11:18am: Mike Wells of the Indianapolis Star says the Pacers have "great, great interest" in Mayo, and that he's the team's top choice among outside free agents.
9:13am: As the Grizzlies agree to re-sign one of their free agents, Marreese Speights, another Memphis free agent continues to seek a new contract. O.J. Mayo almost certainly won't be returning to the Grizzlies, but he "may be close to something" with the Pacers, according to Steve Kyler of HoopsWorld (via Twitter).
Mayo is said to be seeking more than mid-level money, and the Pacers have the cap flexibility to make such an offer. Even if the team decides to match Portland's max offer sheet to Roy Hibbert, it would have about $52MM on its books, taking into account guaranteed salaries, George Hill's cap hold, and a max salary for Hibbert. That would give Indiana a little more than $5MM to offer Mayo. And if the Pacers wait the full three days on Hibbert, or decide not to match his offer, that would clear signficantly more space to pursue Mayo and others.
Yesterday we heard that the Mavericks, Rockets, Clippers, Knicks, and Suns were other teams with a shot to sign Mayo. I imagine the Clippers are out of the running now, having agreed to terms with Jamal Crawford and Chauncey Billups. The Knicks are probably a long shot based on their cap restrictions and Mayo's desired salary, while the Suns could enter the mix in earnest if their agreed-upon offer sheet for Eric Gordon is matched.