Renegotiating Julius Peppers' contract: the basics of a contract restructure

With approximately $10.5 million dollars in cap space and a bevy of roster issues to resolve, Phil Emery has some major questions to resolve with limited resources to do so. Can the Bears avoid franchising Henry Melton with a long-term contract, thereby saving them precious cap space this year? Will Urlacher be back, and what kind of contract will he want? Can Chicago afford to resign guys like Nick Roach, Israel Idonije, Kelvin Hayden, and Lance Louis? Who can they afford to sign in free agency?

While these issues will get resolved in due time, one of the solutions going around is to renegotiate Julius Peppers contract. For the NFL, renegotiating a previously signed contract is an easy way for teams to gain additional cap flexibility without having to cut or trade players they want to keep. Its a win-win situation for the team and the player. The team gets the cap space they need to be able to resign or extend other players, or to acquire free agents, while the player has non-guaranteed money turned into guaranteed money. Non-guaranteed money can encompass a number of different contractual definitions, and includes things like base salary and roster or performance bonuses.

Guaranteed money typically only includes signing bonus dollars, but teams like the New York Jets have put themselves in a cap space pickle by guaranteeing base salaries for players like Santonio Holmes and Mark Sanchez. For the basis of a contract restructure, teams will take some of that non-guaranteed money and convert a portion of it into guaranteed money that spreads out over the remaining years of the contract.

For the Bears, lets look at Julius Peppers' contract. Peppers' joined the Bears in 2010 with a six year, $91.5 million dollar contract, with $42 million guaranteed. Two years into the deal, Jerry Angelo restructured the deal, saving the team about $8 million against the cap that season. The Bears shifted a $10.5 million roster bonus (which would become guaranteed and count against the cap unless Peppers was cut in that offseason) into a signing bonus that would be spread out over the remaining four years of the deal. The roster bonus initially made sense as a way out of the contract for the Bears if Peppers was injured or underperformed after two years. Instead, Peppers earned that money on the field, and the Bears had to restructure to avoid a huge cap hit that year, which meant an approximate $2.6 million was added to each remaining year of Peppers' contract.

That's a large part why Peppers' base salary for 2013 is $12.9 million but his cap hit is over $16 million, over thirteen percent of the Bears' expected cap. What the Bears can do to lower Peppers' cap number is reduce his base salary and convert it into another signing bonus. Brad Biggs proposes converting $9 million of Peppers' base pay into a new signing bonus, which would save the Bears $6 million this year - that $9 million dollar bonus would be spread out at $3 million dollars for each of his three remaining seasons. That six million dollar savings could cover a new Henry Melton contract, or signing a free agent like Andy Levitre.

The downside of that scenario, however, is that Peppers current contract already calls for base salaries of $13.9 million in 2014 and $16.5 million in 2015. Those numbers don't include the previous contract renegotiation of $2.6 million a year in bonus money, so any new renegotiation would mean even more inflated cap numbers. In Biggs' scenario of $9 million dollars in 2013 base salary reconverting into $3 million in new bonus money for each of the next three seasons that means (abacus working) Peppers would have at least $19.5 million count against the cap in 2014 and $22 million in 2015. If the Bears did the Biggs' deal, and cut Peppers prior to the 2015 season, he would still count at least $5.5 million against the cap.

While renegotiating Julius Peppers' would be the easiest way to free up some cap space, the future implications could be dire. There's a reason why Ozzie Newsome already came out and said that the Ravens won't be renegotiating contracts and pushing new bonus money into future caps, because while the immediate savings are nice, the future cost could be immense.