Buying out a contract with a Player Option or ETO

[nate33]

When a team buys out a player's contract, the cap hit for the buyout is spread throughout the remaining years of the player's contract in the same proportion as the remaining salary was apportioned.

What happens when a team buys out a player's contract when the player had a player option or ETO at the end of his deal.

Consider a player like Darius Songaila. Songaila has 3 years remaining on his contract (not counting this year), with the last year an ETO. He is due about $4.2M next year, $4.5M in 2009-10 and $4.8M in his option year.

Let's say the Wizards are trying to generate cap room for the 2010-11 season. They would want Songaila to opt out of his contract. If they were to offer Songaila a buyout of $13.5M (equal to the amount still owed after this season, counting his option year), could they choose to have that buyout be spread out over 2 years rather than 3? In other words, they are claiming that Songaila is exercising his ETO as part of the buyout agreement.

The idea is to pay Songaila more now, so that they don't have to pay him in 2010-11. They are bribing him to opt out.

[FGump]

Coon 50

There is an interesting twist regarding player options. What happens if the team waives the player before he invokes his player option? Can the player invoke the option after he is waived, thus guaranteeing his salary for the option year? To head off this situation, all contracts with player options must indicate whether the player receives his salary for the option year in the event the contract is terminated.

For added details http://members.cox.net/lmcoon/salarycap.htm#50

[nate33]

Coon 50

There is an interesting twist regarding player options. What happens if the team waives the player before he invokes his player option? Can the player invoke the option after he is waived, thus guaranteeing his salary for the option year? To head off this situation, all contracts with player options must indicate whether the player receives his salary for the option year in the event the contract is terminated.

For added details http://members.cox.net/lmcoon/salarycap.htm#50

Hmmm. That sucks. We don't really know the answer then.

Does anybody know how the contracts are typically worded? My guess is that any player who has the leverage to negotiate an ETO or Player Option in the first place, is also going to have the leverage to ensure that the salary is received in case the contract is terminated.

[Three34]

Larry said in a thread the other day that he doesn't know of a single instance in which the player is NOT slated to get the money in the option year if the contract is terminated. It's prolly on page 2 or 3. Can't remember what we were discussing at the time.

[loserX]

As a concrete example, I can tell you that the Timberwolves are on the hook for Juwon Howard's player option next year, despite having bought him out prior to this season.

(Ouch. He wanted to leave as badly as they wanted him gone, and yet the team foots the whole bill.)

[Dunkenstein]

^^^Actually, I believe that under the terms of the buyout, the Wolves are paying Howard less than his contracted salary both this year and next. But you are correct that they do owe him a portion of his player option.

[LarryCoon]

Larry said in a thread the other day that he doesn't know of a single instance in which the player is NOT slated to get the money in the option year if the contract is terminated. It's prolly on page 2 or 3. Can't remember what we were discussing at the time.

Just to clarify, this clause is a recent addition, and it's been slowly grandfathered in as new contracts are signed. What I said earlier is that I don't think there are any contracts left that don't have the clause that says what happens. I have no idea about the distribution of the contracts that do have the clause.