Sources: Derek Jeter, Yanks agree

NEW YORK -- Derek Jeter and the New York Yankees came to terms on his new contract after a final face-to-face meeting, which occurred in the New York area on Saturday, according to sources with knowledge of the negotiations.

Jeter, agent Casey Close, Yankees owner Hal Steinbrenner, president Randy Levine and general manager Brian Cashman all were present.

The meeting took place to complete the contract and heal wounds that occurred during the testy negotiations.

According to an official with knowledge of the contract, the guaranteed portion is $51 million over three years. There's an $8 million player option for a fourth year. The guaranteed portion includes a $3 million buyout if Jeter were to decline the option for 2014. If he exercises it, he would earn a total of $56 million over the four seasons.

The option year could increase in value by as much as an additional $9 million based on incentives, which are defined as points. Jeter would get $1 million for each point he earns. He can earn points by finishing in the top six in the MVP voting or winning a Gold Glove, a Silver Slugger, a regular season MVP, an ALCS MVP or a World Series MVP. Some of the awards are worth multiple points and thus multiple millions. If Jeter were to earn at least nine points, his incentives would be capped at $9 million, bringing the maximum value of the contract to $65 million over four years.

Those terms, obtained through conversations with several sources who requested anonymity, represent a pay cut of approximately $2 million to $3 million a season -- depending on the option year and the incentive clauses -- from the 10 year, $189 million contract Jeter finished. The Yankees did, however, increase their initial offer of $45 million over three years.

Finishing the deal will allow Cashman to know how much money he has in his budget heading into the winter meetings, which begin Monday in Orlando, Fla. The Yankees are expected to make a strong bid for free-agent pitcher Cliff Lee and possibly outfielder Carl Crawford.

Jeter was asking for a four- to six-year deal in the area of $22 million to $24 million a year, and he and Close seemed surprised by what they considered a lowball offer from the Yankees. At one point, Close described the Yankees' negotiating strategy as "baffling" and implied he felt his client should be treated as if he were Babe Ruth.

Earlier this week, ESPNNewYork.com asked a source involved in the negotiations what it would take to get the deal done. "Jeter and Close need to drink the reality potion" was the reply.

And coming off the worst offensive season of his career since he became an every-day player -- .270 batting average, 10 homers, 67 RBIs and an on-base percentage of .340 -- and without any concrete offers to match even the Yankees' initial offer, Jeter and Close gradually altered their demands.

The two sides met earlier this week in Tampa, Fla., after Close called Hal Steinbrenner to set up the get-together. Jeter was present, as was Steinbrenner, Cashman and Levine.

That started the ball rolling. As of Friday night, sources briefed on the negotiations were using terms like "significant" and "terrific" to characterize the tone and progress of the meetings.

And although Jeter had no real leverage, the Yankees also softened their stance. After publicly talking about how they would treat Jeter like any other player in a contract negotiation and judge his value solely on performance -- and pointedly expressing reservations about his age (36) and diminishing range in the field -- the decision to raise their offer even by a couple of million dollars a year is an indication they recognize his iconic status in club history.

The proposed new contract would place his average annual salary at about $17 million a year, keeping him as the highest-paid middle infielder in baseball, ahead of the Colorado Rockies' Troy Tulowitzki, who this week signed a 10-year deal worth $157.75 million, an average of nearly $15.8 million a season.

In the end, what happened between Jeter and the Yankees is what many expected to happen from the moment his previous contract expired at the end of the 2010 World Series.

"I think the deal was always going to get done," said a party involved in the negotiations. "It was inevitable that the Yankees and Derek Jeter would stay together. It just took a little time to get to where we all had to be."

That, and a round of reality potion for everyone in the room.

Wallace Matthews and Andrew Marchand cover the Yankees for ESPNNewYork.com.