Josh Hamilton, the 2010 American League Most Valuable Player, agreed to avoid arbitration and signed to a two-year contract worth $24 million with the Texas Rangers.
The deal allows Hamilton to become a free agent following the 2012 World Series. Had Hamilton and the Rangers gone to arbitration, a third party would have decided between the Rangers offer of $8.7 million per year or Hamilton's offer of $12 million.
In order to become arbitration eligible, a player has to have a least three seasons of major league experience under their belt and no more than six. Hamilton first became arbitration-eligible in 2010, but signed a one-year deal worth $3.25 million, the same season he won AL MVP and lead the Rangers to the World Series.
Last season, Hamilton hit .359 with 32 home runs and 100 RBI in 133 games.
Under arbitration rules, the player's offer at arbitration salary is determined by their overall performance in comparison with other players of similar stats and position. The player presents their offer on a salary for the upcoming season, while the team presents theirs.
An arbitrator decides one way or the other, either for the team or player, and the term is good for one season.
Under arbitration rules, there is no compromise, it's one or the other. Assuming Hamilton had a down season in 2011 like he did in 2009 when he only played 89 games and hit .263, Hamilton's 2012 arbitration could have paid him much less.
Hamilton's two-year contract voids out any more arbitration hearings and automatically makes him an unrestricted free agent in 2012, when he will be turning 32.
His new two-year deal is scheduled to pay him $7.25 million in 2011 and $13.75 million in 2012 along with a $3 million signing bonus.