Yesterday when we learned that Patrick Willis got a 5 year contract extension to the tune of $50 million dollars, I began to try and work up the numbers of the deal. I particularly wanted to do this because I am intrigued by a new rule regarding contract extensions and restructures that is a result of the un-capped year.
The new rule is known as the "30% Rule" and is outlined below.
Article XXIV, Section 8 (b) of the CBA, states that renegotiations/extensions entered into in the 2010 league year may not increase per year from 2009 to 2010 or beyond more than 30 percent of the 2009 salary.
In layman's terms, this means if you made $1 million dollars in salary in 2009 and you wanted a new contract extension (or restructuring of your current deal), you could only make $1.3 million in 2010 (2009 salary plus 30% of that), $1.6 million in 2011 (2010 salary plus 30% of 2009 salary), and so on.
Basically you could get a raise of $300,000 per year, max.
The other thing National Football Post noted in this article was that basically the only way to increase a contract over the maximum salary allowed by the 30% rule was to give Signing Bonus money to fill in the deal. That's guaranteed, up-front money...that teams aren't real comfortable parting with in case of injury, work ethic problems, etc.
So when I saw that Willis' deal was worth $50M, I started to play around with the numbers. I took his 2009 base salary and added 30% to itself to come up with the 2010 salary, on and so forth.
However, the numbers I was coming up with only allowed for a small amount of base salary ($16M) over the life of the contract, meaning Wilis would have had to get a huge signing bonus, north of $30 million dollars (Okay, $34M to be exact)
Then some more info came down the pike. It seems that only $29M was guaranteed. This meant a more reasonable $13M signing bonus had to be the answer. But then what about the rest of the $50M? I thought the only way around the 30% rule was Signing Bonus? Where was the rest of the money coming from and how come nobody mentioned it before when discussing the new rule?
After the jump we'll figure that out.
A few hours after the Willis deal broke, Adam Schefter reported that the deal included $15.5M in signing bonus as well as a "supercede bonus" of $4.8M. The supercede bonus is money guaranteed in case of injury that prevents Willis from participating in 2011 Training Camp. If he shows up healthy he still get's the money though. The only way he can lose it is if he's cut, traded, retires, etc.
The supercede bonus allows the team to not have to pay a huge signing bonus all up front in order to get around the 30% rule, since the money isn't due until 2011. It's a good deal for Willis though because it's still guaranteed money. Theoretically they could have had several supercede bonuses, one each year, to spread out the bonus money over the life of the deal.
OK so that meant $20.3M of the $29M guaranteed came from bonuses (neither of which count towards the 30% rule). That left $8.7 of guaranteed salary money to make up the $29M total. Now, there's $21M left to achieve the $50M "max value" of the deal so let's figure that out.
So if the base salary maxes out at $16M, that leaves $7.3M of non-guaranteed money, subtract that from the $21M we need to account for. That leaves $13.7M that I just couldn't explain. It must be some sort of incentive money even though as of yet, nobody had said teams could work that into contracts without counting against the 30% rule.
Alas, after much tweeting to him, NFP's Andrew Brandt, who has worked as a football executive for over 20 years, published a new article detailing some more about the Willis contract. Here is the link.
Here is an excerpt from the article that breaks down the deal for us:
The 53.3M of the deal is in the following form:
23M in 30% increase money
20.3M in signing bonus and supersede money
10M in easily-earned escalators
The 29M guarantee for Willis is in the following form:
15.5M signing bonus
4.8M supersede bonus (see below)
8.7M in future salary guarantees (injury only)
So I was dead on if you read the bottom half of the quote above. The rest of the $21M (which now looks like $23M) was what I couldn't explain until Brandt wrote this piece. Here's what I learned from his article:
The 2009 salary that the 30% rule is based on is actually base salary PLUS prorated option money. That means the starting point (2009 salary) is higher than I originally had (near the top of this post), and allows for more money in salary than I had thought.
The remaining question that I am still trying to get Brandt to answer is whether that $23M represents the entire 7 years from now until 2016 or just the 5 year extension. That will change how much the 2009 starting point must have been for the 30% calculations.
If anyone has the option proration info for the 2009 season of Willis contract, please let me know. Beyond that (which only slightly affects the the yearly salary numbers), I think we now know just about everything there is to know about this deal and how it was pulled off.
The following is how I predict the annual salary would break down if Wilis' contract was restructured from 2010 thru 2016:
If 2010-2011 were left alone and only the 5 year extension was added, this is how it would break down:
Any new info I'll be sure to put in this post and feel free to ask any questions!