Below is a description of stock compensation relating to both the Predecessor periods (2018, 2019 and January 1, 2020 through September 18, 2020) and the Successor period (September 19, 2020 through December 31, 2020). All stock compensation plans and awards in effect during the Predecessor periods were cancelled upon emergence of the Company from its Chapter 11 Restructuring on September 18, 2020. The plans and awards described below which are designated as Successor plans or awards are the only such plans and awards in effect as of December 31, 2020. Each of the plans and awards described below are designated as either Predecessor or Successor, with the exception of the section labeled “Stock-Based Compensation – Predecessor and Successor” which pertains to both Predecessor and Successor periods.

Stock-based compensation expense is included in “General and administrative expenses” 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. Our accounting policy is to account for forfeitures as they occur.


	Successor		Predecessor
	Period from Sept. 19, 2020 through Dec. 31, 2020		Period from Jan. 1, 2020 through Sept. 18, 2020		Year Ended December 31,
In thousands					2019		2018
Stock-based compensation expense included in G&A	$	8,212	$	4,111	$	12,470	$	11,951
Stock-based compensation capitalized	695		1,660		4,018		3,487
Total cost of stock-based compensation arrangements	$	8,907	$	5,771	$	16,488	$	15,438

Income tax benefit recognized for stock-based compensation arrangements	$	2,053	$	1,028	$	3,118	$	2,988

In connection with our emergence from bankruptcy, the Plan provided for the adoption of a management incentive plan, the Denbury Inc. 2020 Omnibus Stock and Incentive Plan (the “LTIP”), effective as of the Emergence Date, through an amendment and restatement of the Denbury Resources Inc. Amended and Restated 2004 Omnibus Stock and Incentive Plan, as amended and restated as of March 26, 2020. The LTIP reserved 6.2 million shares of Denbury’s common stock for awards to officers, other employees, directors and other service providers. The LTIP provides for, among other things, the grant of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, dividend equivalents, other stock-based awards, cash awards, or any combination of the foregoing. On December 2, 2020, Denbury’s board of directors approved and ratified the LTIP, with initial awards covering 2.2 million shares of common stock granted on December 4, 2020. As of December 31, 2020, 4.0 million shares were available for future grants under the LTIP, all of which could be issued in the form of restricted stock units or performance stock units. Our incentive compensation program is administered by the Compensation Committee of our Board of Directors. The LTIP will expire September 2030.

In December 2020, non-performance-based restricted stock unit (“RSU”) awards were granted to directors and a limited number of employees under the Successor’s LTIP. Holders of non-performance-based RSUs will receive shares of Successor common stock equal to the number of RSUs that have vested upon settlement. Non-performance-based RSUs generally vest over a three-year vesting period with delivery of the shares occurring at the end of the three-year vesting period. Shares to be delivered to participants are expected to be made available from authorized but unissued shares reserved under the LTIP. The grant-date fair value of the RSUs is based on the fair market value of our common stock on the date of grant.

As of December 31, 2020, there was $29.3 million of unrecognized compensation expense related to the Successor’s nonvested non-performance-based restricted stock unit grants. This unrecognized compensation cost is expected to be recognized over a weighted-average period of 2.9 years.

In December 2020, the Successor Board of Directors granted performance stock unit (“PSU”) awards to a limited number of employees. The PSU awards vest based on Denbury’s stock price reaching certain levels (based on the daily volume-weighted average common stock price on the New York Stock Exchange (“NYSE”) for any consecutive 60-day trading period), as shown in the table below, but delivery of the shares will not occur until the conclusion of the three-year performance period. Shares to be delivered to participants are expected to be made available from authorized but unissued shares reserved under the LTIP.

(1)If the 60-day volume-weighted average price falls between the Stock Price Hurdles in Tier 1, 2, 3 or 4, then the cumulative percentage of PSUs granted that become vested shall be calculated using straight-line interpolation between the corresponding percentages in the table above.

As of December 31, 2020, there was $16.6 million of unrecognized compensation expense related to the Successor’s nonvested PSU awards. This unrecognized compensation cost is expected to be recognized over a weighted-average period of 0.2 years, though the underlying shares will not be delivered until the conclusion of the three-year performance period. The range of assumptions used in the Monte Carlo simulation valuation approach is as follows:

In response to the then ongoing significant economic and market uncertainty affecting the oil and gas industry, in June 2020 the Predecessor and its Board of Directors and Compensation Committee implemented a revised compensation structure under which for 21 of the Company’s executives (including our named executive officers) and senior managers, all outstanding equity awards and 2020 targeted variable cash-based compensation were canceled and replaced with a cash retention incentive. In total, $15.2 million in cash retention incentives were prepaid to those employees in June 2020, with an obligation of the executives to repay up to 100% of the compensation (on an after-tax basis) if specified conditions were not satisfied. The Predecessor’s named executive officers’ cash retention incentives were earned 50% based on their continued employment for a period of up to 12 months and 50% based on achieving certain specified incentive metrics.

In accordance with FASC Topic 718, Compensation – Stock Compensation, we accounted for the transaction involving equity compensation as an award modification and reclassified the awards from equity to liability awards. As a result of the modification of the awards, unrecognized compensation at the time of modification was determined to be $18.7 million ($4.1 million of incremental compensation expense), which was higher than the $15.2 million cash payment, and was calculated as the greater of (i) grant date fair value of the previously-outstanding awards plus incremental compensation (defined as cash paid related to the cash retention incentive in excess of the modification date fair value of the previously-existing awards) or (ii) cash paid for the cash retention incentive for each award. The value was recognized as total compensation expense for each award over the service period. The compensation expense was recognized in “General and administrative expenses” in the Consolidated Statements of Operations during the period January 1, 2020 through September 18, 2020 (Predecessor). The accounting for the Predecessor’s remaining share-based compensation awards continued throughout the period covered by the Chapter 11 Restructuring, and upon cancellation of the awards, an additional $4.6 million of compensation expense was recognized during the Predecessor period ended September 18, 2020.

The Amended and Restated 2004 Omnibus Stock and Incentive Plan, amended and restated as of March 26, 2020 (the “2004 Plan”), was an incentive plan that provided for the issuance of incentive and non-qualified stock options, restricted stock awards, restricted stock units, stock appreciation rights (“SARs”) settled in stock, and performance-based awards to officers, employees and directors. Since the 2004 Plan’s inception, awards covering a total of 61.4 million shares of common stock were authorized for issuance pursuant to the 2004 Plan. In connection with our emergence from bankruptcy, all outstanding equity as of September 18, 2020 was cancelled.

Prior to January 1, 2016, the Predecessor granted SARs settled in stock to employees. The SARs generally became exercisable over a three-year vesting period, with the specific terms of vesting determined at the time of grant based on guidelines established by the Predecessor’s Compensation Committee of the Board of Directors. The SARs expired over terms not to exceed 7 years from the date of grant, 90 days after termination of employment, 90 days or one year after permanent disability, depending on the award, or one year after the death of the optionee. The SARs were granted with a strike price equal to the fair market value at the time of grant, which was equal to the closing price on the NYSE on the date of grant.


	Number of Awards	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2019 (Predecessor)	1,981,156	$	9.12
Granted	—	—
Exercised	—	—
Forfeited	—	—
Expired	(580,087)	12.38
Cancelled	(1,401,069)	7.77
Outstanding at September 18, 2020 (Predecessor)	—	—		—	$	—

Exercisable at end of period	—	$	—	—	$	—

As of December 31, 2018, all SARs vested and there was no remaining compensation cost to be recognized in future periods related to nonvested share-based SAR compensation arrangements. The grant-date fair value of SARs vested during the year ended December 31, 2018 was $1.1 million. There were no exercises of SARs for the period January 1, 2020 through September 18, 2020 (Predecessor) or the years ended December 31, 2019 and 2018. In connection with our emergence from bankruptcy, all SARs outstanding as of September 18, 2020 were cancelled.

During the Predecessor period, we granted non-performance-based restricted stock to employees and directors as part of our long-term compensation program. Holders of non-performance-based restricted stock awards had the rights of owning non-restricted stock (including voting rights) except that the holders were not entitled to delivery of a portion thereof until certain requirements were met. Beginning in 2014, non-performance-based restricted stock awards provided the holders with forfeitable dividend equivalent rights which vested with the underlying shares. Non-performance-based restricted stock vested over a three-year vesting period, with the specific terms of vesting determined at the time of grant.

The Predecessor’s Compensation Committee of the Board of Directors annually granted performance-based equity awards to Denbury’s officers. Performance-based awards generally vested over 3.25 years for awards granted in 2018, 2019 and 2020. The number of performance-based shares earned (and eligible to vest) during the performance period was dependent upon: (1) the level of success in achieving specifically identified performance targets (“Performance-Based Operational Awards”) and (2) performance of the Predecessor’s stock relative to that of a designated peer group (“Performance-Based TSR Awards”). As discussed above, in conjunction with our 2020 compensation adjustments, all outstanding Predecessor performance-based equity awards were canceled and replaced with a cash retention incentive in June 2020.

Performance-Based Operational Awards were valued using the fair market value of the Predecessor’s stock, and Performance-Based TSR Awards were valued using a Monte Carlo simulation. Expected volatilities utilized in the model were estimated using historical volatility of the Predecessor stock over a look-back term generally equivalent to the expected life of the award from the grant date. The range of assumptions used in the Monte Carlo simulation valuation approach for Performance-Based TSR Awards (presented at the target level) is as follows:


	Predecessor
	Period from Jan. 1, 2020 through Sept. 18, 2020			Year Ended December 31,
				2019			2018
Weighted average fair value of Performance-Based TSR Awards granted	$	0.15		$	1.95		$	2.29
Risk-free interest rate	0.27		%	2.27		%	2.37		%
Expected life	3.0 years			3.0 years			3.0 years
Expected volatility	89.6		%	77.2		%	102.9		%
Dividend yield	—		%	—		%	—		%


	Performance-Based Operational Awards			Performance-Based TSR Awards
	Number of Awards	Weighted Average Grant-Date Fair Value		Number of Awards	Weighted Average Grant-Date Fair Value
Nonvested at December 31, 2019 (Predecessor)	1,838,584	$	2.27	4,475,998	$	2.65
Granted(1)	—	—		3,041,774	0.15
Vested(2)	—	—		(742,996)	3.42
Forfeited	(102,469)	2.28		(385,183)	1.26
Cancelled	(1,736,115)	2.27		(6,389,593)	1.23
Nonvested at September 18, 2020 (Predecessor)	—	—		—	—

(2)During 2020, the service period lapsed on these TSR performance unit awards. The lapsed units earned a weighted average of 59% of target for each vested TSR performance-based award, representing 438,363 aggregate shares of Predecessor common stock issued. There were no vestings related to the Predecessor’s Operational performance-based awards during 2020.