Contract Negotiation NBA Players NBA Teams

Max Contract Vs. Max-Plus Contract

Nuances.  That’s what contract negotiation often times boils down to.  You think you got your client the best deal possible until a more clever agent finds a way to add in that extra clause into his client’s deal that serves as the cherry on top.  Deron Williams and Chris Paul are undoubtedly ecstatic with their max contract sthat will pay them up to $70 million over four-years.  But what else can an agent insert into a max contract to make it a max-plus contractRoss Siler and Steve Luhm of The Salt Lake Tribune look into it…

  • Trade kickers – Paul has a 15% trade kicker.  If Paul gets traded, the Hornets will have to pay him an extra 15% on whatever he is owed.
  • Money up front – Get a bulk of dough (up to 20%) early in a signing bonus and have the rest spread out through the contract.  Allows a player to invest (yeah…right) the money early, allowing it to outgrow inflation.
  • Large check each year – Instead of your client’s yearly salary being spread out evenly in multiple checks by month, he can get up to 70% per year in one check and have the rest spread out.

So next time you hear a superstar signing a max contract, you should look into whether it is actually a max-plus contract.

By Darren Heitner

Darren Heitner created Sports Agent Blog as a New Year's Resolution on December 31, 2005. Originally titled, "I Want To Be A Sports Agent," the website was founded with the intention of causing Heitner to learn more about the profession that he wanted to join, meet reputable individuals in the space and force himself to stay on top of the latest news and trends.

Heitner now runs Heitner Legal, P.L.L.C., which is a law firm with many practice areas, including sports law and contract law. Heitner has represented numerous athletes and sports agents as legal counsel. He has also served as an Adjunct Professor at Indiana University Bloomington from 2011-2014, where he created and taught a course titled, Sport Agency Management, which included subjects ranging from NCAA regulations to athlete agent certification and the rules governing the profession. Heitner serves as an Adjunct Professor at the University of Florida Levin College of Law, where he teaches a Sports Law class that includes case law surrounding athlete agents and the NCAA rules.

7 replies on “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.

Good point: never take anything at face value before doing your own research. Unfortunately, the exact terms of every players contract is not disclosed for the public to analyze. I think the Deron Williams analysis is a little off. Contracts can be amended or renegotiated at any time. If Deron Williams wants to get traded desperately and he has a trade kicker in place, his agent and the Jazz could agree to renegotiate his deal to strike the kicker. Nothing is ever set in stone.

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.

“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”

Let’s see Section 6(h)

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.

From, which is linked to by the NBPA:

Can existing contracts be renegotiated?

A contract for four or more seasons can be renegotiated after the third anniversary of its signing, extension, or renegotiation that increased any season’s salary by more than 8%. Contracts for fewer than four seasons cannot be renegotiated. A contract cannot be renegotiated between March 1 and June 30 of any year. Only teams under the cap can renegotiate a contract, and the salary in the then-current season can be increased only to the extent that the team has room under the cap. Raises in subsequent years are limited to 10.5% of the salary in the first renegotiated season. The renegotiation may not contain a signing bonus. Contracts cannot be renegotiated downward (players can’t take a “pay cut” in order to create salary cap room for the team) or to contain fewer seasons.

Again, a team over the salary cap cannot renegotiate a contract. An interesting case of this was Shawn Kemp with the Sonics. Kemp, who was unhappy with his contract and wanted to renegotiate, could not get a larger contract from the Sonics because they were over the cap. Kemp forced a trade to Cleveland, who was far enough under the cap at the time to give him the large contract he wanted. Kemp’s contract was renegotiated soon after the trade.

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.

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