Contracts and Incentive Options

Cap Ologist · 02-06-2004, 06:14 PM

I was wondering if anyone knew exactly how the incentive part of contracts work. Say, you sign somebody to a 4 yr 8 million dollar contract with a four million dollar signing bonus with an option out for the last year. If the option is triggered, does the signing bonus still count for the 4th year?

RedKingGold · 02-06-2004, 11:56 PM

Geez,....I thought you were a "Capologist"

The way I understand it, the signing bonus is paid to the player all in front, but its effect is spread out over the length of the contract. In your example:

Year Salary Bonus Player Receives Cap Expense
1 2 million 1 million 6 million 3 million
2 2 million 1 million 2 million 3 million
3 2 million 1 million 2 million 3 million
4 2 million 1 million 2 million 3 million

The player receives 6 million in the first year because he receives ALL of the bonus up front (thats why it is called a signing bonus) however, only 3 of that six million (2 million slary plus 1 million bonus) counts in the first year of the contract; the other 3 million are spread over the rest of the length of the contract

When the contract ends prematurely, either be making an incentive or by releasing him, you are required to pay out the rest of the bonus the next year. So, lets say he reaches his incentive in the third year, his contract expires, you no longer pay his salary and he is no longer on your team, BUT YOU WILL STILL HAVE TO PAY 1 MILLION DOLLARS FOR THE CONTRACT. This is why its called "dead money" because its money you have to spend, but derive no general use (services of a player) for it.

Hope this answers your question,

Mike

SackAttack · 02-07-2004, 12:27 AM

I don't know that they're actually SPENDING the money, since he gets $6 mil up front, but it's money under the cap that they can't use, because it's already spoken for.

Cap Ologist · 02-07-2004, 03:06 PM

That's kind of what I thought. I noticed that the AI were signing lots of guys with options for the last year which is something I hardly ever do. I didn't know if that was a way to clear up cap space sooner or not. Thanks for the help.

02-06-2004, 11:56 PM	#2
RedKingGold College Starter Join Date: Oct 2002	Geez,....I thought you were a "Capologist" The way I understand it, the signing bonus is paid to the player all in front, but its effect is spread out over the length of the contract. In your example: Year Salary Bonus Player Receives Cap Expense 1 2 million 1 million 6 million 3 million 2 2 million 1 million 2 million 3 million 3 2 million 1 million 2 million 3 million 4 2 million 1 million 2 million 3 million The player receives 6 million in the first year because he receives ALL of the bonus up front (thats why it is called a signing bonus) however, only 3 of that six million (2 million slary plus 1 million bonus) counts in the first year of the contract; the other 3 million are spread over the rest of the length of the contract When the contract ends prematurely, either be making an incentive or by releasing him, you are required to pay out the rest of the bonus the next year. So, lets say he reaches his incentive in the third year, his contract expires, you no longer pay his salary and he is no longer on your team, BUT YOU WILL STILL HAVE TO PAY 1 MILLION DOLLARS FOR THE CONTRACT. This is why its called "dead money" because its money you have to spend, but derive no general use (services of a player) for it. Hope this answers your question, Mike

02-07-2004, 12:27 AM	#3
SackAttack Head Coach Join Date: Oct 2000 Location: Green Bay, WI	I don't know that they're actually SPENDING the money, since he gets $6 mil up front, but it's money under the cap that they can't use, because it's already spoken for.

02-07-2004, 03:06 PM	#4
Cap Ologist College Prospect Join Date: Nov 2003 Location: Flower Mound, TX	That's kind of what I thought. I noticed that the AI were signing lots of guys with options for the last year which is something I hardly ever do. I didn't know if that was a way to clear up cap space sooner or not. Thanks for the help.

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