Ken Berger

Recovering from an initial blow that saw Tracy McGrady heading to Sacramento overnight, the Knicks successfully expanded it into a three-team deal that sends the former All-Star to New York -- and clears Jared Jeffries' cap-clogging contract, a key person involved in the negotiations told CBSSports.com.

The Knicks will send Jeffries, Jordan Hill, and draft-pick considerations to Houston, which gets Kevin Martin and Hilton Armstrong from Sacramento and sends McGrady and Sergio Rodriguez to the Knicks. The Kings get Carl Landry and Joey Dorsey from Houston and Larry Hughes from New York.

The three-team blockbuster evolved from talks among the Rockets, Knicks and Bulls involving McGrady's $23 million contract. The Bulls, unsuccessful in their attempt to recruit a third team to meet Houston's demands, pulled out of the discussions Wednesday and found other avenues to clear 2010 cap space -- sending John Salmons to the Bucks and Tyrus Thomas to the Bobcats. The Knicks and Rockets hammered away over the issue of draft-pick protection for hours, until Sacremento emerged early Thursday as a facilitator by agreeing to send Martin -- long coveted by the Rockets -- to Houston.

The deal involving Houston and Sacramento could have stood alone, but was designed as an avenue to steer McGrady to New York in a three-team deal if all demands could be met. The sticking point was the level of protection New York required on their 2011 and 2012 first-round picks. The Knicks were discussing the right to swap 2011 first-rounders with Houston, which would get the Knicks' 2012 No. 1 pick depending on where it falls in the draft.

In the end, the Knicks paid a dear price. The Rockets will have the right to swap No. 1 picks in 2011 with the Knicks unless New York's pick is first overall. The 2012 firs-round pick going to Houston is top-5 protected.

It cost the Knicks a premium price to clear Jeffries' $6.9 million contract off the 2010-11 books. But doing so all but accomplished the goal team president Donnie Walsh set out to achieve when he came to New York -- become a major player in the 2010 free-agent class, recognized by all involved as potentially the best in NBA history. By shedding Jeffries, Walsh will have only four players under contract for '10-'11 -- Eddy Curry, Danilo Gallinari, Wilson Chandler, and Toney Douglas. The Knicks are a Curry buyout away from having the space to sign two max players. If those free agents prefer the sign-and-trade route -- which would get them more money and an extra year -- the Knicks are positioned to accommodate that as well.