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3235-0059 |
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant o |
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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þ Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Denbury Resources Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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þ No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
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SEC 1913 (11-01) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
March 28, 2006
To our Stockholders:
You are hereby notified that the 2006 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 (CDT),
on Wednesday, May 10, 2006, for the following purpose:
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to elect seven directors, each to serve until their successor is
elected and qualified; |
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to consider a stockholder proposal regarding performance-based options; |
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to ratify the appointment by the audit committee of
PricewaterhouseCoopers LLP as the Companys independent auditor for 2006; |
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 27, 2006, 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. If your shares are
held in street name by a broker or bank, you will need to obtain a written proxy from the broker,
bank or other nominee holding your shares to be able to vote at the meeting.
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Phil Rykhoek |
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Senior Vice President, Chief Financial Officer |
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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.
TABLE OF CONTENTS
DENBURY RESOURCES INC.
Proxy Statement
Annual Meeting of Stockholders
to be held on Wednesday, May 10, 2006
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 10th day of May,
2006 at our offices located at 5100 Tennyson Parkway, Suite 1200, Plano, Texas 75024 at 3:00 P.M.
Central Time (CDT), or at any adjournment thereof.
We anticipate that this proxy statement, proxy card and our 2005 annual report to stockholders
will be mailed on or before March 31, 2006.
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 Monday, March 27, 2006. 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 115,400,000 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 Internet 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. If your shares are held in
street name by a broker or bank, you will need to obtain a written proxy from the broker, bank or
other nominee holding your shares to be able to vote at 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 present in person or
represented by proxy at least one-third of our issued and outstanding shares of common stock
entitled to vote 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
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clearly identify such nominee on your proxy card. A majority of the votes cast in person or by
proxy at the meeting 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, FOR the appointment of our auditors and AGAINST the stockholder proposal
regarding performance-based options. 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:
Election of Directors
Our Bylaws provide that our Board of Directors 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 seven directors, all of whom are serving
terms that expire at the meeting. Unless you mark a proxy to the contrary, we plan to vote the
proxies for the election of the seven nominees as directors as listed herein. All seven 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
Gregory L. McMichael
Gareth Roberts
Randy Stein
Wieland F. Wettstein
Donald D. Wolf
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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:
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Officer or |
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Ronald G. Greene (1) (3)
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Chairman and
Director
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1995 |
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Principal Stockholder, Officer and
Director of Tortuga Investment Corp. |
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David I. Heather (2)
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Director
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2000 |
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Director of The Scotia Group |
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Gregory L. McMichael (1)
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Director
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2004 |
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Independent Consultant |
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Gareth Roberts
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President,
Chief Executive
Officer and
Director
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1992 |
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President and Chief Executive Officer,
Denbury Resources Inc. |
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Randy Stein (2) (3)
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Director
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2005 |
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Independent Consultant |
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Wieland F. Wettstein (2) (3)
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Director
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1990 |
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President, Finex Financial Corporation Ltd. |
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Donald D. Wolf (1)
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Director
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2004 |
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President and Chief Executive Officer of
Aspect Energy, LLC |
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Member of the Compensation Committee. |
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Member of the Audit Committee. |
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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.
and Chief Executive Officer of Renaissance from its inception in 1974 until May 1990, and remained
as Chairman until Renaissance was merged with Husky Oil Operations to create Husky Energy, Inc. in
August 2000. He is also the principal stockholder, officer and director of Tortuga Investment
Corp., a private investment company and serves on the Board of Directors of WestJet Airlines Ltd.,
a public Canadian scheduled airline. Mr. Greene has served on the boards of several public and
private companies, as well as industry organizations and community and international charitable
organizations.
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 firm in
Dallas and Houston, Texas, formed in 1981. He retired as president of Scotia in 2002, but
continues to provide technical and strategic advice to Scotia and its client base as an independent
consultant. 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.
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Gregory L. McMichael has been a director of Denbury since December 2004. Mr. McMichael is
currently a self-employed business consultant, having retired in 2004 from his position of Vice
President and Group Leader Energy Research of A.G. Edwards, where he was responsible for all of
the firms equity research in the energy sector. Prior to his employment by A.G. Edwards, which
commenced in
1998, Mr. McMichael was Director of Equity Research of Hanifen, ImHoff, Inc., a regional investment
banking firm based in Denver, for eight years. Mr. McMichael also serves on the board of Matador
Resources Company, a private oil and natural gas company headquartered in Dallas, Texas.
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 30 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.,
a public master limited partnership.
Randy Stein has been a director of Denbury since January 2005. Mr. Stein is currently a
self-employed business consultant having retired from PricewaterhouseCoopers LLP, formerly Coopers
& Lybrand LLP, in 2000. Mr. Stein was employed for 20 years with PricewaterhouseCoopers LLP, most
recently as principal in charge of the Denver tax practice. Mr. Stein served as audit committee
chairman, co-chairman of the nominating and governance committee, and a member of the compensation
committee of Westport Resources Corp., a Denver-based public oil and gas company, from 2000 until
they were acquired in 2004. Mr. Stein is currently a board member and audit committee chairman of
Bill Barrett Corporation, an oil and gas company, and also served on the board and audit committee
of Koala Corporation through 2005, both Denver-based public companies.
Wieland F. Wettstein has been a director of Denbury since 1990. Mr. Wettstein is the
President and controls 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 and private companies during the past 15 years, including several junior oil and gas
companies. Mr. Wettstein is a Chartered Accountant.
Donald D. Wolf has been a director of Denbury since June 2004. Mr. Wolf is currently the Chief
Executive Officer and President of Aspect Energy, a private oil and natural gas company based in
Denver. Beginning in 1996, Mr. Wolf was Chairman and Chief Executive Officer of Westport Resources
Corporation of Denver, Colorado, until Westport merged with Kerr-McGee in 2004. From 1994 to 1996,
Mr. Wolf was President and Chief Operating Officer of UMC Corporation, and from 1981 to 1993, he
was CEO and President of General Atlantic Resources. Mr. Wolf also serves on the boards of
MarkWest Hydrocarbons, Inc., Aspect Energy, LLC and Enduring Resources LLC.
Our Board of Directors recommends that stockholders vote FOR each of the foregoing directors.
Unless otherwise directed by a proxy marked to the contrary, it is the intention of management to
vote proxies FOR the election of the foregoing nominees as directors.
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Proposal Two:
Stockholder proposal regarding performance-based options
The Laborers Local #265 Pension Fund (the Laborers Fund), with a mailing address of 205 West
Fourth Street, Suite 225, Cincinnati, OH 45202, has notified us that it intends to present the
resolution set forth below at the Annual Meeting for action by stockholders. Laborers Funds
supporting statement for the resolution, along with the Board of Directors statement in opposition
is set forth below. As of November 23, 2005, Laborers Fund beneficially owned 3,800 shares of
Denburys common stock. Proxies solicited on behalf of the Board of Directors will be voted
AGAINST this proposal unless stockholders specify a contrary choice in their proxies.
Proposal:
RESOLVED: That the shareholders of Denbury Resources Inc. (the Company) request that the
Compensation Committee of the Board of Directors adopt a policy that a significant portion of
future stock option grants to senior executives shall be performance-based. Performance-based
options are defined as follows: 1) indexed options, in which the exercise price is linked to an
industry or well-defined peer group index; 2) premium-priced stock options, in which the exercise
price is set above the market price on the grant date; or 3) performance-vesting options, which
vest when a performance target is met.
Stockholders Statement Supporting Proposal 2:
As long-term shareholders of the Company, we support executive compensation policies and
practices that provide challenging performance objectives and serve to motivate executives to
enhance long-term corporate value. We believe that standard fixed-price stock option grants can
and often do provide levels of compensation well beyond those merited, by reflecting stock market
value increases, not performance superior to the companys peer group.
Our shareholder proposal advocates performance-based stock options in the form of indexed,
premium-priced or performance-vesting stock options. With indexed options, the option exercise
price moves with an appropriate peer group index so as to provide compensation value only to the
extent that the companys stock price performance is superior to the companies in the peer group
utilized. Premium-priced options entail the setting of an option exercise price above the exercise
price used for standard fixed-price options so as to provide value for stock price performance that
exceeds the premium option price. Performance-vesting options encourage strong corporate
performance by conditioning the vesting of granted options on the achievement of demanding stock
and/or operational performance measures.
Our shareholder proposal requests that the Companys Compensation Committee utilize one or
more varieties of performance-based stock options in constructing the long-term equity portion of
the senior executives compensation plan. The use of performance-based options, to the extent they
represent a significant portion of the total options granted to senior executives, will help place
a strong emphasis on rewarding superior corporate performance and the achievement of demanding
performance goals.
Leading investors and market observers, such as Warren Buffet and Alan Greenspan, have
criticized the use of fixed-price options on the grounds that they all to often reward mediocre or
poor performance. The Conference Boards Commission on Public Trust and Private Enterprise in 2002
looked at the issue of executive compensation and endorsed the use of performance-based options to
help restore public confidence in the markets and U.S. corporations.
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At present, the Company does not employ performance-based stock options as defined in this
proposal, so shareholders cannot be assured that only superior performance is being rewarded.
Performance-based options can be an important component of a compensation plan designed to focus
senior management on accomplishing long-term corporate strategic goals and superior long-term
corporate performance. We urge your support for this important executive compensation reform.
The Board recommends a vote AGAINST Proposal 2 for the following reasons:
The Board has considered this proposal and believes that its adoption is unnecessary and would
not be in the best interests of the Companys stockholders.
The Board believes that our current approach to executive compensation constitutes
performance-based compensation. As more fully described in the compensation committee report
beginning on page 23, our compensation structure provides both short-term and long-term components
for all employees, including: (i) competitive base salaries; (ii) stock purchase plan; (iii) cash
bonuses and (iv) long-term incentive compensation. Both the long-term and short-term components of
our compensation structure have performance-based elements.
Our long-term compensation component is the main focus of our compensation for all employees,
but with a higher level for management. It consists of deferred cash bonuses, stock appreciation
rights payable in stock and restricted stock. The equity-based components are awarded under our
Stock Plan, which was overwhelmingly approved by stockholders. Our Stock Plan is designed to
provide long-term incentives and to align the interests of executive officers (and all other
employees) and stockholders. All stock-based awards granted under the Stock Plan are designed to
motivate the holder to increase the value of the Company, which we believe leads to an increase in
the market price of our shares, which benefits not only the holder but the Companys stockholders
as a whole. Therefore, our long-term executive incentive compensation primarily consists of stock
appreciation rights and restricted stock (both of which recently replaced our historical use of
stock options in order to reduce and minimize dilution). Since the stock price is the primary
measure that stockholders such as you, independent third parties, use to measure our performance,
we believe that it is the best measure of compensation for our executives and is the single best
way to measure our performance.
In addition to being performance based, our awards to executives are long-term in nature.
While the annual recurring long-term awards granted to all employees vest four years from the date
of grant, the one-time grant of restricted stock awarded to our executives during 2004 (the most
significant potential value of each executives compensation) vest over an even longer period of
time, an average of 14 years for the named executive officers, except in the case of death,
disability or change of control. Furthermore, the executives must retain at least one-third of
such vested shares until their separation from the Company. These provisions minimize any
potential economic benefit to an executive arising from short-term movements in our stock price,
one of the main arguments against the use of fixed-price stock options.
Our short-term incentive compensation consists of annual cash bonuses for all employees. We
believe in the team concept and do not pay bonuses to our executives unless each full-time employee
also receives a bonus. Bonus determinations are made by the Committee subjectively, based on the
Committees evaluation of varying measures of performance, such as overall corporate results and
whether or not the Company has achieved its Company-wide goals and objectives, rather than on
arithmetic methods or formulas. Any measure that might be considered to determine whether or not
an oil and gas company had a good year (or other measures of success or failure) is open to
consideration by the Committee. These measures have historically included an evaluation of
production levels, stock performance, achievement of acquisition or disposition goals, completion
of significant transactions, completion of significant projects (such as software systems or
significant construction projects), operating
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and administrative expense levels as compared to
budget, capital expenditures as compared to budget, and the changes in our proved, probable and
possible reserves for that period as compared to costs incurred.
We believe that this subjective measure of performance by the Committee is much more effective
than using a specifically identified formula or measure that could be achieved because of events
that may be beyond the control of the executive. As an example, recently rising commodity prices
could allow an executive to achieve several commonly used performance targets such as earnings per
share or cash flow related measures, even though the Company performance as a whole may be
inadequate. Further, we believe that specific performance targets can cause an executive to focus
solely on those targets and ignore other prudent operating and performance measures. For example,
a production-based target could be achieved through uncontrolled and unreasonable costs. The
Committee has considered the use of such measures, but has concluded that the ability of our
Committee to review the overall results actually achieved in a year using several subjective
measures of performance is a much better way to reward our
executives, and that by linking our executives bonuses to those of all employees and thus
Company-wide performance, we are building a much more cohesive team of employees.
Board of Directors Recommendation
In summary,
we believe that our performance-based short and long-term incentive compensation, our success at
meeting performance goals and our team approach to compensation has served us well over the
years, as evidenced by our strong stock performance and low employee turnover. We have
significantly outperformed the S&P 500 Index and the Dow Jones Exploration and
Production Index during the last few years (see chart and narrative on page 28),
using our current compensation strategy. We do not believe it would be in the best
interest of our stockholders to modify this proven approach to compensation.
We recommend that you vote AGAINST this proposal. Unless otherwise directed by a
proxy marked to the contrary, it is the intention of management to vote proxies
AGAINST the approval of the proposed resolution.
Proposal Three:
Ratify the Appointment of PricewaterhouseCoopers LLP as auditor
PricewaterhouseCoopers LLP has been our auditor during the last two years. It is the
recommendation of our Audit Committee to appointment them to serve as auditors of the Company until
the next annual meeting of the shareholders and to authorize the Audit Committee to fix their
remuneration as such. A representative of PricewaterhouseCoopers LLP is expected to be present at
the Meeting and will be available to answer questions and will be afforded an opportunity to make a
statement if desired.
Board of Directors Recommendation
Based on the recommendation of our Audit Committee, our Board of Directors recommends that
stockholders vote FOR the appointment of PricewaterhouseCoopers LLP as auditor. Unless otherwise
directed by a proxy marked to the contrary, it is the intention of management to vote proxies FOR
the appointment of PricewaterhouseCoopers as auditor.
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
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operations. Members of the Board keep informed of the Companys 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 Boards Nominating/Corporate Governance Committee is
responsible for assessing and periodically
reviewing the adequacy of these guidelines. The guidelines are available on the Companys 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 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 Companys 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 in complying
with Denburys 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:
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ethical handling of actual or apparent conflicts of interest; |
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full, fair and accurate and timely disclosure in filings with the Securities and
Exchange Commission and in other public disclosures; |
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compliance with the law and other regulations; |
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protection of the Companys assets; |
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insider trading policies; and |
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prompt internal reporting of violations of the codes. |
Both of these codes are available on the Companys website at www.denbury.com, under
the
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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 Companys
website, along with 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:
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Denbury Resources Inc.
Attn: Corporate Secretary
5100 Tennyson Parkway, #1200
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.
For contacting Mr. Greene, presiding director at the meetings of non-management directors,
please address your letters to:
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Denbury Resources Inc.
Attn: Ronald G. Greene
5100 Tennyson Parkway, #1200
Plano, TX 75024 |
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, judgment and other skills and experience that will
enhance the Boards 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 consider director candidates
recommended by the stockholders. For the 2007 annual meeting of stockholders, any such
recommendation should be submitted in writing on or before November 1, 2006, to permit adequate
time for review by the Committee. The recommendation should also provide the reasons supporting a
candidates recommendation, the candidates qualifications, the candidates 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
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he or she owns. Stockholders may send recommendations for
director candidates to the address listed
above under Communication with the Board. Stockholders who wish to nominate an individual to the
Board must follow the advance notice and other requirements of the Companys Bylaws.
BOARD MEETINGS, ATTENDANCE AND COMMITTEES
The Board met ten times during the year ended December 31, 2005, including telephone meetings.
All incumbent directors attended at least 75% of the meetings held. The Board took all other
actions by unanimous written consent during 2005. In addition, all directors attended at least 75%
of all meetings of each of the committees on which they served. Mr. Greene, Chairman of the Board,
acts as chairman of each Board meeting.
At each in-person meeting, the Board holds an executive session with only Board members and
also an executive session of the independent board members, excluding Mr. Roberts, President and
CEO. Mr. Greene, Chairman of the Board, was elected by the independent board members to chair both
executive sessions.
The Company encourages the directors to attend, but does not have a policy that all of the
directors must be present at the annual meeting of stockholders. The following directors attended
last years annual meeting of stockholders: Messrs. Greene, Heather, Roberts, Stein, McMichael and
Wettstein. The board has an Audit Committee, a Compensation 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, Stein and Wettstein, with Mr. Stein currently acting as Chairman. Prior to January 2006,
Mr. Wettstein and Mr. Stein were Co-Chairmen. Mr. Greene was also on the Audit Committee from May
2004 to January 2005 to fill a committee vacancy resulting from the decision of Mr. Miller to not
stand for re-election at the 2004 annual meeting. Mr. Greene was replaced on the Audit Committee
by Mr. Stein upon his appointment to the Board in January 2005. The purpose of the Committee is to
appoint, compensate and evaluate the Companys independent auditor and petroleum engineer, and to
provide assistance to the Board in fulfilling its oversight responsibility with respect to:
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the integrity and quality of the financial statements and proven reserves of the Company; |
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evaluation of the internal controls of the Company; |
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the performance of the Companys internal audit function, its independent
auditor, and its independent petroleum engineer; |
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the independent auditors and petroleum engineers qualifications and independence; |
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compliance by the Company with legal and regulatory requirements; |
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evaluation of the Companys effectiveness for assessing, mitigating and
controlling significant business risks; and |
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compliance with the Companys code of conduct and ethics. |
The Audit Committee meets regularly with financial management, the Companys internal auditor
and independent auditor 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 auditor. The internal auditor, independent auditor and independent
engineer 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 engineer, 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 11 times
during 2005, including telephone meetings.
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. Both Mr. Stein and Mr. Wettstein, have such
experience and have been designated as audit committee financial experts. 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 and May 2005. 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 Companys 2005 audited financial
statements:
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The Committee has reviewed and discussed with management the Companys 2005
audited financial statements; |
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The Committee has discussed with the independent auditor, PricewaterhouseCoopers
LLP, the matters required to be discussed by SAS 61, as modified or supplemented,
which include matters related to the conduct of the audit of the Companys
financial statements; |
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The Committee has received written disclosures and the letter from the
independent auditor required by ISB Standard No. 1 (which relates to the auditors
independence from Denbury and its related entities) and has discussed with the
auditor the auditors independence from Denbury; |
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The Committee reviewed the Companys adherence to Section 404 of the
Sarbanes-Oxley Act of 2002 and related regulations; and |
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Based on review and discussions of the Companys 2005 audited financial
statements, including managements discussion and analysis of financial condition
and results of operations, with management and the independent auditor, the Audit
Committee has approved Denburys audited financial statements and managements
discussion and analysis of financial condition and results of operations for
inclusion in the Companys 2005 Annual Report on Form 10-K. |
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The Audit Committee |
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Randy Stein, Chairman |
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Wieland F. Wettstein |
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David I. Heather |
Compensation Committee
The Compensation Committee is currently comprised of Messrs. Greene, McMichael and Wolf, with
Mr. Greene acting as its Chairman. The purpose of the Compensation Committee, acting also as the
Stock Option Plan Committee and Stock Purchase Plan Committee, 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:
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recommending to the Board the design of an overall compensation program and
structure for the Company and reviewing the program annually, recommending to the
Board overall salary increases, bonuses and other annual compensation, and
proposing modifications to the compensation program as deemed necessary; |
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reviewing and approving corporate goals and objectives relevant to the Chief
Executive Officers compensation and evaluating the Chief Executive Officers
performance in light of these goals and determining and recommending to the Board
his compensation in light of this evaluation; |
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recommending to the Board the adoption or amendment of the Companys
equity-based and other incentive compensation plans, and approving, administering
and granting awards under these plans; and |
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preparing and publishing an annual report on executive compensation to be
included in the Companys proxy statement. |
The specific responsibilities of the Compensation Committee are identified in the
Committees charter, which is available on the Companys website at www.denbury.com under
the Corporate Governance link. The Compensation Committee met five times during 2005.
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Nominating/Corporate Governance Committee
The Board created a Nominating/Corporate Governance Committee during 2003, which is currently
comprised of Messrs. Greene, Stein and Wettstein. Mr. Heather was on the Nominating/Corporate
Governance Committee until replaced by Mr. Stein in May 2005. 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:
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identifying individuals qualified to become members of the Board; |
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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; |
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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; |
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developing and recommending to the Board adoption of its various codes of
conduct, ethics, and governance guidelines; |
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monitoring and developing the necessary training for new board members; |
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recommending to the Compensation Committee regarding director compensation and
benefits on an annual basis; and |
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reviewing the Companys proxy statement prior to its publication. |
The specific responsibilities of the Nominating/Corporate Governance Committee are identified
in the Committees charter, which is available on the Companys website at www.denbury.com
under the Corporate Governance link. The Nominating/Corporate Governance Committee met twice
during 2005.
COMPENSATION OF DIRECTORS
Information regarding the compensation received from Denbury, including options, during the
fiscal year ended December 31, 2005, 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 provide both cash and equity 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.
Our directors are paid an annual retainer fee of $35,000, plus $2,000 per board meeting
attended and $1,000 per telephone conference attended, including, as of the fourth quarter of 2005,
a $1,000 fee for
non-committee meetings or conferences attended as part of their duties as a board or committee
member.
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We also reimburse our directors for out-of-pocket travel expenses in connection with each
board meeting 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 also
paid an additional fee of $20,000 per year (and the Co-Chairman was also paid the additional fee
until January 2006) 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 Audit Committee may also receive an
additional $5,000 per year fee for performing special services. The only such award to date has
been to Mr. Heather who performs review work on our annual reserve report and began receiving this
additional fee in the fourth quarter of 2002.
We adopted a Director Compensation Plan effective July 1, 2000, for a term of ten years, and
amended the plan in May 2005 to remove any deferred compensation aspects of the plan, plan features
which had not been used by any director since its adoption. The Director Compensation Plan allows
each non-employee director to make a quarterly election to receive his or her compensation either
in cash or in shares of our common stock. The number of shares issued to a director who elects to
receive shares of common stock under the Director Compensation Plan is calculated by dividing the
director fees to be paid to such director by the closing price of the Companys common stock on the
date the fees are payable, the last day of each quarter. We also reimburse our directors for
out-of-pocket travel expenses in connection with each board meeting attended. We have reserved
200,000 shares for issuance under the Director Compensation Plan, for directors who elect to
receive their compensation in stock, and as of February 28, 2006, had 138,229 shares remaining
available under the plan.
As part of our review of compensation for our directors during 2004, we also issued each
non-employee director 20,000 shares of restricted stock, to the four then existing independent
directors in September 2004, and to Mr. McMichael and Mr. Stein upon the appointment to the Board
in December 2004 and January 2005, respectively. With respect to the 120,000 restricted shares
which have been issued to Denburys independent board members to date, the shares vest 20% per year
over five years. For these shares, on each annual vesting date, 40% of such vested shares may be
delivered to the director with the remaining 60% retained and held in escrow until the directors
separation from the Company. All restricted shares vest upon death, disability or a change in
control.
In January 2005, we issued stock options to the non-employee directors for the first time
since 1993. At that time, we issued to each director 3,000 stock options that 100% cliff vest four
years from the date of grant. We also issued 3,000 stock appreciation rights payable in common
stock to each of the non-employee directors in February 2006. Mr. Roberts has historically
received stock option grants as an employee, and the options held by Mr. Roberts are disclosed
under the heading Executive Compensation.
15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists, as of February 28, 2006, the stockholders of which we are aware
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 February 28, 2006 under our
Stock Option Plan.
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Beneficial Ownership of |
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Common Stock as of |
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February 28, 2006 |
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Percent of |
Name and Address of |
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Shares |
Beneficial Owner |
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Shares |
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Outstanding |
Ronald G. Greene |
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2,054,932 |
(1)(2) |
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1.8 |
% |
David I. Heather |
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33,000 |
(1)(3) |
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* |
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Gregory L. McMichael |
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30,000 |
(1) |
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* |
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Randy Stein |
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20,000 |
(1) |
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* |
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Wieland F. Wettstein |
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78,836 |
(1)(4) |
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* |
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Donald D. Wolf |
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36,203 |
(1) |
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* |
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Gareth Roberts |
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1,705,261 |
(5) |
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1.5 |
% |
Ronald T. Evans |
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417,218 |
(6) |
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* |
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Phil Rykhoek |
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443,632 |
(6) |
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* |
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Mark A. Worthey |
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559,396 |
(6) |
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* |
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Mark C. Allen |
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242,447 |
(6) |
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* |
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Ray Dubuisson |
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212,729 |
(6) |
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* |
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Ron Gramling |
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225,328 |
(6) |
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* |
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James H. Sinclair |
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238,451 |
(6) |
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* |
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All of the executive officers and directors as a group
(14 persons) |
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6,297,433 |
(7) |
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5.4 |
% |
Neuberger
& Berman L.P. |
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20,725,467 |
(8) |
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18.0 |
% |
605 Third Av. |
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New York, NY 10158 |
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Less than 1% |
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(1) |
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Includes 16,000 shares of unvested restricted common stock which vests at the
rate of 4,000 shares per year, on September 15 of each year, (except in the cases of
Messrs. McMichael and Stein, whose vesting occurs on December 8, and January 21, of
each year, respectively) until fully vested. In addition to the foregoing vesting
provisions, all of these shares will vest upon death, disability, or a change in
control of the Company. On each annual vesting date, 40% of such vested shares may
be delivered to the director with the remaining 60% retained and held in escrow until
their ceasing to be a director. |
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Includes 40,300 shares of common stock held by Mr. Greenes spouse in her
retirement plan, 68,000 shares held in the Greene Family Charitable Foundation of
which Mr. Greene is the trustee, and 1,325,006 shares held by Tortuga Investment
Corp., which is solely owned by Mr. Greene. |
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Includes 13,000 shares of common stock held in a family trust of which Mr.
Heather is a trustee. |
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Includes 15,400 shares of common stock held by S.P. Hunt Holdings Ltd., which is
solely owned by |
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a trust of which Mr. Wettstein is a trustee. Also includes 29,636 shares of common
stock held by Mr. Wettsteins spouse in her retirement plan. |
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(5) |
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Includes 196,660 shares of common stock held by a corporation which is solely
owned by Mr. Roberts, 4,456 shares held by his spouse and 381,490 shares which Mr.
Roberts has the right to acquire pursuant to stock options which are currently vested
or which vest within 60 days from February 28, 2006. Also includes 411,018 shares of
unvested restricted stock, 244,400 shares of which vests at the rate of 61,100 shares
per year on August 6 of each of the next four years, 164,500 shares of which vests
upon the latter of Mr. Roberts reaching the retirement age of 60 and his separation
from the Company, and 2,118 shares of which cliff vests after four years of service,
on January 3, 2010. In addition to the foregoing vesting provisions, all of these
shares will vest upon death, disability, or a change in control of the Company. With
respect to one-third of the restricted shares that vest annually, and all of the
shares that vest upon retirement, delivery of the shares will not be made to the
officer until that officers separation from the Company. |
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Includes the following shares of common stock for each respective individual
which they respectively have the right to acquire pursuant to (a) stock options that
are currently vested or that vest within 60 days from February 28, 2006, (b) shares
of unvested restricted stock subject to annual vesting over the next four years on
each August 6, (c) shares of unvested restricted stock that vests upon the latter of
the officer reaching a retirement age between the age of 60 and 65 depending on
length of service, and the officers separation from the Company, and (d) shares of
unvested restricted stock that will cliff vest after four years of service, on
January 3, 2010. In addition to the foregoing vesting provisions, all of these
shares will vest upon death, disability, or a change in control of the Company. With
respect to one-third of the restricted shares that vest annually, and all of the
shares that vest upon retirement, delivery of the shares will not be made to the
officer until that officers separation from the Company. |
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Unvested |
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Unvested |
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Unvested |
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Restricted Stock |
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Restricted Stock |
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Restricted Stock |
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(Annual |
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(Retirement |
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(Four Year Cliff |
Officer |
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Stock Options |
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Vesting) |
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Vesting) |
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Vesting) |
Ronald T. Evans
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54,202 |
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182,000 |
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122,500 |
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1,513 |
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Phil Rykhoek
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84,556 |
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182,000 |
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122,500 |
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1,513 |
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Mark A. Worthey
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141,894 |
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182,000 |
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122,500 |
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1,513 |
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Mark C. Allen
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57,688 |
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88,400 |
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59,500 |
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1,068 |
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Ray Dubuisson
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45,000 |
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88,400 |
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59,500 |
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1,038 |
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Ron Gramling
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88,400 |
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59,500 |
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1,014 |
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James H. Sinclair
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77,020 |
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88,400 |
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59,500 |
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1,059 |
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(7) |
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Includes 841,850 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 February 28, 2006, and 2,020,836 shares of
restricted stock of which vests over time as indicated above. |
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(8) |
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Information based on Schedule 13G filed with the SEC on February 21, 2006.
Neuberger & Berman L.P. claims sole power to vote 7,157,501 shares and shared power
to vote or to direct the vote for 12,552,400 shares and shared power to dispose or
direct the disposition of 20,725,467 shares. |
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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 By-laws.
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Name |
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Age |
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Position |
Gareth Roberts
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53 |
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President and Chief Executive Officer |
Ronald T. Evans
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43 |
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Senior Vice President, Reservoir Engineering |
Phil Rykhoek
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49 |
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Senior Vice President, Chief Financial Officer,
Secretary and Treasurer |
Mark A. Worthey
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48 |
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Senior Vice President, Operations |
Mark C. Allen
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38 |
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Vice President & Chief Accounting Officer |
Ray Dubuisson
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55 |
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Vice President, Land |
Ron Gramling
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60 |
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Vice President, Marketing |
James H. Sinclair
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43 |
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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.
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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.
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 Chevron 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 35 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).
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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 of the last
three completed fiscal years (collectively, the Named Executive Officers).
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Annual Compensation |
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Long Term Compensation |
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Number of |
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|
|
|
|
|
|
|
|
|
Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted |
|
Underlying |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Options |
|
All Other |
Name and Principal Position |
|
Year |
|
Salary |
|
Bonuses(1) |
|
Awards |
|
Granted |
|
Compensation(2,3) |
Gareth Roberts |
|
|
2005 |
|
|
$ |
372,750 |
|
|
$ |
165,587 |
|
|
$ |
|
|
|
|
40,110 |
|
|
$ |
40,183 |
|
President and |
|
|
2004 |
|
|
|
358,340 |
|
|
|
186,092 |
|
|
|
4,657,700 |
(4) |
|
|
46,666 |
|
|
|
38,605 |
|
Chief Executive Officer |
|
|
2003 |
|
|
|
350,000 |
|
|
|
100,091 |
|
|
|
|
|
|
|
45,614 |
|
|
|
37,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald T. Evans |
|
|
2005 |
|
|
$ |
266,250 |
|
|
$ |
118,276 |
|
|
$ |
|
|
|
|
28,650 |
|
|
$ |
32,196 |
|
Senior Vice President, |
|
|
2004 |
|
|
|
256,000 |
|
|
|
132,923 |
|
|
|
3,468,500 |
(4) |
|
|
33,350 |
|
|
|
30,925 |
|
Reservoir Engineering |
|
|
2003 |
|
|
|
250,000 |
|
|
|
71,528 |
|
|
|
|
|
|
|
29,740 |
|
|
|
29,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phil Rykhoek |
|
|
2005 |
|
|
$ |
266,250 |
|
|
$ |
118,276 |
|
|
$ |
|
|
|
|
28,650 |
|
|
$ |
32,196 |
|
Senior Vice President, Chief |
|
|
2004 |
|
|
|
256,000 |
|
|
|
132,923 |
|
|
|
3,468,500 |
(4) |
|
|
33,350 |
|
|
|
30,925 |
|
Financial Officer and Secretary |
|
|
2003 |
|
|
|
250,000 |
|
|
|
71,528 |
|
|
|
|
|
|
|
29,740 |
|
|
|
29,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark A. Worthey |
|
|
2005 |
|
|
$ |
266,250 |
|
|
$ |
118,276 |
|
|
$ |
|
|
|
|
28,650 |
|
|
$ |
32,196 |
|
Senior Vice President, |
|
|
2004 |
|
|
|
256,000 |
|
|
|
132,923 |
|
|
|
3,468,500 |
(4) |
|
|
33,350 |
|
|
|
30,925 |
|
Operations |
|
|
2003 |
|
|
|
250,000 |
|
|
|
71,528 |
|
|
|
|
|
|
|
29,740 |
|
|
|
29,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark C. Allen |
|
|
2005 |
|
|
$ |
188,000 |
|
|
$ |
83,515 |
|
|
$ |
|
|
|
|
20,070 |
|
|
$ |
25,862 |
|
Vice President and |
|
|
2004 |
|
|
|
179,330 |
|
|
|
93,114 |
|
|
|
1,684,700 |
(4) |
|
|
23,334 |
|
|
|
24,649 |
|
Chief Accounting Officer |
|
|
2003 |
|
|
|
175,000 |
|
|
|
50,046 |
|
|
|
|
|
|
|
23,640 |
|
|
|
23,890 |
|
|
|
|
(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 weeks salary and has been paid
to all employees for each of the last three years. |
|
(2) |
|
Amounts in this column for 2005 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 |
|
401(k) |
|
Insurance |
|
|
|
Purchase Plan |
|
Plan |
|
Premiums |
|
Gareth Roberts |
|
$ |
27,956 |
|
|
$ |
9,450 |
|
|
$ |
2,777 |
|
|
Ronald T. Evans |
|
|
19,969 |
|
|
|
9,450 |
|
|
|
2,777 |
|
|
Phil Rykhoek |
|
|
19,969 |
|
|
|
9,450 |
|
|
|
2,777 |
|
|
Mark A. Worthey |
|
|
19,969 |
|
|
|
9,450 |
|
|
|
2,777 |
|
|
Mark C. Allen |
|
|
14,100 |
|
|
|
9,450 |
|
|
|
2,312 |
|
|
20
(3) |
|
The aggregate amount of all other non-cash annual compensation for 2005 was less
than 10% of the total annual salary and bonus of each Named Executive Officer for each
year. |
|
(4) |
|
The holders of these shares have all of the rights and privileges of owning the shares (including voting rights) except that the holders are not entitled to delivery of
the certificates until certain requirements are met. The vesting restrictions on these shares are as follows: i) 65% of the awards vest 20% per year over five years and, ii)
35% of the awards vest upon the holder reaching a retirement age between the age of 60
and 65, depending on length of service, which for each of the Named Executive Officers
would be at age 60. All restricted stock vests upon death, disability or a change of
control. The restricted stock was granted on August 6, 2004. The closing market price
on the date of grant was $9.91 per share. As of December 31, 2005, the value of the
non-vested restricted stock awards was $9,314,742 for Mr. Roberts, $6,936,510 for Messrs.
Evans, Rykhoek and Worthey, and $3,369,162 for Mr. Allen, based on the closing market
price of $22.78 on December 30, 2005. The officers are not entitled to dividends on the
restricted stock unless the stock has vested. The total number of shares awarded to each
officer and the number of shares that vest during each of the next three years (39% of
the total awards) are listed below. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted |
|
|
|
|
Vested During |
|
Restricted Shares Vesting During: |
|
Shares Vesting |
|
Total |
|
|
2005 |
|
2006 |
|
2007 |
|
2008 |
|
2009 |
|
at Age 60 |
|
Grants (shares) |
Gareth Roberts |
|
|
61,100 |
|
|
|
61,100 |
|
|
|
61,100 |
|
|
|
61,100 |
|
|
|
61,100 |
|
|
|
164,500 |
|
|
|
470,000 |
|
Ronald T. Evans |
|
|
45,500 |
|
|
|
45,500 |
|
|
|
45,500 |
|
|
|
45,500 |
|
|
|
45,500 |
|
|
|
122,500 |
|
|
|
350,000 |
|
Phil Rykhoek |
|
|
45,500 |
|
|
|
45,500 |
|
|
|
45,500 |
|
|
|
45,500 |
|
|
|
45,500 |
|
|
|
122,500 |
|
|
|
350,000 |
|
Mark A. Worthey |
|
|
45,500 |
|
|
|
45,500 |
|
|
|
45,500 |
|
|
|
45,500 |
|
|
|
45,500 |
|
|
|
122,500 |
|
|
|
350,000 |
|
Mark C. Allen |
|
|
22,100 |
|
|
|
22,100 |
|
|
|
22,100 |
|
|
|
22,100 |
|
|
|
22,100 |
|
|
|
59,500 |
|
|
|
170,000 |
|
Option Grants in 2005
The following table represents the options granted to the Named Executive Officers during 2005
and the value of such options as of the date of grant:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Options |
|
|
|
|
|
|
|
|
|
|
Number of |
|
Granted to |
|
Exercise |
|
|
|
|
|
Grant Date |
|
|
Options |
|
Employees in |
|
Price |
|
Expiration |
|
Present |
Name |
|
Granted |
|
2005 |
|
($/Share) |
|
Date |
|
Value $(1) |
Gareth Roberts |
|
|
40,110 |
(2) |
|
|
1.6 |
% |
|
$ |
13.855 |
|
|
|
1/3/2015 |
|
|
$ |
242,024 |
|
Ronald T. Evans |
|
|
28,650 |
(2) |
|
|
1.2 |
% |
|
|
13.855 |
|
|
|
1/3/2015 |
|
|
|
172,874 |
|
Phil Rykhoek |
|
|
28,650 |
(2) |
|
|
1.2 |
% |
|
|
13.855 |
|
|
|
1/3/2015 |
|
|
|
172,874 |
|
Mark A. Worthey |
|
|
28,650 |
(2) |
|
|
1.2 |
% |
|
|
13.855 |
|
|
|
1/3/2015 |
|
|
|
172,874 |
|
Mark C. Allen |
|
|
20,070 |
(2) |
|
|
0.8 |
% |
|
|
13.855 |
|
|
|
1/3/2015 |
|
|
|
121,102 |
|
|
|
|
(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 our common stock listed on the NYSE, which was 44.2%; expected dividend
yield 0%; expected option term 5 years; and a risk-free rate of return as of the
date of grant of 3.6%, based on the yield of five year U.S. Treasury securities. The
actual value of the options presented in this table depends upon the performance of the common stock
during the |
21
|
|
|
|
|
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% on January 3, 2009, four years from the date of
grant. |
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, 2005. The options exercised by the
Named Executive Officers during 2005 are listed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
Number of Common Shares |
|
|
|
|
Acquired |
|
Value |
|
Underlying Unexercised |
|
Value of Unexercised In-the |
|
|
on Exercise |
|
Realized |
|
Options at |
|
Money Options at |
Name |
|
in 2005 |
|
in 2005 |
|
December 31, 2005 |
|
December 31, 2005(1) |
|
|
|
|
|
|
|
|
|
|
Exercisable |
|
Unexercisable |
|
Exercisable |
|
Unexercisable |
Gareth Roberts |
|
|
50,000 |
(2) |
|
$ |
1,002,802 |
(2) |
|
|
335,800 |
|
|
|
178,080 |
|
|
$ |
6,250,807 |
|
|
$ |
2,763,437 |
|
Ronald T. Evans |
|
|
19,000 |
(2) |
|
|
358,473 |
(2) |
|
|
24,400 |
|
|
|
121,542 |
|
|
|
442,616 |
|
|
|
1,870,934 |
|
Phil Rykhoek |
|
|
53,846 |
(2) |
|
|
879,408 |
(2) |
|
|
69,654 |
|
|
|
75,098 |
|
|
|
1,158,628 |
|
|
|
1,063,353 |
|
Mark A. Worthey |
|
|
|
|
|
|
|
|
|
|
112,092 |
|
|
|
121,542 |
|
|
|
1,934,706 |
|
|
|
1,870,934 |
|
Mark C. Allen |
|
|
9,000 |
|
|
|
168,099 |
|
|
|
34,000 |
|
|
|
90,732 |
|
|
|
655,450 |
|
|
|
1,412,365 |
|
|
|
|
(1) |
|
Based on the closing price of Denburys common stock on December 30, 2005, of
$22.78 per share as reported by the NYSE. |
|
(2) |
|
Included in the table are options that were exercised and held by the
following officers with the indicated value realized, representing the difference
between the exercise and market price on the date of exercise, even though the
shares were not sold. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Options |
|
|
|
|
|
|
Exercised |
|
Indicated |
|
|
Name |
|
and Held |
|
Value |
|
|
Gareth Roberts |
|
|
28,500 |
|
|
$ |
573,705 |
|
|
|
Ronald T. Evans |
|
|
16,000 |
|
|
|
305,840 |
|
|
|
Phil Rykhoek |
|
|
15,000 |
|
|
|
284,431 |
|
|
22
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 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 that:
|
|
|
we pay base salaries that will attract and retain outstanding talent, generally
around the median salaries of comparable companies; |
|
|
|
|
long-term incentives are the main focus of compensation; |
|
|
|
|
all employees are encouraged to be stockholders to better align their interests
with those of our stockholders; and |
|
|
|
|
employees are rewarded primarily for the effort and results of the team or
Company as a whole, rather than compensating only for individual performance. |
The components of this philosophy consist of:
|
|
|
competitive base salaries; |
|
|
|
|
a stock purchase plan for all employees; |
|
|
|
|
long-term awards for all employees, but with a higher level for the professionals; |
|
|
|
|
restricted stock to the officers; and |
|
|
|
|
a profit sharing plan or bonus plan. |
Base Salaries. In determining an executives salary, the Committee weighs individual
performance, overall corporate performance, the executives position and responsibility in the
organization, the executives 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
23
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 base salaries.
The Chief Executive Officers salary is determined in much the same manner as that of other
employees, with the intent to set his base salary at or near the median of comparable companies
based on salary surveys of the Companys peers. The 2005 salary adjustments, effective January 1,
2006, for the Chief Executive Officer, and other officers were made primarily to recognize the
overall wage inflation in the industry. These salary increases averaged 6.1% for the Company as a
whole (as compared to 5.0% in the prior year), 5.0% for the Named Executive Officers as a group and
5.0% for the President and Chief Executive Officer. The Committee does not consider factors
relating to the Companys performance in setting base salaries, but they do impact the magnitude of
bonuses that are granted (see Bonus Plan below).
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 who 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 Named Executive Officers received approximately
8.5% of the total Company matching compensation during 2005.
Long-term Awards. Prior to December 2005, our only long-term incentive grants were stock
options, except for one-time grants of restricted stock to each officer and director (14
individuals) between August 2004 and January 2005. At our December 15, 2005 board meeting we
modified this practice and beginning January 1, 2006 replaced stock options with a combination of
deferred-payment cash bonuses made outside our 2004 Stock and Omnibus Plan, and stock appreciation
rights payable in stock (SARs) and shares of restricted stock issued pursuant to the plan. We
completely replaced the use of stock options with SARs effective January 1, 2006 because SARs are
less dilutive to our shareholders and provide an employee essentially the same economic benefits as
stock options.
In 2006, the overall concept of our long-term compensation program remains essentially the
same, in that employees and officers receive long-term incentive awards (Awards) on their date of
hire, and have additional Awards granted each year as part of the annual review of compensation by
the Compensation Committee. An employees initial Award generally vests 25% per year over a period
of four years, while the annual Awards generally cliff vest 100% four years from the grant date.
The goal of our long-term incentive program for all employees is to provide a generally consistent
level of Awards that vest each year.
As part of their annual compensation evaluation, the Compensation Committee considers the
computed value of the total Awards using the Black-Scholes pricing model, and also takes into
consideration:
|
|
|
the total Awards outstanding relative to the total common stock outstanding; |
24
|
|
|
|
the number of Awards made by comparable companies in the aggregate and for
similar positions; |
|
|
|
|
the perceived incentive value of the Awards currently held by the employees; and |
|
|
|
|
the overall compensation package by the Company for that year. |
Based on these factors, the Committee determines the appropriate amount of Award value to set
aside for issuance to new employees and the amount to be granted to existing employees who are part
of the Companys annual recurring grant program. Since the price of the Companys stock has
generally increased over the last few years, the Black-Scholes pricing model suggests that the
number of SARs or stock options granted to each employee should decrease correspondingly, assuming
that other variables that are part of the Black-Scholes computation remain constant. Historically,
the Committee, following a practice generally used since 1999, has reduced the number of annual
option grants to each employee by approximately one-half of what the Black-Scholes formula would
suggest is necessary to maintain a consistent level of long-term incentive compensation for each
employee, as they believe the other factors, noted above, should also be taken into consideration.
In determining the Awards for 2005, the Compensation Committee applied the same type of reduction.
After the overall Company-wide levels of cash and long-term incentive compensation are
determined, the overall Award value is allocated among employees on the basis of their current year
bonuses, which are generally based upon the level of base compensation. We began a new practice as
of January 1, 2006, wherein we converted the entire allocated Award value into a combination of
deferred-payment cash bonuses, SARs and shares of restricted stock. For the first level of
employees (see Bonus Plan below for discussion of levels of employees), the long-term value is
awarded as a deferred-payment cash bonus. Such funds are not segregated from the Companys other
assets and are general unsecured obligations of the Company to pay such cash Awards at the time
such Awards vest. For the second level of employees, the long-term value is equally split between
cash and SARs. For all employees in the third level or above, the long-term value is equally split
one-third cash, one-third SARs and one-third restricted stock. The relative relationship between
SARs, cash and restricted stock is made using formulas determined by the Committee in their sole
discretion, which generally relates to relative Black-Scholes values, discounted somewhat to
account for the reduced risk associated with cash or restricted stock. All SARs are granted at the
prevailing market price for our common stock and only have value if the market price of the common
stock increases after the date of grant. All of the SARs granted under the plan expire ten years
from the date of grant.
The Named Executive Officers received approximately 6.0% of the total option grants during
2005. See also Executive Compensation Option Grants in 2005.
Restricted Stock. Following approval of the 2004 Omnibus Stock and Incentive Plan, the
Committee evaluated the issuance of restricted stock to its then existing officers. The Committee
concluded that this additional incentive for management was necessary (i) in light of our
executives compensation compared to their peers, (ii) to further emphasize long-term incentives
that are consistent with those of our stockholders, and (iii) to more closely match their
compensation to overall Company performance. The Committee elected to grant shares of restricted
stock that vested over a long-term period and further required that the officers retain a
significant portion of any restricted stock grant as long as they are employed by the Company. In
August 2004, the Board, on recommendation from the Committee, authorized the issuance of 470,000
shares of restricted stock to Mr. Roberts, President and CEO, 350,000
25
shares to each of the three
Senior Vice Presidents, and 170,000 shares to each of the other Vice Presidents, or a total of
2,200,000 shares. The Committee imposed the following vesting restrictions on those shares: i) 65%
of the awards vest 20% per year over five years and, ii) 35% of the awards vest upon retirement (as
defined in the plan). With respect to the 65% of the awards that vest over five years, on each
annual vesting date, 66-2/3% of the vested shares may be delivered to the officer with the
remaining 33-1/3% retained and held in escrow until the officers separation from the Company.
The Committee also reviewed compensation to directors in 2004. The Committee concluded that
the Companys directors were underpaid as compared to directors of the Companys peers, both as to
cash compensation and as to equity awards. As such, the Board, on recommendation of the Committee,
increased the directors compensation (see Compensation of Directors) and issued each
non-employee director 20,000 shares of restricted stock. With respect to the 120,000 restricted
shares issued to Denburys six independent board members (including 20,000 restricted shares issued
in 2005), the shares vest 20% per year over five years. For these shares, on each annual vesting
date, 40% of such vested shares may be delivered to the director with the remaining 60% retained
and held in escrow until the directors separation from the Company. All restricted shares vest
upon death, disability or a change in control.
As part of the changes made to long-term awards this year (see above), we also issued
restricted stock to several management and upper-level employees in January 2006 as part of their
2005 compensation review. These shares totaled 36,798 to all employees, of which 7,725 were issued
to the Named Executive Officers as a group (including 2,118 to Mr. Roberts).
Bonus Plan. Since 1995, we have had a practice of paying cash bonuses to all of our employees
each year except in 1998, when no bonuses were paid to employees. There is no formal bonus plan,
nor any written formulas for determining bonus amounts. Because whether or not bonuses will be
paid and in what amounts is determined by the Compensation Committee of our Board of Directors on a
Company-wide basis; executive officers receive bonuses only if all employees receive bonuses.
Our bonus practices currently classify employees into five levels for bonus compensation
purposes, three of which are determined solely based on salary level. The remaining two levels
include managers, as defined by senior executives, and officers. At the first bonus level, which
includes all employees, bonuses generally range from zero to ten percent of base salaries, although
in the past bonuses paid at this and all other levels have been as high as twelve and one-half
percent of base salary in an exceptionally good year. There is an additional compensation layer
for all employees in the next salary level, which generally includes the professional group (the
second level), whereby these employees may receive an additional level of bonuses of up to ten
percent of base salaries, for or a total bonus ranging from zero to twenty percent. Those in the
third or highest salary level, which generally includes the higher performing professionals,
technical experts or supervisors and managers, can receive an additional bonus equal to seven and
one-half percent of base salary, or a total bonus ranging from zero to twenty-seven and one-half
percent. In addition, employees that are considered managers, as determined by senior executives,
(the fourth level) are eligible to receive an additional level of bonuses of up to seven and
one-half percent of base salaries in addition to the bonus they receive from the first three
levels, or a maximum bonus of 35%. Lastly, our corporate officers (the fifth level) are eligible to
receive an additional level of bonuses of up to seven and one-half percent of base salaries, for a
total bonus ranging from zero to forty-two and one-half percent. All of our executive officers are
eligible for bonuses at all five levels. All bonuses are paid at the
same percentage for each
level (i.e. if level one is 10%, level two is 10% and levels three through five are 7.5%).
26
Since this practice began in 1995, we have paid cash bonuses ranging from 0% to 50% of base
salary to our executive officers, depending on the Companys results for that year, as determined
by the Compensation Committee of our Board of Directors. In addition to the aforementioned bonus
practice, we have usually paid a Christmas bonus each year that is equivalent to one week of each
employees base salary.
Bonus determinations are made by the directors on our Compensation Committee subjectively, not
based on arithmetic methods or formulas, generally based on our overall corporate results and
whether or not the Company has achieved predetermined Company-wide goals and objectives. Any
measure that might be considered to determine whether or not an oil and gas company had a good year
(or other measures of success or failure) is a possible consideration by the Compensation
Committee. These measures have historically included an evaluation of production levels, stock
performance, achievement of acquisition or disposition goals, completion of significant
transactions, completion of significant projects (such as software systems or significant
construction projects), operating and administrative expense levels
as compared to budget, capital expenditures as compared to budget, and the changes in our proved,
probable and possible reserves for that period as compared to costs incurred. As the Compensation
Committees decisions are subjective evaluations made on an overall basis, it is not possible to
determine how these measures are weighted or evaluated by the Compensation Committee.
The Committee recommended that bonuses for 2005, which were paid in early 2006, be awarded at
the 100th percentile of the bonus range based on the results of the Company for 2005.
During 2005, the Company met almost all of its stated goals and objectives, including (i) a 74%
increase between December 31, 2004 and 2005 in the total proved carbon dioxide reserves to use in
its tertiary program, (ii) completion of an 84 mile long pipeline to transport carbon dioxide to
East Mississippi as part of the Companys planned Phase II tertiary operations, (iii) a 36%
increase in tertiary-related oil production from 2004 to 2005, (iv) the acquisition of five
additional oil fields which are expected to be future tertiary flood candidates with anticipated
significant amounts of recoverable oil reserves from such operations, (v) further expansion of the
Companys drilling program in the Barnett Shale area with corresponding increases in production and
reserves, and (vi) an 18% increase in overall Company proved reserves during 2005 at a reasonable
finding and development cost. While these results were all positive, the Company did face
significant cost inflation in the industry and experienced various cost overruns, and actual
production was slightly less than the originally forecasted production levels. However, the
Committee perceived most of this failure as an industry issue due to cost inflation and shortages
of equipment and services in the industry, and concluded that overall, the Company, its management
and its personnel had performed well and exceeded its planned objectives. As a result, the
Committee recommended a bonus award for 2005 equal to 10.0 % of salaries for the first two bonus
levels and 7.5% for the third through fifth bonus levels. All bonuses were granted at the
100th percentile level of the potential bonus range, the prior maximum bonus being 7.5%
or 10% of salary for each bonus level, or a total of 42.5% for officers and senior management. The
President and Chief Executive Officer and all other Named Executive Officers received a bonus equal
to approximately 42.5% of their salaries, consistent with the other officers and senior management.
Bonuses were also allocated to the President and Chief Executive Officer, other Named Executive
Officers and all other employees in a manner consistent with prior years, as outlined above.
27
The foregoing report has been furnished by the following members of the Committee.
The Compensation Committee
Ronald G. Greene, Chairman
Gregory L. McMichael
Donald D. Wolf
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 who is terminated for cause or
by an employees 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.
SHARE PERFORMANCE GRAPH
The following graph illustrates changes over the five year period ended December 31, 2005 in
cumulative total stockholder return on our common stock as measured against the cumulative total
return of the S&P 500 Index and the Dow Jones U.S. Exploration and Production Index. The results
assume $100 was invested on December 31, 2000 and that dividends were reinvested.
28
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Denbury |
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100 |
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66 |
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103 |
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174 |
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288 |
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INTERESTS OF INSIDERS IN MATERIAL TRANSACTIONS
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.
STOCKHOLDER PROPOSALS
All future stockholder proposals must be submitted in writing to Phil Rykhoek, Chief Financial
Officer and Secretary, 5100 Tennyson Parkway, Suite 1200, Plano, Texas 75024. In order for a
stockholder proposal to be included in the proxy materials for the 2006 Annual Meeting of
Stockholders, the proposal must be received by the Company no later than December 2, 2006. These
proposals must also meet other requirements of the Securities and Exchange Act of 1934 to be
eligible for inclusion.
29
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 2006 annual meeting of stockholders, it must be received prior to February 12,
2007.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP was first appointed by the Audit Committee in May 2004 to audit the
Companys books for 2004 and was re-appointed for 2005. Representatives of PricewaterhouseCoopers
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. The Audit Committee has recommended that
PricewaterhouseCoopers LLP be re-appointed as auditor for 2006, subject to ratification by the
stockholders.
Independent Auditor Fees
The following table presents fees for professional services rendered by PricewaterhouseCoopers
LLP for the year ended December 31, 2005 and 2004.
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Audit fees consist of fees associated with the audit of the Companys
consolidated financial statements, including the audit of the effectiveness of the
Companys internal controls over financial reporting, required quarterly reviews,
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. |
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Fees associated with a license for accounting research software. |
The Audit Committee Charter stipulates that the Audit Committee approve the fees to be
paid to the independent accountants prior to the annual audit. Additionally, all engagements for
non-audit services by the independent public accountants must be approved prior to the commencement
of services. All fees paid to the Companys independent accountants were approved by the Audit
Committee prior to the commencement of services.
30
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 2005 Annual
Report to stockholders for the year ended December 31, 2005. 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: Laurie Burkes, Investor Relations, 5100 Tennyson Parkway, Suite 1200,
Plano, Texas 75024, or by e-mail to invrel@denbury.com.
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By order of the Board of Directors |
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Phil Rykhoek
Senior Vice President, Chief Financial Officer
and Secretary |
31
ANNUAL MEETING OF STOCKHOLDERS OF
DENBURY RESOURCES INC.
May 10, 2006
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
â Please detach along perforated line and mail in the envelope provided. â
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF DIRECTORS, AGAINST PROPOSAL 2 AND FOR PROPOSAL 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK
YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
þ
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NOMINEES: |
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FOR ALL NOMINEES
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by the audit committee of PricewaterhouseCoopers LLP as the
Companys independent auditor for 2006. |
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WITHHOLD AUTHORITY FOR ALL NOMINEES
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Gregory L. McMichael Gareth Roberts
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Randy Stein
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Wieland F. Wettstein Donald D. Wolf
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INSTRUCTION:
To withhold authority to vote for any individual nominee(s),
mark FOR ALL EXCEPT and fill in the circle next to each
nominee you wish to
withhold, as shown here: = |
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To change the address on your account, please check the box
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s)
on the account may not be submitted
via this method. |
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Signature
of Stockholder
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Signature
of Stockholder
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Note:
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Please sign exactly as your name or names appear on this Proxy.
When shares are held jointly, each holder should sign. When signing
as executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate name
by duly authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
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PROXY CARD
DENBURY RESOURCES INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD MAY 10, 2006
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
Stockholders to be held on May 10, 2006, 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 seven nominees for director, for the
appointment of our auditor, and against the stockholder proposal regarding performance-based
options. The proxies are authorized to vote my shares, in their discretion, on any other matter
that is properly brought before the meeting.
(Continued and to be signed on the reverse side.)
ANNUAL MEETING OF STOCKHOLDERS OF
DENBURY RESOURCES INC.
May 10, 2006
PROXY VOTING INSTRUCTIONS
MAIL - Date, sign and mail your proxy card in the
envelope provided as soon as possible.
- or -
TELEPHONE - Call toll-free 1-800-PROXIES
(1-800-776-9437) from
any touch-tone telephone and follow the instructions.
Have your proxy card available when you call.
- OR
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INTERNET - Access www.voteproxy.com and follow
the on-screen instructions. Have your proxy card
available when you access the web page.
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You may enter your voting instructions at 1-800-PROXIES or www.voteproxy.com up until 11:59 PM
Eastern Time the day before the cut-off or meeting date.
ê Please
detach along perforated line and mail in the envelope provided
IF you are not voting via telephone or the Internet. ê
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS,AGAINST PROPOSAL 2
AND FOR PROPOSAL 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK
YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
þ
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1.
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David I. Heather
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PricewaterhouseCoopers LLP as the Companys independent auditor for 2006.
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WITHHOLD AUTHORITY
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Gregory L. McMichael
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FOR ALL NOMINEES
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Gareth Roberts
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Randy Stein
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Donald D. Wolf
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INSTRUCTION: To withhold authority to vote for any individual nominee(s),
mark FOR ALL EXCEPT and fill in the circle next to
each nominee you wish to
withhold, as shown here: = |
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To change the address on your account, please check the box
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s)
on the account may not be submitted
via this method. |
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Signature
of Stockholder
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Date:
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Signature
of Stockholder
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Date:
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Note:
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Please sign exactly as your name or names appear on this Proxy.
When shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate name
by duly authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership, name by authorized person.
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