Thanks, Jon. TP.
Essentially, first rounders get "rookie scale" contracts up to 5 years. The first 2 seasons are guaranteed, the 3rd and 4th are team options, and the 5th is a qualifying offer. The 4th year option and qualifying offer are at significantly higher rates than the first 3 years of the rookie scale (80-100% bump for the 4th season, another big bump for the qualifying offer season). The player need not accept the qualifying offer, but it's for the team's protection. If the qualifying offer is made, the player is a restricted instead of unrestricted free agent so the team can match any offer made after the player's 4th season (which is why Josh Smith, Andre Iguodala, Emeka Okafor, etc. are RFAs right now). And since the player will have played more than 3 (4) seasons under that contract, the player has Bird rights (even if he's been traded) and the team can match any offer without using exceptions.
With respect to the cap and exceptions, teams have a "Rookie Exception" for players signed to rookie scale contracts. Thus, if a team is over the cap, rookie scale contracts do not count against a team's other exceptions (MLE or bi-annual LLE). A team can sign its first rounders and still use all of its MLE and LLE. So signing Giddens will not affect or be affected by our use of the MLE and/or LLE.
Second rounders are different, since the Rookie Exception covers only rookie scale contracts, which are only available to first round picks. If the team is over the cap, second round picks must be signed using the team's other salary cap exceptions - the mid-level, lower-level (or bi-annual), and minimum contract exceptions. However, if a team uses the LLE or minimum contract exception, it may only sign the second rounder to a 2 year deal (those exceptions may only be used for 2 year deals). A player does not get full Bird rights until he has played 3 years with a team (or has played 3 years and has changed teams only by trade).
Pruitt/Powe and Davis are an example of the differences. We used a portion of the MLE to sign Powe 2 years ago and Pruitt last year, so we got them for three years (even though their contracts only started at the minimum level). The players will have full Bird rights when their contracts expire, and we can resign them for any amount, regardless of cap space, without using our salary cap exceptions. On the other hand, we did not use the MLE on Davis (my recollection is he only wanted a 2 year deal but I may be wrong), so we just signed him using the minimum contract exception, under which the contract was limited to 2 years.
So, after this season, both Davis and Powe will be free agents, but only Powe has full Bird rights; Davis has early Bird rights (2 years on same team, or only being moved by trade). Since both are in their first 5 (I think that's the rule) seasons, they are Restricted Free Agents, meaning we have the right to match offers. However, since we will be over the cap, we can only use cap space or available exceptions.
For Powe, since he has Bird rights and is a qualifying veteran free agent, we can use our veteran free agent exception to resign him to any contract up to the maximum player contract. That is, nobody can outbid us for Powe - we can match any possible offer. That exception is available only to resign a player, and is not available to sign a free agent from another team.
Davis, though, only has Early Bird Rights, so the Veteran Free Agent exception only allows us to resign him to a contract up to 175% of his current salary. If a team offers him more than 175% of his current salary, we cannot use the VFA exception. We will only have up to the MLE to resign him.
If a team without cap space offers Powe a full-MLE contract, we can match it and still have our MLE available. If a team with cap space offers Powe a contract worth more than the MLE (say, $7 mil starting salary), we can still match it. If a team offers Davis a full-MLE contract, we can match it, but will have to use our MLE to resign him, and cannot use it to get other free agents. And if a team with cap space offers more than the MLE to Davis, we cannot match it.
That is what happened to Arenas when Golden State drafted him in the second round. After his 2 year minimum salary contract expired, Golden State could offer only the MLE to keep him. Washington offered him more than the MLE, and Golden State, though it wanted to, could not match.
That is why it would be better to use a portion of the MLE to sign Walker to a 3 year deal, starting at the minimum salary. If he does happen to blow up - and considering this kid was a top-10 prospect if not for his injuries, it's possible - and is on a 2-year contract, then we will be limited to the MLE in resigning him.
Now, it's very rare for a second rounder to blow up to the point that he can command a contract above the MLE after 2 years. Arenas may be the only example. So having the flexibility to resign him at any cost is not the big factor. The big factor is the ability to avoid using other exceptions to resign a good second round pick you make. Davis is highly unlikely to get an offer above the MLE next year, even if he has a very good season. But if a team signs him to an offer sheet with a salary starting at, say, $3 million, the Celtics will be able to match, but will have to use $3 million of their MLE to resign him, which hurts flexibility in free agency.
Having full Bird rights, instead of early Bird rights, then, is a huge bonus, and makes the 3 year contract well worth it (particularly since various team options and escape clauses can let the team guarantee three years if the player works out, but have the flexibility to dump the player in his second year if he doesn't work out with few if any salary cap ramifications).
By the way, the VFA exception also applies to players who have neither Bird rights nor early Bird rights - players who have played only one season with their current team. However, the VFA exception only allows a team to resign its "non-Bird" players to a contract with a starting salary at 120% of the previous salary (instead of 175% for early Bird players or any amount for Bird players). It is the VFA exception that would allow us to resign Posey and House for contracts at 120% of their previous salary without using the MLE or LLE.
