We have two stock compensation plans. The first plan has been in existence since 1995 (the “1995 Plan”) and expired in August 2005 (although options granted under the 1995 Plan prior to that time can remain outstanding for up to 10 years). The 1995 Plan provided only for the issuance of stock options, and in January 2005 we issued stock options under the 1995 Plan that utilized substantially all of the remaining authorized shares. The second plan, the 2004 Omnibus Stock and Incentive Plan (the “2004 Plan”), has a 10-year term and was approved by the stockholders in May 2004. The 2004 Plan provides for the issuance of incentive and non-qualified stock options, restricted stock awards, stock appreciation rights (“SARs”) settled in stock, and performance awards that may be issued to officers, employees, directors and consultants. Awards covering a total of 29.5 million shares of common stock are authorized for issuance pursuant to the 2004 Plan, of which awards covering no more than 22.2 million shares may be issued in the form of restricted stock or performance vesting awards. At December 31, 2011, 9,700,640 shares were available under the 2004 Plan for future issuance of awards, all of which could be issued in the form of restricted stock or performance vesting awards. Our incentive compensation program is administered by the Compensation Committee of our Board of Directors.

Prior to January 1, 2006, we granted incentive and non-qualified stock options to our employees. Effective January 1, 2006, we completely replaced the use of stock options for employees with SARs settled in stock, as SARs are less dilutive to our stockholders while providing an employee with essentially the same economic benefits as stock options. The stock options and SARs generally become exercisable over a four-year vesting period, with the specific terms of vesting determined at the time of grant based on guidelines established by the Board of Directors. The stock options and SARs expire over terms not to exceed 10 years from the date of grant, 90 days after termination of employment, 90 days or one year after permanent disability, depending on the plan, or one year after the death of the optionee. The stock options and SARs are granted at the fair market value at the time of grant, which is defined in the 2004 Plan as the closing price on the NYSE on the date of grant.

In 2004, we began the use of restricted stock awards. The holders of these shares have the rights and privileges of owning the shares (including voting rights) except that the holders are not entitled to delivery of a portion thereof until certain requirements are met. Restricted stock awards vest over three-to-four-year vesting periods, with the specific terms of vesting determined at the time of grant.

Beginning in 2007, the Board of Directors has awarded an annual grant of performance equity awards to officers of Denbury. These performance-based shares originally vested over 3.25 years, but beginning with awards granted in 2009, the vesting period was 1.25 years. The number of performance-based shares 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 maximum number of shares that could be earned under the performance-based awards will be earned for performance at the designated target levels (100% target vesting levels) or upon any earlier change of control, and twice the number of shares will be earned if the higher maximum target levels are met. If performance is below the designated minimum levels for all performance targets, no performance-based shares will be earned. Any portion of the performance shares that are not earned by the end of the measurement period will be forfeited. In certain change of control events, one-half (i.e., the target level amount) of the performance-based shares would vest.

Stock-based compensation expense associated with our field employees is included in “Lease operating expense,” while such expense associated with non-field employees is included in “General and administrative expense” in the Consolidated Statements of Operations. Stock-based compensation associated with Encore Merger transition employees is included in “Transaction and other costs related to the Encore Merger” in the Consolidated Statements of Operations. Stock-based compensation associated with our employees involved in exploration and drilling activities is capitalized as part of “Oil and natural gas properties” in the Consolidated Balance Sheets.

Stock-based compensation costs for the years ended December 31, 2011, 2010 and 2009, respectively, are as follows:

			Year Ended December 31,
In thousands			2011		2010		2009
Stock-based compensation expensed:
	General and administrative expense		$	30,256	$	28,169	$	20,435
	Lease operating expense			2,621		2,056		1,432
	Transaction and other costs related to the Encore Merger			313		5,866		-
		Total stock-based compensation expensed		33,190		36,091		21,867
Stock-based compensation capitalized				6,998		3,702		2,455
Total cost of stock-based compensation arrangements			$	40,188	$	39,793	$	24,322

Income tax benefit recognized for stock-based compensation arrangements			$	12,902	$	14,359	$	8,749

The fair value of each SAR award is estimated on the date of grant using the Black-Scholes option pricing model with the assumptions noted in the following table. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life of stock options and SARs granted was derived from examination of our historical option grants and subsequent exercises. The contractual terms (cliff vesting and graded vesting) are evaluated separately for the expected life, as the exercise behavior for each is different. Expected volatilities are based on the historical volatility of our stock. Implied volatility was not used in this analysis, as our tradable call option terms are short and the trading volume is low. Our dividend yield is zero, as we do not pay a dividend.

	2011		2010		2009
Weighted average fair value of SARs granted	$	9.68	$	8.45	$	6.40
Risk-free interest rate		1.74%		2.19%		1.58%
Expected life		4.0 to 5.0 years		4.0 to 4.3 years		3.9 to 4.7 years
Expected volatility		63.3%		65.0%		60.1%
Dividend yield		-		-		-

	Year Ended December 31,
	2011			2010			2009
		Weighted			Weighted			Weighted
	Number	Average		Number	Average		Number	Average
	of Awards	Exercise Price		of Awards	Exercise Price		of Awards	Exercise Price

Outstanding at beginning of period	12,269,340	$	12.28	10,763,955	$	10.77	9,514,999	$	9.32
Granted	1,507,992		18.69	3,444,494		16.30	2,883,311		13.23
Exercised	(1,448,358)		6.97	(1,119,853)		6.21	(1,315,535)		4.33
Forfeited or expired	(379,364)		17.89	(819,256)		17.57	(318,820)		16.36
Outstanding at end of period	11,949,610		13.56	12,269,340		12.28	10,763,955		10.77

Exercisable at end of period	6,179,154	$	10.18	6,214,546	$	8.07	6,087,019	$	6.48

The total intrinsic value of stock options and SARs exercised during the years ended December 31, 2011, 2010 and 2009, was approximately $20.5 million, $12.7 million and $14.8 million, respectively. The total grant-date fair value of stock options and SARs vested during the years ended December 31, 2011, 2010 and 2009, was approximately $11.4 million, $8.7 million and $10.1 million, respectively. The aggregate intrinsic value of stock options and SARs outstanding at December 31, 2011, was approximately $39.9 million, and these options and SARs have a weighted-average remaining contractual life of 4.2 years. The aggregate intrinsic value of options and SARs exercisable at December 31, 2011, was approximately $35.8 million, and these stock options and SARs have a weighted-average remaining contractual life of 3.4 years.

A summary of the status of our non-vested stock options and SARs as of December 31, 2011, and the changes during the year ended December 31, 2011, is presented below:

		Weighted
		Average
		Grant-Date
	Awards	Fair Value
Non-vested at December 31, 2010	6,054,794	$	8.02
Granted	1,507,992		9.68
Vested	(1,452,626)		7.85
Forfeited	(339,704)		8.87
Non-vested at December 31, 2011	5,770,456		8.44

As of December 31, 2011, there was $20.4 million of total compensation cost to be recognized in future periods related to non-vested stock option and SAR share-based compensation arrangements. The cost is expected to be recognized over a weighted-average period of 2.2 years. Cash received from stock option exercises under share-based payment arrangements for the years ended December 31, 2011, 2010 and 2009, was $4.7 million, $4.9 million and $5.7 million, respectively. The tax benefit realized from the exercises of stock options and SARs totaled $0.9 million for 2011, $4.6 million for 2010, and $3.1 million for 2009.

As of December 31, 2011, there was $22.3 million of unrecognized compensation expense related to non-vested restricted stock grants. This unrecognized compensation cost is expected to be recognized over a weighted-average period of 2.6 years. The total vesting date fair value of restricted stock vested during the years ended December 31, 2011, 2010 and 2009 under the 2004 Plan was $12.4 million, $12.7 million and $10.0 million, respectively.

A summary of the status of our non-vested restricted stock grants and the changes during the year ended December 31, 2011, is presented below:

		Weighted
		Average
		Grant-Date
	Shares	Fair Value
Non-vested at December 31, 2010	2,948,834	$	13.70
Granted	1,134,627		18.83
Vested	(818,215)		15.89
Forfeited	(133,811)		17.74
Non-vested at December 31, 2011	3,131,435		14.82

In February 2010, prior to the consummation of the Encore Merger, Encore issued a restricted stock grant to its employees under the Encore Acquisition Company 2008 Incentive Stock Plan (“Encore Plan”). At the time of the Encore Merger, the shares were converted to shares of Denbury restricted stock. The shares vest ratably over a four-year graded vesting period; however, legacy Encore employees who terminate their employment for Good Reason, as defined by Encore's legacy Employee Severance Protection Plan, will automatically vest in their awards upon termination. Encore employees who did not accept permanent positions with Denbury but who continued their employment through a predefined transition period were considered to have terminated for Good Reason and, accordingly, vested in their awards upon termination. As of December 31, 2011, there was $2.3 million of unrecognized compensation expense related to non-vested restricted stock issued under the Encore Plan, which is expected to be recognized over a weighted-average period of 2.0 years. The total vesting date fair value of restricted stock vested during the years ended December 31, 2011 and 2010 under the Encore Plan was $2.3 million and $6.6 million, respectively.

A summary of the status of the non-vested restricted stock grants under the Encore Plan and the changes during the year ended December 31, 2011, is presented below:

		Weighted
		Average
		Grant-Date
	Shares	Fair Value
Non-vested at December 31, 2010	276,620	$	15.42
Granted	-		-
Vested	(149,577)		15.43
Forfeited	(24,000)		15.43
Non-vested at December 31, 2011	103,043		15.43

During 2011, we granted performance-based equity awards (214,627 shares reflecting the 100% targeted vesting level) to the Company's officers, with an average grant-date fair value of $18.71 per share. The actual number of shares to be delivered pursuant to the performance-based awards could range from zero to 200% (429,254 shares) of the stated 100% targeted amount, although we currently estimate that shares to be delivered will approximate 56% of the targeted amount. During 2011, the performance-based equity awards originally granted in 2008 vested at 120% of their original targeted amount, resulting in the issuance of 115,056 shares of Denbury stock with a weighted average grant date fair value of $31.47 per share. Also during 2011, the performance-based equity awards originally granted in 2010 vested at 162% of their originally targeted amount, resulting in the issuance of 331,331 shares of Denbury stock with a weighted average grant-date fair value of $15.63 per share. The total vesting date fair value of performance-based equity awards during the years ended December 31, 2011 and 2010 was $10.9 million and $7.5 million, respectively. The Company recognizes compensation expense when it becomes probable that the performance criteria specified in the plan will be achieved.