Max Contract Vs. Max-Plus Contract

Darren, great post about a really interesting topic. I spent the last two hours looking this stuff up. I encourage you to keep posting about this type of work, but to not take what we read at face value. I really think that Ross Siler (whose work I like) is not completely accurate about this stuff.

Up front payment (large check) is it 70% of 80%?

CBA: The Maximum Advance Amount for a Season shall equal the lesser of (i) 80% of the amount of the player’s Compensation for such Season that is protected for lack of skill and non-insured injury or illness, or (ii) 7.5% of the player’s Base Compensation for such Season.

CBA: In the event that a Team with a Team Salary at or over the Salary Cap enters into an Extension that calls for or contains a signing bonus, such signing bonus shall be paid no sooner than the first day of the first Salary Cap Year covered by the extended term and shall be allocated, in equal parts, over the number of Salary Cap Years covered by the extended term in proportion to the percentage of Base Compensation in each such Salary Cap Year that, at the time of allocation, is protected for lack of skill.

Signing Bonus: while it seems true that a player can get a 20% signing bonus, how can maximum extensions contain a signing bonus without the actual base compensation being reduced each year? That is, if the signing bonus is allocated in equal parts to each of the 4 seasons of Paul’s deal (but is it only over 3 since the 4th year is a player option?), the first year cap hit would be (1) base compensation and (2) the part of the signing bonus? This means that the base compensation in the first year would have to be reduced (and then the corresponding years as well) in order for the base compensation and the signing bonus allocation to be under the maximum salary allowed in each season right? Joe Johnson got a large signing bonus in the trade to the Hawks – can we see how the numbers worked?

CBA: no Player Contract entered into after the date of this Agreement may provide for a Salary plus Unlikely Bonuses in the first Season covered by the Contract that exceeds the following amounts: for any player who has completed fewer than seven (7) Years of Service, the greater of (x) 25% of the Salary Cap in effect at the time the Contract is executed, (y) 105% of the Salary for the final Season of the player’s prior Contract, or (z) $9 million

You are right about the trade kicker. But let’s look at from another angle. Deron Williams probably does not fear that the Jazz are going to trade him (he is a base year player for the next two years). While it would be nice to get the 15% trade kicker, lets think about how this trade bonus could actually impede a potential trade if the player wants to get traded or the team thinks it is best to trade him. Trade kickers impact the amount of salary that a team can take back/trade away and players cannot just simply waive this trade kicker to make salary matching easier. For a player like Luke Walton, the 7.5% is actually a pretty good deal since it would not likely prevent a trade and he would get a million or so if the Lakers combined him with Odom or someone.

Your thoughts about this would be awesome. Thanks.

Darren, I think for baseball contracts, you are exactly right that contracts can be renegotiated or amended. However, I think you are a little off on your Deron Williams analysis. Please see some of the CBA rules below and let me know how you would interpret these CBA provisions. My take is that (a) Deron cannot renegotiate his deal for 3 years and only if his team is under the salary cap and (b) the trade kicker can only be waived to make the trade fit within the range rules in a specific trade. Thanks a lot for talking about this stuff. I am not trying to call you out; I just think this is the key issues of being an agent and I am trying to learn too!

(vv) “Renegotiation,” “renegotiate,” or “renegotiated” means a Contract amendment that provides for an increase in Salary and/or Unlikely Bonuses.

(c) Renegotiations.
No Player Contract may be renegotiated except in accordance with the following:
(1) Subject to Section 7(c)(2) and (3) below, a Player Contract covering a term of four (4) or more Seasons may be renegotiated no sooner than the third anniversary of the signing of the Contract.
(4) In no event may a Team with a Team Salary at or above the Salary Cap renegotiate a Player Contract.

(3) For the sole purpose of enabling an assignee Team to acquire a Player Contract by trade, the player and the assignor Team may agree to waive all or any portion of a trade bonus, but only to the extent necessary to make the trade permissible in accordance with the rules set forth in Section 6(h) above. In the event that, in connection with a trade, a player’s Contract is amended in accordance with this Section 7(d)(3), such Contract may not be subsequently extended or renegotiated until the later of (i) six (6) months from the date of the trade, or (ii) the first date on which the Contract could otherwise be extended or renegotiated pursuant to this Section 7.

Darren, my take is that the player and team can only agree for the player to waive all (but most likely just a portion) of the trade bonus only to the extent necessarto make the trade permissible – meaning that it fits within the traded player exception rules found in 6(h):

A Team may replace a Traded Player with one (1) or more Replacement Players whose Player Contracts are acquired simultaneously and whose post-assignment Salaries for the then-current Salary Cap Year, in the aggregate, are no more than an amount equal to 125% of the pre-trade Salary (or Base Year Compensation, if applicable) of the Traded Player, plus $100,000.

What do you think? Is my analysis right? I am no lawyer or law student so I may not be reading this right. But, I am trying more than some agents probably do.

Thanks. So, I was pretty accurate in my analysis about the renegotiations of a contract? That website is pretty helpful, but I think it is more fun to analyze the language of the CBA. How many teams have you found that are under the cap during the season (e.g., Memphis is the only one this season)? This is pretty rare right since most teams that have cap room use it to sign free agents in the off-season. For D. Will, he would not be able to renegotiate his deal until the 3rd year (and the fourth is at his option). What did you find out on the trade bonus front? Thanks.