UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Amendment No. 1
to
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 6, 2006
DENBURY RESOURCES INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
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| 1-12935
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20-0467835 |
| (Commission File Number)
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(I.R.S. |
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Employer Identification No.) |
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| 5100 Tennyson Parkway, |
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| Suite 1200, Plano, Texas
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75024 |
| (Address of principal executive
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(Zip code) |
| offices) |
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Registrant’s telephone number, including area code: (972) 673-2000
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
Explanatory Note. This Amendment No. 1 to the Form 8-K filed December 12, 2006, modifies that
portion of the Form 8-K under the caption “Long-term Incentive Grants to Executive Officers” below
to reflect technical revisions to the long-term incentive grants which on December 6, 2006 the
Compensation Committee of the Company’s Board of Directors agreed to make to the Company’s eight
executive officers on January 2, 2007, such revisions being principally made to address the
potential tax effect on the Company of those awards while preserving the principal features and
economics of the previously authorized awards.
Section 5 – Corporate Governance and Management
This Form 8-K describes modifications to the compensation arrangements for our executive officers
and directors made at the December 6, 2006 Board of Directors meeting, as further modified by these
technical revisions. The modifications include the awarding of cash bonuses for 2006, setting of
base compensation for 2007, changes in the awards being made as long-term incentive grants to our
eight executive officers, including the Named Executive Officers, and changes in director
compensation. Otherwise the compensation arrangements and plans previously described in previous
filings remain in place.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain Officers
Directors’ Compensation Arrangements
At its meeting on December 6, 2006, the Board of Directors approved increasing their 2007 annual
retainer fee to $40,000 from $35,000 a year, and approved an award of 2,000 shares of restricted
stock on January 2, 2007 to each director, which balloon vest three years after that date.
Additionally, the Board of Directors voted to increase the annual amount being paid to the
Company’s non-executive Chairman of the Board for serving in that position from $5,000 per year to
$20,000 per year.
Executive Officers’ Base Salaries
Effective January 1, 2007, the Chief Executive Officer’s base salary will be increased 10% over his
current base salary, and the base salary of our other executive officers (including the Named
Executive Officers) will increase 5% over their current base salaries. Base salaries for 2007 will
be $451,894 for Gareth Roberts, $308,149 for Phil Rykhoek and Tracy Evans, and $253,575 for Mark
Allen and Jim Sinclair.
The Compensation Committee of the Board of Directors does not consider factors relating to the
Company’s performance in setting base salaries, but the Company’s performance does impact the
magnitude of bonuses that are granted (see “Cash Bonus Grants to Executive Officers” below).
Cash Bonus Grants to Executive Officers
Since 1995, we have had a practice of paying cash bonuses to all of our employees and officers each
year except in 1998, when no bonuses were paid. 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
Company’s results for that year, as determined by the Compensation Committee of our Board of
Directors. This practice and the related methodology did not change in the awarding of bonuses for
2006.
Cash bonuses for 2006, to be paid in early January 2007, for our Chief Executive Officer and our
other executive officers (including the Named Executive Officers), were set by the Compensation
Committee at their December 6th meeting at 38.25% of each executive officer’s respective base
salary, approximately 90% of the upper end of our normal range. Bonuses were not authorized at 100%
of the upper end of the normal range because the Company will not meet several of its projected
2006 targets, most importantly those related to forecasted production. In the Compensation
Committee’s view, 2006 bonuses would have been lower than the 90th percentile
if bonuses had been based solely on Company performance, but they concluded that a somewhat lower
bonus level would not have served the Company’s interest in retaining its employees given the
current competitive pressures in the oil and gas
industry. Bonuses for 2006 will be $157,136 for Gareth Roberts, $112,254 for Phil Rykhoek and Tracy
Evans, and $92,374 for Mark Allen and Jim Sinclair.
Long-term Incentive Grants to Executive Officers
On December 6, 2006, the Compensation Committee agreed that on January 2, 2007, the Company would
issue stock awards to our Company’s executive officers, with shares earned under performance-based
awards based on Company performance for 2007, 2008 and 2009. This decision was ratified by the
Board of Directors on the same date. The previously authorized awards have been split into a
cliff-vesting restricted stock portion and a performance-based shares portion which retain the
principal features and economics of the previously authorized awards. Both the cliff-vesting
restricted shares and the performance-based shares will vest on March 31, 2010 when the Company’s
various financial and operational results for 2009 will have been finalized.
The number of performance-based shares which will be earned (and eligible to vest) during the
performance period will depend on the Company’s level of success in achieving four
specifically-identified performance targets. Generally, one-half of the shares earnable under the
performance-based shares will be earned for performance at the designated target levels (100%
target vesting levels) or upon any earlier change of control, and twice that number of shares will
be earned if the higher maximum target levels are met. If performance is below designated minimum
levels for all performance targets, no performance-based shares will be earned. The targets chosen
by the Compensation Committee are generally intended to be based upon controllable Company
performance factors, which for the most part would exclude the effect of changes in commodity
prices. If circumstances beyond the control of the Company or management were to make some or all
of these performance targets inappropriate in measuring the performance of the Company, the
Company’s Compensation Committee retains discretion to modify the performance targets to meet the
original intent of the grants in those circumstances.
The four specifically-identified performance targets upon which the level of earning of
performance-based shares will be based are shown below at the maximum award levels, along with the
weighting assigned to each target:
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Actual tertiary oil production versus forecasted
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60 |
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Finding cost plus operating expenses plus G&A expense per BOE versus peer group
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50 |
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Actual total corporate production versus forecasted
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45 |
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Reserve replacement
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45 |
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Totals
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200 |
% |
The Committee will have the discretion to reduce the number of performance-based shares otherwise
earned by up to 25% based on other factors, which include their review of the Company’s corporate
governance, environmental and safety compliance, debt levels, as well as other discretionary
factors.
Each of the target levels will be determined and defined by the Compensation Committee, based upon
year-end 2006 forecasts or levels (for example, year-end 2006 reserves will serve as the baseline
for the reserves replacement target), and in the case of peer group measures will be based upon
publicly available information for those peers. Definitive documentation for the performance-based
restricted stock is subject to completion and review and must be approved by the Compensation
Committee. Achievement of discretionary factors and confirmation of performance levels will be
determined by the Compensation Committee. Any portion of the performance shares which are not
earned by the end of the three year measurement period will be forfeited. In certain change of
control events, one-half (i.e. the target level amount) of the performance-based shares and all of
the cliff-vesting restricted stock would vest. The number of shares of cliff-vesting restricted
stock and performance-based shares (at the 100% targeted vesting level) to be granted to the
Company’s executive officers is shown below. The actual number of shares to be delivered pursuant
to the performance-based shares could range from zero to 200% of the stated 100% targeted amount
below.