The Orlando Magic is hard at work this off-season, building on last season's return to the playoffs and striving to field a championship calibur team. The Magic Basketball Operations department has already spent many, many hours preparing for next week's NBA Draft, in addition to the free agency period.

Recently, OrlandoMagic.com caught up with General Manager Otis Smith and Vice President of Basketball Administration Scott Herring to discuss some of the questions many fans are asking this off-season.

Otis Smith, General Manager

Otis, could you explain exactly how the free agency process works?
“July 1 is the first date that we can begin to negotiate with free-agents. After that, it’s just like recruiting in college. On July 1 we bring free agents in, you can court them, talk to them about joining your team. It’s no different than a young high school player coming out and you have to show them what your program is all about.

“You can begin contract negotiations on July 1 with potential free agents, but you cannot sign players until July 11.”

Why July 11?
“The period between July 1 and July 11 is your grace period and courting period. The salary cap becomes “whole” so to speak – that is, the cap number is finalized on that date. Also, players that have the option to opt-out of their current contract usually must do so by July 1, so having the grace period allows you to assess the team’s needs.”

So technically, you could begin calling free agents at 12:01AM on July 1?
“There are instances where teams will call potential free agents at that time. There’s such a limited time period between July and the signing date of July 11, sometimes you have to get started then to gauge interest and confirm travel plans if necessary. So, it does happen, but not often.”

What's your take on this year’s Draft?
“We do not have a first round pick this year – that pick is owed to Detroit to complete the Darko Milicic/Carlos Arroyo trade. I always make the argument that if we had our pick this year, would that pick be Darko Milicic? I don’t think he would be around where we’re picking this year, so in that case we “gained a pick” by acquiring Darko.

"We have two second-round picks. Our second round pick (44th overall selection) and Cleveland’s pick (54th overall selection)"

"When drafting where we are this year, it’s hard to draft by need. I believe that when it’s your turn to pick, you draft the best available player that’s on the board, get an asset, and once you have that asset, then you determine how you are going to use it – whether on our team or for a trade to improve your team."

Editor's Note: The Sacramento pick was conveyed to us by Utah to complete the DeShawn Stevenson/Gordon Giricek trade. The Cleveland pick was conveyed to us to complete the Tony Battie trade. The Magic also gave the No. 39 pick in the second round to the Miami Heat as compensation for hiring new coach Stan Van Gundy, who was still under contract with the team.

We still hold the rights to a couple players that are still overseas. Can you talk about them and their status with the organization?
“We still have the rights to Fran Vasquez, and that’s an ongoing conversation with him and his agent. We’re looking at his buyout from the club that he’s with over there – if he wants to come over here and play, we have to figure that part out first."

"We also have Marcin Gortat, and he will come over and play for our summer league team this year. We’ll assess where he’s at and then determine if he will play here next year or back overseas."

Who will be playing for the Magic in the Pepsi Pro Summer League this July?
“Historically, the rookies on this year’s team play in the summer league. We’ll have J.J. Redick and James Augustine play this season – and they will play the majority of the minutes. Our draft picks from this year will also play. That’s what summer league is about. You’re not trying to win the summer league championship, so to speak. The goal is to continue to develop your young players.”

Many Draft prospects are working out with NBA teams at the moment. How do the Magic evaluate potential Draft picks?
“Dave (Twardzik) and I are a little different when it comes to workouts. We don’t believe in trotting in 40 guys for an individual workout. It’s kind of hard to see if a guy can play based on a two-on-two workout. So, from my standpoint, it’s a body of work – what they’ve done for four years, what they have done in the postseason, all of it. We like to sit down and talk to guys and see where their head’s at and see what type of person they are."

"By the nature of where we are picking this year, many of the guys that will be available when we pick will be at the Pre-Draft Camp in Orlando. That will help us to evaluate them in a five-on-five game setting."

"With the way the rules have changed where a team can’t work a player out until after the Pre-Draft camp, it makes it more difficult on teams drafting in the second round. Basically, we only have three weeks between the camp and the draft, and with a number of teams looking at players, it will be a challenge."

Scott Herring, Vice President of Basketball Administration

Scott, there has been a lot of discussion on how the Magic has a lot of salary cap room this off-season. Can you please explain how this works?
“Well, the salary cap going into the 2007-08 season should be in the mid $50 million dollar range. How much we’ll be under the cap will be affected by a couple of things – one being the actual cap number, which will be set on July 11, and the contract situation of Darko Milicic.”

How do we determine our available cap room?
“There are a few things this year that will help us to determine how much room that we will have this season. First, we have to address the Grant Hill situation. He has a very large cap hold that will prevent us from signing free agents from other teams, so we have to address his status first.

"Darko Milicic’s contact situation will need to be addressed and is more complicated that Grant’s. Additionally, we will also have to address Travis Diener’s contract to determine our final cap room for potential free agent signings.”

What about Darko’s contact?
“Darko is a restricted free agent. After July 11, he has the option of signing with us or signing an offer sheet from another team. If he signs with another team, we can choose to match the terms of that offer sheet or let him go. Currently his contact creates a cap hold on a portion of the available room that we will have under the cap, and this will affect the final number that we will have under the cap.”

What’s this “cap hold” everyone’s talking about?
“A cap hold is a “pseudo-salary, if you will. In determining how much room a team has underneath the cap, you begin with the salary cap number, reduce that number by all the contracts that you have and then subtract cap holds to arrive at your final figure. The NBA doesn’t want teams to reduce their roster down to just seven or eight players, creating artificial cap room, signing a big free agent or two, and filling up the rest of their roster with minimum contracts."

"To prevent this, the league assigns a cap hold to all the free agents a team has – both restricted and unrestricted. For Darko, coming out of his first-round rookie contract, if his salary from last year is greater than the average salary of all the league’s players, his cap hold is two and one-half times his 2006-07 salary. If his 2006-07 salary is less than the average league salary, then his hold is three times his 2006-07 salary.”

"Other free agents, not coming out of the first-round rookie contract, have a cap hold equivalent to one and one-half times their last years salary if that salary is above the league average and two times their last years salary if that salary is below the league average. There’s one other limiting factor on a cap hold. The hold cannot be larger than the player’s maximum first-year salary on their new contract.”

Any contract extensions this off-season?
“Players in first-round rookie contracts can be extended after the third year of their rookie contract. Both Dwight Howard and Jameer Nelson are in that window and are eligible to be offered extended contracts this offseason. Should a player not sign an extension of his rookie contract, he becomes a restricted free agent the following offseason."

"Players in their rookie contract must be extended by October 31st. All other free agents can be signed to extensions any time in the last year of their deal.”

What are 'Bird Rights'?
"A free agent from your own team can be resigned to a contract even if your team goes over the cap in doing so. Technically, it’s called a “Qualifying Veteran Free Agent Exception”."

What's our team situation this off-season?
“We have eleven players (Dwight Howard, Jameer Nelson, J.J. Redick, Carlos Arroyo, Tony Battie, Keith Bogans, Trevor Ariza, James Augustine, Hedo Turkoglu, Pat Garrity and Keyon Dooling) under contract right now, but two – Pat Garrity and Keyon Dooling have already exercised their player options to return next season. Should either have opt-out of the final year of their contract, they would have became unrestricted free agents."

"The final four players on our roster are either restricted (Darko Milicic and Travis Diener) or unrestricted (Grant Hill and Bo Outlaw) free agents.”

What’s the difference between restricted and unrestricted free agents?
“Free agents can be of two varieties – restricted or unrestricted. Restricted free agents receive offer sheets from other teams interested in signing them, but the team they were with the year before has a short period of time to exercise an option to match the offer presented by another team. Unrestricted free agents are free to sign with any team. The team they were with the year before does not get the option to match the offer.”

What's the difference between the Salary Cap and the Luxury Tax?
“The salary cap is set by the league and there are exceptions where teams can go over the cap to sign players in certain situations. The luxury tax is set at a number that is roughly 20-25% above the salary cap, and penalizes teams dollar for dollar for every dollar they are over the tax.”

How do Summer League contracts work?
“Summer league players do not have to be signed to any type of contract at all. They do not get paid at all, but they do receive per diem for meals, and we pay for their travel and lodging.”

What about second round contracts for Draft selections?
"Second round contracts are unique. They may or may not be guaranteed, or they can be partially guaranteed. Many times players drafted in the second round will have their contracts guaranteed by being on the roster during specific set dates, say when the season starts or at the All-Star break. The bare minimum contract for a second-round pick is a one-year, non-guaranteed deal.”

What is a Mid-level Exception?
“Mid-level Exceptions are available every year, and they can be used on one or more players. The value of the contract is tied to the average salary of the league. Contracts based on the mid-level exception can be signed for up to five years.”

And a Bi-annual exception?
“The Bi-annual Exception comes around once every two years and can be used to sign a player to a two-year contract.”

How does the veteran’s minimum work?
“Players must be signed to minimum contracts based on the number of years in the league, from zero to ten. The salary is determined during collective bargaining.”

What's built into an average NBA contract?
“All players that sign a contract receive medical, dental and vision coverage for themselves and their immediate family. Players can elect to make a contribution to a 401(k) plan, and the team matches. Players also get access to a pension plan set by the league.”