This is a modified version of the full Larry Bird Exception. It applies to players who have played on the same team for at least two seasons without changing teams as a free agent.
A player who is traded or claimed off waivers retains their Early Bird Rights. Prior to an arbiters ruling in June 2011, players who were traded or claimed off waivers lost their Early Bird Rights. Teams wishing to re-sign their own free agents may use this exception to sign them for 175% of the player's previous salary or the NBA average, whichever is greater. The contract must be for at least 2 seasons but no more than 4 seasons. One interesting little wrinkle of the Early Bird exception is if a team wishes to a trade a player that would result in the player losing his Early Bird Rights, the player has the right to veto the trade.