Contract will be invalid.
You have 24 hours to make the appropriate roster moves to free up the cap space or this player returns to free agency and you issued a warning.
As for buying out Kotilik you can do so for 66.6% of the remaining value (3Mill) which is 2 mill. You can still spread that out over 2 years at 1 mill hit per year. You can announce that with a seperate post in the transaction areas.