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Impact of pending sale on free agency

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  • Impact of pending sale on free agency

    In the long run, the sale to Mr. Khan (assuming the deal closes and the owners approve) is good news for the rams, especially for those fans that wanted the team to stay in st louis. However, in the immediate short run, the news may not be so good.

    Typically, agreements of this sort contain interim course of business covenants that require the company to be operated "in the ordinary course of business and consistent with prior practice" while a sale is pending. While the press has stated that there are no restrictions on the rams ability to sign free agents or their own players (which makes sense as long as those signings would be in the ordinary course of business), i would be very surprised if the rams signed anyone to any kind of deal requiring an upfront payment while the sale is pending.

    Why? Because why should chip lay out 15 million or more upfront to Oj (or anyone else) when he wont be around to get any of the benefit. The cash would come out of his pocket if the payments get made prior to closing. Its always possible that there is a working capital true up provision that potentially accounts for this type of thing, but that would be very unusual in my experience in deals of this type (and i have seen a number of them).

    The bottom line to me is that the rams are more likely to use the tag than they are to make any type of commitment that requires an immediate up front payment and they are also incentivized to allow players to leave (or cut them) if it saves money (ie cash flow) in the short run. I dont know off the top of my head which rams might be due upcoming signing bonuses, but it sure would be interesting to know because unless the football guys are really really sure that they want those players back, at the margain, they are highly likely to be waived.

    It is also interesting to see whether Khan gets involved in a decision on Vick. As a contract matter, he probably wouldnt have that right. On the other hand, if its something he had a strong view on, i bet billy d would sure want to know that data point, especially to the extent that its something more than a one year deal.

    Ramming speed to all

    general counsel

  • #2
    Re: Impact of pending sale on free agency

    That would really be unfortunate if it is the case. The silver lining would be how weak the FA crop will be without a new CBA. Hopefully there is some kind of provision for free agents because if I remember right, even with a salary cap, the Rams have some money to spend.

    The only thing that has me concerned about a new owner (and I do mean only) is the fear of an Al Davis-type owner. Someone who influences football decisions instead of leaving that to Devaney. Time will tell..(in reference to Vick)

    When do the owners approve him? Does anyone know if it's before free agency opens up?


    • #3
      Re: Impact of pending sale on free agency

      I'll defer to your expertise in corporate law, GC, but that doesn't make sense to this layman on a gut level.

      Why would Chip or the new owner chop DeSpags off at the knees like that by timing the sale as they have? Chip & Lucia seem to have had the team's future success & stability as high on their list of criteria for this deal as any one could have hoped (except for the LA Redux crowd,perhaps) & surely it would be in Khan's best interest to compensate them in the deal if the letter of the law requires Chip to "front" what is, after all, relative peanuts in the context of such a huge deal, no?

      I wouldn't be the least surprised to see The Rams take a relatively conservative approach to free agency but that has more to do with the probably scant options & added cost of picks to lure the top quality RFAs you'd want the Rams to throw money at. Not to mention the huge financial gamble they have to take with the #1 pick.

      Maybe my legal ignurrance is only matched by my naivete but I'd like to think the Rosenbloom era won't end with such a coldhearted move nor the Khan era begin with such a boneheaded one.


      • #4
        Re: Impact of pending sale on free agency

        a couple of things here,I think when you lay out this kind of money he has every right to voice his opinion on the potential Vick deal,he doesn't strike me as the Al Davis type,theres only one Al Davis thank god,and I to look for the Rams to go easy in the FA market and thats understandable for the reasons GC stated,this (sale) is a great thing for the Rams and the rebuilding process, as a fan I just want to see this finalized and then start the path back to putting together a great football team.


        • #5
          Re: Impact of pending sale on free agency

          Ive heard from Demoff himself that the impending sale will not impact spending, and that they have more than enough money to virtually sign anyone they like. I believe this was in a segment he did on 101 ESPN Saint Louis. This sale will not affect their approach this off-season which is more good news for the Rams.


          • #6
            Re: Impact of pending sale on free agency

            Personally, I'd think there would be some discussion of this between Khan and the current ownership. In a sale worth several hundred million, I wouldn't think a couple million up front for free agents would make much difference. If I were the prospective owner, I'd probably prefer to toss in compensation than forgo participation in free agency for a year. Not participating in free agency besides signing their own would appear to go against any rules about carrying on ordinary business practices.


            • #7
              Re: Impact of pending sale on free agency

              Guys, the issue is not whether the rams have the money to spend. They do have the money to spend. The question is will they and why would chip do it?

              Chip sold to the highest bidder. Checketts wasnt an option because he didnt have the money to buy 100% of the team and kroenke has legal rights to sell. Chip has kept the team in st louis. If he lays out 20 mill now for oj (as an example), he is effectively reducing his purchase price by 20 mill.

              There are deals where the buyer effectively "buys the cash" in the business. That is unusual however. If the buyer was keeping the cash in this deal (ie no distributions pre close) then it makes perfect sense that the rams would not be impacted by the sale in the free agent process.

              Its unclear whether this is a stock deal or an asset deal which also impacts the legal analysis. The point of my post is to suggest that this may not help in the long run. I didnt say that it wont, there is just a lot of legal uncertainty.

              As for the "cutting off spags at the knees" comment, you have to remember that chip wont own the team anymore. All the public statements are very nice, but at the end of the day, is he prepared to take millions of dollars out of his pocket to help an asset that he wont own to see the benefits?

              The timing of the deal is what it is. I have been saying for months that the delay in the deal is being caused by terrible general economic conditions which have clobbered the credit markets and brought the m and a business to a virtual hault. The credit markets have heated up recently. The deal business has come back a bit and guys like me that do this every day are working crazy round the clock hours again. Chip sold the team as soon as the process ran its course and as soon as he could. The timing may be unfortunate for the rams, but chip wasnt going to wait because who knows what could happen that could throw the financial markets into turmoil again and mess up the sale.

              From the day georgia died it was inevitable that the team would be sold. There simply wasnt adequate cash in the estate to pay all the taxes and do the distributions to the shareholders to make them all super rich. Of course chip didnt come out and say all that, but it was obvious that there was no alternative from a legal perspective.

              Its intersting to speculate how involved khan will be in decision making. Again, stock/asset sale agreements are all over the map on that topic. Sure, he is going to pay a fortune for the team, but you stilll dont know if the deal is going to close, especially if it has a financing contingency (along with league approval which i dont see being a tough issue here)

              Bottom line. There is continued uncertainty for the Rams at this point. ITs unclear what the impact of the sale will be in the short run and people should be careful not to get too impacted by the public statements.

              ramming speed to all

              general counsel


              • #8
                Re: Impact of pending sale on free agency

                im not sure how an NFL team runs its business, but surely the Rams will have some capital built up to pay for players and free agents, and not be relying on having Chip Rosenbloom come in every week to sign pay slips and take a load of cash out of the bank to finance player acquisitions?


                • #9
                  Re: Impact of pending sale on free agency

                  But tomahawk, he owns the team and its his cash in the bank. When you say "the rams have cash built up" you have to remember that chip and his sister control the team, and therefore the bank account proceeds. Its their money (along with kroenke's), it doesnt belong to "the rams" it belongs to the people that own the stock in the rams.

                  ramming speed to all

                  general counsel


                  Related Topics


                  • MauiRam
                    Is there really an elephant in the room?
                    by MauiRam
                    It appears the Rams will have a new owner next season. It would also appear Khan is the lead horse. I have read differing views on what could be going on at Rams' park with new ownership looming .. The point of this thread is not who the new owner will be, rather to what extent will the "elephant in the room" influence FA and the draft if at all.

                    1) Would Chip and Lucia privately ask DeSpags to limit spending until a new owner takes over?

                    2) If the price of the team has already been negotiated, wouldn't brother and sister stand to make a greater exiting profit if spending were to be curtailed?

                    3) Might the prospective new owner attempt to influence DeSpags regarding spending on FA and the draft? It has been implied before that Billy and Spags could be lame ducks. For sure they'll have a job through the 2010 season, but all bets are off for 2011.

                    From my perspective it would seem best for DeSpags and crew to carry on with their vision of what they're trying to build regardless of impending new ownership, but is it realistic to believe the "elephant" won't interfere?
                    -03-15-2010, 11:36 AM
                  • Goldenfleece
                    What can an uncapped year do for you?
                    by Goldenfleece
                    It won't help you get younger. Assuming there is no collective bargaining agreement signed within the next three weeks, this will mean (a) most of the players who would have been unrestricted free agents will likely be retained by their current teams, (b) the free agents who do hit the open market will mostly be 28 or older because they have to have six years in the league, and (c) the youngest talent in the market will be players who were eligible for free agency several years ago and were unable to land long-term deals.

                    This is bad news for the Rams. If the old CBA was intact the Rams would be sitting pretty $35 million under the salary cap. If the owners successfully negotiated the cap down, this would be even better for the Rams because it would put the squeeze on teams that had been playing it close. With no cap, the Rams are just a mid-market team in the middle of a transition in ownership.

                    The free agent market will likely be smaller than usual and more expensive. Because there will be so few starters available in free agency, I would predict competition would be more fierce. This has less to do with the lack of a cap and more to do with simple supply and demand. Effectively, the 26-year-old crowd who would normally be up for their second contract will be removed from free agency, but there will still be a market for the 31-year-old third contract group and to a lesser extent the 35+ "I'm not dead yet" market.

                    There will still be a few positions we might improve. The quarterback market is likely to be almost non-existent. Even guys like Tarvaris Jackson and Jason Campbell could be retained if their teams so choose, but there will be a few options at back-up runningback including Leon Washington, Willie Parker, Chester Taylor, and Chris Brown. It is unlikely that a true #1 receiver will hit the market, and only a small number of solid #2's. L.J. Smith, formerly of the Eagles, might be an option at tight end, and Ben Watson will be one of the top names in free agency if he is available. The best starter prospects are probably at defensive end: Julius Peppers, Aaron Kampman, and Kyle Vanden Bosch are all possibilities provided they are not tagged. There may be a few options at linebacker including Gary Brackett, Scott Fujita, Angelo Crowell, Cato June, and Tully Banta-Cain.
                    -02-14-2010, 09:29 PM
                  • RebelYell
                    Rams sale
                    by RebelYell
                    There are rumors swirling at Rams park that the sale is much closer than ever. Bernie said he's been hearing rumblings about a local ownership group getting ready and Jim Thomas said he couldn't talk about it when asked. Chip has "gone underground" and isn't available for interviews.

                    Could be all for nothing. My guess is Checketts is close to getting commitments on the required money.
                    -09-29-2009, 06:05 PM
                  • r8rh8rmike
                    Demoff Answers Questions On Rams Sale
                    by r8rh8rmike
                    02.11.2010 5:07 pm
                    Demoff answers questions on Rams sale
                    By Bill Coats
                    St. Louis Post-Dispatch

                    As first reported Wednesday night by Post-Dispatch columnist Bernie Miklasz on, St. Louis Rams owners Chip Rosenbloom and Lucia Rodriguez have entered into a purchase agreement to sell the team to Shahid Khan, an auto-parts manufacturer based in Urbana, Ill.
                    On Thursday afternoon, Kevin Demoff, the Rams’ executive vice president of football operations and chief operating officer, held a news conference at Rams Park. Here are some excerpts from that session:

                    *Where does the process go from here?
                    “Once an agreement is submitted to the league, (minority owner) Stan Kroenke has 60 days in which to decide his intentions per his original agreement with the club. And then depending on what Stan does, the league Finance Committee will look at the process and make a recommendation on any potential owner. And then it will go to the owners for a vote. . . .
                    “There’s a league meeting next month in Orlando and a follow-up meeting in May. I think it’ll probably be a topic that’s discussed at both of those meetings.”

                    *How strong is the commitment to keeping the Rams in St. Louis?
                    “Today is a tremendously exciting day for the organization, because whether or not a sale to a prospective buyer goes through, I think it reaffirms to everybody the commitment this club has to St. Louis and our belief in this marketplace. . . .
                    “Chip and Lucia have always said they want to find a buyer here, that they remain committed to finding a buyer here, and they’re passionate about St. Louis and this market. Whatever happens, I think people realize that they’re genuine about their passion for the market, this club is genuine about our efforts to be in the community and advance this team forward. . . .
                    “There was obviously some skepticism based on some of the rumors swirling around the team. Whatever happens this year, I think that’ll be alleviated and people will see this organization for what it truly is: a group that is dedicated to winning on the field, improving the experience at the dome, and connecting to this community, so that people eventually realize that the Rams are St. Louis’ football team and will continue to be St. Louis’ football team.”

                    *For now, is it business as usual at Rams Park?
                    “On Monday, we’ll continue to hold our personnel meetings regarding free agency. Next week our scouts will travel to Indianapolis for the (NFL Scouting) Combine. . . .
                    “I promise you that March 5, the league year will open up, and we’ll be hosting free agents and looking what can be done to improve this team. I promise you that in April, we’ll be submitting a card to draft a player in the first round.
                    “None of that will change.”

                    *Are you under any financial restraints because of the pending sale?
                    “We walked...
                    -02-13-2010, 10:13 AM
                  • RamWraith
                    Don't expect any free agent miracles for the Rams
                    by RamWraith
                    I am guessing we aren't going to get any big names this off-season. I have this sneaky suspicion that teams will be using their franchise tag on most of the players that are going after big money. All the new money that is out there for teams this season is going to reek havoc with teams like the Rams who have managed their cap well over the last several years. Names like Thomas, Briggs, Clements are all going to get franchised. It is almost cheaper to keep them there at this point. So once again the Rams get hosed.

                    You all might as well start looking at the second tier players that will be getting the big contracts.
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