ESPN's Adrian Wojnarowski first reported the deal July 1, noting Holiday's agreement with the Pelicans will pay him $126 million.
A fair amount of intrigue followed Holiday in free agency this offseason.
Player salaries are continuing to climb, with the league announcing Saturday the cap for next season is set at $99.093 million. Many wondered what kind of contract Holiday could command on the open market.
There's no question the 27-year-old has performed well when he's on the court, and his return last November coincided with an immediate turnaround for the Pelicans, who started 2-10. They were 32-35 with Holiday in the lineup but just 2-13 without him.
According to NBA.com, New Orleans had a 0.9 net rating per 100 possessions with Holiday on the court compared to a minus-4.8 net rating when he was on the bench/unavailable. He averaged 15.4 points and 7.3 assists per game and shot 35.6 percent from three-point range.
The trouble for the Pelicans—and any other team that considered signing Holiday—was how much to weigh his past injury problems against his value.
His absence at the start of the 2016-17 season wasn't injury-related, though. He spent time with his wife, former United States women's national soccer team star Lauren Holiday, who had brain surgery to remove a tumor. The procedure came after Lauren gave birth to the couple's daughter.
While Holiday is a better than average NBA point guard, it's doubtful he'll ever crack the top 10 at his position.
Still, the Pelicans were seemingly in a position where they had to re-sign Holiday.
In order to become a serious playoff contender—which could be particularly important with DeMarcus Cousins entering the final year of his contract—New Orleans needed to have a proven point guard, and the trade for Cousins severely hindered the team's financial flexibility.
Since the Pelicans could go over the cap to re-sign Holiday, their options were either to bring him back for next season and beyond or sign a fringe starter/bench player such as Shaun Livingston, Brandon Jennings or Patty Mills.
Especially based on the early returns of their games together, New Orleans couldn't expect Cousins and Anthony Davis to carry the team by themselves. Holiday's presence doesn't guarantee the Cousins-Davis partnership will lead the Pelicans to the postseason, but it's far better than the alternative.