WELLS' OFFICIAL CONTRACT/BUYOUT

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WELLS' OFFICIAL CONTRACT/BUYOUT

Post by AgMac » November 21st, 2016, 4:39 pm

I just received a copy of MW's contract from USU (thanks, ratofallaggies, it was easy). A copy is attached. Here are what I believe to be the key provisions:

- As I've speculated many times on here, there is no "buyout" per se. Meaning that if we fire Wells, we don't have to hand him a check on his way out the door. Rather, if we fire Wells, USU must "continue to pay Coach's annual guaranteed compensation for the remaining term of the contract."

- The guaranteed compensation is $850,000 for 2017; $900,000 for 2018; and $950,000 for 2019. That is a total of $2.7 million. Again, this is paid out over the course of 3 years - less than $1 million per year. IMO, we are going to lose more than that in revenue with Wells.

- The guaranteed payments are not offset if he gets a different coaching job elsewhere. He has no duty to mitigate.

- We do not have to pay potential, lost incentive bonuses for the years that Wells is fired.

- USU would get $800,000 if Wells voluntarily left for another job.

So there you have it. Hopefully, we can stop the $6 million buyout rumors.
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Re: WELLS' OFFICIAL CONTRACT

Post by ProvoAggie » November 21st, 2016, 4:46 pm

AgMac wrote:- The guaranteed compensation is $850,000 for 2017; $900,000 for 2018; and $950,000 for 2019. That is a total of $2.7 million. Again, this is paid out over the course of 3 years - less than $1 million per year. IMO, we are going to lose more than that in revenue with Wells.
How much revenue does USU make each year off of football ticket sales? The only thing that I could find said that USU Athletics made $2.1m in 2015 in Ticket sales but that is for all sports. I'm guessing that a decent chunk of that came from basketball. I don't see how wells staying on will cost us more than $1m/year in revenue. A lot of funds come from student fee's and the conference payouts and that doesn't change with him at the helm.



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Re: WELLS' OFFICIAL CONTRACT

Post by AgMac » November 21st, 2016, 5:03 pm

ProvoAggie wrote:
AgMac wrote:- The guaranteed compensation is $850,000 for 2017; $900,000 for 2018; and $950,000 for 2019. That is a total of $2.7 million. Again, this is paid out over the course of 3 years - less than $1 million per year. IMO, we are going to lose more than that in revenue with Wells.
How much revenue does USU make each year off of football ticket sales? The only thing that I could find said that USU Athletics made $2.1m in 2015 in Ticket sales but that is for all sports. I'm guessing that a decent chunk of that came from basketball. I don't see how wells staying on will cost us more than $1m/year in revenue. A lot of funds come from student fee's and the conference payouts and that doesn't change with him at the helm.
Sorry, by "revenue" I meant total money coming in, including donations. For example, my season tickets the last few years also included a mandatory BBSF donation. The total was about $300. They were the cheapest West side seats. So let's say the average West side season ticket is a total of $400 (including BBSF donations), and let's say that we lose 1,000 West side season ticket holders. That's $400,000 of your $1m. Now let's say you lose another 1,000 non West side season ticket holders at an average of $150 per season ticket (including BBSF donation). Now up to $550,000. I would guess average attendance is going to be down about 5,000 (based on this year), which leaves 3,000 non-season ticket holders not going to the games. At an average of, let's say, $30 per ticket, multiplied by 6 games, that is $540,000 more dollars. Maybe those numbers are off, but I don't think unrealistically so. Just look at attendance this year, especially towards the end. It will be abysmal the next few years.

This says nothing about other non-ticket revenue like concessions (I know people have said we don't get much because we have a sucky deal) or merchandise.



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Re: WELLS' OFFICIAL CONTRACT

Post by brownjeans » November 21st, 2016, 5:09 pm

Coaches show section (#7) states, "In the event of an early termination of this Agreement, Coach shall receive a pro rata portion of the respective FY payment (based on the number of days that transpired prior to termination)." This statement does not define the type of termination (for cause, USU choice, Coach choice). This seems to contradict what's stated in paragraph 20.
If the pro-rated amount applies, the payout is $520,000 for '17, $545,000 for '18, and $570,000 for '19.



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Re: WELLS' OFFICIAL CONTRACT

Post by ProvoAggie » November 21st, 2016, 5:13 pm

AgMac wrote:
ProvoAggie wrote:
AgMac wrote:- The guaranteed compensation is $850,000 for 2017; $900,000 for 2018; and $950,000 for 2019. That is a total of $2.7 million. Again, this is paid out over the course of 3 years - less than $1 million per year. IMO, we are going to lose more than that in revenue with Wells.
How much revenue does USU make each year off of football ticket sales? The only thing that I could find said that USU Athletics made $2.1m in 2015 in Ticket sales but that is for all sports. I'm guessing that a decent chunk of that came from basketball. I don't see how wells staying on will cost us more than $1m/year in revenue. A lot of funds come from student fee's and the conference payouts and that doesn't change with him at the helm.
Sorry, by "revenue" I meant total money coming in, including donations. For example, my season tickets the last few years also included a mandatory BBSF donation. The total was about $300. They were the cheapest West side seats. So let's say the average West side season ticket is a total of $400 (including BBSF donations), and let's say that we lose 1,000 West side season ticket holders. That's $400,000 of your $1m. Now let's say you lose another 1,000 non West side season ticket holders at an average of $150 per season ticket (including BBSF donation). Now up to $550,000. I would guess average attendance is going to be down about 5,000 (based on this year), which leaves 3,000 non-season ticket holders not going to the games. At an average of, let's say, $30 per ticket, multiplied by 6 games, that is $540,000 more dollars. Maybe those numbers are off, but I don't think unrealistically so. Just look at attendance this year, especially towards the end. It will be abysmal the next few years.

This says nothing about other non-ticket revenue like concessions (I know people have said we don't get much because we have a sucky deal) or merchandise.
I'm regards to donations, a lot of fans use the same donation for football that they use for basketball. Even if these people stop buying football tickets, they'll still have to make the same donation for basketball. I'm not saying that we won't lose $1m but I don't see it right now.

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Re: WELLS' OFFICIAL CONTRACT

Post by andytheaggie » November 21st, 2016, 5:40 pm

ProvoAggie wrote:
AgMac wrote:
ProvoAggie wrote:
AgMac wrote:- The guaranteed compensation is $850,000 for 2017; $900,000 for 2018; and $950,000 for 2019. That is a total of $2.7 million. Again, this is paid out over the course of 3 years - less than $1 million per year. IMO, we are going to lose more than that in revenue with Wells.
How much revenue does USU make each year off of football ticket sales? The only thing that I could find said that USU Athletics made $2.1m in 2015 in Ticket sales but that is for all sports. I'm guessing that a decent chunk of that came from basketball. I don't see how wells staying on will cost us more than $1m/year in revenue. A lot of funds come from student fee's and the conference payouts and that doesn't change with him at the helm.
Sorry, by "revenue" I meant total money coming in, including donations. For example, my season tickets the last few years also included a mandatory BBSF donation. The total was about $300. They were the cheapest West side seats. So let's say the average West side season ticket is a total of $400 (including BBSF donations), and let's say that we lose 1,000 West side season ticket holders. That's $400,000 of your $1m. Now let's say you lose another 1,000 non West side season ticket holders at an average of $150 per season ticket (including BBSF donation). Now up to $550,000. I would guess average attendance is going to be down about 5,000 (based on this year), which leaves 3,000 non-season ticket holders not going to the games. At an average of, let's say, $30 per ticket, multiplied by 6 games, that is $540,000 more dollars. Maybe those numbers are off, but I don't think unrealistically so. Just look at attendance this year, especially towards the end. It will be abysmal the next few years.

This says nothing about other non-ticket revenue like concessions (I know people have said we don't get much because we have a sucky deal) or merchandise.
I'm regards to donations, a lot of fans use the same donation for football that they use for basketball. Even if these people stop buying football tickets, they'll still have to make the same donation for basketball. I'm not saying that we won't lose $1m but I don't see it right now.

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It might not be $1 million per year for the next three years, but I wouldn't doubt that it will end up being that much or more in the long term. What I mean is that the longer we keep him, the further the support will drop, and the longer it will take to get it back up to where it was post-Gary.

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Re: WELLS' OFFICIAL CONTRACT

Post by tkmad » November 21st, 2016, 7:42 pm

Just raise student fees and let them carry the burden.

I say that somewhat TIC, big USU fan but not a fan of continuing programs that require subsidies. If we didn't force the students to subsidize the cost of athletics, we wouldn't be paying coaches $900k a year. Wells salary is more than he's worth, he can thank the students for it.

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Get 20k people to donate $135

Post by LoveMyAggies » November 21st, 2016, 9:18 pm

I'm looking at this $$ wise for a moment, I think we have at least 20k solid followers either on this site or people on this site who know a few people who follow the Aggies. Just not on this site.

Very quickly, if everyone donated $135, we could buy out Wells contract, and demand he resign. Is there a spin doctor who could negotiate with him to leave, and say he resigned??

Meanwhile, maybe AggiesForever could help us set up a private fund with the AD's and President's office. If we hit the $2.7M then they can start negotiating his resignation.

I think this would show class on all sides.



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Re: WELLS' OFFICIAL CONTRACT

Post by LoveMyAggies » November 21st, 2016, 9:19 pm

I would donate that times 2 to cover him leaving. AND to have $$ in the bank for the next coach.



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Re: WELLS' OFFICIAL CONTRACT

Post by buckfever » November 21st, 2016, 9:29 pm

As Aggies forever and ahybe keep trying to point out. Big blue donation is NOT revenue
It goes to player scholarships for every sport. Cost of attendance. COA.
Is that difficult to absorb? It doesn't go to salaries, the light bill or anything else
Hence the name big blue scholarship fund



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Re: WELLS' OFFICIAL CONTRACT

Post by hickaggie » November 21st, 2016, 9:30 pm

LoveMyAggies wrote:I would donate that times 2 to cover him leaving. AND to have $$ in the bank for the next coach.
This is AD incompetence here. How do you not include a mitigation clause. Its should be implied but still... On the other hand Wells won't get a volunteer job with his son's peewee team the way things are going so it doesn't matter.

As far a the cost-benefit though its still a no brainer. What do 10k fans less a game in paid tickets and lost concessions not to mention fewer television bonuses, reduced advertising revenues, fewer donations and several years to build it back up after he is fired add up to.

Got to be far more than $100,000 a month.



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Re: WELLS' OFFICIAL CONTRACT

Post by YoungBloodAggie » November 21st, 2016, 9:43 pm

I have been thinking about building some pro-forma financial statements to reflect the impact of firing Wells and hiring a new coach. Before you can chime in, AgMac, I think even if we promote one of the coordinators (not the best idea in my mind, anyway) we will need to up the pay of that coordinator to probably around $400K at least. I don't think we would pay less than that for a head ball coach at this point.

So, assuming that the new coach costs at least $300K (if we promote an assistant and don't replace one of our seventeen co-coordinators), we would need to see forgone revenues in excess of that to justify it. There are a ton of variables, including Luke Wells leaving when his brother does, how much money the suites bring in now (won't be reflected in my pro forma if I take data from past years), etc.

In reality, I think a coaching change is probably more likely to cost us around $500K. I think it is pretty easy to see how future cash flows, discounted for TMV, can pass this up. It might be a close call, though. I would hope that if the Aggies do let go of Wells, we would reward them with increased support.


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Re: WELLS' OFFICIAL CONTRACT

Post by AgMac » November 21st, 2016, 9:53 pm

buckfever wrote:As Aggies forever and ahybe keep trying to point out. Big blue donation is NOT revenue
It goes to player scholarships for every sport. Cost of attendance. COA.
Is that difficult to absorb? It doesn't go to salaries, the light bill or anything else
Hence the name big blue scholarship fund
I'm not sure what point your trying to make, buck. My point is that as long as there is a mandatory bbsf donation tied to season tickets, you are going to lose out on that money with a decline in season ticket sales.



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Re: WELLS' OFFICIAL CONTRACT

Post by AgMac » November 21st, 2016, 10:03 pm

That was actually going to be my next post, YBA. The cost to USU is not what we have to keep paying Wells, but rather whatever we have to pay a new coach. Assuming we get an up and comer just looking for a shot to prove himself, it would likely be less than $900k per year. Also, we might be able to shed some assistant salary.

My main point is that firing Wells is more feasible than most believe.
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Re: WELLS' OFFICIAL CONTRACT

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Re: WELLS' OFFICIAL CONTRACT

Post by Flying_Scotsman8 » November 21st, 2016, 10:41 pm

In all honesty, I think we are screwed on ticket revenue for the foreseeable future regardless of the coach. How many people on this very site have said they are not renewing tickets because of the horrendous kick-off times? Ticket revenue is going to be very bad, by my uneducated estimate, until either the team starts winning uncontrollably or the kick-off times change.

To make firing Wells worth it, at this point, we would need to get a good coach and have a pretty good team the next few years. Of course, as an Aggie fan, I don't care so much about the money as I do about just straight winning.



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Re: WELLS' OFFICIAL CONTRACT

Post by aggieguy13 » November 21st, 2016, 10:51 pm

It's not like we were consistently selling out the stadium even when we were good. Any potential drop in ticket revenues are going to be less than what most here are predicting. The late kickoff times are also a good point.

Also, sponsors are locked into multi-year contacts, so they're not just going to disappear anytime soon.

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Re: WELLS' OFFICIAL CONTRACT

Post by bwcrc » November 22nd, 2016, 7:29 am

The annual payments to Wells seem to be manageable, but we also have to factor in the salary of a new coach. I agree that we would likely not pay a head coach anything less than $400k per year to start, assuming we hire someone without much of any head coaching experience. Landing anyone with prior head coaching experience will probably increase the starting annual salary. That places the annual total to no less than $1.2MM in the first year, but I would budget more than that to be safe, and I am not sure how well USU can financially handle that. And unless there is an immediate turnaround in the first year, we are not making that up in the first year. It would be more realistic to anticipate making up the difference in the third year.

As for no explicit mitigation provision in the contract, general contract law generally requires a party to mitigate its damages whether the contract explicitly states so or not. I am not licensed to practice law in Utah and have not looked into it at all, but I would be shocked if Wells is terminated and USU is not able to offset his new salary against what is owed him on the remaining term of his USU contract. Very few, if any, of the contracts I have drafted include an explicit mitigation clause and I have litigated cases where a mitigation defense has been raised and those contracts likewise did not contain explicit mitigation clauses. Meeting a duty to mitigate is a very low bar and all Wells would have to do is submit applications to open positions he is qualified to hold.



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Re: WELLS' OFFICIAL CONTRACT

Post by hickaggie » November 22nd, 2016, 8:48 am

bwcrc wrote:The annual payments to Wells seem to be manageable, but we also have to factor in the salary of a new coach. I agree that we would likely not pay a head coach anything less than $400k per year to start, assuming we hire someone without much of any head coaching experience. Landing anyone with prior head coaching experience will probably increase the starting annual salary. That places the annual total to no less than $1.2MM in the first year, but I would budget more than that to be safe, and I am not sure how well USU can financially handle that. And unless there is an immediate turnaround in the first year, we are not making that up in the first year. It would be more realistic to anticipate making up the difference in the third year.

As for no explicit mitigation provision in the contract, general contract law generally requires a party to mitigate its damages whether the contract explicitly states so or not. I am not licensed to practice law in Utah and have not looked into it at all, but I would be shocked if Wells is terminated and USU is not able to offset his new salary against what is owed him on the remaining term of his USU contract. Very few, if any, of the contracts I have drafted include an explicit mitigation clause and I have litigated cases where a mitigation defense has been raised and those contracts likewise did not contain explicit mitigation clauses. Meeting a duty to mitigate is a very low bar and all Wells would have to do is submit applications to open positions he is qualified to hold.
I agree but it should be obviously clear on a football coach' contract as it was in DeRuyter's case. Not just coaching but TV analyis exc. Its just such a unique situation. Like I said half jokingly though, he's not likely to get a job that offsets things much. A position coach maybe at a G5 school. You never though know. The coaching carousel is always full of surprises. Maybe he convinces some dunce of an AD to look at his early record and they get him for a bargain that offsets things a bit.



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Re: WELLS' OFFICIAL CONTRACT

Post by USU78 » November 22nd, 2016, 9:36 am

Great thread. Thanks to the OP for running that down. No more speculation based upon out-of-date or unreliable information.


You keep using that word. I do not think that word means what you think it means.

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Re: WELLS' OFFICIAL CONTRACT

Post by AgMac » November 22nd, 2016, 10:25 am

bwcrc wrote:The annual payments to Wells seem to be manageable, but we also have to factor in the salary of a new coach. I agree that we would likely not pay a head coach anything less than $400k per year to start, assuming we hire someone without much of any head coaching experience. Landing anyone with prior head coaching experience will probably increase the starting annual salary. That places the annual total to no less than $1.2MM in the first year, but I would budget more than that to be safe, and I am not sure how well USU can financially handle that. And unless there is an immediate turnaround in the first year, we are not making that up in the first year. It would be more realistic to anticipate making up the difference in the third year.

As for no explicit mitigation provision in the contract, general contract law generally requires a party to mitigate its damages whether the contract explicitly states so or not. I am not licensed to practice law in Utah and have not looked into it at all, but I would be shocked if Wells is terminated and USU is not able to offset his new salary against what is owed him on the remaining term of his USU contract. Very few, if any, of the contracts I have drafted include an explicit mitigation clause and I have litigated cases where a mitigation defense has been raised and those contracts likewise did not contain explicit mitigation clauses. Meeting a duty to mitigate is a very low bar and all Wells would have to do is submit applications to open positions he is qualified to hold.
Wells' salary is what Hartwell and YoungBloodAggie would categorize as a "sunk cost". We are paying that whether or not we fire Wells. Accordingly, that doesn't factor into the real cost of firing. The real cost of firing him would only be the salary of the new coach.

So really, saying it would "cost" us 2.7 million to "buyout" Wells is inaccurate. It would "cost" us the new coach's salary.



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Re: WELLS' OFFICIAL CONTRACT

Post by USU78 » November 22nd, 2016, 10:46 am

AgMac wrote:
bwcrc wrote:The annual payments to Wells seem to be manageable, but we also have to factor in the salary of a new coach. I agree that we would likely not pay a head coach anything less than $400k per year to start, assuming we hire someone without much of any head coaching experience. Landing anyone with prior head coaching experience will probably increase the starting annual salary. That places the annual total to no less than $1.2MM in the first year, but I would budget more than that to be safe, and I am not sure how well USU can financially handle that. And unless there is an immediate turnaround in the first year, we are not making that up in the first year. It would be more realistic to anticipate making up the difference in the third year.

As for no explicit mitigation provision in the contract, general contract law generally requires a party to mitigate its damages whether the contract explicitly states so or not. I am not licensed to practice law in Utah and have not looked into it at all, but I would be shocked if Wells is terminated and USU is not able to offset his new salary against what is owed him on the remaining term of his USU contract. Very few, if any, of the contracts I have drafted include an explicit mitigation clause and I have litigated cases where a mitigation defense has been raised and those contracts likewise did not contain explicit mitigation clauses. Meeting a duty to mitigate is a very low bar and all Wells would have to do is submit applications to open positions he is qualified to hold.
Wells' salary is what Hartwell and YoungBloodAggie would categorize as a "sunk cost". We are paying that whether or not we fire Wells. Accordingly, that doesn't factor into the real cost of firing. The real cost of firing him would only be the salary of the new coach.

So really, saying it would "cost" us 2.7 million to "buyout" Wells is inaccurate. It would "cost" us the new coach's salary.
Nicely put. The cost of the underperforming SKU has already been incurred, though it is not all yet payable. Question is, do you sink your marketing budget henceforth into the underperforming SKU, or do you recognize the wisdom of the market and develop a SKU people want to buy? Put your marketing behind that?


You keep using that word. I do not think that word means what you think it means.

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Re: WELLS' OFFICIAL CONTRACT

Post by snoel » November 22nd, 2016, 11:05 am

Typically, there is no duty to mitigate when the damages are fixed or liquidated. When the contract spells out the exact amount of the "damages," or provides a formula to determine them, the parties to the contract have already agreed upon the damages to be paid in case of a breach on the part of the university. In other words, when parties to a contract agree on or fix damages to a certain amount in the contract, if it is reasonable it replaces any determination of actual loss. This is especially so if the contract is silent on the issue of the affect of a coach's new employment after the breach. If the parties to the contract did not insert any language to address such a contingency, a court certainly will not (or should not). The question is whether the "damages" in a given contract have been liquidated or fixed and whether they are reasonable or punitive. If they are not liquidated, then a duty to mitigate arises.

(Edited to add the last sentence)



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