Chapter 160 Poison Pill Contract

Time came to July 1st, and the NBA free agency market officially opened.

Dwight Howard's destination was still the focus of everyone's attention, but this was obviously not something that could be decided overnight.

Like a palace drama, it would likely be full of twists and turns.

In fact, because many teams with cap space were waiting for Howard's decision, there weren't many signings after the free agency market opened this year.

The first player to reach a re-signing agreement was a bit of a surprise.

Yi Jianlian and the Mavericks reached a verbal agreement on a 2-year, $5 million contract, with a player option in the second year.

Yi Jianlian successfully stayed in the NBA with his outstanding performance in half a season, and signing a 1+1 contract also showed that he was very confident in himself.

"German Yi Jianlian" Dirk Nowitzki gave a thumbs-up to the signing as soon as it was announced.

This showed that Yi Jianlian's performance last season was recognized by his teammates.

In the following days, small signings were gradually made in the free agency market.

The Hornets re-signed Eric Gordon, the Nets re-signed Gerald Wallace, and the Timberwolves offered restricted free agent Nicolas Batum a 4-year, $45 million offer sheet.

Everything was proceeding in an orderly manner.

However, when the free agency market reached its 5th day, the Houston Rockets suddenly jumped out and attracted everyone's attention.

They offered the New York Knicks' Jeremy Lin a 4-year, $28.8 million contract.

This was a very special contract.

Back in 2003, the league rules were not yet fully standardized.

As a second-round pick, Gilbert Arenas received a 6-year, $65 million offer from the Washington Wizards after his 2-year rookie contract with the Golden State Warriors expired.

At that time, the Warriors were already over the salary cap, and they could only offer Arenas a renewal contract with a starting salary of $4.9 million at most.

The gap between these two contracts was too large, which led to the Warriors ultimately watching Arenas, who had become an All-Star caliber player, leave for Washington.

This caused the Warriors to suffer huge losses at the time, and they fell into a very long period of turmoil.

Since then, the league has introduced the famous "Arenas Rule."

The Arenas Rule stipulates that for restricted free agents who have played in the NBA for 1-2 years, the first-year salary in the offer sheet offered by other teams cannot exceed the mid-level exception of that year.

The rule also stipulates that the salary for the second year is restricted by the maximum increase of 8%.

The salary for the third year can be greatly increased. It can be the highest salary that the team can provide when exercising its option, and is not restricted by the average salary rule.

At the same time, the salary provided in the contract must be guaranteed and does not include any other form of bonus.

And if the increase in the third year exceeds the 8% standard, the league will set an additional restriction for the team: In order to determine the maximum salary level that the team can afford, they must not only confirm whether the first year's salary meets the standard, but they must confirm that the average salary for the entire contract period is lower than the maximum salary.

The Arenas Rule is very long, but the general idea is that the first two years can only be a mid-level contract, but the top salary can be offered directly in the third year.

But when making this offer, you must have enough salary cap space, and the average annual salary cannot be higher than this space.

For example, if a team has $8 million in space from the maximum salary, it must guarantee that the total amount of the 3-year contract does not exceed $24 million, 4 years does not exceed $32 million, and 5 years does not exceed $40 million.

If this space is $11 million, then the maximum contract can only be 5 years and $55 million.

The contract that the Rockets offered to Jeremy Lin was within the range of $32 million over 4 years.

The first year was $5 million, the second year was $5.4 million, and the average annual salary for the last two years was $9.3 million.

The Knicks matched it quickly.

General Manager Glen Grunwald publicly stated that the Knicks would match any offer for Jeremy Lin.

The meaning of this sentence was that "Linsanity" was an inseparable part of the Knicks.

The NBA is a business league. Back then, Yao Ming helped the Rockets' poorest owner increase his net worth tenfold, and the Chinese market made many teams flock to it.

After Jeremy Lin played the "Linsanity" season, the Knicks management said such things, obviously aiming at the huge Chinese market.

However, not long after the Knicks matched the contract, the Rockets offered another 3-year, $25.1 million contract.

This contract was very similar to the previous offer, but the difference was that this was the largest 3-year offer the Rockets could make.

Jeremy Lin's third-year contract would reach the maximum salary, which was $13.8 million!

What was the concept of $13.8 million at this time?

Also on the Knicks, Tyson Chandler, who had just won the Defensive Player of the Year last season, had a salary of $13.6 million in the new season!

Serge Ibaka, one of the Thunder's four young stars, who had just reached a renewal agreement with the team, had a salary of $12.25 million in the first year of the new contract!

Even Danny Granger, the Pacers' absolute core and All-Star player last season, had a contract salary of only $13.69 million next season!

Jeremy Lin's performance last season was crazy enough, but you would definitely have to hesitate before agreeing to renew his contract with a maximum salary.

Originally, the huge Chinese market behind Jeremy Lin could make the always wealthy Knicks not hesitate.

But the Knicks had already signed long-term contracts with Carmelo Anthony, Amar'e Stoudemire, and Chandler.

If they matched Jeremy Lin's offer again, then the team's salary cap space would explode directly in the 2014-2015 season.

Then it wouldn't be a question of how much luxury tax to pay.

In the end, the Knicks chose to give up matching and watched Jeremy Lin be poached by the Rockets for nothing.

The Rockets had previously traded Kyle Lowry, and Goran Dragić, who became a free agent, had just chosen to sign with the Suns. Getting Jeremy Lin was a big addition to them.

However, this was not the end. After getting Jeremy Lin, they offered the same contract to Omer Asik, the Bulls' backup center.

Asik averaged 3.1 points and 5.3 rebounds per game for the Bulls last season, and performed well in limited playing time as a backup center.

The Bulls also gave up matching.

Their salary cap space was even tighter than the Knicks, and it was impossible for them to match such a contract for a role player.

As a result, relying on the Arenas Rule, the Rockets got their starting point guard and center all at once.

Daryl Morey also became the focus of the league in an instant because of these two contracts.

"This is a poison pill contract."

After these two signings were completed, ESPN columnist Chad Ford published a commentary as soon as possible.

"The original intention of the Arenas Rule was to help the parent team keep players, but many people may not have noticed that in order to protect the interests of the players, there is an additional condition in the terms: after the bidding team is successful, the player will only occupy the salary space of the average annual salary of the contract.

What does this mean?

Taking Jeremy Lin as an example, he will only occupy about $8 million in salary space for the Rockets every year, but in the Knicks, he will occupy $13.8 million in salary space for the Knicks in the last year.

Such a contract would be difficult to trade.

So for the parent team, this is a cup of poisonous milk. Forcibly keeping the team will bear completely unbearable salary pressure in the third year of the contract."