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Kovalchuk saga comes to an end
Kovy deal registered as NHL, NHLPA reach settlement
Saturday, 09.04.2010 / 2:53 AM / NHL Free Agency 2010 By Dan Rosen - NHL.com Staff Writer
The Ilya Kovalchuk saga has come to an end.
Kovalchuk will be a New Jersey Devil after all, and the circumvention investigations of the contracts for Roberto Luongo, Marc Savard, Chris Pronger and Marian Hossa will not be pursued.
Early Saturday morning, the National Hockey League and the NHL Players' Association agreed to a global settlement to cease the investigations linked to cap circumvention for the above contracts while adopting regulations to govern long-term contracts of five or more years.
The regulations will be added as a supplement to the Collective Bargaining Agreement and apply to all contracts signed from today. As a result, NHL officials agreed to register the new Kovalchuk contract as it was submitted by New Jersey last week and terminate their reviews of the contracts already registered for Luongo, Savard, Pronger and Hossa.
The Kovalchuk contract reportedly calls for him to make $100 million across 15 years, including $90 million in the first 10 years and $10 million over the last five -- with an annual salary cap hit of $6.67 million. Kovalchuk, who turned 27 in April, will be 42 upon completion of the contract.
Kovalchuk originally had agreed to a 17-year, $102 million contract that was rejected by the NHL based on circumvention of the CBA. That rejection was upheld through arbitration after the NHLPA filed a grievance on Kovalchuk's behalf.
Once system arbitrator Richard Bloch ruled in favor of the NHL's position that the original contract had circumvented the CBA, the League and the NHLPA began working toward today's settlement and regulations.
"We're pleased to be able to establish bright line rules for these contracts going forward and are happy we can turn the page on existing contracts so we're looking forward, not backward," NHL Deputy Commissioner Bill Daly told NHL.com. "From start to finish of the process the Players' Association was responsive, interested and shared our objective to create certainty in this area."
The NHLPA released a statement from Roland Lee, Director of Salary Cap/Marketplace & Associate Counsel for the NHLPA:
"We are pleased to finalize an agreement which ends the League's circumvention investigations and also establishes rules on long-term contracts that will provide players, their certified agents and general managers clarity for the negotiation of new contracts," Lee said. "Turning the page on this process is something that will benefit all parties involved."
The agreement includes two major regulations that go into effect immediately and will be a part of the Collective Bargaining Agreement until its expiration on Sept. 15, 2012. If there is no CBA at the start of the 2012-13 NHL season, the rules will be grandfathered until a new CBA is negotiated:
1. While players and clubs can continue to negotiate long-term contracts (five years or longer) that include contract years in a player's 40s, for purposes of salary-cap calculation the contract will effectively be cut off in the year of the contract in which the player turns 41.
This basically means that if a 33-year-old player signs an eight-year contract, the amount owed to him in the first seven years of the contract will be averaged for the purposes of salary-cap computation. Then, in Year 8 of the contract, the salary he will make for that particular season will determine his salary-cap hit for that season.
So, if Kovalchuk's contract applied to this rule, the average of what he's owed in the first 13 years would be applied to the Devils salary cap from 2010-2023 and the cap hit would be $7.15 million because he is reportedly due to make $93 million across that span. Then, per the reported terms, the cap hit would change to $3 million in 2023-24 (as Kovalchuk turns 41 in April of that season) and $4 million in 2024-25.
2. In any long-term contract that averages more than $5.75 million for the three highest-compensation seasons, the cap charge will be a minimum of $1 million for every season in which the player is 36-39 years of age. That $1 million value will then be used to determine the salary cap hit for the entire contract. If the contract takes the player into his 40s, the previous rule goes into effect.
For example, Savard's contract reportedly calls for him to make $525,000 per season in the final two years of his seven-year, $28 million deal. He will be 38 and 39 in those seasons. If his contract was subject to these new regulations, for purposes of calculating the salary cap the final two years on his deal will reflect as if he was making $1 million. That would make his reported $4 million cap hit go up to $4.14 million.
The club and player still can agree to a contract that pays a player less than $1 million when he is at those ages, but for salary-cap purposes the number applied to the team's annual average salary will be $1 million.
The regulations are designed to keep diveback numbers in contracts to a minimum.
People assume that time is a strict progression of cause and effect, but actually from a non-linear non-subjective viewpoint it's more like a big ball of wibbly wobbly timey wimey...stuff.