ARTICLE XXV:
LIMITATION ON DEFERRED COMPENSATION
INDEX
Section 1. General Limitation
Section 2. Attribution
Section 3. Rabbi Trusts
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.
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Section 2. Attribution.
All Player Contracts shall specify the Season(s) to
which any Deferred Compensation is attributable.
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Section 3. Rabbi
Trusts.
(a) Notwithstanding Section 1, a Player Contract may
provide for an annuity to be purchased by the Team that
will pay the Player (or his designees) an amount of
Deferred Compensation in excess of 30% of Compensation,
provided that:
(i) The Team and the Player agree with respect to
the form and terms of the annuity instrument and the
institution from which it is purchased;
(ii) Ownership of the annuity and all related aspects
are structured in a manner that qualifies the arrangement
as a tax deferred (“rabbi”) trust, in
the opinion of the NBA’s tax advisor; and
(iii) The total cost of the annuity and the schedule
of payment of such costs are specified in the Player
Contract.
(b) Notwithstanding anything to the contrary contained
in Section 3(a) above:
(i) If the institution obligated to make payment
under the annuity fails to do so for any reason (other
than non-compliance by the Team with the provisions
of the annuity contract), the Team shall thereupon
become obligated to pay to the Player as Deferred
Compensation an amount, if any, equal to the unpaid
portion of the purchase price of the annuity for which
the Team remains obligated; and
(ii) If the creditors of the Team and not the Player
receive payments under the annuity, the Team shall
thereupon become obligated to pay to the Player as
Deferred Compensation an amount equal to the full
purchase price of the annuity.
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