Chapter 2: The Knicks

When the news became official in late June, the Knicks' front office was quite excited about its offseason plans and options. Jeremy Lin was very much in the middle of them and the email that arrived from the league office seemed to guarantee he would be in New York for years to come.

Yes, Lin's free agency would have to be dealt with. But the free agency period, starting July 1, seemed for the Knicks to be a case of merely adding to its roster, not subtracting from it.

Less than three weeks later, Lin was the new point guard for the Houston Rockets, after an unforeseen turn of events that has left hard feelings all around. Now the parties are moving on to see who gets the last laugh.

In the memo that arrived on on that last business day in the NBA fiscal year, June 29, the league and the National Basketball Players Association announced an agreement on a dispute that involved Lin and Steve Novak, two Knicks who were to become eligible for free agency. The agreement assured the Knicks would hold the Bird rights for each player -- a matter that had been unresolved because of some conflicting language in the new collective bargaining agreement -- and would be able to re-sign both free agents without losing the flexibility to add other players.

The Knicks would be able to keep their taxpayer's midlevel exception of $3 million. And according to sources, and they had a bevy of names they planned to chase using sign-and-trade options. Using some prudent long-term planning, the Knicks had assembled a cadre of players on non-guaranteed contracts for the 2012-13 that could be used in such deals.

Steve Nash -- like Lin, a point guard -- was at the top of their free agent wish list, but they knew that in any case they could retain Lin, and they were confident they would. The Knicks told the 23-year-old phenom that they wanted him back and saw him having a major role -- Knicks coach Mike Woodson had spoken of Lin openly as the incumbent starter, although the Nash pursuit clouded that. And the Knicks had reason to be confident, as they had the right to match any contract offered to Lin from another team, given his status as a restricted free agent.

The Knicks took the position than many teams do with restricted free agents, inviting such players to test the market and even get an offer sheet from another team. And while they knew this would benefit Lin, who as a so-called "Early Bird" free agent could get a bigger offer from another team than from the Knicks, they still signaled throughout that they would match any offer he received.

For these reasons, the Knicks actually never made Lin a formal contract offer, sources say.

A week into free agency, news arrived that Lin had agreed to a four-year offer sheet with the Houston Rockets that included $19.5 million guaranteed (and a fourth year with a team option, taking the total offer to $28.8 million). The Knicks felt this was a reasonable price.

While Lin would not be able to sign the offer sheet until July 11 or later, because of league rules, the Knicks were confident they would match the offer sheet, and this stance was widely reported. In interviews, Woodson said the Knicks would "absolutely" match the offer. Nash was already off the market, and the NBA world -- and the legions of Lin fans -- assumed that Lin's return to New York was a mere formality.

But the Rockets had a surprise up their sleeves. Perhaps spurred by Woodson's comments, they raised the guaranteed amount of the offer (while lopping off the unguaranteed fourth year), taking it from $19.5 million to $25.1 million. Still, an increase of $5.6 million (plus attendant luxury tax penalties) over three seasons wasn't expected by most observers to deter the Knicks.

While waiting for the offer sheet to arrive, and even avoiding delivery for a day or so, the Knicks had their own surprise in store -- they moved forward with free agent point guard Raymond Felton, a former Knick, and reached an agreement on Saturday, July 14. Rumors spread that the Knicks might not be bringing Lin back after all, and that new stance was confirmed over the weekend by ESPN's Stephen A. Smith, talking to sources close to the Knicks.

What happened?

Somewhere in the process, hard feelings developed on each side. As Chris Broussard reports, the Lin camp felt a lack of enthusiasm from the Knicks that seemed to them like disrespect. At the same time, the Knicks were stung by Lin's willingness to work out a $14.9 million salary in the third year of the offer sheet -- while a backloaded offer for Lin had been widely expected to arrive from some team, the sizable increase became a stumbling block. While from the Houston point of view it was good strategy, and while the Lin camp was going about the business of getting the best offer it could, the Knicks were displeased.

Lin would later tell Sports Illustrated that he had hoped to return to New York, but the new offer changed the Knicks' perspective. Despite his amazing popularity and the potential business benefits to the company -- which have been much debated -- the Knicks found the new offer too rich for their tastes, especially with Felton and free agent signee Jason Kidd ready to step into the point guard position.

"Only Jeremy and his agents know for sure what their motive was," one league executive said. "But it does appear like they overplayed their hand if he truly hoped to stay in New York. They got the strong impression that the Knicks would match anything. They didn't anticipate [New York] had a backup plan."

According to Knicks sources, the team believed that Lin and his representatives were trying to squeeze the team that gave him his big break. Despite the good vibes around Lin during the season, the Knicks questioned if he was truly being a team player, particularly in terms of the contract negotiations. From the Knicks' perspective, it appeared Lin might've been working against them and perhaps taking them for granted.

The Knicks' other major acquisitions had shown a strong desire to be in New York. Amare Stoudemire had said yes when LeBron James, Dwyane Wade and Chris Bosh had said no. Carmelo Anthony stonewalled the New Jersey Nets and other teams because he only wanted to be in New York, forcing his way there in a trade.

Only Jeremy and his agents know for sure what their motive was. But it does appear like they overplayed their hand if he truly hoped to stay in New York. They got the strong impression that the Knicks would match anything. They didn't anticipate [New York] had a backup plan.

-- League executive on Lin situation

Knicks owner James Dolan has been considered by many to be the key player on the Knicks' side of this saga, and that's a fair assessment -- he's a powerful, engaged owner. While the secretive Knicks will likely never explain all of their reasoning, we know that Dolan is especially loyal and favorable to players, like Anthony and Stoudemire, who demonstrate a desire to be with the Knicks.

And beyond the personal reasons, there were business and basketball reasons for the Knicks to be concerned. By signing Lin, the Knicks would have been looking at a luxury tax bill that would likely have set new NBA records. Even for a team accustomed to paying such taxes, this was too rich, the Knicks believed, for a point guard who had started just 25 games in his brief career.

From the New York point of view, was Lin worth an average of $8 million per season -- plus penalties -- when they could get Felton for less than half that?

Furthermore, the Knicks calculated that Linsanity might not be worth as much as assumed. While the value of the Lin phenonemon has been much discussed, the Knicks saw it differently from most observers. Their season-ticket sales were strong and their sponsorships were stronger. Any money from the sale of Lin jerseys or Knicks' merchandise around the world goes into a leaguewide pool, with the Knicks getting the same portion as any other team, according to revenue-sharing rules. Likewise, their share of the league's TV contracts would not change whether Lin was on the team or not, no matter how many people in New York or Asia were watching.

On the court, the Knicks believed they were already in good shape, with Anthony and Tyson Chandler under long-term contract along with Stoudemire. Two additions, Kidd and Marcus Camby, would provide them depth and experience, as would two re-signed players, Novak and J.R. Smith. Even without Lin, the Knicks believed they would be better than they were last season.

Dolan has been known to disregard hard data at times and reward players with whom he has good relationships -- in some such cases, his decisions can seem emotional. In this case, sources said, it was the lack of such emotion that contributed to the decision to let Lin go. While Knicks fans had fallen in love with Lin, Dolan and his front office, especially after the way the process had unfolded, had no such attachment in the end.

"There were a dozen reasons the Knicks didn't match -- it was part business, part emotion and part long-term planning," a source with knowledge of the Knicks thinking said. "I understand that people want the decision to be simplified but it isn't simple."

So they passed. And Lin became an ex-Knick.