In May, I wrote about what really matters in a men's basketball head coaching contract. In part two of the story, I pointed to what I believed would be the high-end of the reasonable range for a revised termination fee:
"Therefore, I wouldn’t be overly concerned about the negotiation skills of the University if a new deal is reached and it includes an eye-catching termination fee of up to $2.5 million after next season."
As it turns out, $2.5 million is exactly what the maximum stated termination fee is. Of course, as further detailed in May, due to the wording in the legal documents the University might effectively pay out around $3 million if Smith were to be terminated after next season. It's a big number, but compared to other men's basketball head coaching contracts it's not wildly unreasonable.
The Amendment - A Closer Look
- The University may not terminate Tubby without just cause during the season. Even if the Gophers start off 0-15, Minnesota cannot keep him off the raised floor at the Barn. It's an interesting provision and one I'm not sure I've come across much in reviewing basketball head coaching contracts. Perhaps it's a pride thing. Doesn't exactly show a lot of confidence is my take, but maybe there's another angle.
- Smith's supplemental compensation was increased $50,000 per year (from $1.15 million to $1.20 million).
- As a reminder from my earlier stories on contracts, Smith's initial base salary was $600,000, but he is rewarded with an increase of at least 5% each year. That means his base is currently at least $766,000. You'll find many articles where people incorrectly state an annual compensation amount of $1.75 million ($1.15 million supplemental + $600k base) because they fail to acknowledge this provision.
- There was no change to the $250,000 supplemental retirement contribution that Smith began receiving in April 2011. He'll continue to receive that amount annually so long as he remains employed.
- The amendment specifically states that at the end of the 2012-13 season, the parties will review and discuss the terms in the amendment. So, we know this deal "through 2016-17" may only take us to March of 2013. There's really no obligation that this clause of the contract creates - its inclusion is a bit goofy.
- If Minnesota reaches the Sweet Sixteen, the term of the agreement will be extended by one year. An extension would also be granted by the University if the Gophers win the Big Ten regular season championship or conference tournament.
- Tubby can leave early and not pay a dime. Think about that one.
- As things now stand, Minnesota would pay cash of $2.5 million to fire Smith early in any of the next several years. To terminate Tubby after the 2014-15 or 2015-16 seasons, they'd pay approximately $2.1 million. Tubby's side did a good job in bargaining for this. The max cash termination amount of $2.5 million isn't unreasonable, but Minnesota can't be pleased with being on the hook for a sizable penalty for many years to come.
Incentives have been sweetened and the minimum threshold bars have been lowered. For example:
- A National Championship would bring a pay day of $1.5 million ($500k under previous terms).
- A Sweet Sixteen appearance means Tubby pockets $200,000 ($50,000)
- Make it into the Second Round ("Second Round" is not defined in the contract, but should be) and Smith will receive $150,000 ($0).
- If the Gophers tie for 4th place in the Big Ten, the U will pay their head coach $50,000 ($0).
- While the U will continue to make the same incentive payouts if the players Smith brings into the program aren't horrible in the classroom (an APR equal to the banned-from-postseason-play cutoff of 930 ($25,000) and a poor 50% graduation rate ($100,000) would provide Tubby with an additional $125,000 of compensation each year), increased amounts have been added for an average APR performance ($150,000 will be paid for a decent APR of 970 or better).
- If the basketball team carries a GPA of 2.9, that's another $100,000 for Tubby.
2012-13 Compensation Scenario
Let's say that in 2012-13, Minnesota finishes in 4th place in the Big Ten and reaches the Sweet Sixteen before losing in the NCAA tournament. Students perform at an average Big Ten level, compiling a 2.9 GPA and a 970 APR. Pretty good year, but certainly attainable. How much cash would the University send out the door to compensate Tubby?
The answer: More than $2.8 million. Also, his contract would be extended by a year. Indeed, Smith's compensation opportunity is quite handsome.