This Form 8-K describes modifications to the compensation arrangements for Denbury Resources Inc.'s named executive officers designated in its most recent proxy statement, including setting of cash bonuses for 2011, and the terms of various 2012 compensation awards made or to be made in the first quarter of 2012 as determined or recommended by the Compensation Committee (the "Committee") of its Board of Directors and ratified by the independent members of the Board of Directors (the "Board") at its most recent meeting. The modifications to 2012 compensation arrangements principally involve changes to performance-based long-term incentive awards to be issued on a pre-determined date in early January 2012, a change to include awards based on Total Shareholder Return over a three-year period, and the setting of base compensation for 2012 for the Company’s most recently designated named executive officers, including its principal executive officer and its principal financial officer, and its next three most highly compensated executive officers. Otherwise the compensation arrangements and plans described in previous filings remain in place.
Base Salaries
Effective January 1, 2012, the base salaries of the named executive officers will be increased over current base salary levels by an average of approximately 4%. These increases were considered necessary in order to keep the base salaries of the named executive officers at the level deemed appropriate by the Committee based in part on peer survey results and an evaluation performed by a third-party outside compensation consulting firm. Base salaries for 2012 will be $624,000 for Mr. Rykhoek, $423,280 for Messrs. Allen, Cornelius and McPherson, and $275,725 for Mr. Dubuisson.
Since 1995, we have had a practice of paying cash bonuses to all of the Company’s employees and officers each year, except in 1998 when no bonuses were paid. Since 1998, we have paid cash bonuses ranging from 67% to 125% of base salary to the Company’s executive officers, depending on the Company's results for that year, as recommended by the Committee.
Historically, the Company's bonus practices have classified employees into various levels or tiers for bonus compensation purposes, which levels are based on an employee's position. Since 2007, the officers that are not part of the management Executive Committee (formerly the Investment Committee) have been eligible for cash bonuses ranging from 0% to 70% of base salary. Officers that are members of the Executive Committee (currently Phil Rykhoek, Mark Allen, Bob Cornelius and Craig McPherson) have been eligible for cash bonuses ranging from 0% to 100% of base salary. All of the Company's bonuses are paid at the same relative percentage for all levels (i.e., if the Committee determines that bonuses should be given at the top of the normal range, which for example for level one is 10%, then each other level would also be at the top of that level's normal range). Bonus determinations are made by the Committee subjectively, not based on arithmetic methods, formulas, or specific targets, but based on an overall retrospective evaluation of the Company's annual corporate results, taking into account a wide range of both non-numeric measures and financial and operational results, which measures and results usually are not determined until the year is near conclusion.
At its December meeting, the Committee concluded that cash bonuses for all employees for 2011 should be awarded at the level of 67% of the various bonus ranges for 2011. This decision was based in part on their assessment of the Company’s performance during 2011 with regard to various factors, including overall production, operating costs, and health, safety and environmental factors. As such, cash bonuses for 2011, to be paid in early 2012 at the 67% level of base salary, will be $402,000 for Mr. Rykhoek, $272,690 for Messrs. Allen and Cornelius, $183,038 for Mr. McPherson (a prorated amount for the eight-month period he was with the Company in 2011) and $124,341 for Mr. Dubuisson.
