The Broncos had previously franchised Prater at a cost of $2.66 million but continued talks with him toward a long-term deal.
The Broncos had until July 16 to sign Prater to a long-term deal. Otherwise, he would have played the entire season under the franchise designation
Prater established himself as an excellent kicker over the past season.
He connected on 19 of 25 field goals, including seven in the fourth quarter or overtime during four of the Broncos' eight victories.
Prater booted a dramatic 59-yard field goal in a win over the Chicago Bears.
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