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
Filed by the Registrant [X]
Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
[ ] 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 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):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
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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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] 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.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
[Graphic omitted]
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
April 3, 2001
To the Shareholders:
You are hereby notified that the 2001 Annual Meeting of Shareholders (the
"Annual Meeting") 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., CDT, on Wednesday, May
23, 2001, for the following purposes:
(1) to elect eight directors, each to serve until their successor is
elected and qualified;
(2) to increase the number of shares that may be issued under our stock
option plan;
and to transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
Only shareholders of record at the close of business on April 2, 2001, are
entitled to notice of and to vote at the Annual Meeting.
Shareholders are urged to vote their proxy promptly by either returning the
enclosed proxy, voting by telephone or voting via the internet, each as more
fully described in the enclosed proxy statement, whether or not they expect to
attend the Annual Meeting in person.
/s/ Phil Rykhoek
Phil Rykhoek
Chief Financial Officer and
Secretary
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS ARE
URGED TO VOTE THEIR PROXY WHETHER OR NOT THEY EXPECT TO ATTEND THE ANNUAL
MEETING IN PERSON. YOUR PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED.
DENBURY RESOURCES INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, MAY 23, 2001
THIS INFORMATION CIRCULAR IS FURNISHED IN CONNECTION WITH THE SOLICITATION
OF PROXIES BY THE MANAGEMENT OF DENBURY RESOURCES INC., a Delaware corporation
("Denbury" or the "Company") for use at the Annual Meeting of the Shareholders
of Denbury (the "Meeting") to be held on the 23rd day of May, 2001 at the time
and place and for the purposes of considering and voting upon the matters set
forth in the accompanying Notice of Annual Meeting.
The Company anticipates mailing to shareholders this Proxy Statement along
with its 2000 Annual Report to Shareholders and the enclosed form of proxy on
approximately April 9, 2001.
RECORD DATE AND COMMON STOCK OUTSTANDING
The Board of Directors of Denbury (the "Board") has fixed the record date
for the Meeting as the close of business on Monday, April 2, 2001 (the "Record
Date"). Only shareholders of Denbury 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 46,091,000 shares of common stock of the Company (the
"Common Stock") outstanding.
VOTING OF COMMON STOCK
A proxy accompanies the Notice of Annual Meeting and this Proxy Statement.
In order to be valid and acted upon at the Meeting, proxies 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. Shareholders may also vote their
shares by phone, (800)- PROXIES, or may vote via the internet at
www.voteproxy.com.
A shareholder who has submitted a proxy may revoke it any time prior to the
Meeting. If a person who has given a proxy attends the Meeting personally, such
person may revoke the proxy and vote in person. In addition, regardless of which
method is used to submit a proxy, a proxy may be revoked by any later- dated
vote via the telephone or internet or may also be revoked in writing and
deposited either at the registered office or principal place of business of
Denbury at any time up to the time of the Meeting, or with the Chairman of the
Meeting on the day of the Meeting. The mere presence of a shareholder at the
Meeting, however, will not constitute a revocation of a previously submitted
proxy.
The presence of one-third of the issued and outstanding shares of Common
Stock entitled to vote, represented in person or by proxy, is required for a
quorum at the Meeting. Holders of Common Stock are entitled to one vote at the
Meeting for each share of Common Stock held of record on the Record Date. In the
election of directors, shareholders will not be allowed to cumulate their votes.
If a shareholder does not wish for their shares to be voted for a particular
nominee, they must identify the exceptions on the proxy. All matters submitted
to a vote at the Meeting require a majority of the votes, present or represented
by proxy, for approval. Abstentions will be included in vote totals and, as
2
such, will have the same effect on each proposal as a negative vote. Broker
non-votes, if any, will not be included in the vote totals and as such, will
have no effect on any proposal.
All shares represented by properly executed proxies will, unless such
proxies have been previously revoked, be voted at the Meeting in accordance with
the directions on the proxies. IF NO DIRECTION IS INDICATED, THE SHARES WILL BE
VOTED FOR ALL THE DIRECTOR NOMINEES AND APPROVAL OF THE INCREASE IN THE NUMBER
OF SHARES THAT MAY BE ISSUED UNDER THE STOCK OPTION PLAN. The Board has
designated Ron Greene and Gareth Roberts to serve as proxies. The Company has no
knowledge of any matters other than those matters set forth in the Notice of
Annual Meeting of Shareholders to be brought before the Meeting. If any other
matters are properly presented for action at the Meeting, it is intended that
Ron Greene and/or Gareth Roberts, as proxies named in the enclosed form of
proxy, and acting thereunder, will vote at his discretion on such matters.
PERSONS MAKING THE SOLICITATION
The costs incurred in the preparation and mailing of the Proxy, Proxy
Statement and Notice of Annual Meeting will be borne by Denbury. In addition to
solicitation by mail, proxies may be solicited by personal interviews, telephone
or other means of communication by directors, officers and employees of Denbury,
who will not be specifically remunerated therefor. While no arrangements have
been made by Denbury to date, it may contract for the distribution and
solicitation of proxies for the Meeting, in which event the costs incurred with
respect to such solicitation will be borne by Denbury.
BUSINESS TO BE CONDUCTED AT THE MEETING
Proposal One
Election of Directors
The Bylaws of Denbury provide that the board of directors shall consist of
a minimum of three and a maximum of fifteen directors. Each of the directors are
to be elected annually and each shall hold office until the close of the next
annual meeting of shareholders or until he ceases to be a director by operation
of law or until his resignation becomes effective. There are presently seven
directors of Denbury, each of whom are serving for terms of office that expire
at the Meeting. On March 22, 2001, the Board voted to increase the number of
directors from seven to eight and to nominate a new director to fill the vacancy
created by this increase.
Unless otherwise directed by a proxy marked to the contrary, it is the
intention of management to vote proxies for the election as directors of the
eight nominees hereinafter set forth. Mr. Jeffrey Smith has been nominated by
the Board to fill the vacancy created by the increase in the number of
directors. The other seven nominees are current members of the Board. If any
nominee should become unavailable or unable to serve as a director, the proxy
may be voted for a substitute nominated by the Board or the Board may be reduced
accordingly; however, the Board is not aware of any circumstances which would be
likely to make any nominee unavailable.
David Bonderman
Ronald G. Greene
David I. Heather
William S. Price, III
Gareth Roberts
Jeffrey Smith
Wieland F. Wettstein
Carrie A. Wheeler
3
The names, municipalities of residence, ages, offices held, period of time
served as director and the principal occupation of each of the persons nominated
for election as directors are as follows:
OFFICER
OR
NAME AND MUNICIPALITY OF OFFICES DIRECTOR
RESIDENCE AGE HELD SINCE PRINCIPAL OCCUPATION
- ------------------------------- -------- --------------------- --------- ---------------------------------------
Ronald Greene (1)(2) 52 Chairman and 1995 Principal Shareholder, Officer and
Calgary, Alberta Director Director of Tortuga Investment Corp.
David Bonderman 58 Director 1996 Principal of the Texas Pacific Group
Fort Worth, Texas
David I. Heather (1) 59 Director 2000 President of The Scotia Group
Dallas, Texas
William S. Price, III(2) 44 Director 1995 Principal of the Texas Pacific Group
San Francisco, California
Gareth Roberts 48 President, Chief 1992 President and Chief Executive Officer,
Plano, Texas Executive Officer Denbury Resources Inc.
and Director
Jeffrey Smith 39 Director Nominee - Principal of the Texas Pacific Group
San Francisco, California
Wieland F. Wettstein(1) 51 Director 1990 Executive Vice-President, Finex
Calgary, Alberta Financial Corporation Ltd.
Carrie A. Wheeler 29 Director 2000 Principal of the Texas Pacific Group
San Francisco, California
[FN]
- ----------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation, Stock Option Plan and Stock Purchase Plan
Committees.
</FN>
DIRECTORS
Ronald G. Greene has been Chairman of the Board and a director of Denbury
since 1995. Mr. Greene was the founder and Chairman of the board of directors of
Renaissance Energy Ltd. and was Chief Executive Officer of Renaissance from its
inception in 1974 until May 1990. He is also the principal shareholder, officer
and director of Tortuga Investment Corp., a private investment company. Mr.
Greene also serves on the board of directors of WestJet Airlines Ltd., a public
Canadian scheduled airline and Husky Energy Inc., a public Canadian oil and gas
company.
David Bonderman has been a director of Denbury since 1996. Mr. Bonderman is
a founding partner of the Texas Pacific Group ("TPG") and has been Managing
General Partner of TPG for more than seven years. Mr. Bonderman also serves on
the board of directors of Bell & Howell Company, Inc.; Continental Airlines,
Inc.; Co-Star Realty Group, Inc.; Ducati Motor Holdings, S.p.A.; Magellan Health
Services, Inc.; Oxford Health Plans, Inc.; Paradyne Networks, Inc.; Ryanair Ltd;
ON Semiconductor Corporation; Urogenesys, Inc.; Washington Mutual and Seagate
Technology, Inc..
4
David I. Heather has been a director of Denbury since 2000. Mr. Heather is
the founding partner and President of The Scotia Group, an independent petroleum
engineering group in Dallas, Texas, founded in 1981. His experience includes
reservoir and economic analysis in almost every producing area throughout the
world. Mr. Heather is a Chartered Engineer of Great Britain and received his
Bachelor of Science degree in Chemical Engineering from the University of London
in 1963.
William S. Price, III has been a director of Denbury since 1995. Mr. Price
is a founding partner of TPG. Before forming TPG in 1992, Mr. Price was
Vice-President of Strategic Planning and Business Development for G.E. Capital,
and from 1985 to 1991 was employed by the management consulting firm of Bain &
Company, attaining officer status and acting as co-head of the Financial
Services Practice. Mr. Price also serves on the board of directors of Belden &
Blake Corporation; Continental Airlines, Inc.; Del Monte Foods Company; Gemplus
International, S.A. and Verado Holdings. Mr. Price also serves on the boards of
several private companies.
Gareth Roberts has been President, Chief Executive Officer and a director
since 1992. Mr. Roberts founded Denbury Management, Inc., the former operating
subsidiary of the Company in April 1990. Mr. Roberts has more than 20 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 in Geology and Geophysics from St. Edmund Hall,
Oxford University. Mr. Roberts also serves on the board of directors of Belden &
Blake Corporation.
Jeffrey Smith, director nominee, joined the Texas Pacific Group in 2000 in
the capacity of Portfolio Company Operations. Mr. Smith has 10 years of
experience in management consulting, serving most recently as a Strategy
Consultant with Bain & Company, a consulting firm, from 1993 to 1999. He was
employed by the consulting firms of The L|E|K Partnership and McKinsey & Co.
from 1991 to 1993. From 1987 to 1990, he was employed by Exxon USA as a Senior
Engineer, and from 1985 to 1986 he conducted research at the R&D Division of
Conoco, Inc. Mr. Smith received his Bachelor of Science and Master of Science
degrees in Petroleum Engineering from the University of Texas. He received his
Master of Business Administration from the Wharton School of Business.
Wieland F. Wettstein has been a director of Denbury since 1990. Mr.
Wettstein is the Executive Vice President of, and indirectly controls 50% of
Finex Financial Corporation Ltd., a merchant banking company in Calgary,
Alberta, a position he has held for more than five years. Mr. Wettstein is
Chairman of the board of directors of a Canadian public oil and natural gas
company, BXL Energy Ltd., and a private technology firm.
Carrie A. Wheeler has been a director of Denbury since 2000. Ms. Wheeler
has been a principal with the Texas Pacific Group since 1996 and prior to
joining the Texas Pacific Group was with Goldman, Sachs & Co. for three years.
Ms. Wheeler also serves on the board of Interlink Group, Inc.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR EACH OF THE
FOREGOING DIRECTORS.
5
PROPOSAL TWO
INCREASE IN NUMBER OF SHARES THAT MAY BE ISSUED UNDER THE STOCK OPTION PLAN
The second proposal to be voted upon is the approval by shareholders of an
amendment to the Company's stock option plan (the "Plan") passed by the Board in
February 2001 which increases the number of shares that may be issued under the
Plan by 600,000 shares. Without shareholder approval of the proposed increase,
only 227,208 shares remain available for future grants under the Plan. The
Company granted 595,635 options during 2000 and 506,620 stock options have been
granted pursuant to the Plan during the first two months of 2001.
History of Shares Authorized under the Plan
When the Plan was adopted on August 9, 1995, a maximum of 1,050,000
issuable shares of Common Stock were reserved for issuance under the Plan. The
Board, and subsequently the shareholders, approved amendments to the Plan to
increase the maximum number of shares issuable under the Plan in 1997, 1998 and
1999, to a total of 5,145,587 shares. If the second proposal is approved by
shareholders, the maximum number of shares which will have been authorized for
issuance under the Plan since its inception will increase by 600,000 to
5,745,587 shares, with 5,031,736 shares available for future issuance as of
March 15, 2001. At that same date, there were 4,204,528 outstanding unexercised
options and 713,851 options have been exercised since the date the Plan was
adopted. At December 31, 2000 outstanding options were exercisable at prices
ranging from $3.77 to $22.24, with a weighted average price of $8.03. Of the
total outstanding options at that date, 1,310,382 options were exercisable.
Since August 9, 1995, the effective date of the Plan, the following
activity has taken place (including the recent Board amendment to increase the
total number of shares available under the Plan):
Actual Stock Stock Options Total Shares
Options Available for Available For
Outstanding Future Grants Future Issuance
--------------------- ------------------- --------------------
Balance - August 9, 1995 614,425 435,575 1,050,000
Granted 4,910,451 (4,910,451) -
Exercised (713,851) - (713,851)
Canceled (606,497) 606,497 -
Authorized increases - 4,695,587 4,695,587
--------------------- ------------------- --------------------
Balance - March 15, 2001 4,204,528 827,208 5,031,736
===================== =================== ====================
Percent of common shares
outstanding - March 15, 2001 9.1% 1.8% 10.9%
===================== =================== ====================
6
SUMMARY OF THE KEY TERMS OF THE PLAN
The Plan is designed to provide key employees, officers and directors with
an added incentive; to help the Company attract and retain personnel of
outstanding competence; and to align the interests of key employees, officers
and directors with those of the shareholders by providing them with the
opportunity to acquire an increased proprietary interest in the Company. The
Plan is administered by the Stock Option Plan Committee of the Board, which is
comprised of Messrs, Price and Greene. The Plan terminates on August 9, 2005
(unless sooner terminated by the Board), except with respect to stock options
then outstanding. The Plan may be amended by the Board, except that shareholders
must approve an increase in the number of shares reserved under the Plan, the
maximum period during which options may be exercised, amendment of the Plan more
frequently than every six months, material modifications in the requirements for
eligibility to participate in the Plan, or material increases in the benefits
accruing to participants in the Plan. The Plan allows the granting of either
non-qualified or incentive stock options to directors, officers and full-time
employees of the Company.
The term, vesting and exercisability of options granted under the Plan is
determined by the Board, provided that failing a contrary determination by the
Board, options vest over a four year period at the rate of 25% per year. The
purchase price of the shares subject to options granted under the Plan is the
lower of the average closing prices on The Toronto Stock Exchange ("TSE") and
the New York Stock Exchange ("NYSE") for the ten trading days prior to the grant
date. Adjustments in the option exercise price and number of shares are adjusted
upon changes in the number of outstanding common shares due to stock dividends,
combinations or other recapitalizations, mergers or spin-offs of part of the
Company's business. No option may be granted for a period exceeding 10 years
from the date of the grant. Options are not transferable.
All outstanding unexpired options vest immediately upon a change of control
of the Company, which includes a tender offer, change in a majority of the
incumbent directors or majority of the Company's common stock, certain mergers
or sale of substantially all the Company's assets. Upon a Plan participant's
disability or retirement all outstanding unexercised stock options vest
immediately and are exercisable for a 90 day period, and upon death vest
immediately and are exercisable for a 365 day period. All option agreements
granted under the Plan must be in accordance with the policies and procedures of
the NYSE and TSE.
BOARD OF DIRECTORS' RECOMMENDATION
The Board is proposing to increase the number of shares available under the
Plan to ensure that there will be sufficient stock options available under the
Plan for option grants to employees during the next twelve months. The Company
considers the issuance of stock options a vital element of its employees'
compensation and necessary to recruit and maintain its valuable employees. See
also "Executive Compensation - Board Compensation Committee Report on Executive
Compensation." The Company generally issues stock options to all new employees
when they begin their employment with Denbury and thereafter, stock options are
generally issued on an annual basis in the month of January.
Pursuant to stock exchange regulations, this increase in the number of
shares of Common Stock reserved for issuance under the Plan must be approved by
the shareholders. Provided that a quorum is present at the meeting, the
amendment must be approved by a simple majority of votes cast by the
shareholders who appear in person or by proxy at the Meeting. THE BOARD OF
DIRECTORS BELIEVES THAT THE PLAN IS AN INTEGRAL PART OF THE COMPANY'S OVERALL
COMPENSATION PLAN AND RECOMMENDS THAT YOU VOTE FOR THE AMENDMENT. Unless
otherwise directed by a proxy marked to the contrary, it is the intention of
management to vote the proxies for the approval of the amendment.
BOARD MEETINGS, ATTENDANCE AND COMMITTEES
The Board met seven times during the year ended December 31, 2000,
including telephone meetings. All incumbent directors, except for Mr. Bonderman,
attended at least 75% of the meetings. The Board took all other actions by
unanimous written consent during 2000. In addition, all directors attended at
7
least 75% of all meetings of each of the committees on which they served. The
Board has an Audit Committee, a Compensation Committee, a Stock Option Committee
and a Stock Purchase Plan Committee. The Board does not have a nominating
committee. The entire Board acts in that capacity.
AUDIT COMMITTEE REPORT
The Audit Committee is comprised of three outside independent directors,
Messrs. Greene, Heather and Wettstein, with Mr. Wettstein acting as Chairman.
The Audit Committee meets regularly with financial management, the internal
auditor and independent auditors to review financial reporting and accounting
and financial controls of the Company. The Audit Committee reviews, and gives
prior approval for, fees and non-audit related services of the independent
auditors. Both the internal auditor and independent auditors 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 on the adequacy of internal controls and quality of financial
reporting. The Audit Committee also meets with the independent reserve
engineers, has the power to conduct internal audits and investigations, receives
recommendations or suggestions for changes in accounting procedures, and
initiates or supervises any special investigations it may choose to undertake.
Each year, the Audit Committee recommends to the Board the selection of a firm
of independent auditors and a firm of independent reserve engineers. The Audit
Committee met three times during 2000.
The NYSE has established standards, which have been accepted by the
Securities and Exchange Commission (the "SEC"), with respect to independence and
financial experience of the members of the audit committee. The NYSE 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 have past employment experience in
finance or accounting or other comparable experience or background such as being
or having been a chief executive officer, chief financial officer or other
senior officer with financial oversight responsibilities. The members of the
Denbury Audit Committee satisfy the NYSE criteria for both independence and
experience.
The Audit Committee reports to the Board on its activities and findings.
The Board has adopted a written charter for the Audit Committee, which is
attached hereto as Appendix A. The Board reviews and approves changes to the
Audit Committee Charter.
The Audit Committee reports as follows with respect to the Company's 2000
audited financial statements:
o The Committee has reviewed and discussed with the Company's management the
Company's 2000 audited financial statements;
o The Committee has discussed with the independent auditors (Deloitte &
Touche LLP) the matters required to be discussed by SAS 61 which includes,
among other items, matters related to the conduct of the audit of the
Company's financial statements:
o The Committee has received written disclosures and the letter from the
independent auditors required by ISB Standard No. 1 (which relates to the
auditors' independence from the Company and its related entities) and has
discussed with the auditors the auditors' independence from the Company;
and
8
o Based on review and discussions of the Company's 2000 audited financial
statements with management and discussions with the independent auditors,
the Audit Committee recommended to the Board that the Company's 2000
audited financial statements be included in the Company's Annual Report on
Form 10-K.
THE AUDIT COMMITTEE
Wieland F. Wettstein, Chairman
Ronald G. Greene
David I. Heather
COMPENSATION COMMITTEE
The Compensation Committee is comprised of Messrs. Greene and Price, with
Mr. Price acting as its Chairman. The Compensation Committee makes
recommendations to the Company's Board with respect to the nature and amount of
all compensation of the Company's officers, reviews the benefit plans of the
Company, including reports from the Company's Stock Option Plan and Stock
Purchase Plan Committees and the Company's health and other benefit plans, and
at least annually prepares a compensation report in accordance with the rules
and regulations promulgated under applicable securities laws. The Compensation
Committee met two times during 2000.
The Board also has appointed a Stock Option Plan Committee and a Stock
Purchase Plan Committee to administer the two respective benefit plans and to
report and coordinate their efforts with the Compensation Committee. Both
committees are comprised of Messrs. Greene and Price, with Mr. Price acting as
their Chairman. These committees met as part of the Compensation Committee
during 2000.
COMPENSATION OF DIRECTORS
Information regarding the compensation received, including options, from
the Company during the fiscal year ended December 31, 2000 by Mr. Roberts,
President, Chief Executive Officer and a director of the Company, is disclosed
under the heading "Executive Compensation - Summary Compensation Table."
DIRECTOR FEES
During 2000, the Company adopted a Director Compensation Plan (the
"Director Plan") to provide compensation to the Company's independent directors
(who were not employees or affiliates) so as to attract, motivate and retain
experienced and knowledgeable persons to serve as directors of the Corporation
and to promote identification of such directors' interests with those of the
Company's shareholders. In February 2001, the Board voted to expand the
eligibility of the Director Plan to include all non-employee directors,
including those affiliated with the Texas Pacific Group, the Company's largest
shareholder.
Under the Director Plan, the Company's non-employee directors are paid an
annual retainer fee of $20,000, plus $2,000 per board meeting attended and
$1,000 per telephone conference attended. In addition, the Chairman of the Audit
Committee, Compensation Committee and the Chairman of the Board are paid an
additional fee of $5,000 per year. The Director Plan allows each director to
make an annual election to receive their compensation in either cash or in
shares of the Company's Common Stock and to elect to defer receipt of such
compensation, if they wish. The Company also reimburses the directors of the
Company for out-of-pocket travel expenses in connection with each board meeting
attended. The Company has reserved 100,000 shares for issuance under the
Director Plan.
9
DIRECTOR OPTIONS
During 2000, Mr. Roberts was granted a total of 21,200 options with an
exercise price equal to the then current market price of $3.98. No other
directors were issued options during 2000 and, as of December 31, 2000, none of
the directors, other than Mr. Roberts, held any options, nor were any issued to
them during 2000. The options held by Mr. Roberts are disclosed under the
heading "Executive Compensation."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists, as of March 15, 2001, the shareholders of which
Denbury is aware that beneficially own more than 5% of its issued and
outstanding Common Stock and the Common Stock held by its executive officers and
directors, individually and as a group. Unless otherwise indicated, each
shareholder identified in the table is believed to have sole voting and
investment power with respect to the shares beneficially held. The table
includes shares that were acquirable within 60 days following March 15, 2001
under the Company's Stock Option Plan. Shareholders should note that some shares
are listed as being beneficially owned by more than one shareholder.
BENEFICIAL OWNERSHIP OF
COMMON STOCK AS OF
MARCH 15, 2001
-----------------------------------------
NAME AND ADDRESS OF PERCENT OF
BENEFICIAL OWNER SHARES OUTSTANDING
- --------------------------------------------------------------- ---------------------- ---------------
Ronald G. Greene............................................... 922,900 (1) 2.0%
David Bonderman................................................ 27,624,314 (2) 60.0%
301 Commerce Street, Suite 3300
Ft. Worth, TX 76102
William S. Price, III.......................................... 27,308,314 (3) 59.3%
345 California Street, Suite 3300
San Francisco, CA 94104
David I. Heather............................................... 5,500 (4) *
Wieland F. Wettstein........................................... 17,144 (5) *
Carrie A. Wheeler.............................................. 500 *
Jeffrey Smith.................................................. - *
Gareth Roberts................................................. 634,239 (6) 1.4%
Ronald T. Evans................................................ 11,697 (7) *
Phil Rykhoek................................................... 93,473 (7) *
Mark A. Worthey................................................ 75,958 (7) *
Mark C. Allen.................................................. 14,636 (7) *
Ron Gramling................................................... 60,026 (7) *
Lynda Perrard.................................................. 49,511 (7) *
All of the executive officers and directors as a group (14
persons).................................................. 29,543,898 (8) 63.7%
Texas Pacific Group............................................ 27,274,314 (9) 59.2%
301 Commerce Street, Suite 3300
Ft. Worth, TX 76102
Charles M. Royce............................................... 2,730,772 (10) 5.9%
1414 Avenue of the Americas
New York, NY 10019
10
- -----------------
* Less than 1%.
(1) Includes 30,150 shares of Common Stock held by Mr. Greene's spouse in her
retirement plan, 900 shares held in trust for Mr. Greene's minor children,
22,000 held in the Greene Family Charitable Foundation of which Mr. Greene
is the trustee, and 554,703 shares held by Tortuga Investment Corp., which
is solely owned by Mr. Greene.
(2) Includes 350,000 shares of Common Stock in a family partnership 100%
controlled by Mr. Bonderman. Mr. Bonderman is also a director, executive
officer and shareholder of TPG Advisors, Inc. and TPG Advisors II, Inc..
TPG Advisors, Inc. is the general partner of TPG GenPar, L.P., which in
turn is the general partner of both TPG Partners, L.P., and TPG Parallel I,
L.P., which are the direct beneficial owners of 8,721,438 shares of Common
Stock attributed to Mr. Bonderman. TPG Advisors II, Inc. is the general
partner of TPG 1999 Equity Partners II, L.P. and also the general partner
of TPG GenPar II, L.P., which in turn is the sole general partner of each
of TPG Partners II, L.P., TPG Parallel II, L.P. and TPG Investors II, L.P.,
which are the direct beneficial owners of 18,552,876 shares of Common Stock
attributed to Mr. Bonderman.
(3) Includes 7,000 shares of Common Stock held by Mr. Price and 27,000 shares
held by Mr. Price's spouse. Mr. Price is also a director, executive officer
and shareholder of TPG Advisors, Inc., and TPG Advisors II, Inc. TPG
Advisors, Inc. is the general partner of TPG GenPar, L.P., which in turn is
the general partner of both TPG Partners, L.P., and TPG Parallel I, L.P.,
which are the direct beneficial owners of 8,721,438 shares of Common Stock
attributed to Mr. Price. TPG Advisors II, Inc. is the general partner of
TPG 1999 Equity Partners II, L.P. and also the general partner of TPG
GenPar II, L.P., which in turn is the sole general partner of each of TPG
Partners II, L.P., TPG Parallel II, L.P. and TPG Investors II, L.P., which
are the direct beneficial owners of 18,552,876 shares of Common Stock
attributed to Mr. Price.
(4) Shares are held in a family trust of which Mr. Heather is a trustee.
(5) Includes 7,700 shares of Common Stock held by S.P. Hunt Holdings Ltd.,
which is solely owned by a trust of which Mr. Wettstein is a trustee. Also
includes 2,544 shares of Common Stock held by Finex Corporation Ltd., of
which Mr. Wettstein is an officer, director and indirectly controls 50% of
Finex Corporation Ltd.
(6) Includes 138,330 shares of Common Stock held by a corporation which is
solely owned by Mr. Roberts, 2,228 shares held by his spouse and 100,750
shares which Mr. Roberts has the right to acquire pursuant to stock options
which are currently vested or which vest within 60 days from March 15,
2001. Ownership also includes 38,000 shares of Common Stock held in a
private charitable foundation which he and his spouse control, but in which
they have no beneficial interest.
(7) Includes 6,250; 80,750; 51,104; 11,500; 47,950; and 43,200 shares of Common
Stock which Mr. Evans, Mr. Rykhoek, Mr. Worthey, Mr. Allen, Mr. Gramling,
and Ms. Perrard, respectively, have the right to acquire pursuant to stock
options that are currently vested or that vest within 60 days from March
15, 2001.
(8) Includes 341,504 shares of Common Stock which the officers and directors as
a group have the right to acquire pursuant to stock options which are
currently vested or which vest within 60 days from March 15, 2001.
Beneficial ownership also includes the shares held by affiliates of TPG,
although Mr. Price and Mr. Bonderman, who are directors of Denbury, are not
the owners of record of these securities. (See also Footnote 9).
(9) These shares are held by affiliates of the Texas Pacific Group. Mr. Price
and Mr. Bonderman, directors of Denbury, are directors, executive officers
and shareholders of TPG Advisors, Inc. and TPG Advisors II, Inc. TPG
Advisors, Inc. is the general partner of TPG GenPar, L.P., which in turn is
the sole general partner of both TPG Partners, L.P. and TPG Parallel I,
L.P., which are the direct beneficial owners of 8,721,438 shares of Common
Stock. TPG Advisors II, Inc. is the general partner of TPG 1999 Equity
Partners II, L.P. and also the general partner of TPG GenPar II, L.P.,
which in turn is the sole general partner of each of TPG Partners II, L.P.,
TPG Parallel II, L.P. and TPG Investors II, L.P., which are the direct
beneficial owners of 18,552,876 shares of Common Stock.
(10) Includes 2,602,472 shares of Common Stock held by Royce & Associates, Inc.
and 128,300 shares of Common Stock held by Royce Management Company. Both
Royce & Associates, Inc. and Royce Management Company are controlled by
Charles M. Royce. Mr. Royce disclaims any beneficial ownership of these
shares.
11
MANAGEMENT
The names of the officers of the Company, 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 death, resignation or removal or until his
successor is duly elected and qualified.
NAME AGE POSITION
- ---- --- --------
Gareth Roberts 48 President and Chief Executive Officer
Ronald T. Evans 38 Vice President, Reservoir Engineering
Phil Rykhoek 44 Chief Financial Officer and Secretary
Mark A. Worthey 42 Vice President, Operations
Mark C. Allen 33 Controller & Chief Accounting Officer
Ron Gramling 55 Vice President, Marketing
Lynda Perrard 57 Vice President, Land
Set forth below is a description of the business experience of each of the
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, Vice President of Reservoir Engineering, is a registered
Professional Engineer and joined Denbury in September 1999. Before joining
Denbury, he was employed in a similar capacity 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.
Phil Rykhoek, a Certified Public Accountant, is Chief Financial Officer,
Vice President, Secretary and Treasurer of the Company. Before joining the
Company 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.
Mark A. Worthey as Vice President, Operations, is a geologist and is
responsible for all aspects of operations in the field. He joined Denbury in
September 1992. Previously, he 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.
Mark C. Allen, a Certified Public Accountant, joined Denbury 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.
Ron Gramling is Vice President, Marketing and President of Denbury's
marketing subsidiary. He joined Denbury in May 1996 when Denbury purchased the
subsidiary's assets. Before becoming affiliated with Denbury, he was employed by
Hadson Gas Systems as Vice President of term supply. Mr. Gramling has 30 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.
12
Lynda Perrard is Vice President, Land of Denbury. Ms. Perrard joined
Denbury in April 1994 and has over 30 years of experience in the oil and gas
industry as a petroleum landman. Before joining Denbury, Ms. Perrard was the
President and Chief Executive Officer of Perrard Snyder, Inc., a corporation
performing contract land services. Ms. Perrard also served as Vice President,
Land for Snyder Exploration Company from 1986 to 1991.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets out a summary of executive compensation for the
President and Chief Executive Officer of the Company and the Company's next four
most highly compensated executive officers for each of the Company's last three
completed fiscal years (collectively the "Named Executive Officers").
ANNUAL COMPENSATION (1) LONG TERM COMPENSATION
------------------------------ ----------------------
NUMBER OF SECURITIES
UNDERLYING OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUSES (2) GRANTED COMPENSATION (3)
--------------------------- ---- ------ ------- ------- ------------
Gareth Roberts 2000 $ 282,000 $ 118,223 21,200 $ 12,949
President and Chief Executive Officer 1999 275,000 60,288 71,500 15,188
1998 275,000 5,288 16,500 19,336
Ronald T. Evans (4) 2000 $ 138,500 $ 62,885 9,500 $ 18,220
Vice President, Reservoir Engineering
Phil Rykhoek 2000 $ 183,750 $ 77,054 13,800 $ 15,937
Chief Financial Officer and Secretary 1999 175,000 38,365 45,500 13,936
1998 175,000 3,365 10,500 13,125
Mark A. Worthey 2000 $ 183,750 $ 77,054 13,800 $ 16,626
Vice President, Operations 1999 175,000 38,365 45,500 11,201
1998 175,000 3,365 10,500 13,125
Ron Gramling (5) 2000 $ 136,500 $ 57,225 10,200 $ 17,554
Vice President, Marketing 1999 130,000 28,500 33,800 15,654
- --------------------------------
(1) The aggregate amount of all other non-cash annual compensation was less
than 10% of the total annual salary and bonus of each Named Executive
Officer for each year.
(2) Bonuses represent the amounts earned based on the Company's performance for
the year indicated, even though they are actually paid in the subsequent
year. Bonuses also include a Christmas bonus that is equivalent to one
week's salary and has been paid to all employees for each of the last three
years. For 1998, there were no bonuses paid except for the Christmas bonus.
13
(3) Amounts in this column for 2000 include the Company's matching
contributions to the Employee Stock Purchase Plan, 401(k) Plan and group
term life insurance premiums paid on behalf of the Named Executive Officers
as follows:
Stock Purchase Group Term Life
Plan 401(k) Plan Insurance
---------------- ------------- ----------------
Gareth Roberts $ 10,575 $ - $ 2,374
Ronald T. Evans 10,531 5,561 2,128
Phil Rykhoek 6,891 6,672 2,374
Mark A. Worthey 7,580 6,672 2,374
Ron Gramling 10,237 5,276 2,041
(4) Mr. Evans was appointed by the Board in May 2000 as Vice President,
Reservoir Engineering of the Company. Mr. Evans was first employed by the
Company in September 1999.
(5) Mr. Gramling was appointed by the Board in July 1999 as Vice President,
Marketing of the Company. Prior to this appointment, Mr. Gramling was
President of a wholly owned subsidiary of the Company.
OPTION GRANTS IN 2000
The following table represents the options granted to the Named Executive
Officers during 2000 and the value of such options as of the date of grant:
INDIVIDUAL GRANTS
---------------------------------------------------------------
% OF
TOTAL OPTIONS
NUMBER OF GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION GRANT DATE
GRANTED 2000 ($/SHARE) DATE PRESENT VALUE $ (1)
------- ---- --------- ----- ---------------
NAME
- ----
Gareth Roberts 21,200 (2) 3.6% $3.98 1/03/10 $45,822
Ronald T. Evans 9,500 (2) 1.6% 3.98 1/03/10 20,533
Phil Rykhoek 13,800 (2) 2.3% 3.98 1/03/10 29,827
Mark A. Worthey 13,800 (2) 2.3% 3.98 1/03/10 29,827
Ron Gramling 10,200 (2) 1.7% 3.98 1/03/10 22,046
- -----------------
(1) As permitted by the Securities and Exchange Commission rules, the Grant
Date Present Value of the options set forth in this table is calculated in
accordance with the Black-Scholes option pricing model, using the following
assumptions; expected volatility computed using, as of the date of grant,
the prior five year monthly average of the Company's Common Stock listed on
the TSE, which was 54.16%; expected dividend yield - 0%; expected option
term - 5 years; and a risk-free rate of return as of the date of grant of
6.5%, based on the yield of five year U.S. treasury securities. The real
value of the options presented in this table depends upon the actual
performance of the Common Stock during the applicable period in which they
are exercised. The dollar amounts in this column are not intended to
forecast potential future appreciation, if any, of the Common Stock.
(2) These options cliff vest 100% on January 3, 2004.
14
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, 2000. No options were exercised by the Named Executive Officers during 2000.
AGGREGATED OPTION EXERCISES IN 2000
AND DECEMBER 31, 2000 OPTION VALUES
NUMBER OF COMMON SHARES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE
ACQUIRED ON VALUE OPTIONS AT MONEY OPTIONS AT
NAME EXERCISE REALIZED DECEMBER 31, 2000 DECEMBER 31, 2000 (1)
- ----------------- ------------- ----------- ------------------------------- ----------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Gareth Roberts - - 62,875 111,325 $ 222,177 $ 513,671
Ronald T. Evans - - 6,250 28,250 42,440 194,307
Phil Rykhoek - - 55,375 72,425 199,415 329,061
Mark A. Worthey - - 31,190 66,281 110,005 329,061
Ron Gramling - - 29,600 53,250 68,764 244,083
- ------------------
(1) Based on the average of the high and low sales price of the Common Stock on
December 29, 2000, of $11.031 per share as reported by the NYSE. A conversion
exchange rate of Cdn. $1.4461 = U.S. $1.00 was assumed in the calculation as
certain of the options are denominated in Canadian dollars.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board (the "Committee") is responsible
for making recommendations to the Board regarding the general compensation
policies of the Company, the compensation plans and specific compensation levels
for officers and certain other managers. The Committee also administers, along
with the specific stock option and stock purchase plan committees, the Company's
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 the Company's operations, and the
Company's financial condition and performance. The overall compensation
philosophy is, (i) that the Company pay base salaries which will attract and
retain outstanding talent, generally around the median salaries of comparable
companies, (ii) that the main focus of compensation be in long-term incentives,
(iii) that all employees be encouraged to be shareholders, and (iv) that the
primary focus of compensation for employees be for the effort and results of the
team or Company as a whole, rather than a focus on individual performance. The
components of this philosophy consist of:
(i) competitive base salaries;
(ii) a stock purchase plan for all employees;
(iii) stock options for all employees, but with a higher level for the
professionals; and
(iv) a profit sharing plan or bonus plan.
BASE SALARIES. In determining an executives' salary, the Committee weighs
individual performance, overall corporate performance, the executive's position
15
and responsibility in the organization, the executive's experience and expertise
and compensation for comparable positions at comparable companies. In making
recommendations, the Committee exercises subjective judgment using no specific
weights for these factors. The Committee believes that base salaries that
average at or near the median of comparable companies, as determined from salary
surveys and other data, are generally appropriate as a frame of reference for
base pay decisions. The specific compensation for individual executives will
vary from these levels as a result of the subjective judgment of the Committee
and based on the recommendation of the Chief Executive Officer with regard to
the other executives. This is the primary part of the compensation package
whereby a distinction is made for individual performance as the other components
of the compensation plan are generally consistent among employee groups and are
proportional to salaries.
STOCK PURCHASE PLAN. To encourage ownership in the Company by all of the
employees, the Company has 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, the Company pays
the income tax on the matching portion for employees that are below a certain
salary threshold, 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.
STOCK OPTIONS. Stock options have been awarded to all employees. To further
encourage the team concept, at the time of each grant the options are allocated
among employees as a percentage of salary, although the professional group does
receive a significantly higher percentage than the rest of the employees. The
executive officers receive stock options at the same percentage of salary as the
other employees in the professional group. These options are designed to retain
and motivate the grantees and to improve long-term Company performance by making
executive rewards consistent with those of all shareholders. All options are
granted at the prevailing market price and will only have value if the market
price of the Common Stock increases after the date of grant.
Since 1997, the Company has granted options to its employees at their time
of employment with such options vesting 25% per year over a period of four
years. Additional options have also been granted on an annual basis to the
professional group (and for the last three years to all employees) which
generally vest 100% four years from the date of grant. The net effect was that
the professional employee would always have options vesting each year for the
next four years. The annual grants made in early 1999 were an exception to the
normal annual vesting schedule as these grants vested 25% per year over a period
of four years. In addition to a modification of the normal vesting parameters,
the Committee authorized a larger than normal grant at that time in order to
give the employees renewed long-term incentives in light of the depressed stock
prices and in lieu of any salary increases or bonuses for 1998.
All of the options granted under the Option Plan expire ten years from the
date of grant and to the extent allowed under the United States federal income
tax laws, are granted as incentive stock options. In determining the specific
level of option grants, the Committee takes into consideration several factors
without giving particular weight to any one factor. These factors include, (i)
the total options relative to the total Common Stock outstanding, (ii) the level
of compensation for each option based on option pricing models such as
Black-Scholes, (iii) the number of option grants made by comparable companies
for similar positions, (iv) the perceived incentive value of the options
currently held by the employees, and (v) the overall compensation package for
that year.
BONUS PLAN. All employees of the Company participate in the profit sharing
or bonus plan. Bonuses are recommended by the Committee and awarded by the Board
each year based on the overall results of the Company and the achievement of
16
predetermined goals and objectives. The bonus plan currently has four levels of
compensation whereby at the base level, which includes all employees, bonuses
range from zero to ten percent of base salaries. There is an additional
compensation layer for all employees in the professional group whereby these
employees could earn an additional bonus of up to ten percent of salaries, or a
total bonus ranging from zero to twenty percent. In addition, certain members of
the professional group that were part of management or were exceptional
performers were eligible to earn an additional bonus of up to ten percent of
salaries, or a total bonus ranging from zero to thirty percent. Lastly, the
officers of the Company and other senior management are eligible for an
additional ten percent of salaries, or a total bonus ranging from zero to forty
percent. In addition to the aforementioned profit sharing plan, the Company has
usually paid a Christmas bonus each year which is equivalent to one week of each
employees' base salary.
The Committee recommended that bonuses be awarded at the maximum end of the
range for 2000, which were paid in early 2001. During 2000, the Company achieved
record levels of production, proved reserves, earnings and cash flow from
operations. Although a significant portion of the strong financial results are
directly correlated to the increase in commodity prices, the Committee
recognizes that the Company also performed well by achieving a 28% increase in
its average production rates between 1999 and 2000, and replacing 448% of its
production at a finding cost of $3.83 per barrel of oil equivalent. The Company
also generally met its stated objectives and goals for the year and met or
exceeded its forecasts in almost every area. As such, the Committee recommended
that bonuses be awarded for 2000, to be paid in early 2001, equal to 10% of
salaries for all employees, 20% for all members of the professional group, 30%
for certain professionals, and 40% for the top managers and officers of the
Company. These bonuses were at the highest point of each range. The President
and Chief Executive Officer and all other Named Executive Officers received a
bonus equal to 40% of their salaries.
The Committee also approved salary increases in 2000, effective January 1,
2001, to reward employees for the improved financial and operating results in
2000, to keep the Company's salaries competitive with the Company's peers, and
to recognize the overall wage inflation in the industry. These salary increases
averaged 7.7% for the Company as a whole, 11.0% for the Named Executive Officers
as a group and 6.0% for the President and Chief Executive Officer.
The foregoing report has been furnished by the following members of the
Committee. None of the Committee members are former or current officers of the
Company or any of its subsidiaries, nor has any member of the Committee had any
Compensation Committee interlocks during the year.
THE COMPENSATION COMMITTEE
William S. Price, III, Chairman
Ronald G. Greene
SEVERANCE PROTECTION PLAN
In December 2000, the Board approved a severance protection plan (the
"Severance Plan") for all employees of the Company. Under the terms of the
Severance Plan, an employee is entitled to receive a severance payment if a
change of control in the Company occurs and the employee is terminated within
two years of the change of control. The Severance Plan will not apply to any
employee that is terminated for cause or by an employee's own decision for other
than good reason (e.g., change of job status or a required move of more than 25
miles). If entitled to severance payments under the terms of the Severance
Plans, the Chief Executive Officer and other officers that are members of the
17
Company's investment committee will receive three times their annual salary and
bonus, all other officers of the Company 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 the Company. All employees will
also receive medical and dental benefits for a period of time equal to 50% of
the number of months during which they receive severance benefits.
The Severance Plan also provide that if officers of the Company 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, 2000 in cumulative total shareholder return on the Company's Common
Stock, assuming an initial investment of $100 on December 31, 1995 as measured
against the cumulative total return of the S&P 500 and the Dow Jones Oil -
Secondary Indexes.
CUMULATIVE TOTAL RETURN ON $100 INVESTMENT
(DECEMBER 31, 1995 - DECEMBER 31, 2000)
1995 1996 1997 1998 1999 2000
-------- -------- -------- -------- -------- ---------
DENBURY $ 100 $ 243 $ 310 $ 105 $ 72 $ 183
S&P 500 100 120 158 200 239 214
DOW JONES OIL -SECONDARY 100 125 122 83 94 147
[GRAPHIC OMITTED]
18
INTERESTS OF INSIDERS IN MATERIAL TRANSACTIONS
Other than as described below, there are no material interests, direct or
indirect, of any director, officer or any shareholder of the Company who
beneficially owns, directly or indirectly, or exercises control or direction
over more than 10% of the 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. The Company believes
that the terms of the transactions described below were as favorable to the
Company as terms that reasonably could have been obtained from non-affiliated
third parties.
TPG INVESTMENTS
TPG has made several different investments in the Company. Its $40.0
million initial investment in December 1995 was comprised of a private placement
of securities, which included 4.2 million shares of Common Stock, 625,000
warrants and 1.5 million shares of convertible preferred stock. The convertible
preferred stock was converted into 2.8 million shares of Common Stock in 1996
and the warrants were exercised in January 1998. TPG also purchased shares in
two public stock offerings of the Company. TPG purchased 800,000 shares of
Common Stock in October 1996 at an aggregate cost of $9.6 million and 313,400
shares of Common Stock in February 1998 at an aggregate cost of $5.0 million.
Both of these acquisitions were made at the same price that the shares were sold
by the Company to the underwriters.
In December 1998, TPG committed to purchase 18,552,876 shares of Common
Stock at $5.39 per share for an aggregate consideration of $100 million. This
sale was approved by shareholders and consummated in April 1999. As a result of
this investment, TPG's ownership increased from approximately 32% to 60% of the
Company's issued and outstanding Common Stock. By virtue of their 60% ownership
of the Company, TPG has the voting power to control the election of directors,
to determine the corporate and management policies of the Company and to effect
the shareholder approval of a merger, consolidation or sale of all or
substantially all of the assets of the Company.
In addition, as part of TPG's $100 million investment, the Company agreed
to execute a new registration rights agreement with TPG. The new registration
rights agreement covers all of the shares owned by TPG, or a total of 27,274,314
shares of Common Stock. The agreement provides TPG "piggyback" registration
rights and also gives TPG the right to cause Denbury to file up to four demand
registrations, including one shelf registration. These demand rights expire in
April 2005 and are subject to customary exceptions and black-out periods. The
Company will bear the expenses of each "piggyback" registration and the expenses
of three of four demand registrations. Under the registration rights agreement,
the Company cannot grant any registration rights to any other person on terms
more favorable than those granted to TPG. The Company has also agreed to
indemnify TPG for specified items with regard to the registration statements.
SHAREHOLDER PROPOSALS
All shareholder proposals must be submitted in writing to Phil Rykhoek,
Chief Financial Officer and Secretary, 5100 Tennyson Parkway, Suite 3000, Plano,
Texas 75024. In order for a shareholder proposal to be included in the proxy
materials for the 2002 Annual Meeting of Shareholders, the proposal must be
received by the Company no later than December 10, 2001. These proposals must
also meet other requirements of the Securities and Exchange Act of 1934 to be
eligible for inclusion.
The form of Proxy for the Annual Meeting of Shareholders 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 djournment thereof, that are
19
not set forth in the Company's 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 2002 Annual Meeting of Shareholders, it must be received
prior to February 23, 2002.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Deloitte & Touche LLP, which has audited the
Company's books annually since 1991, as independent accountants for 2001.
Representatives of Deloitte & Touche LLP are expected to be present at the
Meeting with an opportunity to make a statement and/or respond to appropriate
questions.
AUDIT FEES
Audit fees billed to the Company by Deloitte & Touche LLP for its audit of
the Company's annual financial statements for the year ended December 31, 2000,
and for its review of the financial statements included in the Company's
Quarterly Reports on Form 10-Q filed with the SEC for 2000 totaled $115,000.
ALL OTHER FEES
Fees billed to the Company by Deloitte & Touche LLP during the Company's
2000 fiscal year for all other non-audit service rendered to the Company,
including tax-related services, 401(k) audit fees and fees for assistance with
implementing new accounting standards, total $85,300. In connection with the
recently revised standards for independence of the Company's independent public
accountants promulgated by the SEC, the Audit Committee has considered whether
the provision of such services is compatible with maintaining the independence
of Deloitte & Touche LLP.
OTHER MATTERS
Management knows of no other matter to come before the 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 directors and officers of
the Company and their relationship and transactions with the Company is based
upon information received from the individual directors and officers. All
information relating to any beneficial owner of more than 5% of Denbury's Common
Stock is based upon information contained in reports filed by such owner with
the SEC.
THE COMPANY HAS PROVIDED TO EACH PERSON WHOSE PROXY IS SOLICITED HEREBY A
COPY OF THE COMPANY'S 2000 ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED
DECEMBER 31, 2000. THE ANNUAL REPORT TO STOCKHOLDERS DOES NOT CONSTITUTE A PART
OF THE PROXY SOLICITING MATERIAL. A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MAY BE OBTAINED WITHOUT
CHARGE BY WRITING TO DENBURY RESOURCES INC., ATTN: INVESTOR RELATIONS, 5100
TENNYSON PARKWAY, SUITE 3000, PLANO, TEXAS 75024, OR BY E-MAIL TO
INVREL@DENBURY.COM.
By order of the Board of Directors
/s/ Phil Rykhoek
Phil Rykhoek
Chief Financial Officer and Secretary
20
APPENDIX A
AUDIT COMMITTEE CHARTER
OF
THE BOARD OF DIRECTORS
OF
DENBURY RESOURCES INC.
Composition
- ------------
The Committee shall be comprised of three Directors who are independent of the
management and operating executives. Members, including the Committee Chairman,
shall be appointed by the Board of Directors. At least one of the Committee
members shall have a background in financial reporting, accounting or audit.
An independent director is one who:
(1) Is not and has not been employed in an executive capacity of the
company for at least three years prior to election to the Audit
Committee;
(2) Is not an advisor or consultant to the company, nor affiliated with
any firm that is;
(3) Is not affiliated with a significant customer or supplier of the
company;
(4) Does not have a personal services contract with the company;
(5) Is not affiliated with a tax-exempt entity that receives significant
contributions from the company; and
(6) Is not a spouse, parent, sibling, child or in-law of any person
described in (1) through (5) or any member of management.
Authority
- ---------
The Committee is granted the authority to investigate any activity of the
company, and all employees are directed to cooperate as requested by the members
of the Committee. The Committee is empowered to retain persons having special
competence as necessary to assist the Committee in fulfilling its
responsibility.
Meetings
- --------
The Committee is to meet as many times as the Committee deems necessary, but at
a minimum, twice a year. In addition, the Chairman will discuss the financial
results with the independent accountants and management on a quarterly basis.
The Chairman is to meet annually, outside of normal meeting times, with
management and internal/external auditors to:
(1) Clearly agree on mutual expectations;
(2) Agree on an annual detailed plan of Committee activities; and
(3) Agree on nature, extent, and timing of Committee information needs.
It is the responsibility of the Chairman to schedule all meetings of the
Committee and to provide the committee with a written agenda at least one week
prior to all meetings.
Attendance
- ----------
As necessary or desirable, the Committee may request that members of management,
representatives of the independent public accountants, or representatives of the
independent engineers be present at meetings of the Committee.
Additional attendance at Committee meetings are to include the following:
(1) The Manager of Internal Audit is to attend meetings and to report, at
least annually, on the results of audits, the current audit schedule,
and annual audit plan;
(2) The General Counsel shall report, at least annually, to the Committee
or Committee Chairman on legal matters that may have a significant
impact on the Company's financial statements;
(3) The Chief Financial Officer and Chief Accounting Officer shall report,
at least annually, to the Committee on issues relating to financial
reporting; and
(4) The Committee shall meet with the Manager of Internal Audit, the
independent public accountants, the Chief Financial Officer, and Chief
Accounting Officer in separate executive sessions to discuss any
matters that the Committee or these groups believe should be discussed
privately with the Committee.
Minutes
- -------
The Secretary or Assistant Secretary of the company will prepare the minutes of
each meeting and send a copy of the minutes to the Committee members and the
Company Directors who are not members of the Committee.
Responsibilities and Powers
- ---------------------------
The Committee shall be empowered in accordance with its judgement to the
following Responsibilities and Powers:
Internal Controls and Risk Assessment
(1) Review and evaluate the effectiveness of the Company's processes for
assessing, mitigating and controlling significant business risks.
2
(2) Consider and review with management, the independent public
accountants and the Managerof Internal Audit the effectiveness of the
Company's internal controls.
(3) Review with the independent public accountants and the Manager of
Internal Audit coordination of their respective audit effort and
coverage.
(4) Make its independent perspective available to management for
consultation in the resolution of financial statement issues and for
discussion on significant judgment matters.
Financial Reporting
(5) Review and approve the Company's accounting principles.
(6) Assess the internal processes for managing financial statement risk
areas.
(7) Review financial statements, interim reports, SEC filings and other
documents containing the Company's financial statements.
(8) Review with management and the independent public accountants, upon
completion of their audit, the financial results for the year prior to
their release to the public. The review is to encompass:
o Significant transactions not a normal part of the Company's
operations;
o Changes, if any, during the year in the Company's accounting
principles or their application; and
o Adjustments proposed by the independent public accountants.
External Reserve Engineers
(9) Recommend to the Board of Directors the independent reserve engineers
to be employed by the Company, and the retention or non-retention of
the independent reserve engineers.
(10) Review, prior to preparation of the year-end reserves, the scope and
general extent of the independent reserve engineer's work (i.e.
engagement letter). The engineer's fees are to be agreed with
management and annually summarized for Committee review.
(11) Review the independent reserve engineers identification of issues and
business risks and exposures.
(12) Review the independence of the independent reserve engineers as it
relates to their interest in the Company and confirm their
independence from the influence of management.
(13) Inform the independent reserve engineers and management that the
independent reserve engineers and the Committee may communicate with
each other at all times, and that the Committee Chairman may call a
meeting whenever he deems it necessary.
3
(14) Instruct the independent reserve engineers that the Committee expects
to be advised if thereare any areas that require its special
attention.
(15) Evaluate the cooperation received by the independent reserve engineers
in performing their duties, including their access to all requested
records, data and information. Also, elicit the comments of management
regarding the responsiveness of the independent reserve engineers to
the Company's needs.
(16) Discuss with the independent reserve engineers the quality of the
Company's technical personnel, and relevant recommendations which the
independent reserve engineers may have.
(17) Review with management and the independent petroleum engineers the
proved reserves of the Company. The review is to encompass:
o Review of significant changes from prior period reports;
o Evaluate of the quality of the reserve estimates prepared by both
the independent engineers and the Company relative to the
Company's peers in the industry; and
o Review of significant differences between the Company and
independent engineers reserve estimates.
External Audit
(18) Recommend to the Board of Directors the independent public accountants
to be employed by the Company, and the retention or non-retention of
the independent public accountants.
(19) Review, prior to the annual audit, the scope and general extent of the
independent public accountant's audit. The auditor's fees are to be
agreed with management and annually summarized for Committee review.
(20) Assess the independent public accountants process for identifying and
responding to key audit and internal control risks.
(21) Review the independent public accountants identification of issues and
business and financial statement risks and exposures.
(22) Review the independence of the independent public accountants, giving
additional consideration to the range of audit and non-audit services
performed by them. Obtain a formal written statement describing any
relationships between the independent public accountants and the
Company.
(23) Inform the independent public accountants and management that the
independent public accountants and the Committee may communicate with
each other at all times, and that the Committee Chairman may call a
meeting whenever he deems it necessary.
(24) Instruct the independent public accountants that the Committee expects
to be advised if there are any areas that require its special
attention.
4
(25) Review with the Company's management, and independent public
accountants, the Company's general policies and procedures to
reasonably assure itself of the adequacy of internal accounting and
financial reporting controls.
(26) Evaluate the cooperation received by the independent public
accountants during their audit, including their access to all
requested records, data and information. Also, elicit the comments of
management regarding the responsiveness of the independent public
accountants to the Company's needs. Inquire of the independent public
accountants whether there have been any disagreements with management
which if not satisfactorily resolved would have caused them to issue a
nonstandard report on the Company's financial statements.
(27) Discuss with the independent public accountants the quality of the
Company's financial and accounting personnel, and relevant
recommendations which the independent public accountants may have
(including those in their "letter of comments and recommendations").
Topics to be considered during this discussion include improving
internal financial controls, the quality of earnings, and a review of
accounting policies and management reporting systems. Review written
responses of management to "letter of comments and recommendations"
from the independent public accountants.
Internal Audit
(28) Concur in the appointment, replacement, reassignment or dismissal of
the Manager of Internal Audit.
(29) Evaluate the internal audit process for establishing the annual
internal audit plan, including business risk assessment.
(30) Review and approve the annual audit plan.
(31) Review significant findings and management's response to internal
audit reports, including follow-up actions.
(32) Confirm and assure the independence of the internal auditor.
(33) Insure the internal auditor's compliance with the Institute of
Internal Auditors, Standards for the Professional Practice of Internal
Auditing.
Compliance With Laws and Regulations
(34) Determine whether the Company has an effective process for determining
risks and exposures from litigation and claims from noncompliance with
laws and regulations.
(35) Review with the Company's General Counsel and others any legal, tax or
regulatory matters that may have a material impact on the Company's
operations and financial statements.
Compliance With Codes Of Ethical Conduct
5
(36) The Committee is to make, or cause to be made, all necessary inquires
of management, the Manager of Internal Audit and the independent
public accountants concerning established standards of corporate
conduct and performance, and deviations therefrom.
(37) Review in-house policies and procedures for regular review of
officers' expenses and perquisites, including any use of corporate
assets. Inquire as to the results of the review, and, if appropriate,
review a summary of the expenses and perquisites of the period under
review.
Other
(38) Apprise the Board of Directors, through minutes and special
presentation as necessary, of significant developments in the course
of performing the above duties.
(39) Recommend to the Board of Directors any appropriate extension or
changes in the duties of the Committee or to the Committee charter. To
facilitate review of Committee activities, duties and charter, the
Committee shall:
o Periodically survey the Board of Directors, Management and
independent public accountants on the role of the Committee to
identify possible changes and revisions;
o Complete a self-assessment process at least every two years and
review the results with the Board of Directors, Management and
external/internal auditors. The charter should be re-evaluated in
light of assessment results.
o Review and reassess the adequacy of the Charter on an annual
basis.
6
*** PROXY CARD ***
DENBURY RESOURCES INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
WEDNESDAY, MAY 23, 2001
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
- ---------------
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
- -------------------------------------------
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number which is presented below available when you call.
TO VOTE BY INTERNET
- -------------------
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number which is presented below available when
you access the web page.
YOUR CONTROL NUMBER IS -> [ ]
Please Detach and Mail in the Envelope Provided
[ X ] Please mark your vote as in this example
FOR AGAINST FOR, except vote withheld from
1. Proposal to elect directors. [ ] [ ] [ ] the following nominees:
Nominees:
Ronald G. Greene -----------------
David Bonderman -----------------
David I. Heather -----------------
William S. Price, III -----------------
Gareth Roberts -----------------
Jeffrey Smith -----------------
Wieland F. Wettstein -----------------
Carrie A. Wheeler -----------------
FOR AGAINST ABSTAIN
2. Proposal to increase the number of shares that may be issued under Denbury's
Employee Stock Option Plan by 600,000 shares. [ ] [ ] [ ]
Signature: Date: Signature: _ Date:
------------------------- ------------------- --------------------------- --------------------
(If held Jointly)
*** PROXY CARD ***
DENBURY RESOURCES INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 23, 2001
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 23, 2001, 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 EIGHT NOMINEES FOR DIRECTOR AND FOR THE PROPOSAL TO
INCREASE THE NUMBER OF SHARES ISSUABLE UNDER THE STOCK OPTION PLAN. THE PROXIES
ARE AUTHORIZED TO VOTE YOUR SHARES, IN THEIR DISCRETION, ON ANY OTHER MATTER
THAT IS PROPERLY BROUGHT BEFORE THE MEETING.
PLEASE SIGN AND MAIL YOUR PROXY TODAY.