025-26 Salary Cap Year were $180 million, and total deductible Team Content Expenses for such Salary Cap Year were $250 million, then the amount included in BRI in respect of Net Licensing Revenues would be $161.24 million, which is the lesser of: (a) $180 million, and (b) $161.24 million (i.e., $250 million minus $88.76 million (i.e., $78,862,052 growing at three percent (3%) per Salary Cap Year for four (4) Salary Cap Years)).
  
  Net Licensing Revenues shall not include value, if any, from contractual provisions (including, but not limited to, those previously identified by the Players Association in connection with prior BRI audits) that (x) require NBA or Team licensing partners to utilize the licensing rights purchased from the NBA and/or Teams in licensing deals, or (y) impose on NBA and/or Team licensing partners marketing or promotional obligations;
  1. Twenty-five percent (25%) of the gross proceeds, net of twenty-five percent (25%) of Taxes, and twenty-five (25%) of reasonable and customary Team and Related Party expenses related thereto, subject to the provisions of Section 1(a)(6) below, from arena plaza naming rights agreements with respect to 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 by a Related Party (in accordance with Section 1(a)(7)(i) below); and
  2. The specified value (included as barter) of data received pursuant to a contract to the extent that a data clause is specifically valued within the contract terms, net of reasonable and customary expenses (including Taxes) related thereto, subject to Section 1(a)(6) below, including, without limitation, such specified value received or to be received by a Related Party (in accordance with Section 1(a)(7)(i)).
2. Notwithstanding anything to the contrary in Section 1(a)(1) above, it is understood that the following is a non-exclusive list of examples of revenues that are or may be received by the NBA, Properties, Media Ventures, other League-related entities, NBA Teams and Related Parties (the foregoing persons or entities, beginning with “NBA,” collectively referred to in this Section 1(a)(2) only as “NBA-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:
  1. Proceeds from the assignment of Player Contracts;
  2. Proceeds (A) from the sale, transfer or other disposition of any of the assets or property (excluding ordinary course sales of inventory and the revenues (if any) deemed to be included in BRI pursuant to Section 1(a)(1)(xii) above) of, or ownership interests in, any NBA-related entity, or (B) from loans or other financing transactions;
  3. Proceeds from the grant of Expansion Teams and relocation fees paid by existing Teams to NBA-related entities;
  4. Dues;
  5. Capital contributions received by an NBA-related entity from one of its owners, shareholders, members or partners;
  6. Fines and compensation withheld in connection with suspensions;
  7. Revenue sharing (by means of revenue transfers or otherwise) among Teams;
  8. Interest income;
  9. Insurance recoveries, except where, and only to the extent that, such recoveries are in respect of lost revenues that would have otherwise been included in BRI, in which event such recoveries shall be included in BRI in the Salary Cap Year in which they are received;
  10. Proceeds from the sale or rental of real estate;
  11. Any thing of value received in connection with the design or construction of a new or renovated arena or other team facility including, but not limited to, receipt of title to or a leasehold interest in real property or improvements, reimbursement of project-related expenses, benefits from project-related infrastructure improvements, or tax abatements, unless (and only to the extent that) such value is being provided to the Team or a Related Party in lieu of payments that the Team or Related Party would have otherwise received pursuant to an arena lease or other instrument concerning a Team’s use of an arena (“lease”) and would have constituted BRI if paid to the Team or a Related Party; provided, however, that the determination of the amount, if any, to be included in BRI with respect to the value of any of the foregoing shall be made either (A) in accordance with the provisions of Section 1(a)(4) below or (B) based upon direct evidence that the Team or Related Party, after proposing that it would receive certain revenues constituting arena-generated BRI, subsequently agreed specifically to forego such revenues in direct exchange for a thing of value (as described above in this Section 1(a)(2)(xi)) with the consequence that the arena-generated BRI revenues received or to be received by the Team or Related Party were or would be (in the opinion of the Accountants) less than the fair market value of arena-generated BRI revenues received or to be received by other NBA Teams in similar transactions, or (C) based upon direct evidence that the parties to the transaction had agreed that certain revenues constituting arena-generated BRI would be paid to the Team or Related Party and that such revenues were subsequently foregone by the Team or the Related Party in direct exchange for a thing of value (as described above in this Section 1(a)(2)(xi)); and provided further that, when a determination is made pursuant to clause (B) or clause (C) of this Section 1(a)(2)(xi), the amount(s), if any, to be included in BRI shall be allocated (with an appropriate interest adjustment to reflect the time value of money where the thing of value received by the Team or Related Party is in the form of cash or a cash equivalent, such as a check or wire transfer) over the Salary Cap Years in which the arena-generated BRI revenues foregone would have been received by the Team or Related Party (up to a maximum of twenty (20) Salary Cap Years) and not on a lump-sum basis;
  12. Any thing of value that induces or is intended to induce a Team either to relocate to or remain in a particular geographic location (whether or not provided in connection with a new or renegotiated arena lease), unless (and only to the extent that) such value is being provided to the Team or a Related Party in lieu of payments that the Team or Related Party would have otherwise received pursuant to an arena lease and that would have constituted BRI had they been paid to the Team or a Related Party; provided, however, that the determination of the amount, if any, to be included in BRI shall be made either (A) in accordance with the provisions of Section 1(a)(4) below or (B) based upon direct evidence that the parties to the transaction had agreed that certain revenues constituting arena-generated BRI would be foregone by the Team or Related Party, in direct exchange for a thing of value as described above in this Section 1(a)(2)(xii), and provided, further that, when a determination is made pursuant to clause (B) of this Section 1(a)(2)(xii), the amount(s), if any, to be included in BRI shall be allocated (with an appropriate interest adjustment to reflect the time value of money where the thing of value received by the Team or Related Party is in the form of cash or a cash equivalent, such as a check or wire transfer) over the Salary Cap Years in which the arena-generated BRI revenues foregone would have been received by the Team or Related Party (up to a maximum of fifteen (15) Salary Cap Years) and not on a lump-sum basis. With respect to transactions involving payments asserted to fall within the exclusion in this Section 1(a)(2)(xii), the NBA will provide the Players Association with the executed memoranda of understanding, term sheet, or other such executed summary of terms, if any, for such underlying transactions;
  13. Payments made to Teams or to the NBA pursuant to the provisions of Article VII, Section 12 (Designated Share Arrangement) below;
  14. Distributions, dividends or royalties paid by any NBA-related entity to owners, shareholders, members or partners;
  15. Any category or source of revenue or proceeds that was expressly identified in any BRI Report (as defined in Section 10(b) below) or in any document or written communication (including debriefing memos) authored by the Accountants and provided to the Players Association and the NBA (but excluding any underlying work papers) in connection with the Audit Reports for any of the 1995-96 through 2021-22 Salary Cap Years that was not included in BRI for such Salary Cap Years, unless such category or source was included on the “open issues” list prepared by the Accountants in connection with any of the Audit Reports for the 2005-06 through 2021-22 Salary Cap Years, in which case such category or source shall be included in or excluded from BRI, as the case may be, in accordance with the other terms of this Article;
  16. Proceeds received by (A) Properties (and its related entities) that were treated or, consistent with past practice, would have been treated as within the scope of the Agreement between NBA Properties, Inc., and the National Basketball Players Association, dated as of September 18, 1995, as amended January 20, 1999, July 29, 2005 and December 8, 2011 (the “2011 Group License Agreement”) (including, but not limited to, proceeds received pursuant to the license of “fantasy games,” which proceeds would have been included in the computation of Player Merchandise Revenues in accordance with the 2011 Group License Agreement), or (B) a League-related entity relating to the following categories defined in the same manner as was used in the audited League Entities’ Combined Financial Statements for the year ended September 30, 2021: (1) licensing, other than Net Licensing Revenues to the extent included in BRI pursuant to Section 1(a)(1)(xviii), above; and/or (2) a League-related entity’s representation of, and services performed for, 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 a majority interest in or otherwise control an NBA Team or, if such third party is a Related Party, proceeds received by the League-related entity shall not be included in BRI if representation of such Related Party does not relate either to such entity’s NBA ownership or NBA Players;
  17. Monies collected from Team-related fundraising for charitable purposes or other charitable activities (including Team-organized “50/50 raffles”), other than monies paid pursuant to Team sponsorship agreements that are included in BRI pursuant to Section 1(a)(1)(v) above;
  18. Proceeds solely related to the NBA 2K League, NBAGL and other leagues, teams and basketball organizations (e.g., an international league) that do not involve the playing of basketball by any then-current NBA players;
  19. Proceeds from the leasing or use of any Team physical assets (e.g., a Team plane);
  20. Any thing of value received from a concessionaire, food service vendor or other third party equipment or service provider that, if received in kind, is installed in an NBA arena or, if received in cash, is directed to defraying the costs of the construction or substantial renovation of an NBA arena;
  21. Proceeds from businesses outside the arena (e.g., restaurants, casinos, hotels, retail businesses, etc.), except for revenues otherwise included in BRI for Team-identified stores. For clarity, the foregoing exclusion will not apply to revenues from the business operations of the NBA basketball team that are otherwise includable as BRI under other provisions of this Agreement, including, without limitation, revenues received from sales of Team game tickets, media rights, sponsorships, signage outside the arena (subject to the limitations set forth in Section 1(a)(1)(vi) above), and arena plaza game-day sales of novelties and concessions (subject to the limitations set forth in Section 1(a)(1)(v) above);
  22. Without limitation to any other basis for non-inclusion in BRI, BRI shall not include the value, if any, of (A) goods or services that are operationally necessary to the performance of a contract, including, without limitation, certain ticketing platforms and tools (e.g., Pricemaster, Presence, Open Distribution, Archtics, Ticketmaster Marketplace,Ticketmaster Account Manager), (B) product discounts, or (C) waived fees;
  23. Value, if any, attributable to data received by an NBA-related entity (or the right to receive such data), whether or not the provision of such data is pursuant to a contractual obligation, other than amounts that are included in BRI pursuant to Section 1(a)(1)(xx) above; and
  24. Value, if any, from contractual provisions (including but not limited to those previously identified by the Players Association in connection with prior BRI audits) that require NBA or Team marketing partners to utilize the marketing rights purchased from an NBA-related entity in sponsorship deals.
3. The parties agree that (i) in determining whether a category or source of revenue or proceeds constitutes BRI: (A) consideration shall be given to whether such category or source is more similar in kind or nature to the included categories and sources listed in Section 1(a)(1)(i) through (xx) above, on the one hand, or to the excluded categories and sources listed in Section 1(a)(2)(i) through (xxiv) above, on the other; and (B) no inference may be drawn from the fact that such category or source was not included in the categories and sources listed in Section 1(a)(1)(i) through (xx) above, or the fact that such category or source was not included in the categories and sources listed in Section 1(a)(2)(i) through (xxiv) above; and (ii) in any proceeding involving a dispute over (A) the includability or categorization of any revenue or expense item for BRI purposes; (B) the amount to be included in or deducted from BRI with respect to any revenue or expense item; or (C) the accounting methodology used by the Accountants in connection with any audit of BRI, the parties may refer to the past practice of the parties or the Accountants in connection with the Audit Reports for any of the 1999-2000 through 2021-22 Salary Cap Years; provided, however, that no reference may be made to the past practice of the parties or the Accountants with respect to any source or category of revenue or expense that was included on the “open issues” list prepared by the Accountants in connection with any of such Audit Reports; provided, further, that any such past practice shall be superseded to the extent changed or clarified by the terms of this Agreement. In addition, no reference may be made, with respect to expenses related to the NBA’s non-international business, to the fact that such category of expenses falls within Section 1(a)(14) below, to argue for the inclusion or exclusion of expenses related to the League’s non-international business.
4. The parties agree that, with respect to any lease entered into after the date of this Agreement between a Team (or a Related Party) and an arena that is not a Related Party, the Accountants may attribute to the Team (or a Related Party) for purposes of computing BRI for a Salary Cap Year portions of arena revenues received by the arena or its related entities that would be included in BRI if received by the Team (or a Related Party) to the following extent: in the event of a renewal, extension or renegotiation of a lease between the same parties, or a new lease entered into by a Team (or a Related Party) with an arena that is not a Related Party, the Team will be deemed to receive in the first Salary Cap Year covered by the new lease or by the renewal, extension or renegotiation of the existing lease (as the case may be) the greater of (i) the amount of such revenues that the Team or the Related Party in fact receives under the lease or, (ii) if in the opinion of the Accountants, the Team (and/or the Related Party) is receiving substantially less than fair market value as determined by the Accountants (taking into account factors such as the rent paid by the Team or the Related Party, the number and identity of other major tenants in the arena, market conditions, the extent to which arena revenues are used to fund construction or renovations of the arena, and comparable lease arrangements in the NBA), an amount determined by the Accountants to constitute the fair market value of the revenues that a tenant, in the same circumstances as the Team or Related Party, would receive for such Salary Cap Year. In either of the preceding cases, the Accountants will also determine the amount to be included in BRI for Salary Cap Years beyond the first Salary Cap Year.
5. 1. In no event shall the same revenues be included in BRI, directly or indirectly, more than once (including as a result of changes in accounting methods or practices), the purpose of this provision being to preclude the double-counting of revenues, whether in the same or in multiple Salary Cap Years.
  2. In no event shall the same expenses be deducted from BRI, directly or indirectly, more than once (including as a result of changes in accounting methods or practices), the purpose of this provision being to preclude the double-counting of expenses, whether in the same or in multiple Salary Cap Years.
6. Subject to Section 11 below (Players Association Audit Rights):
  1. With respect to expenses incurred in connection with all proceeds coming within Section 1(a)(1)(v) above, all reported expenses shall be conclusively presumed to be reasonable and customary, and such expenses shall not be the subject of the accounting procedures set forth in Section 10 below.
  2. With respect to expenses incurred in connection with all proceeds coming within Section 1(a)(1)(ix) above that are consistent with the types and categories of expenses incurred by Properties as reflected in the audited financial reports of Properties for the year ended July 31, 1994, (1) all such reported expenses shall be conclusively presumed to be reasonable and customary, and such expenses shall not be the subject of the accounting procedures set forth in Section 10 below, but (2) such expenses shall be disallowed to the extent they exceed the ratio of expenses to revenues for the category of revenues set forth in Exhibit D hereto.
  3. With respect to the NBA Store (the “Store”) and any other new venture or business (whether or not involving the creation of a new entity) undertaken by the NBA, Properties, Media Ventures, or any other League-related entity requiring significant capital investment or start-up costs (“New Venture”), the League-related entities shall be able to deduct from BRI reasonable and customary expenses related thereto, including, but not limited to, cost of goods sold, sales tax, all reasonable operating expenses of the Store or New Venture (including, but not limited to, salaries and benefits directly related to the operations of the Store or New Venture, promotional and advertising costs, rent, direct overhead, general and administrative expenses of the Store or New Venture), reasonable financing costs and amortization of capital improvements and start-up costs; provided, however, that in no event shall the expenses attributable to the Store or New Venture cause the amount included in BRI for the Store or New Venture to be less than zero (0) for any Salary Cap Year.
  4. With respect to miscellaneous BRI or new categories of BRI (other than revenues attributable to the Store or a New Venture), the NBA, Properties, Media Ventures, other League-related entities, Teams and Related Parties shall be able to deduct all reasonable and customary expenses (including reasonable and customary Taxes), including, for example, in connection with All-Star Weekend, subject to the terms of this Section 1(a)(6).
  5. In each Salary Cap Year, except for (A) Team Content Revenues and Team Content Expenses (as defined below) and (B) Playoff-Related Revenues and Expenses (as defined below), all Team and Related Party revenues included in, and all Team and Related Party expenses deducted from, BRI are subject to an aggregate uniform percentage-of-revenues expense cap of eleven and one-tenth percent (11.1%) (see also Exhibit D hereto), with any such expenses disallowed to the extent they exceed that cap. For the avoidance of doubt, for the 2021-22 Salary Cap Year, the total Team and Related Party revenues and expenses that would have been subject to the new eleven and one-tenth percent (11.1%) expense cap were the amounts identified in the parties’ letter agreement, dated June 28, 2023. For the purposes of this Article VII, Section 1, (1) “Team Content Revenues” and “Team Content Expenses” mean, respectively, revenues and related expenses from local TV, cable, and Team direct-to-consumer media and (2) “Playoff-Related Revenues and Expenses” means the revenues and expenses reported in the “playoff gate receipts, net” amount shown in the Audit Report for the 2015-16 Salary Cap Year. Team Content Revenues, Team Content Expenses, and Playoff-Related Revenues and Expenses are not subject to the above uniform expense cap. Team Content Expenses will be deductible and uncapped, and will include, without limitation those expenses identified in the parties’ letter agreement, dated June 28, 2023. Playoff-related expenses will continue to be deductible in accordance with the terms of the 2011 CBA as reflected in the Audit Report for the 2015-16 Salary Cap Year. For the avoidance of doubt, Taxes will be deducted from revenues included in BRI under Sections 1(a)(1)(i), (iii), (vi), (vii), (viii), (x), (xi), (xiii), (xiv), (xviii), and (xix) (to the extent set forth in those subsections) before the application of the eleven and one-tenth percent (11.1%) ratio in calculating the uniform expense cap, and before the deduction of expenses.
  6. To the extent that, for a Salary Cap Year, total Team Content Expenses and League Content Expenses (inclusive of NBAE and ITV expenses after application of caps) exceeds the product of Team Content Revenues and League Content Revenues (inclusive of NBAE and ITV revenues) multiplied by the Rollover Ratio (as defined below), that excess would be amortized over such Salary Cap Year and the next two Salary Cap Years. The “Rollover Ratio” shall be eighteen and one-half percent (18.5%), except that, beginning in the 2026-27 Salary Cap Year, the Rollover Ratio shall be the higher of (A) eighteen and one-half percent (18.5%) or (B) the highest actual ratio of Team Content Expenses and League Content Expenses to Team Content Revenues and League Content Revenues in any of the preceding Salary Cap Years under the CBA. Any amortized amount would be excluded from each Salary Cap Year’s rollover threshold calculation. An imputed interest rate equal to the 1-month Secured Overnight Financing Rate plus 1.225% (calculated as of the July 1 of the Salary Cap Year during which such interest accrues) will be applied on amortized amounts and recouped in each Salary Cap Year in which amounts are amortized. For the purposes of this Article VII, Section 1, “League Content Revenues” and “League Content Expenses” mean, respectively, revenues and expenses related to all NBA and League-related content categories of BRI, including Digital, International League Pass (DBS), NBAE, ITV, Media Ventures, Radio, and National TV. For the avoidance of doubt, League Content Expenses will remain deductible and, with the exception of NBAE and ITV, uncapped.
  For example, if, in the 2025-26 Salary Cap Year, the sum of Team Content Revenues and League Content Revenues were $5 billion, and the sum of Team Content Expenses and League Content Expenses (after application of caps on NBAE and ITV expenses) were $1 billion, and the imputed interest rate calculated pursuant to this Section 1(a)(6)(vi) were four percent (4%), then the amortized amount would be $75 million (i.e., $1 billion – $925 million (i.e., 18.5% of $5 billion)). $25 million of the amortized amount would be deducted from BRI in the 2025-26 Salary Cap Year. In the 2026-27 Salary Cap Year, the amortized amount to be deducted from BRI in respect of the 2025-26 Salary Cap Year would be $26 million (i.e., $25 million, grown at four percent (4%) interest per Salary Cap Year for one Salary Cap Year). In the 2027-28 Salary Cap Year, the amortized amount to be deducted from BRI in respect of the 2025-26 Salary Cap Year would be $27.04 million (i.e., $25 million, grown at four percent (4%) interest per Salary Cap Year for two Salary Cap Years).
7. 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 control, or own at least fifty percent (50%) of, the NBA Team or that are controlled or owned at least fifty percent (50%) by the persons or entities controlling or owning at least fifty percent (50%) of the NBA Team (such third parties are referred to in this Agreement as a “Related Party”), and Related Parties themselves engage in transactions with third parties that may result in a Related Party’s receipt of revenues that constitute BRI. (Any entity that was an “entity related to an NBA team” as defined by Article VII, Section 1(a)(4)(i) of the September 18, 1995 Collective Bargaining Agreement between the NBA and the Players Association (the “1995 CBA”) shall be deemed a Related Party under this Agreement for so long as such entity continues to be an entity related to an NBA Team within the meaning of the 1995 CBA.) As provided in Section 1(a)(1) above, the relevant proceeds received by any Related Party that come within such subsection and that relate to such Related Party’s Team shall be included in BRI. However, except in connection with telecast agreements (which are subject to Section 1(a)(7)(ii) below), with respect to any such revenues or proceeds retained or received by a Related Party (other than arena revenues that relate to such Related Party’s Team including, but not limited to, in-arena sales of novelties and concessions, NBA game parking, arena club revenues, suite and seat revenues and fixed and temporary in-arena signage, which shall be included in BRI as if received by the Team), or by a Team pursuant to a transaction with a Related Party, such revenues or proceeds shall be included in BRI only to the extent that the NBA and the Players Association agree or, if they fail to agree, the Accountants shall reasonably determine the amount, if any, of such revenues or proceeds to attribute to the Team (taking into account factors such as the nature of the transaction, arrangement and/or relationship between the Team and the Related Party or between the Related Party and a third party, any amounts included in BRI with respect to other Teams (or Related Parties) that have entered into comparable transactions, arrangements and/or relationships with third parties, market conditions, the nature of any services or activities performed by the Related Party for, or in connection with, the generation of revenues or proceeds and the amount of revenues or proceeds that the Related Party would be expected to retain or receive with respect to comparable transactions, arrangements and/or relationships with third parties), and the amount so attributed shall be the only amount included in BRI. To the extent that the amount of such proceeds to be included in BRI cannot reasonably be determined with respect to any particular transaction, the Accountants shall determine a reasonable amount with respect to such transaction, which shall be included in BRI. (In the event the Accountants refuse to make any such determination, such determination shall be made by a jointly selected expert with respect to any such transaction.) Without limiting the foregoing, in no event shall BRI include consideration paid to a Related Party in connection with rights acquired by such Related Party from a Team for fair market value, even if such consideration relates to NBA games or NBA-related activities (including, by way of example and not limitation, advertising revenue or subscriber fees earned by a Related Party television network that relate, directly or indirectly, to the telecast of NBA games licensed to the television network by a Team).
  2. In the event that, following the execution of this Agreement, a Team (other than the New York Knicks (“Knicks”)) enters into a local or regional telecast agreement with a Related Party, a copy of such agreement shall be provided to the Players Association within ten (10) days of approval of such agreement by the NBA. The Players Association and the NBA shall each have the right, not later than ten (10) days following the date on which the Players Association receives a copy of such agreement, to submit such agreement to a jointly-selected television valuation expert or (in the absence of such agreement) determined in accordance with the procedure set forth in this subsection (“TV Expert”) for the limited purpose set forth in this Section 1(a)(7)(ii). In the event that a party has so elected to submit such agreement to a TV Expert and the parties have not jointly selected a TV Expert within twenty (20) days following the date on which the Players Association receives a copy of such agreement, each party shall appoint its own television valuation designee and the two designees so appointed shall within ten (10) days of their appointment, jointly select a third party to serve as the TV Expert. Such TV Expert shall review such agreement to determine if the aggregate amount to be paid to the Team by the Related Party for the rights to telecast the Team’s games pursuant to such agreement is more than fifteen percent (15%) above or more than fifteen percent (15%) below the fair market value of such rights over the term of such agreement. In making such determination, the TV Expert may take into account factors such as the nature of the transaction, arrangement and/or relationship between the Team and the Related Party, any amounts included in BRI with respect to other Teams (or Related Parties) that have entered into comparable transactions, arrangements and/or relationships with other programming licensors, market conditions, the nature of any services or activities performed by the Related Party for, or in connection with, the generation of revenues or proceeds and the amount of revenues or proceeds that the Related Party would be expected to retain or receive with respect to comparable transactions, arrangements and/or relationships with third parties; provided that in no event shall BRI include consideration paid to a Related Party in connection with rights acquired by such Related Party from a Team for fair market value, even if such consideration relates to NBA games or NBA-related activities (including, by way of example and not limitation, advertising revenue or subscriber fees earned by a Related Party television network that relate, directly or indirectly, to the telecast of NBA games licensed to the television network by a Team). In the event that the TV Expert determines that such aggregate amount is more than fifteen percent (15%) above or below fair market value, the TV Expert shall be instructed to submit to the parties the amount for each Season of such agreement that he determines reflects the fair market value of such rights and such amounts, and no other amounts, shall be included in BRI with respect to such agreement for each Salary Cap Year covered by such agreement. Any determination made by the TV Expert pursuant to either of the preceding two sentences shall be submitted to the parties no later than twenty (20) days from the date on which such agreement was submitted to the TV Expert for his review. Any fees or costs associated with the retention or determination of the TV Expert shall be borne equally by the Players Association and NBA. The Players Association and the TV Expert shall maintain the confidentiality of any such agreement (and any determination made by the TV expert in accordance with this Section 1(a)(7)(ii)) pursuant to the terms of Section 11(c) below relating to the confidentiality of BRI Audits.
  3. With respect to the transactions listed below in this Section 1(a)(7)(iii), 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 MSG Network is a Related Party of the Knicks (in the case of Section 1(a)(7)(iii)(A) below) and the Madison Square Garden arena is a Related Party of the Knicks (in the case of Section 1(a)(7)(iii)(B) below):
    1. New York Knicks transaction with MSG Network regarding the sale of local media rights: BRI for the Knicks for each NBA Season covered by this Agreement 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) for such NBA season.
    2. New York Knicks transactions with Related Parties involving signage: BRI for the Knicks for the 2021-22 NBA Season shall include $16,560,026 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 percentage increase (or decrease) in signage as determined in accordance with Sections 1(a)(1)(v) and (a)(1)(vi) above.
    At such time as the MSG Network and/or the Madison Square Garden Arena are no longer Related Parties, BRI for the New York Knicks in the categories described in Section 1(a)(7)(iii)(A) and/or (B) above, as the case may be, shall not be determined in accordance with the foregoing and will instead be determined by the applicable provisions of Sections 1(a)(1) and (a)(7)(ii) above.
8. In the event that, pursuant to the NBA’s national broadcast, national telecast and network cable television agreements, NBA Teams receive revenue sharing proceeds that are attributable to NBA game telecasts in more than one Salary Cap Year, such proceeds shall be allocated over the same number of Salary Cap Years (beginning with first Salary Cap Year after the Salary Cap Year in which such proceeds are actually received) as the number of Salary Cap Years in which such games were televised. Any other contingent payments received by the NBA pursuant to such agreements shall be included in BRI to the extent and in a manner agreed upon by the parties, or, if the parties cannot agree, in a reasonable manner determined by the Accountants.
9. The NBA and each NBA Team shall in good faith act and use their commercially reasonable efforts to increase BRI for each Salary Cap Year during the term of this Agreement. In the exercise of such commercially reasonable efforts, the NBA and each NBA Team shall be entitled to act in a manner consistent with their reasonable business judgment and shall not (i) take any action intended to benefit, at the expense of BRI, other commercial activities (such as the WNBA and the NBAGL) unrelated to the performance of Players in NBA basketball games or in NBA-related activities, or (ii) shift or forgo revenues attributable to Salary Cap Years during the term of this Agreement in exchange for revenues or benefits during Salary Cap Years following the expiration of this Agreement (unless there is a reasonable business justification unrelated to collective bargaining for such shift or forgoing). There shall be no obligation on the part of the NBA or any NBA Team to accelerate into Salary Cap Years within the term of this Agreement revenues attributable to Salary Cap Years following the expiration of this Agreement. In evaluating compliance with this subsection, the parties and the System Arbitrator shall consider and give substantial weight to the reasonable business judgment of the NBA or the NBA Team but no deference will be applied where the NBA is alleged to have shifted or forgone revenues of $350 million or more for the purpose of securing leverage in collective bargaining, in which case any finding of non-compliance shall require proof by a clear preponderance of the evidence. The following is a list of decisions in respect of which the business judgment of the NBA or an NBA Team shall conclusively be deemed reasonable: membership location; arena capacity or configuration; number and location of games played; whether to outsource or operate a line of business; and whether to accept or decline a sponsorship, advertising or naming rights opportunity. The foregoing list shall not limit in any manner the circumstances in which the business judgment of the NBA or an NBA Team may be deemed reasonable.
10. The parties agree that upon a finding by the System Arbitrator (which, if appealed, is affirmed by the Appeals Panel) that the NBA or an NBA Team (or a Related Party) has willfully failed to provide to the Accountants information concerning revenues or expenses material to the Accountants’ preparation of an Audit Report, and that such failure to provide information resulted in an understatement of BRI of more than $5,511,614 with respect to the 2023-24 Salary Cap Year (increasing by four and one-half percent (4.5%) for each subsequent Salary Cap Year of this Agreement, beginning with the 2024-25 Salary Cap Year), then the amount by which BRI was understated shall be included in BRI in the Salary Cap Year in which such finding is made, with interest accruing from the date of the Audit Report for the Salary Cap Year in which such amount would have been included but for such understatement, with interest (at a rate equal to the one (1) year Treasury Bill rate as published in The Wall Street Journal on the date of the issuance of such Audit Report). In addition, if any Team, or if the NBA, violates the foregoing, it shall be fined $3 million for its first violation during the term of this Agreement and an additional $1.5 million for each additional violation. (For example, if a Team violates the foregoing for the first time, it shall be fined $3 million; if such Team violates the foregoing a second time, it shall be fined $4.5 million; and if such Team violates the foregoing a third time, it shall be fined $6 million.) Fifty percent (50%) of any such fine amounts shall be remitted by the NBA to an NBPA-Selected Charitable Organization (as defined in Article VI, Section 6 above) and fifty percent (50%) shall be remitted by the NBA to a Section 501(c)(3) Organization selected by the NBA.
11. Neither the NBA or a League-related entity nor a Team or a Related Party will enter into any lease or other agreement providing for the receipt of revenues includable in BRI that contains provisions that purport to limit access of the Accountants to the books and records of the NBA, such League-related entity, such Team, or such Related Party in a manner inconsistent with the terms of this Agreement or that would preclude the calculation of revenues (if any) to be included in BRI pursuant to the provisions of Section 1(a)(1)(xii) above.
12. Premium payments made by a Team for any insurance that, if paid, would be includable in BRI pursuant to Section 1(a)(2)(ix) above, shall be deducted from such Team’s BRI for the Salary Cap Year in which any such insurance recovery is received.
13. Equity Transactions.
  1. The value of equity securities received by NBA-related entities (as defined in Section 1(a)(2) above) in entities that were not NBA-related entities prior to such receipt, to the extent otherwise constituting BRI under this Agreement, shall be included in BRI as follows:
    1. if the equity securities (including contingent securities, as defined below) are Publicly Tradable when received, the Publicly Traded Value of those securities will be included in BRI commencing in the Salary Cap Year in which they are received;
    2. if the equity securities consist of options, warrants, convertible securities or similar securities (“contingent securities”), and (x) those contingent securities are sold, the Net Proceeds will be included in BRI commencing in the Salary Cap Year in which the sale occurs, or (y) those contingent securities are exercised or converted into other securities that are or become Publicly Tradable, the Publicly Traded Value of the resulting securities (net of any exercise or conversion price and taxes, as determined below) will be included in BRI commencing in the Salary Cap Year in which the exercise or conversion occurs (if the resulting securities were Publicly Tradable at that time) or in the Salary Cap Year in which the resulting securities later become Publicly Tradable, whichever is first;
    3. if the equity securities (including contingent securities and any securities resulting from the exercise or conversion of contingent securities) are not Publicly Tradable at the time of receipt (or, in the case of contingent securities, at the time of exercise or conversion), no BRI value shall be attributable to such securities until (x) they become Publicly Tradable or are sold or otherwise transferred for consideration other than securities that are not Publicly Tradable, whichever is first, at which time the Publicly Traded Value or Net Proceeds, as applicable, will be included in BRI commencing in the Salary Cap Year in which such event occurs or (y) they are specifically pledged and valued as part of a transaction that provides liquidity without selling the equity position, even if other assets are also pledged as a part of such transaction, in which case BRI will include an amount equal to the specific value assigned to the equity securities (“Specifically Assigned Value”) commencing in the Salary Cap Year in which they are specifically pledged and valued; or
    4. notwithstanding the foregoing, if any contingent securities are exercisable or convertible into securities that are or become Publicly Tradable, but those contingent securities are not exercised or converted within one (1) year of any such right, the Players Association shall have the right, by written notice to the NBA, to have the Publicly Traded Value of such securities included in BRI as if those contingent securities had been exercised or converted on the date of such notice (net of any exercise or conversion price and taxes, as determined below).
  2. For purposes of this Section 1(a)(13), (A) “Publicly Tradable” means (x) the applicable equity securities have been registered for sale under applicable state, federal and foreign laws, are listed and tradable on a generally recognized stock exchange or in the over-the-counter market, or (y) the applicable equity securities can be readily purchased and sold on a nationally recognized secondary market (e.g., without limitation on any example, shares in “Facebook” as of the date of the 2011 CBA), and in each case under (x) and (y), any contractual or other prohibition or limitation on sale would not preclude a sale; (B) “Publicly Traded Value” means the weighted average daily trading price of the applicable equity securities for the thirty (30) trading days (x) preceding the date of receipt if the securities are Publicly Tradable prior to that date or (y) following the date they become Publicly Tradable; provided that if such equity securities are sold during the Salary Cap Year in which their Publicly Traded Value is first included in BRI, the “Publicly Traded Value” of such equity securities shall be the Net Proceeds from such sale; (C) “Net Proceeds” means the proceeds received by the selling entity from the applicable sale, net of commissions and reasonable expenses relating to such sale, any exercise or conversion price with respect to securities resulting from the exercise or conversion of contingent securities, and any applicable taxes of the selling entity (or if the selling entity is a pass-through entity for income tax purposes, such entity’s owners), which shall be determined using a tax rate equivalent to the highest marginal combined federal, state and local tax rate that would be applicable in the locale where the principal place of business of the selling entity is located, which in the case of a Team or a Related Party of a Team shall be deemed to be the locale of the arena in which the Team plays more than one-half of its Regular Season home games; and (D) a sale of equity securities shall not be subject to inclusion in BRI if the sale is part of a larger transaction in which (x) BRI has been fully accounted for or (y) all or substantially all of the assets of an NBA-related entity or business unit thereof are sold and such equity securities do not represent a majority of the value in such transaction. In all cases, the Publicly Traded Value of, Net Proceeds from, or Specifically Assigned Value of the applicable equity securities will be included in BRI over a five (5) year amortization period (inclusive of the Salary Cap Year in which such Publicly Traded or Specifically Assigned Value is first included in BRI), even if such equity securities are sold during such five (5) year period.
  3. For the avoidance of doubt, (A) in no event shall the value of, or proceeds or distributions from, equity securities in NBA-related entities be included in BRI, and (B) the value of, or proceeds or distributions from, equity securities in non-NBA-related entities shall be included in BRI exclusively pursuant to this Section 1(a)(13), and only once under the applicable provision of Section 1(a)(13)(i) above.
14. International Development and Operations Expenses. The NBA and League-related entities may deduct from BRI expenses related to the development and operation of the League’s international business (“Newly-Deductible International Expenses”), subject to a limit of ten percent (10%) of the League’s gross BRI international revenues (the allowed amount of such expense following application of the ten percent (10%) cap being the “Allowed Newly-Deductible International Expenses”). Newly-Deductible International Expenses for any Salary Cap Year shall include all such international expenses incurred at the League level that are not otherwise deductible under this Agreement (excluding expenses in currently-deductible categories that are in excess of applicable percentage-of-revenue expense caps and the write-down of equity investments). For the purposes of this Agreement, the League’s gross BRI international revenue and Newly-Deductible International Expenses for the 2021-22 Salary Cap Year were the amounts set forth in the parties’ letter agreement dated June 28, 2023.
15. Miscellaneous BRI Accounting Rules.
  1. Team charter travel expenses for Regular Season games, associated with broadcast and other personnel for whom such travel expenses are otherwise deductible (for example, without limitation on any other example, Team personnel traveling in connection with the sale of Team sponsorships), shall be deductible at fifty percent (50%).
  2. BRI for premium seating, in respect of: (A) bunker, super, and party suites, (B) theatre boxes, loge boxes, and other such non-traditional premium seating inventory, and (C) traditional club seats, shall be calculated by using the parties’ previously-agreed upon methods, as reflected in the Audit Report for the 2015-16 Salary Cap Year.
  3. To the extent salary paid to a person who also owns an interest in the Team would otherwise be deductible from BRI, such salary shall only be deductible for BRI purposes only if all of the following criteria are met and if the expense otherwise qualifies for such deduction (for example, without limitation, the salary is related to the BRI against which it is deducted): (A) the owner owns less than seven and one-half percent (7.5%) of the Team; (B) the job being performed by the owner would otherwise be performed by a non-owner staff member; (C) the job being performed by the owner is his/her full time job and he/she has no other roles with outside companies (with the exception of limited duty Board roles); (D) the salary being earned is reasonable and customary, relative to what a non-owner staff member would earn, for the services being provided; and (E) there are no other individuals performing substantially the same role employed by the Team where the role is such that ordinarily there is only one person performing it (for example, without limitation, Team president).
  4. With respect to expenses associated with League-related entity advertising and public relations campaigns: (A) the expenses will be allocated to BRI and non-BRI revenue categories according to the methodology agreed to by the parties in connection with the final Audit Report for the 2015-16 Salary Cap Year, except that such expenses shall also be allocated to the NBA’s Regular Season gate assessment during the Salary Cap Year in addition to the other categories previously included in the allocation; and (B) the expenses shall be deducted from BRI, subject to Section 1(a)(6)(ii) above.
  5. Revenues and expenses related to the new In-Season Tournament (“IST”) shall be included in BRI as follows: (A) revenues and expenses from home-market Group Stage games and IST Quarterfinals games not played in a neutral market will be treated as if earned or incurred during a Regular Season game; (B) notwithstanding anything to the contrary in this Agreement, including, without limitation, Article XX, Section 4(c), for purposes of Article VII, Section 1(a), revenues and expenses from neutral-market games will be treated as league “Special Events,” subject to the 100% expense cap for Special Events, except that, during the 2023-24 and 2024-25 Salary Cap Years only, 50% of the expenses related to any neutral-market IST game (other than the IST Finals Game, and excluding any payments from the NBA to Teams described in the succeeding subpart) will be treated as Team expenses subject to Section (1)(a)(6)(v) above; and (C) payments from the NBA to Teams for participation in neutral-market IST games will be included in miscellaneous BRI at the Team level, with the NBA recording an expense relating to such payment at the League level in Special Events.
  6. Barter otherwise includable in BRI will not be excluded solely on the basis that the bartered-for goods or services were not used. For the avoidance of doubt, expenses associated with the receipt and use of bartered goods or services will be deductible from BRI subject to rules applicable to other expenses (e.g., that a barter expense is deductible only where it relates to a category that allows for deduction of expenses).
Accounting Methods/Lump Sum Payments.
1. Subject to Sections 1(b)(2) and (b)(3) below, and any provision hereof that expressly provides for an alternative accounting treatment, BRI for each Salary Cap Year shall be calculated exclusively pursuant to the accrual method of financial accounting (and not, for any purpose, the cash method of financial accounting) and in accordance with United States Generally Accepted Accounting Principles. By way of example, and not limitation, in the event a team receives a signing bonus in consideration for its agreement to enter into a five (5) year contract for the local telecast of its games, such signing bonus shall be amortized in equal annual amounts over the five (5) Salary Cap Years covered by such television contract.
2. Except as otherwise provided in the case of luxury suites and premium seat licenses, in no event shall the amortization period for any lump sum payment exceed seven (7) years.
3. Any payments that constitute BRI and that are subject to being repaid to the payor under certain circumstances (the “Contingencies”) shall constitute BRI in the Salary Cap Year in which such payments would have been earned but for the Contingencies unless, at the time of such payments, the Contingencies under which the payments would be repaid are likely to occur, in which case the payments will not be included in BRI unless and until such time as the Contingencies under which such repayments would be made do not occur or are not likely to occur. In the event that a payment that has been included in BRI is subsequently repaid, BRI shall be reduced by the amount of such repayment in the Salary Cap Year in which such repayment is made. In any proceeding commenced before the System Arbitrator relating to the terms of this Section 1(b)(3), the NBA will bear the burden of demonstrating that the applicable Contingencies are likely to occur.
4. With respect to lump sum payments (e.g., signing bonuses) that constitute BRI and are received by a Team or Related Party under agreements entered into by a Team or Related Party, for the period, if any, between (x) the date when the lump sum payment is received and (y) the beginning of the Salary Cap Year when the amortization period for the lump sum payment begins pursuant to Section 1(b)(1) above, BRI shall include in each applicable Salary Cap Year during this period imputed interest on the amount of such lump sum payment at a rate equal to the one (1) year Treasury Bill rate as published in The Wall Street Journal on the date the payment was received; provided, however, that such imputed interest shall only be calculated and included in BRI if each of the following is satisfied: (i) the lump sum payment received by the Team or Related Party is in the amount of one million dollars ($1,000,000) or more; (ii) the lump sum payment is received by the Team or Related Party at least twelve (12) months before the start of the Salary Cap Year in which it will first be included in BRI under Section 1(b)(1) above; and (iii) the lump sum payment is not related to a ticket, luxury suite or seat licensing transaction including, without limitation, revenues included in BRI under Sections 1(a)(1)(i), 1(a)(1)(vii), and 1(a)(1)(x) above.
5. Loan proceeds from contractual counterparties that would be included in BRI if received as payment (rather than a loan) will be included in BRI if there is no realistic expectation of repayment, subject to application of the lump sum amortization rules in this Section 1(b) and allocations for multi-element deals. If amounts in respect of such a loan are included in BRI, but the loan is subsequently repaid, BRI shall be reduced by the amount of such repayment in the Salary Cap Year in which such repayment is made.
“Projected BRI” for a Salary Cap Year means the amount determined as follows: Prior to the start of each Salary Cap Year, the NBA and the Players Association shall meet for the purpose of agreeing upon Projected BRI for that Salary Cap Year. In the absence of an agreement of the parties otherwise on or prior to the last day of the Moratorium Period of the applicable Salary Cap Year, Projected BRI for such Salary Cap Year shall be the sum of amounts determined in accordance with the following:
1. With respect to BRI sources other than national broadcast, national telecast or network cable television contracts, Projected BRI shall include BRI for the preceding Salary Cap Year, increased by four and one-half percent (4.5%). For purposes of this Section 1(c)(1), a contract between or among any League-related entities and/or Teams shall not be considered national broadcast, national telecast or network cable television contracts.
2. With respect to national broadcast, national telecast or network cable television contracts including the NBA/ABC agreement dated October 3, 2014 (“NBA/ABC Agreement”) (a copy of which has been provided to the Players Association) and the NBA/TBS agreement, dated October 3, 2014 (“NBA/TBS Agreement”) (a copy of which has been provided to the Players Association), and national broadcast, national telecast or network cable television contracts covering Seasons that succeed the Seasons covered by the NBA/ABC and NBA/TBS Agreements (“Successor Agreements”) (copies of which shall be provided to the Players Association within ten (10) days of execution), Projected BRI for a Salary Cap Year shall include (i) the rights fees or other non-contingent payments stated in such contracts with respect to the Season covered by such Salary Cap Year (as such rights fees or non-contingent payments may be adjusted by agreement of the parties to such contracts); (ii) the amounts of revenue sharing proceeds, if any, that are includable in BRI for such Salary Cap Year pursuant to Section 1(a)(8) above; (iii) the amounts with respect to contingent payments (other than revenue sharing proceeds), if any, attributable to Salary Cap Years covered by this Agreement in Successor Agreements as such amounts are agreed upon by the parties, or if the parties do not reach agreement, by the Accountants; and (iv) the amount included in BRI for the preceding Salary Cap Year with respect to the value of advertising or promotional time provided to the NBA as part of the NBA/ABC and NBA/TBS Agreements (or any Successor Agreements) that is used for any purpose other than those listed in Sections 1(a)(1)(ii)(A)-(D).
3. In no event shall the same amounts be included in Projected BRI or Interim Projected BRI, directly or indirectly, more than once (including in the event that the terms of any Successor Agreements would cause the same amounts to be indirectly included in Projected BRI or Interim Projected BRI for a Salary Cap Year pursuant to both subsections (1) and (2) above), the purpose of this provision being to preclude the double-counting of amounts in the calculation of Projected BRI or Interim Projected BRI, whether in the same or in multiple Salary Cap Years.
“Local Expansion Team BRI” means the BRI of the Expansion Teams during their first two (2) 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).
“Projected Local Expansion Team BRI” means Local Expansion Team BRI for the immediately preceding Season, increased by four and one-half percent (4.5%).
“Interim Projected BRI” means a projection of BRI for a Salary Cap Year using Estimated BRI in place of BRI for the previous Salary Cap Year.
“Barter” means to trade by exchanging one commodity, service or other non-cash item for another.
“Estimated Total Benefits” means the estimate of Total Benefits for a Salary Cap Year as set forth in the Interim Audit Report (as defined in Section 10(a) below) for such Salary Cap Year.
“Estimated Total Salaries” means the estimate of Total Salaries for a Salary Cap Year as set forth in the Interim Audit Report for such Salary Cap Year.
“Estimated Total Salaries and Benefits” means the sum of Estimated Total Benefits and Estimated Total Salaries for a Salary Cap Year as set forth in the Interim Audit Report for such Salary Cap Year.
“Estimated BRI” means the estimate of BRI for a Salary Cap Year as set forth in the Interim Audit Report for such Salary Cap Year.

7.2 Salary Cap, Minimum Team Salary, Tax Level, Apron Levels, and Draft Pick Penalty.

Calculation of Salary Cap, Minimum Team Salary, Tax Level, and Apron Levels.
1. For each Salary Cap Year during the term of this Agreement, there shall be a Salary Cap. The Salary Cap for each Salary Cap Year covered by the Term of this Agreement will equal forty-four and seventy-four one hundredths percent (44.74%) of Projected BRI for such Salary Cap Year, less Projected Benefits for such Salary Cap Year, divided by the number of Teams scheduled to play in the NBA during such Salary Cap Year, other than Expansion Teams during their first two (2) Salary Cap Years in the NBA.
2. Notwithstanding Section 2(a)(1) above, in the event that Projected BRI for any Salary Cap Year in which one or more Expansion Teams is scheduled to play its second Season, plus Projected Local Expansion Team BRI for such Salary Cap Year, multiplied by the applicable percentage of Projected BRI set forth in Section 2(a)(1) above, less Projected Benefits for such Salary Cap Year (including for the Expansion Team(s)), divided by the number of Teams scheduled to play in the NBA during such Salary Cap Year (including the Expansion Team(s)), exceeds the Salary Cap calculated in accordance with Section 2(a)(1) above, the Salary Cap shall equal the amount calculated pursuant to this Section 2(a)(2).
3. In the event that the Salary Cap for a Salary Cap Year is calculated based upon an Interim Audit Report for the prior Salary Cap Year in accordance with Section 2(a)(7) below and BRI and Total Salaries and Benefits as set forth in the Audit Report for the prior Salary Cap Year are different from those in the Interim Audit Report such that the Salary Cap would have been different from that based upon the Interim Audit Report, any such difference in the Salary Cap shall be debited or credited, as the case may be, to the Salary Cap for the subsequent Salary Cap Year, except that, with respect to the 2029-30 Salary Cap Year (or, in the alternative, if either the NBA or Players Association exercises its option to terminate this Agreement pursuant to Article XXXIX, the 2028-29 Salary Cap Year) any such differences shall be debited or credited, as the case may be, to the Salary Cap for the then current Salary Cap Year, in all such cases with interest (at a rate equal to the one (1) year Treasury Bill rate as published in The Wall Street Journal on the date of the issuance of the Interim Audit Report).
4. For each Salary Cap Year covered by the term of this Agreement, there shall be:
  1. a Minimum Team Salary equal to ninety percent (90%) of the Salary Cap for such Salary Cap Year;
  2. a “Tax Level” equal to one hundred twenty-one and one-half percent (121.5%) of the Salary Cap for such Salary Cap Year; (iii) a “First Apron Level” and a “Second Apron Level” as follows:
    1. For the 2023-24 Salary Cap Year, the First Apron Level shall equal the sum of: (1) the Tax Level for the 2023-24 Salary Cap Year, and (2) $6.716 million multiplied by a fraction, the numerator of which is the average of the Salary Cap for the 2022-23 Salary Cap Year and the Salary Cap for the 2023-24 Salary Cap Year, and the denominator of which is the Salary Cap for the 2022-23 Salary Cap Year. For each subsequent Salary Cap Year, the First Apron Level shall equal the First Apron Level for the 2023-24 Salary Cap Year multiplied by a fraction, the numerator of which is the Salary Cap for the applicable Salary Cap Year and the denominator of which is the Salary Cap for the 2023-24 Salary Cap Year.
    2. For the 2023-24 Salary Cap Year, the Second Apron Level shall equal the sum of: (1) the Tax Level for the 2023-24 Salary Cap Year, and (2) $17.5 million. For each subsequent Salary Cap Year, the Second Apron Level shall equal the Second Apron Level for the 2023-24 Salary Cap Year multiplied by a fraction, the numerator of which is the Salary Cap for the applicable Salary Cap Year and the denominator of which is the Salary Cap for the 2023-24 Salary Cap Year.
    For clarity, for purposes of the foregoing calculations, the Salary Cap shall be the Salary Cap as calculated in accordance with Sections 2(a)(1)-(3) above without regard to Sections 2(a)(5) and (6) below.
    
    For example, assume the Salary Cap for the 2023-24 Salary Cap Year is $134 million, for the 2024-25 Salary Cap Year is $140.7 million, and for the 2025-26 Salary Cap Year is $147.735 million (and that no adjustments pursuant to Section 2(a)(5) below are required in any of those years).
    
    For the 2023-24 Salary Cap Year:
    - The Tax Level would be $162.81 million (i.e., $134 million (the 2023-24 Salary Cap) multiplied by 121.5%);
    - The First Apron Level would be $169.807 million (i.e., $162.81 million (the 2023-24 Tax Level) plus an amount equal to $6.716 million multiplied by a fraction, the numerator of which is $128.828 million (the average of the 2022-23 Salary Cap of $123.655 million and the 2023-24 Salary Cap of $134 million), and the denominator of which is $123.655 million (the 2022-23 Salary Cap)); and
    - The Second Apron Level would be $180.31 million (i.e., $162.81 million (the 2023-24 Tax Level) plus $17.5 million).
    For the 2024-25 Salary Cap Year:
    - The Tax Level would be $170.951 million (i.e., $140.7 million multiplied by 121.5%);
    - The First Apron Level would be $178.297 million (i.e., $169.807 million (the 2023-24 First Apron Level) multiplied by a fraction, the numerator of which is $140.7 million (the 2024-25 Salary Cap) and the denominator of which is $134 million (the 2023-24 Salary Cap)); and
    - The Second Apron Level would be $189.326 million (i.e., $180.31 million (the 2023-24 Second Apron Level) multiplied by a fraction, the numerator of which is $140.7 million (the 2024-25 Salary Cap) and the denominator of which is $134 million (the 2023-24 Salary Cap)).
    For the 2025-26 Salary Cap Year:
    - The Tax Level would be $179.498 million (i.e., $147.735 million multiplied by 121.5%);
    - The First Apron Level would be $187.212 million (i.e., $169.807 million (the 2023-24 First Apron Level) multiplied by a fraction, the numerator of which is $147.735 million (the 2025-26 Salary Cap) and the denominator of which is $134 million (the 2023-24 Salary Cap)); and
    - The Second Apron Level would be $198.792 million (i.e., $180.31 million (the 2023-24 Second Apron Level) multiplied by a fraction, the numerator of which is $147.735 (the 2025-26 Salary Cap) and the denominator of which is $134 million (the 2023-24 Salary Cap)).
5. 1. For each Salary Cap Year beginning with the 2023-24 Salary Cap Year, in the event that (A) there is a Shortfall Amount (as defined in Section 12(a)(21) below) for such Salary Cap Year, and (B) the Carryover Amount (as defined in Section 12(a)(12) below) in respect of the subsequent Salary Cap Year is equal to zero (0), then the Salary Cap, Minimum Team Salary, Tax Level, First Apron Level, and Second Apron Level for such subsequent Salary Cap Year (as calculated in accordance with Sections 2(a)(1)-(4) above) shall each be increased by an amount equal to the Shortfall Amount divided by the number of Teams in the NBA during such subsequent Salary Cap Year (other than Expansion Teams in their first two (2) Salary Cap Years in the NBA).
  2. For each Salary Cap Year beginning with the 2023-24 Salary Cap Year, in the event that there is an Overage Amount (as defined in Section 12(a)(20) below) for such Salary Cap Year that exceeds six percent (6%) of Total Salaries and Benefits, then the Salary Cap, Minimum Team Salary, Tax Level, First Apron Level, and Second Apron Level for the subsequent Salary Cap Year (as calculated in accordance with Sections 2(a)(1)-(4) above) shall each be reduced by an amount calculated as follows:
    - STEP 1: Subtract six percent (6%) of Total Salaries and Benefits from the Overage Amount.
    - STEP 2: If Projected BRI for the subsequent Salary Cap Year does not exceed BRI for the Salary Cap Year by more than eight percent (8%) of BRI for the Salary Cap Year or the Overage Amount described above exceeds nine percent (9%) of Total Salaries and Benefits, then divide the result of Step 1 by the number of Teams in the NBA during the subsequent Salary Cap Year (other than Expansion Teams in their first two (2) Salary Cap Years in the NBA). The result of this calculation is the amount of the reduction in each of the Salary Cap, Minimum Team Salary, Tax Level, First Apron Level, and Second Apron Level for such subsequent Salary Cap Year, and no further steps are required.
      
      If Projected BRI for the subsequent Salary Cap Year exceeds one hundred eight percent (108%) of BRI for the Salary Cap Year and the Overage Amount described above does not exceed nine percent (9%) of Total Salaries and Benefits, then proceed to Step 3.
    - STEP 3: Subtract one hundred eight percent (108%) of BRI for the Salary Cap Year from Projected BRI for the subsequent Salary Cap Year.
    - STEP 4: Multiply the result of Step 3 by fifty percent (50%).
    - STEP 5: Subtract the result of Step 4 from the result of Step 1. If the result of this step is less than zero (0), then no adjustments shall be made to the Salary Cap, Minimum Team Salary, Tax Level, First Apron Level, or Second Apron Level for the subsequent Salary Cap Year, and no further steps are required.
    - STEP 6: Divide the result of Step 5 by the number of Teams in the NBA during such subsequent Salary Cap Year (other than Expansion Teams in their first two (2) Salary Cap Years in the NBA). The result of this calculation is the amount of the reduction in each of the Salary Cap, Minimum Team Salary, Tax Level, First Apron Level, and Second Apron Level for such subsequent Salary Cap Year.
  Example: Assume: (i) 2024-25 Total Salaries and Benefits is $5.5 billion, the 2024-25 Designated Share is $5.1 billion, and the resulting 2024-25 Overage Amount is $400 million (which equals approximately 7.3% of Total Salaries and Benefits); (ii) 2025-26 Projected BRI is $10.5 billion, 2024-25 BRI is $10 billion, and thus 2025-26 Projected BRI exceeds 2024-25 BRI by 5%; and (iii) there are 30 Teams in the NBA in the 2025-26 Season. The 2025-26 Salary Cap, Minimum Team Salary, Tax Level, First Apron Level, and Second Apron Level would each be reduced by $2,333,333 (i.e., $70 million (i.e., 2024-25 Overage Amount of $400 million less $330 million (i.e., 6% of 2024-25 Total Salaries and Benefits) divided by 30 (i.e., the number of Teams in the NBA during the 2025-26 Season)).
  
  Example: Same assumptions as in the prior example, except assume 2025-26 Projected BRI is $10.9 billion (instead of $10.5 billion), and thus 2025-26 Projected BRI exceeds 2024-25 BRI by 9%. The 2025-26 Salary Cap, Minimum Team Salary, Tax Level, First Apron Level, and Second Apron Level would each be reduced by $666,667 (i.e., the difference between the $70 million from the prior example and $50 million (i.e., 50% of $100 million (i.e., 2025-26 Projected BRI of $10.9 billion less $10.8 billion (i.e., 108% of 2024-25 BRI of $10 billion)) divided by 30 (i.e., the number of Teams in the NBA during the 2025-26 Season))).
6. Notwithstanding anything to the contrary in Sections 2(a)(1)-(5) above, in no event shall any of the Salary Cap, Minimum Team Salary, Tax Level, First Apron Level, or Second Apron Level for a Salary Cap Year (a) decrease to an amount that is less than its amount for the immediately preceding Salary Cap Year, or (b) increase to an amount that exceeds one hundred ten percent (110%) of its amount for the immediately preceding Salary Cap Year.
7. In the event that the Audit Report for a Salary Cap Year has not been completed as of the last day of such Salary Cap Year, and the NBA and the Players Association have not reached an agreement on Projected BRI and Projected Benefits pursuant to Article VII, Section 1 and Article IV, Section 8 for the immediately following Salary Cap Year, then the Salary Cap, Minimum Team Salary, Tax Level, First Apron Level, and Second Apron Level for the immediately following Salary Cap Year will be calculated pursuant to Sections 2(a)(1)-(6) above, except that Interim Projected BRI shall be utilized instead of Projected BRI, Estimated BRI shall be utilized instead of BRI, and Estimated Total Salaries and Benefits shall be utilized instead of Total Salaries and Benefits. In the event that the Interim Audit Report for a Salary Cap Year has not been completed as of the last day of such Salary Cap Year, and the NBA and Players Association have not reached agreement on Projected BRI and Projected Benefits pursuant to Article VII, Section 1 and Article IV, Section 8, then the Salary Cap for the immediately following Salary Cap Year shall, until such Interim Audit Report is completed, be an amount that would have been the Salary Cap for the preceding Salary Cap Year had Projected BRI or Interim Projected BRI, as the case may be, for such preceding Salary Cap Year included, with respect to the NBA’s national broadcast, national telecast, or network cable television contracts, the rights fees or other non-contingent payments stated in such contracts for the Season following the Season covered by such preceding Salary Cap Year instead of for the Season covered by such preceding Salary Cap Year.
8. The Salary Cap, Minimum Team Salary, Tax Level, First Apron Level, and Second Apron Level for a Salary Cap Year will be in effect commencing on the first day of the Salary Cap Year and shall continue through and including the last day of the Salary Cap Year.
Operation of Salary Cap.
1. 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.
2. Room. Subject to the other provisions of this Agreement, including, without limitation, Article II, Section 7, any Team with Room may enter into a Player Contract that calls for a Salary in the first Salary Cap Year covered by such Contract that would not exceed the Team’s then-current Room.
Operation of Minimum Team Salary.
1. As used in this Agreement, the following terms shall have the following meanings:
  1. “MTS Cap Hold Team Salary” means, for a Team for a Salary Cap Year, the Team’s Team Salary calculated in the same manner as Team Salary is calculated by the Accountants for purposes of computing Total Salaries and Benefits in the Audit Report (as defined in Section 10(a)(1) below).
  2. “MTS Payment Team Salary” means, for a Team for a Salary Cap Year, the Team’s MTS Cap Hold Team Salary as of the start of the first day of the Regular Season occurring within such Salary Cap Year:
    1. plus any Salary in respect of such Salary Cap Year that is excluded from the Team’s Team Salary pursuant to Section 4(h) below;
    2. minus any Salary in respect of such Salary Cap Year that is included in the Team’s Team Salary pursuant to Section 3(e) below; and
    3. plus any Salary in respect of such Salary Cap Year that is excluded from the Team’s Team Salary pursuant to Section 4(b) below.
  3. “MTS Threshold” means, for a Team for a Salary Cap Year, the lesser of (A) the Minimum Team Salary for such Salary Cap Year, and (B) such Team’s MTS Cap Hold Team Salary as of the start of the first day of the Regular Season occurring within such Salary Cap Year.
2. In the event that a Team’s MTS Payment Team Salary for a Salary Cap Year is less than the applicable Minimum Team Salary for that Salary Cap Year, then:
  1. The NBA shall cause such Team to make a payment to the NBA equal to the difference between the Team’s MTS Payment Team Salary and the Minimum Team Salary; and
  2. Subject to Section 2(c)(7) below, and notwithstanding anything to the contrary in Section 2(d) below, such Team shall be prohibited from receiving a share of any tax amount that the NBA elects to distribute to non-taxpaying Teams in respect of such Salary Cap Year pursuant to Section 2(d)(4)(i) below.
3. Beginning at the start of the first day of the Regular Season and continuing through the end of the Salary Cap Year encompassing such Regular Season, a Team’s Team Salary shall include an amount equal to the amount (if any) by which the Minimum Team Salary exceeds the lesser of such Team’s (i) then-current MTS Cap Hold Team Salary, and (ii) MTS Cap Hold Team Salary as of the start of the first day of the Regular Season.
4. If, on a day during the Regular Season, a Team’s MTS Cap Hold Team Salary decreases to an amount that is less than its MTS Threshold, then the Team will be required to increase its MTS Cap Hold Team Salary to an amount equal to or greater than its MTS Threshold by the end of the immediately following day.
5. If, as of the end of the last day of a Salary Cap Year, the Minimum Team Salary for such Salary Cap Year exceeds the portion of total MTS Cap Hold Team Salaries for which a Team is financially responsible plus any payment that the Team is required to make pursuant to Section 2(c)(2)(i) above, then, in addition to any payment required pursuant to Section 2(c)(2)(i) above, such Team shall make a payment to the NBA equal to the amount of such excess. For the purposes of this Section 2(c)(5), MTS Cap Hold Team Salaries shall:
  1. include any Incentive Compensation excluded from Salaries in accordance with Article VII, Section 3(d) but actually earned by players during such Salary Cap Year; and
  2. exclude all Incentive Compensation included in Salaries in accordance with Article VII, Section 3(d) but not actually earned by players during such Salary Cap Year.
6. Any payment due by a Team in respect of a Salary Cap Year pursuant to Section 2(c)(2)(i) or 2(c)(5) above shall be made by the Team to the NBA no later than ten (10) business days following the completion of the Governing Audit Report for such Salary Cap Year. The NBA shall then distribute any such payments equally to each Team within ten (10) business days following its receipt of such payments.
7. Notwithstanding Section 2(c)(2)(ii) above, for the 2023-24 Salary Cap Year only, if (i) a Team’s MTS Payment Team Salary for the 2023-24 Salary Cap Year is less than the Minimum Team Salary for such Salary Cap Year, and (ii) such Team does not owe a Tax for such Salary Cap Year, then such Team shall be entitled to receive a fifty percent (50%) share of any tax amount that the NBA elects to distribute to non-taxpaying Teams in respect of such Salary Cap Year pursuant to Section 2(d)(4)(i) below. For example, if there were twenty-four (24) non-taxpaying Teams for the 2023-24 Salary Cap Year and one (1) of such Teams had a MTS Payment Team Salary for such Salary Cap Year less than the Minimum Team Salary, then such Team, rather than receiving one-twenty-fourth (1/24th) of the total amount that the NBA elects to distribute to non-taxpaying Teams pursuant to Section 2(d)(4)(i) below, would instead receive a Tax distribution amount equal to the total amount to be distributed to non-taxpaying Teams multiplied by a fraction, the numerator of which is one-half (0.5) and the denominator of which is twenty-three and one-half (0.5/23.5). Each of the other twenty-three (23) non-taxpaying Teams for the 2023-24 Salary Cap Year would receive a Tax distribution amount equal to the total amount to be distributed to non-taxpaying Teams multiplied by a fraction, the numerator of which is one (1) and the denominator of which is twenty-three and one-half (1/23.5).
8. 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.

Operation of Tax Level.

As used in this Agreement, the following terms shall have the following meanings:
1. “Tax Team Salary” means, for a Team for a Salary Cap Year, the Team’s Team Salary as of the start of its last Regular Season game occurring within such Salary Cap Year, calculated by the Accountants in the same manner as Team Salary is calculated by the Accountants for purposes of computing Total Salaries and Benefits in the Audit Report:
  1. plus all Incentive Compensation excluded from Salary under Section 3(d) below but actually earned by the player during such Salary Cap Year;
  2. minus all Incentive Compensation included in Salary under Section 3(d) below but not actually earned by the player during such Salary Cap Year;
  3. plus, with respect to any trade that occurs following the conclusion of the Team’s last Regular Season game, the portion of any trade bonus earned by a player that is included in the Team’s Team Salary for such Salary Cap Year;
  4. plus any amount that is added to the Team’s Team Salary for such Salary Cap Year following the start of the Team’s last Regular Season game pursuant to Section 4(a)(1)(iii) below;
  5. minus fifty percent (50%) of any reduction made to a player’s Compensation as a result of a suspension by the NBA (but not by a Team); and
  6. plus, with respect to a Standard NBA Contract between a Team and a Free Agent with zero (0) Years of Service or one (1) Year of Service, the amount (if any) by which (x) the Minimum Player Salary that would be applicable to a player with two (2) Years of Service as set forth in the Minimum Annual Salary Scale for the Salary Cap Year in which such Free Agent was signed (or in the event such Free Agent’s Contract is terminated during the Regular Season, the Minimum Player Salary that would be applicable to a player with two (2) Years of Service as set forth in the Minimum Annual Salary Scale for the Salary Cap Year in which such Free Agent was signed, reduced pro rata to reflect the player’s post-termination Salary), exceeds (y) the Salary attributable to such Standard NBA Contract. For the purposes of this Section 2(d)(1)(i)(F):
    1. a Standard NBA Contract between a Team and a Two-Way Player (either signed pursuant to Article II, Section 11(h), or the result of the exercise of a Standard NBA Contract Conversion Option) will be deemed to be a “Standard NBA Contract between a Team and a Free Agent” provided that such Two-Way Player’s Two-Way Contract was: (i) signed by the player as a Free Agent; or (ii) the result of the exercise of the Two-Way Player Conversion Option provided for in the Exhibit 10 of a Contract that he signed as a Free Agent; and
    2. a Standard NBA Contract between a Team and a player under a 10-Day Contract (signed pursuant to Article II, Section 9(g)) will be deemed to be a Standard NBA Contract between a Team and a Free Agent provided that such 10-Day Contract was signed by the player as a Free Agent.
2. “Tax Bracket Amount” means, for a Salary Cap Year, an amount equal to $5 million multiplied by a fraction, the numerator of which is the Salary Cap for such Salary Cap Year and the denominator of which is the Salary Cap for the 2023-24 Salary Cap Year.
For example, assume the Salary Cap for the 2023-24 Salary Cap Year is $134 million and the Salary Cap for the 2024-25 Salary Cap Year is $140.7 million. The Tax Bracket Amount for the 2023-24 Salary Cap Year would be $5 million (i.e., $5 million multiplied by a fraction, the numerator of which is $134 million and the denominator of which is $134 million), and the Tax Bracket Amount for the 2024-25 Salary Cap Year would be $5.25 million (i.e., $5 million multiplied by a fraction, the numerator of which is $140.7 million (the 2024-25 Salary Cap) and the denominator of which is $134 million (the 2023-24 Salary Cap)).

Each Team whose Tax Team Salary exceeds the Tax Level for any Salary Cap Year shall be required to pay a tax to the NBA. For each Salary Cap Year, the tax shall be calculated: (A) using the applicable rates in Section 2(d)(2)(i) (“Standard Tax Rates”) for any Team whose Tax Team Salary did not exceed the Tax Level in three (3) or more of the four (4) Salary Cap Years immediately preceding such Salary Cap Year; and (B) using the applicable rates shown in Section 2(d)(2)(ii) (“Repeater Tax Rates”) for any Team whose Tax Team Salary exceeded the Tax Level in three (3) or more of the four (4) Salary Cap Years immediately preceding such Salary Cap Year.

Standard Tax Rates:

Incremental Team Salary Above Tax Level	Tax Rate for Increment 2023-24 and 2024-25 Salary Cap Years	Tax Rate for Increment Beginning with 2025-26 Salary Cap Year
$0 – 100% of Tax Bracket Amount	$1.50-for-$1	$1.00-for-$1
100% of Tax Bracket Amount – 200% of Tax Bracket Amount	$1.75-for-$1	$1.25-for-$1
200% of Tax Bracket Amount – 300% of Tax Bracket Amount	$2.50-for-$1	$3.50-for-$1
300% of Tax Bracket Amount – 400% of Tax Bracket Amount	$3.25-for-$1	$4.75-for-$1
400% of Tax Bracket Amount and Over	Tax rates increase by $0.50 for each additional 100% of Tax Bracket Amount above the Tax Level (e.g., for Tax Team Salary 400% of Tax Bracket Amount to 500% of Tax Bracket Amount above the Tax Level, the Tax rate is $3.75-for-$1 for that increment).	Tax rates increase by $0.50 for each additional 100% of Tax Bracket Amount above the Tax Level (e.g., for Tax Team Salary 400% of Tax Bracket Amount to 500% of Tax Bracket Amount above the Tax Level, the Tax rate is $5.25-for-$1 for that increment).

Repeater Tax Rates:

Incremental Team Salary Above Tax Level	Tax Rate for Increment 2023-24 and 2024-25 Salary Cap Years	Tax Rate for Increment Beginning with 2025-26 Salary Cap Year
$0 – 100% of Tax Bracket Amount	$2.50-for-$1	$3.00-for-$1
100% of Tax Bracket Amount – 200% of Tax Bracket Amount	$2.75-for-$1	$3.25-for-$1
200% of Tax Bracket Amount – 300% of Tax Bracket Amount	$3.50-for-$1	$5.50-for-$1
300% of Tax Bracket Amount – 400% of Tax Bracket Amount	$4.25-for-$1	$6.75-for-$1
400% of Tax Bracket Amount and Over	Tax rates increase by $0.50 for each additional 100% of Tax Bracket Amount above the Tax Level (e.g., for Tax Team Salary 400% of Tax Bracket Amount to 500% of Tax Bracket Amount above the Tax Level, the Tax rate is $4.75-for-$1 for that increment).	Tax rates increase by $0.50 for each additional 100% of Tax Bracket Amount above the Tax Level (e.g., for Tax Team Salary 400% of Tax Bracket Amount to 500% of Tax Bracket Amount above the Tax Level, the Tax rate is $7.25-for-$1 for that increment).

Example: In respect of the 2023-24 Salary Cap Year, the Tax Bracket Amount is $5 million. Assume that Team A is subject to the Standard Tax Rates, and Team A has a Tax Team Salary that exceeds the Tax Level by $15 million. Team A would pay a Tax of $28.75 million (i.e., $5 million times $1.50, plus $5 million times $1.75, plus $5 million times $2.50).

Example: Assume that, in respect of the 2025-26 Salary Cap Year, the Tax Bracket Amount is $6 million, Team B is subject to the Standard Tax Rates, and Team B has a Tax Team Salary that exceeds the Tax Level by $15 million. Team B would pay a Tax of $24 million (i.e., $6 million times $1.00, plus $6 million times $1.25, plus $3 million times $3.50).

Example: Assume that, in respect of the 2026-27 Salary Cap Year, the Tax Bracket Amount is $6.5 million, Team C is subject to the Repeater Tax Rates, and Team C has a Tax Team Salary that exceeds the Tax Level by $15 million. Team C would pay a Tax of $51.625 million (i.e., $6.5 million times $3.00, plus $6.5 million times $3.25, plus $2 million times $5.50).

Each Team that owes a tax in respect of a Salary Cap Year shall make the required tax payment to the NBA no later than ten (10) business days following the completion of the Governing Audit Report for such Salary Cap Year.
All amounts remitted to the NBA by NBA Teams pursuant to this Section 2(d) shall be the exclusive property of the NBA, and such amounts shall be used and/or distributed as follows:
1. Subject to Sections 2(c)(2)(ii) and 2(c)(7) above, the NBA may elect to distribute up to fifty percent (50%) of such amounts to one (1) or more Teams based in whole or in part on the fact that such Team(s) did not owe a tax for such Salary Cap Year (e.g., subject to Sections 2(c)(2)(ii) and 2(c)(7) above, the NBA could elect to distribute fifty percent (50%) of such amounts in equal shares to all non-taxpayers in such Salary Cap Year); and
2. amounts not distributed in accordance with Section 2(d)(4)(i) above shall be used for one (1) or more “League purposes” (as defined below) selected by the NBA. For purposes of this Section 2(d)(4), the use of tax amounts for a “League purpose” shall mean the use of such amounts for any purpose, including, but not limited to, the distribution of such amounts to one (1) or more Teams; provided, however, that such amounts may not be distributed to a Team or expended for the benefit or detriment of a Team in a manner that is based, directly or indirectly, in whole or in part, on the amount of the Team’s Team Salary or on whether the Team is a taxpayer. Without limiting the foregoing, a team assistance plan adopted by the NBA and funded, in whole or in part, with tax amounts shall be considered a “League purpose” if, pursuant to the plan, a Team’s entitlement to an assistance receipt and/or the amount of such receipt is based, in whole or in part, on a profit, loss, and/or expense computation determined by the NBA under which the Team is credited with a Team Salary no less than the league average; provided, however, that in order to qualify as a “League purpose,” such a plan may not otherwise base a Team’s entitlement to assistance and/or the amount of such assistance on the amount of a Team’s Team Salary or on whether the Team is a taxpayer.

Operation of Apron Levels.

“Apron Team Salary” means, for a Team for a Salary Cap Year, the Team’s Team Salary:
1. plus all Performance Bonuses excluded from a player’s Salary under Section 3(d) below;
2. plus the Salary attributable to a Contract signed by a Free Agent with zero (0) Years of Service or one (1) Year of Service provided for in Section 2(d)(1)(i)(F) above;
3. plus any amount that could be added to the Team’s Team Salary for such Salary Cap Year pursuant to Section 4(a)(1)(iii) below;
4. minus any Free Agent Amounts as described in Section 4(a)(2) below;
5. plus, with respect to any Restricted Free Agent, the greater of (A) the Salary plus Unlikely Bonuses called for in any outstanding Qualifying Offer (or any outstanding Maximum Qualifying Offer, if applicable) tendered to the player, or (B) the Salary plus Unlikely Bonuses called for in any First Refusal Exercise Notice (as defined in Article XI, Section 5(g)) issued with respect to such player;
6. minus any amounts with respect to unsigned First Round Picks described in Section 4(a)(4) below;
7. plus the amount of any outstanding Required Tender to a First Round Pick;
8. minus the amount of any Salary Cap Exception that is deemed included in Team Salary pursuant to Sections 4(a)(7) and 6(n)(2) below;
9. plus any amount excluded from its Team Salary pursuant to Section 4(l) below; and
10. minus the amount of any incomplete roster cap hold amount added to the Team’s Salary pursuant to Section 4(f) below.
1. At any point during a Salary Cap Year, the following rules shall apply with respect to the transactions listed in the table in Section 2(e)(4) below (the “Transaction Restrictions Table”):
  1. A Team may not engage in a transaction set forth in the Transaction Restrictions Table if, immediately following such transaction, the Team’s Apron Team Salary for such Salary Cap Year would exceed the “Applicable Apron Level” that corresponds with such transaction in the table; and
  2. A Team that engages in a transaction set forth in the Transaction Restrictions Table may not, for the remainder of such Salary Cap Year, have an Apron Team Salary that exceeds the Applicable Apron Level that corresponds with such transaction in the table.
2. During the period beginning on the day after the last day of a Regular Season through the last day of the Salary Cap Year encompassing such Regular Season, the following rules, in addition to the rules set forth in Section 2(e)(2)(i) above, shall apply with respect to the transactions listed in the Transaction Restrictions Table:
  1. A Team may not engage in any transaction set forth in rows E through J of the Transaction Restrictions Table if, immediately following such transaction, the Team’s Apron Team Salary for the immediately following Salary Cap Year (for purposes of this Section 2(e), the “Subsequent Salary Cap Year”) would exceed the Applicable Apron Level (for such Subsequent Salary Cap Year) that corresponds with such transaction in the table; and
  2. A Team that engages in any transaction set forth in rows E through J of the Transaction Restrictions Table may not, at any time from immediately following such transaction through the end of the Subsequent Salary Cap Year, have an Apron Team Salary for such Subsequent Salary Cap Year that exceeds the Applicable Apron Level (for such Subsequent Salary Cap Year) that corresponds with such transaction in the table.
3. The following additional restrictions will apply to Teams that use the Taxpayer Mid-Level Salary Exception:
  1. During the 2023-24 Salary Cap Year, a Team may not engage in any transaction set forth in rows A through E of the Transaction Restrictions Table if it has previously signed a Player Contract pursuant to the Taxpayer Mid-Level Salary Exception during such Salary Cap Year.
  2. For each Salary Cap Year beginning with the 2024-25 Salary Cap Year, a Team may not engage in any transaction set forth in rows A through F of the Transaction Restrictions Table if it has previously signed a Player Contract pursuant to the Taxpayer Mid-Level Salary Exception during such Salary Cap Year.
To effectuate the rules set forth in Section 2(e)(2)(ii) above, during the period beginning on the day after the last day of a Regular Season through the last day of the Salary Cap Year encompassing such Regular Season, a Team shall not be permitted to engage in any transaction if such transaction would result in the Team failing to comply with the rules set forth in Section 2(e)(2)(ii) as of the first day of the Subsequent Salary Cap Year assuming that:
1. For purposes of determining the Team’s Apron Team Salary for the Subsequent Salary Cap Year:
  1. all Team or Player Options in respect of such Subsequent Salary Cap Year are exercised;
  2. no outstanding ETOs in respect of such Subsequent Salary Cap Year are exercised;
  3. the Team engages in no additional transactions for the remainder of the then-current Salary Cap Year; and
  4. any player on the Team whose Salary for the Subsequent Salary Cap Year may increase by virtue of meeting the Higher Max Criteria during the fourth Season of his Rookie Scale Contract achieves the highest Salary that he is eligible to earn based on any Generally Recognized League Honors for the just-completed Regular Season for which winners have not yet been announced; and
2. The amount of the Salary Cap, First Apron Level, and Second Apron Level for the Subsequent Salary Cap Year is equal to the amount of the Salary Cap, First Apron Level, and Second Apron Level, respectively, for the then-current Salary Cap Year.

Transaction Restrictions Table:

Transaction	Applicable Apron Level
A. Team signs or acquires a player using the Bi-annual Exception (as described in Section 6(d) below)	First Apron Level
B. Team signs or acquires a player using the Non-Taxpayer Mid-Level Salary Exception (as described in Section 6(e) below)	First Apron Level
C. Team acquires a player pursuant to a Contract entered into in accordance with Section 8(e)(1) below	First Apron Level
D. Team signs a Contract during the Regular Season with a player who was previously under a Contract that: (i) was terminated during such Regular Season; and (ii) prior to such termination, provided for a Salary for the Salary Cap Year encompassing such Regular Season of greater than the amount of the Non-Taxpayer Mid-Level Salary Exception for such Salary Cap Year	First Apron Level
E. Team acquires a player using an Expanded Traded Player Exception (as described in Section 6(j)(1)(iv) below)	First Apron Level
F. Team acquires a player using a Standard Traded Player Exception (as described in Section 6(j)(1)(i) below) (i) after the end of the Regular Season in which such Traded Player Exception arose, or (ii) if such Traded Player Exception arose during the period from the day following the last day of a Regular Season through the day before the first day of the immediately following Regular Season, after the last day of such following Regular Season	First Apron Level
G. Team acquires a player using a Transition Traded Player Exception (as described in Section 6(j)(1)(iii) below)	First Apron Level
H. Team acquires a player using an Aggregated Standard Traded Player Exception (as described in Section 6(j)(1)(ii) below)	Second Apron Level
I. Team pays cash to another Team in connection with a trade in accordance with Section 8(a) below	Second Apron Level
J. Team acquires a player using a Traded Player Exception (as described in Section 6(j)(1)(i), (ii), (iii), or (iv) below), which Traded Player Exception is in respect of a Player Contract signed and traded pursuant to Section 8(e)(1) below	Second Apron Level
K. Team signs a player using the Taxpayer Mid-Level Salary Exception (as described in Section 6(f) below)	Second Apron Level

Notwithstanding anything to the contrary in Section 2(e)(2) above, a Team that engages in one or more of the transactions set forth in rows F through J in the Transaction Restrictions Table during the 2023-24 Salary Cap Year will not by virtue of engaging in any such transaction(s) be prohibited from having an Apron Team Salary in the 2023-24 Salary Cap Year that exceeds the Applicable Apron Level for such Salary Cap Year.

Examples: Assume the following First Apron Levels and Second Apron Levels:

Salary Cap Year	First Apron Level	Second Apron Level
2023-24	$170 million	$180.5 million
2024-25	$178.5 million	$189.5 million
2025-26	$187.5 million	$199 million

On July 8, 2023, having not previously signed a Player Contract pursuant to the Taxpayer Mid-Level Salary Exception at any point during the 2023-24 Salary Cap Year, Team A signs a Player Contract pursuant to the Non-Taxpayer Mid-Level Salary Exception. Immediately following such signing, Team A’s 2023-24 Apron Team Salary is $165 million and the remaining portion of the Non-Taxpayer Mid-Level Salary Exception is $2 million. Such signing (a transaction set forth in row B of the Transaction Restrictions Table with an Applicable Apron Level of the First Apron Level): (a) is not prohibited by Section 2(e)(2)(iii)(A) above because Team A had not previously signed a Player Contract pursuant to the Taxpayer Mid-Level Salary Exception at any point during the 2023-24 Salary Cap Year; and (b) is not prohibited by Section 2(e)(2)(i)(A) above because, immediately following such signing, Team A’s 2023-24 Apron Team Salary is less than or equal to $170 million (i.e., the 2023-24 First Apron Level). As a result of such signing, pursuant to Section 2(e)(2)(i)(B) above, Team A may not, for the remainder of the 2023-24 Salary Cap Year, have a 2023-24 Apron Team Salary that exceeds $170 million (i.e., the 2023-24 First Apron Level).
On June 20, 2025 (after the conclusion of the 2024-25 Regular Season in April 2025), having not previously signed a Player Contract pursuant to the Taxpayer Mid-Level Salary Exception at any point during the 2024-25 Salary Cap Year, Team B acquires by assignment a Player Contract using a Standard Traded Player Exception that arose during the 2024-25 Regular Season. Immediately following such trade, Team B’s 2024-25 Apron Team Salary is $177 million, and Team B’s 2025-26 Apron Team Salary (calculated in accordance with Section 2(e)(3)(i) above) is $175 million. Such trade (a transaction set forth in row F of the Transaction Restrictions Table with an Applicable Apron Level of the First Apron Level): (a) is not prohibited by Section 2(e)(2)(iii)(B) above because Team A had not previously signed a Player Contract pursuant to the Taxpayer Mid-Level Salary Exception at any point during the 2024-25 Salary Cap Year; (b) is not prohibited by Section 2(e)(2)(i)(A) above because, immediately following such trade, Team B’s 2024-25 Apron Team Salary is less than or equal to $178.5 million (i.e., the 2024-25 First Apron Level); and (c) is not prohibited by Section 2(e)(2)(ii)(A) above because immediately following such trade, Team B’s 2025-26 Apron Team Salary (calculated in accordance with Section 2(e)(3)(i) above) is less than or equal to $178.5 million (i.e., the assumed 2025-26 First Apron Level as calculated in accordance with Section 2(e)(3)(ii) above). As a result of the trade: (i) pursuant to Section 2(e)(2)(i)(B) above, Team B may not for the remainder of the 2024-25 Salary Cap Year, have a 2024-25 Apron Team Salary that exceeds $178.5 million (i.e., the 2024-25 First Apron Level); (ii) pursuant to Section 2(e)(2)(ii)(B) above, Team B may not, for the remainder of the 2024-25 Salary Cap Year, have a 2025-26 Apron Team Salary (calculated in accordance with Section 2(e)(3)(i) above) that exceeds $178.5 million (i.e., the assumed 2025-26 First Apron Level); and (iii) pursuant to Section 2(e)(2)(ii)(B) above, Team B may not, for the entirety of the 2025-26 Salary Cap Year, have a 2025-26 Apron Team Salary that exceeds $187.5 million (i.e., the 2025-26 First Apron Level).
On July 10, 2025, having not previously engaged (x) in a transaction set forth in row E or F of the Transaction Restrictions Table at any point from the day following the last day of the 2024-25 Regular Season through the end of 2024-25 Salary Cap Year or (y) in any transactions set forth in rows A through F of the Transaction Restrictions Table at any point during the 2025-26 Salary Cap Year, Team C signs a Player Contract pursuant to the Taxpayer Mid-Level Salary Exception. (Note, for clarity, that it is necessarily the case that Team C also did not engage in the transaction set forth in row G of the Transactions Restriction Table at any point from the day following the last day of the 2024-25 Regular Season through the date of the Player Contract signing in this example, because such transaction can occur only during the 2023-24 Salary Cap Year.) Immediately following such signing, Team C’s 2025-26 Apron Team Salary is $195 million. Such signing (a transaction set forth in row K of the Transaction Restrictions Table with an Applicable Apron of the Second Apron Level): (a) is not prohibited by Section 2(e)(2)(ii)(B) above because Team C had not previously engaged in a transaction set forth in rows E through G of the Transaction Restrictions Table (i.e., transactions that would have prohibited Team C from having an Apron Team Salary that exceeds the First Apron Level in the 2025-26 Salary Cap Year) at any point from the day following the last day of the 2024-25 Regular Season through the end of 2024-25 Salary Cap Year; (b) is not prohibited by Section 2(e)(2)(i)(B) above because Team C had not previously engaged in any transactions set forth in rows A through G of the Transaction Restrictions Table (i.e., transactions that would have prohibited Team C from having an Apron Team Salary that exceeds the First Apron Level in the 2025-26 Salary Cap Year) at any point during the 2025-26 Salary Cap Year; and (c) is not prohibited by Section 2(e)(2)(i)(A) above because, immediately following such signing, Team C’s 2025-26 Apron Team Salary is less than or equal to $199 million (i.e., the 2025-26 Second Apron Level). As a result of such signing, for the remainder of the 2025-26 Salary Cap Year: (i) pursuant to Section 2(e)(2)(i)(B) above, Team C may not have a 2025-26 Apron Team Salary that exceeds $199 million (i.e., the 2025-26 Second Apron Level); and (ii) pursuant to Section 2(e)(2)(iii)(B) above, Team C may not engage in any of the transactions set forth in rows A through F of the Transaction Restrictions Table.
On July 9, 2024, having not previously engaged (x) in any of the transactions set forth in rows E through J of the Transaction Restrictions Table at any point from the day following the last day of the 2023-24 Regular Season through the end of 2023-24 Salary Cap Year or (y) in any of the transactions set forth in the Transactions Restrictions Table at any point during the 2024-25 Salary Cap Year, Team D seeks to acquire by trade a player using the Aggregated Standard Traded Player Exception. Immediately following such trade, Team D’s 2024-25 Apron Team Salary would be $195 million. The proposed trade (a transaction set forth in row H of the Transaction Restrictions Table with an Applicable Apron Level of the Second Apron Level) is prohibited by Section 2(e)(2)(i)(A) above because, immediately following the trade, Team D’s 2024-25 Apron Team Salary would exceed $189.5 million (i.e., the 2024-25 Second Apron Level).
On June 22, 2024 (after the conclusion of the 2023-24 Regular Season in April 2024), having not previously engaged in any of the transactions set forth in rows A through E of the Transaction Restrictions Table at any point during the 2023-24 Salary Cap Year, Team E acquires by trade a Player Contract using the Transition Traded Player Exception. Immediately following such trade, Team E’s 2023-24 Apron Team Salary is $175 million, and Team E’s 2024-25 Apron Team Salary (calculated in accordance with Section 2(e)(3)(i) above) is $168 million. Such trade (a transaction set forth in row G of the Transaction Restrictions Table with an Applicable Apron Level of the First Apron Level): (a) is not prohibited by Section 2(e)(2)(i)(B) above because Team E had not previously engaged in any of the transactions set forth in rows A through E of the Transaction Restrictions Table at any point during the 2023-24 Salary Cap Year (i.e., transactions that would have prohibited Team E from having an Apron Team Salary that exceeds the First Apron Level in the 2023-24 Salary Cap Year); (b) is not prohibited by Section 2(e)(2)(i)(A) above because, notwithstanding that Team E’s 2023-24 Apron Team Salary exceeds $170 million (i.e., the 2023-24 First Apron Level), pursuant to Section 2(e)(5) above, a Team that uses the Transition Traded Player Exception to acquire a player during the 2023-24 Salary Cap Year will not by virtue of using such Traded Player Exception be prohibited from having a 2023-24 Apron Team Salary that exceeds the 2023-24 First Apron Level; and (c) is not prohibited by Section 2(e)(2)(ii)(A) above because, immediately following such trade, Team E’s 2024-25 Apron Team Salary (calculated in accordance with Section 2(e)(3)(i) above) is less than or equal to $170 million (i.e., the assumed 2024-25 First Apron Level as calculated in accordance with Section 2(e)(3)(ii) above). As a result of the trade, pursuant to Section 2(e)(2)(ii)(B) above: (i) for the remainder of the 2023-24 Salary Cap Year, Team E may not have a 2024-25 Apron Team Salary (calculated in accordance with Section 2(e)(3)(i) above) that exceeds $170 million (i.e., the assumed 2024-25 First Apron Level); and (ii) for the entirety of the 2024-25 Salary Cap Year, Team E may not have a 2024-25 Apron Team Salary that exceeds $178.5 million (i.e., the 2024-25 First Apron Level).

Draft Pick Penalty.
1. As used in this Agreement, the following terms shall have the following meanings:
  1. “Second Apron Team” means, for a Salary Cap Year, a Team that, as of the start of the Team’s last Regular Season game occurring within such Salary Cap Year, has an Apron Team Salary for such Salary Cap Year that exceeds the Second Apron Level for such Salary Cap Year.
  2. “Draft Pick Penalty” means, for a Team’s first round draft pick, that such draft pick shall be the final draft pick in the first round of the applicable NBA Draft (regardless of the position in the first round of the Draft at which the Team otherwise would have selected pursuant to NBA rules governing the order of selection by Teams in the Draft); provided, however, that, if multiple Teams’ first round draft picks are each subject to a Draft Pick Penalty in respect of the same NBA Draft, then the Teams with such first round draft picks shall select in the inverse order of their winning percentage for the Regular Season immediately preceding such NBA Draft (with priority in selection among any such Teams tied on a winning percentage basis established pursuant to NBA rules governing the order of selection by Teams in the Draft). For example, if Team A’s and Team B’s first round draft picks in the 2032 NBA Draft are each subject to a Draft Pick Penalty, and Team A finished with a better winning percentage than Team B for the 2031-32 Regular Season, then Team A would make the final selection in the first round of the 2032 NBA Draft and Team B would make the immediately preceding selection.
2. Beginning with the 2024-25 Salary Cap Year, if a Team is a Second Apron Team for a Salary Cap Year, then:
  1. the Team shall be prohibited from trading (either conditionally or unconditionally) its first round draft pick in the first NBA Draft that occurs following the seventh Season that follows the Season occurring within such Salary Cap Year; and
  2. with respect to the four (4) Salary Cap Years immediately following such Salary Cap Year:
    1. If the Team is a Second Apron Team for two (2) or more of such four (4) Salary Cap Years, then such first round draft pick shall be subject to a Draft Pick Penalty; and
    2. If the Team is a Second Apron Team for fewer than two (2) of such four (4) Salary Cap Years, then, as of the day following the last day of the Regular Season encompassed by the third of such four (4) Salary Cap Years in which the Team is not a Second Apron Team, such Team shall be permitted to trade (conditionally or unconditionally) such first round draft pick. For clarity, such first round draft pick shall not be subject to a Draft Pick Penalty.
    Example: If Team A is a Second Apron Team for the 2024-25 Salary Cap Year, then it would be prohibited from trading its 2032 first round draft pick (i.e., its first round draft pick in the first NBA Draft that occurs following the seventh Season that follows the Season occurring within such Salary Cap Year). If Team A is also a Second Apron Team for the 2025-26 and 2028-29 Salary Cap Years, then Team A’s 2032 first round draft pick would be subject to a Draft Pick Penalty.
    
    Example: If Team B is a Second Apron Team for the 2024-25 Salary Cap Year, then it would be prohibited from trading its 2032 first round draft pick. If Team B is not a Second Apron Team in the 2025-26, 2026-27, and 2027-28 Salary Cap Years, then Team B would be permitted to trade its 2032 first round draft pick as of the day following the last day of the 2027-28 Regular Season (and such first round draft pick would not be subject to a Draft Pick Penalty).
Expansion Team Salary Caps, Minimum Team Salaries, Tax Levels, and Apron Levels. Each Expansion Team shall have the same Salary Cap, Minimum Team Salary, Tax Level, First Apron Level, and Second Apron Level as all other Teams, except as follows:
1. During the first Salary Cap Year in which it begins play, an Expansion Team shall have a Salary Cap equal to sixty-six and two-thirds percent (66-2/3%) of the Salary Cap calculated pursuant to Section 2(a) above (the “First Year Expansion Team Salary Cap”); and shall have a Minimum Team Salary equal to ninety percent (90%) of the First Year Expansion Team Salary Cap.
2. During the Salary Cap Year immediately following the Salary Cap Year in which it begins play, an Expansion Team shall have a Salary Cap equal to eighty percent (80%) of the Salary Cap calculated pursuant to Section 2(a) above (the “Second Year Expansion Team Salary Cap”); and shall have a Minimum Team Salary equal to ninety percent (90%) of the Second Year Expansion Team Salary Cap.

7.3 Determination of Salary.

For the purposes of determining a player’s Salary with respect to a Salary Cap Year, the following rules shall apply:

Deferred Compensation.
1. General Rule: All Player Contracts entered into, extended, or renegotiated after the date of this Agreement shall specify the Season(s) in which any Deferred Compensation is earned. Deferred Compensation shall be included in a player’s Salary for the Salary Cap Year encompassing the Season in which such Deferred Compensation is earned.
2. Over 38 Rule: The following provisions shall apply to any Player Contract entered into, extended, or renegotiated that, beginning with the date such Contract, Extension, or Renegotiation is signed, covers four (4) or more Seasons, including one (1) or more Seasons commencing after such player will reach or has reached age thirty-eight (38) (an “Over 38 Contract”):
  1. Except as provided in Sections 3(a)(2)(ii)-(iii) below, the aggregate Salaries in an Over 38 Contract for Salary Cap Years commencing with the fourth Salary Cap Year of such Over 38 Contract or the first Salary Cap Year that covers a Season that follows the player’s 38th birthday, whichever is later, shall be attributed to the prior Salary Cap Years pro rata on the basis of the Salaries for such prior Salary Cap Years.
  2. If a Qualifying Veteran Free Agent who is age 35 or 36 enters into an Over 38 Contract with his Prior Team covering five (5) Seasons, the Salary in such Over 38 Contract for the fifth Salary Cap Year shall be attributed to the prior Salary Cap Years pro rata on the basis of the Salaries for such prior Salary Cap Years. For purposes of this Section 3(a)(2)(ii), a Qualifying Veteran Free Agent who (x) enters into an Over 38 Contract with his Prior Team prior to October 1 of a Salary Cap Year, (y) is age 34 at the time he enters into the Contract, and (z) will turn age 35 on or before such October 1 shall be deemed to be 35 at the time he enters into such Over 38 Contract.
  3. For each Salary Cap Year of an Over 38 Contract beginning with the second Salary Cap Year prior to the First Zero Year (as defined in Section 3(a)(2)(vi) below), if the player’s Contract has not been terminated as of the July 1 of such Salary Cap Year, then the Salaries of the player for such Salary Cap Year and the subsequent two (2) or fewer Salary Cap Years covered by the Contract (including any Zero Year (as defined in Section 3(a)(2)(vi) below)) shall, on such July 1, be aggregated and attributed in equal shares to each of such three (3) or fewer Salary Cap Years.
  4. Notwithstanding Section 3(a)(2)(i) above, there shall be no re-allocation of Salaries pursuant to this Section 3(a)(2) for any Contract between a Qualifying Veteran Free Agent and his Prior Team covering four (4) or fewer Seasons entered into by a player at age 35 or 36. For purposes of this Section 3(a)(2)(iv), a Qualifying Veteran Free Agent who (x) enters into an Over 38 Contract with his Prior Team prior to October 1 of a Salary Cap Year, (y) is age 34 at the time he enters into the Contract, and (z) will turn age 35 on or before such October 1 shall be deemed to be 35 at the time he enters into such Over 38 Contract.
  5. For purposes of determining whether a Contract is an Over 38 Contract pursuant to this Section 3(a)(2) only, Seasons shall be deemed to commence on October 1 and conclude on the last day of the Salary Cap Year.
  6. “Zero Year” means, with respect to an Over 38 Contract, any Salary Cap Year in which the Salary called for under the Contract has been attributed, in accordance with Section 3(a)(2)(i), (ii), or (iii) above, to prior Salary Cap Years of the Contract. “First Zero Year” means, with respect to an Over 38 Contract, the earliest Salary Cap Year in which the Salary called for under the Contract has been attributed, in accordance with Section 3(a)(2)(i), (ii), or (iii) above, to prior Salary Cap Years of the Contract.
  7. For purposes of this subsection (a)(2): (i) a player (A) whose birthday is on a date during the Moratorium Period and (B) who signs a Contract, Extension, or Renegotiation on or before the fifth day following the date on which the Moratorium Period concludes shall be treated as if his age, at the time of such signing, was his age on the immediately preceding June 30; and (ii) any player whose Over 38 Contract is signed pursuant to Section 8(e)(1) below shall not be considered a Qualifying Veteran Free Agent.
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 provided for in a Player Contract that is earned upon the signing of such Contract;
  2. at the time of a trade of a Player Contract, any amount that, under the terms of the Contract, is earned in the form of a bonus upon the trade of the Contract; and
  3. payments in excess of the Excluded International Player Payment Amount, in accordance with Section 3(e) below.
2. Proration: Any signing bonus contained in a Player Contract shall be allocated over the number of Salary Cap Years (or over the then-current and any remaining Salary Cap Years in the case of a signing bonus described in Section 3(b)(1)(ii) above) covered by such Contract in proportion to the percentage of Base Compensation in each such Salary Cap Year that, at the time of allocation, is protected for lack of skill; provided, however, that if the Player Contract provides for an ETO, the foregoing allocation shall be performed only over Salary Cap Years that precede the Effective Season of such ETO. In the event that, at the time of allocation, none of the Base Compensation provided for by a Player Contract (or none of the then-current or remaining Base Compensation in the case of a signing bonus described in Section 3(b)(1)(ii) above) is protected for lack of skill, then the entire amount of the signing bonus shall be allocated to the first Salary Cap Year of the Contract (or, in the case of a signing bonus described in Section 3(b)(1)(ii) above, the Salary Cap Year during which the player’s Contract is traded).
3. 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 first Salary Cap Year covered by the extended term and shall be allocated, in equal parts, over the number of Salary Cap Years covered by the extended term in proportion to the percentage of Base Compensation in each such Salary Cap Year that, at the time of allocation, is protected for lack of skill. In the event that, at the time of the allocation, none of the Base Compensation provided for during the extended term is protected for lack of skill, then the entire amount of the signing bonus shall be allocated to the first Salary Cap Year 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 Section 3(b)(3)(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 first Salary Cap Year covered by the extended term, the following rules shall apply:
    1. The signing bonus shall be allocated over the remaining Salary Cap Years (including the then-current Salary Cap Year) under the original term of the Contract and the extended term in proportion to the percentage of Base Compensation in each such Salary Cap Year that, at the time of allocation, is protected for lack of skill. In the event that, at the time of allocation, none of the Base Compensation provided for during the then-current and any remaining Salary Cap Years under the original term of the Contract or during the extended term is protected for lack of skill, then the entire amount of the signing bonus shall be allocated to the Salary Cap Year during which the Extension is signed; and
    2. The Extension shall be deemed a Renegotiation and shall be subject to the rules governing Renegotiations set forth in Section 7 below; and
    3. Notwithstanding Article II, Section 3(b), the Exhibit 1 of such Extension must provide that the signing bonus shall be paid in two (2) installments as follows:
      1. the first installment shall be paid on a specified date prior to the first day of the first Salary Cap Year covered by the extended term, and shall be for an amount equal to the portion of the signing bonus that is allocated to the Salary Cap Year(s) covered by the original term of the Contract; and
      2. the second installment shall be paid on a specified date on or after the first day of the first Salary Cap Year covered by the extended term, and shall be for an amount equal to the portion of the signing bonus that is allocated to the Salary Cap Year(s) covered by the extended term of the Contract.
  3. If a Team and player enter into an Extension and provide that the trade bonus provision contained in the original Contract would not be applicable to the extended term in accordance with Article XXIV, Section 2(a)(v), then, in the case of an earned signing bonus described in Section 3(b)(1)(ii) above, the signing bonus shall be allocated over the then-current and any remaining Salary Cap Year(s) covered by the original term of the extended Contract (and not any of the Salary Cap Years covered by the extended term) in proportion to the percentage of Base Compensation in each such Salary Cap Year that, at the time of allocation, is protected for lack of skill. In the event that, at the time of allocation, none of the then-current or applicable remaining Base Compensation is protected for lack of skill, then the entire amount of the signing bonus shall be allocated to the Salary Cap Year during which the player’s extended Contract is traded.
  4. If a Team and player enter into an Extension that contains a trade bonus provision that is applicable to the Contract’s original and extended term, then, in the case of a signing bonus described in Section 3(b)(1)(ii) above that is earned prior to the first day of the Salary Cap Year covered by the extended term:
    1. For purposes of calculating the signing bonus and allocating the signing bonus to the applicable Salary Cap Year(s), the Base Compensation in the extended term of the Contract shall be the Base Compensation as set forth in the Contract; provided, however, that:
      1. If the Contract provides for Base Compensation in the first Salary Cap Year of the extended term that is expressed as a percentage of the Salary Cap in accordance with Article II, Section 7(d) or Section 7(e), then the Base Compensation in the extended term of the Contract shall be determined assuming that the Salary Cap will increase by four and one-half percent (4.5%) each Salary Cap Year beginning with the Salary Cap Year following the then-current Salary Cap Year and ending with the first Salary Cap Year covered by the extended term; or
      2. If the Contract provides for Salary plus Unlikely Bonuses in the first Salary Cap Year of the extended term that exceeds the applicable Maximum Annual Salary that would apply to such player assuming that (a) the player will be credited with a Year of Service for each remaining year of the original term of the Contract, and (b) the Salary Cap will increase by four and one-half percent (4.5%) each Salary Cap Year beginning with the Salary Cap Year following the then-current Salary Cap Year and ending with the first Salary Cap Year covered by the extended term, then the Base Compensation in the extended term of the Contract shall be determined to be the Base Compensation that would result from the deemed amendment(s) pursuant to Article II, Section 7(c) using the assumptions described in clauses (a) and (b) of this subsection.
    2. Notwithstanding the Exhibit 4 to such Contract, the signing bonus shall be paid in two (2) installments as follows:
      1. The first installment shall be paid within thirty (30) days of the date of the trade to which the bonus applies, and shall be for an amount equal to the portion of the signing bonus that is allocated to the Salary Cap Year(s) covered by the original term of the Contract; and
      2. The second installment shall be paid within thirty (30) days of the first day of the first Salary Cap Year covered by the extended term, and shall be for an amount equal to the portion of the signing bonus that is allocated to the Salary Cap Year(s) covered by the extended term of the Contract.
  5. In the event that a team is required to make signing bonus payment(s) pursuant to Section 3(b)(3)(i), 3(b)(3)(ii)(C), or 3(b)(3)(iv) above, and the amount(s) of the signing bonus allocation in respect of such signing bonus are deemed amended pursuant to Article II, Section 7(c), then the amount of the payment required pursuant to Section 3(b)(3)(i), 3(b)(3)(ii)(C)(2), or 3(b)(3)(iv)(B)(2) above shall be reduced to equal the sum of the signing bonus allocation amount(s) that result from the deemed amendment(s) pursuant to Article II, Section 7(c).
Loans to Players. The following rules shall apply to any loan made by any Team to a player:
1. If any such loan bears no interest (or annual interest at an effective rate lower than the “Target Rate” (as defined below)), then the interest shall be imputed on the outstanding balance at a rate equal to the difference between the Target Rate and the actual rate of interest to be paid by the player and such imputed interest shall be included in the player’s Salary. The “Target Rate” means the “Prime Rate” (as defined below) plus one percent (1%) as of the date the loan is agreed upon, except that the “Target Rate” shall be no lower than seven percent (7%) or greater than nine percent (9%). For purposes of this Section 3(c)(1), “Prime Rate” means the prime rate reported in the “Money Rates” column or any successor column of The Wall Street Journal.
2. No loan made to a player may (along with other outstanding loans to the player) exceed the amount of the player’s Salary for the then-current Salary Cap Year that is protected for lack of skill. All loans must be repaid through deductions from the player’s remaining Current Base Compensation over the years of the Contract that, at the time the loan is agreed upon, provide for Base Compensation that is fully protected for lack of skill (prior to the Effective Season of any ETO) in equal annual amounts (the “annual allocable repayment amounts”). If a loan is made at a time when the remaining Current Base Compensation due for the relevant Season that is fully protected for lack of skill is less than the annual allocable repayment amount that would be owed on a loan for the full amount of the player’s Current Base Compensation that is fully protected for lack of skill for the relevant 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 Current Base Compensation that is fully protected for lack of skill. (For example, if a Player has $2 million in Current Base Compensation (fully protected for lack of skill) 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 Current Base Compensation for that Season, the loan may not exceed $1.6 million.)
3. In addition to the restrictions set forth in Section 3(c)(2) above: (i) no loan may be made that would result in a violation of Article II, Section 13(e); and (ii) no loan may be made to a player whose Contract provides for Base Compensation equal to the Minimum Player Salary.
4. 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.
Incentive Compensation.
1. For purposes of determining a player’s Salary each Salary Cap Year, except as provided in Sections 3(d)(2)-(4) below, any Performance Bonus (provided such Performance Bonus may be included in a Player Contract in accordance with Section 5(b) below), shall be included in Salary only if such Performance Bonus would be earned if the Team’s or player’s performance were identical to the performance in the immediately preceding Salary Cap Year.
2. Notwithstanding Section 3(d)(1) above, in the event that, at the time of the signing of a Contract, Renegotiation or Extension, the NBA or the Players Association believes that the performance of a player and/or his Team during the immediately preceding Salary Cap Year does not fairly predict the likelihood of the player earning a Performance Bonus during any Salary Cap Year covered by the Contract, Renegotiation, or extended term of the Extension (as the case may be), 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 more likely than not 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 conduct a hearing within five (5) business days after the initiation of the proceeding, and shall render a determination within five (5) business days after the hearing. Notwithstanding anything to the contrary in this Section 3(d)(2), no party may, in connection with any proceeding before the Expert, refer to the facts that, absent a challenge pursuant to this Section 3(d)(2), a Performance Bonus would or would not be included in a player’s Salary pursuant to Section 3(d)(1) above, or would be termed “Likely” or “Unlikely” pursuant to Article I, Section 1(ff) or (eeee). If, following an NBA challenge, the Expert determines that a Performance Bonus is more likely than not 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 Performance Bonus is more likely than not 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 Section 3(d)(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 Salary Cap Year who signs a Contract containing a Performance Bonus, or in the case of a player signed or acquired by an Expansion Team whose Contract contains a Performance Bonus to be paid as a result of, in whole or in part, the player’s achievement of agreed-upon benchmarks relating to the Team’s performance during its first Salary Cap Year, such 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 Performance 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 conduct a hearing within five (5) business days after the initiation of the proceeding, and shall render a determination within five (5) business days after the hearing. The Expert’s determination that a Performance 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 Section 3(d)(3) shall be borne equally by the parties.
4. In the event that either party initiates a proceeding pursuant to Section 3(d)(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 Sections 3(d)(2) and (3) above may be filed with the Grievance Arbitrator in accordance with Article XXXI, Sections 2-7 and 15.
6. All Incentive Compensation described in Article II, Sections 3(b)(iii) and 3(c) shall be included in Salary.

International Player Payments.

Any amount in excess of the amounts set forth below (“Excluded International Player Payment Amounts”) 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 player who is participating in the game of basketball as a professional outside of the United States to enter into a Player Contract or in connection with securing the right to enter into a Player Contract with such a player shall be deemed Salary (in the form of a signing bonus) to the player:

Salary Cap Year	Excluded International Player Payment Amount
2023-24	$825,000
2024-25	$850,000
2025-26	$875,000
2026-27	$900,000
2027-28	$925,000
2028-29	$950,000
2029-30	$975,000

Subject to Article XIII, any payment up to the Excluded International Player Payment Amount for a Salary Cap Year paid by or at the direction of any NBA Team pursuant to Section 3(e)(1) above to a professional basketball team outside the United States to secure the contractual release of a player shall not be deemed Salary to the player.
Any payment for a Salary Cap Year paid by or at the direction of any NBA Team pursuant to Section 3(e)(1) above may be paid in a single installment or in multiple installments. The Excluded International Player Payment Amount, whether used in whole or in part, may be used by an NBA Team whenever it signs a player to a new Player Contract, except that the Excluded International Player Payment Amount may not be used, in whole or in part, more than once in any three-Salary Cap Year period with respect to the same player.
The Excluded International Player Payment Amount, 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 Excluded International Player Payment Amount, 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 Excluded International Player Payment Amount.
Notwithstanding Section 3(e)(1) above, no amount paid or to be paid pursuant to this Section 3(e) shall be counted toward the Minimum Team Salary obligation of a Team in accordance with Section 2(b) or (c) above.
Within two (2) business days following the NBA’s receipt of notice of any payments made by any NBA Team that are governed by this Section 3(e), the NBA shall provide the Players Association with written notice of such payments.
Notwithstanding anything to the contrary in this Section 3(e), Teams shall be prohibited from making any payment governed by this Section 3(e) for the purpose of inducing a player to enter into a Two-Way Contract or a Contract with an Exhibit 10, or in connection with securing the right to enter into a Two-Way Contract or a Contract with an Exhibit 10 with a player; and any Team that agrees to make a payment governed by this Section 3(e) with respect to a player shall be prohibited from entering into a Two-Way Contract or a Contract with an Exhibit 10 with such player for a period of one (1) year following the date of such agreement.

One-Year Minimum Contracts. Except where otherwise stated in this Agreement, the Salary of every player who signs a one-year, 10-Day, or Rest-of-Season Contract for the Minimum Player Salary applicable to such player shall be the lesser of (1) such Minimum Player Salary, or (2) the portion of such Minimum Player Salary that is not reimbursed out of the League-wide benefits fund described in Article IV, Section 6(h).
Insurance Premium Reimbursement. If a Team reimburses a player for life insurance premiums pursuant to Article II, Section 4(j)(ii), such premium reimbursement shall not be included in the computation of the player’s Salary.
Averaging. In accordance with Article XI, Section 5(d)(iii), a player’s Salary for each Salary Cap Year covered by his Contract shall be deemed in certain circumstances to be the average of the aggregate Salaries for each such Salary Cap Year.
Player Conduct-Related Compensation Reductions. The computation of a player’s Salary shall be made without regard to any reduction made (or to be made) to his Compensation in accordance with Article VI, Section 1 or Article XLI, Section 4(e). For clarity, this Section 3(i) shall not apply to the computation of a player’s Adjustment Salary in accordance with Article VII, Section 12.
Existing Contracts. A player’s Salary with respect to any Salary Cap Year covered by a Contract entered into prior to the effective date of this Agreement shall continue to be calculated in accordance with the Salary Cap rules that were in existence at the time the Contract was entered into except as provided in Section 7(d)(6) below. In no event shall the preceding sentence apply to the calculation of Salary with respect to any Contract, Extension (with respect to the extended term), Renegotiation, transaction, or event entered into or occurring on or after the effective date of this Agreement.

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 paid or to be paid 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), except that, with respect to any Player Contract that has been terminated pursuant to the NBA’s waiver procedure, if the waiving Team elects in writing to have the player’s Salary stretched for Team Salary purposes in accordance with applicable CBA stretch rules, then the amount to be included in Team Salary for a Salary Cap Year in respect of the terminated Player Contract shall equal the amount allocated to such Salary Cap Year in accordance with such rules.
  2. Any amount called for in a retired player’s Player Contract paid or to be paid to the player. When a player retires and the Team continues to pay such amounts, then, for purposes of computing the player’s Salary for the then-current and any remaining Salary Cap Year covered by the Contract, the aggregate of such amounts, notwithstanding the payment schedule, shall be allocated pro rata over the then-current and each remaining Salary Cap Year on the basis of the remaining unearned protected Compensation in each such Salary Cap Year at the time of retirement.
  3. Amounts paid or to be paid pursuant to awards for, or settlements of, Grievances between a player and a Team concerning Compensation obligations under a Player Contract in accordance with the following rules (which, except for purposes of Section 4(a)(1)(iii)(C) below, shall be applied with respect to each Season for which there is any Compensation in dispute, as if the grievance relates only to such Season):
    1. 1. When a player initiates a Grievance (as defined in Article XXXI) against a Team seeking the payment of Compensation for a Season covered by the current or any future Salary Cap Year that the Team asserts is not owed, fifty percent (50%) of the disputed amount shall be included in Team Salary for the Salary Cap Year to which the Grievance relates. If the Grievance is resolved during or prior to the Salary Cap Year to which it relates, following resolution of the Grievance, whether by award or settlement, the disputed amount payable by the Team in excess of the fifty percent (50%) allocation shall be included in Team Salary for the Salary Cap Year to which the Grievance relates, or, alternatively, the amount by which the fifty percent (50%) allocation exceeds the disputed amount payable by the Team shall be subtracted from Team Salary for the Salary Cap Year to which the Grievance relates.
      2. If a Grievance described in the first sentence of Section 4(a)(1)(iii)(A)(1) above is resolved after the conclusion of the Salary Cap Year to which it relates, the disputed amount payable by the Team related to such Salary Cap Year in excess of the fifty percent (50%) allocation shall be included in Team Salary for the Salary Cap Year in which the Grievance is resolved, or, alternatively, the amount by which the fifty percent (50%) allocation exceeds the disputed amount payable by the Team related to such Salary Cap Year shall be subtracted from Team Salary for the Salary Cap Year in which the grievance is resolved. Notwithstanding the preceding sentence: (i) a Team shall be required to pay additional tax to the NBA if and to the extent that, due to the operation of this Section 4(a)(1)(iii)(A)(2), the aggregate tax it pays to the NBA pursuant to Section 2(d) above for the two (2) Salary Cap Years in question (the Salary Cap Year for which the fifty percent (50%) allocation was made and the subsequent Salary Cap Year in which the Grievance was resolved) is less than it would have been had the Grievance been resolved during the Salary Cap Year to which it related; and (ii) a Team shall be entitled to a tax refund from the NBA if and to the extent that, due to the operation of this Section 4(a)(1)(iii)(A)(2), the aggregate tax it pays to the NBA pursuant to Section 2(d) above for the two (2) Salary Cap Years in question is greater than it would have been had the grievance been resolved during the Salary Cap Year to which it related. In order to facilitate any such required tax refund from the NBA to the Team, the NBA shall set aside, pending resolution of the Grievance, the amount of tax paid by that Team in the Salary Cap Year to which the Grievance relates that is attributable to the fifty percent (50%) allocation. Following resolution of the Grievance, the NBA shall pay to the Team the tax refund to which it is entitled (if any) based upon the resolution of the Grievance, and the remainder of the set aside tax funds shall be distributed by the NBA to one (1) or more Teams or otherwise used by the League in such manner as the NBA may reasonably determine, consistent with the provisions of Section 2(d)(4) above.
    2. When a player initiates a Grievance against a Team seeking the payment of Compensation for a Season covered by a prior Salary Cap Year that the Team asserts is not owed, following resolution of the Grievance, whether by award or settlement, the disputed amount payable by the Team, if any, shall be included in Team Salary for the Salary Cap Year in which the Grievance is resolved (but only to the extent that it had been previously excluded from Team Salary). Notwithstanding the preceding sentence: (i) a Team shall be required to pay additional tax to the NBA if and to the extent that, due to the operation of this Section 4(a)(1)(iii)(B), the aggregate tax it pays to the NBA pursuant to Section 2(d) above for the two (2) Salary Cap Years in question (the Salary Cap Year to which the Grievance related and the subsequent Salary Cap Year in which the Grievance was resolved) is less than it would have been had the disputed amount payable by the Team been included in Team Salary during the Salary Cap Year to which it related; and (ii) a Team shall be entitled to a tax refund from the NBA if and to the extent that, due to the operation of this Section 4(a)(1)(iii)(B), the aggregate tax it pays to the NBA pursuant to Section 2(d) above for the two (2) Salary Cap Years in question is greater than it would have been had the disputed amount payable by the Team been included in Team Salary during the Salary Cap Year to which it related.
    3. If a Grievance relates to a player’s Compensation for more than one (1) Season, for purposes of determining the disputed amount payable by the Team with respect to each such Season following the resolution of the Grievance, the aggregate amounts payable to the player for all Seasons pursuant to the resolution of the Grievance, whether by award or settlement, shall be allocated to each such Season in proportion to the amount of Compensation that was in dispute for such Season, unless, in the case of an award, the Grievance Arbitrator allocates the amounts payable to the player to specific Seasons.
    4. Immediately upon reaching any agreement (oral or written) to resolve a Grievance relating to a player’s Compensation, a Team shall notify the NBA by email and provide the NBA with the terms of such agreement. A Team’s failure to comply with the preceding sentence may be considered evidence of a violation of Article XIII. If a Team delays or attempts to delay in any manner the processing or resolution of a Grievance relating to a player’s Compensation for the purpose of creating or increasing its Room in any Salary Cap Year or for the purpose of reducing or deferring a tax payment to the NBA, such conduct shall constitute a violation of Article XIII.
  4. Salaries anticipated to be included in Team Salary based upon any agreement disclosed to the NBA pursuant to Article II, Section 13(a)(i) (including, without limitation, any executed Player Contract whose validity is conditional on the passage of a physical examination by the player or on the assignment of the Contract), except to the extent that any such Salary is less than a player’s Free Agent Amount (as defined in Section 4(d) below).
2. 1. With respect to each Veteran Free Agent who last played for a Team who is an Unrestricted Free Agent, the Free Agent Amount (as defined in Section 4(d) below) attributable to such Veteran Free Agent.
  2. With respect to each Veteran Free Agent who last played for a Team who is a Restricted Free Agent, the greater of (A) the Free Agent Amount (as defined in Section 4(d) below) attributable to such Veteran Free Agent, (B) the Salary called for in any outstanding Qualifying Offer (other than a Two-Way Qualifying Offer, as defined in Article XI, Section 1(e)(iii)(B) below) tendered to such Veteran Free Agent (or, if the Restricted Free Agent was also tendered a Maximum Qualifying Offer pursuant to Article XI, Section 4(a)(ii), the Salary called for in such outstanding Maximum Qualifying Offer), or (C) the Salary called for in any First Refusal Exercise Notice (as defined in Article XI, Section 5(g)) issued with respect to such Veteran Free Agent.
3. The aggregate Salaries called for under all outstanding Offer Sheets (as defined in Article XI, Section 5(b)).
4. An amount with respect to a Team’s unsigned First Round Pick, if any, as determined in accordance with Section 4(e) below.
5. An amount with respect to the number of players fewer than twelve (12) included in a Team’s Team Salary, as determined in accordance with Section 4(f) below.
6. Value or consideration received by retired players that is determined to be includable in Team Salary in accordance with Article XIII, Section 5.
7. The amount of any Salary Cap Exception that is deemed included in Team Salary in accordance with Section 6(n)(2) below.
8. An amount, if any, included in Team Salary in accordance with the Minimum Team Salary rules set forth in Section 2(c)(3) above.
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, have included in its Team Salary the entire Salary for the then-current Salary Cap Year and for all future Salary Cap Years.
Free Agents. Subject to Section 4(a)(2)(ii) above, until a Team’s Veteran Free Agent re-signs 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. 1. A Qualifying Veteran Free Agent, other than a Qualifying Veteran Free Agent described in Section 4(d)(1)(ii) below, will be included at one hundred fifty percent (150%) of his prior Salary if it was equal to or greater than the Estimated Average Player Salary for the prior Salary Cap Year, and one hundred ninety percent (190%) of his prior Salary if it was less than the Estimated Average Player Salary for the prior Salary Cap Year.
  2. A Qualifying Veteran Free Agent following the second Option Year of his Rookie Scale Contract will be included at two hundred fifty percent (250%) of the player’s prior Salary if it was equal to or greater than the Estimated Average Player Salary for the prior Salary Cap Year, and three hundred percent (300%) of his prior Salary if it was less than the Estimated Average Player Salary for the prior Salary Cap Year.
2. An Early Qualifying Veteran Free Agent will be included at one hundred thirty percent (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 Sections 6(b) and 6(j)(5) below.
3. A Non-Qualifying Veteran Free Agent will be included at one hundred twenty percent (120%) of his prior Salary.
4. Notwithstanding Sections 4(d)(1)-(3) above, if the player’s prior Salary was equal to or less than the Minimum Player Salary applicable to such player, he will be included at the portion of the then-current Minimum Annual Salary applicable to such player that would not be reimbursed out of the League-wide benefits fund described in Article IV, Section 6(h).
5. Notwithstanding Sections 4(d)(1)-(3) above, at no time shall a player’s Free Agent Amount exceed the Maximum Player Salary applicable to such player or be less than the portion of the Minimum Annual Salary applicable to such player that would not be reimbursed out of the League-wide benefits fund described in Article IV, Section 6(h).
6. Notwithstanding Sections 4(d)(1)-(3) above, at no time shall a Free Agent Amount for a Veteran Free Agent following the second or third Season of his Rookie Scale Contract exceed the maximum amount the Team may pay the player pursuant to Section 6(n)(3) below.
7. Notwithstanding Sections 4(d)(1)-(5) above, if a Two-Way Player completes a Two-Way Contract, the player’s Free Agent Amount will be the Minimum Annual Salary applicable to a player completing a Standard NBA Contract for the zero (0) Years of Service Minimum Annual Salary.
8. For purposes of this Section 4(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 Incentive Compensation actually earned for such Season under the Player Contract in effect when the player finished the prior Season.
First Round Picks.
1. 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 one hundred twenty percent (120%) of his applicable Rookie Scale Amount (“Rookie Scale Cap Hold Amount”), and, subject to Sections 4(e)(2) and (3) 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 Cap Hold 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 Cap Hold 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 renounces its exclusive rights to the player in accordance with Article X, Section 4(g). 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 Cap Hold 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 Cap Hold 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 renounces its exclusive rights to the player in accordance with Article X, Section 4(g).
3. A Team that holds draft rights to a First Round Pick may elect to have the player’s applicable Rookie Scale Cap Hold Amount excluded from its Team Salary at any time prior to the first day of any Regular Season by providing the NBA with a written statement that the Team will not sign the player during that Salary Cap Year accompanied by a written statement from the First Round Pick renouncing his right to accept any outstanding Required Tender made to him by the Team. After making such an election, (i) the Team shall be prohibited from signing the player during that Salary Cap Year, except in accordance with Section 5(c)(4)(ii) below, (ii) the Team shall continue to possess such rights with respect to the player that the Team possessed pursuant to Article X immediately prior to such election, and (iii) the player’s applicable Rookie Scale Amount shall be included again in his Team’s Team Salary at the applicable Rookie Scale Cap Hold Amount on the following July 1. When a First Round Pick provides a Team with a written statement renouncing his right to accept that year’s outstanding Required Tender, the Player shall no longer be permitted to accept it.
4. For purposes of this Section 4(e), in the event that a First Round Pick does not sign a Contract with the Team that holds his draft rights during the Salary Cap Year immediately following the Draft in which he was selected (or during the same Salary Cap Year in which he was drafted if the Draft occurs on or after July 1), the “applicable Rookie Scale Amount” for such First Round Pick means, with respect to any subsequent 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.
Incomplete Rosters.
1. If at any time from July 1 through the day prior to the first day of the Regular Season a Team has fewer than twelve (12) players, determined in accordance with Section 4(f)(2) below, included in its Team Salary, then the Team’s Team Salary shall be increased by an amount calculated as follows:
  - STEP 1: Subtract from twelve (12) the number of players included in Team Salary.
  - STEP 2: If the result in Step 1 is a positive number, multiply the result in Step 1 by the Minimum Annual Salary applicable to players with zero (0) Years of Service under the Minimum Annual Salary Scale for that Salary Cap Year.
2. In determining whether a Team has fewer than twelve (12) players included in its Team Salary for purposes of Section 4(f)(1) above only, the only players who shall be counted are (i) players under Contract with the Team who are included in Team Salary, (ii) Free Agents who are included in Team Salary pursuant to Section 4(a)(2) above, (iii) players to whom Offer Sheets have been given, and (iv) unsigned First Round Picks who are included in Team Salary pursuant to Section 4(e) above.
Renouncing.
1. To renounce a Veteran Free Agent, a Team must provide the NBA with a written statement renouncing its right to re-sign the player, effective no earlier than the July 1 following the last Season covered by the player’s Contract. (The NBA shall notify the Players Association of any such renunciation by email within two (2) business days following receipt of notice of such renunciation.) If a Team renounces a Veteran Free Agent, the player will no longer qualify as a Qualifying Veteran Free Agent, Early Qualifying Veteran Free Agent, or Non-Qualifying Veteran Free Agent, as the case may be, and the Team will only be permitted to re-sign such player with Room (i.e., the Team cannot sign such player pursuant to Section 6(b) below), pursuant to the Minimum Player Salary Exception, or to a Two-Way Contract. Notwithstanding the foregoing, in the event a Team renounces one or more players pursuant to this Section 6(g) (or, with respect to a First Round Pick, pursuant to Article X, Section 4(g)) in order to create Room for an Offer Sheet, and the offeree-player’s Prior Team subsequently matches the Offer Sheet and enters into a Contract with that player, the Team may rescind the renunciation (in the case where a Team renounces only one player) or all such renunciations (in the case where the Team renounces more than one player) within two (2) business days of the date the Offer Sheet is matched (or, if the Prior Team conditions its match on the player reporting for and passing a physical, within two (2) business days of the player passing the physical), whereupon any such “unrenounced” player may again sign a Player Contract with the Team as a First Round Pick, Qualifying Veteran Free Agent, Early Qualifying Veteran Free Agent, or Non-Qualifying Veteran Free Agent, as the case may be, and will again be included in his Prior Team’s Team Salary at his applicable Free Agent Amount; provided, however, that a Team may not rescind the renunciation of a player if (i) at the time the player was renounced, the Team’s Team Salary was at or below the Salary Cap and “unrenouncing” the player would cause the Team’s Team Salary to exceed the Salary Cap, or (ii) at the time the player was renounced, the Team’s Team Salary was above the Salary Cap and “unrenouncing” the player would cause the Team’s Team Salary to exceed the Salary Cap by more than the amount by which the Team’s Team Salary exceeded the Salary Cap prior to the renunciation.
2. A Team cannot renounce any player who is a Restricted Free Agent.
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. Subject to Section 4(h)(5) below, a Team may apply to the NBA to have the player’s Salary for each remaining Salary Cap Year covered by the Contract excluded from Team Salary beginning on the first anniversary of the date of the last Regular Season, Play-In, or playoff game in which the player played; provided, however, that if the player played in fewer than ten (10) Regular Season, Play-In, and playoff games in the last Season in which he played, then the earliest date upon which a Team may apply to the NBA to have the player’s Salary excluded from its Team Salary in accordance with this Section 4(h) shall be the later of (A) sixty (60) days following the date during such Season in which the player last played in a Regular Season, Play-In, or playoff game, and (B) the first anniversary of the date during a prior Season in which the player last played in a Regular Season, Play-In, or playoff game under such Contract. Notwithstanding anything to the contrary in this Section 4(h)(1), a Team may not apply to have a player’s Salary excluded from Team Salary prior to the first anniversary of the date of the first Regular Season game that the player is on the Team’s roster under the Contract in question.
2. 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 or, upon agreement of the NBA and the Players Association, a Fitness-to-Play Panel established under Article XXII. A player shall be deemed to have suffered a career-ending injury or illness if it is determined (i) by such a physician or Fitness-to-Play Panel that the player has an injury or illness that (x) prevents him from playing skilled professional basketball at an NBA level for the duration of his career, or (y) substantially impairs his ability to play skilled professional basketball at an NBA level and is of such severity that continuing to play professional basketball at an NBA level would subject the player to medically unacceptable risk of suffering a life-threatening or permanently disabling injury or illness, or (ii) by such Fitness-to-Play Panel that the player has an injury or illness that would create a materially elevated risk of death, paralysis, or other permanent spinal injury for the player under the procedures set forth in Article XXII, Section 11.
3. Notwithstanding Sections 4(h)(1) and (2) above, if after a player’s Salary is excluded from Team Salary in accordance with this Section 4(h), the player plays in twenty-five (25) NBA Regular Season, Play-In, and playoff games in any Season for any Team, the excluded Salary for the Salary Cap Year covering such Season and each subsequent Salary Cap Year shall thereupon be included in Team Salary of the Team from which the Salary was previously excluded (and if the twenty-fifth (25th) game played is a Play-In or playoff game, then the excluded Salary shall be included in Team Salary retroactively as of the start of the Team’s last Regular Season game); provided, however, that the foregoing sentence shall not apply in the event a player is determined to have suffered a career-ending injury or illness pursuant to Section 4(h)(2)(ii) above. After a player’s Salary for one (1) or more Salary Cap Years has been included in Team Salary in accordance with this Section 4(h)(3), the Team shall be permitted to re-apply to have the player’s Salary (for each Salary Cap Year remaining at the time of the re-application) excluded from Team Salary in accordance with the rules set forth in this Section 4(h) (including the waiting period criteria set forth in Section 4(h)(1) above).
4. If a Team applies to have a player’s Salary excluded from its Team Salary pursuant to this Section 4(h), the player shall cooperate in the processing of the application, including by appearing at the reasonably scheduled place and time for examination by the jointly-selected physician. The player shall not make any misrepresentation or fail to disclose any relevant information in connection with the processing of the application.
5. Only the Team with which the player was under Contract at the time his career-ending injury or illness became known or reasonably should have become known shall be permitted to apply to have the player’s Salary excluded from Team Salary pursuant to this Section 4(h). A Team may only apply to have a player’s Salary excluded from its Team Salary pursuant to this Section 4(h) during the term covered by the player’s Contract. For clarity, if a player’s Salary is excluded from Team Salary pursuant to this Section 4(h), if, at the time of such exclusion, the Team has previously elected to stretch any Salary in respect of one or more current or future Salary Cap Years pursuant to Section 7(d)(6), such stretched Salary shall also be excluded.
6. Notwithstanding anything to the contrary in this Agreement, (i) if a Team applies to have a player’s Salary excluded from its Team Salary pursuant to this Section 4(h) and such application is granted, the Team will be prohibited from re-signing or re-acquiring that player at any time, and (ii) if a Team makes a request for an Exception to replace a Disabled Player pursuant to Section 6(c) below for a Salary Cap Year, then, whether such application is granted or denied, the Team will be precluded from applying to have that player’s Salary excluded from its Team Salary pursuant to this Section 4(h) for the same Salary Cap Year.
Summer Contracts.
1. Except as provided in Section 4(i)(2) below and subject to Article II, Section 15, from July 1 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 Team Salary until the first day of such Regular Season (i.e., the player will be deemed not to have any Salary until the first day of such Regular Season), provided that such Contracts satisfy the requirements of this Section 4(i) (each such Contract, a “Summer Contract”). Except as set forth in the following sentence, no Summer Contract may provide for (i) Compensation of any kind that is or may be paid or earned prior to the first day of the next Regular Season, or (ii) Compensation protection of any kind pursuant to Article II, Section 3(i) or 4. 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. A Team that has entered into one or more Summer Contracts must terminate such Contracts no later than the day prior to the first day of a Regular Season, except to the extent the Team has Room for such Contracts or is entitled to use the Minimum Player Salary Exception.
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 (1) Season only and provides for no more than the Minimum Player Salary applicable to such player.
Two-Way Contracts. Two-Way Player Salaries shall be excluded from Team Salary. Thus, for example, a Team is not required to have Room or an Exception to sign, acquire, or convert a player to a Two-Way Contract.
Exhibit 10 Bonus. Any amounts earned by a player pursuant to an Exhibit 10 Bonus shall be excluded from Team Salary.
Second Round Pick Exception. Subject to Article II, Section 15, each Salary Cap Year, from July 1 through July 30, if a Team signs a Player Contract pursuant to the Second Round Pick Exception, such Contract will not be included in Team Salary until July 31 of such Salary Cap Year (i.e., the player will be deemed not to have any Salary until such July 31).
Team Salary Summaries.
1. The NBA shall provide the Players Association with Team Salary summaries and a list of current Exceptions twice a month during the Regular Season and once every week 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 as provided for in Section 4(m)(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 (2) business days following receipt of such notice, provide the Players Association with any such summary or list that should have been provided pursuant to Section 4(m)(1) above.

7.5 Salary Cap Contract Structure Rules.

Annual Salary Increases and Decreases.
1. The following rules apply to all Player Contracts other than Contracts between Qualifying Veteran Free Agents or Early Qualifying Veteran Free Agents and their Prior Team:
  1. For each Salary Cap Year covered by a Player Contract after the first Salary Cap Year, the player’s: (A) Salary, excluding Incentive Compensation, may increase or decrease in relation to the previous Salary Cap Year’s Salary, excluding Incentive Compensation, by no more than five percent (5%) of the Salary for the first Salary Cap Year covered by the Contract; and (B) Regular Salary may increase or decrease in relation to the previous Salary Cap Year’s Regular Salary by no more than five percent (5%) of the Regular Salary for the first Salary Cap Year covered by the Contract.
  2. In the event that the first Salary Cap Year covered by a Contract provides for Incentive Compensation, the amount of each bonus included in the first Salary Cap Year of the Contract may increase or decrease in each subsequent Salary Cap Year by up to five percent (5%) of the amount of such bonus in the first Salary Cap Year of the Contract.
2. The following rules apply to all Player Contracts between Qualifying Veteran Free Agents or Early Qualifying Veteran Free Agents and their Prior Team (except any such Contracts signed pursuant to Section 6(d)(4), Section 6(e)(4), Section 6(f)(3), Section 6(g)(4), or Section 8(e)(1) below, which shall be governed by Section 5(a)(1) above):
  1. For each Salary Cap Year covered by a Player Contract after the first Salary Cap Year, the player’s: (A) Salary, excluding Incentive Compensation, may increase or decrease in relation to the previous Salary Cap Year’s Salary, excluding Incentive Compensation, by no more than eight percent (8%) of the Salary for the first Salary Cap Year covered by the Contract; and (B) Regular Salary may increase or decrease in relation to the previous Salary Cap Year’s Regular Salary by no more than eight percent (8%) of the Regular Salary for the first Salary Cap Year covered by the Contract.
  2. In the event that the first Salary Cap Year covered by a Contract provides for Incentive Compensation, the amount of each bonus included in the first Salary Cap Year of the Contract may increase or decrease in each subsequent Salary Cap Year by up to eight percent (8%) of the amount of such bonus in the first Salary Cap Year of the Contract.
3. The following rules apply to all Extensions other than Extensions entered into in connection with a trade pursuant to Section 8(e)(2) below:
  1. For each Salary Cap Year covered by an Extension after the first Salary Cap Year covered by the extended term, the player’s: (A) Salary, excluding Incentive Compensation, may increase or decrease in relation to the previous Salary Cap Year’s Salary, excluding Incentive Compensation, by no more than eight percent (8%) of the Salary for the first Salary Cap Year covered by the extended term of the Contract; and (B) Regular Salary may increase or decrease in relation to the previous Salary Cap Year’s Regular Salary by no more than eight percent (8%) of the Regular Salary for the first Salary Cap Year covered by the Contract.
  2. In the event that the first Salary Cap Year covered by the extended term of a Contract provides for Incentive Compensation, the amount of each bonus included in the first Salary Cap Year of the extended term may increase or decrease in each subsequent Salary Cap Year by up to eight percent (8%) of the amount of such bonus in the first Salary Cap Year of the extended term.
4. The following rules apply to Extensions entered into in connection with a trade pursuant to Section 8(e)(2) below:
  1. For each Salary Cap Year covered by an Extension after the first Salary Cap Year covered by the extended term, the player’s: (A) Salary, excluding Incentive Compensation, may increase or decrease in relation to the previous Salary Cap Year’s Salary, excluding Incentive Compensation, by no more than five percent (5%) of the Salary for the first Salary Cap Year covered by the extended term of the Contract; and (B) Regular Salary may increase or decrease in relation to the previous Salary Cap Year’s Regular Salary by no more than five percent (5%) of the Regular Salary for the first Salary Cap Year covered by the Contract.
  2. In the event that the first Salary Cap Year covered by the extended term of a Contract provides for Incentive Compensation, the amount of each bonus included in the first Salary Cap Year of the extended term may increase or decrease in each subsequent Salary Cap Year by up to five percent (5%) of the amount of such bonus in the first Salary Cap Year of the extended term.
5. For purposes of Sections 5(a)(1)(ii), 5(a)(2)(ii), 5(a)(3)(ii), and 5(a)(4)(ii), in the event that the first Salary Cap Year covered by the Contract or extended term, as applicable, provides for Incentive Compensation, the criteria for earning any bonus included in such Salary Cap Year must be unchanged in any subsequent Salary Cap Year.(6) The foregoing rules set forth above in this Section 5 shall not apply to Two-Way Contracts, which are subject to the rules set forth in Article II, Section 11(a).
Performance Bonuses.
1. Notwithstanding any other provision of this Agreement, no Player Contract may provide for Unlikely Bonuses in any Salary Cap Year that exceed fifteen percent (15%) of the player’s Regular Salary for such Salary Cap Year at the time the Contract is signed; provided, however, that: (i) with respect to Extensions, if the amount of Unlikely Bonuses in the Salary Cap Year in which the Extension is signed exceeds fifteen percent (15%) of the player’s Regular Salary for such Salary Cap Year, the Extension may provide for up to the same percentage of Unlikely Bonuses in the first year of the extended term; and (ii) no Renegotiation may provide for an increase in Unlikely Bonuses if, after the Renegotiation, the amount of Unlikely Bonuses in respect of any Salary Cap Year covered by the renegotiated Contract exceeds fifteen percent (15%) of the player’s Regular Salary for such Salary Cap Year.
2. No Player Contract may provide for any Unlikely Bonus for the first Salary Cap Year covered by the Contract that, if included in the player’s Salary for such Salary Cap Year, 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.
No Futures Contracts. Subject to Section 5(c)(4) below, but notwithstanding any other provision in this Agreement:
1. Every Player Contract must cover at least the then-current Season (or the upcoming Season in the case of a Contract entered into from July 1 through the day prior to the first day of the Season).
2. No Team and player may enter into a Player Contract from the commencement of the Team’s last game of the Regular Season through the following June 30. The preceding sentence shall not prohibit a Team and player from entering into an amendment to an existing Player Contract during such period if such amendment would otherwise be permitted under this Agreement.
3. A Player Contract that covers more than one (1) Season must be for a consecutive period of Seasons.
4. 1. A player who receives a Required Tender or a Qualifying Offer during the month of June may accept such Required Tender or Qualifying Offer beginning on the date he receives it.
  2. From February 1 through June 30 of any Salary Cap Year, a First Round Pick may enter into a Rookie Scale Contract commencing with the following Season, provided that as of or at any point following the first day of the then-current Regular Season (or the preceding Regular Season in the case of a Contract signed from the day following the last day of the Regular Season through June 30) the player was a party to a player contract with a professional basketball team or league not in the NBA covering such Regular Season. With respect to any Rookie Scale Contract entered into pursuant to this Section 5(e)(4)(ii) and subject to the provisions in Article VII and VIII: (i) the Rookie Salary Scale applicable to such Contract shall be the Rookie Salary Scale for the Salary Cap Year encompassing the first Season covered by the player’s Contract; (ii) in lieu of providing for Compensation for each Season covered by the Contract as a specific dollar amount, teams must state in Exhibit 1 of the Contract that the player’s Current Base Compensation and, if applicable, Incentive Compensation for each such Season shall be “[___]% of the player’s applicable Rookie Salary Scale”; and (iii) the player’s Base Compensation protection shall be expressed in terms of a percentage of the player’s Base Compensation.

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 Agreement when entered into or were entered into prior to the effective date of this Agreement in accordance with the rules then in effect.
Veteran Free Agent Exception. Subject to the rules set forth in Section 6(n) below, beginning at 12:01 p.m. eastern time on the last day of the Moratorium Period 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 plus Unlikely Bonuses in the first Salary Cap Year totaling up to the maximum amount provided for in Article II, Section 7. Annual increases and decreases in Salary and Unlikely Bonuses shall be governed by Section 5(a)(2) above.
2. If the player is a Non-Qualifying Veteran Free Agent, then, subject to Article II, Section 7, the new Player Contract may provide in the first Salary Cap Year up to the greater of: (i) one hundred twenty percent (120%) of the Regular Salary for the final Salary Cap Year of the player’s prior Contract, plus one hundred twenty percent (120%) of any Likely Bonuses and Unlikely Bonuses, respectively, called for in the final Salary Cap Year covered by the player’s prior Contract; (ii) Salary plus Unlikely Bonuses totaling one hundred twenty percent (120%) of the then-current Minimum Annual Salary applicable to the player; or (iii) in the case of a Contract between a Team and its Restricted Free Agent, the Salary and Unlikely Bonuses required to be provided in a Qualifying Offer. Annual increases and decreases in Salary and Unlikely Bonuses shall be governed by Section 5(a)(1) above.
3. 1. If the player is an Early Qualifying Veteran Free Agent, the new Player Contract must cover at least two (2) Seasons (not including a Season covered by an Option Year) and, subject to Article II, Section 7, may provide in the first Salary Cap Year up to the greater of: (A) one hundred seventy-five percent (175%) of the Regular Salary for the final Salary Cap Year covered by his prior Contract, plus one hundred seventy-five percent (175%) of any Likely Bonuses and Unlikely Bonuses, respectively, called for in the final Salary Cap Year covered by the player’s prior Contract, or (B) Salary plus Unlikely Bonuses totaling an amount equal to one hundred five percent (105%) of the Average Player Salary for the prior Salary Cap Year (or if the Audit Report for the prior Salary Cap Year has not been completed, one hundred five percent (105%) of the Average Player Salary for the prior Salary Cap Year as computed by substituting Estimated Total Salaries (as defined in Section 1(i) above) for Total Salaries). Annual increases and decreases in Salary and Unlikely Bonuses shall be governed by Section 5(a)(2) above.
  2. Notwithstanding anything to the contrary in Section 5(a)(2) above or this Section 6(b)(3), if an Early Qualifying Veteran Free Agent with two (2) Years of Service receives an Offer Sheet in accordance with the provisions of Article XI, Section 5(d), the player’s Prior Team may use the Early Qualifying Veteran Free Agent Exception to match the Offer Sheet.
Disabled Player Exception.
1. Subject to the rules set forth in Section 6(n) below, a Team may, in accordance with the rules set forth in this Section 6(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”).
  1. An application for a Disabled Player Exception in respect of a Salary Cap Year, regardless of when the Disabling Injury or Illness occurred, may be made at any time from July 1 through January 15 of such Salary Cap Year.
  2. If a Team wishes to sign a Replacement Player pursuant to this Section 6(c), such Replacement Player’s Contract may be for one Season and provide Salary and Unlikely Bonuses for the Salary Cap Year in which the player is signed totaling up to the lesser of (A) fifty percent (50%) of the Disabled Player’s Salary for the then-current Salary Cap Year, or (B) an amount equal to Non-Taxpayer Mid-Level Salary Exception (as defined in Section 6(e) below) for such Salary Cap Year.
  3. If a Team wishes to acquire a Replacement Player pursuant to this Section 6(c), the Replacement Player must have only one Season remaining on his Player Contract and the Replacement Player’s post-assignment Salary for the Salary Cap Year in which the Replacement Player is acquired may be up to the lesser of the amount described in Section 6(c)(1)(ii)(A) above or the amount described in Section 6(c)(1)(ii)(B) above, plus, in either case, $100,000.
2. For purposes of this Section 6(c), “Disabling Injury or Illness” means any injury or illness that, in the opinion of the physician described in Section 6(c)(4) below, makes it substantially more likely than not that the player would be unable to play through the following June 15.
3. The Exception for a Disabling Injury or Illness shall expire on the March 10 following the date the Exception is granted.
4. The determination of whether a player has suffered a Disabling Injury or Illness shall be made by a physician designated by the NBA, who shall review the relevant medical information and, if the physician deems it appropriate, examine the player. The NBA shall advise the Players Association of the determination of its physician within one (1) 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 the neutral physician deems it appropriate, examine the player. Within three (3) business days of receipt of such information (and examination of the player, if requested), the neutral physician shall make 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 equally and jointly by the NBA and the Players Association.
5. If a Team requests an Exception pursuant to this Section 6(c), the player with respect to whom the request is made shall cooperate in the processing of the request, including by appearing at the scheduled place and time for examination by the NBA-appointed physician and, if necessary, the neutral physician. The player shall not make any misrepresentation or fail to disclose any relevant information in connection with the processing of the application.
6. Notwithstanding a Team’s receipt of an Exception in respect of a Disabled Player pursuant to this Section 6(c), such player, upon recovering from his injury or illness, may resume playing for the Team. If the player resumes playing for the Team, or is traded, prior to the Team’s use of its Exception, the Exception shall be extinguished.
7. The Disabled Player Exception is available only to the Team with which the player was under Contract, and during the term of the Contract that the player was under, at the time his Disabling Injury or Illness became known or reasonably should have become known. In order for a Team to be granted a Disabled Player Exception pursuant to this Section 6(c), the Disabled Player must continue to be on the Team’s roster from the time the Team makes an application for the Exception through the date upon which the Exception is granted.
8. If a Team makes a request for an Exception to replace a Disabled Player pursuant to this Section 6(c) and such request is denied, the Team shall not be permitted to make any subsequent request for an Exception to replace the same player pursuant to this Section 6(c) unless ninety (90) days have passed since the first request was denied and the Team establishes that the subsequent request is based on a new injury or an aggravation of the same injury. If a Team makes a request for an Exception to replace a Disabled Player for a Season pursuant to this Section 6(c), then, whether such request is granted or denied, the Team shall be permitted to renew its request for an Exception to replace the Disabled Player for a subsequent Season(s) by applying for another Exception in respect of that player for such Season in accordance with the rules set forth in this Section 6(c).
Bi-annual Exception. Subject to the rules set forth in Section 2(e) above and Section 6(n) below:
1. A Team may use the Bi-annual Exception during a Salary Cap Year to sign and/or acquire by assignment one (1) or more Player Contracts that, in the aggregate, provide for Salaries and Unlikely Bonuses (or in the case of assignment, post-assignment Salaries and Unlikely Bonuses) in the first Salary Cap Year totaling up to 3.32% of the Salary Cap for such Salary Cap Year; provided, however, that, prior to the first day of the 2024-25 Salary Cap Year, a Team shall not be permitted to use the Bi-annual Exception to acquire a Player Contract by assignment.
2. The term of a Player Contract signed pursuant to the Bi-annual Exception may not exceed two (2) Seasons in length, and the remaining term of a Player Contract acquired by assignment pursuant to the Bi-annual Exception may not exceed two (2) Seasons in length.
3. A Team may not use all or any portion of the Bi-annual Exception (i) if at the time the Team proposes to use the Exception the Team has already used the Mid-Level Salary Exception for Room Teams in that same Salary Cap Year, or (ii) in any two (2) consecutive Salary Cap Years. The prohibition in the preceding sentence against using the Bi-annual Exception or any portion thereof in any two (2) consecutive Salary Cap Years shall apply to the 2022-23 Salary Cap Year (i.e., if a Team used all or any portion of the Bi-annual Exception during the 2022-23 Salary Cap Year, that Team shall not be permitted to use all or any portion of the Bi-annual Exception during the 2023-24 Salary Cap Year).
4. Player Contracts signed pursuant to the Bi-annual Exception covering two (2) Seasons may provide for an increase or decrease in Salary and Unlikely Bonuses for the second Salary Cap Year in accordance with Section 5(a)(1) above.
5. The Bi-annual Exception for a Team, if applicable, shall arise on the first day of a Salary Cap Year and shall expire at the start of the Team’s last game of the Regular Season during that Salary Cap Year.
Non-Taxpayer Mid-Level Salary Exception. Subject to the rules set forth in Section 2(e) above and Section 6(n) below:
1. A Team may use the Non-Taxpayer Mid-Level Salary Exception to sign and/or acquire by assignment one (1) or more Player Contracts during each Salary Cap Year that, in the aggregate, provide for Salaries and Unlikely Bonuses (or in the case of assignment, post-assignment Salaries and Unlikely Bonuses) in the first Salary Cap Year totaling up to 9.12% of the Salary Cap for such Salary Cap Year; provided, however, that, prior to the first day of the 2024-25 Salary Cap Year, a Team shall not be permitted to use the Non-Taxpayer Mid-Level Salary Exception to acquire a Player Contract by assignment.
2. The term of a Player Contract signed pursuant to the Non-Taxpayer Mid-Level Salary Exception may not exceed four (4) Seasons in length, and the remaining term of a Player Contract acquired by assignment pursuant to the Non-Taxpayer Mid-Level Salary Exception may not exceed four (4) Seasons in length.
3. A Team may not use all or any portion of the Non-Taxpayer Mid-Level Salary Exception if at the time the Team proposes to use the Exception the Team has already used the Mid-Level Salary Exception for Room Teams in that same Salary Cap Year.
4. Player Contracts signed pursuant to the Non-Taxpayer Mid-Level Salary Exception may provide for annual increases and decreases in Salary and Unlikely Bonuses in accordance with Section 5(a)(1) above.
5. Notwithstanding anything to the contrary in Section 6(e)(3) above, if a Veteran Free Agent with one (1) or two (2) Years of Service receives an Offer Sheet in accordance with the provisions of Article XI, Section 5(d), the player’s Prior Team may use the Non-Taxpayer Mid-Level Salary Exception to match the Offer Sheet.
6. The Non-Taxpayer Mid-Level Salary Exception for a Team shall arise on the first day of each Salary Cap Year and shall expire at the start of the Team’s last game of the Regular Season during that Salary Cap Year.

Taxpayer Mid-Level Salary Exception. Subject to the rules set forth in Section 2(e) above and Section 6(n) below:

A Team may use the Taxpayer Mid-Level Salary Exception to sign one (1) or more Player Contracts during each Salary Cap Year not to exceed two (2) Seasons in length, that, in the aggregate, provide for Salaries and Unlikely Bonuses in the first Salary Cap Year totaling up to the amounts set forth below, provided that the Team’s Apron Team Salary immediately following the Team’s use of such Exception exceeds the First Apron Level:

	Taxpayer Mid-Level Salary Exception
For the 2023-24 Salary Cap Year:	$5 million
For each subsequent Salary Cap Year:	$5 million multiplied by a fraction, the numerator of which is the Salary Cap for that Salary Cap Year and the denominator of which is the Salary Cap for the 2023-24 Salary Cap Year

A Team may not use all or any portion of the Taxpayer Mid-Level Salary Exception if at the time the Team proposes to use the Exception the Team has already used the Mid-Level Salary Exception for Room Teams in that same Salary Cap Year.
Player Contracts signed pursuant to the Taxpayer Mid-Level Salary Exception may provide for annual increases and decreases in Salary and Unlikely Bonuses in accordance with Section 5(a)(1) above.
The Taxpayer Mid-Level Salary Exception for a Team shall arise on the first day of each Salary Cap Year and shall expire at the start of the Team’s last game of the Regular Season during that Salary Cap Year.
In the event that, during a Salary Cap Year, a Team: (i) does not use the Non-Taxpayer Mid-Level Salary Exception to acquire any Player Contracts by assignment; (ii) uses the Non-Taxpayer Mid-Level Salary Exception in order to sign one (1) or more new Player Contracts during a Salary Cap Year, not to exceed two (2) Seasons in length that, in the aggregate, provide for Salaries and Unlikely Bonuses in the first Salary Cap Year of the Contract(s) totaling no more than the amounts set forth in Section 6(f)(1) above, and (iii) but for the Team’s use of the Non-Taxpayer Mid-Level Salary Exception as described in clause (ii) above, the Team otherwise would be permitted to engage in a transaction that causes the Team’s Apron Team Salary to exceed the First Apron Level for such Salary Cap Year in accordance with the rules set forth in Section 2(e) above, then the Team shall be permitted to engage in such transaction, whereupon the Team will be deemed to have used the Taxpayer Mid-Level Salary Exception instead of the Non-Taxpayer Mid-Level Salary Exception for all purposes under this Article VII, and the Team’s ability to use the Non-Taxpayer Mid-Level Salary Exception during such Salary Cap Year shall thereupon be extinguished.

Mid-Level Salary Exception for Room Teams. Subject to the rules set forth in Section 6(n) below:
1. In the event (i) a Team’s Team Salary at any time during a Salary Cap Year is below the Salary Cap for such Salary Cap Year such that the Team is not entitled to use the Bi-annual Exception, Non-Taxpayer Mid-Level Salary Exception, or Taxpayer Mid-Level Salary Exception, and (ii) at the time the Team proposes to use the Mid-Level Salary Exception for Room Teams, the Team has not already used either the Bi-annual Exception, the Non-Taxpayer Mid-Level Salary Exception, or the Taxpayer Mid-Level Salary Exception in that same Salary Cap Year, then the Team may at such time use the Mid-Level Salary Exception for Room Teams to sign and/or acquire by assignment one (1) or more Player Contracts that, in the aggregate, provide for Salaries and Unlikely Bonuses (or in the case of assignment, post-assignment Salaries and Unlikely Bonuses) in the first Salary Cap Year totaling up to 5.678% of the Salary Cap for such Salary Cap Year; provided however, that prior to the first day of the 2024-25 Salary Cap Year, a Team shall not be permitted to use the Mid-Level Salary Exception for Room Teams to acquire a Player Contract by assignment.
2. The term of a Player Contract signed pursuant to the Mid-Level Salary Exception for Room Teams may not exceed three (3) Seasons in length, and the remaining term of a Player Contract acquired by assignment pursuant to the Mid-Level Salary Exception for Room Teams may not exceed three (3) Seasons in length.
3. Once a Team uses the Mid-Level Salary Exception for Room Teams during a Salary Cap Year, the Team will be prohibited from using either the Non-Taxpayer Mid-Level Salary Exception, the Taxpayer Mid-Level Salary Exception, or the Bi-annual Exception at all times thereafter during such Salary Cap Year.
4. Player Contracts signed pursuant to the Mid-Level Salary Exception for Room Teams may provide for annual increases and decreases in Salary and Unlikely Bonuses in accordance with Section 5(a)(1) above.
5. The Mid-Level Salary Exception for Room Teams for a Team shall: (i) arise on the date upon which the Team’s Team Salary falls below the Salary Cap for such Salary Cap Year such that the Team is not entitled to use the Bi-annual Exception, the Non-Taxpayer Mid-Level Salary Exception, and the Taxpayer Mid-Level Salary Exception; and (ii) expire at the start of the Team’s last game of the Regular Season during that Salary Cap Year.
Rookie Scale Exception. A Team may enter into a Rookie Scale Contract in accordance with Article VIII, Section 1.
Minimum Player Salary Exception. A Team may sign a player to, or acquire by assignment, a Player Contract, not to exceed two (2) Seasons in length, that provides for a Salary for the first Season equal to the Minimum Player Salary applicable to that player (with no bonuses of any kind). A Player Contract signed or acquired pursuant to the Minimum Player Salary Exception covering two (2) Seasons must provide for a Salary for the second Season equal to the Minimum Player Salary applicable to the player for such Season (with no bonuses of any kind).
Traded Player Exception.
1. Subject to the rules set forth in Section 6(n) below and Section 6(j)(6) below, a Team may acquire one (1) or more players by assignment in accordance with the following:
  1. Standard Traded Player Exception. Subject to the rules set forth in Section 2(e) above, a Team may use the “Standard Traded Player Exception” to replace one (1) Traded Player with one (1) or more Replacement Players whose Player Contracts are acquired simultaneously or non-simultaneously and whose post-assignment Salaries for the Salary Cap Year in which the Replacement Player(s) are acquired, in the aggregate, are no more than an amount equal to one hundred percent (100%) of the pre-trade Salary of the Traded Player, plus $250,000, provided that any Player Contract acquired non-simultaneously pursuant to this Exception must be acquired within one (1) year following the date on which the Traded Player was traded.
  2. Aggregated Standard Traded Player Exception. Subject to the rules set forth in Section 2(e) above, a Team may use the “Aggregated Standard Traded Player Exception” to replace two (2) or more Traded Players with one (1) or more Replacement Players whose Player Contracts are acquired simultaneously and whose post-trade Salaries for the then-current Salary Cap Year, in the aggregate, are no more than an amount equal to one hundred percent (100%) of the aggregated pre-trade Salaries of the Traded Players, plus $250,000.
  3. Transition Traded Player Exception. During the 2023-24 Salary Cap Year only, and subject to the rules set forth in Section 2(e) above: a Team may use the “Transition Traded Player Exception” to replace one (1) or more Traded Players with one (1) or more Replacement Players whose Player Contracts are acquired simultaneously and whose post-trade Salaries for the 2023-24 Salary Cap Year, in the aggregate, are no more than an amount equal to one hundred ten percent (110%) of the pre-trade Salaries of the Traded Player(s), plus $250,000.
  4. Expanded Traded Player Exception. Subject to the rules set forth in Section 2(e) above, a Team may use the “Expanded Traded Player Exception” to replace one (1) or more Traded Players with one (1) or more Replacement Players whose Player Contracts are acquired simultaneously and whose post-trade Salaries for the then-current Salary Cap Year, in the aggregate, are no more than an amount equal to the greater of: (y) the lesser of: (A) two hundred percent (200%) of the aggregated pre-trade Salaries of the Traded Player(s), plus $250,000; or (B) one hundred percent (100%) of the aggregated pre-trade Salaries of the Traded Player(s), plus an amount equal to $7.5 million multiplied by a fraction, the numerator of which is the Salary Cap for the then-current Salary Cap Year and the denominator of which is the Salary Cap for the 2023-24 Salary Cap Year; or (z) one hundred twenty-five percent (125%) of the aggregated pre-trade Salaries of the Traded Player(s), plus $250,000.
  5. Room Under Salary Cap Plus $250,000. Except as provided in Section 6(j)(2) below, and notwithstanding Section 6(n) below, a Team with a Team Salary below the Salary Cap may acquire one (1) or more players by assignment whose post-assignment Salaries, in the aggregate, are no more than an amount equal to the Team’s room under the Salary Cap plus $250,000. For clarity, a Team that acquires one (1) or more players in accordance with this Section 6(j)(1)(v) (or with room under the Salary Cap (i.e., without making use of the additional $250,000)) may not simultaneously acquire any players in accordance with Sections 6(j)(1)(i)-(iv) above.
2. In lieu of conducting a trade in accordance with Section 6(j)(1)(v) above, and notwithstanding Section 6(n) below and subject to Section 2(e) above and Section 6(j)(6) below, a Team with a Team Salary below the Salary Cap may conduct a trade in accordance with Sections 6(j)(1)(iii)-(iv) above.
3. Notwithstanding anything to the contrary in Section 6(j)(1) above, if a Team’s post-assignment Apron Team Salary would exceed the First Apron Level, then the $250,000 allowance referenced in each of Sections 6(j)(1)(i)-(v) above shall be reduced to $0.
4. Notwithstanding anything to the contrary in Section 6(j)(1) above, the following rules will apply when a Team is aggregating the Contracts of two (2) or more Traded Players in a trade pursuant to a Traded Player Exception set forth in Section 6(j)(1)(ii), 6(j)(1)(iii), or 6(j)(1)(iv) above:
  1. No player whose Player Contract was acquired pursuant to an Exception in the two (2) month period preceding the trade may be among the Traded Players whose Contracts are being aggregated pursuant to Sections 6(j)(ii), 6(j)(iii), or 6(j)(iv) above (for example, if a player were traded to a Team pursuant to an Exception on November 20, 2023, then the player’s Contract could not be aggregated with any other Contract for purposes of a trade until January 20, 2024); provided, however, that if a Team acquires a Player Contract pursuant to an Exception on or before December 16 of a Salary Cap Year, then the foregoing restriction shall not apply in the event the player is subsequently traded on or after the day prior to the NBA trade deadline of such Salary Cap Year; and
  2. Other than during the period beginning on December 15 of a Salary Cap Year through the NBA trade deadline of such Salary Cap Year, if a Team is aggregating the Contracts of three (3) or more Traded Players in a trade and the number of Replacement Players that the Team is acquiring in respect of such Traded Players is less than the number of such Traded Players, then no more than one (1) of such Traded Players may be a Minimum Traded Player (as defined below). For the purposes of this rule only, a “Minimum Traded Player” is a player whose Contract provides for his applicable Minimum Player Salary for the Salary Cap Year in which the trade of his Contract occurs or, if the trade occurs during the period beginning on the day after the last day of the Regular Season of a Salary Cap Year through the last day of such Salary Cap Year, a player whose Contract provides for his applicable Minimum Player Salary in the immediately following Salary Cap Year.
5. If (x) a Qualifying Veteran Free Agent or Early Qualifying Veteran Free Agent and his prior Team enter into a Player Contract, in accordance with Section 6(b)(1) or (3) above, in connection with an agreement to trade the Contract in accordance with Section 8(e) below, (y) the Team’s Team Salary immediately following such Contract signing is above the Salary Cap, and (z) the new Contract to be traded provides for Salary and Unlikely Bonuses for the first Season of such Contract in excess of the Salary and Unlikely Bonuses that could have been provided for by the Contract had the player been a Non-Qualifying Veteran Free Agent and the Contract had been signed pursuant to Section 6(b)(2) above, then for purposes of calculating the assignor Team’s Traded Player Exception, the player’s Salary shall be deemed equal to the greater of (i) the Salary for the last Season of his preceding Contract, or (ii) fifty percent (50%) of the Salary for the first Season of his new Contract. For purposes of this Section 6(j)(5), if the player’s immediately prior Contract was a one-year Contract that provided for Salary equal to the Minimum Player Salary (with no bonuses of any kind), the player’s prior Salary shall include the portion of the Minimum Player Salary, if any, that was reimbursed out of the League-wide benefits fund described in Article IV, Section 6(h).
6. For purposes of calculating a Team’s Traded Player Exception under this Section 6(j), a Traded Player’s Salary shall be deemed reduced by the amount of the player’s unearned Base Compensation that, at the time of the trade, is not fully protected for lack of skill and injury or illness (or may become not fully protected for lack of skill and injury or illness due to additional conditions or limitations set forth in the Exhibit 2 of the player’s Contract). For purposes of this Section 6(j)(6):
  1. With respect to the assignment of Player Contracts occurring during the period from January 8 through the last day of the Regular Season, a Traded Player’s Base Compensation for such Season shall be deemed fully protected for lack of skill and injury or illness;
  2. With respect to the assignment of a Player Contract that is a one-year Contract that provides for Salary equal to the Minimum Player Salary (with no bonuses of any kind), the player’s unearned Base Compensation shall exclude the portion of the Minimum Player Salary, if any, that is reimbursed out of the League-wide benefits fund described in Article IV, Section 6(h); and
  3. With respect to the assignment of Player Contracts occurring during the period from the day following the last day of a Regular Season through June 30 of that Salary Cap Year, a Traded Player’s Salary will equal the lesser of: (x) the player’s Salary for the current Salary Cap Year; and (y) the player’s Salary for the subsequent Salary Cap Year reduced by the amount of the player’s unearned Base Compensation for the subsequent Salary Cap Year that, at the time of the trade, is not fully protected for lack of skill and injury or illness (or may become not fully protected for lack of skill and injury or illness due to additional conditions or limitations set forth in the Exhibit 2 of the player’s Contract).
  To illustrate the foregoing, assume that a Team seeks to replace a Traded Player whose Contract provides for (i) Base Compensation and Salary for each of the 2023-24 and 2024-25 Seasons of $8 million, and (ii) Base Compensation protection for lack of skill and injury or illness equal to $1 million for each such Season. If the trade of such Traded Player occurs on:
  1. the day prior to the first day of the 2023-24 Regular Season, the Traded Player’s Salary for purposes of calculating the Team’s Traded Player Exception under this Section 6(j) would be $1 million ($8 million (the player’s 2023-24 Salary) reduced by $7 million (the amount of the player’s unearned 2023-24 Base Compensation that is not fully protected for lack of skill and injury or illness at the time of the trade));
  2. after one-quarter of the 2023-24 Regular Season has elapsed, the Traded Player’s Salary for purposes of calculating the Team’s Traded Player Exception under this Section 6(j) would be $2 million ($8 million (the player’s 2023-24 Salary) reduced by $6 million ($8 million multiplied by 75% – the amount of the player’s unearned 2023-24 Base Compensation that is not fully protected for lack of skill and injury or illness at the time of the trade));
  3. on January 8, 2024, the Traded Player’s Salary for purposes of calculating the Team’s Traded Player Exception under this Section 6(j) would be $8 million ($8 million (the player’s 2023-24 Salary) reduced by $0 (pursuant to Section 6(j)(6)(i) above, the deemed amount of the player’s unearned 2023-24 Base Compensation that is not fully protected for lack of skill and injury or illness at the time of the trade)); and
  4. on the day following the last day of the 2023-24 Regular Season, the Traded Player’s Salary for purposes of calculating the Team’s Traded Player Exception under this Section 6(j) would be $1 million (the lesser of: (i) $8 million ($8 million (the player’s 2023-24 Salary) reduced by $0 (the amount of the player’s unearned 2023-24 Base Compensation that is not fully protected for lack of skill and injury or illness at the time of the trade)), and (ii) $1 million ($8 million (the player’s 2024-25 Salary) reduced by $7 million (the amount of the player’s unearned 2024-25 Base Compensation that is not fully protected for lack of skill and injury or illness at the time of the trade)).
7. Notwithstanding anything to the contrary in this Section 6(j), no Traded Player Exception shall arise from trading a player during a Salary Cap Year if the Team has previously used (or simultaneously uses) a Disabled Player Exception in respect of such player during such Salary Cap Year.
8. The foregoing rules in this Section 6(j) shall not apply to Two-Way Players. Accordingly, for example, a Traded Player Exception will not arise from trading a Two-Way Player.
Second Round Pick Exception. A Team that holds the draft rights to a Second Round Pick may use the Second Round Pick Exception to sign such player to a Player Contract in accordance with the following:
1. The term of a Player Contract signed pursuant to the Second Round Pick Exception must be either: (i) two (2) Seasons with an Option in favor of the Team for a third Season; or (ii) three (3) Seasons with an Option in favor of the Team for a fourth Season.
2. If a Player Contract signed pursuant to the Second Round Pick Exception has a term of two (2) Seasons with an Option in favor of the Team for a third Season, then such Contract must provide for:
  1. Salary plus Unlikely Bonuses for the first Season of up to the Minimum Player Salary applicable to a player with one (1) Year of Service; and
  2. the player’s applicable Minimum Player Salary for the second Season and the Option Year.
  For clarity, the foregoing amounts shall be those as set forth in the Minimum Annual Scale for the Salary Cap Year in which the Contract is signed.
3. If a Player Contract signed pursuant to the Second Round Pick Exception has a term of three (3) Seasons with an Option in favor of the Team for a fourth Season, then such Contract must provide for:
  1. Salary plus Unlikely Bonuses for the first Season of up to the Minimum Player Salary applicable to a player with two (2) Year of Service;
  2. Salary plus Unlikely Bonuses for the second Season of up to the amount shown in the “Year 2” column for a player with two (2) Years of Service in the Minimum Annual Salary Scale; and(iii) the player’s applicable Minimum Player Salary for the third Season and the Option Year.
  For clarity, the foregoing amounts shall be those as set forth in the Minimum Annual Scale for the Salary Cap Year in which the Contract is signed.
4. For Player Contracts signed in accordance with Section 6(k)(3) above, annual increases and decreases in Salary and Unlikely Bonuses from the first Season to the second Season shall be governed by Section 5(a)(1) above.
Reinstatement. If a player has been dismissed and disqualified from further association with the NBA and subsequently reinstated pursuant to Article XXXIII (Anti-Drug Agreement), the Team for which the player last played may enter into a Player Contract with such player in accordance with the applicable rules set forth in Article XXXIII, Section 13(f) or (g), 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 (1) Season, annual increases and decreases in Salary and Unlikely Bonuses shall be governed by Section 5(a)(1) above.
Non-Aggregation. Other than in accordance with Section 6(j) above, a Team may not aggregate or combine any of the Exceptions set forth above in order to sign or acquire one (1) or more players at Salaries greater than that permitted by any one of the Exceptions. If a Team has more than one (1) Exception available at the same time, the Team shall have the right to choose which Exception it wishes to use to sign or acquire a player.
Other Rules.
1. A Team shall be entitled to use the Disabled Player Exception, Bi-annual Exception, Non-Taxpayer Mid-Level Salary Exception, Taxpayer Mid-Level Salary Exception, and a Traded Player Exception set forth in Sections 6(c), (d), (e), (f), and (j) above, respectively, except as set forth in Sections 6(j)(1)(v) and 6(j)(2) above, only if, at the time any such Exception would arise and at all times until it is used, the Team’s Team Salary, excluding the amount(s) of such Exception and any other Exception that would be included in Team Salary pursuant to Section 6(n)(2) below, is (i) at or above the Salary Cap, or (ii) below the Salary Cap by less than the amount(s) of the Team’s Exception(s) (excluding the amount of the Taxpayer Mid-Level Salary Exception unless the Team is no longer able to use the Non-Taxpayer Mid-Level Salary Exception but remains able to use the Taxpayer Mid-Level Salary Exception, in which case the amount of the Taxpayer Mid-Level Salary Exception shall be included).
2. In the event that when a Disabled Player Exception, Bi-annual Exception, Non-Taxpayer Mid-Level Salary Exception (or the Taxpayer Mid-Level Salary Exception instead of the Non-Taxpayer Mid-Level Salary Exception if the Team is no longer able to use the Non-Taxpayer Mid-Level Salary Exception but remains able to use the Taxpayer Mid-Level Salary Exception), and/or a Traded 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 Exceptions, the Team’s Team Salary falls below the Salary Cap) by less than the amount of such Exceptions, then (i) the Team’s Team Salary shall include, until the Exceptions are actually used or until the Team no longer is entitled to use the Exceptions, the amount of the Exceptions (or any unused portion of the Exceptions), 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 Season covered by his Contract, instead of the amount of the Exception, shall be included in Team Salary. When a Bi-annual Exception, Non-Taxpayer Mid-Level Salary Exception, Taxpayer Mid-Level Salary Exception, or Traded Player Exception is used to sign or acquire a player (as applicable), the Salary for the first Season of the signed Contract or the Salary for the then-current Salary Cap Year of the acquired Contract (as applicable), plus any then-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) will no longer be included in Team Salary.
3. Notwithstanding anything to the contrary in this Agreement, if a player is a Veteran Free Agent following the second or third Season of his Rookie Scale Contract (where the first Option Year or second Option Year (as applicable) to extend such Contract was not exercised), then any new Player Contract between the player and the Team that signed him to his Rookie Scale Contract (and/or, if such Contract was subsequently assigned, any such assignee Team) may provide for Regular Salary, Likely Bonuses, and Unlikely Bonuses in the first Salary Cap Year of up to the Regular Salary, Likely Bonuses, and Unlikely Bonuses, respectively, that the player would have received for such Salary Cap Year had his first or second Option Year (as applicable) been exercised. Annual increases and decreases in Salary and Unlikely Bonuses shall be governed by Section 5(a)(2) above.
4. Beginning on January 10 of each Season, each unused Exception, other than the Traded Player Exception, the Minimum Player Salary Exception (which is governed by Section 6(i) above and Article I, Section 1(kk)) and the Disabled Player Exception, shall be reduced daily throughout the remainder of the Regular Season by the amount of the unused Exception as of January 10 multiplied by a fraction, the numerator of which is one (1) and the denominator of which is the total number of days in such Regular Season; provided that the foregoing reduction shall not apply in the event a Team is using the applicable Exception:
  1. During the period beginning on January 10 of a Salary Cap Year through the date of the NBA trade deadline of such Salary Cap Year; or
  2. For purposes of matching an Offer Sheet.

7.7 Extensions, Renegotiations, and Other Amendments.

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 Section 7(a)(2) below: (i) a Player Contract covering a term of three (3) or four (4) Seasons (including, for clarity, any Option Year) may be extended no sooner than the second anniversary of the signing (or, as applicable, the Extension) of the Contract; and (ii) a Player Contract covering a term of five (5) or six (6) Seasons (including, for clarity, any Option Year) may be extended no sooner than the third anniversary of the signing (or, as applicable, the Extension) of the Contract. A Player Contract covering a term of one (1) or two (2) Seasons (including, for clarity, any Option Year) may not be extended. If a player and Team seek to enter into an Extension pursuant to this Section 7(a) (other than a Designated Veteran Player Extension in accordance with Section 7(a)(3)(ii) below) more than one (1) year prior to the July 1 preceding the first Season covered by the extended term, then the Extension may only be negotiated and entered into during the off-season (i.e., during the period from July 1 through the day prior to the first day of a Regular Season). Notwithstanding the foregoing, a Player Contract may be extended pursuant to the Designated Veteran Player Extension rules set forth in Article II, Section 7 and Section 7(a)(3)(ii) below no sooner than the third anniversary of the signing of the Contract, and Designated Veteran Player Extensions may only be negotiated and entered into during the off-season. For purposes of this Section 7: (A) to determine the second or third anniversary of the signing of an Extension or Renegotiation, an Extension or Renegotiation entered into during the period from October 2 through the day prior to the first day of the Regular Season of a Salary Cap Year shall be deemed to have been signed on October 1 of such Salary Cap Year; and (B) the number of Seasons covered by a Player Contract that was previously extended shall be the number of Seasons covered by the most-recent Extension.
2. 1. A Player Contract that has been renegotiated to provide for an increase in Salary in any Salary Cap Year covered by the Contract of more than ten percent (10%) of the player’s Salary prior to the Renegotiation, may not subsequently be extended until the third anniversary of the signing of such Renegotiation.
  2. A Team and a player shall not be permitted to extend any Player Contract with a term that has been shortened as a result of the player’s exercise of an Early Termination Option.
  3. Subject to the rules set forth in this Section 7(a): (a) a Contract may be extended following the exercise of an Option by a player or Team; and (b) a Contract may be extended following the non-exercise of an Option by a player or Team only if the extended term covers a minimum of two (2) Seasons (excluding any new Option Year). In order to effectuate an Extension of the types described in this Section 7(a)(2)(iii), a Team and player may amend a Contract to provide simultaneously for the (i) exercise or non-exercise (as applicable) of the Option, and (ii) the Extension.
3. 1. Subject to Article II, Section 7, a Player Contract extended in accordance with this Section 7(a) (other than an Extension entered into in connection with a trade pursuant to Section 8(e)(2) below or a Designated Veteran Player Extension) may, in the first Salary Cap Year covered by the extended term, provide for a Salary, excluding Incentive Compensation, of up to the greater of: (A) one hundred forty percent (140%) of the Regular Salary in the last Salary Cap Year covered by the original term of the Contract; or (B) one hundred forty percent (140%) of the Estimated Average Player Salary for the Salary Cap Year in which the Extension is signed (or, if the Extension provides for any Incentive Compensation in the first Salary Cap Year covered by the extended term, then one hundred forty percent (140%) of the Estimated Average Player Salary for such Salary Cap Year less the amount of such Incentive Compensation). In the event that the last Salary Cap Year covered by the original term of the Contract provides for Incentive Compensation, the first Salary Cap Year covered by the extended term may provide for Likely Bonuses and Unlikely Bonuses of up to one hundred forty percent (140%) of the Likely Bonuses and Unlikely Bonuses, respectively, in the last Salary Cap Year covered by the original term. Annual increases and decreases in Salary and Unlikely Bonuses shall be governed by Section 5(a)(3) above.
  2. Notwithstanding Section 7(a)(3)(i) above, a Designated Veteran Player Extension may provide for a Salary in the first Salary Cap year covered by the extended term totaling no more than the maximum amount provided for in Article II, Section 7. Annual increases and decreases in Salary shall be governed by Section 5(a)(3) above.
  3. Notwithstanding Section 7(a)(3)(i) or (ii) above, for an Extension entered into in connection with a trade pursuant to Section 8(e)(2) below:
    1. If such Extension is signed prior to the first day of the 2024-25 Salary Cap Year, then the Extension may, in the first Salary Cap Year covered by the extended term, provide for a Salary, excluding Incentive Compensation, of up to one hundred five percent (105%) of the Regular Salary in the last Salary Cap Year covered by the original term of the Contract. In the event that the last Salary Cap Year covered by the original term of the Contract provides for Incentive Compensation, the first Salary Cap Year covered by the extended term may provide for Likely Bonuses and Unlikely Bonuses of up to one hundred five percent (105%) of the Likely Bonuses and Unlikely Bonuses, respectively, in the last Salary Cap Year covered by the original term. Annual increases and decreases in Salary and Unlikely Bonuses shall be governed by Section 5(a)(4) above.
    2. If such Extension is signed on or after the first day of the 2024-25 Salary Cap Year, then the Extension may, in the first Salary Cap Year covered by the extended term, provide for a Salary, excluding Incentive Compensation, of up to the greater of: (A) one hundred twenty percent (120%) of the Regular Salary in the last Salary Cap Year covered by the original term of the Contract; or (B) one hundred twenty percent (120%) of the Estimated Average Player Salary for the Salary Cap Year in which the Extension is signed (or, if the Extension provides for any Incentive Compensation in the first Salary Cap Year covered by the extended term, then one hundred twenty percent (120%) of the Estimated Average Player Salary for such Salary Cap Year less the amount of such Incentive Compensation). In the event that the last Salary Cap Year covered by the original term of the Contract provides for Incentive Compensation, the first Salary Cap Year covered by the extended term may provide for Likely Bonuses and Unlikely Bonuses of up to one hundred twenty percent (120%) of the Likely Bonuses and Unlikely Bonuses, respectively, in the last Salary Cap Year covered by the original term. Annual increases and decreases in Salary and Unlikely Bonuses shall be governed by Section 5(a)(4) above.
  4. For purposes of determining the maximum allowable Salary in the first year of the extended term of an Extension pursuant to Sections 7(a)(3)(i) and 7(a)(3)(iii) above only, the amount of any bonuses that a player may receive pursuant to Article II, Sections 3(b)(iii) and 3(c) shall be added to the player’s Regular Salary and excluded from his Incentive Compensation.
  5. Notwithstanding anything to the contrary in this Agreement, a player who will not be a Qualifying Veteran Free Agent at the conclusion of his Contract will not be eligible to enter into an Extension pursuant to this Section 7(a).
4. Subject to Article II, Section 7, any Player Contract of a player who has played for his current Team for at least ten (10) Seasons and whose Salary in the last Salary Cap Year covered by the original term of the Contract is less than the Salary in the second-to-last Salary Cap Year covered by such Contract may, in the first Salary Cap Year covered by an extended term, provide for a Salary equal to one hundred seven and one-half percent (107.5%) of the greater of (i) the average of the Regular Salaries for each Salary Cap Year covered by the original Contract beginning with the Salary Cap Year in which such Contract was entered into, or previously extended, as the case may be, or (ii) the Regular Salary in the last Salary Cap Year covered by his original Contract. In the event that the last Salary Cap Year covered by the original term of the Contract provides for Incentive Compensation, the first Salary Cap Year covered by the extended term may provide for Likely Bonuses and Unlikely Bonuses of up to one hundred seven and one-half percent (107.5%) of the Likely Bonuses and Unlikely Bonuses, respectively, in the last Salary Cap Year covered by the original term. Annual increases and decreases in Salary and Unlikely Bonuses shall be governed by Section 5(a)(3) above. If, however, the Salary that may be included in the first year of an extended term pursuant to this Section 7(a)(4) is less than the Salary that may be included in the first year of an extended term pursuant to Section 7(a)(3) above, then the Contract may, in the first Salary Cap Year covered by an extended term, provide for a Salary of up to the amount permissible under Section 7(a)(3) above.
Rookie Scale Extensions. No Rookie Scale Contract may be extended except in accordance with the following:
1. A First Round Pick who enters into a Rookie Scale Contract may enter into an Extension of such Rookie Scale Contract during the period from 12:01 p.m. eastern time on the last day of the Moratorium Period through 6:00 p.m. eastern time on the day prior to the first day of the Regular Season of the second Option Year provided for in such Contract (assuming the Team exercises such Option).
2. An Extension of a Rookie Scale Contract may provide for Salary and Unlikely Bonuses in the first Salary Cap Year covered by the extended term totaling no more than the maximum amount provided for in Article II, Section 7. Annual increases and decreases in Salary and Unlikely Bonuses shall be governed by Section 5(a)(3) above.
3. Notwithstanding anything to the contrary in this Agreement, a player who will not be a Qualifying Veteran Free Agent at the conclusion of his Rookie Scale Contract will not be eligible to enter into an Extension of a Rookie Scale Contract pursuant to this Section 7(b).
Renegotiations. No Player Contract may be renegotiated except in accordance with the following:
1. Subject to Sections 7(c)(2) and (3) below, a Player Contract covering a term of four (4) or more Seasons may be renegotiated no sooner than the third anniversary of the signing of the Contract.
2. Subject to Section 7(c)(3) below, any Player Contract that has been renegotiated in accordance with Section 7(c)(1) above to provide for an increase in Salary or Incentive Compensation in any Salary Cap Year covered by the Contract of more than five percent (5%), or extended in accordance with Section 7(a) or (b) above, may not subsequently be renegotiated until the third anniversary of the signing of such Extension or Renegotiation.
3. Assuming Section 7(c)(1) or (2) above are satisfied, a Team with a Team Salary below the Salary Cap may renegotiate a Player Contract in accordance with the following rules:
  1. Subject to Article II, Section 7, the Renegotiation may provide for additional Regular Salary, Likely Bonuses, and/or Unlikely Bonuses for the then-current Salary Cap Year covered by the Contract (the “Renegotiation Season”) that, in the aggregate, would not exceed the Team’s Room at the time of the Renegotiation. (For clarity, a Renegotiation may provide for additional Likely Bonuses and/or Unlikely Bonuses even if such category (i.e., Likely Bonuses or Unlikely Bonuses) was not provided for by the Contract.)
  2. Every category (Regular Salary, Likely Bonuses and Unlikely Bonuses, respectively) that is increased for the Renegotiation Season must also be increased for each of the remaining Seasons of the Contract. For each Season of the Contract after the Renegotiation Season, the player’s additional Regular Salary may increase or decrease over the previous Season’s additional Regular Salary by no more than eight percent (8%) of the additional Regular Salary provided for in the Renegotiation Season. In the event that the Renegotiation Season provides for additional Incentive Compensation, the amount of additional Likely Bonuses and Unlikely Bonuses provided for in each Season after the Renegotiation Season may increase or decrease by up to eight percent (8%) of the amount of additional Likely Bonuses and Unlikely Bonuses, respectively, provided for in the Renegotiation Season.
  3. No Renegotiation may contain a signing bonus, unless the Renegotiation is accompanied by an Extension and the signing bonus would otherwise be permitted under the rules governing the inclusion of signing bonuses in Extensions.
4. In no event may a Team with a Team Salary at or above the Salary Cap renegotiate a Player Contract.
5. In no event may a Team and a player renegotiate a Player Contract from March 1 through June 30 of any Salary Cap Year.
Other.
1. In no event shall a Team and player negotiate a decrease in Salary or in any Incentive Compensation for any Salary Cap Year covered by a Player Contract.
2. A Player Contract that is extended pursuant to Section 7(a) above may be renegotiated simultaneously, but only if and to the extent permitted by the rules set forth in Section 7(c) above. Notwithstanding anything to the contrary in this Agreement, if a Player Contract is extended pursuant to Section 7(a) above and renegotiated simultaneously, then the amount of the player’s Salary, excluding Incentive Compensation, in the first Salary Cap Year covered by the extended term may decrease by no more than forty percent (40%) of the player’s Regular Salary (as renegotiated) in the last Salary Cap Year covered by the original term. In the event that the last Salary Cap Year covered by the original term provides for Incentive Compensation and such Incentive Compensation is also renegotiated, the amount of Likely Bonuses and Unlikely Bonuses in the first Salary Cap Year covered by the extended term may decrease by up to forty percent (40%) of the player’s Likely Bonuses and Unlikely Bonuses, respectively (as renegotiated), in the last Salary Cap Year covered by the original term.
3. A Contract that is amended pursuant to Article XXIV, Section 2(a)(iii)(B)(3) to waive all or any portion of a trade bonus in connection with the trade of a Player Contract may not be subsequently renegotiated until the later of (i) six (6) months from the date of the trade, or (ii) the first date on which the Contract could otherwise be renegotiated pursuant to this Section 7.
4. In connection with the trade of a Player Contract, notwithstanding anything to the contrary in Article XII, Section 2(a), a player and the assignor Team may agree upon an amendment to the Contract providing for the exercise or non-exercise of an Option contained in the Contract by a player or Team (as the case may be), provided that the amendment also provides that (i) the player will be traded to the assignee Team within a specified period of time not to exceed forty-eight (48) hours of the execution of the amendment, and (ii) such trade and the consummation of such trade are conditions precedent to the validity of the amendment.
5. In the event that a Team and a player agree to amend a Player Contract in accordance with Article II, Section 3(p), then: (i) for purposes of calculating the player’s Salary for the then-current and any remaining Salary Cap Year covered by the Contract, notwithstanding any stretch of the player’s protected Compensation payment schedule, the aggregate reduction in the player’s protected Compensation, if any, shall be allocated pro rata over the then-current and each remaining Salary Cap Year on the basis of the remaining unearned protected Base Compensation in each such Salary Cap Year; and (ii) the Team shall not be permitted to sign the player to a new Player Contract (or claim the player off of waivers) before the later of: (x) one (1) year following the date that the player’s Player Contract with such Team was terminated; or (y) the July 1 following the last Season of such Player Contract.
6. 1. For any Contract terminated on or after the first day of the 2023-24 Salary Cap Year, the following rules shall apply for purposes of determining a Team’s Team Salary in circumstances where the Contract is terminated prior to the September 1 preceding the final Season covered by the Contract and, prior to such September 1, the Team elects to have the player’s Salary for the then-current and any remaining Salary Cap Years stretched (i.e., re-attributed):
    1. in the event the Team so elects during the period from September 1 through the following June 30 of a Salary Cap Year, (i) the player’s post-termination Salary for the then-current Salary Cap Year (after giving effect to the provisions of Section (d)(5) above, if applicable) shall remain unchanged, and (ii) the player’s post-termination Salary for each remaining Salary Cap Year (after giving effect to the provisions of Section (d)(5) above, if applicable) shall be aggregated and allocated evenly over a number of Salary Cap Years equal to twice the number of Seasons (including any Player Option Year) remaining on the Contract following the Salary Cap Year in which the election occurred, plus one (1) Season; or
    2. in the event the Team so elects during the period from July 1 through August 31 of a Salary Cap Year, the player’s post-termination Salary for the then-current and any remaining Salary Cap Years (after giving effect to the provisions of Section (d)(5) above, if applicable) shall be aggregated and allocated evenly over a number of Salary Cap Years equal to twice the number of Seasons (including any Player Option Year) remaining on the Contract following the date of the election (including the upcoming Season), plus one (1) Season.
  2. To make an election pursuant to Section 7(d)(6)(i) above, a Team must provide the NBA with a written statement electing to stretch the player’s Salary. The NBA shall provide notice of such election to the Players Association by email within two (2) business days following the NBA’s receipt of such notice.
  3. Notwithstanding anything to the contrary in this Section 7(d)(6): (A) in no event shall a Team be permitted to elect to stretch a waived player’s Salary if the portion of the Team’s Team Salary representing all of the Team’s waived players (and any other former players) in any future Salary Cap Year exceeds or as a result of the proposed stretch would exceed fifteen percent (15%) of the Salary Cap in effect during the Salary Cap Year in which the election occurs; (B) any Team that stretches a player’s Salary for Salary Cap purposes may not subsequently sign or acquire such player prior to the July 1 following the end of the last Season of the player’s Contract (including, for clarity, any Option Year); and (C) a Team that terminates a player’s Contract and subsequently signs or acquires such player prior to July 1 following the end of the last Season of the player’s Contract (including, for clarity, any Option Year) may not make an election to stretch the Salary of such terminated Contract pursuant to Section 7(d)(6)(i) above.
  4. In the event a Team makes an election pursuant to Section 7(d)(6)(i) above to stretch the Salary provided for in a Player Contract, the amount included in Total Salaries in respect of such Contract shall be calculated without regard to such election.
7. 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.
8. A Team and player may negotiate the terms and conditions of an amendment to a Player Contract (including an Extension or Renegotiation) only during the period of time in which the Team and player are permitted to enter into such amendment. Notwithstanding the foregoing, if a Team and player would be permitted to enter into an amendment to a Player Contract as of the last day of the Moratorium Period immediately following a Season, then the Team and player may negotiate the terms and conditions of such amendment beginning on the day following the last day of such Season.

7.8 Trade Rules.

Subject to the rules in Section 2(e) above, a Team shall be permitted to pay or receive in connection with one (1) or more trades occurring during a Salary Cap Year, directly or indirectly, up to an aggregate amount equal to 5.15% of the Salary Cap for such Salary Cap Year in cash across all such trades, including cash received as reimbursement for Compensation obligations to players whom the Team is acquiring.

For purposes of this Section 8(a), (i) if a Contract is signed and then traded pursuant to Section 8(e)(1) below, and the Contract contains a signing bonus, the payment of all or any portion of such bonus by the Team that signed the Contract shall be treated as a reimbursement of a Compensation obligation of the assignee Team and shall be subject to this Section 8(a), and (ii) the amounts paid or received by a Team in connection with one (1) or more trades occurring during a Salary Cap Year shall not be netted against each other (thus, for example, if the maximum allowable cash limit for the 2023-24 Salary Cap Year were $6.5 million and Team A paid $6.5 million in connection with one (1) trade occurring during such Salary Cap Year and received $6.5 million from another Team in connection with a subsequent trade occurring during the same Salary Cap Year, Team A would be unable to either pay or receive any cash in connection with any subsequent trades that it makes during that Salary Cap Year).
A player (other than a Two-Way Player) with a one-year Contract (excluding any Option Year) who would be a Qualifying Veteran Free Agent or an Early Qualifying Veteran Free Agent upon completing the playing services called for under his Contract cannot be traded without the player’s consent; provided, however, that in accordance with Article II, Section 3(h) above, the player and Team may agree at the time of signing such Contract that the player’s right to consent to a trade pursuant to this Section 8(b) shall be eliminated. Should the player consent (or if the player and Team agreed at the time of signing to eliminate his right to consent) and the player is traded (except if the Contract has an Option for the second year that was exercised prior to the trade), then, for purposes of determining whether the player is a Qualifying Veteran Free Agent, Early Qualifying Veteran Free Agent, or Non-Qualifying Veteran Free Agent at the conclusion of the Contract or any subsequent Contract between the player and the assignee Team, the player shall be considered as having changed Teams by means of signing a Contract with the assignee Team as a Free Agent (and not by means of trade). For clarity, for any player who did not agree at the time of signing to eliminate his right to consent, such right under this Section 8(b) shall continue following the initial trade of the player’s Contract and any proposed subsequent trade of such Contract during the term thereof (not including any Option Year).
A Team cannot trade any player after the NBA trade deadline occurring in the last Season of the player’s Contract, or after the NBA trade deadline occurring in any Season that could be the last Season of the player’s Contract based upon the exercise or non-exercise of an Option or Early Termination Option.
1. No Draft Rookie who signs a Standard NBA Contract or player who signs a Two-Way Contract may be traded before thirty (30) days following the date on which the Contract is signed.
2. No player who signs a Standard NBA Contract as a Free Agent (or who signs a Standard NBA Contract while under a Two-Way Contract) may be traded before the later of (A) three (3) months following the date on which such Contract was signed or (B) the December 15 of the Salary Cap Year in which such Contract was signed; provided, that if a Contract is signed in connection with an agreement to trade the Contract in accordance with Section 8(e) below, the foregoing rule shall not apply to the initial trade but shall instead be applicable if the Contract is traded a second time. For the purposes of this rule, a Two-Way Contract that is converted to a Standard NBA Contract pursuant to such Contract’s Standard NBA Contract Conversion Option will be deemed to be a Standard NBA Contract signed by a Free Agent on the date of the conversion.
3. Notwithstanding the rule set forth in Section (d)(ii) above, any player who signs a Standard NBA Contract with his prior Team meeting the following criteria may not be traded before the later of (x) three (3) months following the date on which such Contract was signed or (y) the January 15 of the Salary Cap Year in which such Contract was signed: the Team Salary of the player’s Team is above the Salary Cap immediately following the Contract signing and the player is a Qualifying Veteran Free Agent or Early Qualifying Veteran Free Agent who, in accordance with Section 6(b)(1) or (3) 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 one hundred twenty percent (120%) of the Salary for the last Season of the player’s immediately prior Contract. The rule set forth in this Section (d)(iii) shall not apply to a player if his new Contract provides for Salary equal to the Minimum Player Salary (with no bonuses of any kind). For purposes of the foregoing sentence, if the player’s immediately prior Contract was a one-year Contract that provided for Salary equal to the Minimum Player Salary (with no bonuses of any kind), the player’s prior Salary shall include the portion of the Minimum Player Salary, if any, that was reimbursed out of the League-wide benefits fund described in Article IV, Section 6(h).
1. Subject to the rules set forth in Section 2(e) above, a Veteran Free Agent and his Prior Team may enter into a Player Contract pursuant to an agreement between the Prior Team and another Team concerning the signing and subsequent trade of such Contract, but only if (i) the Veteran Free Agent finished the prior Season on his Prior Team’s roster, (ii) the Contract is for at least three (3) Seasons (excluding any Option Year) but no more than four (4) Seasons in length, (iii) the Contract is not signed pursuant to the Non-Taxpayer Mid-Level Salary Exception or the Mid-Level Salary Exception for Room Teams, (iv) the first Season of the Contract is fully protected for lack of skill, (v) the Contract is entered into prior to the first day of the Regular Season, (vi) with respect to any 5th Year Eligible Player (as defined in Article II, Section 7) who met one of the Higher Max Criteria (as defined in Article II, Section 7), the Contract may not provide the player with Salary (plus Unlikely Bonuses) in excess of twenty-five percent (25%) of the Salary Cap (as calculated pursuant to Article II, Section 7) in effect at the time the Contract is signed, and (vii) the acquiring Team has Room for the player’s Salary plus any Unlikely Bonuses provided for in the first Season of the Contract.
2. A player and his Team may amend a Player Contract (including by entering into an Extension but not by entering into a Renegotiation) pursuant to an agreement between such Team and another Team concerning the signing of the amendment and subsequent trade of the amended Contract; provided, however, that: (i) no such agreement may be made during the period from the last day of the last Regular Season covered by the Contract (or the last day of any Regular Season that could be the last Regular Season covered by the Contract based upon the exercise or non-exercise of an Option or ETO) through the following June 30; (ii) no such Extension entered into pursuant to this Section 8(e)(2) prior to the first day of the 2024-25 Salary Cap Year may cover more than three (3) Seasons from the date the Extension is signed; and (iii) no such Extension entered into pursuant to this Section 8(e)(2) on or after the first day of the 2024-25 Salary Cap Year may cover more than four (4) Seasons from the date the Extension is signed. The Salary and Unlikely Bonuses that may be provided in the first year of the extended term and annual increases and decreases in Salary and Unlikely Bonuses shall be governed by Section 7(a)(3)(iii) and Section 5(a)(4) above.
3. A Player Contract or Extension entered into pursuant to Section 8(e)(1) or (2) above may not contain an Exhibit 6 thereto. However, the preceding sentence shall not prohibit the Teams involved in the trade from agreeing that the trade (and thus the validity of the Player Contract or Extension) will be conditional upon the passage of a physical examination to be performed by a physician designated by the assignee-Team in accordance with NBA procedures.
1. In the event a player enters into (A) an Extension pursuant to Section 7(a) above (other than a Designated Veteran Player Extension governed by Section (f)(ii) below) that covers five (5) Seasons (or, for Extensions entered into prior to the first day of the 2024-25 Salary Cap Year, four (4) or more Seasons) and/or provides for Salary and Unlikely Bonuses or annual increases or decreases in the player’s Salary and Unlikely Bonuses in excess of the amounts that, at the time such Extension was entered into, were permissible in Extensions entered into in connection with an agreement to trade the Contract pursuant to Section 8(e)(2) above, or (B) a Renegotiation pursuant to Section 7(c) above, then the player may not be traded before six (6) months following the date on which such Extension or Renegotiation was signed. If a team acquires a player in a trade, then, for a period of six (6) months following the date of the trade, the team may not enter into (X) an Extension with the player pursuant to Section 7(a) above that covers five (5) Seasons (or, if the trade occurred prior to the first day of the 2024-25 Salary Cap Year, four (4) or more Seasons) and/or provides for Salary and Unlikely Bonuses or annual increases or decreases in the player’s Salary and/or Unlikely Bonuses in excess of the amounts that, at the time such trade occurred, were permissible in Extensions entered into in connection with an agreement to trade the Contract pursuant to Section 8(e)(2) above, or (Y) a Renegotiation pursuant to Section 7(c) above.
2. In the event a player enters into a Designated Veteran Player Extension pursuant to Section 7(a)(3)(ii) above or a Designated Veteran Player Contract pursuant to Article II, Section 7, the player may not be traded before one (1) year following the date on which he entered into such Designated Veteran Player Extension or Designated Veteran Player Contract.
In the event a Rookie Scale Contract is extended pursuant to Section 7(b) above and a Team proposes to trade such Contract to another Team prior to the first day of the Salary Cap Year immediately following such Extension, then, only for purposes of determining whether the acquiring Team has Room for the Contract, the Salary for the last Salary Cap Year of the original term of the Contract shall be deemed to equal the average of the aggregate Salaries for such Salary Cap Year and each Salary Cap Year of the extended term. For purposes of this subsection (g), the Salary for each Salary Cap Year of the extended term of the Contract shall be the Salary as set forth in the Contract; provided, however, that:
1. If the Contract provides for Base Compensation in the first Salary Cap Year of the extended term that is expressed as a percentage of the Salary Cap in accordance with Article II, Section 7(d), then the Base Compensation in the extended term of the Contract shall be determined assuming that (a) the Salary Cap in the first Salary Cap Year covered by the extended term will equal one hundred four and one-half percent (104.5%) of the Salary Cap in effect at the time that the proposed trade would occur, and (b) the player does not meet any of the applicable Higher Max Criteria during the fourth Season of his Rookie Scale Contract; or
2. If the Contract provides for Salary plus Unlikely Bonuses in the first Salary Cap Year of the extended term that exceeds the applicable Maximum Annual Salary that would apply to such player assuming that the Salary Cap in the first Salary Cap Year covered by the extended term will equal one hundred four and one-half percent (104.5%) of the Salary Cap in effect at the time that the proposed trade would occur, then the Salary plus Unlikely Bonuses in the extended term of the Contract shall be determined to be the Salary plus Unlikely Bonuses that would result from the deemed amendment(s) pursuant to Article II, Section 7(c) using the assumption described above in this subsection (ii).
If a Team trades a player and the assignee Team subsequently places the player on waivers, the assignor Team shall not be permitted to sign the player to a new Contract (or claim the player off of waivers) before the earlier of: (i) one (1) year following the date all conditions to the trade were satisfied; or (ii) the July 1 following the last Season of the player’s Player Contract.
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 preexisting 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.
As soon as is practicable following each trade (but in no event later than one (1) week from the date of the trade), the NBA shall send to the Players Association, by email, a summary of the principal terms of the trade; provided, however, that the NBA may omit from such summary any terms that the NBA or one (1) or more Teams involved in the trade reasonably deem confidential (other than such terms as may be necessary to verify the Teams’ compliance with Section 8(a) above).
A “trade” of a player under this Agreement shall mean an assignment of a Player Contract pursuant to a negotiated exchange between two or more Teams following a trade conference call with the NBA league office. For clarity, the word “trade” shall not include an assignment of a player via the NBA’s waiver procedures.

7.9 Miscellaneous.

Except where this Agreement states otherwise, for purposes of any rule in this Agreement that limits, involves counting, or otherwise relates to, the number of Seasons covered by a Contract:
1. If a Player Contract or Extension is signed after the beginning of a Season, the Season in which the Contract or Extension is signed shall be counted as one (1) full Season covered by the Contract or Extension; and in the case of an Extension that is signed during the period from the end of a Season through the immediately following June 30, the Season immediately preceding the signing of the Extension (i.e., the just-completed Season) shall be counted as one (1) full Season covered by the Extension.
2. An Option Year shall be counted as one (1) Season covered by the Contract.
Except where this Agreement states otherwise, all of the rules in this Agreement that limit, affect the calculation of, or otherwise relate to, the Compensation or Salary provided for in a Player Contract shall apply to Option Years.

7.10 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” (and a “Draft Audit Report,” and, if applicable, an “Interim Audit Report” and, if applicable, an “Interim Designated Share Audit Report”) setting forth BRI, and Total Salaries and Benefits for the immediately preceding Salary Cap Year, and the information called for by Section 12 below (the “Designated Share Information”). The audit reports provided for by this Section 10(a)(1) are 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 reports provided for by this Section 10(a)(1).
2. The Accountants shall submit a “Draft Audit Report” for each Salary Cap Year to the NBA and the Players Association, along with relevant supporting documentation, two (2) weeks prior to the scheduled issuance of the final Audit Report.
3. The final Audit Report shall be submitted by the Accountants to the parties by 6:00 p.m. eastern time on the last day of the Salary Cap Year under audit. The audit shall begin as needed to ensure there is no reduction in the audit duration compared to the 2011 CBA. The Audit Report shall not be deemed final until the parties have confirmed in writing their agreement (in a form acceptable to the parties) with such Report. The NBA, the Players Association, and the Teams shall use their best efforts to facilitate the Accountants’ timely completion of the Audit Report.
4. In the event that, for any reason, the Accountants fail to submit to the parties a final Audit Report by 6:00 p.m. eastern time on the last day of the Salary Cap Year under audit, the Accountants shall prepare an interim Audit Report (the “Interim Audit Report”) by such time setting forth the Accountants’ best estimate of BRI and Total Salaries and Benefits for the preceding Salary Cap Year and, based upon such best estimates, the Designated Share Information. Such Interim Audit Report shall include:
  1. All amounts of BRI and Total Salaries and Benefits (or the portions thereof) and all Designated Share Information (or the portions thereof) 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 of BRI or Total Salaries and Benefits (or portions thereof) as to which the Accountants have not completed their review or which are the subject of a good faith dispute between the parties, the NBA’s good faith proposal as to the proper amount, if any, that should be included in the Audit Report.
  3. With respect to any items of Designated Share Information that are the subject of a good faith dispute between the parties, the Accountants’ good faith determination as to such items, taking into account the provisions of Sections 10(a)(4)(i) and (ii).
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. The Audit Report shall not be deemed final until the parties have confirmed in writing their agreement (in a form acceptable to the parties) with such Report or all disputes with respect to such Report have been finally resolved by means of the dispute-resolution procedures provided for by this Agreement.

If, at the conclusion of the Audit Report Challenge Period (as defined by Section 12(a)(11) below), the Accountants have not submitted or are unable to submit a final Audit Report (because, by way of example but not limitation, there are disputes or claims that have been asserted pursuant to Article XXXII, Section 9(c) and which remain pending), the Accountants shall prepare and submit to the parties, within five (5) business days following the completion of the Audit Report Challenge Period, an Interim Designated Share Audit Report that shall include the information set forth in the Interim Audit Report as adjusted or amended so as to reflect any final determinations made by the System Arbitrator or the Appeals Panel (as the case may be) in proceedings commenced pursuant to Article XXXII, Section 9(b) and involving disputes or claims with respect to such Interim Audit Report. The sole purposes for which any Interim Designated Share Audit Report is to be used under this Agreement are to perform or form the basis for the calculations to be made pursuant to Section 12 below and, if applicable, to perform the calculations that determine whether the conditions to the parties’ mutual termination rights set forth in Article XXXIX, Sections 7-8 are satisfied.
For purposes of determining BRI, Total Salaries and Benefits, and the Designated Share Information, 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 NBA and the Players Association shall agree upon such forms no later than April 1 of each Salary Cap Year.
The Accountants shall review the reasonableness of any estimates of revenues or expenses for a Salary Cap Year included in the Teams’ and the NBA’s BRI Reports for such Salary Cap Year 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 Salary Cap Year differ from such estimates, adjustments shall be made in BRI for the following Salary Cap Year in accordance with the provisions of Section 10(f) below.
With respect to deducted expenses, except for Newly-Deductible International Expenses, the NBA, League-related entities, Teams, and Related Parties shall report in BRI Reports only those expenses that are reasonable and customary in accordance with the provisions of Section 1(a) above. Subject to the terms of Section 1(a)(6) and Section 1(a)(14) above, and Section 11 below, 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: (1) 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 (2) if the Accountants propose that any adjustments be made to any revenue or expense item or any other information contained in the BRI Reports.
The Accountants shall indicate which amounts included in BRI for a Salary Cap Year, if any, represent estimates of revenues or expenses. With respect to any such estimated revenues or expenses, the Accountants shall, in preparing the Audit Report for the immediately succeeding Salary Cap Year (“Subsequent Audit Report”), or the Audit Report for the same Salary Cap Year in the event that an Interim Audit Report was previously issued for that Salary Cap Year, determine the actual revenues and expenses received for the prior Salary Cap Year and include as a credit or debit to BRI in such Subsequent Audit Report the amount of the aggregate difference, if any, between all such estimated revenues and expenses for the prior Salary Cap Year and the actual revenues and expenses received for such Salary Cap Year.
In the event that in the course of preparing an Audit Report for a Salary Cap Year the Accountants discover that they committed an error in computing BRI in the Audit Reports for either of the two (2) previous Salary Cap Years, which error resulted in a material understatement or overstatement of BRI for either of such Salary Cap Years, and the parties agree that such error was committed and agree as to the amount of the resulting understatement or overstatement (or, if they do not agree, an error (and the amount of such error) is established pursuant to the dispute resolution procedures provided for in this Agreement) the amount of such understatement or overstatement of BRI shall be added to or subtracted from BRI, as the case may be, with interest (at a rate equal to the one (1) year Treasury Bill rate as published in The Wall Street Journal on the date of the issuance of such Audit Report) accruing from the date of the Audit Report for the Salary Cap Year in which such understatement or overstatement occurred in equal annual amounts over the then-current and subsequent Salary Cap Years. Notwithstanding the foregoing, the parties will jointly instruct the Accountants that their audits shall not include procedures specifically designed to detect errors committed in prior audits.
In the event that there is an NHL players’ strike or owners’ lockout (“work stoppage”) resulting in the cancellation of all or part of any NHL season in any Salary Cap Year, and such work stoppage results in a refund being made to luxury suite-holders, premium seat license-holders, or to purchasers of fixed arena signage and/or naming rights in arenas in which both an NBA Team and an NHL team plays its home games, then the revenues for luxury suites, premium seat licenses, and fixed arena signage and/or naming rights in such arenas shall be determined as if such refunds were not made. If the work stoppage continues for a second year, then the NHL revenues shall be deemed to be the amount included for the prior year.
All disputes with respect to any Interim Audit Report shall be resolved exclusively in accordance with the procedures set forth in Article XXXII.
In the event of a trade that (i) occurs after the final Audit Report for a Salary Cap Year is submitted by the Accountants and before the conclusion of such Salary Cap Year, and (ii) results in a player earning a trade bonus, the final Audit Report shall be amended to reflect such trade bonus for purposes of calculating such player’s Salary and the Team’s Team Salary (and thus, for clarity, for the purposes of computing the amount of tax the Team owes pursuant to Article VII, Section 2(d)); however, the portion of such trade bonus that is included in the Team’s Team Salary for such Salary Cap Year shall be excluded from Total Salaries for such Salary Cap Year, and included in Total Salaries for the immediately following Salary Cap Year.

7.11 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, to audit the books and records of NBA teams (of its choosing), with the number of such audits in each Salary Cap Year set forth below (the “First Audit”); provided, however, that such review shall be limited to (i) revenue items (including in respect of equity transactions subject to Section 1(a)(13) above), and (ii) expense items, in each case that appear or should have appeared 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, 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 set forth in Article XXXII. In addition, in the event that First Audit Disputed Adjustments in excess of $8 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 up to an additional ten (10) NBA teams for the same Salary Cap Year, in accordance with the foregoing procedures (the “Second Audit”). If, as a result of the Second Audit, additional Disputed Adjustments in excess of $8 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 for that Salary Cap Year. The amount of any and all Disputed Adjustments that are ultimately resolved in favor of the Players Association in accordance with this Section 11(a) shall be added to BRI in the Salary Cap Year in which such resolution is reached. The aggregate number of NBA Teams selected for the First Audit by the Players Association over the course of the first six (6) Salary Cap Years of the CBA will be ninety (90), to be distributed over the Salary Cap Years at the Players Association’s option. For the seventh Salary Cap Year of the CBA, the Players Association will be entitled to select fifteen (15) NBA Teams for First Audits, supplemented by any of the ninety (90) audits that were not used in a previous Salary Cap Year.
League Audit. The Players Association shall have the right as part of the annual review of BRI Reports to retain the Players Association’s Accountants to conduct an audit, at its own expense, of the books and records of the NBA, Properties, Media Ventures, and other League-related entities associated with generating BRI, provided, however, that such audit shall be limited to (i) revenue items (including in respect of equity transactions subject to Section 1(a)(13) above) and (ii) expense items, regardless of whether such expenses exceed the applicable BRI ratio of expenses to revenues set forth in Exhibit D, in each case that appear or should have appeared in the BRI Report. 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 League Disputed Adjustments in connection with the prior Audit Report) resulting in an understatement of BRI, they shall submit proposed adjustments to the NBA consistent with their findings. In the event that the NBA disputes such proposed adjustments, such proposed adjustments shall be deemed to be League Disputed Adjustments and resolved in accordance with the procedures set forth in Article XXXII. The amount of any and all such League Disputed Adjustments that are resolved in the Players Association’s favor shall be included in BRI in the Salary Cap Year in which such resolution is reached. In addition, in the event that any such League 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 Salary Cap Years covered by the Agreement.
Confidentiality. In connection with any audit conducted by the Players Association pursuant to this Section 11, the Players Association agrees to sign, and to cause its representatives to sign, a confidentiality agreement in the form annexed hereto as Exhibit J-1. The Players Association also agrees to sign, and to cause its representatives to sign, a similar confidentiality agreement with respect to information obtained in connection with the Accountants’ audit pursuant to Section 10 above.
Preceding Salary Cap Year Audit Adjustments. Notwithstanding anything else in this Agreement or any release in the annual BRI letter agreement, if upward or downward adjustments are made in connection with a Players Association-initiated audit, an adjustment to BRI in respect of the same item can also be made for revenues or expenses related to the preceding Salary Cap Year, if applicable. For example, without limitation, if, based on the audit findings, the parties agree that a Team under-reported 2023-24 BRI by one million dollars ($1,000,000), and that the same error in the same amount occurred in 2022-23, then 2024-25 BRI would be adjusted upward by two million dollars ($2,000,000).
Related Party Access. The Players Association’s Accountants shall have access to such portions of a Related Party’s books and records that the accountants have a well-founded basis to believe have a meaningful impact on BRI. For purposes of the foregoing, (i) where a team plays in an arena owned or operated by a Related Party, the Players Association’s Accountants will have access to that Related Party arena company’s trial balance relating to all revenues and to such other portions of the trial balance that the Players Association’s Accountants have a well-founded basis to believe have a meaningful impact on BRI; (ii) for other Related Parties, information requests should fit the circumstances to enable the Players Association’s Accountants to verify the accuracy of BRI amounts (x) that cannot reasonably be verified through other means, and (y) without accessing financial and business information that there is no well-founded basis to believe have a meaningful impact on BRI; and (iii) the NBA, Players Association, and the Team will collectively consider any request for access to Related Party books and records while onsite and make their best efforts to resolve the access issue.
Bilateral Adjustments. Subject to the deadlines set forth in Section 11(g) below, the NBA may propose BRI adjustments with respect to any Team audited by the Players Association. The NBA’s right to propose such adjustments may not adversely affect in any way the time and resources available to the Players Association under its audit rights. In the event that the Players Association disputes such proposed adjustments, such proposed adjustments shall be resolved in accordance with the procedures set forth in Article XXXII. The amount of any and all such proposed adjustments that are ultimately resolved in favor of the NBA in accordance with this Section 11(f), including any adjustments made pursuant to Section 11(d) above, shall be deducted from BRI in the Salary Cap Year in which such resolution is reached.
Timing. Audits conducted by the Players Association must be noticed within ninety (90) days after issuance of the final Audit Report in respect of the applicable Salary Cap Year. Any proposed adjustments by the Players Association and NBA relating to Team audits (and in the case of the Players Association, with respect to any League Office audits) will be resolved by April 30 of the following calendar year. Each party will provide its proposed adjustments by March 25.

7.12 Designated Share Arrangement.

Definitions. As used in this Agreement, the following terms shall have the following meanings:
1. “Actual Reduction Percentage” means, with respect to a Salary Cap Year, the lesser of (i) ten percent (10%), and (ii) the percentage that, when multiplied by Adjusted Total Salaries, equals the Uncapped Reduction Amount.
2. “Adjusted Team Salary” means for a Team, with respect to a Salary Cap Year, the portion of Adjusted Total Salaries for such Salary Cap Year for which the Team is financially responsible. For clarity, for purposes of this Section 12(a)(2), (i) with respect to a player that was employed by more than one (1) Team under the same Player Contract during the Salary Cap Year (i.e., in cases where a player’s Contract is acquired by trade or pursuant to the NBA waiver procedure), the portion of the Adjustment Salary in respect of the Adjustment Contract for which each such Team is financially responsible shall be determined in accordance with NBA rules; and (ii) a Team shall be considered financially responsible for any signing bonus allocation (or the allocation of any amount treated as a signing bonus pursuant to Section 3(b)(1) above) that was the result of a signing bonus (or the result of any amount treated as an earned signing bonus pursuant to Section 3(b)(1) above) paid by the Team.
3. “Adjusted Total Benefits” means, with respect to a Salary Cap Year, an amount equal to Total Benefits for such Salary Cap Year less any amounts reimbursed out of the League-wide benefits fund described in Article IV, Section 6(h) in respect of such Salary Cap Year.
4. “Adjusted Total Salaries” means, with respect to a Salary Cap Year, an amount equal to Total Salaries for such Salary Cap Year plus any amounts reimbursed out of the League-wide benefits fund described in Article IV, Section 6(h) in respect of such Salary Cap Year.
5. “Adjusted Total Salaries and Benefits” means, with respect to a Salary Cap Year, the sum of Adjusted Total Salaries and Adjusted Total Benefits for such Salary Cap Year.
6. “Adjustment Contract” means, with respect to a Salary Cap Year, any Contract that provides for Salary that is included in Adjusted Total Salaries for such Salary Cap Year.
7. “Adjustment Salary” means, with respect to a Salary Cap Year, the amount of Salary in respect of an Adjustment Contract that is included in Adjusted Total Salaries for such Salary Cap Year.
8. “Adjustment Schedules” means the schedules prepared by the NBA with respect to each Salary Cap Year in advance of each semi-monthly payment date setting forth for each player the applicable Compensation adjustment to be applied in respect of the applicable Compensation payment.
9. “Aggregate Reduction Amount” means, with respect to a Salary Cap Year, an amount equal to the sum of the Contract Reduction Amounts for all Adjustment Contracts for such Salary Cap Year.
10. “Aggregate Team Overage Balance” means, with respect to a Salary Cap Year, an amount equal to the sum of all Team Overage Balances for such Salary Cap Year.
11. “Audit Report Challenge Period” means the period beginning with the date on which an Interim Audit Report is issued by the Accountants and ending on the last date by which all challenges thereto brought pursuant to Article XXXII, Section 9(b) are resolved.
12. “Carryover Amount” means, with respect to a Salary Cap Year, (i) the amount, if any, by which the Uncapped Reduction Amount in respect of the immediately preceding Salary Cap Year exceeded the Aggregate Reduction Amount in respect of such immediately preceding Salary Cap Year, less (ii) the amount, if any, by which the Shortfall Amount for the immediately preceding Salary Cap Year exceeded the amount distributed to players pursuant to Section 12(e)(3) below with respect to such immediately preceding Salary Cap Year.
13. “Carryover Interest Rate” means, with respect to a Salary Cap Year, a rate equal to the Secured Overnight Financing Rate as published in The Wall Street Journal on the first day of such Salary Cap Year, plus 1.225%.
14. “Contract Reduction Amount” means for an Adjustment Contract, with respect to a Salary Cap Year:
  1. Prior to the completion of the Governing Audit Report: an amount equal to the Adjustment Salary in respect of such Adjustment Contract for such Salary Cap Year multiplied by the Withholding Percentage; and
  2. For purposes of, and following the completion of, the Governing Audit Report: an amount equal to the Adjustment Salary in respect of such Adjustment Contract for such Salary Cap Year multiplied by the Actual Reduction Percentage.
15. “Designated Share” means, with respect to a Salary Cap Year, fifty percent (50%) of BRI for such Salary Cap Year, provided that the Designated Share for a Salary Cap Year shall be increased or decreased in accordance with the following:
  1. in the event that BRI for a Salary Cap Year exceeds Forecasted BRI for such Salary Cap Year, then the Designated Share for such Salary Cap Year shall equal fifty percent (50%) of Forecasted BRI for such Salary Cap Year, plus sixty and one-half percent (60.5%) of the difference between BRI for such Salary Cap Year and Forecasted BRI for such Salary Cap Year; and
  2. in the event that Forecasted BRI for a Salary Cap Year exceeds BRI for such Salary Cap Year, then the Designated Share for such Salary Cap Year shall equal fifty percent (50%) of Forecasted BRI for such Salary Cap Year, less sixty and one-half percent (60.5%) of the difference between Forecasted BRI for such Salary Cap Year and BRI for such Salary Cap Year.
Notwithstanding anything to the contrary in the foregoing, in no event shall the Designated Share for any Salary Cap Year be less than forty-nine percent (49%) of BRI for such Salary Cap Year or greater than fifty-one percent (51%) of BRI for such Salary Cap Year.

To illustrate the foregoing:
1. if BRI for a Salary Cap Year were to equal $10 billion, and Forecasted BRI for such Salary Cap Year were to equal $9.5 billion, then the Designated Share for such Salary Cap Year would equal $5.0525 billion (i.e., $4.75 billion (i.e., Forecasted BRI of $9.5 billion multiplied by 50%) plus $0.3025 billion (i.e., 60.5% of $0.5 billion – the difference between BRI of $10 billion and Forecasted BRI of $9.5 billion)), which would equate to 50.525% of BRI;
2. if BRI for a Salary Cap Year were to equal $9.5 billion, and Forecasted BRI for such Salary Cap Year were to equal $10 billion, then the Designated Share for such Salary Cap Year would equal $4.6975 billion (i.e., $5 billion (i.e., Forecasted BRI of $10 billion multiplied by 50%) less $0.3025 billion (i.e., 60.5% of $0.5 billion – the difference between Forecasted BRI of $10 billion and BRI of $9.5 billion)), which would equate to 49.4474% of BRI; and
3. if BRI for a Salary Cap Year were to equal $10 billion, and Forecasted BRI for such Salary Cap Year were to equal $9 billion, then the Designated Share for such Salary Cap Year would equal $5.1 billion or 51% of BRI since the amount per the calculation would exceed 51% of BRI (i.e., $4.5 billion (i.e., Forecasted BRI of $9 billion multiplied by 50%) plus $0.605 billion (i.e., 60.5% of $1 billion – the difference between BRI of $10 billion and Forecasted BRI of $9 billion) would equal $5.105 billion or 51.05% of BRI).
1. “Distribution Amount” means, with respect to a Salary Cap Year, an amount equal to the sum of the Aggregate Reduction Amount for such Salary Cap Year and any Shortfall Amount for such Salary Cap Year, allocated in accordance with Section 12(e) below.
2. “Forecasted BRI” means:
  1. With respect to the 2023-24 Salary Cap Year, ninety and forty-eight hundredths percent (90.48%) of BRI for the 2022-23 Salary Cap Year; and
  2. With respect to each Salary Cap Year beginning with the 2024-25 Salary Cap Year, one hundred four and one-half percent (104.5%) of Forecasted BRI for the immediately preceding Salary Cap Year.
3. “Governing Audit Report” means, with respect to a Salary Cap Year, the Audit Report for such Salary Cap Year, or, if no final Audit Report has been submitted at the conclusion of the Audit Report Challenge Period, the Interim Designated Share Audit Report for such Salary Cap Year.
4. “Interest Amount” means, with respect to a Salary Cap Year, the Carryover Interest Rate for such Salary Cap Year multiplied by the Carryover Amount with respect to such Salary Cap Year.
5. “Overage” or “Overage Amount” means, with respect to a Salary Cap Year, the amount, if any, by which Adjusted Total Salaries and Benefits for such Salary Cap Year exceeds the Designated Share for such Salary Cap Year.
6. “Shortfall Amount” means, with respect to a Salary Cap Year, the amount, if any, by which the Designated Share for such Salary Cap Year exceeds Adjusted Total Salaries and Benefits for such Salary Cap Year.
7. “Team Overage Balance” means for a Team, with respect to a Salary Cap Year, the Overage Amount (if any) for such Salary Cap Year to which such Team is entitled (calculated in accordance with Section 12(d) below), adjusted in accordance with Section 12(e) below.
8. “Uncapped Reduction Amount” means, with respect to a Salary Cap Year, the sum of the Overage Amount, the Carryover Amount, and the Interest Amount with respect to such Salary Cap Year.
9. “Withholding Percentage” means, with respect to a Salary Cap Year, ten percent (10%), provided that in the event that the Salary Cap for such Salary Cap Year is limited to one hundred ten percent (110%) of the Salary Cap for the immediately preceding Salary Cap Year pursuant to Section 2(a)(5) above, then the NBA and Players Association shall discuss in good faith reducing the Withholding Percentage (i.e., to a percentage that is less than ten percent (10%)), taking into account reasonable estimates of Team and League financial performance (accounting for attendant risks and the likely size of any Shortfall Amount).
Benefit Adjustment.
1. In the event that, for a Salary Cap Year, prior to any reduction pursuant to this Section 12(b)(1), the Uncapped Reduction Amount less any Shortfall Amount would exceed ten percent (10%) of Adjusted Total Salaries, the Additional Benefit Amount as provided for by Article IV, Section 4(d)(1) (i.e., the one percent (1%) of BRI amount for additional benefits) shall be reduced by such excess amount (or, if such excess amount is greater than the Additional Benefit Amount, then the Additional Benefit Amount shall be reduced in full). Any reduction to the Additional Benefit Amount for a Salary Cap Year pursuant to this Section 12(b)(1) shall be deducted from Total Benefits (and, thus, Adjusted Total Benefits) for such Salary Cap Year (thus decreasing the Overage Amount and/or increasing the Shortfall Amount for such Salary Cap Year, as applicable).
2. For purposes of calculating Projected Benefits (and, thus, the Salary Cap) for a Salary Cap Year, no reduction expected to be made pursuant to Section 12(b)(1) above shall be taken into account.
Compensation Adjustments.
1. For each Salary Cap Year, each Compensation payment made to a player in respect of the Season encompassed by such Salary Cap Year pursuant to an Adjustment Contract shall be adjusted by the percentage reduction that, when applied to each remaining Compensation payment in respect of that Season pursuant to such Adjustment Contract, and taking into account any Compensation adjustments already made pursuant to this Section 12(c), would result in a reduction (pursuant to this Section 12(c)) of the total Compensation payable to such player pursuant to the Adjustment Contract in respect of that Season equal to the then-applicable Contract Reduction Amount.
2. In the event that, as of the completion of the Governing Audit Report, the Compensation payable to a player pursuant to the Adjustment Contract has already been reduced pursuant to this Section 12(c) by an amount that exceeds the then-applicable Contract Reduction Amount, then such excess shall be paid to the player in equal installments over the remaining semi-monthly payment dates on which payments are due to such player for the applicable Season pursuant to the Adjustment Contract beginning with either the next semi-monthly payment date following the issuance of the Governing Audit Report or, if practicability warrants, the second semi-monthly payment date following the issuance of the Governing Audit Report (or, if there are no remaining payments due to such player for the applicable Season pursuant to the Adjustment Contract, such excess shall be paid to the player within sixty (60) days following the completion of the Governing Audit Report).
3. If for any reason, in respect of a Salary Cap Year, the Contract Reduction Amount for an Adjustment Contract exceeds the amount by which the Compensation provided for by such Contract was decreased pursuant to this Section 12(c) above, then the Players Association shall make good faith efforts to facilitate the applicable Team’s recovery of such excess from the applicable player via a direct payment. In the event any amount remains outstanding as of the first semi-monthly payment date for the immediately following Salary Cap Year, such outstanding amount shall be subtracted from the Contract Reduction Amount for such Adjustment Contract in respect of the Salary Cap Year with respect to which such amount remains outstanding (and the parties shall adjust (or, if necessary, deem amended) the Governing Audit Report to reflect such decrease).
4. Within seven (7) days after receiving any set of Adjustment Schedules from the NBA, or within seven (7) days after any event that the Players Association believes warrants a change in any previously-issued Adjustment Schedules, the Players Association may bring a proceeding before the System Arbitrator, in accordance with Article XXXII, Section 10, contesting the NBA’s calculation of any player’s Compensation adjustment pursuant to this Section 12(c). Notwithstanding the commencement of any such proceeding, each Team shall continue making Compensation adjustments in accordance with this Section 12(c), and in no event shall any Team be prohibited from making such Compensation adjustments prior to a final determination in any such proceeding. In the event that the NBA makes a determination, or a final determination is made in a proceeding in accordance with this Section 12(c)(4), that an adjustment to a player’s Compensation was erroneously calculated by the NBA, the sole remedy with respect to any amounts erroneously deducted from the player’s Compensation shall be to modify, as soon as practicable, the deduction amounts applicable to such player so as to reduce, in equal amounts, all scheduled future deductions from post-determination payments of Compensation until the amount of any prior over-deduction is fully offset; provided, however, that to the extent that reducing the player’s future deductions would not fully offset the prior over-deductions, the NBA shall instruct the applicable Team to pay the player as soon as practicable such additional amounts as are necessary to fully offset such over-deductions.
Team Overage Balance. In respect of each Salary Cap Year, each Team’s Team Overage Balance shall (prior to any adjustments made in accordance with Section 12(e) below) equal:
1. If there is an Overage Amount that is less than or equal to ten percent (10%) of Adjusted Total Salaries: the Overage Amount divided by thirty (30).
2. If there is an Overage Amount that is greater than ten percent (10%) of Adjusted Total Salaries: an amount equal to the sum of (i) ten percent (10%) of Adjusted Total Salaries divided by thirty (30), and (ii) the amount by which the Overage exceeds ten percent (10%) of Adjusted Total Salaries, multiplied by a fraction, the numerator of which is the Team’s Adjusted Team Salary for such Salary Cap Year, and the denominator of which is Adjusted Total Salaries for such Salary Cap Year.
3. If the Overage Amount is zero (0): zero (0).
Allocation of Distribution Amount. Each Salary Cap Year, as part of the Governing Audit Report, the following processes will apply with respect to Team Overage Balances and the Distribution Amount for such Salary Cap Year (the “Distribution Year”):
1. Beginning with the earliest Salary Cap Year in respect of which the Aggregate Team Overage Balance is greater than zero (0):
  1. If the Distribution Year is later than such Salary Cap Year, then each Team’s Team Overage Balance in respect of such Salary Cap Year shall be increased by an amount equal to its Team Overage Balance in respect of such Salary Cap Year multiplied by the Carryover Interest Rate in respect of the Distribution Year (and thus the Aggregate Team Overage Balance in respect of such Salary Cap Year shall be increased by the sum of the increase to each Team’s Team Overage Balance in accordance with this Section 12(e)(1)(i)); and
  2. With respect to such Salary Cap Year, the Distribution Amount for the Distribution Year shall be allocated as follows:
    1. If the Distribution Amount is greater than or equal to the Aggregate Team Overage Balance in respect of such Salary Cap Year, each Team shall be allocated a portion of the Distribution Amount equal to its Team Overage Balance in respect of such Salary Cap Year. As a result, each Team’s Team Overage Balance in respect of such Salary Cap Year (and thus the Aggregate Team Overage Balance in respect of such Salary Cap Year) shall be reduced to zero (0); or
    2. If the Distribution Amount is less than the Aggregate Team Overage Balance in respect of such Salary Cap Year, each Team shall be allocated a portion of the Distribution Amount in proportion to its Team Overage Balance in respect of such Salary Cap Year. As a result, each Team’s Team Overage Balance in respect of such Salary Cap Year shall be reduced by its respective allocated amount (and thus the Aggregate Team Overage Balance in respect of such Salary Cap Year shall be reduced by the sum of such allocated amounts).
2. The process described in Section 12(e)(1) above shall then be repeated, in chronological order, for each successive Salary Cap Year for which the Aggregate Team Overage Balance is greater than zero (0), utilizing the portion of the Distribution Amount for the Distribution Year that has not yet been allocated to Teams in respect of an earlier Salary Cap Year.
3. If, as a result of the existence of a Shortfall Amount for the Distribution Year and following the procedures described in Sections 12(e)(1)-(2) above, the portion of the Distribution Amount that has not been allocated to Teams is greater than zero (0), such unallocated portion of the Distribution Amount shall then be allocated to each player in proportion to the Adjustment Salary provided for by his Adjustment Contract(s) (as a percentage of Adjusted Total Salaries) for the Distribution Year. Notwithstanding the foregoing, if the portion of the Distribution Amount to be allocated to players pursuant to this Section 12(e)(3) in respect of the Distribution Year exceeds the Aggregate Reduction Amount in respect of such Salary Cap Year, then such excess, rather than being allocated to each player in proportion to the Adjustment Salary provided for by his Adjustment Contract(s), shall be allocated to each player on such proportional basis as may be reasonably determined by the Players Association.
Example: Assume (i) as set forth in the Governing Audit Report for the 2024-25 Salary Cap Year (i.e., the Distribution Year), the 2024-25 Distribution Amount is $500 million, and (ii) prior to any allocations of the 2024-25 Distribution Amount pursuant to this Section 12(e), there is a 2023-24 Aggregate Team Overage Balance of $200 million and a 2024-25 Aggregate Team Overage Balance of $400 million, and (iii) the 2024-25 Carryover Interest Rate is five percent (5%).

The earliest Salary Cap Year in which the Aggregate Team Overage Balance is greater than zero (0) is the 2023-24 Salary Cap Year. Because the 2024-25 Distribution Year is later than the 2023-24 Salary Cap Year, each Team’s 2023-24 Team Overage Balance (and hence the 2023-24 Aggregate Team Overage Balance) would be increased by five percent (5%) (i.e., the 2024-25 Carryover Interest Rate). As a result of such increase, the 2023-24 Aggregate Team Overage Balance would be $210 million (i.e., $200 million increased by five percent (5%)).

The 2024-25 Distribution Amount of $500 million is greater than the 2023-24 Aggregate Team Overage Balance of $210 million. Accordingly, $210 million of the 2024-25 Distribution Amount would be allocated to Teams in amounts equal to each Team’s 2023-24 Team Overage Balance. As a result of such allocation, each Team’s 2023-24 Team Overage Balance (and hence the 2023-24 Aggregate Team Overage Balance) would be zero (0).

The next Salary Cap Year in which the Aggregate Team Overage Balance is greater than zero (0) is the 2024-25 Salary Cap Year. The Distribution Year is not later than the 2024-25 Salary Cap Year and thus neither each Team’s 2024-25 Team Overage Balance nor the 2024-25 Aggregate Team Overage Balance would be increased pursuant to Section 12(e)(1)(i) above.

The unallocated portion of the 2024-25 Distribution Amount is $290 million ($500 million less the $210 million amount that was allocated in respect of the 2023-24 Salary Cap Year), which is less than the 2024-25 Aggregate Team Overage Balance of $400 million. Accordingly, $290 million of the 2024-25 Distribution Amount would be allocated to Teams in proportion to each Team’s 2024-25 Team Overage Balance. As a result of such allocation, each Team’s 2024-25 Team Overage Balance would be decreased by its respective allocation of the 2024-25 Distribution Amount (and hence the 2024-25 Aggregate Team Overage Balance would be reduced by $290 million), resulting in a 2024-25 Aggregate Team Overage Balance of $110 million ($400 million less the $290 million amount allocated from the 2024-25 Distribution Amount).

In accordance with Section 12(e)(3) above, no portion of the 2024-25 Distribution Amount would be allocated to players in respect of 2024-25 Adjustment Contracts.
Team Reconciliation Payments. The NBA shall facilitate the following payments to be made within sixty (60) days following the completion of the Governing Audit Report in respect of each Salary Cap Year, based on the allocations described in Section 12(e) above. Each Team shall be entitled to receive or, if the result of the following calculation is negative for such Team, required to pay, the following amount in respect of a Salary Cap Year:
1. The sum of: (i) the total Distribution Amount allocated to the Team in accordance with Sections 12(e)(1)-(2) above; and (ii) the portion of the Distribution Amount allocated in accordance with Section 12(e)(3) above to each player in respect of an Adjustment Contract for which the Team is (or was) the last Team responsible for making payments to the player in respect of the Season encompassed by the Salary Cap Year for which the Governing Audit Report was just completed; less
2. The sum of: (i) the total amount by which such Team reduced (or is scheduled to reduce) Compensation payments to players in respect of the Season encompassed by such Salary Cap Year pursuant to Section 12(c) above; and (ii) the Shortfall Amount (if any) in respect of such Salary Cap Year divided by the number of Teams that played in the NBA during such Salary Cap Year.
Player Reconciliation Payments. Following completion of the Governing Audit Report in respect of each Salary Cap Year, each player to whom a portion of the Distribution Amount is allocated in accordance with Section 12(e)(3) above shall be paid the amount of such allocation in respect of an Adjustment Contract by the final Team responsible for making payments to such player pursuant to such Adjustment Contract in respect of the Salary Cap Year for which the Governing Audit Report was just completed. Such payment shall be made to the player in equal installments over the remaining semi-monthly dates on which payments are due to the player for the applicable Season pursuant to the Adjustment Contract beginning with either the next semi-monthly payment date following the issuance of the Governing Audit Report or, if practicability warrants, the second semi-monthly payment date following the issuance of the Governing Audit Report (or, if there are no remaining payments due to the player for such Season pursuant to the Adjustment Contract, in one (1) payment to be made within sixty (60) days following the completion of the Governing Audit Report).
Survival of Obligation and Terms. In the event that, upon the expiration or termination of this Agreement, there is an Aggregate Team Overage Balance in respect of any Salary Cap Year (including the final Salary Cap Year of this Agreement) that is greater than zero (0), the sum total of any Aggregate Team Overage Balances shall be due and owing by the players to the Teams and shall be recouped in full by the Teams under a successor collective bargaining agreement via reductions to the Compensation otherwise payable to players (i) no later than the Salary Cap Years in which such Aggregate Team Overage Balances would have been recouped pursuant to this Section 12 had these provisions continued in effect, and (ii) using the method described in this Section 12 or such other method as is mutually agreed by the parties. Notwithstanding any other provision of this Agreement, the terms of this Section 12(h) shall survive the expiration or termination of this Agreement. For clarity, nothing in this Section 12(h) shall impact any right to engage in any strikes, lockouts, or cessations or other stoppages of work following the expiration or termination of this Agreement.
Information to Be Included in Audit Report. The parties shall cause the Accountants to include in the Interim Audit Report and the Governing Audit Report for each Salary Cap Year schedules setting forth, with respect to such Salary Cap Year:
1. BRI, the Designated Share, Total Salaries and Benefits, and Adjusted Total Salaries and Benefits;
2. the Overage Amount or the Shortfall Amount (as applicable);
3. the Actual Reduction Percentage;
4. the Aggregate Reduction Amount;
5. the Distribution Amount;
6. the Aggregate Team Overage Balance and each Team’s Team Overage Balance, both before and after the application of Sections 12(e)(1)-(2) above;
7. for each prior Salary Cap Year in respect of which the Aggregate Team Overage Balance is greater than zero (0) prior to the application of Sections 12(e)(1)-(2) above, the Aggregate Team Overage Balance and each Team’s Team Overage Balance in respect of each such prior Salary Cap Year, both before and after the application of Sections 12(e)(1)-(2) above;
8. a listing of each Team and the Distribution Amount allocated to each such Team in accordance with Sections 12(e)(1)-(2) above;
9. a listing of each Adjustment Contract, the associated Contract Reduction Amount, and the Distribution Amount allocated to the player in respect of such Adjustment Contract in accordance with Section 12(e)(3) above;
10. a summary of the reconciliation payments described in Sections 12(f)-(g) above;
11. the amount (if any) by which each Team’s Tax Team Salary (as computed pursuant to Section 2(d) above) exceeds the Tax Level, and the resulting tax payment due by the Team;
12. the amount (if any) of any Minimum Team Salary payment owed by a team in accordance with Section 2(c) above; and
13. the amount (if any) by which each Team’s Apron Team Salary (as computed pursuant to Section 2(e) above) exceeds the Second Apron Level.
Miscellaneous.
1. For all purposes under this Agreement, the computation of a player’s Salary or Adjustment Salary shall be made without regard to any adjustment made (or to be made) to such player’s Compensation in accordance with this Section 12.
2. When (i) pursuant to Article VI, Section 1 or Article XLI, Section 4(e), a player has forfeited a portion of his Compensation for a Season (payable to him pursuant to an Adjustment Contract) (the “forfeited amount”) and (ii) following the completion of the Governing Audit Report, the Contract Reduction Amount for such Adjustment Contract for the applicable Salary Cap Year is greater than zero (0), then the player shall be entitled to a refund of a portion of the forfeited amount. The refund shall be in an amount equal to the Contract Reduction Amount for the Adjustment Contract for the Salary Cap Year to which the forfeited amount related multiplied by a fraction, the numerator of which is the forfeited amount, and the denominator of which is the player’s Base Compensation for such Season pursuant to the Adjustment Contract as of the date(s) the Compensation was forfeited. For clarity, the amount of the refund shall be less all amounts required to be withheld by any governmental authority. For purposes of the foregoing calculation, a player’s Contract Reduction Amount shall be deemed to include only the portion of the player’s Contract Reduction Amount that relates to the Base Compensation for the applicable Season set forth in the applicable Adjustment Contract. Such refund shall be made to the player within sixty (60) days following the completion of the Governing Audit Report for the Salary Cap Year in which the forfeited amount is collected.