Sign-and-Trade
A Sign-and-Trade is a mechanism where a Player that is no longer under Contract with his Prior Team, initially signs with his Prior Team on the condition of being traded to a new Team.
Sign-and-Trade allows a Team to sign a Player using the Prior Team’s Bird Rights.
Requirements
A Team may execute a Sign-and-Trade with a Free Agent if:
- Signed prior to the start of the Regular Season;
- Player is Free Agent and finished prior Season on Sending Team’s Roster;
- Contract is for at at least 3 Seasons (excluding Options), up to 4 Seasons;
- NTMLE and Room MLE are not used to sign the Player;
- First Season of Contract is fully guaranteed;
- Acquiring Team has sufficient Room for Player’s Salary plus Unlikely Bonuses.
5th Year Eligible Player
Player eligible for the Higher Max Criteria language is still limited to only 25% of the Salary Cap.
Signing Bonus
Any payment made by the Sending Team shall be treated as Cash-in-Trade to the Receiving Team (and limited to such rules).
Physical Exam Contingency
A Sign-and-Trade and Extend-and-Trade cannot contain an Exhibit 6, but can still be conditioned upon the Player passing a physical exam.
Extend-and-Trade
Generally
Similar to a Sign-and-Trade, a Team may enter into an Extension with the Player under the condition he is traded subsequent to the amendment to the Contract.
When signing an Extend-and-Trade, the terms of the Contract are more restrictive than if signing an Extension and staying with his Prior Team (discussed below).
In 2020-21, Steven Adams agreed to an Extend-and-Trade. He signed a 2-year, $35 million Extension with the Thunder, and as part of the Extension he was traded to the Pelicans.
Eligibility
In addition to being Extension eligible, an Extend-and-Trade cannot be signed from the last day of the Regular Season in the last Season of the Contract (including Option Year) through June 30th.
Compensation
Salary
The Extend-and-Trade can include Salary that is greater of:
- 120% of the Regular Salary in the last year of the original term of the Contract; or
- 120% of the Estimated Average Player Salary (EAPS) for the Salary Cap Year in which the Extension is signed.
- If the first year of the Extension includes Incentive Compensation, then 120% of the EAPS less the amount of such Incentive Compensation.
Incentive Compensation
120% of Likely and Unlkely Incentive Compensation, respectively, in the last year of the original term of the Contract.
Adjustment for Certain Bonuses
When determining the Player’s maximum allowable Salary in an Extend-and-Trade, you add (i) bonuses for physical/academic achievement, and (ii) bonuses related to promotional appearances to Regular Salary, and exclude them from Incentive Compensation.
Increase/Decrease Limitations
For each Salary Cap Year following the first year of a Contract signed via and Extend-and-Trade, the increase/decrease limitation shall be 5% instead of 8% like a typical Veteran Extension.
Years
May not cover more than 4 Seasons (including the remaining Seasons in the Original Contract).
Other Considerations
Trade Bonuses
Adding a Trade Bonus
If the original Contract did not include a Trade Bonus, the Contract can be amended to include a Trade Bonus that will be triggered on any subsequent trade (i.e. does not trigger on the Extend-and-Trade).
Amending Trade Bonus
In connection with an Extend-and-Trade Contract, you can (i) reduce the amount of the Trade Bonus to be paid to the player or (ii) provide the Trade Bonus will not be applicable to the extended term of the Contract.
If traded during the original term, the Trade Bonus is due, and is calculated based on remaining Base Compensation owed in original term of Contract (the Player can still waive the Trade Bonus at the time of the Trade).
Physical Exam Contingency
A Sign-and-Trade and Extend-and-Trade cannot contain an Exhibit 6, but can still be conditioned upon the Player passing a physical exam.