DENBURY RESOURCES INC.
Information Circular - Proxy Statement
Annual and Special Meeting of Shareholders
to be held on Tuesday, May 19, 1998
INTRODUCTION AND GENERAL PROXY MATTERS
THIS INFORMATION CIRCULAR IS FURNISHED IN CONNECTION WITH THE SOLICITATION
OF PROXIES BY THE MANAGEMENT OF DENBURY RESOURCES INC. ("Denbury" or the
"Company") for use at the Annual and Special Meeting of the Shareholders of
Denbury (the "Meeting") to be held on the 19th day of May, 1998 at the time and
place and for the purposes set out in the accompanying Notice of Annual and
Special Meeting, and any adjournments thereof. The approximate date on which
this Information Circular - Proxy Statement and the enclosed Instrument of Proxy
will first be sent to shareholders is April 9, 1998. The dollar disclosures
contained herein are reported in U.S. dollars unless otherwise noted.
RECORD DATE
The Board of Directors of Denbury has fixed the record date for the Meeting
at the close of business on Wednesday, April 8, 1998 (the "Record Date"). Only
shareholders of Denbury of record as at the Record Date are entitled to receive
notice of the Meeting unless such person transfers his shares after the Record
Date and the transferee of those shares establishes that he owns the shares and
demands, not later than the close of business on May 8, 1998, that the
transferee's name be included in the list of shareholders entitled to vote.
APPOINTMENT AND REVOCATION OF PROXIES
An Instrument of Proxy accompanies the Notice of Annual and Special Meeting
and this Information Circular. In order to be valid and acted upon at the
Meeting, Instruments of Proxy must be received by the Secretary of Denbury c/o
CIBC Mellon Trust Company, Corporate Trust Department, 600 Dome Tower, 333 - 7th
Avenue S.W., Calgary, Alberta, T2P 2Z1, not less than 48 hours (excluding
Saturdays, Sundays and holidays) before the time set for the holding of the
Meeting or any adjournment thereof.
The instrument appointing a proxy shall be in writing and shall be executed
by the shareholder or his attorney authorized in writing or, if the shareholder
is a corporation, under its corporate seal or by an officer or attorney thereof
duly authorized.
The persons named in the enclosed form of proxy are directors and/or
officers of Denbury. Each shareholder has the right to appoint a proxyholder
other than the persons designated in the form of proxy, who need not be a
shareholder, to attend and to act for him and on his behalf at the Meeting. To
exercise such right, the name of the nominees of management should be crossed
out and the name of the shareholder's appointee should be legibly printed in the
blank space provided.
A shareholder who has submitted a proxy may revoke it any time prior to the
exercise thereof. If a person who has given a proxy attends personally at the
Meeting at which such proxy is to be voted, such person may revoke the proxy and
vote in person. In addition to revocation in any other manner permitted by law,
a proxy may be revoked by instrument in writing executed by the shareholder or
his attorney authorized in writing or, if the shareholder is a corporation,
under its corporate seal or by an officer or attorney thereof duly authorized
and deposited either at the registered office of Denbury at any time up to and
including the last business day preceding the day of the Meeting, or any
adjournment thereof, at which the proxy is to be used, or with the Chairman of
the Meeting on the day of the Meeting, or any adjournment thereof, and upon
either of such deposits, the proxy is revoked.
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PERSONS MAKING THE SOLICITATION
This solicitation is made on behalf of the management of Denbury. The costs
incurred in the preparation and mailing of the Instrument of Proxy, Notice of
Annual and Special Meeting and this Information Circular 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.
EXERCISE OF DISCRETION BY PROXY
The shares represented by proxy in favour of management nominees shall be
voted on any ballot at the Meeting and, where the shareholder specifies a choice
with respect to any matter to be acted upon, the shares shall be voted on any
ballot in accordance with the specification so made.
In the absence of such specification, the common shares will be voted for
the election of the seven director nominees named herein and in favour of the
other matters to be acted upon. The persons appointed under the Instrument of
Proxy furnished by Denbury are conferred with discretionary authority with
respect to amendments or variations of those matters specified in the Instrument
of Proxy and Notice of Annual and Special Meeting. At the time of printing this
Information Circular, management of Denbury knows of no such amendment,
variation or other matter.
OUTSTANDING VOTING SHARES
As at March 15, 1998, 26,598,413 common shares of Denbury were issued and
outstanding, each share carrying the right to one vote on a ballot at the
Meeting. Abstentions will be included in vote totals and, as such, will have the
same effect on each proposal as a negative vote. Broker non-votes, if any, will
not be included in vote totals and, as such, will have no effect on any
proposal. A quorum for the transaction of business at the Meeting is not less
than two (2) persons present, holding or representing not less than 5% of the
common shares entitled to be voted at the Meeting. All matters submitted to a
vote at the Meeting require a majority of the votes, present or represented by
proxy, for approval.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 15, 1998,
concerning beneficial ownership of the Common Shares by: (i) any shareholders
known to the Company to beneficially own more than 5% of the issued and
outstanding Common Shares, and (ii) all executive officers and directors
individually and as a group. Except as otherwise indicated and except for those
shares that are listed as being beneficially owned by more than one shareholder,
each shareholder identified in the table has sole voting and investment power
with respect to their shares.
<TABLE>
<CAPTION>
Beneficial Ownership as of
March 15, 1998
----------------------------
Name and Address of
Beneficial Owner Shares Percent
- ------------------------------------------- --------------- ---------
<S> <C> <C>
Ronald G. Greene........................... 900,900 (1) 3.4% (1)
Suite 700, 407 - 2nd Street
Calgary, Alberta T2P 2Y3
David Bonderman............................ 8,971,438 (2) 33.8% (2)
201 Main Street, Suite 2420
Ft. Worth, TX 76102
Wilmot L. Matthews......................... 156,250 (3) *
1 First Canadian Place, Suite 5101
Toronto, ON M5X 1E3
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Name and Address of
Beneficial Owner Shares Percent
- ------------------------------------------- --------------- ---------
William S. Price, III...................... 8,724,438 (4) 32.8%(4)
345 California Street, Suite 3300
San Francisco, CA 94104
David M. Stanton........................... 2,000 (5) *
Wieland F. Wettstein....................... 83,389 (6) *
Gareth Roberts............................. 498,302 (7) 1.9%(7)
Matthew Deso............................... 25,801 (8) *
Phil Rykhoek............................... 9,109 (8) *
Mark A. Worthey............................ 79,001 (8) *
Bobby J. Bishop............................ 2,439 *
All of the executive officers and
directors as a group (11
persons)................................ 10,632,817 (9) 40.2%(9)
TPG Advisors, Inc.......................... 8,721,438 32.8%
201 Main Street, Suite 2420
Ft. Worth, TX 76102
<FN>
* Less than 1%.
(1) Includes 30,150 Common Shares held by Mr. Greene's spouse in her
retirement plan, 900 shares held in trust for Mr. Greene's minor children
and 520,833 Common Shares held by Tortuga Investment Corp., which is
solely owned by Mr. Greene.
(2) Includes 250,000 Common Shares in a family partnership 100% controlled by
Mr. Bonderman. Mr. Bonderman is a director, executive officer and
shareholder of TPG Advisors, Inc., which 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
the remaining securities attributed to Mr. Bonderman.
(3) Includes 52,300 Common Shares held by a subsidiary of Marjad Inc., which
is wholly owned by Mr. Matthews, 2,450 Common Shares held in various
trusts of which Mr. Matthews is a trustee and an income beneficiary and
1,500 Common Shares as to which Mr. Matthews holds a power of attorney but
no beneficial interest.
(4) Includes 1,000 Common Shares held by Mr. Price and 2,000 Common Shares
held by Mr. Price's spouse. Mr. Price is a director, executive officer and
shareholder of TPG Advisors, Inc., which 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
the remaining securities attributed to Mr. Price.
(5) Although Mr. Stanton is not considered to be a "beneficial owner" as that
term is defined by the Securities and Exchange Commission, Mr. Stanton is
an officer of TPG Advisors, Inc., the general partner of TPG Partners L.P.
and TPG Parallel I, L.P. and is a principal of TPG Partners, L.P.
(6) Includes 76,439 Common Shares held by S.P. Hunt Holdings Ltd., which is
solely owned by a trust of which Mr. Wettstein is a trustee.
(7) Includes 138,330 Common Shares held by a corporation which is solely owned
by Mr. Roberts, 38,000 Common Shares held in a private charitable
foundation which he and his spouse control and 2,228 Common Shares held by
his spouse.
(8) Includes 17,500, 6,562, and 73,250 Common Shares which Mr. Deso, Mr.
Rykhoek and Mr. Worthey, respectively, have the right to acquire pursuant
to stock options which are currently vested or which vest within 60 days
from March 15, 1998.
(9) Includes 97,312 Common Shares 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, 1998. Beneficial
ownership also includes the shares held by affiliates of TPG, although Mr.
Price and Mr. Bonderman, who are directors of the Company, are not the
owners of record of these securities. Mr. Price and Mr. Bonderman are
directors, executive officers and shareholders of TPG Advisors, Inc.,
which 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 these 8,721,438 shares.
</FN>
</TABLE>
The Company is neither directly or indirectly owned or controlled by
another corporation or foreign government.
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MANAGEMENT
The names of the officers of the Company and the offices held by them with
the Company and the period during which such office has been held by them 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 45 President and Chief Executive Officer
Matthew Deso 44 Vice President, Exploration
Phil Rykhoek 41 Chief Financial Officer and Secretary
Mark Worthey 40 Vice President, Operations
Bobby Bishop 37 Controller & Chief Accounting Officer
Ron Gramling 52 President of Marketing Subsidiary
Lynda Perrard 54 Vice President, Land of Operating Subsidiary
Set forth below is a description of the business experience of each of the
officers.
Gareth Roberts - President, Chief Executive Officer and a Director, is the
founder of the operating subsidiary of the Company, which was founded in April
1990. Mr. Roberts has 25 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.
Matthew Deso - Vice President, Exploration, has been with the Company since
October 1990, first as a consultant and thereafter when he moved to Dallas in
January 1994, as Vice President of Exploration, his current position. Mr. Deso
has 22 years of petroleum geology experience, and received a Bachelor of Science
in Geosciences from the University of Texas in 1976. Mr. Deso also worked for
Enserch Exploration (three years), Terra Resources (three years) and TXO
Production Corp. (eight years) in positions of varying responsibility.
Phil Rykhoek - Chief Financial Officer, a Certified Public Accountant, has been
with the Company since June 1995. Prior to joining the Company, Mr. Rykhoek was
Executive Vice President and co-founder of Petroleum Financial, Inc., a private
company formed in May 1991 to provide oil and natural gas accounting services on
a contract basis to other entities. Mr. Rykhoek was also employed by Amerac
Energy Corporation (formerly Wolverine Exploration Company) for eight years,
most recently as Vice President and Chief Accounting Officer and began his
career with Price Waterhouse in 1979.
Mark A. Worthey - Vice President, Operations, is a geologist and is responsible
for all aspects of operations in the field. He joined the Company 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.
Bobby J. Bishop - Controller and Chief Accounting Officer, a Certified Public
Accountant, joined the Company as Controller in August 1993 and was appointed to
the position of Chief Accounting Officer in December, 1997. Prior to joining the
Company, Mr. Bishop was the Chief Financial Officer for Arcadia Exploration and
Production Company, a private company. He also worked for Lake Ronel Oil Company
and TXO Production Corp. Mr. Bishop graduated from the University of Oklahoma
with a Bachelor of Business Administration in Accounting in 1983.
Ron Gramling - President of the Company's marketing subsidiary, joined the
Company in May 1996 when the Company purchased the subsidiary's assets. Prior to
becoming affiliated with the Company, he was employed by Hadson Gas Systems as
Vice President of term supply. Mr. Gramling has 28 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.
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Lynda Perrard - Vice President, Land of the Company's operating subsidiary,
joined the Company in April 1994. Ms. Perrard has over 30 years of experience in
the oil and gas industry as a petroleum landman. Prior to joining the Company,
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.
STATEMENT OF EXECUTIVE COMPENSATION
For the purpose of reporting executive remuneration paid in 1997, there
were five individuals employed as executive officers of the Company during the
year. The aggregate cash compensation paid to these executive officers by the
Company and its subsidiaries for services rendered during fiscal 1997 was
$849,791.
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 financial years (collectively the "Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation (1) Long Term Compensation
---------------------------- ----------------------
Other Common Shares Under
Name and Principal Position Year Salary Bonuses Compensation(2) Option/SARs Granted
- ---------------------------- ---- -------- -------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Gareth Roberts 1997 $197,917 $38,846 $14,843 40,000
President and Chief 1996 172,917 25,865 12,401 25,000
Executive Officer 1995 150,000 2,885 525 Nil
Matthew Deso 1997 $138,750 $27,692 $10,406 28,000
Vice President, 1996 122,917 17,404 8,438 12,500
Exploration 1995 100,000 1,923 Nil 5,000
Phil Rykhoek 1997 $138,750 $27,692 $10,406 28,000
Chief Financial Officer 1996 122,917 12,404 5,976 31,250
and Secretary (3) 1995 55,682 1,923 Nil 50,000
Mark Worthey 1997 $138,750 $27,692 $10,406 28,000
Vice President, 1996 122,917 17,404 8,438 12,500
Operations 1995 100,000 1,923 Nil Nil
Bobby J. Bishop (4) 1997 $ 94,375 $19,327 $7,078 19,000
Controller and Chief 1996 83,541 7,683 5,750 7,000
Accounting Officer 1995 72,800 1,346 Nil 2,500
<FN>
(1) The aggregate amount of all other annual compensation as defined by
applicable securities regulations was not greater than the lesser of
$10,000 and 10% of the total annual salary and bonus of each Named
Executive Officer for each financial year.
(2) Includes stock purchase plan contributions by the Company and a car
allowance for Mr. Roberts.
(3) Mr. Rykhoek joined Denbury in June 1995.
(4) Mr. Bishop was appointed Chief Accounting Officer on December 9, 1997.
</FN>
</TABLE>
Stock Options
The Company has an employee stock option plan (the "Plan") pursuant to
which stock options may be granted to full and part-time employees, officers and
directors of the Company and its subsidiaries, from time to time, as the board
of directors of the Company may determine. The Plan allows the granting of
either non-qualified or incentive stock options. Under the terms of the Plan,
the number of Common Shares reserved for future issuance may not
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exceed 2,650,000 Common Shares, subject to shareholder ratification by Ordinary
Resolution at the Meeting. See "Business to Be Conducted at The Meeting -
Amendment to Stock Option Plan". The term of options granted under the Plan are
determined by the board of directors provided that no option may be granted for
a period exceeding 10 years from the date of the grant, or such lesser period of
time as permitted, from time to time, by the applicable rules of The Toronto
Stock Exchange (the "TSE"). The purchase price of any shares subject to option
under the Plan is fixed by the board of directors but may not be less than the
lowest purchase price permitted under the rules of TSE or The New York Stock
Exchange ("NYSE"). All option agreements granted under the Plan must be in
accordance with the policies and procedures of the TSE and NYSE.
As of December 31, 1997, options granted pursuant to the Plan were
incentive and non-qualified stock options which in the aggregate represented
rights to acquire an aggregate 1,546,256 Common Shares held by seven officers
and 48 employees. These options are exercisable at prices ranging from $5.55 to
$22.24, with a weighted average price of $11.06. Of the total outstanding
options, 391,872 options were exercisable as of December 31, 1997. The Company
granted 797,162 options during 1997.
Option Grants in Last Fiscal Year
The following table represents the options granted to the Named Executive
Officers during 1997 and the value of such options as of the date of grant:
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------
% of
Total
Options
Number of Granted to Exercise
Options Employees in Price Expiration Grant Date
Name Granted Fiscal Year ($/Sh) Date (1) Present Value $(2)
- ----- ----------- ------------ -------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Gareth Roberts 20,000 (3) 2.5% $13.38 02/24/07 $87,400
20,000 (4) 2.5% $13.38 02/24/07 87,400
Matthew Deso 14,000 (3) 1.8% $13.38 02/24/07 61,180
14,000 (4) 1.8% $13.38 02/24/07 61,180
Phil Rykhoek 14,000 (3) 1.8% $13.38 02/24/07 61,180
14,000 (4) 1.8% $13.38 02/24/07 61,180
Mark Worthey 14,000 (3) 1.8% $13.38 02/24/07 61,180
14,000 (4) 1.8% $13.38 02/24/07 61,180
Bobby J. Bishop 9,500 (3) 1.2% $13.38 02/24/07 41,515
9,500 (4) 1.2% $13.38 02/24/07 41,515
<FN>
(1) All of the granted options have a ten year term.
(2) 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 three year monthly average of the Common Shares as
listed on the TSE, which was 29%; expected dividend yield - 0%; expected
option term - 4 years; and risk-free rate of return as of the date of grant
of 6.2%, based on the yield of five year U.S. treasury securities.
(3) The options vest in their entirety three (3) years from the date of grant
with no vesting prior thereto.
(4) The options vest in their entirety four (4) years from the date of grant
with no vesting prior thereto.
</FN>
</TABLE>
Option Exercises and Holdings
The following table sets forth information with respect to the Named
Executive Officers concerning options exercised during 1997 and unexercised
options held as of December 31, 1997.
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<TABLE>
<CAPTION>
Aggregated Option Exercises in 1997
and December 31, 1997 Option Values
Shares Value of Unexercised
Acquired Number of Unexercised In-the
on Value Options at Money Options at
Exercise Realized(1) December 31, 1997 December 31, 1997 (2)
-------- ---------- ------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gareth Roberts 27,750 $330,780 - 65,000 $ - $ 500,426
Matthew Deso 45,000 515,450 17,500 40,500 223,738 292,173
Phil Rykhoek 22,500 266,069 1,875 56,125 20,897 475,939
Mark Worthey - - 73,250 40,500 834,576 292,173
Bobby J. Bishop 25,000 274,205 - 26,000 - 181,030
<FN>
(1) Aggregate value realized is calculated based upon the difference between
the exercise price of the options and the closing price of the Common
Shares on the NYSE on the date of exercise. The Canadian currency was
converted to U.S. funds, as to certain options, using the current exchange
rate at the time of exercise.
(2) Based on the closing sale price of the Common Shares on December 31, 1997,
of $18.625 per share as reported by the NYSE. A conversion exchange rate of
Cdn. $1.37 = U.S. $1.00 was assumed in the calculation as certain of the
options are denominated in Canadian dollars.
</FN>
</TABLE>
Compensation Committee Interlocks and Insider Participation
During 1997, the compensation committee of the Company consisted of Messrs.
Ronald Greene and William Price, III, both independent directors. To the
Company's knowledge, there are no inter-relationships involving members of the
Compensation Committee or other directors of the Company requiring disclosure in
this section of the Information Circular.
Board Compensation Committee Report on Executive Compensation
The compensation committee of the Board of Directors (the "Committee") is
responsible for making recommendations to the Board of Directors 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 of Directors 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 are high enough to
attract good people, 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 all employees be
compensated for team effort rather than 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 the professionals, (iv)
a profit sharing plan or bonus plan for all employees with bonuses ranging from
zero to ten percent of base salaries, and (v) a profit sharing or bonus plan for
the senior professional group.
In determining both salary and other compensation, the Committee weighs
individual performance, corporate overall performance, the executive's position
and responsibility in the organization, the executive's experience and
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<PAGE>
expertise and compensation for comparable positions at comparable companies. In
making recommendations, the Committee exercises subjective judgement using no
specific weights for these factors and also relies heavily on the recommendation
of the Chief Executive Officer with regard to individual performance.
Stock options are awarded to senior executives and key employees to retain
and motivate the grantees and to improve long-term Company performance by making
executive rewards consistent with that of all shareholders. Options are granted
at the prevailing market price and will only have value if the market price of
the Common Shares increases. These options are structured to provide incentives
for key employees to remain with the Company and provide a mechanism for these
individuals to benefit from improvements in the performance of the Company.
Commencing in 1997, the Company modified the option vesting schedule for future
grants. Historically, the Company had granted options to its key employees at
their time of employment with such options vesting over a period of three years.
Additional options were also granted on an annual basis which vested 100% three
years from the date of grant. The net effect was that an employee would have
options vesting each year for the next three years. Although the general concept
has remained the same, the overall program was lengthened from three years to
four years. As a result, any future option grants made at the time of employment
will vest ratably over a period of four years and any subsequent grants
(normally on an annual basis) to an employee will vest 100% four years from the
date of grant. To make the transition to this four year program, on February 21,
1997 the Compensation Committee and Board of Directors granted two series of
options to its key employees with one series vesting 100% at the end of three
years and one series vesting 100% at the end of four years. All of the options
granted under the Plan expire ten years from the date of grant.
To encourage ownership in the Company by all of the employees, the Company
has a stock purchase plan which allows each employee 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 previously
unissued shares at the current market price. The stock purchase plan requires
each employee to hold these shares for a minimum of one year before disposition.
During 1997, the Company achieved outstanding financial results as a result
of increased production and improved product prices with dramatic improvement in
almost all statistical categories. Production, on a BOE basis, increased by 71%
and cash flow from operations increased 66% from the prior year. Net income
increased 70% from $8.7 million during 1996 to $14.9 million during 1997 and
proved reserves, on a BOE basis, increased by 91% from 1996 to 1997. Based upon
these overall results, in January, 1998, the Compensation Committee awarded a
bonus equal to 10% of base compensation to all employees, after certain
adjustments for tenure. In addition, the Compensation Committee awarded
additional bonuses to the Company's senior management, including a bonus of
$40,000 to Mr. Roberts, the Company's CEO.
Consistent with the above policies and objectives, the base annual salary
for Mr. Gareth Roberts, President and CEO of the Company, was increased in
January 1998 from $200,000 to $275,000. Consistent with the philosophy of the
Board of Directors that executive officers have their main focus of compensation
in the area of long-term incentives, the Company awarded an additional 417,120
stock options in January 1998 to employees of the Company vesting 100% four
years from the date of grant. Of those option grants, 16,500 stock options were
awarded to Mr. Roberts.
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
Ronald G. Greene
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<PAGE>
Termination of Employment, Change in Responsibilities and Employment Contracts
The Company has no Employment Contracts with any employees as at December
31, 1997.
Directors and Officers Insurance
During 1997, the Company renewed its directors and officers insurance
coverage for all of its officers and directors for three years at an annual cost
of approximately $143,000. The insurance provides up to $15 million of coverage
for the officers and directors with deductibles ranging from zero to $350,000,
depending on the type of claim, and $15 million coverage for the Company. The
Company has paid for 100% of the cost of this insurance.
BOARD MEETINGS, ATTENDANCE AND COMMITTEES
The Board of Directors met seven times during the year ended December 31,
1997, including the meetings by way of telephone conference. 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 1997. In
addition, all directors attended at least 75% of all meetings of each of the
committees on which they served. Mr. Wilmot Matthews was appointed to the Board
of Directors on December 9, 1997 to fill a vacancy.
The Board of Directors has an Audit Committee, a Compensation Committee, a
Stock Option Committee and a Stock Purchase Plan Committee. The Audit Committee
is comprised of Messrs. Greene, Matthews and Wettstein, with Mr. Wettstein
acting as Chairman. The Audit Committee is responsible for reviewing the scope
and audit plan of the independent auditors' examinations of the Company's
financial statements and receiving and reviewing their reports. The Audit
Committee reviews fees and non-audit engagements of the independent accountants
and each year recommends to the Board their selection of the firm of independent
accountants to audit the accounts and records of the Company. The Audit
Committee also meets with the independent auditor, conducts 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. The Audit Committee met two times during 1997.
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 of Directors 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 will at least annually prepare a compensation report in accordance with the
rules and regulations promulgated under applicable securities laws. The
Compensation Committee met twice during 1997.
The Board also appointed a Stock Option Plan Committee and a Stock Purchase
Plan Committee in December, 1995 to administer the two respective benefit plans
and to report and coordinate their efforts with the Compensation Committee. The
Stock Option Committee and Stock Purchase Plan Committee is comprised of Messrs.
Greene and Price, with Mr. Greene acting as its Chairman. These committees met
as part of the Compensation Committee during 1997.
10
<PAGE>
COMPENSATION OF DIRECTORS
Information regarding the compensation received, including options, from
the Company during the fiscal year ended December 31, 1997 by Mr. Roberts,
President, Chief Executive Officer and a director of the Company, is disclosed
under the heading "STATEMENT OF EXECUTIVE COMPENSATION - Summary Compensation
Table".
Directors Fees
The Company reimburses the Directors of the Company for out-of-pocket
traveling expenses in connection with each board meeting attended. There are no
other arrangements in respect of which Directors of the Company receive monetary
compensation for acting in that capacity.
Directors Options
During 1997, Mr. Roberts was granted a total of 40,000 options with an
exercise price equal to the then current market price of U.S. $13.38. No other
options were issued to directors in 1997.
The following table shows the aggregate number of options exercised and the
value realized upon exercise of the options. As of December 31, 1997, none of
the directors, other than Mr. Roberts, hold any options. The options held by Mr.
Roberts are disclosed under the heading "STATEMENT OF EXECUTIVE COMPENSATION".
<TABLE>
<CAPTION>
Aggregated Share Option Exercises in 1997
and
December 31, 1997 Option Values for Options Held by Directors
Common
Shares Number of Value of
Acquired Aggregate Unexercised Unexercised in-the-
on Value Options at Money Options at
Name Exercise Realized(1) December 31, 1997 December 31, 1997
- ---- --------- ----------- ------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wieland Wettstein 18,000 $ 217,800 Nil Nil Nil Nil
<FN>
(1) Aggregate value realized is calculated based upon the difference between the
exercise price of the options and the closing price of the Common Shares on
NYSE on the date of exercise. The Canadian dollar amounts were converted
using the current exchange rate at the time of exercise.
</FN>
</TABLE>
11
<PAGE>
SHARE PERFORMANCE GRAPH
The following graph illustrates changes over the five year period ended
December 31, 1997 in cumulative total shareholder return, assuming an initial
investment of $100 on December 31, 1992 and reinvestment of dividends as
measured against the cumulative total return of the TSE 300 Index and the TSE
Oil and Gas Index. Since the Company has only been traded on the NYSE since May
9, 1997, the Company used the share performance on the TSE for its comparison.
Cumulative Total Return on $100 Investment
(December 31, 1993 - December 31, 1997)
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
----- ----- ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
Denbury $ 100 $ 122 $ 121 $ 132 $ 323 $ 431
TSE 300 100 129 126 141 177 200
TSE Oil & Gas Index 100 133 124 143 195 200
</TABLE>
12
<PAGE>
COMPLIANCE WITH SECTION 16(a)
Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder require the Company's executive officers and directors, and persons
who own more than ten percent (10%) of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission and exchanges on which the securities of
the Company are listed and posted for trading and to furnish the Company with
copies. The Company first became subject to Section 16(a) on December 21, 1995.
Based solely on its review of the copies of such forms received by it, or
written representations from such persons, the Company is not aware of any
person who failed to file any reports required by Section 16(a) to be filed for
fiscal 1997.
INTERESTS OF INSIDERS IN MATERIAL TRANSACTIONS
Other than as described in the paragraphs that follow, 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 5% of the outstanding Common
Shares, or any known family member, associate or affiliate of such persons,
participating 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
In December 1995, the Company closed a $40.0 million private placement of
securities with partnerships that are affiliated with TPG (the "TPG Placement").
The TPG Placement was comprised of: (i) 4.2 million Common Shares issued at
$5.85 per share; (ii) 625,000 warrants at a price of $1.00 per warrant,
entitling the holders thereof to purchase 625,000 Common Shares at $7.40 per
share; and (iii) 1.5 million shares of $10 stated value Convertible First
Preferred Shares, Series A ("Convertible Preferred"). The shareholders of the
Company at a Special Meeting on October 9, 1996 approved a resolution to amend
the terms of the Convertible Preferred to allow the Company to require a
conversion of the Convertible Preferred at any time. All of the Convertible
Preferred shares were converted into 2,816,372 Common Shares on October 30, 1996
and the warrants were exercised on January 20, 1998.
In connection with the TPG Placement, TPG received the right to nominate
three of the directors of the Company out of a maximum of seven. Of the current
directors, Messrs. Bonderman, Price and Stanton were nominated by TPG. See
"Management." In addition, until December 21, 1997, TPG had certain "piggyback"
registration rights which allowed TPG to include all or part of the Common
Shares acquired by TPG in any registration statement of the Company during that
period. Commencing December 21, 1997 and until December 21, 2000, TPG may
request and receive one demand registration whereby TPG may make a written
request to the Company for registration under the Securities Act of the Common
Shares acquired by TPG. Finally, the agreement provides that TPG shall have the
right, but not the obligation, to maintain its pro rata ownership interest in
the equity securities of the Company, in the event that the Company issues any
additional equity securities or securities convertible into Common Shares of the
Company, by purchasing additional shares of the Company on the same terms and
conditions. This right, however, expires should TPG's share holdings represent
less than 20% of the outstanding Common Shares calculated on a fully-diluted
basis. At the request of the NYSE, the Company has agreed to make the extension
of this right subject to shareholder ratification every five years with the
first vote on the matter expected to be at the annual meeting in the year 2000.
TPG waived its right to maintain its pro rata ownership with regard to the
public offering by the Company in October 1996, but did purchase 800,000 Common
Shares included in the offering directly from the Company. These Common Shares
were sold to TPG for 93.5% of the public offering price, or the same net price
that the remainder of the shares included in the offering were being sold to the
underwriters. TPG also waived its right to maintain its pro rata ownership with
regard to the equity offering completed in February 1998 but purchased 313,400
shares in the offering at 95.25% of the public offering price, or the same net
price that the remainder of the shares included in the offering were being sold
to the underwriters. As of February 28, 1998, TPG was the beneficial owner of
8,721,438 Common Shares, which represented 32.8% of the Company's outstanding
Common Shares.
13
<PAGE>
In 1995, the Company issued 333,333 Common Shares to Tortuga Investment
Corp. as a financial advisory fee for its services in connection with the TPG
Placement. Tortuga Investment Corp. is a corporation wholly-owned by Mr. Ronald
Greene, currently Chairman of the Board of Directors of the Company. Mr. Greene
was not a director of the Company, nor had he held any director or officer
position with the Company prior to the time of the issuance of such Common
Shares.
Modification of Debentures
In addition to modifying the terms of the Convertible Preferred at the
special meeting of the shareholders on October 9, 1996, the shareholders
approved the issuance of 7,948 Common Shares in lieu of interest, plus an
additional 308,642 Common Shares to redeem the principal amount of the
outstanding 9.5% Convertible Debentures (the "Debentures") in accordance with
their existing terms. Mr. Ronald G. Greene, Chairman of the Board of Directors,
owned 80% of the Debentures, which were purchased by him at market value prior
to his election to the Board of Directors. These Debentures were redeemed on
October 15, 1996. Mr. Greene also purchased Cdn. $1,500,000 of 6 3/4%
Convertible Debentures at market value prior to his election to the Board of
Directors that were converted into 187,500 Common Shares on July 31, 1996 in
accordance with the terms of the 6 3/4% Convertible Debentures.
Purchase of Working Interests
In May 1996, the Company purchased oil and natural gas working interests
from four employees for an aggregate consideration of $387,000, which included
$158,000 paid to Mr. Matthew Deso, Vice President of Exploration of the Company,
$133,000 paid to Mr. Mark Worthey, Vice President of Operations of the Company
and $26,000 paid to the spouse of Mr. Gareth Roberts, President and Chief
Executive Officer of the Company. The purchase prices were determined by the
Company based on the present value of the estimated future net revenue to be
generated from the estimated proved reserves of the properties (based on the
prior year's report thereon from Netherland, Sewell & Associates, Inc.) using a
15% discount rate. The acquisitions were for additional working interests in
properties in which the Company also holds an interest. To the best of the
Company's knowledge, none of the Company's officers or directors have any
remaining interests in properties owned by the Company.
INDEBTEDNESS OF DIRECTORS AND SENIOR OFFICERS
Management of the Company is not aware of any indebtedness outstanding by
directors or officers of the Company to the Company or its subsidiaries at any
time during the year ended December 31, 1997.
CORPORATE GOVERNANCE
The Toronto Stock Exchange Committee on Corporate Governance in Canada
recently issued a series of proposed guidelines for effective corporate
governance (the "TSE Report"). The guidelines address matters such as the
constitution and independence of corporate boards, the functions to be performed
by boards and their committees and the effectiveness and the education of board
members. The TSE has adopted as a listing requirement the disclosure by each
listed corporation, on an annual basis, of its approach to corporate governance
with reference to the guidelines contained in the TSE Report.
The following describes the Company's approach to corporate governance in
relation to the guidelines contained in the TSE Report.
Composition of the Board
The Board has determined that of its seven director nominees, six are
unrelated directors as that expression is defined in the TSE Report. The sole
related director is the Company's President and CEO. In addition, three of its
seven director nominees do not have interests in, or relationships with, either
the Company or its largest shareholder, TPG. Although TPG is not considered a
significant shareholder as defined by the TSE Report, they are the beneficial
owner of 32.8% of the outstanding Common Shares and as such is the Company's
largest single
14
<PAGE>
shareholder (see "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT"). The Company believes that such Board representation fairly
reflects the investment in the Company by shareholders. The Chairman of the
Board is not a member of management of the Company.
Committees of the Board
The Board has appointed four different committees, the Audit Committee, the
Compensation Committee, the Stock Option Plan Committee and the Stock Purchase
Plan Committee. All of these committees are composed entirely of unrelated
directors. For a description of the duties of such committees, see, "BOARD
MEETINGS, ATTENDANCE AND COMMITTEES".
Mandate and Responsibility of the Board
Under its statutory mandate, the Board is responsible for management of the
business and affairs of the Company and in addition has assumed responsibility
for certain key matters. In the area of strategic planning, the management of
the Company provides an operational analysis of the Company to the Board on a
regular basis. In connection therewith, the Board discusses various strategic
planning matters and identifies business risks associated with the activities of
the Company, as it considers appropriate, including an analysis and discussion
of whether these systems and techniques proposed by management to manage the
risks are adequate.
In accordance with its legal mandate, the Board takes responsibility for
recruiting those members of senior management who become officers of the
Company. Currently the officers are as described under "MANAGEMENT". Through its
Compensation Committee, the Board reviews all appointments to the senior
management team. The Compensation Committee also has responsibility for
assessing the requirements and performance, on an overview basis, of the
President and CEO and the senior management team in order to set salaries and
approve bonus awards for performance.
The Company currently communicates with investors and shareholders through
various channels. Examples include annual and quarterly reports, news releases,
briefing sessions, analyst meetings and group meetings. During 1996, the Company
adopted a formal communications and insider trading policy.
The Board through its Audit Committee assumes responsibility for the
integrity of the Company's internal control and management information systems.
The Audit Committee meets with the external auditors to discuss the results of
the annual audit which includes, in accordance with generally accepted auditing
standards, a review of the Company's financial systems and related internal
controls. This committee also discusses with management and with the independent
auditors all significant accounting matters. In addition, the Board regularly
reviews the Company's development programs, budgets, projected cash flows and
other financial reports.
The Company allows any member of the Board to engage an outside advisor at
the expense of the Company in appropriate circumstances.
Decisions Requiring Prior Approval by the Board
The Board has delegated to the CEO and senior management the responsibility
for day to day management of the business of the Company, subject to compliance
with the plans approved from time to time by the Board. The Board retains
responsibility for significant changes in the Company's affairs, such as
approval of major capital expenditures, debt refinancing arrangements, equity
offerings and significant acquisitions and divestitures. As mandated by the
Company's Articles of Continuance, certain matters of a significant nature
require a 2/3rds majority vote of the Board.
Recruitment of New Directors and Assessment of Board Performance
The Board does not formally review individual board members or committee
members and their contributions.
15
<PAGE>
Although the Company does not have a formal process of orientation or education
for new members of the Board, senior management and the other directors spend a
significant amount of time with new directors to help them become acquainted
with the Company. This includes reviewing financial reports, projections,
budgets, geological data and other items.
As all Board members are significant shareholders or represent significant
shareholders of the Company, the Company does not pay any compensation to its
directors, other than to reimburse them for out-of-pocket expenses that they
incur in their duties as a Board member. The Company believes that each Board
member's Common Share ownership should be sufficient compensation and motivation
to perform their duties as a Board member.
Shareholder Feedback and Concerns
The Company communicates regularly with its shareholders and the President
and CEO spends a significant portion of his time in shareholder relations, as do
other directors and senior management to a lesser degree. This includes
published communications, meetings with investors, analysts and investment fund
managers with respect to financial results and other announcements of the
Company, as well as meetings with individual investors and shareholders. Any
shareholder concerns are reported regularly to the Board.
Expectations of Management
As part of the Company's annual budgeting process, the Board's expectations
of management over the next year are approved and specified. The President and
CEO and other members of senior management review the Company's progress at
Board and committee meetings, which are normally held every quarter. These
reviews report on strategic, operational and financial issues facing the
Company.
The Board believes that the Board and its committees carry out effective
governance of the Company's affairs. The Board will continue to review the
Company's governance practices, particularly in relation to the TSE Report and
will make changes as required.
BUSINESS TO BE CONDUCTED AT THE MEETING
Receipt of the Consolidated Financial Statements and Auditors' Report
At the Meeting, shareholders will receive and consider the consolidated
financial statements of Denbury for the year ended December 31, 1997 and the
auditors' report thereon, but no vote by the shareholders with respect thereto
is required or proposed to be taken.
Election of Directors
The Articles of Incorporation 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 retire
from office at the Meeting.
Unless otherwise directed, it is the intention of management to vote
proxies in the accompanying form in favour of the election as directors of the
seven nominees hereinafter set forth. All seven nominees are currently members
of the board of directors. If any nominee should become unavailable or unable to
serve as a director, the
16
<PAGE>
proxy may be voted for a substitute selected by persons named as proxies or the
Board may be reduced accordingly; however, the Board of Directors is not aware
of any circumstances likely to render any nominee unavailable.
David Bonderman
Ronald G. Greene
Wilmot L. Matthews
William S. Price, III
Gareth Roberts
David M. Stanton
Wieland F. Wettstein
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:
<TABLE>
<CAPTION>
Officer
Name and or
Municipality of Offices Director
Residence Age Held Since Principal Occupation
- --------------------- ----- --------------- ------ ---------------------------
<S> <C> <C> <C> <C>
Ronald Greene (1)(2) 49 Chairman and 1995 Sole Shareholder, Officer
Calgary, Alberta Director and Director of Tortuga
Investment Corp.
David Bonderman 55 Director 1996 Principal of the Texas
Fort Worth, Texas Pacific Group
Wilmot L. Matthews (1) 61 Director 1997 Independent Business
Toronto, Ontario
William Price, III(2) 41 Director 1995 Principal of the Texas
San Francisco, California Pacific Group
Gareth Roberts 45 President, 1992 President and Chief
Dallas, Texas Chief Executive Executive Officer,
Officer and Denbury Resources Inc.
Director
David Stanton 35 Director 1995 Principal of the Texas
San Francisco, California Pacific Group
Wieland Wettstein (1) 48 Director 1990 Executive Vice-President,
Calgary, Alberta Finex Financial Corporation
Ltd.(a merchant banking
company)
<FN>
(1) Member of the Audit Committee.
(2) Member of the Compensation, Stock Option Plan and Stock Purchase Plan
Committees.
</FN>
</TABLE>
Directors (other than Gareth Roberts)
Ronald G. Greene is the Chairman of the Board, and has been a director of the
Company since 1995. Mr. Greene is the founder and Chairman of the Board of
Renaissance Energy Ltd. and was Chief Executive Officer of Renaissance from its
inception in 1974 until May 1990. He is also the sole shareholder, officer and
director of Tortuga Investment Corp., a private investment company. Mr. Greene
also serves on the Board of Directors of a private Western Canadian airline,
WestJet Airlines Ltd.
17
<PAGE>
David Bonderman has been a director of the Company since 1996. Mr. Bonderman is
a co-founder and principal of TPG. Prior to forming TPG in 1992, Mr. Bonderman
was the Chief Operating Officer of the Robert M. Bass Group, Inc. (now doing
business as Keystone, Inc.), joining them in 1983. Keystone, Inc. is the
personal investment vehicle of Fort Worth, Texas-based investor Robert M. Bass.
Mr. Bonderman serves on the boards of Bell & Howell Company; Beringer Wine
Estates; Continental Airlines, Inc.; Ducati Motors S.P.A.; Ryanair PLC; Virgin
Entertainment, Limited; and Washington Mutual, Inc.
Wilmot L. Matthews was first elected as director of the Company on December 9,
1997. Mr. Matthews, a Chartered Accountant, has been involved in all aspects of
investment banking by serving in various positions with Nesbitt Burns Inc. and
its predecessor companies from 1964 until his retirement in September 1996, most
recently as Vice Chairman and Director. Mr. Matthews is currently President of
Marjad Inc., a personal investment company, and also serves on the Board of
Directors of Renaissance Energy Ltd., WestJet Airlines Ltd. and several private
companies.
William S. Price, III has been a director of the Company since 1995. Mr. Price
is a co-founder and principal of TPG. Prior to 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 is Chairman of the Board of Favorite Brands
International, Inc. Mr. Price also serves on the Board of Directors of
Continental Airlines, Inc., Beringer Wine Estates, VSP Holdings, Inc., Belden &
Blake Corporation, Zilog, Inc. and Del Monte Foods.
David M. Stanton has been a director of the Company since 1995. Mr. Stanton is a
principal of TPG. From 1991 until he joined TPG in 1994, Mr. Stanton was a
venture capitalist with Trinity Ventures where he specialized in information
technology, software and telecommunications investments. Mr. Stanton also serves
on the Board of Directors of TPG Communications, Inc., Paradyne Partners, L.P.,
Belden & Blake Corporation and Zilog, Inc.
Wieland F. Wettstein has been a director of the Company since 1990. Mr.
Wettstein is the Executive Vice President of Finex Financial Corporation Ltd., a
merchant banking company in Calgary, Alberta, a position he has held for more
than five years. Mr. Wettstein serves on the Board of Directors of a public oil
and natural gas company, BXL Energy Ltd., and on the Board of Directors of a
private technology firm.
Appointment of Auditors
Unless otherwise directed, it is management's intention to vote the proxies
in favour of an ordinary resolution to appoint the firm of Deloitte & Touche,
Chartered Accountants, Calgary, Alberta, to serve as auditors of Denbury until
the next annual meeting of the shareholders and to authorize the directors to
fix their remuneration as such. Deloitte & Touche have been Denbury's auditors
since January 1, 1991. A representative of Deloitte & Touche is expected to be
present at the Meeting and will be available to answer questions and will be
afforded an opportunity to make a statement if desired.
Amendment to Stock Option Plan
At a Special Meeting of Shareholders held on December 21, 1995, the
shareholders of the Company ratified, approved and confirmed a Stock Option Plan
made effective August 9, 1995 (the "Plan"), pursuant to which a maximum of
1,050,000 Common Shares were reserved for issuance. At the Special Meeting of
Shareholders on May 21, 1997, the Plan was amended to increase the number of
options reserved for issuance to 2,000,000. The Board of Directors of the
Company has amended the Plan to increase the number of options reserved for
future issuance under the Plan to 2,648,000, subject to shareholder and
regulatory approval. Since the disclosures made in the 1997 Information Circular
- - Proxy Statement which were as of March 15, 1997, the following activity in the
Plan has taken place:
18
<PAGE>
<TABLE>
<CAPTION>
Actual Stock Stock Options Reserved for
Options Available for Future
Outstanding Future Grants Issuance
-------------- ------------- --------------
<S> <C> <C> <C>
Balance March 15, 1997 1,693,975 306,025 2,000,000
Granted 543,959 (543,959) -
Exercised (238,306) - (238,306)
Cancelled (23,250) 23,250 -
Authorized increases - 886,306 886,306
-------------- ------------- --------------
Balance February 28, 1998 1,976,378 671,622 2,648,000
============== ============= ==============
Percent of Common Shares
outstanding February 28, 1998 7.5% 2.5% 10.0%
============== ============= ==============
</TABLE>
Since August 9, 1995, the effective date of the Plan, the following
activity has taken place:
<TABLE>
<CAPTION>
Actual Stock Stock Options Reserved for
Options Available for Future
Outstanding Future Grants Issuance
-------------- ------------- --------------
<S> <C> <C> <C>
Balance August 9, 1995 614,425 435,575 1,050,000
Granted 1,883,784 (1,883,784) -
Exercised (481,831) - (481,831)
Cancelled (40,000) 40,000 -
Authorized increases - 2,079,831 2,079,831
-------------- ------------- --------------
Balance February 28, 1998 1,976,378 671,622 2,648,000
============== ============= ==============
Percent of Common Shares
outstanding February 28, 1998 7.5% 2.5% 10.0%
============== ============= ==============
</TABLE>
Since the last Annual Meeting, the Board of Directors authorized a 886,306
share increase subject to shareholder and regulatory approval. If this increase
is approved, the Stock Options available for future grants under the Plan will
be 671,622 Common Shares, and the maximum number of Common Shares reserved for
future issuance under the Plan will be 2,648,000 Common Shares, or approximately
2.5% and 10%, respectively, of the issued and outstanding Common Shares as at
February 28, 1998. The Board of Directors approved this increase to ensure that
there will be sufficient Stock Options available for the previously granted
options which are subject to shareholder and regulatory approval, and for
additional option grants which may be approved in fiscal 1998. Pursuant to the
regulations of the TSE, this increase in the Common Shares reserved for issuance
under the Plan must be approved by the Shareholders. Accordingly, at the Meeting
the following Ordinary Resolution to approve the amendment to the Denbury Stock
Option Plan will be presented:
BE IT RESOLVED, as an Ordinary Resolution of the shareholders of the
Company, that the Common Share Maximum under the Stock Option Plan of
the Company, as amended, be increased by 886,306 Common Shares and that
the same is hereby ratified, approved and authorized.
The foregoing resolution must be approved by a simple majority of votes
cast by Shareholders who vote in person or by proxy at the Meeting in respect of
the above resolution.
The Board of Directors recommends that shareholders vote for the approval
of the Ordinary Resolution amending the Stock Option Plan.
19
<PAGE>
INTEREST OF CERTAIN PERSONS AND COMPANIES IN MATTERS
TO BE ACTED UPON
Management of the Company is not aware of any material interest of any
director, nominee for director, senior officer or anyone who has held office as
such since the beginning of the Company's last financial year or of any
associate or affiliate of any of the foregoing persons in any matter to be acted
on at the Meeting except as disclosed herein.
SHAREHOLDER PROPOSALS
Any proposals from shareholders to be presented for consideration for
inclusion in the proxy material in connection with the 1999 annual meeting of
shareholders of the Company must be submitted in accordance with the rules of
the SEC and received by the Secretary of the Company at the Company's principal
executive offices at 17304 Preston Rd, Suite 200, Dallas, Texas 75252, no later
than the close of business on February 1, 1999.
OTHER MATTERS
Management knows of no amendment, variation or other matters to come before
the Meeting other than the matters referred to in the Notice of Annual and
Special Meeting. However, if any other matter properly comes before the Meeting,
the accompanying proxy will be voted on such matter in accordance with the best
judgment of the person or persons voting the proxy.
All information contained in this Information Circular 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 the Denbury
Common Shares is based upon information contained in reports filed by such owner
with the SEC.
THE CORPORATION HAS PROVIDED TO EACH PERSON WHOSE PROXY IS SOLICITED HEREBY
A COPY OF THE CORPORATION'S 1997 ANNUAL REPORT AND A COPY OF ITS ANNUAL REPORT
ON FORM 10-K (WITHOUT EXHIBITS) TO THE SECURITIES AND EXCHANGE COMMISSION FOR
THE YEAR ENDED DECEMBER 31, 1997.
APPROVAL AND CERTIFICATION
The contents and sending of this Information Circular has been approved by
the directors of Denbury.
The foregoing contains no untrue statement of a material fact and does not
omit to state a material fact that is required to be stated or that is necessary
to make a statement not misleading in light of the circumstances in which it was
made.
DATED at Calgary, Alberta as of the 30th day of March, 1998.
DENBURY RESOURCES INC.
/s/ Gareth Roberts /s/ Phil Rykhoek
- ------------------------- -------------------------
Gareth Roberts Phil Rykhoek
President and Corporate Secretary and
Chief Executive Officer Chief Financial Officer
20
