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06-06-2006, 03:42 PM
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kdb209
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Ordinary Buyouts (as opposed to the one time Complience Buyouts last offseason) are pretty much the same as they were under the old CBA:

2/3's of the remaining salary (1/3 if player is under 26yo) paid out over 2x the remaining number of years on the contract.

Buyouts do count against the cap, but it is not just a straight forward Buyout Dollars/Buyout Years, due to the way salaries are averaged over multi year deals for cap purposes. If the actual salary paid on the deal prior to the buyout is more than the cap averaged salary for those years (ie the averaging gave them a cap discount), then that discount is counted against the cap over the remaining life of the original contract in addition to the actual buyout dollars over the 2x term. The converse is true - if the amout paid was less than the averaged cap hit, they get a cap credit back against the buyout.

For all the gory details see Article 50.5 (d) (iii) in the CBA:

Quote:
(iii) Treatment of Ordinary Course Buyouts for Purposes of Calculating Averaged Club Salary. As a result of the averaging rules set forth in this Agreement, the actual Player Salary and Bonuses paid to a Player in a League Year of an SPC may be either more, or less, than the Averaged Amount of such SPC included in the Club's Averaged Club Salary for such League Year. If a Club elects to buy out an SPC pursuant to the Ordinary Course Buyout provision set forth in Section 50.9(i) below, the disparity between the actual Player Salary and Bonuses paid in the earlier League Year(s) of the SPC and the Averaged Amount included in the Club's Averaged Club Salary in such League Year(s) is accounted for in how the buyout agreement is treated for purposes of averaging. For a Club that buys out an SPC pursuant to an Ordinary Course Buyout, the amount to be included in the Club's Averaged Club Salary for each League Year during the term of the buyout agreement is determined as follows:

(A) For a League Year during the term of the original SPC that was bought out, the included amount is the original Averaged Amount of the SPC for that League Year, reduced by the amount of the buyout "savings" for that League Year (with "buyout savings" defined as the actual amount of Player Salary and Bonuses that was to be paid under the SPC for such League Year minus the amount of Player Salary that is to be paid under the buyout agreement). If the amount of buyout "savings" in a League Year is more than the original Averaged Amount for such League Year, then the amount of such excess is included in the Averaged Club Salary for such League Year as a "credit."

(B) For a League Year following the term of the original SPC that was bought out, the amount included in the Club's Averaged Club Salary is the amount of Player Salary that is to be paid under the buyout agreement for that League Year.
The method for calculating the includable amounts for a Club's Averaged Club Salary is set forth in the following Illustrations. For each Illustration, assume that the Player is over age 26 and therefore is entitled to two-thirds (2/3) of his remaining Player Salary, to be paid over twice the remaining length of the SPC, in the event he is bought out pursuant to an Ordinary Course Buyout. Also, assume for all illustrations that the Player signed a three-year SPC, which is bought out after the first League Year (Year 1), and therefore, the Player is entitled to earn two-thirds (2/3) of the remaining Player Salary owed under the SPC over Years 2 through 5.
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          Illustration #1:  
                                           
Year 1   Year 2   Year 3     Year 4    Year 5

1.   Original SPC Amount             
$4.0M    $2.5M    $2.5M

2.   Original Averaged Amt
.          $3.0M    $3.0M    $3.0M

3.   Buyout Amount 
(2/3 of $5M)              $1.666M  $1.666M   (Total = $3.333M)

4.   Buyout AmtOver twice                          833,000  $833,000 $833,000 $833,000         
   Length of original SPC        

5.    Buyout 
"Savings"                      $1.666M   $1.666M       -             -
            (
Line 1 minus Line 4)    
         
    
6.    AmtIncluded in                                   $1.333M  $1.333M  $833,000 $833,000
                      Averaged Club Salary  
          
(Line 2 minus Line 5

The total amount actually paid to the Player under the buyout agreement over four years is $3.3 million, but the total Averaged Amount included in the Club's Averaged Club Salary is $4.3 million. The $1 million difference reflects the $1 million that the Club saved against its Payroll Room in Year 1 (the Club paid $4 million, but the Averaged Club Salary in Year 1 only included $3 million based on the averaging).

PHP Code:
    Illustration #2:  
                        
Year 1   Year 2   Year 3     Year 4    Year 5
1.  Original SPC Amount          
$6.0M     $4.0M    $2.0M

2.  Original Averaged Amt
.       $4.0M     $4.0M    $4.0M

3.  Buyout Amount 
(2/3 of $6M)             $2.666M  $1.333M  (Total = $4.0M)

4.  Buyout AmtOver twice                     $1.0M       $1.0M     $1.0M    $1.0M         
   Length of original SPC        

     5.  Buyout 
"Savings"                 $3.0M       $1.0M       -                -
(
Line 1 minus Line 4)    

    
6.  AmtIncluded in                       $1.0M       $3.0M     $1.0M     $1.0M
           Averaged Club Salary
          
(Line 2 minus Line 5
The total amount actually paid to the Player under the buyout agreement over four years is $4.0 million, but the total Averaged Amount included in the Club's Averaged Club Salary is $6.0 million. The $2 million difference reflects the $2 million that the Club saved against its Payroll Room in Year 1 (the Club paid $6 million, but the Averaged Club Salary in Year 1 only included $4 million based on the averaging).
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    Illustration #3:  
                     
Year 1   Year 2   Year 3     Year 4    Year 5
1.  Original SPC Amount       
$2.0M        $4.0M    $6.0M

2.  Original Averaged Amt
.    $4.0M        $4.0M     $4.0M

3.  Buyout Amount 
(2/3 of $10M)         $2.666M  $4.0M  (Total = $6.666 M)

4.  Buyout AmtOver twice                    $1.666M  $1.666M  $1.666M  $1.666M         
   Length of original SPC        

     5.  Buyout 
"Savings"                $2.333M   $4.33M       -                -
           (
Line 1 minus Line 4)    

    
6.  AmtIncluded in                   $1.666M   (- $333K)  $1.666M  $1.666M
       Averaged Club Salary                                         
"credit"
       
(Line 2 minus Line 5
The total amount actually paid to the Player under the buyout agreement over four years is $6.66 million, but the total Averaged Amount included in the Club's Averaged Club Salary is $4.66 million. The $2 million difference reflects the extra $2 million that the Club paid in Year 1 (the Club paid $2 million, but the Averaged Club Salary in Year 1 included $4 million based on the averaging), which the Club may save against its Payroll Room over the term of the buyout agreement.

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