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Old 06-23-2014   #1
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Default Agent's Take: How your team structures deals -- and why it matters

Agent's Take: How your team structures deals -- and why it matters
By Joel Corry | Former Sports Agent
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There are four basic NFL contract structures with slight variances within each general structure.

Signing bonus
The only guaranteed money with this structure is a signing bonus, which is prorated or spread out evenly over the life of a contract for a maximum of five years. A big signing bonus can keep salary cap numbers low in the early years of the deal while making it difficult for a team to cut a player because signing bonus proration accelerates onto a team's current salary cap upon release. As salaries have escalated, teams have moved away from the pure signing-bonus model. Teams that still use this structure usually give their players less overall guarantees than comparable players on other teams with different structures. Since it is usually cap prohibitive to release a player that gets a significant signing bonus with this model, some teams are willing to include roster bonuses due in the first couple of days of the second contract year (i.e.; third day of the league year).

Signing bonus and salary guarantees
Guaranteed money with this structure consists of a signing bonus and salary guarantees. The base salary in the first contract year is usually fully guaranteed (injury, salary cap and skill guarantees) at signing. Roster bonuses in the first contract year due a few days after signing are fairly common. Even though these roster bonuses technically aren't guaranteed, they are considered as a part of the guaranteed money. Salary guarantees in subsequent contract years are mainly base salary. Some teams will fully guarantee the second-year base salary at signing.

The trend is for base salaries after the first contract year to be conditionally guaranteed. They are guaranteed for injury only initially but fully guaranteed if a player is on the team's roster on a specified date in each specific contract year. This date will vary from team to team but is normally within the first few days of the current league year (i.e.; 2015 base salary becomes guaranteed on third day of the 2015 league year). Early roster bonuses (first day of the league year) in subsequent contract years containing guarantees aren't as common as the base salary guarantees but operate in a similar manner.

A majority of salary guarantees have offset language. An offset clause reduces the guaranteed money a team owes a player when he is released by the amount of his new deal with another team. Without an offset, the player receives his salary from the team that released him as well as the full salary from his new contract with another club.

Signing bonus and option bonus
The player receives a signing bonus and an option bonus with this structure. An option bonus is essentially an additional signing bonus that's usually paid in the second or third year of a contract to exercise later years in the deal. Since an option bonus is given the same treatment on the salary cap as a signing bonus, it is also prorated or evenly spread out over the life of a contract for a maximum of five years.

Option bonuses aren't quite as secure as signing bonuses. Typically, an option non-exercise fee for the same amount as the option bonus is included in the contract. It's usually payable the day after the option exercise period expires if the player hasn't been released. Fully guaranteed base salaries at signing that void or reduce after an option has been exercised are sometimes a part of the deal to minimize or eliminate the risk of the player getting released before the option exercise period ends.

Pay as you go
Pay as you go is a relatively new structure teams are starting to embrace. A player's cash and salary cap numbers are the same in each contract year because he is receiving salary guarantees instead of a signing bonus under this model. The first contract year usually consists of a fully guaranteed base salary and a roster bonus due a few days after signing. The second year in the most lucrative pay-as-you-go contracts has a fully guaranteed base and a conditionally guaranteed early roster bonus similar to the conditional salary guarantees in the signing bonus/salary guarantee structure.

There may also be conditional guarantees in the third year. Deals with this structure have higher cap numbers, particularly in the early years, because of the absence of a signing bonus. Since there isn't any signing bonus proration, teams have more cap flexibility. A team won't have any dead money (a cap charge for a player no longer on the roster) if a player is released during the latter years of the deal once the guarantees have expired, provided that his contract hasn't been restructured.

What it all means
Teams are requiring per-game active roster bonuses in contracts with more frequency under each of the basic contract structures. The primary benefit of the roster bonuses is they provide teams some financial and cap relief with injuries. The per-game amount is only payable if a player is on the 46-man active roster for that particular game. For example, Kaepernick has $2 million roster bonuses ($125,000 per game) in most years of his deal. If Kaepernick suffered a season-ending injury in San Francisco's eighth game during the 2015 season, he would only earn $1 million of his $2 million 2015 roster bonus.

It's important for an agent to know a team's structural conventions during a contract negotiation. Insisting that a team deviate from their structural preferences is usually an exercise in futility. Teams are extremely reluctant to establish new contractual precedents but are more likely to make an exception with highly sought after free agents, superstars and quarterbacks.

Here's a look at the preferred structure of the most lucrative contracts on each NFL team.
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Houston Texans: Signing bonuses and fully guaranteed base salaries in the first two years are how most of Houston's lucrative contracts (Duane Brown, Arian Foster, Johnathan Joseph, Matt Schaub) are structured. The Texans deviated from their usual contract structure with Brian Cushing's deal. It contains signing and option bonuses. Hefty per-game roster bonuses were required with Cushing ($1.25 million each in 2014-2019) and Schaub ($1 million in each of the past three years) because of injury concerns. Foster also has per-game roster bonuses.
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Old 06-26-2014   #2
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Default Re: Agent's Take: How your team structures deals -- and why it matters

Joel Corry is one of my go-to guys on Twitter for contract questions.
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Old 06-26-2014   #3
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Default Re: Agent's Take: How your team structures deals -- and why it matters

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Is there a way I can flag this so I can come right back to these definitions when needed?
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Old 06-26-2014   #4
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Default Re: Agent's Take: How your team structures deals -- and why it matters

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Is there a way I can flag this so I can come right back to these definitions when needed?
http://www.texanstalk.com/forums/sub...ption&t=105409
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Old 06-26-2014   #5
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Default Re: Agent's Take: How your team structures deals -- and why it matters

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Is there a way I can flag this so I can come right back to these definitions when needed?
Subscribe to or save the thread in your favorites... or ask me and I'll pull up the link. Is that what you mean by "flag"?
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Old 06-26-2014   #6
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Default Re: Agent's Take: How your team structures deals -- and why it matters

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Subscribe to or save the thread in your favorites... or ask me and I'll pull up the link. Is that what you mean by "flag"?
I think I'm already subscribed... that should do it.
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