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Uncapped, but not Unlimited - Part I

For 16 years the NFL has had a salary cap structure. There are only a dozen players in the league who predate the salary cap, and only 20 percent of the coaches, 25 percent of the scouts, and half the owners can relate to days without it. So, this is a new experience for almost everybody. This will be a process where 32 teams don't know what's going to happen this year with regard to restricted free agency, with spending levels, with cuts ... with anything. They know what the rules are, but how teams are actually going to operate within them -- this has never happened before.

There will likely be a variety of responses to these rules by the 32 teams. The sagging economy may ultimately turn out to be the biggest impediment standing in any team's way with regard to major spending sprees, but there are rules that will make such an approach quite difficult.

The biggest factor for the uncapped year, particularly for players, will be restricted free agency. In the past 10 years, more and more teams have been signing their rookies to four-year deals instead of three-year deals. So, year after year, there have been fewer and fewer quality restricted free agents available because the good ones are still on their rookie contracts.

Last year there were less than 20 starters who were restricted free agents (RFAs). This year there will be 110 starters who will be restricted free agents because, instead of just the players who finished their third year being restricted free agents, it will be players who've finished their third, fourth, and fifth years (like Stephen Gostkowski and Logan Mankins).

Players going into their fifth and sixth years who are normally unrestricted free agents (UFAs) represent more than half of the spending in free agency in a typical year. Players like Asante Samuel, Michael Turner, Calvin Pace, and DeAngelo Hall have fallen into this category in the recent past. Those are the players getting $10 million-$20 million signing bonuses. All those types of players this year will be restricted free agents in the uncapped setting.

That's just one major difference between the normal environment and 2010's uncapped climate. Here are some other points and rule clarifications to keep you informed in these somewhat uncertain times.

Free agency - As we stated above, players with four or five accrued seasons will now be RFAs instead of UFAs. They'll join the group of players with three accrued seasons in that category. As has been the case with RFAs, the process for signing them remains the same: They have a six-week window where they can solicit offer sheets from another club from the beginning of free agency until one week before the draft, and clubs will have the right to match that offer sheet in seven days or receive whatever level of draft choice compensation that has been predetermined for the player.

There are four different RFA levels, which have four different levels of financial compensation levels and draft choice compensation to the team. The following chart lists the various tender offers:

2010 RFA tender numbers
Compensation 3rd year 4th year 5th year
1st & 3rd $3.043 $3.168 $3.268
First $2.396 $2.521 $2.621
Second $1.684 $1.759 $1.809
Original $1.101 $1.176 $1.226

In the last 10 years, there have been 64 RFA offer sheets; about half were matched, so, there have been about six each year. But until now, there were only 100 RFAs per year and very few starters involved. Now that you have eight times as many starters and three times as many players, you'd expect there to be more offer sheets simply because the pool is more attractive and larger. Plus, there are fewer UFAs than would normally be available. This could provide more stability on clubs with less player movement because the offer sheet process is rather tedious and you never know if the original club will match it or not.

Franchise and transition players - The franchise and transition tenders remain the same: two first-round picks compensation for signing franchise players, and the offer sheet system for transition players. In addition, teams have a second transition tag available: either two transitions, or one franchise, one transition. Because there are so many more restricted free agents and better quality ones, while you have an additional transition tag, there are less quality players (UFAs) to use them on. Many of those players' market value simply doesn't reach the tag level. Each club is going to have to look at their own group of UFAs to see if they are going to utilize their additional tag. On a typical year only about a third of the clubs use their one tag, so to think in a year with fewer UFAs they would use two is probably unlikely but it's still available for those clubs that have multiple high quality (UFAs).

Final eight plan- It's really two separate plans. One for the four teams who lost in the divisional playoff round (Baltimore, San Diego, Arizona, Dallas) and one for the four teams in the conference championship games (Indianapolis, New Orleans, Minnesota, New York Jets). There are some things common to both. This rule only deals with unrestricted free agents. It has no affect on players who were terminated from their prior contract. So, players the Patriots signed last year that would be unaffected by this would be Leigh Bodden, Chris Baker, Fred Taylor, Leigh Bodden, Tully Banta-Cain - each of whom was released by his previous club.

The final four teams can re-sign any of their own UFAs to whatever contract length or value they wish. However, they can only acquire a new UFA from another club after they have lost a UFA. Lost means the new contract has actually been signed and submitted to the league, and you cannot start talking to a UFA until you've lost one. The league is very specific on this - you can't bring a player in for a visit, you can't make a phone call, you can't call his agent, you can't call the player. So, there could be the potential for gamesmanship among rivals - you could simply delay the reporting of your contract if you're signing a rival's player. Also, the player that you acquire after you've lost one has to have a contract value equal to or lower than the player you lost. So you can't lose a backup special teamer and sign a superstar.

The rules are much more relaxed for the second group of four clubs. In addition to signing all of your own and signing anybody after you lose one, those teams can sign one player to a contract that averages approximately $5.5 million* per year and an unlimited number of players whose contracts average $3.7 million* or less. The $5.5 million and $3.7 million would be restrictive in a normal year when they are tons of UFAs but that's probably not going to be much of a factor given how few quality UFAs there will be. There will be less than a dozen UFAs who are less than 28 years old. There are about 65 who are under 30, and these are the players that normally garner the big money. So these restrictions on the second four clubs aren't really going to hurt many teams.
**These totals will be determined this month. Approximates based on a percentage. *

Restrictions of structures of contracts- Any player who is signing an extension, if his contract started in a cap year, the 30-percent up rule is still in affect. For example, a player in his rookie deal with a couple years left on his contract and in 2009 had a $500,00 salary, if you sign him to an extension in the uncapped year his annual salary sequence can't be more than 30 percent above his 2009 salary. The only thing excluded from that stream is signing bonus. So if you have a player who had a $500,000 salary before but he's now a $6 million-a-year player, you'd have to give that player a $25 million signing bonus and $5 million worth of salary to make it a six-year, $30 million deal. So there are still going to be significant restraints on extensions.

Also, the 50-percent down rule will prevent teams from manipulating contracts in the event that there is another salary cap in the future. If you have a five-year, $25 million deal with an $8 million signing bonus with a $1 million salary in the first year for $9 million in total compensation, a team cannot just give him $9 million in the first year as guaranteed salary so it fully counts in the uncapped year in an attempt to eliminate cap ramifications in the future. If the salary in the first year of the contract is more than double the salary in the second year of the contract, the entire difference is prorated as signing bonus. So, if you make the first year $9 million and the second year $2 million, the $7 million difference would get prorated as signing bonus so you can't frontload a contract because the 50-percent down rule prevents that.

The combination of the 30-percent up rule and the 50-percent down rule will have important restrictions on the structure of an extension for Tom Brady. First, the 30-percent rule would only allow the 2010 salary to be 30-percent above his $8 million 2009 salary. So you couldn't give him a $50 million roster bonus in case there's another salary cap in 2011. Second, his salary in 2010 cannot be more than double his salary in 2011.

Another reason why a team wouldn't want to do that is, if the entire compensation is salary in the first year and the player holds out or has some other breach of his contract later on, there would be nothing to recover because you can only recover signing bonus. So, if you call it salary in the first year, it's not recoverable at any other point in time.

Rookie contracts- All rules regarding rookie contracts are still in effect: the 25-percent rule, the likely to be earned rule, the rookie pool allocation ... all the other rules that have been in place for 16 years. On the first pick overall, if he's going to get $30 million guaranteed, he couldn't get that in the first year because that would violate the rookie pool, which is basically $3 million for the first pick. The rookie compensation makes up 15 percent of the total compensation for clubs each year. That's not an area where you can frontload contracts.

Player benefits- Many of the benefits that were negotiated into the CBA are not funded during an uncapped year. For example, 401(k) matching, annuity, severance pay, performance base pay, which total about $10 million per club, players won't receive.

Tomorrow, in Uncapped, but not Unlimited - Part II, we'll answer some frequently asked questions about the uncapped year.

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