Structure of Zach's contract... | FinHeaven - Miami Dolphins Forums

Structure of Zach's contract...

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grooves12

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Does anyone know how the bonuses we owe Zach are structured??

According to:this $4.5 million of the $8.3million he is scheduled to make this year is an OPTION bonus which activates the remaining year (through 2008) of his contract.

Is this bonus GUARANTEED if he is on the roster or is it truly an OPTION on the team's part and if we decide not to activate it that his contract would run out at he would essentially be a free agent next year, leaving us with no dead money???

If that is the case, I think it might be our teams best interest NOT to excercise the option, and take this oppurtunity to start looking to the future. That is a LOT of money for a guy who is on the downhill side of his career.
 
It's $6 million and $4.5 million this year. Total signing bonus was $10.5 million. Impossible to eat because that's nearly a $5 million cap hit not to mention no replacement for him. As long as Thomas can keep his level going for 3 more years he's earning the bling.
 
If the Dolphins gave up Zach Thomas there would be 20 teams calling up for his services, that says something about how he plays, he's a keeper!!!
 
I haven't seen anything about it being guaranteed. If it's an option bonus, then it's amortized over the last 5 yrs. If it's a roster bonus, then I'm sure the Fins will do something with his contract. I believe it to be an option bonus and can't imagine that it was negotiated any other way.
 
Originally posted by clumpedplatelet
I haven't seen anything about it being guaranteed. If it's an option bonus, then it's amortized over the last 5 yrs. If it's a roster bonus, then I'm sure the Fins will do something with his contract. I believe it to be an option bonus and can't imagine that it was negotiated any other way.
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So, if that's the case what happens if the fron office decides NOT to excercise the option??

How would that affect us cap wise??

Also, if it is an OPTION bonus as you state... and it is then amortized over the remaining years... why does it show up as being counted completely in THIS year's cap, in your spreadsheet??

Wouldn't it be $4.5million / 5 = $900,000 for the cap hit this year?? Thus lowering his cap number by #3.6million compared to what you have listed??
 
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If it's an option, it depends on if it's an option for the remaining 5 yrs of his deal or similar to Fielder's where it only applies to future yrs. I'm quite sure it's for the remaining 5 yrs, thus, if not paid....Zach is UFA. This would apply if it's a roster bonus.

I wouldn't worry....Zach is going no where
 
So, basically what it boils down to is his cap hit for this year is miscalculated on the Salary Cap Spreadsheet on this webpage.

It is shown as being counted COMPLETELY in this year's cap, where it should be prorated from 2004-2008. This lowers his cap impact this year to $4.745 million.

That is a SIGNIFICANT difference... and if that is the case, we likely don't HAVE to do anything with him. As it stands (assuming all the other calculations on the spreadsheet are fairly accurate) ... just relasing Fiedler (who's option bonus looks to be misrepresented in the "Savings" columns) and Griese, would get us just about even with the salary cap... and Thomas' roughly $4 million difference would put us UNDER the cap by that amount, with room to still restructure Madison (paycut) and Surtain (extension.)
 
Originally posted by grooves12
So, basically what it boils down to is his cap hit for this year is miscalculated on the Salary Cap Spreadsheet on this webpage.
Click to expand...

If you follow the second link in my previous post you will find a side letter concerning options. Options can be paid, renounced or just not paid. If not renounced or paid the amount stays in team salary and the team receives a credit next year.
 
But, isn't that basically the least likely thing to occur...

as I see it

A) They will pay him the money possibly renegotiationg lowered/guaranteed base salaries... but that really isn't necessary at this point because his cap impact isn't THAT high. $4.745 million isn't that high for a player of Zach's caliber.

B) They will nenounce the payment and try to renegotiate an extension that is structured differently. This is possible, but I really don't see the benefit to the team seeing as they just went through tough negotiations last year, and once again... Zach cap impact isn't THAT high.

So, basically what you are saying though, is that according to league calculations. The $4.5 million bonus counts against THIS year's cap, until the day it is excercised... at which point it then becomes prorated among the remaining years??
 
Originally posted by Merman


If you follow the second link in my previous post you will find a side letter concerning options. Options can be paid, renounced or just not paid. If not renounced or paid the amount stays in team salary and the team receives a credit next year.
Click to expand...

Also, nowhere in that section of the CBA does it say the FULL amount is to count against this year's cap at any time. That last section only states that if nothing is renounced or paid that any amount counted against THAT year's salary cap will be credited the next year. The way I understand that is the league will assume the option is excercised if they are not informed otherwise.... and therefor the amount will be prorated.

So, for Zach that means an extra $900,000 cap impact this year... not $4.5million

It just doesn't make sense for the teams to give option bonuses in that way if it is to impact them so severely.

But really what it all boils down to, is the Dolphins are in MUCH better shape cap-wise than your spreadsheet represents... because it boils down to there are MUCH more savings to be had by not paying Fiedler his bonus, and releasing him than shown... and Zach is going to count FAR less than the $8million is he slotted for.
 
I suggest you reread the legalese and think about the situation a little more. An option gives various alternatives. A big one was spreading out the $10.5 million signing bonus. Another is having the option to again assess a player's performance in the future without paying all the money up front or at least paying for the right to do so. A player has the opportunity of another payday or having the term of his contract shortened or voided to seek employment elsewhere. A contract with options also makes it easier for both sides of an agreement to tolerate longer terms.

As for the way an option is accounted for: why should teams that negotiate contracts with options have an unfair advantage over other teams that negotiate straight forward contracts??? The easiest way to insure fairness is to include all compensation in team salary in the year due. Then if the option is exercised the actual results can be recorded. If a team decides to do nothing then leaving the option amount in team salary seems appropriate.
 
I guess we are just interpreting things differently. I haven't put as much time and effort into getting all the numbers put together, but the Salary cap and all its intricacies have always intrigued me, so I have followed things like this for quite some time.... and I have NEVER seen anything that shows the total amount of ANY signing bonus (which is what an option bonus is) be included completely in one year's salary cap.

From the first paragraph pertaining to option bonuses in your link:

* Any amount specified to be paid for the exercise of an option by a Club to extend the term of a Player Contract shall be treated as signing bonus, prorated over the remaining term of the contract commencing in the League Year in which it is exercised OR the last League Year in which the option MAY BE exercised, whichever comes first
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... wouldn't 2004 be the last league year in which the option bonus MAY BE excercised??

So, to me, that says that it will be calculated as a signing bonus and prorated over the remaining term of the contract beginning on the first day of the 2004 league year, whether the option has been excercised at that point or not. The league is assuming the contract WILL BE excercised for cap calculation purposes, and treating it as signing bonus, until the team notifies them otherwise.

I don't know... if you see something that says the TOTAL amount is to be included anywhere in there... please point it out to me. But I think that first section is pretty clear.
 

The CBA states

* Any amount specified to be paid for the exercise of an option by a Club to extend the term of a Player Contract shall be treated as signing bonus, prorated over the remaining term of the contract commencing in the League Year in which it is exercised or the last League Year in which the option may be exercised, whichever comes first. Such an option amount shall, immediately upon execution of the contract, renegotiation or extension, be included in any calculation for purposes of the 25% Rule for Rookies, set forth in Article XVII, Section 4(e) of the CBA, and/or the 30% Rule, set forth in Article XXIV, Section 8 of the CBA, prorated over the remaining term of the contract commencing in the last League Year in which the option may be exercised. Notwithstanding the foregoing: (i) if a Club renounces its right to exercise the option, the option amount shall not be included in Team Salary as of the date of such renunciation; and (ii)

Page 136

if the club does not renounce, but nonetheless does not exercise the option, the full amount of the option amount previously counted against Team Salary shall be credited to the Club's Salary Cap in the next League Year.

*Side Letter 10/21/96: Sec. 4
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The first sentence tells you an option to extend the term of the contract is involved and is considered a signing bonus. If you go to the section of what is a signing bonus you find the same thing.

The second sentence that is in bold type tells you that "notwithstanding " (in spite of) the fore going (what was said before), if a Club renounces its right to exercise the option, the option amount shall not be included in Team Salary as of the date of such renunciation. It's written in the negative but is saying if the option is renounced then the option is taken out of team salary. The next part of the clause reinforces the point by saying if the option is not renounced or exercised the full amount of the option will be left in team salary for the year and the team will get a credit next year.

You are focusing on how to prorate the bonus. The last league year is probably the last year of the CBA agreement but I would have to research that more.
 
I think you are overextending the meaning and power of that sentence.

I think the only reason it is written that way is to show that once a team renounces the money disappears. Because, normal signing bonuses ALWAYS get counted in one way or another. So, what this is saying is ... it is exactly the same as a signing bonus EXCEPT if the team renounces it the get the amount previously counted against the cap back, as in the team has an OPTION on if they really want to pay it or not.

The way you are describing it just doesn't make any sense... they would not calculate it one way and then magically a certain day passes and it gets calculated a completely different way. I know the salary cap is complicated... but not THAT complicated. The CBA goes to great lengths to decide whether certain kinds of pay/bonuses are SALARY or SIGNING BONUS to keep things easier to keep a handle on and keep calculated correctly... and I don't see how or why they would make something SALARY up until a certain point... and then either:

A) it disappears completely OR
B) becomes signing bonus.

There is just no sound reason on why it should EVER be counted as salary when those are the ONLY two outcomes of that money.

Also... in your explanation of how you are coming to the conclusion that the full amount is to be included in salary you are missing what I consider the KEY part of that sentence.

amount previously counted against Team Salary
Click to expand...

The way I understand it, that amount is the prorated amount as per the first sentence.


... but you sound like you have your mind pretty made up about this. (As do I) ... so I don't think there is any need to keep arguing about our interpretations of the wording. But in all my experiences following cap articles I never remember seeing anything that said, "As soon as team XXX excercises the option bonus for player YYYY, $4million will drop off from their books."

Clumpy... Whats your take?
 
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