The deal includes the most amount of money the team can pay Smith because of the early bird rights, which only allows the Knicks to offer him the average player’s salary, with standard annual increments of 7.5 percent.
Next week, the NBA financial figures for 2013-14 will available to the public and the average salary is projected at around $5.5 million.
Last season, Smith averaged 18.1 points and 5.3 rebounds per game, which helped him earn the league’s Sixth Man of the Year award.
The Knicks’ player had a major role in the team’s regular-season success, but struggled in the playoff, after he received a one game suspension. The suspension led him to a downward spiral where he made only 33 percent of his field goals.