Amare Stoudemire will opt out of the final year of his contract if he doesn’t sign an extension with the Phoenix Suns before the deadline at the end of this month. The All-Star power forward said there was “no chance” he would exercise the final year of his contract with the Suns without an extension, which would pay him about $17.7 million.

With Steve Kerr now out as general manager, the repercussions can be felt all the way in South Florida. Kerr played an integral role in discussions with agent Happy Walters. Over the course of the past few months, the two negotiated about as amicably as parties on opposing sides can on an extension that would have kept Stoudemire in Phoenix through 2015.

The Suns, it appears, have significantly hurt their chances of keeping Stoudemire. Those talks will now need to start anew. Walters expects to receive a finalized, formal extension offer before free agency begins on July 1, but the absence of Kerr means there is mystery now where there was none before. Unless the Suns come equipped with a maximum offer for three additional years (through the 2013/14 season) for a combined total of approximately $61 million (approximately $79 million including Stoudemire’s player option for next season), it’s likely Stoudemire will be on his way to test the free agent waters. Even with such an offer, the apparent lack of direction may be enough to turn Stoudemire away.

The Suns’ loss could be the Heat’s gain.

When healthy, Stoudemire is perhaps the most explosive low post presence in the game today. He averaged 23.1 points and 8.9 rebounds last season while playing all 82 regular season games, and was especially effective after the Suns decided against trading him at the All-Star break. His contributions on the court certainly merit at-or-near maximum contract consideration, which could pay him as much as $100 million over five seasons.

But such a long-term commitment is terrifying for a man so prone to injury.

Stoudemire had microfracture surgery to repair his left knee in October of 2005. The procedure, where tiny fractures are created in bones around the knee, causing bleeding and clotting to spur new cartilage development, forced him to miss nearly all of the 2005/06 season. He returned to the court in March 2006, just five months after the surgery, but his play dropped off dramatically. With ongoing stiffness in both knees, he was shelved for the remainder of the season.

Amare had a second surgery, an arthroscopic procedure to remove debris in his right knee, in April of 2006. He underwent another arthroscopic surgery on his right knee in October of 2007. He was then sidelined for the final few months of the 2008/09 season after surgery for a detached retina.

He now appears fully recovered and in good health, eager to find a new home.

But there is lingering concern by some that the Florida native will eventually need another operation on his left knee, as is commonplace following microfracture surgery. I’m not a doctor, but I would imagine that the legs and fuel tank of a player who’s come back from microsurgery are not, in the long haul, going to hold up as well through age as those of a normal NBA athlete. Signing Amare on through age 32 comes with a high degree of risk.

Therein lies the problem.

Amare would be a wonderful addition to the Heat roster, as the dominant low post presence the team has coveted since the better days of Shaquille O’Neal. But while he seems determined to accept little shy of a maximum contract, Riley would be wise to account for the risk involved in such a commitment.

So how can the gap be bridged? How can Amare get the contract he seeks while the Heat get the protection it requires?

The answer could lie in the “performance bonus.”

A performance bonus is exactly what it sounds like. It is a bonus paid on top of a player’s base compensation for the achievement of a certain, predetermined goal. Bonuses must be structured so that they provide an incentive for positive achievement by the player or team, and are based upon numerical benchmarks (such as points per game or team wins). The numerical benchmarks must be specific – e.g., a bonus may be based on the player’s free throw percentage exceeds 80%, but may not be based on the player’s free throw percentage improving over his previous season’s percentage.

The details surrounding such incentives can be complicated. For salary cap purposes, performance bonuses are classified as either “likely to be achieved” or “unlikely to be achieved,” and are only included in team salary if they are “likely to be achieved.” The league office determines what is likely and what is not. Their guideline is whether the criterion was achieved in the previous season. For example, if a player had seven assists per game the previous season, then an incentive based on seven assists per game would probably be classified as “likely to be achieved,” but an incentive based on eight assists per game would probably be classified as “not likely to be achieved.” All performance bonuses are re-evaluated at the start of each season to determine whether they should be classified as likely or unlikely to be achieved for the season to come.

If you’re with me so far, you can see the obvious benefits to the Heat of such a concept. If Amare remains healthy and performs to the level of his abilities, everybody wins. The Heat would presumably find success on the court, and Amare would get richly compensated for it, having earned his full compensation. But if he suffers any sort of ongoing injury, Miami would be afforded several compensatory benefits.

First, any bonuses Amare would not be able to achieve as a result of such injury would not need to be paid. Such dollars can be quite substantial when dealing with contracts on the order of $100 million.

Second, any bonuses not achieved by Amare in any given season would subsequently be classified as “not likely to be achieved” in the following season, and would therefore increase the team’s total cap space for that season. Again, such dollars can be quite substantial.

Finally, one aspect of most NBA contracts that Commissioner David Stern has made us all well aware of is their guaranteed nature. In most situations, if a player succumbs to an injury, he still needs to be paid (though some of it may qualify to be picked up by insurance) and his contract still reduces his team’s available cap space. However, only a player’s base salary can be guaranteed — not bonuses. If the Heat were ever forced to waive Amare, they would only be on the hook for the guaranteed portion of his contract.

And now on to the specific proposal. Drum roll please!

(Note that this is just an example so you can see how such an idea could work in practice).

If I were Pat, I could see my way clear to offer Amare Stoudemire a 5-year contract starting at $16 million. That’s about $1.2 million shy of his max, and about $600k shy of Wade’s max. After incorporating his max raises of 8.0%, it’s also $98.2 million over the term of the deal.

Of that total, 75% could be in the form of base compensation and 25% in the form of performance incentives. Performance incentives could be tied to the number of games he plays, the number points he scores, and the number of rebounds he grabs.

Now this is where it gets a bit complicated. In my hypothetical scenario, Amare’s incentives would be broken down into two parts: Part 1 and Part 2.

Part 1 would exclusively deal with the number of regular season games in which he plays, and would represent 2/3 of the total potential incentive bonus for any given season. For example, it could be broken down as follows:

Incentives Part 1 (based on Regular Season play)
a) 1/3 of total for Part 1 if plays at least 50 games
b) 1/3 additional if plays at least 60 games
c) 1/3 additional if plays at least 70 games

Part 2 would exclusively deal with his points and rebounds, and would represent 1/3 of the total incentive bonus for any given season. It would depend upon the full achievement of the Part 1 bonus.

Incentives Part 2 (based on Regular Season play)
a) 1/2 of total for Part 2 if Part 1 fully achieved AND scores at least 20.0 points per game
b) 1/2 of total for Part 2 if Part 1 fully achieved AND grabs at least 9.0 rebounds per game

Here it is in picture format:

The formula is long and complicated, no doubt, but it would provide the Heat the protection it needs to freely offer up a near-maximum contract to a player with such a history of injury.

In a league in which earning your salary is not always exactly paramount, it would be wise to attempt to avoid mistakes along the lines of Eddy Curry. Curry, a talented low-post scorer, has made a shade over $20 million “playing for the New York Knicks” the past two seasons, but that’s a bit of an overstatement as Curry saw time in only ten total contests – suffering various ailments and refusing to get himself into adequate playing shape. He holds a player option for $11.2 million on his contract for next season. Pretty safe bet that he takes the Knicks up on that.

Whether Amare would be amenable to such a structure remains to be seen.