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Danilo Gallinari signs 2-year, $34 million extension with the Nuggets

Denver has used some of its remaining cap space to lock in Gallinari with a unique contract extension.

Danilo Gallinari has agreed to a two-year, $34 million contract extension that will keep him with the Denver Nuggets through the 2017-18 season if fully carried out, according to Yahoo! Sports' Adrian Wojnarowski.

The unique transaction will give Gallinari a pay raise to $14 million this season, then tack on a year at $15.5 million in 2016-17 and a player option for $16.1 million in 2017-18. He'll also receive a trade kicker, per Wojnarowski. In total, Gallinari will make around $46 million over the next three years.

The Nuggets were eligible to make this deal because they still had $5 million in cap space and Gallinari had gone at least three years since his last contract. They used a similar provision to give Wilson Chandler a four-year, $46 million extension earlier this summer.

Gallinari was previously set to make $11.5 million next year become an unrestricted free agent after the 2016 season. His name came up in some trade rumors over the last month, but the Nuggets instead opted to extend Gallinari after the Ty Lawson trade gave them some added financial flexibility.

The extension is still a bit of a risk for Denver given Gallinari's injury history, which includes multiple knee surgeries over the past few years. Meanwhile, the new deal makes a lot of sense for Gallinari, who is getting financial security in case of another injury.

Gallinari struggled early on last season but finished strong, averaging 19 points, five rebounds and two assists per game while shooting 45 percent from the floor and 40 percent from beyond the arc in the last 20 games of the season. If his knee problems are truly behind him, the 26-year-old forward is clearly still talented enough to start for a good team. He could thrive under Michael Malone next year if the Nuggets go back to the fast-paced style that brought them success in the past.

The Nuggets also extended Chandler's contract recently, locking down the two forwards they received from the Knicks in the Carmelo Anthony trade. Denver will likely have another down year after trading Lawson, but the front office is securing players it thinks will be an important part of the franchise's future under Malone.

Gallinari averages 14 points, four rebounds and two assists per game for his career.