That's the trick though...
Unless you can really hammer home the lack of reliable "availability" for Kase, he's going to have a production case in potential Arbitration, to get a lot more than that on a contract. It's hard to see him being awarded more than the "walk away" number of ~$4.5M. But i could easily see him reaching into the mid-upper $3Ms range. Which is a lot more than Toronto would obviously like to, or be able to afford to pay him. That'd throw a huge wrench in their already exceptionally tight cap situation.
Alternatively, if you're the Leafs, you hope Kase just recognizes that it's a good situation for him, and decides to sign a reasonable, affordable deal to carry on with his role there. Problem with that is, given Kase's inability to stay healthy...there's a reasonable chance he's looking at every contract (including this one) as critical to building himself a little nest egg, for when those injuries have piled up to the point he's no longer able to play at an NHL level. Thus, potentially trying to do whatever is within his power to maximize the dollar value of this deal.
So if you're the Leafs...that QO is a dangerous one. Because of the Arb rights it leads to, and the mess that could potentially cause. It's also not like Kase is a significant "key piece" or even really a particularly valuable "asset" to consider trading. That's where i could absolutely see the Leafs playing it safe, and just letting him walk rather than risk getting stuck with him on a deal they can't afford...and it's probably the prudent course of action.