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KVH Salary Bonus?

A little known (okay, maybe unknown until now) aspect of the Jason Kidd trade could be a bonus for the Nets this off-season. Al Iannazzone has reported in The Record, in his blog and on the YES website that Keith Van Horn's nonguaranteed contract could be a Net asset...and a substantial one.

How so? There's nothing definitive online, but Iannazzone reports the Nets don't have to make a decision on waiving Van Horn until October and thus can trade his contract--and the $3.75 million he would make next season--in the off-season. Officially, Van Horn was signed to a three-year deal in February to facilitate the Jason Kidd trade, to get the numbers to work. Only the first year, at $4.2 million, was guaranteed. Draft Express reports the second year was for $3.75 million and the third $3.3 million, for a total of $11.25 million. The same Draft Express data shows those two years as "partially unguaranteed".

Normally, team options in contracts like Van Horn's must be exercised by July 1 or slightly after. But there is nothing to prevent a team and player from agreeing to extend that date beyond July. Such deals often provide the player a partial guarantee, a lesser amount of money than his contract's worth. In other words, a buyout. This is called "limited salary protection" for the player. In fact, ESPN notes in its list of 2008 NBA free agent that Van Horn has such protection, but does not indicate how much he will receive. While the Nets' other free agents--Nenad Krstic, Boki Nachbar, DeSagana Diop and Darrell Armstrong--are listed as restricted or unrestricted, Van Horn is listed as neither.

How would a trade using Van Horn's contract work? Look no further than the trade the Nets made with the Hornets in late October as an example. On October 31, New Jersey traded Bernard Robinson, who was going to make $1.08 million this season; Mile Ilic, who was going to make $870,000; and an undisclosed amount of cash to New Orleans for David Wesley. Wesley, like Van Horn, had "limited salary protection". His contract called for him to be paid $1.75 million, but it also contained a buyout option of $250,000, exercisable around the time the season started. So the Nets exercised the option and bought out Wesley on November 1. The Hornets in turn waived Robinson and Ilic, buying out their contracts--no doubt with the cash the Nets sent south. It was in fact the second time Wesley's contract was traded last summer. The first time at the end of September, he was traded by Cleveland to New Orleans for Cedric Simmons, a young big man the Cavs wanted to take a chance on. Everyone in both transactions knew that Wesley planned on retiring. He had publicly said so. But because his contract had that "limited salary protection", it was a valuable commodity...just like Van Horn's could be this summer.

The Nets can't trade Van Horn's contract before July 1 because under the collective bargaining agreement teams can't trade players with player or team options between the end of their season and July 1...four days after the NBA Draft. After that, the contract could become quite valuable in trade negotiations. A $3.75 million contract is valued for trading purposes at $4.8 million...$3.75 million x 1.25% + $100,000. That's the calculation used in the NBA's Collective Bargaining Agreement to massage the equal value needed for trades. Add in Stromile Swift's expiring $6.2 million, $6.95 million for trade purposes, and you're at $11.8 million.

There were reports at the time of the Kidd trade back in February that Van Horn's agent, David Falk, originally wanted a two-year guarantee for his client. The Mavs, who did the sign-and-trade negotiations, wanted his contract be pro-rated, meaning the contract wouldn't be paid in full, but rather would be based on what percent of the season he was on an NBA team roster. At some point, a compromise was reached and the deal went through.

A deal like this would also solve a mystery: why didn't the Nets simply waive Van Horn after the trade or after a suitable interval? Most expected he would be waived shortly after the trade or maybe 30 days later. That number had been thrown around. But Van Horn is still on the Nets' official roster although no beat reporter has seen him or spoken to him at the IZOD Center or the Nets' training facility. If he had been waived early on, the Nets would have given up his rights meaning they couldn't deal his contract. Starting July 1, it appears, they can.