In a conference call, Yankees president Randy Levine said the club offered him a $5 million contract for 2008 with incentive clauses that could have increased the value to $8 million. The option for 2009 would have kicked in at $9 million if they won the American League pennant next season.
"It is now time for the New York Yankees to move forward," Levine said. "We will be doing that very, very quickly."
Torre arrived at Legends Field on Thursday for face-to-face talks with team officials. He traveled from New York with general manager Brian Cashman and chief operating officer Lonn Trost. It appeared the two sides were close to agreement on Thursday afternoon, according to a source.
Yankees owner George Steinbrenner, sons Hal and Hank, and Levine also were at the team's spring training complex. Torre's arrival first was reported by the New York Post.
Torre made $7.5 million this year, the final season of a $19.2 million, three-year contract. His new deal would have included substantial bonuses for each round of the playoffs the team reached.
"We felt we needed to go to a performance-based mode," Levine said. "We thought it was very fair. It clearly was at the top of the market, but we respect Joe's decision."
Bench coach Don Mattingly is the leading contender to replace Torre. Yankees broadcaster Joe Girardi, the NL Manager of the Year with Florida in 2006, is another top contender.
Cashman said there will be a full search for a replacement.
Just 10 days ago, the Yankees were bounced out of the first round of the playoffs for the third straight year.