OK, signing might not be the correct word. But here was the action and limitation each party could have...
By rule the Rockets could not sign Lin before giving the option to the Knicks first. So the Rockets and Lin mutually agreed on an offer sheet first, the Knicks had 3 days to notify the Rockets whether they would match. Before the 3 day expired, the Knicks traded for Felton, then notify the Rockets they would not match the offer sheet, then Lin could sign with the Rockets.
This does not change the fact that the Rockets and Lin took action to agree with a $25k deal before the Knicks took action to aquired Felton. All that matter was the Knicks learned Lin's price were out of their range before they decided to move on with the plan to trade for Felton.