Importing the Hartenstein discussion from the Bridges Trade thread:
"I'd appreciate someone explaining to me why the Knicks can't match a higher offer to retain their own free agent. My understanding was that the Gilbert Arenas provision was supposed to address this specific situation and prevent that from happening."
So, as
CBAFAQ #43 notes, the Gilbert Arenas provision applies to
restricted free agents who have 1 or 2 years of service time. When a player is an Early Bird or Non-Bird free agent, and the team lacks cap room to match, a competing team can only offer up to a certain exception amount (designed to be something the team itself can match). It was designed to prevent teams losing their successful second-round picks, who are often RFAs after 2 years in the league. But it does not help them in situations where, e.g., the player is a non-bird FA, and the team has only the Taxpayer MLE, and an offer comes in above that (as any offer for Hartenstein would)
Hartenstein is an Early Bird UFA, not an RFA. He has 6 years of service time, so the Gilbert Arenas provision doesn't apply. The Early Bird exception only allows teams to exceed the cap to re-sign their free agents for up to 175% of the player's previous salary (which was $9.25M for Hartenstein), or 105% of the average league salary (~$10M, so irrelevant here), for a contract of 2-4 years with 8% raises. Doing that math out leads to a $16.2M starting salary, $20.4M 4th-year salary, and roughly the 4/$72 total that has been reported (you can probably add some incentives on there to bump it up a bit, but not by much). But either way, the Early Bird exception doesn't let them match an offer at his likely market value, if it vastly exceeds that offer.
If he had played a third season for the Knicks, or arrived via trade rather than free agency, they'd have full Bird rights and could exceed the cap to match any offer he received up to the max.