Bailey is recovering from shoulder surgery, and as a result, the contract starts on minor-league deal.
The major-league side of the deal is worth $2.5 million and includes a 2015 option and buyout as well as incentives, according to a source. Should Bailey reach the majors, he'll make a prorated base salary of $1.975 million, plus the incentives, the source said.
Bailey spent the past two seasons with the Boston Red Sox, but injuries limited him to just 49 appearances.
Bailey has 89 career saves, but just 14 of them have come with the Red Sox. The rest came over three seasons with the Oakland Athletics, with whom he averaged 25 saves a season.
Boston acquired the 29-year-old right-hander in a trade prior to the 2012 season.