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Posted: **Fri Sep 5, 2008 1:36 pm**

I have a question regarding deferred compensation and trades.
When a player signs a contract, his team can choose to pay up to 30% in deferred compensation (payments made after the original contract expires).
According to the CBA, Deferred Compensation shall be included in a player’s Salary in the Season in which such Deferred Compensation is earned so it has no conquence on the team's salary cap.
This point is quite clear to me but I couldn't find anything regarding trade rules and deferred compensation. In the CBA, Deferred Compensation is explained in Article VII and Article XXV but I didn't find an answer to my question :

If Team A signs a player to a contract and both parties agree that 30% will be deferred compensation then a few years later the player is traded to another team (Team B) what is the rule ?
Will his new team be obligated to pay only his current compensation ? I mean can teams make an agreement that deferred compensation will be paid by his original team (Team A) instead of hiw new team (Team B) ?

NBA teams can pay up to $3M cash in trades so I doubt it's posible but I read yerterday something about Zach Randolph's contract and a potential trade with the Memphis Grizzlies.
When Zach Randolph signed his extension in Portland, 30% was deferred compensation.
He was traded to the Knicks one year ago and we all know the ownership (Cablevision) doesn't care much about spending so can the Knicks offer to pay Randolph's deferred compensation to make his albatross contract more friendly in trades ?

I don't think it's allowed because obviously it would be a loophole but I'd rather ask the question to be sure.

ARTICLE VII: BASKETBALL RELATED INCOME, SALARY CAP, MINIMUM TEAM SALARY, AND ESCROW ARRANGEMENT

Section 3. Determination of Salary.
For the purposes of determining a player’s Salary with respect to an NBA Season, the following rules shall apply:

(a) Deferred Compensation.

(1) General Rules:

(i) 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 in the Season in which such Deferred Compensation is earned.

(ii) Notwithstanding Section 3(a)(1)(i) above, for purposes of an annuity compensation arrangement included in a Player Contract in accordance with Article XXV, Section 3 of this Agreement only, Deferred Compensation shall include only the portion of the cost of the annuity instrument to be paid by the Team after the playing term covered by the Contract, if any, and shall not include any Compensation that the player is scheduled to receive after the term of the Contract pursuant to such annuity compensation arrangement. The portion of the cost of the annuity paid by the Team while the player is required to render playing services under the Player Contract shall be included in Salary for the Salary Cap Year in which such cost is paid.

ARTICLE XXV: LIMITATION ON DEFERRED COMPENSATION

Section 1. General Limitation.
No NBA Team may sign a Player Contract with any player under which more than 30% of Compensation is Deferred Compensation. For purposes of this provision only, Deferred Compensation shall mean Deferred Compensation during the period commencing more than two (2) years after the playing term covered by a Player Contract.

Section 2. Attribution.
All Player Contracts shall specify the Season(s) to which any Deferred Compensation is attributable.

Posted: **Fri Sep 5, 2008 4:38 pm**

It is my understanding that when two teams make a deal for a player with deferred compensation, they can decide between themselves what portion each team pays of the deferred compensation already accrued. This does not fall within the $3M limit that one team can send the other in the trade as it is a portion of contracted salary.

Zach Randolph has already earned some $36M over the first three year of his current contract. Assuming that the Knicks agreed to pay the deferred compensation accrued during Randolph's playing days in Portland, and assuming he had the full 30% deferred, he is owed currrently $10.8M in deferred compensation by the Knicks. If the reports coming out of Memphis are true that Memphis is looking to acquire him from New York, the discussion on deferred compensation centers on what portion of that $10.8M each team will be responsible to pay Randolph.

If the trade is made, Memphis will be responsible for paying the deferred Randolph accrues in the last three years of his current deal.

Posted: **Fri Sep 5, 2008 4:48 pm**

Thank you Dunkenstein, I was wondering the same thing that Kosmo posted. Since it's for prior years, it has no effect on salary cap. Your answer makes sense.

I imagine there's probably some rate of interest, or no player would take defered compensation, so it's probably up to 10.8 mil, plus interest.

Posted: **Fri Sep 5, 2008 8:35 pm**

Luv those Knicks wrote: I imagine there's probably some rate of interest, or no player would take defered compensation, so it's probably up to 10.8 mil, plus interest.

There is rarely any interest involved. Agents will put deferred compensation in a contract to protect his client from spending all his money during his short earning span and having no income or savings when he retires.

Posted: **Fri Sep 5, 2008 11:43 pm**

Dunkenstein wrote:
Luv those Knicks wrote: I imagine there's probably some rate of interest, or no player would take defered compensation, so it's probably up to 10.8 mil, plus interest.

There is rarely any interest involved. Agents will put deferred compensation in a contract to protect his client from spending all his money during his short earning span and having no income or savings when he retires.

If the Knicks absorbed Zach's deferred amount that makes a little more sense on why they would take on Francis' contract.
Zach's full 30% is pretty rare?
I saw reported the same summer Melo and another big contract each had 6 mil deferred to his 24 mil.

Posted: **Fri Sep 5, 2008 11:47 pm**

Here is another news clip on Zach

http://www.thememphisedge.com/2008/09/0 ... to-knicks/

" Any potential Memphis deal involving New York forward Zach Randolph
is now in the Knicks’ court from what I’m told. The Griz will agree to
a package that includes Darko Milicic and Marko Jaric going to the
Knicks for Randolph. But Griz brass apparently wants the Knicks to
pick up more of the deferred payments owed Randolph in the latter year
of his contract.

Posted: **Sat Sep 6, 2008 5:43 am**

^^^ This writer (like many when it comes to CBA and related matters) doesn't really know what he's talking about. A team is not permitted to pay (now or in the future) deferred money on salary that has yet been earned by a player it is trading away. Financially, all that the Knicks could legally do would be to include $3M in the deal along with agreeing to pay the total of the deferred salary Randolph has accrued prior to the trade.

Another thought came to me. Donnie Walsh's #1 priority is to clear cap space in 2010. Darko's contract ends in 09-10, but Jaric would still be on the Knick's books in 10-11. Maybe Walsh is holding out for a substitution of Antoine Walker for Jaric in the deal. Walker has only one guaranteed year left on his contract. Trading Randolph for Walker and Darko means that the Knicks would remove a total of $17.33M from their cap in the summer of 2010. To me that would be enough incentive to pay all of Randolph's currently accrued deferred salary, plus send Memphis a $3M sweetener in the deal.

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