At some point after the first wave of “Linsanity” swept over New York, jubilant Knicks fans looked at each other and asked the same question aloud: “We picked up this guy off waivers and he is set to hit free agency in July, so will we be able to keep him?”

Initially, it was assumed that the Knicks would have to use their entire mid-level exception to retain Lin via free agency. However, the Players Association took legal action in an attempt to convince an arbitrator that players picked up off waivers would be able to maintain their so called “Bird Rights.” Surprisingly, the arbitrator ruled in favor of the NBPA, and as result, it was determined that when Lin became a restricted free agent, New York would be able to re-sign him without having to dip into their MLE to do it. At that point, it seems almost certain that New York would let Lin test the free agent market, secure an offer and then match said offer sheet.

As I detailed earlier this week, in addition the fact that Lin is a promising young point guard (a position of need in NY) who has shown flashes of brilliance when he set the league on fire in early February, the financial incentives to bring back Lin outweigh the on-court basketball reasons. “Linsanity” was a veritable goldmine for the entire Knicks organization. From ticket sales, to TV ratings on the MSG network, to jersey sales – Lin was a cash cow. (For full details, click here).

Nonetheless, there was still the issue of which team would present Lin with an offer sheet and what the financial commitment of the new deal would entail. When it was reported Lin was flying to Houston to meet with GM Daryl Morey, the speculation was that the Rockets would include a back-loaded deal that included a so-called “poison pill,” which would have significant tax ramifications in the third and fourth years of the deal. The objective would be to possibly prevent the Knicks from matching. When point guard Goran Dragic purportedly agreed to a deal with Phoenix (no contract offer can be signed until July 11th) and Houston traded away Kyle Lowry earlier in the day, most in New York were expecting Morey to make Lin a monster offer. The most the Rockets could have offered was around $40 million over four years, with the third and fourth years in the neighborhood of $10 million each.

However, at around 8 p.m. EST on Thursday evening, Jonathan Feigen of the Houston Chronicle tweeted that the Lin had agreed to sign an offer sheet with only the first three years guaranteed, and a team option on the fourth and final season. The annual payouts will be $5.0 million the first year, $5.2 million the second year, and $9.3 million both the third and fourth years, with only the third season guaranteed. All told, only $19.5 million would be guaranteed. The total potential value of the contract would be $28.8 million, if the team elected to exercise the team option for the 2015-2016 season.

This had to be music to the ears of Knicks GM Glen Grunwald and owner James Dolan. Again, it was widely assumed, with good reason, that the Knicks would unhesitatingly match any offer Lin received. Having the flexibility on that fourth season is a welcomed relief. Due to the small sample size, Lin is certainly not a proven commodity. The opportunity to cut Lin loose in 2015 reduces the risk significantly. In addition, it works well with the Knicks’ current payroll going forward. Yes, Dolan will have to pay a massive tax during the 2015-16 campaign, but the contracts of the Knicks “Big Three” of Carmelo Anthony, Tyson Chandler and Amar’e Stoudemire expire that season. As a result, if the Knicks chose not to exercise that option on Lin, they could completely gut their roster and could be looking at creating close to $70 million in cap space.

All told, we learned two things today: First, it remains exceedingly likely that the New York Knicks will match the offer sheet that Lin signs on July 11th. However, the contract that that Lin and the Knicks will eventually be locked into is far more favorable, manageable and team-friendly than many expected it to be.