SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
Denbury Resources Inc.
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(Name of Registrant as Specified In Its Charter)
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[GRAPHIC OMITTED]
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
April 1, 2004
To the Shareholders:
You are hereby notified that the 2004 Annual Meeting of Stockholders of
Denbury Resources Inc., a Delaware corporation ("Denbury" or the "Company"),
will be held at the Denbury offices located at 5100 Tennyson Parkway, Suite
3000, Plano, Texas 75024, at 3:00 P.M., Central Time, on Wednesday, May 12,
2004, for the following purpose:
(1) to elect six directors, each to serve until their successor is elected
and qualified;
(2) to approve a new omnibus stock and incentive plan;
and to transact such other business as may properly come before the annual
meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on March 31, 2004 are
entitled to notice of and to vote at the annual meeting.
Stockholders are urged to vote their proxy promptly by either returning the
enclosed proxy, voting by telephone or voting via the internet, each as more
fully described in the enclosed proxy statement, whether or not they expect to
attend the annual meeting in person.
/s/ Phil Rykhoek
Phil Rykhoek
Senior Vice President, Chief Financial Officer
and Secretary
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS ARE
URGED TO VOTE AND RETURN THEIR PROXY WHETHER OR NOT THEY EXPECT TO ATTEND THE
ANNUAL MEETING IN PERSON. YOUR PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS
VOTED.
DENBURY RESOURCES INC.
Proxy Statement
Annual Meeting of Stockholders
to be held on Wednesday, May 12, 2004
THE ENCLOSED PROXY IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF
VOTES BY THE MANAGEMENT OF DENBURY RESOURCES INC., a Delaware corporation
("Denbury" or the "Company") for use at the annual meeting of the stockholders
of Denbury to be held on the 12th day of May, 2004 at our offices located at
5100 Tennyson Parkway, Suite 3000, Plano, Texas 75024 at 3:00 P.M. Central Time,
or at any adjournment thereof.
We anticipate that this proxy statement, proxy card and our 2003 annual
report to stockholders will be mailed on or before April 2, 2004.
RECORD DATE AND COMMON STOCK OUTSTANDING
Our board of directors has fixed the record date for the annual meeting as
of the close of business on Wednesday, March 31, 2004. Only Denbury stockholders
of record as of the record date are entitled to receive notice of and to vote at
the meeting. As of the record date, there were approximately 54.7 million shares
of common stock of Denbury issued and outstanding.
VOTING OF COMMON STOCK
A proxy card is included with this proxy statement. In order to be valid
and acted upon at the annual meeting, your proxy card must be received by the
Secretary of Denbury or by the transfer agent, American Stock Transfer and
Trust, 40 Wall Street, New York, NY 10005, before the time set for the holding
of the meeting or any adjournment thereof. You may also vote your shares by
phone, (800)-PROXIES, or may vote via the Internet at www.voteproxy.com.
If you submit a proxy, you may revoke it any time prior to the meeting, or
if you attend the meeting personally, you may revoke your proxy at that time and
vote in person. In addition, regardless of which method you used to submit your
proxy, you may revoke it by any later-dated vote via the telephone, the
Iinternet or in writing. This later dated proxy may be deposited at either our
registered office or our principal place of business, at any time up to the time
of the meeting, or with the Chairman of the meeting on the day of the meeting.
You should note that your mere presence at the meeting, however, will not
constitute a revocation of a previously submitted proxy.
In order for us to have a quorum at our annual meeting, we must have at
least one-third of our issued and outstanding shares of common stock represented
in person or by proxy at the meeting. If you are a holder of our common stock,
you are entitled to one vote at the meeting for each share of common stock that
you held as of the record date. You will not be allowed to cumulate your votes
for the election of directors. If you do not wish to vote for a particular
nominee, you must clearly identify such nominee on your proxy card. A majority
of the votes cast in person or by proxy is required to elect each nominee for
director and to approve each item at the meeting. We will include abstentions in
the vote totals, which means that they have the same effect on each proposal as
a negative vote. However, broker non-votes, if any, will not be included in the
vote totals and therefore will not have any effect.
We will vote all properly executed proxies at the meeting in accordance
with the direction on the proxy. YOU SHOULD NOTE THAT IF NO DIRECTION IS
INDICATED, THE SHARES WILL BE VOTED FOR ALL THE DIRECTOR NOMINEES AND FOR
APPROVAL OF THE 2004 OMNIBUS STOCK AND INCENTIVE PLAN. Our Board has designated
Ron Greene and/or Gareth Roberts to serve as proxies. We do not know of any
matters, other than those matters listed on the Notice of Annual Meeting of
Stockholders, that will be brought before the meeting. However, if any other
matters are properly presented for action at the meeting, we intend for Ron
Greene and/or Gareth Roberts, as proxies named in the enclosed proxy card, to
vote at their discretion on such matters.
PERSONS MAKING THE SOLICITATION
We will bear all the costs incurred in the preparation and mailing of the
proxy, proxy statement and Notice of Annual Meeting. In addition to solicitation
by mail, our directors, officers or employees may solicit proxies by personal
interviews, telephone or other means of communication. If they do so, these
individuals will not receive any special compensation for these services. Even
though we have not made any provision to do so, we may also retain a proxy
solicitor to assist us with the distribution and solicitation of proxies for the
meeting at our expense.
BUSINESS TO BE CONDUCTED AT THE MEETING
Proposal One:
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ELECTION OF DIRECTORS
Our Bylaws provide that our Board of Ddirectors shall consist of a minimum
of three and a maximum of fifteen directors. Each of the directors is elected
annually and holds office until the close of the next annual meeting of
stockholders unless he resigns from that position or ceases to be a director by
operation of law. We presently have eight directors, all of whom are serving
terms that expire at the meeting. Two directors, Messrs. Miller and Smith, will
not be standing for re-election. We appreciate the contribution that Messrs.
Miller and Smith made to Denbury.
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Unless you mark a proxy to the contrary, we plan to vote the proxies for
the election of the six nominees as directors as listed herein. All six of these
individuals are current members of the Board. We do not foresee any reason why
any of these nominees would become unavailable, but if they should, we may
either vote your proxy for a substitute that is nominated by the Board or reduce
the size of our Board accordingly.
Ronald G. Greene
David I. Heather
William S. Price, III
Gareth Roberts
Wieland F. Wettstein
Carrie A. Wheeler
The names, ages, offices held, period of time served as a director and the
principal occupation of each person nominated for election as a director are as
follows:
Officer or
Offices Director
Name Age Held Since Principal Occupation
--------------------------- ------- ----------------- ------------ ----------------------------------------------
Ronald Greene(1) (3) 55 Chairman and 1995 Principal Stockholder, Officer and
Director Director of Tortuga Investment Corp.
David I. Heather (2) (3) 62 Director 2000 Founder and Director of The Scotia Group
William S. Price, III(1) 47 Director 1995 Principal of the Texas Pacific Group
Gareth Roberts 51 President, 1992 President and Chief Executive Officer,
Chief Executive Denbury Resources Inc.
Officer and
Director
Wieland F. Wettstein(2) (3) 54 Director 1990 President, Finex Financial Corporation Ltd.
Carrie A. Wheeler 32 Director 2000 Principal of the Texas Pacific Group
(1) Member of the Compensation, Stock Option Plan and Stock Purchase Plan
Committees.
(2) Member of the Audit Committee.
(3) Member of the Nominating/Corporate Governance Committee.
Directors
Ronald G. Greene has been Chairman of the Board and a director of Denbury
since 1995. Mr. Greene was the founder and served as Chairman of the Board of
Directors of Renaissance Energy Ltd. From 1974 until August 2000. He was Chief
Executive Officer of Renaissance from its inception in 1974 until May
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1990. He is also the principal stockholder, officer and director of Tortuga
Investment Corp., a private investmentcompany. Mr. Greene also serves on the
Board of Directors of WestJet Airlines Ltd., a public Canadian scheduled airline
and Husky Energy Inc., a Canadian public oil and gas company.
David I. Heather has been a director of Denbury since 2000. Mr. Heather is
a founding partner and director of The Scotia Group, an independent geoscience
and reservoir-engineering group in Dallas and Houston, Texas, formed in 1981.
Mr. Heather is a Chartered Engineer of Great Britain and received his Bachelor
of Science degree in Chemical Engineering from the University of London in 1963.
William S. Price, III has been a director of Denbury since 1995. Mr. Price
is a founding partner of TPG. Before forming TPG in 1992, Mr. Price was
Vice-President of Strategic Planning and Business Development for G.E. Capital,
and from 1985 to 1991 was employed by the management consulting firm of Bain &
Company, attaining officer status and acting as co-head of the Financial
Services Practice. Mr. Price serves on the Board of Directors of Del Monte Foods
Company; Gemplus International, S.A. and Petco Animal Supplies, Inc. Mr. Price
also serves on the boards of several private companies.
Gareth Roberts has been President, Chief Executive Officer and a director
since 1992. Mr. Roberts founded Denbury Management, Inc., the former primary
operating subsidiary of the Company in April 1990. Mr. Roberts has more than 29
years of experience in the exploration and development of oil and natural gas
properties with Texaco, Inc., Murphy Oil Corporation and Coho Resources, Inc.
His expertise is particularly focused in the Gulf Coast region where he
specializes in the acquisition and development of old fields with low
productivity. Mr. Roberts holds honors and masters degrees from St. Edmund Hall,
Oxford University, where he has been elected to an Honorary Fellowship. Mr.
Roberts also serves as Chairman of the Board of Directors of Genesis Energy,
L.P. and as a director for Belden & Blake Corporation, both public companies.
Wieland F. Wettstein has been a director of Denbury since 1990. Mr.
Wettstein is the President, and indirectly controls 50%, of Finex Financial
Corporation Ltd., a merchant banking company in Calgary, Alberta, a position he
has held since November 2003. Prior to that, Mr. Wettstein was Executive Vice
President of Finex since 1987. Mr. Wettstein has been a director of a number of
Canadian public companies during the past 15 years, including several junior oil
and gas companies. Currently he is a Director and Chairman of the Audit
Committee of Triquest Energy Ltd., a junior Canadian public oil and gas
exploration company. Mr. Wettstein is a Chartered Accountant.
Carrie A. Wheeler has been a director of Denbury since 2000. Ms. Wheeler
has been a principal with the Texas Pacific Group since 1996 and prior to
joining the Texas Pacific Group was with Goldman, Sachs & Co. for three years.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE
FOREGOING DIRECTORS.
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Proposal Two:
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APPROVE 2004 OMNIBUS STOCK AND INCENTIVE PLAN
The second proposal before the stockholders is the approval of a new
omnibus stock and incentive plan. The Board adopted the 2004 Omnibus Stock and
Incentive Plan ("2004 Plan") on February 18, 2004, subject to approval by the
stockholders. The 2004 Plan is intended to replace the current stock option plan
adopted in August of 1995 ("1995 Plan") and also provides for the potential
issuance of restricted stock, stock appreciation rights and performance awards,
none of which are allowed under the 1995 Plan. The 2004 Plan, if approved, will
be effective May 12, 2004 and will terminate ten years later on May 12, 2014. No
awards will be granted under the 2004 Plan prior to its approval by the
stockholders of the Company. THE FULL TEXT OF THE NEW PLAN IS ATTACHED AS
EXHIBIT A.
Current Stock Option Plan
A total of 8,195,587 shares have been authorized under the 1995 Plan which
terminates on August 9, 2005 (unless sooner terminated by the board), except
with respect to stock options then outstanding. As of March 15, 2004, there were
5,890,775 options outstanding under the 1995 Plan with exercise prices ranging
from $3.84 to $22.24 per share, with a weighted average exercise price of
$10.12. At that same date, the closing price of our common stock on the NYSE was
$15.10 per share. Of the total outstanding stock options as of March 15, 2004,
2,404,509 options were exercisable. As of March 15, 2004, there were an
additional 133,092 shares reserved for future issuance that may be granted
pursuant to the 1995 Plan. It is our intent to continue to issue options under
this old plan until the earlier of: (i) the date that these remaining shares are
used, or (ii) the date that we begin to issue stock appreciation rights in
tandem with the stock options under the 2004 Plan (see "Stock Appreciation
Rights" below). After discontinuance of this old option plan, the then issued
stock options will remain outstanding until exercised or they expire by their
terms, which may be up to ten years from the date of grant.
Purpose of the Plan
The Board of Directors believes that the Company must offer a competitive
equity incentive program if it is to continue to successfully attract and retain
the best possible candidates for positions of responsibility within the Company.
The Board of Directors expects that the 2004 Omnibus Stock and Incentive Plan
will be an important factor in attracting, retaining and rewarding the high
caliber employees essential to our success and in motivating these individuals
to strive to enhance our growth and profitability.
Shares Subject to the Plan
The new stock incentive plan initially authorizes a total of 2,500,000
shares of common stock that may be issued under the plan. Of that total, up to
1,375,000 aggregate shares may be issued as restricted stock awards or
performance awards. These authorized amounts are subject to adjustment upon
certain changes in our capitalization.
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Administration of the Plan
The new stock incentive plan will be administered by the Compensation
Committee of the Board of Directors. The Committee shall have the duties to:
o direct administration of the plan;
o direct distribution of all awards made pursuant to the plan;
o determine the type and specific terms of all awards made pursuant to
the plan;
o adopt rules and procedures as necessary for administration of the
plan;
o determine all questions with regard to rights of employees and
participants in the plan;
o enforce the terms of the plan;
o cause the Company to maintain the information required for tax and
other purposes;
o engage services of counsel as need be;
o prescribe procedures and receive from employers and employees such
information as necessary for administration of the plan;
o cause the Company to maintain separate accounts in the name of each
participant with regard to their ownership of options, restricted
stock, stock appreciation rights or performance awards granted
pursuant to the plan; and
o interpret and construe the plan.
The Committee may designate an administrator to carry out certain primarily
administrative or ministerial functions.
The Board of Directors may amend the plan and awards, provided that they
may not, without stockholder approval:
o increase the number of shares authorized for the plan or change the
class of eligible participants;
o grant awards which expire beyond the maximum 10-year period;
o make any changes for which applicable law or authority would require
stockholder approval; and
o make any amendment that would substantially impair any award
previously granted to any holder without the consent of such holder.
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Eligibility
Any employee whose customary work schedule is a minimum of thirty (30)
hours per week and is designated as an employee of the Company is eligible to
participate in the plan. Although the plan will allow our directors to
participate, none of our non-employee directors currently have stock options,
nor is there any current plan to issue stock options or other incentive stock
rights to directors. All of our 374 full-time employees are participants in our
existing stock option plan and we expect that they will all participate in our
new stock incentive plan.
Stock Incentives under the New Stock Incentive Plan
We believe the use of stock incentives will promote the growth in value of
our stock and the enhancement of long-term stockholder return.
The new stock incentive plan authorizes the grant of:
o incentive and non-qualified stock options;
o restricted stock awards;
o performance awards; and
o stock appreciation rights.
The specific terms of each of these grants are determined by the
Compensation Committee, subject to compliance with the provision of applicable
income tax, securities and other laws and regulations and terms of the plan.
STOCK OPTIONS. The Compensation Committee determines the term, vesting and
exercisability of options granted under the plan, provided that if the committee
fails to specify a vesting schedule and the option is not an annual option, the
options vest over a four year period at the rate of 25% per year. Stock options
designated as annual options vest 100% four years from the date of grant. All
options vest immediately upon a holder's death or disability or upon a change of
control (as defined).
The exercise price of the option is set by the Committee, but may not be
less than one hundred percent (100%) of the closing price on the New York Stock
Exchange on the date of grant. Although the plan provides that options are
allocated at the discretion of the Committee, we generally allocate our stock
options among the employees in approximately the same ratio as their bonuses.
See also "Executive Compensation - Board Compensation Committee Report on
Executive Compensation - Stock Options."
The plan provides that the option exercise price may be paid in cash, by
check, by cash equivalent, by a broker assisted cashless exercise, with shares
of common stock (but only where expressly permitted in the option and only with
shares owned for six months), or a combination of the above. An option holder
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must also make adequate provision for the withholding of applicable income and
employment taxes, if any, relating to the exercise of the option, which may
include, if permitted by the Compensation Committee, the optionee's surrender of
shares of common stock in an amount necessary to satisfy the minimum withholding
and employment taxes.
Unless otherwise provided in the option, stock options will terminate at
the earliest of the following events:
o the 90th day following the holder's separation from the Company except
for death, disability or for cause (as defined);
o immediately upon separation as a result of a discharge for cause;
o on the first-year anniversary of a separation by reason of death or
disability;
o on the tenth-year anniversary of the date of grant.
Options are not transferable. There are additional restrictions on the exercise
price and term of the option if an Incentive Stock Option is awarded to a person
who owns more than 10% of our outstanding common stock.
RESTRICTED STOCK AWARDS. We may not grant restricted stock awards and
performance awards covering more than 1,375,000 shares of common stock pursuant
to the new stock incentive plan. Grants of shares of restricted stock will be
subject to such terms, conditions, restrictions or limitations as the Committee
deems appropriate, including the determination of who votes the restricted
shares. The plan gives the Committee the discretion to accelerate the date on
which restrictions lapse with regard to a restricted stock award. During the
restricted period, the certificates representing the stock award will bear a
restrictive legend and will be held by Denbury, together with any dividends or
distributions thereon if applicable, and will remain a general asset of the
Company until the conclusion of the restricted period.
The Committee believes that restricted stock grants provide a meaningful
retention plan and further incentivize management to increase stockholder value
over the course of the restricted stock's vesting schedule. Furthermore, the
Compensation Committee believes that under such an arrangement additional
performance related incentives would be appropriate, which if met, would
accelerate the vesting schedule. If the plan is approved, the Committee is
considering the grant of restricted stock to the officers of the Company under a
long-term (perhaps up to 10 years) vesting schedule. The definitive terms,
conditions, awards and allocation will be considered by the Board following
stockholder approval.
PERFORMANCE AWARDS. The new stock incentive plan allows for the grant of
performance stock awards that are contingent upon the attainment of certain
performance objectives as defined by the Committee. We may not grant restricted
stock awards and performance awards covering more than 1,375,000 shares pursuant
to the new stock incentive plan. The performance objectives to be achieved
during the performance period and the measure of whether and to what degree such
objectives have been attained will also be determined by the Committee, but will
be intended to comply with the requirements of Section 162(m) of the Code, so as
to insure the deductibility of such amounts. The performance award may be
payable in cash or stock or a combination of cash and stock, but the stock
portion of any one award may not exceed 500,000 shares, and the cash portion may
not exceed $500,000 during any plan year. We do not have any current plans to
issue performance awards.
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STOCK APPRECIATION RIGHTS. The plan allows for the grant of stock
appreciation rights in tandem with a stock option or performance award. The
stock appreciation right gives a participant the right to receive the
appreciation in the fair market value of the related award between the award
grant date and the exercise date, payable in shares of common stock (having a
fair market value equal to the appreciation in value), less the minimum
obligation for federal and state withholding taxes with respect to such
exercise. Upon the exercise of the stock appreciation right, the related stock
option or performance award is also canceled. In the event of a tender offer or
exchange offer for thirty percent (30%) or more of the Company's common stock,
the stock appreciation right may be payable in cash rather than stock.
The Committee plans to issue stock appreciation rights in tandem with our
stock options commencing in 2005, or at such later time that we adopt the
provisions of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation,"as amended. The use of stock appreciation rights
in tandem with our stock options will reduce the dilutive effect of our stock
option program as participants receive only the incremental appreciation in
value (paid in stock valued at the current market value), rather than receiving
one share of stock for each option. The shares issued for the incremental
appreciation in value pursuant to a stock appreciation right will always be less
than the number of shares issued to exercise a traditional stock option. While
the dilution to stockholders is reduced, the compensation is the same for the
participant. Thus, while the new stock incentive plan currently allows for a
total of 1,125,000 shares to be used for stock options (assuming that 1,375,000
shares are used for restricted stock or performance award grants), the actual
shares of common stock expected to be issued when stock appreciation rights are
granted in tandem with stock options is expected to be significantly less. We do
not plan to issue stock appreciation rights until after we adopt SFAS No. 123
(which date is currently undetermined) due to the requirement to mark stock
appreciation rights to their current market value each period under our current
accounting rules.
Change in Control
A change of control occurs if:
o there is a change in the majority of the incumbent directors; or
o a party acquires 30% or more of our common stock and becomes the
largest beneficial owner of the Company; or
o a merger or consolidation in which (i) less than 40% of the combined
voting power for the election of directors is retained by the
stockholders of the Company immediately prior to the effective date of
the merger, or (ii) 50% or more of the senior officers of the Company
are terminated due to the change of control; or
o the sale of all, or substantially all, of the assets of the Company.
In the event of a change in control, all stock awards not acquired by the
Company will become immediately exercisable or vested. In this event, the
participant may be required to exercise such award within a specified time
period from the date of notice of change in control. A change in the ownership,
assets or directors of a subsidiary will not constitute a change in control.
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Federal Income Tax Considerations
Under current U.S. federal tax law, the following are the U.S. federal
income tax consequences generally arising with respect to awards made under the
plan.
EXERCISE OF INCENTIVE STOCK OPTION AND SUBSEQUENT SALE OF SHARES. A
participant who is granted an Incentive Stock Option does not realize taxable
income at the time of the grant or at the time of exercise. If the participant
makes no disposition of shares acquired pursuant to the exercise of an Incentive
Stock Option before the later of two years from the date of grant or one year
from such date of exercise ("statutory holding period"), any gain (or loss)
realized on such disposition will be recognized as a long-term capital gain (or
loss). Under such circumstances, the Company will not be entitled to any
deduction for federal income tax purposes.
However, if the participant disposes of the shares during the statutory
holding period, that will be considered a disqualifying disposition. Provided
the amount realized in the disqualifying disposition exceeds the exercise price,
the ordinary income a participant shall recognize in the year of a disqualifying
disposition will be the lesser of (i) the excess of the amount realized over the
exercise price, or (ii) the excess of the fair market value of the shares at the
time of the exercise over the exercise price; and the Company generally will be
entitled to a deduction for the amount of ordinary income recognized by such
participant. The ordinary income recognized by the participant is not considered
wages and the Company is not required to withhold, or pay employment taxes, on
such ordinary income. Finally, in addition to the ordinary income described
above, the participant shall recognize capital gain on the disqualifying
disposition in the amount, if any, by which the amount realized in the
disqualifying disposition exceeds the fair market value of the shares at the
time of the exercise, and shall be long-term or short-term capital gain
depending on the participant's post-exercise holding period for such shares.
Special tax rules apply when all or a portion of the exercise price of an
Incentive Stock Option is paid by delivery of already owned shares, but
generally it does not materially change the tax consequences described above.
Notwithstanding the favorable tax treatment of Incentive Stock Options for
regular tax purposes, as described above, for alternative minimum tax purposes,
an Incentive Stock Option is generally treated in the same manner as a
non-qualified stock option. Accordingly, a participant must generally include as
alternative minimum taxable income for the year in which an Incentive Stock
Option is exercised, the excess of the fair market value of the shares acquired
on the date of exercise over the exercise price of such shares. However, to the
extent a participant disposes of such shares in the same calendar year as the
exercise, only an amount equal to the optionee's ordinary income for regular tax
purposes with respect to such disqualifying disposition will be recognized for
the optionee's calculation of alternative minimum taxable income in such
calendar year.
EXERCISE OF NON-QUALIFIED STOCK OPTION AND SUBSEQUENT SALE OF SHARES. A
participant who is granted a non-qualified stock option does not realize taxable
income at the time of the grant, but does recognize ordinary income at the time
of exercise in an amount equal to the excess of the fair market value of the
shares acquired on the date of exercise over the exercise price of such shares;
and the Company generally will be entitled to a deduction for the amount of
ordinary income recognized by such participant. The ordinary income recognized
by the participant is considered supplemental wages and the Company is required
to withhold, and the Company and the participant are required to pay applicable
employment taxes, on such ordinary income.
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Upon the subsequent disposition of shares acquired through the exercise of a
non-qualified stock option, any gain (or loss) realized on such disposition will
be recognized as a long-term, or short-term, capital gain (or loss) depending on
the participant's post-exercise holding period for such shares.
LAPSE OF RESTRICTIONS ON RESTRICTED STOCK AND SUBSEQUENT SALE OF SHARES. A
participant who has been granted an award of restricted stock does not realize
taxable income at the time of the grant. When the restrictions lapse, the
participant will recognize ordinary income in an amount equal to the excess of
the fair market value of the shares at such time over the amount, if any, paid
for such shares; and the Company generally will be entitled to a deduction for
the amount of ordinary income recognized by such participant. The ordinary
income recognized by the participant is considered supplemental wages and the
Company is required to withhold, and the Company and the participant are
required to pay applicable employment taxes, on such ordinary income. Upon the
subsequent disposition of the formerly restricted shares, any gain (or loss)
realized on such disposition will be recognized as a long-term, or short-term,
capital gain (or loss) depending on the participant's holding period for such
shares after their restrictions lapse.
Under Section 83(b) of the Code, a participant who receives an award of
restricted stock may elect to recognize ordinary income for the taxable year in
which the restricted stock was received equal to the excess of the fair market
value of the restricted stock on the date of the grant, determined without
regard to the restrictions, over the amount (if any) paid for the restricted
stock. Any gain (or loss) recognized upon a subsequent disposition of the shares
will be capital gain (or loss) and will be long term or short term depending on
the post-grant holding period such shares. If, after making the election, a
participant forfeits any shares of restricted stock, or sells restricted stock
at a price below its fair market value on the date of grant, such participant is
only entitled to a tax deduction with respect to the consideration (if any) paid
for the restricted stock, not the amount elected to be included as income at the
time of grant.
STOCK APPRECIATION RIGHTS, AND PERFORMANCE AWARDS. A participant who is
granted a stock appreciation right does not realize taxable income at the time
of the grant, but does recognize ordinary income at the time of exercise of the
stock appreciation right in an amount equal to the excess of the fair market
value of the shares (on the date of exercise) with respect to which the stock
appreciation right is exercised, over the grant price of such shares; and the
Company generally will be entitled to a deduction for the amount of ordinary
income recognized by the such participant.
An individual who has been awarded a performance award does not realize
taxable income at the time of the grant, but does recognize ordinary income at
the time the award is paid equal to the amount of cash (if any) paid and the
fair market value of shares (if any) delivered; and the Company generally will
be entitled to a deduction for the amount of ordinary income recognized by the
such participant.
The ordinary income recognized by a participant in connection with a stock
appreciation right, or performance award is considered supplemental wages and
the Company is required to withhold, and the Company and the participant are
required to pay applicable employment taxes, on such ordinary income. To the
extent, if any, that shares are delivered to a participant in satisfaction of
either the exercise of a stock appreciation right, or the payment of a
performance award, upon the subsequent disposition of such shares any gain (or
loss) realized will be recognized as a long-term, or short-term, capital gain
(or loss) depending on the participant's post-delivery holding period for such
shares.
11
Board of Directors' Recommendation
The Board believes that the proposed adoption of the 2004 Omnibus Stock and
Incentive plan is in the best interests of the Company and its stockholders for
the reasons stated above. This proposal requires a simple majority of votes cast
at the meeting, provided that there is a quorum. OUR BOARD OF DIRECTORS BELIEVES
THAT OUR 2004 OMNIBUS STOCK AND INCENTIVE PLAN IS AN INTEGRAL PART OF OUR
OVERALL COMPENSATION PLAN AND RECOMMENDS THAT YOU VOTE FOR ITS APPROVAL. Unless
otherwise directed by a proxy marked to the contrary, it is the intention of
management to vote the proxies for the approval of the amendment.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of December 31, 2003, with
respect to certain of our compensation plans for which our common stock is
authorized for issuance.
Number of securities
remaining available for
Number of securities future issuance under
to be issued upon Weighted-average equity compensation
exercise of exercise price of plans (excluding
outstanding options, outstanding options, securities reflected in
warrants and rights warrants and rights column (a))
--------------------------- ---------------------------- --------------------------
Plan Category (a) (b) (c)
---------------------------- --------------------------- ---------------------------- --------------------------
Equity compensation plans
approved by
security holders:
Stock Option Plan 5,374,202 $ 9.25 1,040,530
Employee Stock
Purchase Plan - - 406,466
Equity compensation
plans not approved by
security holders:
Director
Compensation Plan - - 75,481
--------------------------- ---------------------------- --------------------------
Total 5,374,202 $ 9.25 1,522,477
=========================== ============================ ==========================
A description of the material terms of the Director Compensation Plan is
included under the heading "Compensation of Directors-Directors' Fees."
12
GOVERNANCE OF THE COMPANY
The business, property and affairs of the Company are managed by the Chief
Executive Officer under the direction of the Board of Directors. The Board has
responsibility for establishing broad corporate policies and for overall
performance and direction of the Company, but is not involved in day-to-day
operations. Members of the Board keep informed of the Company's business by
participating in Board and committee meetings, by reviewing analyses and reports
sent to them regularly, and through discussions with the Chief Executive Officer
and other officers.
Corporate Governance Guidelines
The Board has adopted corporate governance guidelines that address
significant issues of corporate governance and set forth the procedures by which
the Board carries out its responsibilities. Among the areas addressed by the
guidelines are director qualifications and responsibilities, Board committee
responsibilities, selection and election of directors, director compensation and
tenure, director orientation and continuing education, access to management and
independent advisors, succession planning and management development, Board
meetings, and Board and committee performance evaluations. The Board's
Nominating/Corporate Governance Committee is responsible for assessing and
periodically reviewing the adequacy of these guidelines. The guidelines are
available on the Company's website at www.denbury.com under the "Corporate
Governance" link. The Company will provide the guidelines free of charge to
stockholders who request them.
Director Independence
The guidelines provide that at least a majority of the members of the Board
must be independent as required by the recently approved New York Stock Exchange
("NYSE") corporate governance listing standards. The Board has affirmatively
determined that all nominees for director, with the exception of Mr. Roberts,
the Company's President and Chief Executive Officer, qualify as independent
directors under these standards based on its review of all relevant facts and
circumstances.
Code of Conduct and Ethics
The Company has a code of conduct and ethics that applies to its officers,
employees and directors. This code assists employees in resolving ethical issues
that may arise and in complying with Denbury's policies. The President and Chief
Executive Officer, Senior Vice President and Chief Financial Officer and Vice
President and Chief Accounting Officer are also subject to the Code of Ethics
for Senior Financial Officers and Principal Executive Officer. The purpose of
these codes is to promote, among other things:
o ethical handling of actual or apparent conflicts of interest;
o full, fair and accurate and timely disclosure in filings with the
Securities and Exchange Commission and in other public disclosures;
o compliance with the law and other regulations;
13
o protection of the Company's assets;
o insider trading policies; and
o prompt internal reporting of violations of the codes.
Both of these codes are available on the Company's website at www.denbury.com,
under the "Corporate Governance" link. The Company will provide these codes free
of charge to stockholders who request them. Any waiver of these codes with
respect to officers and directors of the Company may be made only by the Board
of Directors and will be disclosed to stockholders on the Company's website, as
well as any amendments to these codes.
Communication with the Board
The Board has approved the process that stockholders or other interested
parties may use in contacting the members of the Board. All parties wishing to
communicate with the Board should address letters to:
Denbury Resources Inc.
Attn: Corporate Secretary
5100 Tennyson Parkway, #3000
Plano, TX 75024
In addition, interested parties may e-mail the corporate secretary and Board
members at: secretary@denbury.com. All such communications will be forwarded by
the Secretary directly to the Board.
Identification of Director Candidates
Our Nominating/Corporate Governance Committee is responsible for
identifying and reviewing director candidates to determine whether they qualify
for and should be considered for membership on the Board. The committee seeks
candidates from diverse business and professional backgrounds with outstanding
integrity, achievements, judgement and other skills and experience that will
enhance the Board's ability to serve the long- term interests of stockholders.
Members of the Board will be asked to submit recommendations when there is an
opening or anticipated opening for a director position. The Nominating/Corporate
Governance Committee may also use outside sources or third parties to find
potential Board member candidates, and similarly may use the services of outside
sources or a third party to identify, evaluate or assist in identifying or
evaluating nominees brought to their attention.
The Nominating/Corporate Governance Committee will also equally consider
director candidates recommended by the stockholders. Any such recommendation
should be submitted in writing on or before November 1, 2004, to permit adequate
time for review by the Committee. The recommendation should also provide the
reasons supporting a candidate's recommendation, the candidate's qualifications,
the candidate's consent to being considered as a nominee, and a way to contact
the candidate to verify his or her interest and to gather further information,
if necessary. In addition, the stockholder should submit information
demonstrating the number of shares he or she owns. Stockholders may send
recommendations for director candidates to the address listed above under
"Communication with the Board." Stockholders who themselves wish to nominate an
individual to the Board must follow the advance notice and other requirements of
the Company's Bylaws.
14
BOARD MEETINGS, ATTENDANCE AND COMMITTEES
The Board met eight times during the year ended December 31, 2003,
including telephone meetings. All incumbent directors attended at least 75% of
the meetings. The Board took all other actions by unanimous written consent
during 2003. In addition, all directors attended at least 75% of all meetings of
each of the committees on which they served. The Company encourages the
directors to attend the annual meeting of stockholders but does not require it.
The following directors attended last year's annual meeting of stockholders:
Messrs. Greene, Heather, Roberts, and Wettstein. The board has an Audit
Committee, a Compensation Committee, a Stock Option Plan Committee, a Stock
Purchase Plan Committee and a Nominating/Corporate Governance Committee. On
occasion, the Board appoints other committees to deal with certain matters.
Audit Committee Report
The Audit Committee is currently comprised of three outside independent
directors, Messrs. Heather, Miller and Wettstein, with Mr. Wettstein acting as
Chairman. The purpose of the Committee is to appoint, compensate, evaluate and
terminate the Company's independent accountants and petroleum engineers, and to
provide assistance to the Board in fulfilling its oversight responsibility with
respect to:
o the integrity and quality of the financial statements and proven
reserves of the Company;
o evaluation of the internal controls of the Company;
o the performance of the Company's internal audit function, the
independent accountants, and the independent petroleum engineers;
o the independent accountants and petroleum engineers qualifications and
independence;
o compliance by the Company with legal and regulatory requirements;
o evaluation of the Company's effectiveness for assessing, mitigating
and controlling significant business risks; and
o compliance with the Company's code of conduct and ethics.
The Audit Committee meets regularly with financial management, the internal
auditor and independent auditors to review financial reporting and accounting
and financial controls of the Company. The Audit Committee reviews and gives
prior approval for fees and non-audit related services of the independent
auditors. The internal auditor, independent auditors and independent engineers
all have unrestricted access to the Audit Committee and meet with the Audit
Committee without management representatives present to discuss the results of
their examinations and their opinions. The Audit Committee also meets with the
independent reserve engineers, has the power to conduct internal audits and
investigations, receives recommendations or suggestions for changes in
accounting procedures, and initiates or supervises any special investigations it
may choose to undertake. Each year, the Audit Committee recommends to the Board
the selection of a firm of independent auditors and a firm of independent
reserve engineers. The Audit Committee met four times during 2003.
15
The NYSE and the Securities and Exchange Commission (the "SEC") have
adopted standards with respect to independence and financial experience of the
members of the Audit Committee. The standards require that all of the members of
audit committees be independent and that they all be able to read and understand
fundamental financial statements, including balance sheets, income statements
and cash flow statements. Additionally, at least one member of the committee
must be deemed to be the "audit committee financial expert." The financial
expert must be knowledgeable in the application of generally accepted accounting
principles, the understanding and preparation of financial statements,
accounting for estimates, accruals and reserves, internal accounting controls
and audit committee functions. Such knowledge is to have been obtained through
past education and experience in positions of financial oversight. The Chairman
of our Audit Committee, Mr. Wettstein, has such experience and has been
designated the "audit committee financial expert." All members of the Audit
Committee satisfy the criteria for both independence and experience.
The Audit Committee reports to the board on its activities and findings.
The Board adopted a written charter for the Audit Committee in 2000 and amended
it in February 2003. The charter is available on our website at www.denbury.com
under the "Corporate Governance" link.
The Audit Committee reports as follows with respect to the Company's 2003
audited financial statements:
o The Committee has reviewed and discussed with management the Company's
2003 audited financial statements;
o The Committee has discussed with the independent auditors, Deloitte &
Touche LLP, the matters required to be discussed by SAS 61 which
include matters related to the conduct of the audit of the Company's
financial statements;
o The Committee has received written disclosures and the letter from the
independent auditors required by ISB Standard No. 1 (which relates to
the auditors' independence from Denbury and its related entities) and
has discussed with the auditors the auditors' independence from
Denbury; and
o Based on review and discussions of the Company's 2003 audited
financial statements with management and discussions with the
independent auditors, the Audit Committee recommended to the Board
that the Company's 2003 audited financial statements be included in
Denbury's 2003 Annual Report on Form 10-K.
THE AUDIT COMMITTEE
Wieland F. Wettstein, Chairman
David I. Heather
David B. Miller
16
Compensation Committee
The Compensation Committee is comprised of Messrs. Greene and Price, with
Mr. Price acting as its Chairman. The purpose of the Compensation Committee, in
conjunction with the Stock Option Plan Committee and Stock Purchase Plan
Committee, both of which are the same individuals and meet concurrently, is to
provide assistance to the Board in discharging its responsibilities relating to
the compensation and development of the Chief Executive Officer and other
officers, and to oversee and administer equity and other compensation and
benefit plans, including:
o structuring an overall compensation program and structure for the
Company and reviewing the program annually, setting overall salary
increases, bonuses and other annual compensation, and proposing
modifications to the compensation program as deemed necessary;
o reviewing and approving corporate goals and objectives relevant to the
Chief Executive Officer's compensation and evaluating the Chief
Executive Officer's performance in light of these goals and
determining and approving his compensation in light of this
evaluation;
o recommending to the Board the adoption or amendment of the Company's
equity-based and other incentive compensation plans, and approving,
administering and granting awards under these plans; and
o preparing and publishing an annual report on executive compensation to
be included in the Company's proxy statement.
The specific responsibilities of the Compensation Committee are identified
in the Company's charter, which is available on the Company's website at
www.denbury.com under the "Corporate Governance" link. The Compensation
Committee met twice during 2003.
Nominating/Corporate Governance Committee
The Board created a Nominating/Corporate Governance Committee during 2003
comprised of Messrs. Greene, Miller and Wettstein. In February 2004, the
Committee was modified to include Mr. Heather rather than Mr. Miller as Mr.
Miller will not be standing for re-election at the 2004 annual meeting. All of
the members of the Nominating/Corporate Governance Committee are independent
under the NYSE corporate governance listing standards. The purpose of the
Committee is to provide assistance to the Board in discharging its
responsibilities for ensuring the effective governance of the Company,
including:
o identifying individuals qualified to become members of the Board;
o recommending to the Board the director nominees for the annual meeting
of stockholders or for appointment by the Board if a vacancy occurs
between annual meetings;
o seeking to maintain the independence and quality of the Board through
an annual self- evaluation and compliance with applicable laws and
regulations for each director and committee member;
17
o developing and recommending to the Board adoption of its various code
of conduct, ethics, and governance guidelines;
o monitoring and developing the necessary training for new board
members;
o recommending to the Compensation Committee regarding director
compensation and benefits on an annual basis; and
o reviewing prior to its publication, the Company's proxy statement.
The specific responsibilities of the Nominating/Corporate Governance
Committee are identified in the Company's charter, which is available on the
Company's website at www.denbury.com under the "Corporate Governance" link. The
Nominating/Corporate Governance Committee had its initial meeting in February
2004.
COMPENSATION OF DIRECTORS
Information regarding the compensation received from Denbury, including
options, during the fiscal year ended December 31, 2003 by Mr. Roberts,
President, Chief Executive Officer and a director of the Company, is disclosed
under the heading "Executive Compensation - Summary Compensation Table."
Directors' Fees
We have a Director Compensation Plan to provide compensation to all of our
non-employee directors so as to attract, motivate and retain experienced and
knowledgeable persons to serve as our directors and to promote an identity of
interest between our directors and you, our stockholders. The Director Plan was
adopted effective July 1, 2000, for a term of ten years.
Our non-employee directors are paid an annual retainer fee of $20,000, plus
$2,000 per board meeting attended and $1,000 per telephone conference attended.
The Chairman of the Compensation Committee and the Chairman of the Board are
also paid an additional fee of $5,000 per year. The Chairman of the Audit
Committee is paid an additional fee of $20,000 per year and the other Audit
Committee members are paid an additional annual retainer of $5,000 for serving
on the Audit Committee. The members of the aAudit Committee may also receive an
additional $5,000 per for performing special services. Mr. Heather performs
review work on our annual reserve report and began receiving this additional fee
in the fourth quarter of 2002.
The Director Plan allows each non-employee director to make an annual
election to receive his or her compensation either in cash or in shares of our
common stock and to elect to defer receipt of such compensation, if they wish.
The number of shares issued to a director who elects to receive shares of common
stock under the Director Plan is calculated by dividing the director fees to be
paid to such director by the average price of the Company's common stock for the
ten trading days prior to the date the fees are payable. Generally directors'
fees are paid quarterly. We also reimburse our directors for out-of-pocket
travel expenses in connection with each board meeting attended. We have reserved
100,000 shares for issuance under the Director Plan, for directors who elect to
receive their compensation in stock, and through December 31, 2003, had issued
24,519 shares pursuant to the plan.
18
Although directors are eligible to receive options under our stock option
plan, no options have been granted to directors since 1993 and no directors hold
options, other than Mr. Roberts, who holds options granted to him as an employee
under our Stock Option Plan. The options held by Mr. Roberts are disclosed under
the heading "Executive Compensation."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists, as of March 26, 2004, the stockholders that
beneficially own more than 5% of our issued and outstanding common stock and the
common stock held by our executive officers and directors, individually and as a
group to our knowledge solely based upon public filings. Unless otherwise
indicated, each stockholder identified in the table is believed to have sole
voting and investment power with respect to the shares beneficially held. The
table includes shares that were acquirable within 60 days following March 26,
2004 under our Stock Option Plan.
Beneficial Ownership of
Common Stock as of
March 26, 2004
------------------------------------------
Percent of
Name and Address of Shares
Beneficial Owner Shares Outstanding
--------------------------------------------------------------- ---------------------- ----------------
Ronald G. Greene............................................... 944,601 (1) 1.7%
William S. Price, III.......................................... 36,000 (2) *
David I. Heather............................................... 6,500 (3) *
David B. Miller................................................ - *
Wieland F. Wettstein........................................... 29,418 (4) *
Carrie A. Wheeler.............................................. 500 *
Jeffrey Smith.................................................. - *
Gareth Roberts................................................. 693,655 (5) 1.3%
Ronald T. Evans................................................ 32,692 (6) *
Phil Rykhoek................................................... 137,895 (6) *
Mark A. Worthey................................................ 128,670 (6) *
Mark C. Allen.................................................. 43,302 (6) *
Ray Dubuisson.................................................. 8,661 (6) *
Ron Gramling................................................... 91,431 (6) *
James H. Sinclair.............................................. 48,321 (6) *
All of the executive officers and directors as a group (15
persons).................................................. 2,201,646 (7) 4.0%
Wellington Management Company.................................. 3,960,400 (8) 7.3%
75 State Street
Boston, MA 02109
* Less than 1%.
(1) Includes 20,150 shares of common stock held by Mr. Greene's spouse in
her retirement plan, 900 shares held in trust for Mr. Greene's minor
children, 34,000 shares held in the Greene Family Charitable
Foundation of which Mr. Greene is the trustee, and 564,703 shares held
by Tortuga Investment Corp., which is solely owned by Mr. Greene.
(2) Includes 7,000 shares of common stock held by Mr. Price and 29,000
shares held by Mr. Price's spouse.
19
(3) Shares are held in a family trust of which Mr. Heather is a trustee.
(4) Includes 7,700 shares of common stock held by S.P. Hunt Holdings Ltd.,
which is solely owned by a trust of which Mr. Wettstein is a trustee.
Also includes 14,818 shares of common stock held by Mr. Wettstein's
spouse in her retirement plan.
(5) Includes 138,330 shares of common stock held by a corporation which is
solely owned by Mr. Roberts, 2,228 shares held by his spouse and
174,200 shares which Mr. Roberts has the right to acquire pursuant to
stock options which are currently vested or which vest within 60 days
from March 26, 2004. Ownership also includes 63,000 shares of common
stock held in a private charitable foundation which he and his spouse
control, but in which they have no beneficial interest.
(6) Includes 19,500 shares of common stock for Mr. Evans, 127,800 shares
for Mr. Rykhoek, 92,471 shares for Mr. Worthey, 32,800 shares for Mr.
Allen, 82,850 shares for Mr. Gramling, 7,500 shares for Mr. Dubuisson,
and 45,856 shares for Mr. Sinclair, which they respectively have the
right to acquire pursuant to stock options that are currently vested
or that vest within 60 days from March 26, 2004.
(7) Includes 582,977 shares of common stock which the officers and
directors as a group have the right to acquire pursuant to stock
options which are currently vested or which vest within 60 days from
March 26, 2004.
(8) Information based on Schedule 13G filed with the SEC on February 12,
2004. Wellington Management Company claims shared power to vote or to
direct the vote for 2,873,000 shares and shared power to dispose or to
direct the disposition of 3,960,400 shares.
20
MANAGEMENT
The names of our officers, the offices held by them and the period during
which such offices have been held are set forth below. Each officer holds office
until his successor is duly elected and qualified in accordance with the
Bylaws.
Name Age Position
---- --- --------
Gareth Roberts 51 President and Chief Executive Officer
Ronald T. Evans 41 Senior Vice President, Reservoir Engineering
Phil Rykhoek 47 Senior Vice President, Chief Financial Officer, Secretary and
Treasurer
Mark A. Worthey 46 Senior Vice President, Operations
Mark C. Allen 36 Vice President & Chief Accounting Officer
Ray Dubuisson 53 Vice President, Land
Ron Gramling 58 Vice President, Marketing
James H. Sinclair 41 Vice President, Exploration
Set forth below is a description of the business experience of each of our
officers other than Gareth Roberts. See "Business to be Conducted at the Meeting
- Election of Directors" for a discussion of the business experience of Gareth
Roberts.
Ronald T. Evans, Senior Vice President, Reservoir Engineering, is a
registered Professional Engineer who joined us in September 1999. Before joining
Denbury, he was employed as a manager with Matador Petroleum Corporation for 3
years and employed by Enserch Exploration, Inc. for 12 years in various
positions. Mr. Evans received his Bachelor of Science degree in Petroleum
Engineering from the University of Oklahoma in 1984 and his MBA from the
University of Texas at Dallas in 1995. Mr. Evans also serves as a director of
Genesis Energy, L.P.
Phil Rykhoek, a Certified Public Accountant, is Senior Vice President,
Chief Financial Officer, Secretary and Treasurer of Denbury. Before joining us
in June 1995, Mr. Rykhoek was co-founder and an executive officer of Petroleum
Financial, Inc. ("PFI"), a private company formed in May 1991 to provide
accounting, financial, and management services on a contract basis to other
entities. While at PFI, Mr. Rykhoek was also an officer of Amerac Energy
Corporation, where he had been employed in various positions for eight years,
most recently as Vice President and Chief Accounting Officer. Mr. Rykhoek also
serves as a director of Genesis Energy, L.P.
Mark A. Worthey, Senior Vice President, Operations, is a geologist and is
responsible for all aspects of operations in the field. Before joining us in
September 1992, Mr. Worthey was with Coho Resources, Inc. as an exploitation
manager, beginning his employment there in 1985. Mr. Worthey graduated from
Mississippi State University with a Bachelor of Science degree in petroleum
geology in 1984. Mr. Worthey also serves as a director of Genesis Energy, L.P.
Mark C. Allen, a Certified Public Accountant, is Vice President and Chief
Accounting Officer. Mr Allen joined us in April 1999 as Controller and Chief
Accounting Officer. Prior to joining Denbury, Mr. Allen was Manager of Financial
Reporting for ENSCO International Incorporated from November 1996 to April 1999.
Prior to November 1996, Mr. Allen was a manager in the accounting firm of Price
Waterhouse LLP.
21
Ray Dubuisson is Vice President, Land, of Denbury. He joined us in July
2002. Prior to joining Denbury, Mr. Dubuisson was a practicing oil and gas
attorney in the Houston area primarily involved in exploration and production
transaction work, preparation of title opinions, and negotiation and preparation
of acquisition and divestiture agreements. He is licensed to practice law in the
State of Texas, and has previously served as Vice President of Land for Weber
Energy Corporation and Quanah Petroleum in Dallas, as Gulf Coast District Land
Manager for Aminoil in Houston, and as Landman for Chervron in New Orleans.
Ron Gramling is Vice President, Marketing. He joined us in May 1996. Before
becoming affiliated with Denbury, he was employed by Hadson Gas Systems as Vice
President of Term Supply. Mr. Gramling has 34 years of marketing, transportation
and supply experience in the natural gas and crude oil industry. He received his
Bachelor of Business Administration degree from Central State University,
Edmond, Oklahoma in 1970.
James H. Sinclair, Vice President of Exploration joined Denbury in 1993.
During his tenure he has served in management positions in acquisitions and
exploration. Before joining Denbury, he was with COHO Resources, Inc. as a
geologist. Mr. Sinclair received his Bachelor of Science degree in Geology in
1984 from Northeast Louisiana University. He is a member of the AAPG (American
Association of Petroleum Geologists), Dallas Geologic Society, and the SEG
(Society of Exploration Geophysicists).
22
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets out a summary of executive compensation for our
President and Chief Executive Officer and our next four most highly compensated
executive officers for each the last three completed fiscal years (collectively,
the "Named Executive Officers").
Annual Compensation Long Term Compensation
---------------------------- -------------------------
Number of Securities
Underlying Options All Other
Name and Principal Position Year Salary Bonuses(1) Granted Compensation(2,3)
--------------------------- ---- ------ ------- ------- ------------
Gareth Roberts 2003 $350,000 $100,091 22,807 $37,630
President and Chief Executive Officer 2002 309,500 129,342 22,845 14,390
2001 299,000 125,350 18,700 13,488
Ronald T. Evans 2003 $250,000 $ 71,528 14,870 $29,962
Senior Vice President, Reservoir 2002 201,750 84,600 14,901 26,102
Engineering 2001 195,000 81,750 12,200 24,775
Phil Rykhoek 2003 $250,000 $ 71,528 14,870 $29,962
Senior Vice President, Chief Financial 2002 201,750 84,600 14,901 26,102
Officer and Secretary 2001 195,000 81,750 12,200 19,291
Mark A. Worthey 2003 $250,000 $ 71,528 14,870 $29,962
Senior Vice President, Operations 2002 201,750 84,600 14,901 26,102
2001 195,000 81,750 12,200 24,775
Mark C. Allen 2003 $175,000 $ 50,046 11,820 $23,890
Vice President and Chief Accounting 2002 160,430 67,245 11,844 20,992
Officer 2001 155,000 64,981 9,700 18,712
(1) Bonuses represent the amounts earned based on our performance for the
year indicated, even though they are actually paid in the subsequent
year. Bonuses also include a Christmas bonus that is equivalent to one
week's salary and has been paid to all employees for each of the last
three years.
(2) Amounts in this column for 2003 include our matching contributions to
the Employee Stock Purchase Plan, 401(k) Plan, and life and disability
insurance premiums paid on behalf of the Named Executive Officers as
follows:
Stock Purchase Insurance
Plan 401(k) Plan Premiums
----------------- ------------- -----------------
Gareth Roberts $26,250 $9,000 $2,380
Ronald T. Evans 18,750 9,000 2,212
Phil Rykhoek 18,750 9,000 2,212
Mark A. Worthey 18,750 9,000 2,212
Mark C. Allen 13,125 9,000 1,765
(3) The aggregate amount of all other non-cash annual compensation for
2003 was less than 10% of the total annual salary and bonus of each
Named Executive Officer for each year.
23
Option Grants in 2003
The following table represents the options granted to the Named Executive
Officers during 2003 and the value of such options as of the date of grant:
Individual Grants
---------------------------------------------------------------
% of
Total
Options
Number of Granted to Exercise
Options Employees in Price Expiration Grant Date
Name Granted 2003 ($/Share) Date Present Value $ (1)
---- ------- ---- --------- ----- -------------------
Gareth Roberts 22,807 (2) 2.4% $ 11.27 1/2/2013 $137,070
Ronald T. Evans 14,870 (2) 1.6% 11.27 1/2/2013 89,369
Phil Rykhoek 14,870 (2) 1.6% 11.27 1/2/2013 89,369
Mark A. Worthey 14,870 (2) 1.6% 11.27 1/2/2013 89,369
Mark C. Allen 11,820 (2) 1.2% 11.27 1/2/2013 71,038
(1) As permitted by the Securities and Exchange Commission rules, the
Grant Date Present Value of the options set forth in this table is
calculated in accordance with the Black-Scholes option pricing model,
using the following assumptions: expected volatility computed using,
as of the date of grant, the prior five year monthly average of the
our common stock listed on the NYSE, which was 59.8%; expected
dividend yield - 0%; expected option term - 5 years; and a risk-free
rate of return as of the date of grant of 2.97%, based on the yield of
five year U.S. Treasury securities. The real value of the options
presented in this table depends upon the actual performance of the
common stock during the applicable period in which they are exercised.
The dollar amounts in this column are not intended to forecast
potential future appreciation, if any, of the common stock.
(2) These options cliff vest 100% four years from the date of grant, on
January 2, 2007.
Option Exercises and Holdings
The following table sets forth information with respect to the Named
Executive Officers concerning unexercised options held by them as of December
31, 2003. The options exercised by the Named Executive Officers during 2003 are
listed below.
24
Aggregate Option Exercises in 2003
and December 31, 2003 Option Values
Number of Common Shares
Shares Underlying Unexercised Value of Unexercised In-the
Acquired on Value Options at Money Options at
Name Exercise Realized December 31, 2003 December 31, 2003 (1)
----------------- ------------- ----------- --------------------------------- ---------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Gareth Roberts - $ - 153,000 85,552 $ 876,483 $ 507,550
Ronald T. Evans 10,000 87,600 10,000 51,471 96,050 288,357
Phil Rykhoek - - 114,000 55,771 656,623 330,777
Mark A. Worthey 5,000 35,800 78,671 55,771 454,025 330,777
Mark C. Allen - - 23,000 43,164 227,125 251,400
(1) Based on the average of the high and low sales price of Denbury's
common stock on December 31, 2003, of $13.845 per share as reported by
the NYSE. For purposes of calculating the value of unexercised
in-the-money options, a conversion exchange rate of Cdn. $1.4461 =
U.S. $1.00 was assumed as to 6,250 of Mr. Rykhoek's options which are
denominated in Canadian dollars.
Board Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board (the "Committee") is responsible
for making recommendations to the Board regarding the general compensation
policies of the Company, the compensation plans and specific compensation levels
for officers and certain other managers. The Committee also administers, along
with the Stock Option and Stock Purchase Plan Committees, our stock option and
stock purchase plans for all employees.
The basic policy adopted by the Board is to ensure that salary levels and
compensation incentives are designed to attract and retain qualified individuals
in key positions and are commensurate with the level of executive
responsibility, the type and scope of our operations, and our financial
condition and performance.
The overall compensation philosophy is:
o that we pay base salaries that will attract and retain outstanding
talent, generally around the median salaries of comparable companies;
o that long-term incentives are the main focus of compensation;
o that all employees are encouraged to be stockholders to better align
their interests with those of our stockholders; and
o that employees are rewarded primarily for the effort and results of
the team or Company as a whole, rather than compensating only for
individual performance.
25
The components of this philosophy consist of:
o competitive base salaries;
o a stock purchase plan for all employees;
o stock options for all employees, but with a higher level for the
professionals; and
o a profit sharing plan or bonus plan.
BASE SALARIES. In determining an executive's salary, the Committee weighs
individual performance, overall corporate performance, the executive's position
and responsibility in the organization, the executive's experience and expertise
and compensation for comparable positions at comparable companies. In making
recommendations, the Committee exercises subjective judgment using no specific
weights for these factors. The Committee believes that base salaries that
average at or near the median of comparable companies, as determined from salary
surveys and other data, are generally appropriate as a frame of reference for
base pay decisions. The specific compensation for individual executives will
vary from these levels as a result of the subjective judgment of the Committee
and based on the recommendation of the Chief Executive Officer with regard to
the other executives. This is the primary part of the compensation package
whereby a distinction is made for individual performance, as the other
components of the compensation plan are generally consistent among employee
groups and are proportional to salaries.
The Chief Executive Officer's salary is determined in much the same manner
as other employees, with an intent to set his base salary at or near the median
of comparable companies. The salary adjustments for the Chief Executive Officer,
and for all employees, were lower in 2003 than in prior years due to the mixed
overall results of operations of the Company (see discussion regarding results
of the Company during 2003 under "Bonus Plan" below), with bonuses set at 67% of
the maximum range and most salary adjustments made primarily to recognize the
overall wage inflation in the industry.
STOCK PURCHASE PLAN. To encourage stock ownership in the Company by all of
the employees, we have a stock purchase plan which allows all employees to
contribute up to 10% of their base compensation with the Company matching 75% of
such contributions. The combined funds are used at the end of each quarter to
purchase common stock at the current market price. In addition, we pay the
income tax on the matching portion for employees that are below a certain salary
threshold, who are generally the employees that are not in the professional
group. The stock purchase plan requires each employee to hold these shares for a
minimum of one year before disposition. The top five most highly compensated
officers received approximately 9.6% of the total Company matching compensation
during 2003.
STOCK OPTIONS. Stock options have been awarded to all employees. To further
encourage our team concept, at the time of each grant, options are generally
allocated among employees on the basis of their bonuses. The executive officers
receive stock options at the same percentage of bonuses as the other employees
in the management and professional group. These options are designed to retain
and motivate the grantees and to improve long-term Company performance by making
executive rewards consistent with
26
those of all stockholders. All options are granted at the prevailing market
price and will only have value if the market price of the common stock increases
after the date of grant. The top five most highly compensated officers received
approximately 8.4% of the total option grants during 2003. See also "Executive
Compensation - Option Grants in 2003."
Since 1997, we have granted options to our employees at their time of
employment, which options vest 25% per year over a period of four years.
Additional options have also been granted on an annual basis to the professional
group (and for the last five years to all employees) as part of their annual
bonus and compensation package, which is based on our overall results and
achievement of predetermined goals and objectives for the prior year. These
annual option grants generally vest 100% four years from the date of grant. The
annual grants made in early 1999 were an exception to the normal annual vesting
schedule, as these grants vested 25% per year over a period of four years. In
addition to a modification of the normal vesting parameters, the Committee
authorized a larger than normal grant at that time in order to give the
employees renewed long-term incentives in light of the depressed prices for
Denbury common stock and in lieu of salary increases and bonuses which were not
awarded for 1998.
All of the options granted under the Option Plan expire ten years from the
date of grant and, to the extent allowed under the United States federal income
tax laws, are granted as incentive stock options. In determining the specific
level of option grants, the Committee takes into consideration several factors,
without giving particular weight to any one factor. These factors include:
o the total options relative to the total common stock outstanding;
o the level of compensation for each optionee based on option pricing
models such as Black- Scholes;
o the number of option grants made by comparable companies for similar
positions;
o the perceived incentive value of the options currently held by the
employees; and
o the overall compensation package for that year.
2004 OMNIBUS STOCK AND INCENTIVE PLAN. The Committee recently approved the
2004 Omnibus Stock and Incentive Plan and recommends approval of the plan by our
stockholders (see "Proposal Two" for more data regarding the proposed plan). The
Committee determined that it was appropriate to replace the existing stock
option plan in light of recent compensation trends in the industry and in light
of the 2005 expiration date of the existing plan. The Committee also wanted to
provide more flexibility to the Company by allowing for the possibility of other
types of equity-based grants other than stock options, such as restricted stock,
performance awards and stock appreciation rights. As discussed under "Proposal
Two" above, the Committee plans to issue stock appreciation rights, payable in
shares of common stock, in tandem with stock options grants, most likely
commencing in 2005. This strategy will provide the same level of compensation to
each participant, but will reduce the overall dilutive effects of the option
plan for the stockholders.
27
The Committee also plans to evaluate and consider the issuance of
restricted stock to its officers (assuming that new stock plan is approved by
stockholders). This additional incentive for management is considered necessary
in light of our executives' compensation compared to their peers, to further
emphasize long-term incentives that are consistent with those of our
stockholders, and to more closely match their compensation to overall Company
performance. The Committee intends to accomplish this by granting restricted
stock that vest over a long-term period, which could vest sooner if certain
annual performance objectives are met, and by requiring that the officers retain
a significant portion of any restricted stock grant as long as they are employed
by the Company. The Committee has not yet determined the number of shares,
allocation, or the precise terms of the proposed restricted grants, pending
approval of the plan by stockholders.
BONUS PLAN. All of our employees participate in our bonus plan. Bonuses are
recommended by the Committee and awarded by the Board each year based on our
overall results and the achievement of predetermined goals and objectives. The
bonus plan currently has four levels of compensation whereby at the base level,
which includes all employees, bonuses range from zero to ten percent of base
salaries. There is an additional compensation layer for all employees in the
professional group, whereby these employees could earn an additional bonus of up
to ten percent of salaries, or a total bonus ranging from zero to twenty
percent. In addition, certain members of the professional group that were part
of management or were exceptional performers were eligible to earn an additional
bonus of up to ten percent of salaries, or a total bonus ranging from zero to
thirty percent. Lastly, our officers and other senior management are eligible
for an additional ten percent of salaries, or a total bonus ranging from zero to
forty percent. In addition to the aforementioned bonus plan, we have usually
paid a Christmas bonus each year which is equivalent to one week of each
employee's base salary.
The Committee recommended that bonuses for 2003 be awarded at the 67th
percentile of the bonus range, which were paid in early 2004, as compared to
bonuses awarded at the maximum level in the prior year. During 2003, the Company
met certain of its stated goals and objectives but missed others, resulting in a
bonus that was less than the maximum. On the positive side, the Company
increased its net asset value per share during 2003 and reduced its overall debt
by $50 million during the year, achieving its debt target of $300 million by
year-end 2003. The Company continued to execute its strategy in its core
tertiary operations, increasing the related oil production 28% from the first
quarter of 2003 average of 4,345 BOE/d to the fourth quarter of 2003 average of
5,579 BOE/d. The rate of return and profits from operations in this core area
continued to be strong, as partially evidenced by a PV-10 Value of our tertiary
proved oil reserves of approximately $435 million versus a net unrecovered cash
flow investment of only $23 million as of year-end 2003. While these results are
positive, the Company failed to (i) meet its overall stated production targets
due to operational delays, primarily in the offshore Gulf of Mexico, and less
than anticipated exploration results, (ii) exceeded its operating expense and
capital expenditure budgets, and (iii) generally underperformed its peers in the
stock market. As a result of the mixed results, the Committee recommended a
bonus award for 2003 equal to 6.7 percent of salaries for all employees, an
additional 6.7 percent for all members of the professional group, an additional
6.7 percent for certain professionals, and an additional 6.7 percent for our top
managers and officers. All bonuses were granted at the 67th percentile level of
the potential bonus range, the maximum bonus being 10% of salary for each bonus
level or a total of 40% for the officers and senior management. The President
and Chief Executive Officer and all other Named Executive Officers received a
bonus equal to approximately 27% of their salaries.
28
In 2003, the Committee approved salary increases, effective January 1,
2004, primarily to recognize the overall wage inflation in the industry.
Consistent with the reduced bonus level, these salary increases were less than
those of the prior year. These salary increases averaged 3.0% for the Company as
a whole (as compared to 5.2% in the prior year), 2.4% for the Named Executive
Officers as a group and 2.4% for the President and Chief Executive Officer.
The foregoing report has been furnished by the following members of the
Committee.
THE COMPENSATION COMMITTEE
William S. Price, III, Chairman
Ronald G. Greene
Severance Protection Plan
In December 2000, the board approved a severance protection plan for all of
our employees. Under the terms of the severance plan, an employee is entitled to
receive a severance payment if a change of control in the Company occurs and the
employee is terminated within two years of the change of control. The severance
plan will not apply to any employee that is terminated for cause or by an
employee's own decision for other than good reason (e.g., change of job status
or a required move of more than 25 miles). If entitled to severance payments
under the terms of the severance plan, the Chief Executive Officer and our three
senior vice presidents will receive three times their annual salary and bonus,
all of our other officers will receive two and one-half times their annual
salary and bonus, certain other members of management will receive two times
their annual salary and bonus, and all other employees will receive from
one-third to one and one-half times their annual salary and bonus depending on
their salary level and length of service with us. All employees will also
receive medical and dental benefits for one-half the number of months for which
they receive severance benefits.
The severance plan also provides that if our officers are subject to the
"parachute payment" excise tax, then the Company will pay the employee under the
severance plan an additional amount to "gross up" the payment so that the
employee will receive the full amount due under the terms of the severance plan
after payment of the excise tax.
29
SHARE PERFORMANCE GRAPH
The graph below shows the cumulative total return to our stockholders
during the five years ended December 31, 2003 in comparison to the cumulative
returns on the S&P 500 Index and the Dow Jones Oil- Secondary Index. The results
assume $100 was invested on December 31, 1998 and that dividends were
reinvested.
Cumulative Total Return on $100 Investment
(December 31, 1998 - December 31, 2003)
1998 1999 2000 2001 2002 2003
------- --------- -------- ------- -------- --------
Denbury $ 100 $ 68 $ 175 $ 116 $ 179 $ 221
S&P 500 100 121 110 97 76 97
Dow Jones Oil - Secondary 100 115 184 169 173 227
[GRAPHIC OMITTED]
INTERESTS OF INSIDERS IN MATERIAL TRANSACTIONS
Other than as described below, there are no material interests, direct or
indirect, of any of our directors, officers or stockholders who beneficially
own, directly or indirectly, or exercise control or direction over more than 10%
of our outstanding common stock, or any known family member, associate or
affiliate of such persons, in any transaction within the last three years or in
any proposed transaction that has materially affected or would materially affect
the Company or any of its subsidiaries. We believe that the terms of the
transactions described below were as favorable to us as terms that reasonably
could have been obtained from non-affiliated third parties.
30
TPG Investments
TPG has made several different investments in the Company. Its $40.0
million initial investment in December 1995 was comprised of a private placement
of securities, which included 4.2 million shares of common stock, 625,000
warrants and 1.5 million shares of convertible preferred stock. The convertible
preferred stock was converted into 2.8 million shares of common stock in 1996
and the warrants were exercised in January 1998. TPG also purchased shares in
two of our public stock offerings. TPG purchased 800,000 shares of common stock
in October 1996 at an aggregate cost of $9.6 million and 313,400 shares of
common stock in February 1998 at an aggregate cost of $5.0 million. Both of
these acquisitions were made at the same price that the shares were sold by the
Company to the underwriters. In April 1999, TPG purchased 18,552,876 shares of
common stock at $5.39 per share for an aggregate consideration of $100 million.
As a result of this investment, TPG's ownership at that time increased from
approximately 32% to 60% of our then issued and outstanding common stock. In
addition, as part of TPG's $100 million investment in 1999, we agreed to execute
a new registration rights agreement with TPG. The new registration rights
agreement covered all of the shares then owned by TPG, or a total of 27,274,314
shares of common stock.
In April 2001, TPG elected to be included as a selling stockholder under a
shelf registration statement filed by Denbury. During November and December
2002, TPG sold 7.5 million shares of common stock for net proceeds of
approximately $71.3 million. In March 2003, TPG sold an additional 2.5 million
shares under this registration statement for net proceeds of approximately $27.4
million. TPG sold an additional 8.0 million shares in December 2003 for net
proceeds of approximately $106 million and sold the remaining balance of
approximately 9.3 million shares on March 26, 2004 for net proceeds of
approximately $139.3 million. TPG representatives currently hold three of the
eight seats on our board and following the 2004 annual meeting, assuming that
the proposed director nominees are elected, will hold two of the six seats on
our board. We anticipate that one or both of these directors will be replaced by
our 2005 annual meeting. Since our certificate of incorporation requires a
two-thirds majority vote by the board of directors on most significant
transactions, such as significant asset purchases and sales, issuances of equity
and debt, changes in the board of directors and other matters, assuming that
representatives of TPG continue to hold one-third of the board seats (as
proposed herein), they will still be able to exert significant influence on any
decisions on these matters.
STOCKHOLDER PROPOSALS
All future stockholder proposals must be submitted in writing to Phil
Rykhoek, Chief Financial Officer and Secretary, 5100 Tennyson Parkway, Suite
3000, Plano, Texas 75024. In order for a stockholder proposal to be included in
the proxy materials for the 2004 Annual Meeting of Stockholders, the proposal
must be received by the Company no later than December 3, 2004. These proposals
must also meet other requirements of the Securities and Exchange Act of 1934 to
be eligible for inclusion.
The form of Proxy for the annual meeting of stockholders grants authority
to the persons designated therein as proxies to vote in their discretion on any
other matters that come before the meeting, or any adjournment thereof, that are
not set forth in our proxy statement, except for those matters as to which
adequate notice is received. In order for a notice to be deemed adequate for
purposes of the 2004 annual meeting of stockholders, it must be received prior
to February 13, 2005.
31
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, which has audited the Company's books annually since
1991, served as independent accountants for 2003. Representatives of Deloitte &
Touche LLP are expected to be present at the annual meeting and will have an
opportunity to make a statement and/or to respond to appropriate questions. As
of April 1, 2004, the Audit Committee had not selected the Company's independent
accountants for 2004.
Independent Auditor's Fees
The following table presents fees for professional services rendered by
Deloitte & Touche LLP for the Company for the years ended December 31, 2003 and
2002.
2003 2002
----------------- -----------------
Audit Fees (1) $ 294,116 $ 217,405
Audit Related Fees (2) 29,758 24,103
Tax Fees (3) - 4,969
----------------- -----------------
Total (4) $ 323,874 $ 246,477
================= =================
(1) Audit fees consisted of audit work and review services, as well as
work only the independent auditor can reasonably be expected to
provide, such as comfort letters, consents and review of documents
filed with the SEC.
(2) Audit related fees consisted of employee benefit plan audit and
consultation on financial accounting and reporting matters and
internal control assistance related to Sarbanes-Oxley.
(3) Tax fees consisted of tax consultation and research.
(4) There were no other fees paid to Deloitte & Touche during the
respective periods.
In September 2002, the Audit Committee passed a resolution that
pre-approved all audit and audit related services performed by Deloitte & Touche
LLP. The resolution also stated that any non-audit services performed by
Deloitte & Touche LLP should be pre-approved by the Audit Committee or its
Chairman. The non-audit services disclosed above were performed prior to this
resolution and prior to the adoption of the Sarbanes-Oxley Act of 2002, which
requires such pre-approval.
32
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder require our executive officers and directors, and persons who own
more than ten percent (10%) of our common stock, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission and stock
exchanges and to furnish us with copies. Based solely on our review of the
copies of such forms received by us, or representations made by the officers and
directors to us, we are not aware of any late filings of these forms.
OTHER MATTERS
We know of no other matter to come before the annual meeting other than the
matters referred to in the Notice of Annual Meeting. However, if any other
matter properly comes before the meeting, the accompanying proxy will be voted
on such matter at the discretion of the person or persons voting the proxy.
All information contained in this proxy statement relating to the
occupations, affiliations and securities holdings of our directors and officers
and their relationship and transactions with us is based upon information
received from the individual directors and officers. All information relating to
any beneficial owner of more than 5% of our common stock is based upon
information contained in reports filed by such owner with the SEC. The
information contained in this proxy statement in the sections entitled "Board
Compensation Committee Report on Executive Compensation,""Share Performance
Graph" and "Audit Committee Report" shall not be deemed incorporated by
reference by any general statement incorporating by reference any information
contained in this proxy statement into any filing under the Securities Act of
1933 or the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates by reference the information contained in such
sections, and shall not otherwise be deemed filed under the Securities Act or
the Exchange Act.
WE HAVE PROVIDED TO EACH PERSON WHOSE PROXY IS SOLICITED HEREBY A COPY OF
OUR 2003 ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 2003. THE
ANNUAL REPORT TO STOCKHOLDERS DOES NOT CONSTITUTE A PART OF THE PROXY SOLICITING
MATERIAL. A COPY OF OUR ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO DENBURY
RESOURCES INC., ATTN: INVESTOR RELATIONS, 5100 TENNYSON PARKWAY, SUITE 3000,
PLANO, TEXAS 75024, OR BY E-MAIL TO INVREL@DENBURY.COM.
By order of the Board of Directors
/s/ Phil Rykhoek
Phil Rykhoek
Senior Vice President, Chief Financial Officer
and Secretary
33
Exhibit A
2004
OMNIBUS STOCK AND INCENTIVE PLAN
FOR
DENBURY RESOURCES INC.
TABLE OF CONTENTS
(1) Purpose..................................................................................................1
(2) Definitions..............................................................................................1
(a) "Administrator".................................................................................1
(b) "Agreed Price"..................................................................................1
(c) "Applicable Laws"...............................................................................1
(d) "Award".........................................................................................1
(e) "Board".........................................................................................1
(f) "Broker Assisted Exercise"......................................................................1
(g) "Cause".........................................................................................2
(h) "Change in Control".............................................................................2
(i) "Change in Control Price........................................................................3
(j) "Code"..........................................................................................3
(k) "Committee".....................................................................................3
(l) "Common Stock"..................................................................................3
(m) "Company".......................................................................................3
(n) "Date of Grant..................................................................................3
(o) "Director"......................................................................................3
(p) "Disability"....................................................................................3
(q) "Effective Date"................................................................................3
(r) "Eligible Person(s)"............................................................................3
(s) "Employee(s)"...................................................................................4
(t) "Fair Market Value".............................................................................4
(u) "Holder"........................................................................................4
(v) "Incentive Stock Option.........................................................................4
(w) "Investment Committee"..........................................................................4
(x) "Limited SAR"...................................................................................4
(y) "Non-Qualified Stock Option"....................................................................4
(z) "Option"........................................................................................4
(aa) "Option Price"..................................................................................4
(bb) "Parent"........................................................................................4
(cc) "Performance Award".............................................................................4
(dd) "Performance Measures"..........................................................................5
(ee) "Performance Period"............................................................................5
(ff) "Plan"..........................................................................................5
(gg) "Plan Year".....................................................................................5
(hh) "Reserved Shares"...............................................................................5
(ii) "Restriction(s)" "Restricted"...................................................................5
(jj) "Restricted Period".............................................................................5
(kk) "Restricted Shares".............................................................................5
(ll) "Restricted Share Award"........................................................................5
(mm) "Restricted Share Distributions"................................................................5
(nn) "SAR"...........................................................................................5
(oo) "Shares"........................................................................................5
(pp) "Spread"........................................................................................6
(qq) "Separation"....................................................................................6
(rr) "Subsidiary"....................................................................................6
(ss) "1933 Act"......................................................................................6
(tt) "1934 Act.......................................................................................6
(uu) "Vested"........................................................................................6
(vv) "10% Person"....................................................................................6
(3) Award Reserved Shares....................................................................................6
(4) Conditions for Grant of Awards...........................................................................7
(5) Grant of Options.........................................................................................8
(6) Option Price.............................................................................................8
(7) Exercise Options.........................................................................................9
(8) Vesting of Options.......................................................................................9
(9) Termination of Option Period............................................................................10
(10) Acceleration............................................................................................10
(11) Adjustment of Reserved Shares...........................................................................11
(12) Transferability of Awards...............................................................................12
(13) Issuance of Reserved Shares.............................................................................12
(14) Administration of the Plan..............................................................................13
(15) Tax Withholding.........................................................................................15
(16) Restricted Share Awards.................................................................................15
(17) Performance Awards......................................................................................16
(18) Stock Appreciation Rights and Limited Stock Appreciation Rights.........................................17
(19) Section 83(b) Election..................................................................................19
(20) Interpretation..........................................................................................20
(21) Amendment and Discontinuation...........................................................................20
(22) Effective Date and Termination Date.....................................................................20
2004 OMNIBUS STOCK AND INCENTIVE PLAN FOR
DENBURY RESOURCES INC.
1. Purpose.
The purpose of this Plan is to advance the interests of Denbury Resources
Inc., a Delaware Corporation, and increase shareholder value by providing
additional incentives to attract, retain and motivate those qualified and
competent employees and Directors, upon whose efforts and judgment its success
is largely dependent.
2. Definitions.
As used herein, the following terms shall have the meaning indicated:
(a) "Administrator" shall mean the person(s) designated by the Committee
to carry out nondiscretionary administrative duties with respect to
the Plan and Awards.
(b) "Agreed Price" shall relate to the grant of an Award in the form of a
SAR or Limited SAR, and shall mean the value assigned to the Award's
Reserved Shares which will form the basis for calculating the Spread
on the date of exercise of the SAR or Limited SAR, which assigned
value may be any value determined by the Committee, including the Fair
Market Value of the Reserved Shares on the Date of Grant.
(c) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws,
U.S. federal and state securities laws, and the Code; and the similar
laws of any foreign country or jurisdiction where Options are, or will
be, granted.
(d) "Award" shall mean either an Option, a SAR, a Restricted Share Award,
or a Performance Award, except that where it shall be appropriate to
identify the specific type of Award, reference shall be made to the
specific type of Award; and provided, further, that references to
Award shall be deemed to be references to the written agreement
evidencing such Award, and provided, finally, without limitation, that
unless expressly provided to the contrary in the terms of the Award,
in the event of a conflict between the terms of the Plan and the terms
of an Award, the terms of the Plan are controlling.
(e) "Board" shall mean the Board of Directors of the Parent.
(f) "Broker Assisted Exercise" shall mean a special sale and remittance
procedure pursuant to which the Holder of an Option shall concurrently
provide irrevocable written instructions to (a) an Administrator
designated brokerage firm ("Broker") to effect the immediate sale of
the Reserved Shares and remit to the Administrator, out of the sale
proceeds available on the settlement date, sufficient funds to cover
the aggregate Option Price plus all applicable Federal, state and
local income and employment taxes required
A-1
to be withheld by the Company, and (b) the Administrator to deliver
the certificates for the Shares directly to such brokerage firm in
order to complete the sale.
(g) "Cause" shall mean either (i) a final, non-appealable conviction of a
Holder for commission of a felony involving moral turpitude, or (ii)
Holder's willful gross misconduct that causes material economic harm
to the Company or that brings substantial discredit to the Company's
reputation.
(h) "Change in Control" shall mean any one of the following:
(1) "Continuing Directors" no longer constitute a majority of the
Board; the term "Continuing Director" means any individual who
has served in such capacity for one year or more;
(2) after the Effective Date, any person or group of persons acting
together as an entity (other than the Texas Pacific Group and its
Affiliates) become (i) the beneficial owners (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended)
directly or indirectly, of shares of common stock representing
thirty percent (30%) or more of the voting power of the Company's
then outstanding securities entitled generally to vote for the
election of the Company's Directors, and (ii) the largest
beneficial owner directly or indirectly of the Company's then
outstanding securities entitled generally to vote for the
election of the Company's Directors;
(3) the merger or consolidation to which the Company is a party if
(i) the stockholders of the Company immediately prior to the
effective date of such merger or consolidation have beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of
less than forty percent (40%) of the combined voting power to
vote for the election of directors of the surviving corporation
or other entity following the effective date of such merger or
consolidation; or (ii) fifty percent (50%) or more of the
individuals constituting the members the Investment Committee are
terminated due to the Change in Control; or
(4) the sale of all or substantially all, of the assets of the
Company or the liquidation or dissolution of the Company.
(5) Notwithstanding the foregoing provisions of this Section 2(h), if
a Holder's Separation is for a reason other than for Cause 90
days prior to the date on which a Change in Control occurs, such
termination shall be deemed to have occurred immediately
following a Change in Control.
(6) Notwithstanding anything herein to the contrary, under no
circumstances will a change in the constitution of the board of
directors of any Subsidiary, a change in the beneficial ownership
of any Subsidiary, the merger or consolidation of a Subsidiary
with any other entity, the sale of all or substantially all of
A-2
the assets of any Subsidiary or the liquidation or dissolution of
any Subsidiary constitute a "Change in Control" under this Plan.
(i) "Change in Control Price" shall mean the higher of (i) the highest
price per Share paid in any transaction reported on the NYSE or such
other exchange or market as is the principal trading market for the
Common Stock, or (ii) the highest price per share paid in any bona
fide transaction related to a Change in Control, at any time during
the 60 day period immediately preceding such occurrence; with such
occurrence date to be determined by the Administrator.
(j) "Code" shall mean the Internal Revenue Code of 1986, as now or
hereafter amended.
(k) "Committee" shall mean the Compensation Committee of the Board,
provided, further, that in granting Performance Awards, Committee
shall refer to only those members of the Compensation Committee who
are "Outside Directors" within the meaning of Section 162(m) of the
Code.
(l) "Common Stock" shall mean the common stock, $.001 par value, of the
Parent.
(m) "Company"shall mean, individually and collectively, the Parent and the
Subsidiaries, except that when it shall be appropriate to refer only
to Denbury Resources Inc., the reference will be to "Parent".
(n) "Date of Grant" shall mean the date on which the Committee takes
formal action to grant an Award, provided that it is followed, as soon
as reasonably practicable, by written notice to the Eligible Person
receiving the Award.
(o) "Director" shall mean a member of the Board.
(p) "Disability" shall mean a Holder's present incapacity resulting from
an injury or illness (either mental or physical) which, in the
reasonable opinion of the Administrator based on such medical evidence
as it deems necessary, will result in death or can be expected to
continue for a period of at least twelve (12) months and will prevent
the Holder from performing the normal services required of the Holder
by the Company; provided, however, that such disability did not
result, in whole or in part: (i) from chronic alcoholism; (ii) from
addiction to narcotics; (ii) from a felonious undertaking; or (iv)
from an intentional self-inflicted wound.
(q) "Effective Date" shall mean May 12, 2004.
(r) "Eligible Person(s)" shall mean those persons or entities, as
applicable, who are Employees, or non-employee Directors.
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(s) "Employee(s)" shall mean each person whose customary work schedule is
a minimum of thirty (30) hours per week, and who is designated as an
employee on the books of the Company.
(t) "Fair Market Value" per Share on the date of reference shall be the
Closing Price on such date, provided, further, that if the actual
transaction involving the Shares occurs at a be the most recent
Closing Price; provided, further, that "Closing Price" means the
closing price of the Shares on the New York Stock Exchange as reported
in any newspaper of general circulation.
(u) "Holder" shall mean, at each time of reference, each person with
respect to whom an Award is in effect; provided, further, that
following the death of a Holder, it shall refer to the person who
succeeds to the rights of such Holder.
(v) "Incentive Stock Option" shall mean an Option that is an incentive
stock option as defined in Section 422 of the Code.
(w) "Investment Committee" shall mean the committee of that name
established by the Board, who shall be solely responsible for
selecting its members, and whose members on the Effective Date are
Messrs. Gareth Roberts, Ronald T. Evans, Mark Worthey and Phil
Rykhoek.
(x) "Limited SAR" shall mean a limited stock appreciation right as defined
in Section 18 hereof.
(y) "Non-Qualified Stock Option" shall mean an Option that is not an
Incentive Stock Option.
(z) "Option" (when capitalized) shall mean the grant of the right to
purchase Reserved Shares through the payment of the Option Price and
taking the form of either an Incentive Stock Option or a Non-Qualified
Stock Option; except that, where it shall be appropriate to identify a
specific type of Option, reference shall be made to the specific type
of Option; provided, further, without limitation, that a single Option
may include both Incentive Stock Option and Non-Qualified Stock Option
provisions.
(aa) "Option Price" shall mean the price per Reserved Share which is
required to be paid by the Holder in order to exercise his or her
right to acquire the Reserved Share under the terms of the Option.
(bb) "Parent" shall mean Denbury Resources Inc.
(cc) "Performance Award" shall mean the award which is granted contingent
upon the attainment of the performance objectives during the
Performance Period, all as described more fully in Section 13.
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(dd) "Performance Measures" shall mean one or more of the following: (i)
earnings per share, (ii) return on average common equity, (iii)
pre-tax income, (iv) pre-tax operating income, (v) net revenue, (vi)
net income, (vii) profits before taxes, (viii) book value per share,
(ix) changes in amounts of oil and gas reserves, (x) changes in
production rates, (xi) net asset value, (xii) net asset value per
share, (xiii) sales, (xiv) finding cost, or (xv) operating cost
reductions, but shall not include remaining in the employ of the
Company for a specified period of time.
(ee) "Performance Period" shall mean the period described in Section 13
with respect to which the performance objectives relate.
(ff) "Plan" shall mean this 2004 Omnibus Stock and Incentive Plan for
Denbury Resources Inc.
(gg) "Plan Year" shall mean the calendar year.
(hh) "Reserved Shares" shall mean, at each time of reference, the total
number of Shares described in Section 3 with respect to which the
Committee may grant an Award, all of which Reserved Shares shall be
held in the Parent's treasury or shall be made available from the
Parent's authorized and unissued Shares.
(ii) "Restriction(s)" "Restricted" and similar shall mean the restrictions
applicable to Reserved Shares subject to an Award which constitute "a
substantial risk of forfeiture" of such Reserved Shares within the
meaning of Section 83(a)(1) of the Code.
(jj) "Restricted Period" shall mean the period during which Restricted
Shares are subject to Restrictions.
(kk) "Restricted Shares" shall mean the Reserved Shares granted to an
Eligible Person which are subject to Restrictions; provided, further,
that the Committee may, in its sole discretion, determine that the
Restrictions which otherwise would have been imposed have been fully
satisfied on the Date of Grant by reason of prior service and/or other
considerations, and thus provide that such Restricted Shares shall be
fully Vested on the Date of Grant.
(ll) "Restricted Share Award" shall mean the award of Restricted Shares.
(mm) "Restricted Share Distributions" shall mean any amounts, whether
Shares, cash or other property (other than regular cash dividends)
paid or distributed by the Parent with respect to Restricted Shares
during a Restricted Period.
(nn) "SAR" shall mean a stock appreciation right as defined in Section 18
hereof.
(oo) "Share(s)" shall mean a share or shares of Common Stock.
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(pp) "Spread" shall mean the difference between the Option Price, or the
Agreed Price, as the case may be, of the Share(s) on the date of the
Award, and the Fair Market Value of such Share(s) on the date of
reference.
(qq) "Separation" shall mean the date on which a Holder ceases to have an
employment relationship with the Company for any reason, including
death or Disability; and provided, further, without limitation, such
employment relationship will cease, in the case of a non- Employee
Director, upon his or her ceasing to be a Director; provided, however,
that a Separation will not be considered to have occurred while an
Employee is on sick leave, military leave, or any other leave of
absence approved by the Company, if the period of such leave does not
exceed 90 days, or, if longer, so long as the Employee's right to
redeployment with the Company is guaranteed either by statute or by
contract.
(rr) "Subsidiary" shall mean, where the Award is an Incentive Stock Option,
a "subsidiary corporation", whether now or hereafter existing, as
defined in Section 424(f) of the Code, and on the case of any other
Award, shall mean any entity which would be a subsidiary corporation
as defined in Section 424(f) of the Code if it were a corporation.
Notwithstanding the foregoing, Genesis Energy, Inc. shall not be
considered a Subsidiary for purposes of this Plan.
(ss) "1933 Act" shall mean the Securities Act of 1933, as amended.
(tt) "1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
(uu) "Vested" and similar terms shall mean the number of Option Shares
which have become nonforfeitable and the number of Restricted Shares
on which the Restrictions have lapsed; provided, further, and without
limitation, that the lapse of Restrictions based on the attainment of
performance objectives is also a Vesting event.
(vv) "10% Person" shall mean a person who owns directly (or indirectly
through attribution under Section 425(d) of the Code) at the Date of
Grant of an Incentive Stock Option, stock possessing more than 10% of
the total combined voting power of all classes of voting stock (as
defined in Section 424 of the Code) of the Parent on the Date of
Grant.
3. Award of Reserved Shares.
(a) As of the Effective Date, 2,500,000 Shares shall automatically, and
without further action, become Reserved Shares. Notwithstanding the
foregoing, not more than 1,375,000 Reserved Shares may be issued under
the Plan as a result of the Vesting of Restricted Stock or Performance
Awards. To the extent any Award shall terminate, expire or be
canceled, the Reserved Shares subject to such Award (or with respect
to which the Award is measured), shall remain Reserved Shares. Where
an Award is settled on a basis other than the issuance of Reserved
Shares, the Reserved Shares which measured the amount of such Award
settlement shall be canceled and no longer considered Reserved Shares.
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(b) Notwithstanding any provision in this Plan to the contrary, no person
whose compensation may be subject to the limitations on deductibility
under Section 162(m) of the Code shall be eligible for a grant during
a single calendar year of an Award with respect to, or measured by,
more than 500,000 Reserved Shares. The limitation under this Section
3(b) shall be construed so as to comply with the requirements of
Section 162(m) of the Code.
4. Conditions for Grant of Awards.
(a) Without limiting the generality of the provisions hereof which deal
specifically with each form of Award, Awards shall only be granted to
such one or more Eligible Persons as shall be selected by the
Committee.
(b) In granting Awards, the Committee shall take into consideration the
contribution the Eligible Person has made or may be reasonably
expected to make to the success of the Company and such other factors
as the Committee shall determine. The Committee shall also have the
authority to consult with and receive recommendations from officers
and other personnel of the Company with regard to these matters. The
Committee may from time to time in granting Awards under the Plan
prescribe such terms and conditions concerning such Awards as it deems
appropriate, including, without limitation, relating an Award to
achievement of specific goals established by the Committee or to the
continued employment of the Eligible Person for a specified period of
time, provided that such terms and conditions are not inconsistent
with the provisions of this Plan.
(c) Incentive Stock Options may be granted only to Employees, and all
other Awards may be granted to any Eligible Person.
(d) The Plan shall not confer upon any Holder any right with respect to
continuation of employment by the Company, or any right to provide
services to the Company, nor shall it interfere in any way with his or
her right or the Company's right to terminate his or her employment at
any time.
(e) The Awards granted to Eligible Persons shall be in addition to regular
salaries, pension, life insurance or other benefits (if any) related
to their service to the Company, and nothing herein shall be deemed to
limit the ability of the Company to enter into any other compensation
arrangements with any Eligible Person.
(f) The Administrator shall determine in each case whether periods of
military or government service shall constitute a continuation of
employment or service for the purposes of this Plan or any Award.
(g) Notwithstanding any provision hereof to the contrary, each Award which
in whole or in part involves the issuance of Reserved Shares may
provide for the issuance of such Reserved Shares for consideration
consisting of cash or cash equivalents, or such other consideration as
the Committee may determine, including (without limitation) as
compensation for past services rendered.
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(h) The Committee may delegate in writing to the Administrator the
authority to grant awards to new employees of the Company, provided
that such authority contains limits on the maximum amount or number of
Awards (on both an individual basis and, if the Committee so
designates, on an aggregate basis) that the Administrator may grant
under such authority. Such authority shall also designate the terms
and conditions for these grants.
5. Grant of Options.
(a) The Committee may grant Options to Eligible Persons from time to time,
alone, in addition to, or in tandem with, other Awards granted under
the Plan. An Option granted hereunder shall be either an Incentive
Stock Option or a Non-Qualified Stock Option, and shall clearly state
whether it is (in whole or in part) an Incentive Stock Option or a
Non-Qualified Stock Option; provided, further, that failure of an
Option designated as an Incentive Stock Option to qualify as an
Incentive Stock Option will not affect its validity, and the portion
which does not qualify as an Incentive Stock Option shall be a
Non-Qualified Stock Option.
(b) If both Incentive Stock Options and Non-Qualified Stock Options are
granted to a Holder, the right to exercise, to the full extent
thereof, Options of either type shall not be contingent in whole or in
part upon the exercise of, or failure to exercise, Options of the
other type.
(c) The aggregate Fair Market Value (determined as of the Date of Grant)
of the Reserved Shares with respect to which any Incentive Stock
Option is exercisable for the first time by a Holder during any
calendar year under the Plan and all such plans of the Company (as
defined in Section 425 of the Code) shall not exceed $100,000;
provided, further, without limitation, that any portion of an Option
designated as an Incentive Stock Option which exceeds such $100,000
limit will, notwithstanding such designation, be a validly granted
Non-Qualified Stock Option.
(d) The Committee may at any time offer to buy out for a payment in cash,
an Option previously granted, based on such terms and conditions as
the Committee shall establish and as communicated to the Holder by the
Administrator at the time that such offer is made.
6. Option Price.
(a) The Option Price shall be any price determined by the Committee which
is not less than one hundred percent (100%) of the Fair Market Value
per Share on the Date of Grant; provided, however, that in the case of
an Incentive Stock Option granted to a 10% Person, the Option Price
shall not be less than 110% of the Fair Market Value per Share on the
Date of Grant. The Administrator shall determine the Fair Market Value
per Share.
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(b) Unless further limited by the Committee in any Option, the Option
Price may be paid in cash, by certified or cashier's check, by wire
transfer, by money order, through a Broker Assisted Exercise, with
Shares (but with Shares only if expressly permitted by the terms of
the Option and only with Shares owned by the Holder for at least 6
months prior to the exercise date), or by a combination of the above;
provided, however, that the Administrator may accept a personal check
in full or partial payment. If the Option Price is permitted to be,
and is, paid in whole or in part with Shares, the value of the Shares
surrendered shall be the Shares' Fair Market Value on the date
delivered to the Administrator.
7. Exercise of Options.
An Option shall be deemed exercised when (i) the Administrator has received
written notice of such exercise in accordance with the terms of the Option, and
(ii) full payment of the aggregate Option Price plus required withholding tax
amounts, if any, described in Section 15, of the Reserved Shares as to which the
Option is exercised has been made. Separate stock certificates shall be issued
by the Parent for any Reserved Shares acquired as a result of exercising an
Incentive Stock Option and a Non-Qualified Stock Option.
8. Vesting of Options.
(a) Without limitation, each Option shall Vest in whole or in part, and
shall expire, according to the terms of the Option. Unless otherwise
expressly provided in an Option, each Option which is not an Annual
Option as described in Section 8(b) below, shall Vest, and Reserved
Shares subject to such Option shall become Vested Option Shares, on
the dates set forth in the following Vesting Schedule:
(1) 25% of the Reserved Shares on the first anniversary of the Date
of Grant;
(2) 25% of the Reserved Shares on the second anniversary of the Date
of Grant;
(3) 25% of the Reserved Shares on the third anniversary of the Date
of Grant; and
(4) 25% of the Reserved Shares on the fourth anniversary of the Date
of Grant.
(b) Except as otherwise expressly provided in such Option, an Option which
is expressly designated as an "Annual" Option shall not Vest, and
shall remain 100% forfeitable, until the fourth (4th) anniversary of
its Date of Grant, and on such fourth (4th) anniversary of its Date of
Grant such Annual Option shall become 100% Vested, and all Reserved
Shares subject to such Annual Option shall become Vested Option
Shares.
(c) The Committee, in its sole discretion, may accelerate the date on
which all or any portion of an otherwise unvested Option shall Vest or
restrictions on Restricted Shares will lapse.
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9. Termination of Option Period.
(a) Unless the terms of an Option expressly provide for a different date
of termination, the unexercised portion of an Option shall
automatically and without notice terminate and become null and void at
the time of the earliest to occur of the following:
(1) on the 90th day following Holder's Separation for any reason
except death, Disability or for Cause; or
(2) immediately upon Separation as a result, in whole or in material
part, of a discharge for Cause; or
(3) on the first anniversary of a Separation by reason of death or
Disability;
(4) in the case of a 10% Person, on the fifth (5th ) anniversary of
the Date of Grant; or
(5) on the tenth (10th) anniversary of the Date of Grant.
(b) Notwithstanding any provision of the Plan to the contrary, in the
event of the proposed dissolution or liquidation of the Parent, or in
the event of a proposed sale of all or substantially all of the assets
of the Company, or the proposed merger of the Parent with or into
another corporation (collectively, the "Transaction"), unless
otherwise expressly provided (by express reference to this Section
9(b)) in the terms of an Option, after the public announcement of the
Transaction, the Committee may, in its sole discretion, direct the
Administrator to deliver a written notice ("Cancellation Notice") to
any Holder of an Option, canceling the unexercised Vested portion
(including the portion which becomes Vested by reason of
acceleration), if any, of such Option, effective on the date specified
in the Cancellation Notice ("Cancellation Date"). Notwithstanding the
forgoing, the Cancellation Date may not be earlier than the last to
occur of (i) the 15th day following delivery of the Cancellation
Notice, and (ii) the 60th day prior to the proposed date for the
consummation of the Transaction ("Proposed Date"). Without limitation,
the Cancellation Notice will provide that, unless the Holder elects in
writing to waive, in whole or in part, a Conditional Exercise, that
the exercise of the Option will be a Conditional Exercise. A
"Conditional Exercise" shall mean that in the event the Transaction
does not occur within 180 days of the Proposed Date, the exercising
Holder shall be refunded any amounts paid to exercise such Holder's
Option, such Option will be reissued, and the purported exercise of
such Option shall be null and void ab intitio.
10. Acceleration.
(a) Unless otherwise expressly provided in the Award, in the event the
Holder's Separation is by reason of the Holder's death, or Disability,
all Awards granted to the Holder shall become fully exercisable,
Vested, or the Restricted Period shall terminate, as the case may be
(hereafter, in this Section 10, such Award shall be "accelerated").
(b) Unless otherwise expressly provided in an Award, in the event of a
Change in Control (i) all Awards shall be accelerated, and (ii) in the
sole discretion of the Committee, the value of some or all Awards may
be cashed out on the basis of the Change in Control Price, at any time
during the 60 day period immediately preceding any bona fide
transaction related to a Change in Control; provided, further, that if
a date prior to such occurrence is selected for a cash out, any
subsequent increase in the Change in Control Price will be paid to
each Holder on the date of such occurrence, or as soon thereafter as
reasonably possible.
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11. Adjustment of Reserved Shares.
(a) If at any time while the Plan is in effect or Awards with respect to
Reserved Shares are outstanding, there shall be any increase or
decrease in the number of issued and outstanding Shares through the
declaration of a stock dividend or through any recapitalization
resulting in a stock split-up, combination or exchange of Shares, then
and in such event:
(i) appropriate adjustment shall be made in the maximum number of
Reserved Shares which may be granted under Section 3, and
equitably in the Reserved Shares which are then subject to each
Award, so that the same proportion of the Parent's issued and
outstanding Common Stock shall continue to be subject to grant
under Section 3, and to such Award, and
(ii) in addition, and without limitation, in the case of each Award
(including, without limitation, Options) which requires the
payment of consideration by the Holder in order to acquire
Reserved Shares, an appropriate equitable adjustment shall be
made in the consideration (including, without limitation the
Option Price) required to be paid to acquire the each Reserved
Share, so that (i) the aggregate consideration to acquire all of
the Reserved Shares subject to the Award remains the same and,
(ii) so far as possible, (and without disqualifying an Incentive
Stock Option) the relative cost of acquiring each Reserved Share
subject to such Award remains the same.
All such determinations shall be made by the Board in its sole
discretion.
(b) The Committee may change, or direct the Administrator to change, the
terms of Options outstanding under this Plan, with respect to the
Option Price or the number of Reserved Shares subject to the Options,
or both, when, in the Committee's judgment, such adjustments become
appropriate by reason of a corporate transaction (as defined in
Treasury Regulation ss. 1.425-1(a)(1)(ii)); provided, however, that if
by reason of such corporate transaction an Incentive Stock Option is
assumed or a new Incentive Stock Option is substituted therefore, the
Committee, or at the direction of the Committee, the Administrator,
may only change the terms of such Incentive Stock Option such that (i)
the excess of the aggregate Fair Market Value of the Shares subject to
the substituted Incentive Stock Option immediately after the
substitution or assumption, over the aggregate Option Price of such
Shares at such time, is not more than the excess of the aggregate Fair
Market Value of all Reserved Shares subject to the Incentive Stock
Option immediately before such substitution or assumption over the
aggregate Option Price of such Reserved Shares at such time, and (ii)
the substituted Incentive Stock Option, or the assumption of the
original Incentive Stock Option does not give the Holder additional
benefits which such Holder did not have under the original Incentive
Stock Option. Without limiting the generality of any other provisions
hereof, including, without limitation, Section 21, except to the
minimum extent, if any, required by Section 424(a) of the Code with
respect to Incentive Stock Options, no change made under the authority
of this Section 11(b) in the terms of an Option shall alter such
Option's material provisions in a way that makes such Option less
valuable to its Holder.
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(c) Except as otherwise expressly provided herein, the issuance by the
Parent of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in
connection with direct sale for adequate consideration, or upon the
exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Parent convertible into
such shares or other securities, shall not affect, and no adjustment
shall be made with respect to Reserved Shares subject to Awards
granted under the Plan.
(d) Without limiting the generality of the foregoing, the existence of
outstanding Awards with respect to Reserved Shares granted under the
Plan shall not affect in any manner the right or power of the Parent
to make, authorize or consummate (1) any or all adjustments,
recapitalizations, reorganizations or other changes in the Parent's
capital structure or its business; (2) any merger or consolidation of
the Parent; (3) any issue by the Parent of debt securities, or
preferred or preference stock which would rank above the Reserved
Shares subject to outstanding Awards; (4) the dissolution or
liquidation of the Parent; (5) any sale, transfer or assignment of all
or any part of the assets or business of the Company; or (6) any other
corporate act or proceeding, whether of a similar character or
otherwise.
12. Transferability of Awards.
Each Award shall provide that such Award shall not be transferable by the
Holder otherwise than by will or the laws of descent and distribution, and that
so long as an Holder lives, only such Holder or his or her guardian or legal
representative shall have the right to exercise such Incentive Stock Option.
13. Issuance of Reserved Shares.
No Holder shall be, or have any of the rights or privileges of, the owner
of Reserved Shares subject to an Award unless and until certificates
representing such Common Stock shall have been issued and delivered to such
Holder. As a condition of any issuance of Common Stock, the Administrator may
obtain such agreements or undertakings, if any, as the Administrator may deem
necessary or advisable to assure compliance with any such law or regulation or
shareholder agreement including, but not limited to, a representation, warranty
or agreement to be bound by any legends that are, in the opinion of the
Administrator, necessary or appropriate to comply with the provisions of any
securities law deemed by the Administrator to be applicable to the issuance of
the Reserved Shares and which are endorsed upon the Share certificates.
Share certificates issued to the Holder receiving such Reserved Shares who
is a party to any shareholders agreement, voting trust, or any similar agreement
shall bear the legends contained in such agreements. Notwithstanding any
provision hereof to the contrary, no Reserved Shares shall be required to be
issued with respect to an Award unless counsel for the Parent shall be
reasonably satisfied that such issuance will be in compliance with applicable
federal or state securities laws.
In no event shall the Company be required to sell or issue Reserved Shares
under any Award if the sale or issuance thereof would constitute a violation of
applicable federal or state securities law or regulation or a violation of any
other law or regulation of any governmental authority or any national
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securities exchange. As a condition to any sale or issuance of Reserved
Shares, the Company may place legends on Reserved Shares, issue stop transfer
orders, and require such agreements or undertakings as the Company may deem
necessary or advisable to assure compliance with any such law or regulation.
Without limitation, the Company shall use its best efforts to register the
Reserved Shares with the Securities and Exchange Commission under a Form S-8.
14. Administration of the Plan.
(a) The Plan shall be administered by the Committee and, except for the
powers reserved to the Board in Section 21 hereof, the Committee shall
have all of the administrative powers under Plan. Without limitation,
all members of the Committee must be independent Directors under
applicable rules of the New York Stock Exchange.
(b) The Committee, from time to time, may adopt rules and regulations for
carrying out the purposes of the Plan and, without limitation, may
delegate all of what, in its sole discretion, it determines to be
primarily administrative or ministerial duties to the Administrator.
The determinations under, and the interpretations of, any provision of
the Plan or an Award by the Committee (or the Administrator in the
exercise of his administrative authority) shall, in all cases, be in
its sole discretion, and shall be final and conclusive.
(c) Any and all determinations and interpretations of the Committee shall
be made either (i) by a majority vote of the members of the Committee
at a meeting duly called, with at least 2 days prior notice, or (ii)
without a meeting, by the written approval of all members of the
Committee.
(d) No member of the Committee, or the Administrator, shall be liable for
any action taken or omitted to be taken by such member or by any other
member of the Committee or by the Administrator with respect to the
Plan, and to the extent of liabilities not otherwise insured under a
policy purchased by the Company, the Company does hereby indemnify and
agree to defend and save harmless any member of the Committee, and the
Administrator, with respect to any liabilities asserted or incurred in
connection with the exercise and performance of their powers and
duties hereunder, unless such liabilities are judicially determined to
have arisen out of such person's gross negligence, fraud or bad faith.
Such indemnification shall include attorney's fees and all other costs
and expenses reasonably incurred in defense of any action arising from
such act of commission or omission. Nothing herein shall be deemed to
limit the Company's ability to insure itself with respect to its
obligations hereunder.
(e) In particular, and without limitation, except for the authority
granted to the Administrator under Section 4(h) to make determinations
described in subsections (i), (ii), and (iii) below while carrying out
the general delegation by the Committee with respect to the grant of
Awards to new Employees, the Committee shall have the sole authority,
consistent with the terms of the Plan:
(i) to determine whether and to what extent Awards are to be granted
hereunder to one or more Eligible Persons;
(ii) to determine the number of Reserved Shares to be covered by each
such Award granted hereunder;
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(iii) to determine the terms and conditions of any Award granted
hereunder, and to amend or waive any such terms and conditions
except to the extent, if any, expressly prohibited by the Plan;
(iv) to determine whether and under what circumstances an Option may
be settled in Restricted Shares instead of Reserved Shares;
(v) to determine whether, to what extent, and under what
circumstances Awards under the Plan are to be made, and operate,
on a tandem basis vis-a-vis other Awards under the Plan; and;
(vi) to determine (or to delegate to the Administrator the authority
to determine) whether to permit payment of tax withholding
requirements in Shares.
(f) Without limitation, Committee (and the Administrator in carrying out
his responsibilities under Section 4(h) shall have the authority to
adopt, alter, and repeal any or all of its rules, guidelines, and
practices with respect to the Plan, and all questions of
interpretation, with respect to the Plan or any Award shall be decided
by the Committee (or by the Administrator in carrying out his duties
under Section 4(h), whose decision shall be final, conclusive and
binding upon the Company and each other affected party.
(g) Without limitation the Committee in it's sole discretion may limit the
authority granted, or previously granted, hereunder by the Committee
to the Administrator by notifying the Administrator in writing of such
change.
15. Tax Withholding.
On or immediately prior to the date on which a payment is made to a Holder
hereunder or, if earlier, the date on which an amount is required to be included
in the income of the Holder as a result of an Award, the Holder shall be
required to pay to the Company, in cash, or in Shares (but in Shares only if
expressly permitted in the Award, or by written authorization of the
Administrator, and then only in the minimum amount required to satisfy the
minimum withholding requirements with respect to such Award), the amount (if
any) which the Company reasonably determines to be necessary in order for the
Company to comply with applicable federal or state tax withholding requirements,
and the collection of employment taxes; provided, further, without limitation,
that the Administrator may require that such payment be made in cash.
16. Restricted Share Awards.
(a) The Committee may grant Awards of Restricted Shares to any Eligible Person,
for no cash consideration, for such minimum consideration as may be
required by applicable law, or for such other consideration as may be
specified in the grant. The terms and conditions of Restricted Shares shall
be specified in the Award. The Committee, in its sole discretion, shall
determine what rights, if any, the person to whom an Award of Restricted
Shares is made shall have in the Restricted Shares during the Restriction
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Period and the Restrictions applicable to the particular Award, including
whether the holder of the Restricted Shares shall have the right to vote
the Restricted Shares and the extent, if any, of Holder's right to receive
Restricted Share Distributions. Unless otherwise provided in the Restricted
Share Award, upon the expiration of Restrictions, the Restricted Shares
shall cease to be Restricted Shares.
(b) The Restrictions on Restricted Shares shall lapse in whole, or in
installments, over whatever Restricted Period shall be selected by the
Committee.
(c) Without limitations, the Committee may accelerate the date on which
Restrictions lapse with respect to any Restricted Shares.
(d) During the Restricted Period, the certificates representing the
Restricted Shares, and any Restricted Share Distributions, shall be
registered in the Holder's name and bear a restrictive legend
disclosing the Restrictions, the existence of the Plan, and the
existence of such Restricted Share Award. Such certificates shall be
deposited by the Holder with the Company, together with stock powers
or other instruments of assignment, each endorsed in blank, which will
permit the transfer to the Company of all or any portion of the
Restricted Shares, and any assets constituting Restricted Share
Distributions, which shall be forfeited in accordance with the terms
of such Restricted Share Award. Restricted Shares shall constitute
issued and outstanding Common Stock for all corporate purposes and the
Holder shall have all rights, powers and privileges of a holder of
unrestricted Shares except those that are expressly excluded under the
terms of the Restricted Share Award, and Holder will not be entitled
to delivery of the stock certificates until all Restrictions shall
have terminated, and the Company will retain custody of all related
Restricted Share Distributions (which will be subject to the same
Restrictions, terms, and conditions as the related Restricted Shares)
until the conclusion of the Restricted Period with respect to the
related Restricted Shares; and provided, further, that any Restricted
Share Distributions shall not bear interest or be segregated into a
separate account but shall remain a general asset of the Company,
subject to the claims of the Company's creditors, until the conclusion
of the applicable Restricted Period; and provided, finally, that any
material breach of any terms of the Restricted Share Award, as
reasonably determined by the Administrator, will cause a forfeiture of
both Restricted Shares and Restricted Share Distributions.
17. Performance Awards.
(a) Performance Awards during a Plan Year may be granted only to the Chief
Executive Officer and the four (4) highest paid employees as of the
last day of such Plan Year ("Covered Employees"), and shall in all
events be specifically designated as Performance Awards. Nothing
herein shall be construed as limiting the Committee's authority to
grant other types of Awards to Eligible Persons, including Covered
Employees, conditioned on the satisfaction of such criteria, including
those comprising the Performance Measures, as the Committee, in its
sole discretion, may select.
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(b) Without limitation, the Committee's grant of Performance Awards may,
in its sole discretion, be made in Reserved Shares, or in cash, or in
a combination of Reserved Shares and cash, but the cash portion of
such Award may not exceed $500,000 in a Plan Year.
(c) The Committee shall select the Performance Measures which will be
required to be satisfied during the Performance Period in order to
earn the Performance Award. Such Performance Measures, and the
duration of any Performance Period, may differ with respect to each
Covered Employee, or with respect to separate Performance Awards
issued to the same Covered Employee. The selected Performance
Measures, the Performance Period(s), and any other conditions to the
Company's obligation to pay a Performance Award shall be set forth in
each Performance Award on or before the first to occur of (i) the 90th
day of the selected Performance Period, (ii) the first date on which
more than 25% of the Performance Period has elapsed, and (iii) the
first date, if any, on which satisfaction of the Performance
Measure(s) is no longer substantially uncertain.
(d) Performance Awards may be payable in a single payment or in
installments but may not be paid in whole or in part prior to the date
on which the Performance Measures are attained, except that such
payment may be accelerated upon the death or Disability of the Covered
Employee, or as a result of a Change in Control, it being understood
that if such acceleration events occur prior to the attainment of the
Performance Measures, the Performance Award will not be exempt from
Section 162(m) of the Code.
(e) The extent to which any applicable performance objective has been
achieved shall be conclusively determined by the Committee, but may be
specifically delegated to the Administrator. Without limitation, where
a Covered Employee has satisfied the Performance Measures with respect
to a Performance Award, if permitted under the terms of such
Performance Award, the Committee, in its sole discretion, may reduce
the maximum amount payable under such Performance Award.
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18. Stock Appreciation Rights and Limited Stock Appreciation Rights
(a) The Committee shall have authority to grant a SAR, or to grant a
Limited SAR with respect to all or some of the Reserved Shares covered
by any Option ("Related Option"), or with respect to, or as some or
all of, a Performance Award ("Related Performance Award"). A SAR or
Limited SAR granted with respect to an Incentive Stock Option must be
granted on the Date of Grant of such related Option. A SAR or Limited
SAR granted with respect to a Related Non-Qualified Stock Option or a
Performance Award, may be granted on or after the Date of Grant of
such Related Option or Related Performance Award.
(b) For the purposes of this Section 18, the following definitions shall
apply:
(i) The term "Offer" shall mean any tender offer or exchange offer
for thirty percent (30%) or more of the outstanding Common Stock
of the Parent, other than one made by the Parent; provided that
the corporation, person or other entity making the Offer acquires
at least five percent (5%) of such Common Stock pursuant to such
Offer.
(ii) The term "Offer Price Per Share" shall mean the highest price per
Share paid in any Offer which is in effect at any time during the
period beginning on the sixtieth (60th) day prior to the date on
which a Limited SAR is exercised and ending on the date on which
the Limited SAR is exercised. Any securities or properties which
are a part or all of the consideration paid or to be paid for
Common Stock in the Offer shall be valued in determining the
Offer Price Per Share at the higher of (1) the valuation placed
on such securities or properties by the person making such Offer,
or (2) the valuation placed on such securities or properties by
the Administrator.
(iii) The term "Limited SAR" shall mean a right granted under this
Plan with respect to a Related Option or Related Performance
Award, that shall entitle the Holder to an amount in cash equal
to the Offer Spread in the event an Offer is made.
(iv) The term "Offer Spread" shall mean, with respect to each Limited
SAR, an amount equal to the product of (1) the excess of (A) the
Offer Price Per Share immediately preceding the date of exercise
over (B) (x) if the Limited SAR is granted in tandem with an
Option, then the Option Price per Share of the Related Option, or
(y) if the Limited SAR is issued with respect to a Performance
Award, the Agreed Price under the Related Performance Award,
multiplied by (2) the number of Reserved Shares with respect to
which such Limited SAR is being exercised; provided, however that
with respect to any Limited SAR granted in tandem with an
Incentive Stock Option, in no event shall the Offer Spread exceed
the amount permitted to be treated as the Offer Spread under
applicable Treasury Regulations or other legal authority without
disqualifying the Option as an Incentive Stock Option.
A-17
(v) The term "SAR" shall mean a right granted under this Plan,
including, without limitation, a right granted in tandem with an
Award, that shall entitle the Holder thereof to an amount equal
to the SAR Spread payable as described in Section 18(d).
(vi) The term "SAR Spread" shall mean with respect to each SAR an
amount equal to the product of (1) the excess of (A) the Fair
Market Value per Share on the date of exercise over (B) (x) if
the SAR is granted in tandem with an Option, then the Option
Price per Reserved Share of the Related Option, (y) if the SAR is
granted in tandem with a Performance Award, the Agreed Price
under the Related Performance Award, or (z) if the SAR is granted
by itself with respect to a designated number of Reserved Shares,
then whichever of the Fair Market Value of the Reserved Shares on
the Date of Grant, or the Agreed Price, shall be designated in
the SAR, in each case multiplied by (2) the number of Reserved
Shares with respect to which such SAR is being exercised;
provided, however, that with respect to any SAR granted in tandem
with an Incentive Stock Option, in no event shall the SAR Spread
exceed the amount permitted to be treated as the SAR Spread under
applicable Treasury Regulations or other legal authority without
disqualifying the Option as an Incentive Stock Option.
(c) To exercise the SAR or Limited SAR, the Holder shall:
(i) Give written notice thereof to the Company, specifying the SAR or
Limited SAR being exercised and the number or Reserved Shares
with respect to which such SAR or Limited SAR is being exercised,
and
(ii) If requested by the Company, deliver within a reasonable time the
agreement evidencing the SAR or Limited SAR being exercised, and
the Related Option agreement, or Related Performance Award
agreement, to the Secretary of the Company who shall endorse or
cause to be endorsed thereon a notation of such exercise and
return all agreements to the Holder.
(d) As soon as practicable after the exercise of a SAR or Limited SAR, the
Company shall transfer to the Holder Reserved Shares having a Fair
Market Value on the date the SAR or Limited SAR is exercised equal to
either the SAR Spread, or to the Offer Spread, as the case may be;
provided, however, without limiting the generality of Section 15, that
the Company may, in its sole discretion, withhold from such
transferred Reserved Shares any amount necessary to satisfy the
Company's minimum obligation for federal and state withholding taxes
with respect to such exercise.
(e) A SAR or Limited SAR may be exercised only if and to the extent that
it is permitted under the terms of the Award which, in the case of a
Related Option, shall be only when such Related Option is eligible to
be exercised; provided, however, a Limited SAR may be exercised only
during the period beginning on the first day following the date of
expiration of the Offer and ending on the thirtieth (30th) day
following such date.
(f) Upon the exercise or termination of a Related Option, or the payment
or termination of a Related Performance Award, the SAR or Limited SAR
with respect to such Related Option or Related Performance Award
likewise shall terminate.
(g) A SAR or Limited SAR shall be transferable only to the extent, if any,
that the Related Award is transferable, and under the same conditions.
(h) A SAR or Limited SAR granted with respect to an Incentive Stock Option
may be exercised only when the Fair Market Value of the Reserved
Shares exceeds the Option Price.
A-18
(i) Each SAR or Limited SAR shall be on such terms and conditions not
inconsistent with this Plan as the Committee may determine.
(j) The Holder shall have no rights as a stockholder with respect to the
related Reserved Shares as a result of the grant of a SAR or Limited
SAR.
(k) With respect to a Holder who, on the date of a proposed exercise of a
SAR or Limited SAR, is an officer (as that term is used in Rule 16a-1
promulgated under the 1934 Act or any similar rule which may
subsequently be in effect), such proposed exercise may only occur as
permitted by Rule 16b-3, including without limitation paragraph
(e)(3)(iii) (or any similar rule which may subsequently be in effect
promulgated pursuant to Section 16(b) of the 1934 Act).
19. Section 83(b) Election.
If as a result of receiving an Award, a Holder receives Restricted Shares,
then such Holder may elect under Section 83(b) of the Code to include in his or
her gross income, for his or her taxable year in which the Restricted Shares are
transferred to such Holder, the excess of the Fair Market Value (determined
without regard to any Restriction other than one which by its terms will never
lapse), of such Restricted Shares at the Date of Grant, over the amount (if any)
paid for the Restricted Shares. If the Holder makes the Section 83(b) election
described above, the Holder shall (i) make such election in a manner that is
satisfactory to the Administrator, (ii) provide the Administrator with a copy of
such election, (iii) agree to promptly notify the Company if any Internal
Revenue Service or state tax agent, on audit or otherwise, questions the
validity or correctness of such election or of the amount of income reportable
on account of such election, and (iv) agree to pay the withholding amounts
described in Section 15.
A-19
20. Interpretation.
(a) If any provision of the Plan is held invalid for any reason, such
holding shall not affect the remaining provisions hereof, but instead
the Plan shall be construed and enforced as if such provision had
never been included in the Plan.
(b) THIS PLAN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
(c) Headings contained in this Agreement are for convenience only and
shall in no manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine, or neuter gender shall be a
reference to such other gender as is appropriate.
(e) Nothing contained in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to shareholder
approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
21. Amendment and Discontinuation of the Plan.
The Board, or the Committee (subject to the prior written authorization of
the Board), may from time to time amend the Plan or any Award; provided,
however, that (except to the extent provided in Section 9(b)) no such amendment
may, without approval by the shareholders of the Parent, (a) increase the number
of Reserved Shares or change the class of Eligible Persons, (b) permit the
granting of Awards which expire beyond the maximum 10-year period described in
Section 9(a)(5), or (c) make any change for which applicable law or regulatory
authority (including the regulatory authority of the NYSE or any other market or
exchange on which the Common Stock is traded) would require shareholder approval
or for which shareholder approval would be required under Section 162(m) of the
Code to secure complete deductibility of all compensation paid as a result of
Awards; and provided, further, that no amendment or suspension of the Plan or
any Award issued hereunder shall, except as specifically permitted in this Plan
or under the terms of such Award, substantially impair any Award previously
granted to any Holder without the consent of such Holder.
22. Effective Date and Termination Date.
The Plan shall be effective as of its Effective Date, and shall terminate
on the tenth anniversary of such Effective Date; provided, further, without
limitation, that unless otherwise expressly provided in an Award, the
termination of the Plan shall not terminate an Award which is outstanding on
such date.
A-20
*** PROXY CARD ***
DENBURY RESOURCES INC.
ANNUAL MEETING OF STOCKHOLDERS
to be held
Wednesday May 12, 2004
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
---------------
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
-------------------------------------------
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number, which is presented below, available when you call.
TO VOTE BY INTERNET
-------------------
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number, which is presented below, available when
you access the web page.
YOUR CONTROL NUMBER IS -> [ ]
Please Detach and mail in the Envelope Provided
[X] Please mark your
votes as in this
example
FOR, except vote
withheld from the
1. Proposal to elect directors. FOR AGAINST following nominees:
Nominees: [ ] [ ] [ ]
Ronald G. Greene ----------------------
David I. Heather ----------------------
William S. Price, III ----------------------
Gareth Roberts ----------------------
Wieland F. Wettstein ----------------------
Carrie A. Wheeler ----------------------
FOR AGAINST ABSTAIN
2. Proposal to approve a new omnibus stock and incentive plan. [ ] [ ] [ ]
Signature:_________________________Date:___________________Signature: ___________________________ Date:___________________
(If held Jointly)
*** PROXY CARD ***
DENBURY RESOURCES INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 12, 2004
By signing this proxy, I appoint Ronald G. Greene, Chairman of the Board of
Denbury, and Gareth Roberts, President and Chief Executive Officer of Denbury,
and each of them acting singly, my attorney and proxy, with full power of
substitution, to vote on my behalf all of the shares of Denbury Resources Inc.
common stock that I am entitled to vote at the Annual Meeting of Shareholders to
be held on May 12, 2004, and at any adjournments of the meeting. This proxy
revokes any earlier proxy I have signed with respect to these shares.
If this proxy is properly executed, your shares of Denbury Resources Inc.
common stock represented by this proxy will be voted in the manner you specify.
If no specification is made, your shares of Denbury Resources Inc. stock will be
voted for each of the six nominees for director and for the proposal to approve
a new omnibus stock and incentive plan. The proxies are authorized to vote my
shares, in their discretion, on any other matter that is properly brought before
the meeting.
PLEASE SIGN AND MAIL YOUR PROXY TODAY.