Gallardo could gain the right to void the option and become a 29-year-old free agent after 2014 if he accumulates six "points" over the next five years in a system that awards five points for winning a Cy Young Award, three points for finishing second in the balloting and one point for finishing third.
He has a full no-trade clause for the first three seasons. After 2012, Gallardo can submit a list of 10 teams for a limited no-trade provision and would have to approve a deal to any of those teams.
"It's a great feeling knowing I'm going to be here for the next five years," Gallardo said. "Growing up, me and my parents never dreamed of this amount. It hasn't really settled in yet. I try not to show too much emotion, but it's great."
According to The Associated Press, Gallardo received a $1.25 million signing bonus; $500,000 payable when the contract is approved by Major League Baseball, $500,000 on July 15 and $250,000 on Nov. 15. His 2010 salary was bumped up to $500,000 and he will earn $3.25 million in '11, $5.5 million in '12, $7.75 million in '13 and $11.25 million in '14. The '15 option calls for a $13 million salary with a $600,000 buyout.
If Gallardo is traded in years four or five of the contract, the price of the option increases to $14 million.
Gallardo's original 2010 contract called for a $450,000 salary. He would have been salary arbitration-eligible for the first time after this season, putting him on track to reach free agency during the 2013-14 offseason.
Now, Brewers general manager Doug Melvin has succeeded in delaying his young ace's entry into the market. Melvin struck a similar deal nearly two years ago with left fielder Ryan Braun, whose extension runs through 2015 and covers two years of free agency. Braun was also 24 when he signed.
Teams take on risk in deals for such young players, but in return get cost certainty and often the chance to delay free-agent departures. Players may leave some money on the table versus going year-to-year through arbitration, but they get a lifetime of financial security in return.
"Yovani felt like if we could get to a certain number when this whole thing started, then we would have to seriously think about it," said Gallardo's agent, former Major League pitcher Bobby Witt. "He was looking at the security for his family and being able just to go out there and pitch."
The Brewers began discussions with Witt more than a year ago. At first, they discussed a three- or four-year deal, but those talks fizzled once the 2009 season began and were revisited this spring after the club renewed Gallardo's '10 contract.
The option was the final sticking point.
"As a player enters free agency, obviously, that's his peak earning years, and there was some disagreement about the club having that option," said assistant general manager Gord Ash, the point man on negotiations with Witt and Octagon associate Scott Pucino. "We developed a system. ... It's not something I've seen done often, if at all, and I think it was a good solution to this dilemma we had on how to handle that sixth year."
The Mexican-born, Texas-raised Gallardo, Milwaukee's second-round Draft pick in 2004, lost his Opening Day start against the Rockies but is showing signs of growing into a four-pitch Major League ace.
He returned in 2009 from an '08 season lost almost entirely to knee injuries and went 13-12 with a 3.73 ERA. He became the fourth different Brewers pitcher to top 200 strikeouts in a season -- Teddy Higuera, his Mexican countryman, is the only Brewer to do so twice -- and ranked third among National League starters with a .219 batting average against.
The injury that caused Gallardo to miss the bulk of 2008, a torn ACL in his right knee, was the result of an early-season accident at Wrigley Field. His arm has remained mostly healthy, and the Brewers were convinced by a series of motion analyses in recent years that his delivery was clean. The latest analysis was conducted in Spring Training under the watch of new pitching coach Rick Peterson, considered an expert in biomechanics.
"That gives us a little more comfort level, not that that's the be-all and end-all," Ash said. "But the red flags are not there in his delivery."
In terms of performance, there may be significantly less risk. The Brewers are almost certain they have something special.
"As an organization, we view him as a top-of-the-rotation guy," Brewers manager Ken Macha said. "He's got great stuff. We all knew that. But the poise that he shows -- he never gets flustered, he's always in control of his emotions when he's out there. I think the rest of his teammates feel that when he's out there, this is going to be a 'W'"
"I've had the great privilege of having a lot of young pitchers break into the big leagues and having very, very good to great careers," Peterson said. "Yovani is in that class, without question."
The Brewers now have their top two starters signed through 2012 and under control through '13. Left-hander Randy Wolf signed a three-year contract during the Winter Meetings in December that includes a club option for '13.