NHL, NHLPA agree to contract rules, approve Kovalchuk's deal

Darren Dreger
9/4/2010 12:30:38 PM
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Ilya Kovalchuk will finally join the New Jersey Devils after his re-submitted contract was officially approved by the NHL just before 3 a.m. (et) Saturday morning.

The re-worked contract now calls for Kovalchuk to collect a reported $100 million over 15 years, with an annual cap hit of close to $6.66 million. The deal is thought to pay out $90 million in the first 10 years and $10 million over the last five.

The 27-year-old forward originally signed a 17-year, $102 million deal, but that contract was rejected by the NHL after claims of circumvention. The two sides went back and forth, several times, trying to agree on a new deal.

“We have been advised today that the NHL has approved the contract between Ilya Kovalchuk and the New Jersey Devils. We are very pleased with this decision which will see Ilya Kovalchuk remain a valuable member of the Devils," said Devils president and general manager Lou Lamoriello in a statement.

“The New Jersey Devils acted in good faith throughout this entire process and operated solely on the assumption that our negotiations and both contracts reached were fully
compliant with the CBA, as written and applied. Arbitrator Bloch reached that same conclusion in his August 9 decision. We are pleased that this matter has finally been
concluded to all parties' satisfaction.”

Some reports had suggested Kovalchuk might have left for Russia and the KHL had this contract been rejected, but his agent, Jay Grossman, told the New York Post that the player had his heart set on playing in the NHL.

"He has a lot of loyalty to his native country, but once he made that commitment to the Devils with the first contract, he was committed to them exclusively," Grossman said. "He never changed his mind. There were a couple of times when he raised his voice, but that's about it."

The NHL and the NHL Players' Association reached an agreement on an amendment to the rules that govern long-term contracts.

Kovalchuk's deal has been approved as part of a new global settlement. Deals like those signed by Kovalchuk, Roberto Luongo, Marian Hossa, and Marc Savard will be the last of their kind.

The amendments address two specific rules which only apply to long-term contracts (contracts defined as five years or longer).

First: For long-term contracts extending beyond the age of 40, the contract's average annual value for the years up to and including 40, are calculated by dividing total value in those years by the number of years up to and including 40. Then for the years covering ages 41 and beyond, the cap charge in each year is equal to the value of the contract in that year.

For example, when a 35-year old player agrees to a seven-year deal that expires when he's 42, the NHL would now take the first five years of the contract to age 40 and average them out. The total becomes the dollars divided by five years. That player's average annual salary would then become the cap hit.

His cap hit in the final two years of his deal would be the actual value of the contract in those seasons, therefore a cap hit of $525,000 for years six and seven of the deal.

Secondly, for long-term contracts that include years in which the player is 36, 37, 38, 39 and 40; the amount used for purposes of calculating his average annual value is a minimum of $1 million in each of those years (even if his actual compensation is less during those seasons).

As an example, a player signs the exact same seven-year deal discussed above, however the deal is signed at the age of 32 and is set to expire when the player reaches 39 years old.  For that contract, the two seasons at $525,000 would remain, however they would be treated as years at $1 million for the purpose of calculating the appropriate cap charge.

These new rules will only apply to contracts negotiated and filed after Sept. 3. They do not apply retroactively to existing contracts, therefore long-term deals signed by the likes of Henrik Zetterberg and Rick DiPietro would remain unaffected by Friday's decision.

The NHLPA released a statement from Roland Lee, Director of Salary Cap/Marketplace & Associate Counsel for the NHLPA:

"We are pleased to finalize an agreement which ends the League's circumvention investigations and also establishes rules on long-term contracts that will provide players, their certified agents and general managers clarity for the negotiation of new contracts," Lee said. "Turning the page on this process is something that will benefit all parties involved."

The NHL also cited its approval with bringing clarity to such contract situations.

"We're pleased to be able to establish clearly-defined rules for these types of contracts going forward and just as happy we can turn the page on uncertainties relating to several other existing contracts,” NHL Deputy Commissioner Bill Daly said in a release. "From start to finish of this multi-week process we were able to work closely and cooperatively with representatives of the Players' Association, who shared our belief that the creation of definitive rules and guidelines in this area would be beneficial to everyone – Clubs and players alike."


Ilya Kovalchuk (Photo: Bruce Bennett/Getty Images)


(Photo: Bruce Bennett/Getty Images)
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