The Grizzlies, who had $8 million in salary-cap space, had been courting both Darko Milicic and Anderson Varejao, meeting with them over the last week. With the Grizzlies now out of the picture, Varejao has no suitors left that have cap space to present him with an offer sheet.

The Cavs would certainly match any team's offer of the midlevel exception, which is $5.3 million. He could still seek a sign-and-trade deal for more than that, but because he is a restricted free agent, the Cavs would not have to cooperate.

Sources indicate that early talks between the Cavs and Varejao revealed the sides were far apart on money. Now the Cavs have significant leverage, which could further slow the process. If the two sides cannot agree on a long-term deal, Varejao can sign a one-year contract for the Cavs' qualifying offer of $1.3 million.