For example, assume there is a $58 million salary cap, and during the offseason a team has $50 million committed to salaries, along with a Non-Taxpayer Mid-Level exception for $5 million, a trade exception for $2.5 million, and an unrenounced free agent whose free agent amount is $2 million. Their salaries and exceptions total $59.5 million, or $1.5 million over the cap. What if their free agent signs with another team? The $2 million free agent amount comes off their cap, so their team salary (including their remaining exceptions) drops to $57.5 million. This total is below the cap so the team loses its Non-Taxpayer Mid-Level and trade exceptions.
There is logic behind this. The whole idea behind an "exception" is that it is an exception to the rule which says a team cannot go over the salary cap. In other words, an exception is a mechanism which allows a team to function above the cap. If a team isn't over the cap, then the concept of an exception is moot. Therefore, if a team's team salary ever drops this far, its exceptions go away. A rule of thumb is that a team may have either exceptions or cap room, but it can't have both at the same time. However, a team in this situation does qualify to use the Room Mid-Level exception (see question number
25).