NBA “Max” Contracts Not Identical
If you were paying attention this summer, you probably thought Deron Williams and Chris Paul signed identical contract extensions. Both opted for three-year deals with a fourth-year player option that will pay them the maximum allowed under NBA salary cap rules.
We’ll have to wait until July to find out exactly how much those contracts will be worth, but Williams and Paul can expect to make more than $14 million beginning in 2009-10 and $50 million to $70 million depending on whether they exercise that fourth-year option.
It turns out, though, that Paul’s contract has sweeteners that Williams’ does not. As one person has described it, Williams signed a “max contract” but not a “max-plus contract.” This was the first time I’d ever heard that distinction in five years of covering the NBA.
For starters, Paul has a 15 percent trade kicker that Williams does not. For the uninitiated, a trade kicker is a bonus that gets paid if a player ever gets traded. You can be sure the Hornets aren’t looking to trade Paul, but if they ever did, Paul’s bank account would get a bump.
It’s easier to offer an example of how a trade kicker works for a player who isn’t making the maximum. Luke Walton has one in the contract he signed with the Lakers last summer. If the Lakers traded him tomorrow, Walton would get a 7.5 percent bonus on the $26 million he’s owed.
That would come out to $1.95 million, which definitely would make the news a lot easier to take. Paul’s salary can’t exceed the maximum set by the NBA’s cap rules, but if the cap rose and he was traded, Paul’s new salary likely would get bumped up to the max.
If the cap rose dramatically and Paul was traded in the third season of his new extension, that 15 percent trade kicker could give him an extra $3 million or so. Since trade kickers can greatly complicate a potential deal, teams are reluctant to give them out to players.
There are other ways to sweeten a contract, with no telling exactly what the Hornets did for Paul. A player can receive up to a 20 percent signing bonus and take a corresponding cut in base pay every season.
That could give Paul up to $10 million up front once his extension kicks in. The overall value of the contract still is the same, but you can see just how different Williams’ and Paul’s extensions would look just from the signing bonus money alone.
There also are provisions that allow a player to receive up to 70 percent of his salary in one check every season. Kobe Bryant is the most famous example. He already has been paid nearly $15 million for this season, which had to be a hell of a check for Jerry Buss to write.
Bryant’s contract calls for him to be paid 70 percent of his salary each season by Sept. 1. Some owners simply can’t do that. I can’t say how much Paul is getting paid up front every season, but it’s another way a team can sweeten a max contract.
If you take a $10 million signing bonus and 70 percent of $12 million in base pay, Paul could get $18 million of his max contract in up front money. Again, the overall value of the contracts is the same, but obviously how the checks are cashed is different.
I don’t know the specifics on the signing bonuses and the up front money that Williams and Paul will be receiving. I would love to hear from somebody with a little more cap familiarity than me about just how max and max-plus works.
LeBron James’ extension with Cleveland, incidentally, is said to be the ultimate max-plus deal, with every concession you could come up with.
- Ross Siler, Salt Lake Tribune
