Sham Sports has an excellent, easy-to-read article about some of the "creative financing" going on around the league this summer. A few examples: weird, nonguaranteed contracts, and deals that descend in value from year to year. If you went radioactive over the "toxic offer," Sham's post is for you.
Surprise, surprise: the contract extension that Brandon Roy just signed is highlighted by Sham because of its "intense" final year guarantee conditions.
To recap, B. Roy signed a 5 year deal with the fifth year being an early termination option. That means, after 4 years Brandon can choose whether to rip up the deal and seek a new one or go on ahead with the fifth year at pre-agreed terms, estimated by Sham (and subject to change) at $19.2 million dollars for that final year.
But, what, exactly are those terms? Check it out...
Signed a 5 year maximum contract extension in August 2009, the values of which are not yet known exactly because the maximum salary for the 2010/11 season has not been calculated yet (and won't be until the 2010 moratorium). In the mean time, the 2009/10 maximum salary is used instead.
Contract contains a trade kicker for the lesser of $4,000,000 or 15%. The final year is only 75% guaranteed, but becomes fully guaranteed if any one of the following happens:
1) The team obtains a permanent total disability insurance policy of at least $17,000,000 from an insurance company with an AM Best financial strength rating of A- or better.
2) The team secures insurance coverage under the NBA TTD Program.
3) The team wins the NBA Championship in any of the following seasons: 2009-10, 2010-11, 2011-12, 2012-13, or 2013-14.
4) Roy is selected to the NBA All-Star team in at least three of the following seasons: 2010-11, 2011-12, 2012-13, or 2013-14.
5) During the 2013-14 season, Roy plays in at least 55 of the team's regular season games.
6) During the 2013-14 season, Roy's team makes the playoffs and Roy plays in 80% of team's playoff games.
Uncle Cliffy cliffnotes version: Assuming Brandon doesn't violate the terms of his contract by doing something ridiculous and also decides not to opt out of his contract's 5th year, Brandon is set to get 75% of that final year's contract price no matter what. That figure is estimated at roughly $14.4 million. Now, for the additional $4.8 million dollars to be guaranteed in the fifth year, Brandon simply needs to win a title, make 3 all star teams in the first 4 years of his new deal or meet minimum playing time thresholds in the deal's 4th year. He needs to meet only one, not all, of those conditions.
Like we said from the start, $80 million dollar deals simply are not finalized overnight. The provisions outlined above are a nice window into the complexities of this negotiation, which was viewed by some observers as dragging on longer than necessary.
The Blazers were looking to fully take care of Brandon while also protecting themselves as much as possible from financial damage that could result from a catastrophic injury. Brandon wanted to make sure he was getting paid the full amount over five years should the injury occur in the fourth or fifth year after he had already put in some serious work helping the team during his prime.
After the two sides agreed to a five year deal with the early termination option for Brandon, they found themselves forced to compromise on this issue: at what point(s), exactly, will Brandon have contributed enough in the first years of his new deal to fully guarantee the last year of his deal, given that the Blazers would be completely out of luck (and on the hook for millions of dollars) should injury befall him?
That's not an easy question at all. Do teams owe players after the fact for services rendered? Hasn't Brandon "earned" a full guarantee just because he's Brandon? Can you find a fair way to turn the full guarantee into a motivating factor for a player who is about to be see his salary rise astronomically? You can see why it might take awhile to iron out these big-dollar deals and how proposals and counter-proposals between the two sides would take some serious time to digest.
At first glance, it seems that the resolution to these questions, outlined in the terms above, ended up being quite favorable to Brandon. I say that because there is a relatively simple way for him to trigger a full guarantee, one that relies exclusively on previously-demonstrated ability: Brandon only needs to make 3 All-Star games in the first 4 years of his deal. Having already made 2 All-Star games in his first 3 seasons and given that he will be entering his prime once his extension kicks in, meeting this provision seems like a lock; it would likely take 2 long-term injuries (or 1 truly catastrophic injury) during the first four years of his deal to prevent this contract from going fully guaranteed. That is an unlikely scenario and a chance that any athlete, even a superstar in Brandon's situation, can live with.
Putting aside the question of "who won the compromise?", though, the best part of these provisions from a Blazer fan's perspective is the line about winning a ring. A single title removes a $4.8 million dollar question mark from Brandon's life. Even for someone as fully motivated and focused as Brandon, that's some serious extra motivation.
You mean I get to bathe in champagne and guarantee myself almost $5 million dollars on the same night? OK!
Note: this provision isn't exactly a "bonus" payment because it won't be paid until the contract's fifth year and will likely be triggered regardless of whether or not Brandon succeeds in taking Portland to the promised land. But it is a sign that the team is personally incentivizing Brandon Roy for the team's success and, by putting it in writing, it sends a message to Brandon that the team is committed to putting him in a position to meet that provision.
Indeed, I have never doubted Brandon's desire to win a title. However, raised eyebrows are the inevitable result when the organization does something like cash Raef Lafrentz's insurance checks rather than trade him. So it is comforting to see that the team's focus -- even when it comes to the weird minutiae of contract guarantee provisions -- is on adding to the trophy case. At the end of the day, all the talk about building a title-contending team around Brandon has been reinforced by these contract provisions, for all parties involved.
I'm not sure what else Brandon, or Blazers fans, could ask for.
-- Ben (email@example.com)
PS Thanks to Kelly Dwyer for tweeting this to my attention.