By Jim Thomas

The optimism of earlier this week has faded into a blunt reality for the National Football League in its hopes of extending its labor agreement.

Negotiations broke off Tuesday, leaving the league and the NFL Players Association deadlocked. A special league meeting is planned for Thursday in New York, and league commissioner Paul Tagliabue told teams to prepare for the start of free agency Friday without a new deal.

"We're deadlocked," Gene Upshaw, the executive director of the players association, told The Associated Press. "There's nowhere to go. There's no reason to continue meeting. We're too far apart on our economics, and too far apart on revenue sharing, and we'll go to the uncapped year. There won't be an extension."

These words came just one day after Dallas Cowboys owner Jerry Jones told reporters that a new deal would be in place by the end of the week.

Of course, there are still two days before the start of the free agency and trading period Friday. And a lot of agreements, in a lot of businesses, get done at the 11th hour.

But for now, teams remain in a strange sort of limbo as they approach one of the busiest and most critical times of the year.

"I don't like where we find ourselves," Atlanta general manager Rich McKay said over the weekend at the NFL scouting combine. "I find us really stuck in the mud. You really don't know which way this thing is going to go. ... It would be extremely difficult to operate without an extension. Extremely difficult."

The current labor agreement doesn't expire until after the 2007 season. But the '07 season would be uncapped - meaning there would be no salary cap. Teams could spend as much - or as little - as they wanted, which would be a big advantage to big-market spenders such as Dallas' Jones or Washington owner Dan Snyder.

The uncapped year was put into the current collective bargaining agreement as an incentive to owners to extend the labor contract before 2007.

There are incentives to spur the players association to an agreement as well. For example, once the uncapped year is reached, the earliest players can qualify for unrestricted free agency is after six years of service instead of the current four years.

On the Rams' roster, for example, linebacker Pisa Tinoisamoa is scheduled for unrestricted free agency following the '06 season. But if '07 is an uncapped year, he would have to wait two more seasons.

If the current free agency period starts without a labor agreement, some provisions are triggered in the bargaining agreement that neither players nor clubs would like. Foremost is the provision that signing bonus money can be pro-rated - or spread out - over a maximum of four years instead of the usual seven. This almost certainly would lead to smaller signing bonuses for players.

Another provision would limit the annual salary increases a player can receive to 30 percent after the first year of any new contracts.

"These rules are quite restrictive," Indianapolis Colts president Bill Polian said. "They limit creativity in contract construction quite severely."

For example, it's much easier to back-load a seven-year contract than a four-year deal if you're trying to lessen the cap implications of a deal in its early years.

"The old contracts we would do with somebody along these lines," Tennessee general manager Floyd Reese said. "You would say, 'OK, I'll give you a $10 million signing bonus, and then the minimum salary the first year and maybe the second year, and then later on in the contract really jack the salaries up.' Now, because of the 30 percent rule, you really can't do that."

Cap-strapped teams would feel the effects of these restrictions the most. Latest figures from the NFL Players Association show 11 teams currently have more than $100 million committed against the cap for 2006, headed by Oakland ($124 million), Washington ($120.2 million) and Kansas City ($120.1 million).

Without a new labor agreement, the projected salary cap for 2006 will be between $92 million and $95 million, meaning many clubs will have to rework a lot of contracts and jettison a lot of players to fit under the cap.

(The Rams, by the way, are in better shape than most. They currently have $84.5 million committed to players in '06, a figure that will drop by a few million dollars if the team - as expected - works out a contract extension for wide receiver Isaac Bruce and releases linebacker Chris Claiborne by the end of this week.)

But a labor extension would help cap-strapped teams greatly, because initial reports have the '06 cap exceeding $100 million with a new agreement.

The root of the stalemate between players and owners is - what else? - money. At issue is not only how big a piece of the pie goes to the players, but also exactly what kinds of revenue go into the pie.

Under the old model, players got nearly two-thirds of designated gross revenue, a figure that mainly consisted income from network television and ticket sales.

But over the years, some of the wealthier and more business-savvy teams figured out ways to generate revenue not included in designated gross revenue - money from sponsorship deals and luxury suites, for example. The players association wants a share of that money as well, having basically all revenue thrown into one big pool known as total football revenue.

The NFL reportedly is offering players about 56 percent of total football revenue.

If the old formula is used, splitting up only network TV and ticket money, league sources say the owners are offering a 67.1 percent share.

In both cases, the players association wants a higher percentage than the league is offering. And when you're talking about an overall pool of money that is in the billions of dollars, under either model, a few percentage points amount to millions of dollars.

The danger, of course, is that a few percentage points could kill the golden goose the NFL has become since the current financial and free-agent system was implemented in the early 1990s.

"We need a deal because the competitive balance that exists in this league is directly related to the fact that we have a salary cap," Polian said. "For the long-term future and health of the league, it would be great to have a deal."