Sources: New trade offer in works

Updated: July 14, 2012, 2:33 PM ET

The Houston Rockets have reconstructed their trade proposal to the Orlando Magic for superstar center Dwight Howard, vowing to take back even more long-term salary from the Magic in hopes of convincing Orlando to consent to trade Howard directly to Houston, according to sources briefed on the trade talks.

Sources told ESPN.com the Rockets, after going ahead Friday with their plans to release starting power forward Luis Scola via the NBA's amnesty clause, are now able to absorb the contracts of Glen Davis, Jason Richardson and Chris Duhon -- in addition to offering Orlando various combinations of future first-round draft picks and players drafted in the first round by Houston last month -- to give the Magic an opportunity to wipe their payroll virtually clean for their post-Howard rebuilding effort.

General manager Daryl Morey is trying to construct a trade that will allow the Rockets to take back, in addition to Howard, multiple players from a group that includes Davis, Richardson, Duhon and Hedo Turkoglu. With Scola's three remaining seasons valued at roughly $21 million off the books, Houston will have increased flexibility to help the Magic shed salary.

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Friday thus loomed as a pivotal day in the Rockets' all-out quest to trade for Howard. Sources say the Rockets have notified the league office they were indeed releasing Scola, as expected, while also launching the process of signing New York Knicks restricted free agent Jeremy Lin to his long-awaited offer sheet.

Lin signed a three-year offer sheet Friday at the Rockets' summer-league base in Las Vegas, a source close to the talks told ESPNNewYork.com's Ian Begley. The deal is worth a little more than $25 million -- $5 million in the first year, $5.225 million in the second year and $14.8 million in the third year.

The Knicks have been adamant that they will match Houston's offer to Lin, but they can take three days to do so.

The Rockets also have committed a three-year offer sheet worth just more than $25 million to Chicago Bulls restricted free agent Omer Asik. It's believed the Rockets will make Asik's offer sheet official after the Knicks match on Lin, but Asik's fate is less certain, with the Bulls said to be wavering on whether to bring the bruising big man back.

The Rockets promised offer sheets to Asik and Lin early in free agency -- and are thus honor-bound to go through with them to ensure they'll suffer no future repercussions from agents or players in free agency -- but Houston wouldn't lose out completely if both offer sheets are matched since the Rockets, in that scenario, would have more cap space to try to get the Orlando trade done, which is clearly their No. 1 priority.

Houston officials, though, have remained steadfast in their belief that, no matter what happens with Asik, no team in the running for Howard can offer a bigger menu of trade options to Orlando. Sources stressed that the Rockets are not prepared to trade all of the following assets just for Howard, but they're inviting the Magic to shed a significant amount of long-term salary while also likely shipping Kevin Martin, Patrick Patterson, Marcus Morris and Chandler Parsons to the Magic from their current roster to make the salary-cap math work.

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The Rockets also have the draft rights to three players selected in last month's first round -- Jeremy Lamb, Royce White and Terrence Jones -- and, according to sources, are prepared to combine an asset or two from that group with future first-round picks they have stashed.

Houston, sources say, has also aggressively dangled a potential lottery pick acquired this week from Toronto in the Kyle Lowry deal. Future picks are known to hold great appeal to new Magic general manager Rob Hennigan and no team in the recent running for Howard -- Brooklyn and the Los Angeles Lakers are the other two top suitors -- has a first-rounder of that caliber to send to Orlando.

The Rockets, in addition, could be forced to waive a handful of players with nonguaranteed contracts (Shaun Livingston, Courtney Fortson, Josh Harrellson, Jerome Jordan, Jon Leuer, Diamon Simpson and Greg Smith) to clear sufficient cap space.

The Rockets, meanwhile, continue to ignore the long-standing rumblings that Howard has no interest in committing to Houston long-term and would threaten instead to just play out next season and head to free agency in July 2013 if Morey does manage to complete a trade for him.

If the Rockets acquired Howard and, as the season progressed, sensed that their chances of re-signing him in July had not improved, they would have the ability to move Howard on or before the NBA's annual trading deadline in February. But the Rockets have left little doubt that they are optimistic that, given time, they can convince Howard to stay long-term if they can just get the chance.

The Los Angeles Lakers remain interested in a Howard deal, as well, but the Lakers don't have the available future draft picks or the financial flexibility to take on Orlando's unwanted contracts, as the Rockets do, meaning that L.A. would almost certainly need an additional team or two to join the trade to get it pushed through.

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The Rockets have been discussing a multitude of trade scenarios with the Magic this month, offering to serve as the team that would acquire Howard in a direct trade between the clubs, or as a third team that would participate in a trade that lands Howard with the Lakers and brings All-Star center Andrew Bynum to Houston.

Now, though, Houston appears to be lasered in only on getting Howard, which would potentially fill the Rockets' void in the middle given the early injury-forced retirement of Yao Ming in 2011. If Howard could be convinced to stay in Houston after such a swap, it would also more than atone for the collapsed three-way deal with the New Orleans Hornets and Lakers in December that would have landed Pau Gasol in Houston if NBA commissioner David Stern, acting as the lead decision-maker for the league-owned Hornets, hadn't canceled the trade.

It has been an open secret around the league for months that the Rockets are willing to trade for a player of Howard's or Bynum's caliber with no assurance that either one will sign an extension before becoming a free agent in 2013.

Sources say that Hennigan, meanwhile, would be more comfortable with taking back a package of youngsters, recent draftees and future first-round draft picks -- while also shedding the long-term salary -- than taking on Bynum as Howard's replacement. Although Bynum is the best individual player Orlando has been offered this month, he's also entering the final year of his contract, like Howard, which means that the Magic would be in a similar position as they are now with Howard if they traded for Bynum and Bynum refused to sign an extension.

ESPN The Magazine's Ric Bucher reported Wednesday that the Atlanta Hawks continue to pursue Howard via trade, as well, but one source described Atlanta as "not the best option" for the Magic.