The contract is the maximum amount the Knicks can give Smith via the early Bird rights, which allow a team to offer the average player salary with standard annual raises of 7.5 percent. The league's financial figures for 2013-14 will be released next week, but the average salary is projected at approximately $5.5 million.
According to a league source, Smith's deal contains a player option in the final year.
The Knicks also came to terms with restricted free agent Pablo Prigioni on Thursday, agreeing on a three-year deal, according to the guard's agent, George Bass. The third year is a team option. Prigioni's contract will start at about $1.5 million, the agent said, but could increase to $2 million with incentives.
Prigioni tweeted about his return to the Knicks:
I am very happy to remain part of this great team. Thank you for the trust and support of all. KNICKS!!!!!!!!!
— Pablo Prigioni (@PPrigioni9) July 5, 2013
Prigioni, 36, averaged 3.5 points and 3.0 assists for the Knicks this past season. He emerged as a vital piece for New York late in the regular season, as the Knicks reeled off 13 straight wins between mid-March and early April after inserting Prigioni into the starting lineup.
Prigioni also started 10 of the Knicks' 12 playoff games, averaging 4.5 points and 3.2 assists. The former Spanish League standout was reportedly mulling a return to Europe.
Regarding suitors for Smith, Rose said the shooting guard had other offers but wanted to stay in New York. Earl Smith Sr., J.R.'s father, said Wednesday that his son had drawn interest. A league source said the Milwaukee Bucks, Detroit Pistons and Dallas Mavericks were among those to show interest in Smith earlier in the week.
Smith, though, has a strong relationship with Knicks coach Mike Woodson, and the Freehold, N.J., product enjoys playing close to his family. Those likely factored into his decision to stay in New York.
The 27-year-old averaged 18.1 points and 5.3 rebounds per game last season, in which he won the league's Sixth Man of the Year award. He played an integral role in the Knicks' regular-season success but struggled mightily in the playoffs, making just 33 percent of his field goal attempts.
Signings can't become official until the leaguewide moratorium is lifted July 10.
Smith's deal is similar -- though for fewer total dollars -- to contracts offered to other shooting guards on the free-agent market.
J.J. Redick agreed to a four-year, $27 million contract with the Los Angeles Clippers, via a sign-and-trade on Tuesday. Oklahoma City Thunder sharpshooter Kevin Martin signed a four-year contract in the neighborhood of $30 million with the Minnesota Timberwolves, sources told ESPN.com's Marc Stein.
Smith averaged more points and rebounds per game than both players, but his reputation for inconsistent play and his subpar postseason may have caused teams with cap space to shy away from offering him a lucrative, long-term pact.
With Smith's and Prigioni's deals agreed upon, the Knicks can turn their attention to another of their free agents -- Chris Copeland.
New York extended a qualifying offer to Copeland, a restricted free agent, and will have the opportunity to match any offer he gets on the open market. However, it will be hard for them to match any significant offer to Copeland because they used $1.5 million of their mini-midlevel exception on Prigioni's deal. The Knicks have approximately $1.75 million of the $3.2 million exception left to use, and that may not be enough to retain Copeland.
A league source told ESPN.com that the Indiana Pacers have made an offer to Copeland. Another league source told ESPNNewYork.com's Jared Zwerling that the Los Angeles Lakers have made an offer to the 29-year-old and that the Cleveland Cavaliers have shown interest.
Ian Begley is a regular contributor to ESPNNewYork.com. ESPNNewYork.com's Jared Zwerling contributed to this report.