Possible Crabtree scenarios

In our continuing effort to bring readers inside the negotiations between Michael Crabtree and the 49ers -- through columns, podcast and videocasts – we’re trying to uncover the issues, risks and rewards for both sides. Ultimately, the only way this standoff will end is if there are true and significant consequences to not having a negotiated agreement, meaning that one side sees that the risks of their actions will outweigh the rewards. We haven’t reached that point yet, but it may be coming soon.

One below-the-radar aspect of the longest stalemate in the NFL in recent years is the potential salary cap (specifically, rookie salary cap) and cash flow aspect of Crabtree’s decision-making.

Due to the operation and rigid rules of the NFL’s rookie pool, there may be potential pitfalls in waiting until next year for the Crabtree camp. Many assume that a contract can be structured in any way it needs to be as a result of negotiations. That may not be the case if this lasts into next year. Although 2010 may not have an overall salary cap, the rookie pool system is certainly expected to operate as it has.

Here are a few scenarios that could transpire with Crabtree:

(1) Crabtree agrees to a five-year contract with the 49ers prior to Nov. 17 -- the deadline for him to play this season -- and is eligible to play upon being activated.

If this happens, the 49ers will use their remaining allocated 2009 rookie pool room --they are the only team that has not used the vast majority of its rookie pool -- to structure a contract and build the types of guarantees necessary to fit in this part of the round.

Yet to be discussed is the amount of downside Crabtree has in the loss of game checks for the weeks missed and the amount of upside -- escalators and incentives -- allocated to year one of the contract, a year in which Crabtree is unlikely to produce much. Certainly, Crabtree and his agent, Eugene Parker, have discussed this option and are aware and comfortable with the risks they’re taking at this point by rejecting the 49ers’ current proposals.

Despite the present impasse, I still think this is the most likely result.

(2) Crabtree does not sign with the 49ers prior to Nov. 17 and is forced -- by NFL rule -- to sit out the 2009 season. His rights are then traded between March 1, 2010, and the week prior to the 2010 draft in late April.

The team acquiring his rights would then have to negotiate a contract for him using 2010 rookie pool money, although it will have no separate allocation of rookie pool money to use on Crabtree.

To explain further, teams are assigned a rookie pool number based on their selections in the corresponding draft. For undrafted rookies -- such as Crabtree in this scenario -- any amounts of bonus or salary over the minimum ($325,000 in 2010) will count toward the pool.

The rookie pool number that the team acquiring Crabtree will be assigned following the 2010 draft will not include an allocation for Crabtree because he will not be a 2010 draft selection. In other words, while in this scenario Crabtree would be a 2010 rookie signing, he would be a signing that is separate and apart from the 2010 rookie class – but for cap purposes, he would have to be included and factored into that rookie pool. Thus, as I explain below, structuring a contract with appropriate guarantees will be a huge challenge.

(3) Crabtree does not sign with the 49ers before Nov. 17 and is forced to sit out the season. He is also not traded prior to the 2010 NFL Draft, enters the draft and is taken at some point (our own Wes Bunting projects that if a few of the top junior receivers come out, he could be as low as the fifth or sixth receiver taken, as heard in our podcast today).

The team that drafts Crabtree would then be assigned a rookie pool number for Crabtree based on his selection and would pay him accordingly. He would then have a pool number that, unlike the second scenario above, would be part of the rookie pool for the team that drafts him, with an appropriate slot selection suggested by the league.

Here’s the problem with the latter two scenarios.

Rookie contracts are difficult enough to structure due to the rookie pool even without these complications. Due to the cap limitations on rookie contracts, a large amount of compensation is in the form of NLTBE (Not Likely To Be Earned) incentives and option bonuses -- all money not counting against the rookie pool -- rather than signing bonus and salaries.

In the scenarios above, there is significant money with some risk and some cash flow problems for Crabtree. More of the “guaranteed” money would have to be in the form of a year two option bonus and NLTBE incentives that would be earned upon achieving minimum performance standards.

From Crabtree’s vantage point, there is risk in achieving those minimum standards this year due to his late arrival, but -- if he signs with the 49ers -- he can still structure a deal with the majority of the compensation in bonus money. The ability to do so becomes problematic if this goes into next year.

Crabtree could guarantee future salaries to try to build the kind of guarantee levels that they are looking for, but the cash flow would not be beneficial at all.

In the event Crabtree is part of the 2010 rookie pool, he would not earn his option bonus -- the bulk of the bonus money in the contract -- until 2011. Not only is that cash flow a year later than if he were to sign this year, but 2011 is an unknown now in the NFL. Teams and players are starting to prepare for the possibility of a lockout.

Further, more and more teams are structuring contracts where the NLTBE incentives is not paid as an incentive at the end of the season in which it was earned; rather, it is paid as a roster bonus the following year. This means that even if Crabtree earns the one-time incentive in his first year of 2010 -- although many rookies do not -- he would not be eligible for payment until March of 2011, a year in which football and everything that goes with it is potentially at risk due to a lockout.

Having laid out these risks, I do know from long experience that Eugene Parker is as professional and learned as they come. I’m sure he has thought through these scenarios and has explained everything to Crabtree. Parker may believe that waiting a year for a contract that far exceeds the one presently being offered is a better option. There is obviously risk associated with that since that contract is not a certainty.

Decisions like this are about risk and reward. I trust that Parker and the union have explained to Crabtree what all the outcomes look like, in the event he continues to roll the dice. As you can tell from reading this post, it’s a bit complicated and technical to understand but important to know nonetheless.

We’ll continue to try and be the source for all things Crabtree.

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