How the Knicks Should Handle a 'Poison Pill' Offer for Free-Agent Jeremy Lin

For the New York Knicks, Jeremy Lin turned out to be the story of the 2011-12 season. But even months removed from "Linsanity," the popular point guard remains in the headlines, and his contract situation is quickly becoming the story of the offseason.

After being claimed off waivers around the halfway point of the shortened season, New York signed Lin to a one-year deal. Heading into the offseason, Lin is now a restricted free agent, and thanks to the "Gilbert Arenas provision" of the new CBA, he can be offered no more than $5 million in 2012-13 and 2013-14.

Following an arbitration hearing last month, New York also has Lin's Early Bird rights, which allow him to be re-signed without the Knicks having to use their mid-level exception.

On the surface, it looks pretty easy for the Knicks to re-sign Lin, as they have the ability to match any offer for the point guard. However, some new developments in the contract situation could force New York to let him go.

In what we all know now as a "poison pill" deal, a team with cap space like the Toronto Raptors could offer Lin a contract worth a total of $40 million over four years. For the Knicks, matching that offer would mean paying Lin the $5 million in years one and two with substantial salary increases in years three and four.

His contract would look roughly like this:

2012-13: $5 million

2013-14: $5 million

2014-15: $15 million

2015-16: $15 million

Such a contract could really cause some problems for the Knicks down the line, as they would be paying Jeremy Lin $15 million in 2014-15, a season in which Amar'e Stoudemire, Carmelo Anthony and Tyson Chandler will be in the books for a substantial chunk of change. 

To further put the situation in context, let's look at all of the team's salaries in 2014-15, including the $15 million for Lin:

Carmelo Anthony: $23.5 million (player option)

Amar'e Stoudemire: $23.4 million

Jeremy Lin: $15 million

Tyson Chandler: $14.6 million

Iman Shumpert: $2.8 million (team option)

Total: $79.3 million

Assuming that all options are picked up, the Knicks would be way over the salary cap of $58 million. The salary cap will assuredly increase by then, but judging by past trends, the Knicks would still easily surpass the new cap ceiling. 

The Knicks wouldn't merely be over the cap, but over the luxury tax "apron" as well, which would stop the Knicks from being able to use the $5 million mid-level exception for that season.

Basically, the Knicks would need to acquire seven more players using only the $3 million "taxpayer" exception and a bunch of veteran's minimum contracts. Even if Lin turns out to be all that New York hoped for, that is a situation no team wants to be in.

However, there are ways that the Knicks could build a more talented roster, and it would revolve mainly around the next two offseasons.

Reports from the New York Post say that J.R. Smith may be looking to rejoin the Knicks long-term by signing for $2.8 million this offseason and signing a longer-term deal the next.

Next offseason, the Knicks will have Smith's Early Bird rights, so they would be able to add him to the roster through the 2014-15 season to a contract worth around $5 million per year without having to worry about the salary cap or losing the mid-level exception. So, if the Knicks sign Smith long-term this season or next, they will have him on the roster for 2014-15 and will still be able to use the taxpayer exception.

Along with Lin, you may have seen that the Knicks also have Early Bird rights this year for sharpshooter Steve Novak, meaning he can be signed the same way that Jeremy Lin can be. For a one-dimensional player like Novak, New York will likely be able to avoid a "poison pill" offer and instead pay him a salary of $3 million per year over the course of four years.

Again, if the Knicks sign Novak through the 2014-15 season now, they will not have to use the taxpayer exception on him when the time comes around.

With Smith and Novak signed through 2014-15, the Knicks' salaries would something look like this:

Carmelo Anthony: $23.5 million (player option)

Amar'e Stoudemire: $23.4 million

Jeremy Lin: $15 million

Tyson Chandler: $14.6 million

J.R. Smith: $5 million

Steve Novak: $3 million

Iman Shumpert: $2.8 million (team option)

Total: $87.3 million

In this situation, the Knicks would already have two of the most important parts of their supporting cast on the team and would be much more comfortable using the $3 million exception and veteran's minimum contracts to fill out the roster.

Being so far over the cap would not be ideal, but the Knicks will still be able to keep their most important pieces if they play it smart.

There is one major problem, though.

By 2014-15, teams this far over the luxury tax would be paying unbelievable sums back to the NBA as a penalty (further explanation on Larry Coon's Salary Cap FAQ).

For the Knicks to truly handle a "poison pill" offer, they would require a lot of spending from owner James Dolan, and they would have to hope that Lin remains as marketable as he is now to help pay for the incredible taxation. 

If Lin turns out to be no more than a serviceable starter, New York will long regret matching a backloaded offer like this. But, if the Knicks really believe in Lin, they can find a way to handle a "poison pill" offer by the time the 2014-15 season comes around.

Player salary information from HoopsHype.

NBA salary cap information from Larry Coon's Salary Cap FAQ.