Sources: Cliff Lee to return to Phillies

The numbers had been crunched and all the scenarios exhausted Monday night when Cliff Lee finally made his decision.

He picked up the phone, thanked Rangers general manager Jon Daniels for his time in Texas and revealed he was signing with the Philadelphia Phillies. Agent Darek Braunecker simultaneously delivered the news to New York Yankees general manager Brian Cashman. And just like that, Lee was back where he felt he belonged.

The most intriguing negotiation of the hot stove season came to a stunning conclusion late Monday when Lee, 32, spurned bigger offers from the Yankees and Rangers and agreed to a five-year, guaranteed $120 million contract with the Phillies, sources said. The deal includes an "easily reachable" vesting option for a sixth year, a source said, and most likely will ensure that Lee finishes his career in a Philadelphia uniform.

Lee is slated to make $11 million next season with his salary jumping to $21.5 million in 2012 and an additional bump to $25 million in each of the next three seasons, according to information obtained by The Associated Press.

Lee's deal includes a $27.5 million option that vests if he pitches 200 innings in 2015 or a total of 400 innings over the 2014-15 seasons. If the option doesn't vest, the deal includes a $12.5 million buyout.

Lee joins Carl Crawford of the Boston Red Sox and Jayson Werth of the Washington Nationals as the third free agent to sign a contract of more than $100 million this offseason. In addition, Colorado shortstop Troy Tulowitzki recently signed an extension that tacked $134 million onto his deal with the Rockies.

Lee's agreement carries the third-biggest guarantee ever for a pitcher, behind CC Sabathia's $161 million contract with the Yankees and Barry Zito's $126 million deal with the San Francisco Giants. But in the end, his negotiations were as much about heartstrings as purse strings.

In July 2009, Phillies general manager Ruben Amaro Jr. acquired Lee from the Cleveland Indians to be a stretch-drive savior in a pennant race. Lee helped pitch the Phillies into the playoffs and posted a 2-0 record with a 2.81 ERA in Philadelphia's World Series loss to the Yankees.

Beyond that, Lee came to embrace the clubhouse culture in Philadelphia, and he and his wife, Kristen, quickly grew to love the city. So when the Phillies acquired pitcher Roy Halladay in a trade with Toronto last December and sent Lee to Seattle for three prospects in an ancillary move, it came as a crushing disappointment to the family. One Phillies front-office member said the Lees were "heartbroken" by the news.

Lee split the 2010 season between Seattle and Texas, dominated the postseason before suffering two losses to San Francisco in the World Series, and was at the top of every publication's free-agent rankings in November. The Yankees and Rangers quickly made their interest known, sending delegations to Lee's home in Little Rock, Ark., and gradually increasing their offers well beyond their initial comfort zones.

Sabathia, Lee's former Cleveland teammate, lobbied him to come to New York, and Lee's teammates in Texas wore out his cell phone imploring him to come back to Arlington.

The Phillies, meanwhile, lurked on the periphery, intent on becoming a player as Lee neared his decision. Baseball sources said Amaro and his front office jumped into the process with increased fervor after last week's winter meetings in Lake Buena Vista, Fla. "It happened in a hurry," said a source familiar with the negotiations.

There were some significant obstacles to overcome. The Phillies' club policy typically precludes contracts of longer than three years for pitchers, and they held the line with Halladay to three years and $60 million, plus a $20 million vesting option for 2014. But it was clear that wouldn't get it done with Lee, and Amaro broke with the policy of his predecessor, Pat Gillick, and kept sweetening the Phillies' offer to Lee. Eventually, the Phillies got it close enough to the New York and Texas packages that Lee couldn't say no.

The Yankees' final offer to Lee came in at $132 million over six years, a source said, with a $16 million player option that could have brought it to $148 million. But as that whopping figure stood out there for days without a positive response from Lee, Yankees officials grew increasingly pessimistic over their chances of landing the pitcher.

Two sources within the Yankees organization told ESPNNewYork.com's Wallace Matthews on Tuesday morning that it was clear to them by Sunday that if Lee hadn't already accepted their offer, he probably never would.

Lee's decision now leaves Cashman with some serious salvage work to do. Sabathia is coming off knee surgery, A.J. Burnett sported a 5.26 ERA this past season, and Phil Hughes and Ivan Nova will begin the 2011 season at age 24. The Yankees haven't expressed much interest in trading for Kansas City's Zack Greinke, and they probably would be challenged making a deal within the division for Tampa Bay's Matt Garza. In addition, what remains of the free-agent market is a monumental dropoff from Lee.

As for the Rangers, they made a six-year offer for an undetermined figure with a seventh-year option, only to come up short in their bid to land Lee. Now they'll have to either explore a deal for Garza or take a look at Carl Pavano, Brandon Webb, Jeff Francis and some other free-agent pitchers who are still available. The Rangers apparently don't match up with Kansas City in a potential trade for Greinke.

The Rangers' highest offer was six years at $138 million, with some of that money deferred (although it's unclear how much), and a vesting option for a seventh year at $23 million, a source told ESPNDallas.com's Richard Durrett.

"We're disappointed but now we can move on and look at other ways to improve the team," Daniels told ESPNDallas.com. "We still have every expectation to win this year. It's hard to find fault with Cliff's decision when he chooses a spot where he and his family are comfortable, and he has a chance to win. He was a part of the most successful team in club history, to this point, and we thank him for his role here."

The Rangers will see part of Philadelphia's imposing staff in 2011 as they face the Phillies in Philadelphia May 20-22.

"Bring them on," manager Ron Washington said. "They have a great pitching staff, that's for sure. But it only matters how you play that day. We'll have to be ready."

Sources said Amaro is trying to trade pitcher Joe Blanton to free up some money, but the Lee acquisition signifies another major commitment for a franchise that hasn't been hesitant to spend money. The Phillies ranked fourth among the 30 MLB teams with a $142 million Opening Day payroll, and they continue to throw bouquets to a fan base that's produced 123 straight sellouts at Citizens Bank Park.

A Red Sox source told ESPNBoston.com's Gordon Edes that Boston and Phladelphia talked Monday about a Blanton trade but couldn't come to agreement on a deal. At this point there is no reason to expect a deal, the source said.

Beyond the finances, the Phillies have a starting rotation that will be the envy of baseball in 2011. Most teams are fortunate to have one starter who can be classified as a bona fide ace. With Halladay, Lee, Roy Oswalt and Cole Hamels in the mix, Philadelphia manager Charlie Manuel now has four. If the Phillies thought expectations for the team were high in 2010, they haven't seen anything yet.

Jerry Crasnick is a senior baseball writer for ESPN.com. Richard Durrett of ESPNDallas.com, Wallace Matthews of ESPNNewYork.com and Gordon Edes of ESPNBoston.com contributed to this report.