Demystifying the James Jones Contract

James Jones has a fascinating contract.

He is making $4.32 million in base salary this season, plus another $10,000 in bonuses, for a total of $4.33 million. He has three additional seasons remaining on his contract which will pay him base salaries of $4.64 million (2010-11), $4.96 million (2011-12) and $5.28 million (2012-13), as well as an additional $10,000 in bonus money for each season he remains on the Heat roster. The final season is subject to an early termination option in the unlikely event that Jones were to want to opt out early.

The final three seasons of his contract are currently only 40% guaranteed, for $1.856 million (2010-11), $1.984 million (2011-12) and $2.112 million (2012-13). However, each season becomes fully guaranteed if he is not waived on or before June 30, 2010.

The Heat want desperately to trade him so that they can move his entire salary off the books. But they can’t afford to take the risk of being stuck with his full salary obligations if they are unsuccessful in finding a trade partner. Therefore, any trade scenario involving Jones needs to happen on or before June 30. If a trade is not executed by then, Jones will certainly be waived on June 30.

Jones’ contract is further complicated by the presence of a trade bonus. If he were to be traded, the contract calls for a up-front bonus equal to 15% of the remaining value of the contract (excluding bonuses) to be paid upon execution. Since Jones currently has $14.880 million remaining to be paid over the next three years (he has already been paid in full for this season), the trade bonus would equal $2.232 million.

Payment of the trade bonus isn’t a big deal. While the $2.232 million would technically be the responsibility of the team trading for him, the Heat could throw up to $3.0 million of cash into the trade to more than offset it.

The trade bonus does, however, increase Jones’ current salary for trade purposes. Trade bonuses get allocated to all remaining contract years, excluding years subject to an option, in proportion to the percentage of salary in each of those seasons that is guaranteed. Thus, for trade purposes, his current $4.33 million salary would increase to $5.57 million from the perspective of a team looking to acquire him. His additional three seasons would count $5.146 million (2010-11), $5.466 million (2011-12), and $5.290 million (2012-13) against the cap if he is then retained by the team that acquires him, and $2.352 million (2010-11), $2.480 million (2011-12), and $2.112 million (2012-13) if he is subsequently waived prior to the June 30 deadline.

Despite the Heat’s strong desire, a trade is going to be virtually impossible.

There is not a single team in the N.B.A. with enough cap space to swallow a $5.57 million current season salary. Thus, the only way he could be traded is by utilizing the traded player exception. And since taking on salary in exchange for Jones defeats the purposes of this exercise, the team that trades for him needs to have a large enough trade exception to accommodate his current salary.

The only teams in the N.B.A. with a trade exception large enough to accommodate Jones’ current salary are the Orlando Magic, Utah Jazz and Washington Wizards.

So… unless you feel that one of these three teams is going to want to take on Jones’ contract (presumably to capitalize on his buyout) in return for some combination of Heat draft picks and up to $3 million in cash, Jones isn’t going anywhere before year end. And unless Pat Riley wants to risk guaranteeing the three years and $14.910  million remaining on his contract, Jones isn’t going anywhere… period.

The inevitable truth is that Jones will be waived by the Heat on June 30.

Once he is waived, he will cost $1.856 million, $1.984 million and $2.112 million against the Heat’s cap over the next three seasons. The $1.856 million will eat into the Heat’s cap space for the highly-anticipated summer of 2010.

When Jones was signed in July 2008, the partial guarantee was dubbed as one which ensures that Miami could still have maximum spending capability during the free agent summer of 2010. Riley went on to call Jones “a perfect fit.” Less than two years later, it is plainly obvious to see that the contract was a mistake.

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