<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ___)
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[_] Preliminary proxy statement
[X] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
INLAND RESOURCES INC.
(Name of Registrant as Specified in Its Charter)
_______________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
______________________________________________________________________________
(2) Aggregate number of securities to which transactions applies:
______________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
______________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________________________________
(5) Total Fee paid:
______________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
_________________________________________________________________
(2) Form, schedule or registration statement no.:
_________________________________________________________________
(3) Filing party:
_________________________________________________________________
(4) Date filed:
_________________________________________________________________
<PAGE>
INLAND RESOURCES INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of INLAND
RESOURCES INC. (the "Company") will be held on Wednesday, April 30, 1997, at
9:00 a.m., local time, at the Denver Petroleum Club located at 555 17th Street,
Suite 3700, Denver, Colorado 80202, for the following purposes:
(1) To elect five members of the Board of Directors to serve until the
1998 annual meeting of stockholders or until their respective successors
are duly elected and qualified;
(2) To approve and adopt the 1997 Stock Option Plan under which
500,000 shares of Common Stock will be reserved for issuance to key
employees, directors and consultants of the Company; and
(3) To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
The holders of record of Common Stock and Series B Preferred Stock of the
Company at the close of business on March 19, 1997 will be entitled to vote at
the meeting, as described above.
For a period of at least ten days prior to the meeting, a complete list of
stockholders entitled to vote at the meeting will be open to the examination of
any stockholder during ordinary business hours at the Company's offices at 475
17th Street, Suite 1500, Denver, Colorado.
By order of the Board of Directors
MICHAEL J. STEVENS
Secretary
March 24, 1997
---------------------------------
You are cordially invited to attend the meeting in person. Even if
you plan to be present, you are urged to sign, date and mail the enclosed proxy
promptly. However, if you attend the meeting, you may vote in person or by your
proxy.
<PAGE>
INLAND RESOURCES INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
APRIL 30, 1997
This proxy statement is furnished in connection with a solicitation of
proxies by the Board of Directors of Inland Resources Inc. ("Inland" or the
"Company"). The proxies solicited in connection with this proxy statement will
be used at the annual meeting of stockholders of the Company to be held on
Wednesday, April 30, 1997 at 9:00 a.m., local time, at the Denver Petroleum Club
located at 555 17th Street, Suite 3700, Denver, Colorado 80202, and at any
adjournment thereof, for the purposes set forth in the foregoing notice of the
meeting. Properly executed proxies received in time for the meeting will be
voted as specified therein. If either of the enclosed forms of proxy is
executed and returned, it may nevertheless be revoked by written notice to
either of the persons named as a proxy or the Secretary of the Company at any
time before it is exercised, by voting in person at the meeting or by giving a
later proxy. This proxy statement and the enclosed forms of proxy are being
mailed on or about March 24, 1997.
The Company's principal executive office is located at 475 17th Street,
Suite 1500, Denver, Colorado 80202, and its telephone number is (303) 292-0900.
At the close of business on March 19, 1997 (the "Record Date"), the Company
had outstanding and entitled to vote 6,312,059 shares of Common Stock, $.001 par
value (the "Common Stock"), and 1,000,000 shares of Series B Convertible
Preferred Stock, $.001 par value (the "Series B Preferred Stock"). The holders
of record of such shares on such date will be entitled to one vote at the annual
meeting for each share held by them. The holders of Common Stock and the
holders of Series B Preferred Stock will vote together as one class on all
matters presented at the annual meeting. The presence, in person or by proxy, of
a majority of the outstanding shares of Common Stock and Series B Preferred
Stock entitled to vote at the annual meeting will constitute a quorum. All
references to shares of Common Stock in this proxy statement have been adjusted
to give effect to the 1 for 10 reverse stock split effected June 3, 1996.
The Annual Report to Stockholders for the year ended December 31, 1996,
including financial statements, is enclosed with this proxy statement.
MATTERS TO BE ACTED UPON
As of the date of this proxy statement, the Board of Directors of the
Company knows of no matters other than Proposal 1 and Proposal 2, described
below, which are likely to be presented for consideration at the annual meeting.
However, if any other matters should properly come before the meeting or any
adjournment thereof, the persons named in the enclosed proxy will have
discretionary authority to vote such proxy in accordance with their best
judgment on such matters and with respect to matters incident to the conduct of
the meeting. Votes will be counted at the meeting by an election judge to be
appointed by the Company prior to the meeting. An abstention or non vote on a
matter will not be counted for purposes of determining whether the required vote
necessary to approve such matter was received.
-1-
<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS
At the annual meeting, the holders of Common Stock and the holders of
Series B Preferred Stock will be asked to consider and act upon a resolution to
elect five members of the Board of Directors. Directors will be elected by a
plurality of votes.
PROPOSAL 2 - APPROVAL OF 1997 STOCK OPTION PLAN
At the annual meeting, the holders of Common Stock and the holders of
Series B Preferred Stock will be asked to consider and act upon the approval of
the Board of Directors' recommendation to approve and adopt the 1997 Stock
Option Plan (the "1997 Plan"). The affirmative vote, either in person or by
proxy, of the holders of more than 50% of the shares of Common Stock and Series
B Preferred Stock outstanding as of the Record Date, voting as one class, is
necessary to approve and adopt the 1997 Plan. Accordingly, if a stockholder
abstains from voting certain shares on the approval and adoption of the 1997
Plan, or a beneficial owner fails to deliver written instructions to his nominee
holder of shares so that the nominee holder is not able to vote such shares, it
will have the effect of a negative vote.
PROPOSAL 1
ELECTION OF DIRECTORS
At the meeting, five directors are to be elected to hold office until the
1998 annual meeting of stockholders or until their successors are elected and
qualified. The Company's Articles of Incorporation, as amended, provides that
the number of directors shall be fixed by the Board of Directors, but shall not
be less than three members. The Board of Directors is now comprised of five
members, as fixed by the Board of Directors. The nominees for consideration by
holders of Common Stock and Series B Preferred Stock are identified below under
"Management".
Proxies for shares of Common Stock and Series B Preferred Stock may not be
voted for a greater number of persons than the number of nominees named in this
proxy statement. It is the intention of the persons named in the enclosed forms
of proxy to vote such proxy FOR the election of the nominees named below unless
authorization is withheld on the proxy. Management does not contemplate that
any nominee will be unable or unwilling to serve as a director or become
unavailable for any reason, but if such should occur before the meeting, a proxy
voted for any such individual will be voted for another nominee to be selected
by management.
The enclosed forms of Common Stock and Series B Preferred Stock proxies
provide a means for holders of Common Stock and Series B Preferred Stock to vote
for all of the nominees listed therein, to withhold authority to vote for one or
more of such nominees or to withhold authority to vote for all such nominees.
Each properly executed proxy received in time for the meeting will be voted as
specified therein. If a holder of Common Stock or Series B Preferred Stock does
not specify otherwise, the shares represented by such stockholder's proxy will
be voted for the nominees listed therein or, as noted above, for other nominees
selected by management. The withholding of authority or abstention will have no
effect upon the election of directors by holders of Common Stock and Series B
Preferred Stock because under Washington law directors are elected by a
plurality of the votes cast, assuming a quorum is present. The presence of a
majority of the outstanding shares of Common Stock and Series B Preferred Stock
will constitute a quorum. The shares held by each holder of Common Stock and
Series B Preferred Stock who signs and returns the enclosed form of Common Stock
or Series B Preferred Stock proxy, as applicable, will be counted for purposes
of determining the presence of a quorum at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES TO THE BOARD OF
---
DIRECTORS IDENTIFIED BELOW.
-2-
<PAGE>
MANAGEMENT
DIRECTOR NOMINEES AND EXECUTIVE OFFICERS
The following table provides information as of March 1, 1997, with
respect to each of the Company's directors and executive officers:
<TABLE>
<CAPTION>
Served as Executive
Officer or
Name Age Position Director Since
---- --- -------- -------------------
<S> <C> <C> <C>
DIRECTORS
Kyle R. Miller 44 Chairman, President and 1992
Chief Executive Officer
Richard F. Conway/(1)(2)/ 43 Director 1995
Arthur J. Pasmas/(1)(2)/ 62 Director 1994
Thomas J. Trzanowski 58 Director 1996
Paul C. Schorr IV/(1)(2)/ 29 Director 1996
OTHER EXECUTIVE OFFICERS
Bill I. Pennington 45 Vice President and 1994
Chief Financial Officer
John E. Dyer 34 Vice President and 1993
Chief Operating Officer
Michael J. Stevens 31 Secretary and Treasurer 1993
</TABLE>
- --------------------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
KYLE R. MILLER. Mr. Miller has served as President, Chief Executive
Officer and a Director of the Company since December 10, 1992. He was Chairman
of the Board of Directors from December 10, 1992 until September 21, 1994, and
was reappointed Chairman on October 1, 1996. For the five years prior to
becoming President and Chief Executive Officer of the Company, Mr. Miller was
engaged in oil and gas exploration through his own company, Miller Oil Company.
RICHARD F. CONWAY. Mr. Conway has served as Vice President of Smith
Management Company, New York, New York, a private company engaged in various
businesses and investments, including oil and gas, since August 1994. Prior
thereto, he was Senior Vice President of Needham & Company, Inc., a New York -
based investment banking firm, for approximately two and one-half years. Mr.
Conway also has over eight additional years of investment banking experience.
He is also a director of Hawaiian Airlines, Inc., a publicly traded airline.
-3-
<PAGE>
ARTHUR J. PASMAS. Mr. Pasmas has served as Vice President of Smith
Management Company, New York, New York, a private company engaged in various
businesses and investments, including oil and gas, since 1987. Prior thereto,
he was the founder in 1968, and served as President and Chief Executive Officer,
of Resources Investment Corporation until it was acquired by Smith Management
Company in 1987. He currently manages various oil and gas investments for Smith
Management Company from offices in Houston, Texas, and also serves as Chairman
of the Board of GOEX International, Inc., Cleburne, Texas, and as a director of
Regency Health Services, Inc., Tustin, California, a publicly traded health care
company.
THOMAS J. TRZANOWSKI. Mr. Trzanowski has served as president and a
director of Pengo Realty Group, Inc., New York, New York, a private real estate
holding company engaged in real estate investments, since June 1994. He has
also served as President and a director of Spire Realty Group, Inc., Houston,
Texas, a private property management company, since July 1989. Both companies
are wholly owned subsidiaries of Smith Management Company. Mr. Trzanowski also
served as Treasurer of Smith Management Company from November 1983 through
December 1994.
PAUL C. SCHORR IV. Mr. Schorr has served as Vice President of
Citicorp Venture Capital, New York, New York, a wholly-owned subsidiary of
Citibank engaged in private equity investing, since June 1996. Prior thereto,
he was a management consultant with McKinsey & Company, Inc., from September
1993 until June 1996. Mr. Schorr graduated from Harvard Business School with
honors in 1993. He also serves as a director of Fairchild Semiconductor
Corporation, a private company based in Portland, Maine.
BILL I. PENNINGTON. Mr. Pennington has served as Chief Financial
Officer of the Company since September 21, 1994, and as Vice President since
March 22, 1996. He served as a director of the Company from September 21, 1994
until September 25, 1996 and as Treasurer of the Company from September 21, 1994
until March 22, 1996. He also served as President, Chief Operating Officer and
a Director of Lomax Exploration Company, now known as Inland Production Company
("IPC"), from May 1987 until Inland's acquisition of IPC on September 21, 1994.
From March 1986 until May 1987, Mr. Pennington was a manager with the accounting
firm of Coopers & Lybrand in Houston, Texas. From 1983 through 1986, Mr.
Pennington was an Executive Vice President and a director of Texas General
Petroleum Corporation, a Texas corporation. Mr. Pennington is a certified
public accountant.
JOHN E. DYER. Mr. Dyer has been Chief Geologist of the Company since
March 1, 1993, Vice President of the Company since April 28, 1993 and Chief
Operating Officer of the Company since March 22, 1996. From January 1992 until
his association with the Company he was an independent consulting geologist to
the oil and gas industry for various companies. From March 1988 through
December 1991, he was the Chief Geologist for Miller Oil Company.
MICHAEL J. STEVENS. Mr. Stevens has been the Controller of the
Company since June 28, 1993 and the Secretary since September 30, 1993. He was
the Treasurer of the Company from September 30, 1993 until September 21, 1994,
and was reappointed as Treasurer on March 22, 1996. Prior to his association
with the Company, for the past five years he was an auditor with Coopers &
Lybrand (4.5 years) and senior internal auditor (0.5 years) at Diversified
Energy, Inc., a publicly traded oil and gas company in Minneapolis, Minnesota.
Mr. Stevens is a certified public accountant.
The Company has an Audit Committee and Compensation Committee. The Company
does not have a nominating committee.
The Compensation Committee recommends and approves salaries of
executive officers. Its current members are Messrs. Pasmas, Conway and Schorr.
It took five actions by written consent and held two meetings in 1996.
The Audit Committee reviews financial press releases and earnings
reports and recommends to the Board the independent public accountants to be
used by the Company. Its current members are Messrs. Pasmas, Conway and Schorr.
The Audit Committee took one action by written consent in 1996.
-4-
<PAGE>
The Board of Directors of the Company held a total of four meetings
during 1996 and took eight actions by written consent. The Company's non-
employee directors are paid $500 for each meeting attended. Directors are also
reimbursed for reasonable expenses incurred in connection with attendance at
Board or committee meetings. Effective August 29, 1994, the stockholders of
the Company approved an amendment to the Company's stock option plan to provide
for the grant of an option for 1,000 shares of Common Stock to each non-employee
director upon the date of initial election and upon the date of each reelection
to the Board. There are no available shares for grant under the Company's
option plan, but the Board expects to continue to approve the grant of an option
for 1,000 shares of Common Stock to each non-employee director upon the date of
reelection to the Board.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"), or upon written
representations received by the Company, the Company is not aware of any failure
by any officer, director or beneficial owner of more than 10% of the Company's
Common Stock to timely file with the Securities and Exchange Commission any Form
3, 4 or 5 relating to 1996, except that each of Kyle R. Miller, Bill I.
Pennington and John E. Dyer failed to timely file a Form 4 to report the grant
of a warrant by the Company to each of them, and Richard F. Conway filed late
one Form 4 reporting his wife's purchase of 1,000 shares of Common Stock.
CERTAIN TRANSACTIONS
Pengo Securities Corp. ("Pengo") has entered into two Registration
Rights Agreement with the Company pursuant to which the Company has agreed to
register for resale certain shares of Common Stock owned by Pengo and Arthur J.
Pasmas at the Company's expense and certain other shares at the expense of Pengo
and Arthur J. Pasmas. During 1994, Pengo requested the Company register 600,000
shares of Common Stock for resale by Pengo at the Company's expense, which
aggregated approximately $5,663.
Pengo has entered into a Registration Rights Agreement with the
Company in connection with the purchase by Pengo of 1,200,000 shares of Common
Stock for an aggregate purchase price of $6 million ($5.00 per share) pursuant
to which the Company has agreed to register for resale such shares of Common
Stock at the Company's expense. To date, Pengo has not requested the Company
register any of such shares for resale.
Effective July 1, 1995, Randall D. Smith ("Smith"), Inland and IPC,
entered into a Farmout Agreement pursuant to which IPC agreed to farmout to
Smith 40-acre drill sites and Smith agreed to expend approximately $6,800,000 to
drill wells on such drill sites between July 1, 1995 and December 31, 1995.
Pursuant to the Farmout Agreement, 21 wells were drilled and funded by Smith, 20
of which were producing wells and one of which was a dry hole. IPC earned a
supervisory fee of $25,000, proportionately reduced to IPC's working interest
ownership in the drill site, for each well drilled, for an aggregate of $326,178
in supervisory fees in 1995. The Farmout Agreement provided that Smith would
reconvey the drill sites to IPC once Smith had recovered from production an
amount equal to 100% of his expenditures, including supervisory fees and
severance and production taxes, plus an additional sum equal to an annual 22%
rate of return on all such sums expended by Smith ("Payout"). On November 22,
1995, Inland, IPC and Smith entered into an Option Agreement pursuant to which
Smith granted to IPC the option to reacquire the drill sites on March 10, 1997
by issuing that number of shares of Common Stock valued at $5.00 per share
(the market price on November 22, 1995), which, based upon such valuation, would
equal the amount necessary for Smith to achieve Payout. If Inland and IPC failed
to exercise such option, Smith was given an option, exercisable prior to
expiration of the third business day following March 10, 1997, to purchase that
number of shares of Common Stock which, based on a valuation of $5.00 per share,
would equal an amount that would cause Smith to achieve Payout. In the event
Smith elected to purchase such shares, Inland agreed to register the shares upon
Smith's request and to pay all expenses of such registration. Prior to June 1,
1996, Smith transferred a portion of his interests in the farmout wells, the
Farmout Agreement and Option Agreement to Jeffrey A. Smith and John W. Adams
(collectively, with Smith, the "Farmout Stockholders"). The Farmout
Stockholders transferred all of said interests to Farmout, Inc. ("Farmout")
prior to June 1, 1996.
-5-
<PAGE>
On June 12, 1996, Smith Management Company, Inc. an affiliate of Smith
("Smith Management") (an affiliate of Smith), Farmout, the Farmout Stockholders,
Inland and IPC entered into an agreement (the "Purchase Agreement") pursuant to
which the Farmout Stockholders transferred one hundred percent (100%) of the
outstanding capital stock of Farmout to Inland in exchange for 1,309,880 shares
(the "Farmout Shares") of Common Stock, with such transfer to be effective June
12, 1996, but with the Farmout Shares not to be delivered by Registrant to the
Farmout Stockholders until January 2, 1997. The effect of the Purchase
Agreement was to accelerate the March 10, 1997 acquisition date for the 20
producing wells which IPC had the right to acquire under the Option Agreement.
Consequently, Inland has, through its acquisition of the outstanding stock of
Farmout, indirectly acquired these wells. Inland also has agreed to register
the Farmout Shares upon the request of the Farmout Stockholders and to pay all
expenses of such registration.
Pursuant to the Purchase Agreement, Smith Management also agreed to
purchase 950,000 shares of a newly designated series of preferred stock of
Inland (the "Series B Preferred Stock") which has 1,000,000 shares designated in
the series. Smith Management assigned this right to Pengo Securities Corp.,
which purchased the 950,000 shares. Arthur J. Pasmas ("Pasmas"), a director of
Inland and a Vice President of Smith Management, entered into a similar
agreement with Inland on June 12, 1996 pursuant to which he agreed to purchase
the remaining 50,000 shares of Series B Preferred Stock. The Series B Preferred
Stock was issued by Inland to Pengo Securities Corp. and Pasmas for cash of $10
per share (an aggregate of $10,000,000) on July 31, 1996. The Series B
Preferred Stock bears a dividend of 12% per annum on the Redemption Price
(defined below); has a liquidation preference over Common Stock equal to $10.00
per share plus any accumulated and unpaid dividends; is redeemable at a
"Redemption Price" equal to $10.00 per share, plus accumulated and unpaid
dividends; is convertible at a "conversion price" of $6.27 per share (divided
into the Redemption Price) subject to certain anti-dilution adjustments; and is
entitled to one vote per share of Series B Preferred Stock on all matters
submitted to the stockholders of Inland and votes with the Common Stock as one
voting group or class, and not as a separate voting group or class, except where
required by law or except with regard to various amendments to Inland's Articles
of Incorporation affecting the Series B Preferred Stock or creating another
series of preferred stock with rights equal to or greater than the rights of the
Series B Preferred Stock. Each holder of Series B Preferred Stock may, at his
or its option, elect to take dividends in the form of shares of Common Stock,
rather than cash, at the then-current "conversion price." Each holder of Series
B Preferred Stock has presently elected to take dividends in Common Stock,
subject to their right to change such election upon six months' advance notice.
During 1996, 79,745 shares of Common Stock were accrued for issuance as
dividends, and no dividends on Series B Preferred Stock were accumulated or in
arrears at December 31, 1996. If at any time prior to July 31, 1998, (i) Inland
sells all or substantially all of its assets other than in the ordinary course
of business, (ii) Inland merges or consolidates with or into another person,
(iii) a change of control of Inland occurs or (iv) Inland is liquidated or
dissolved, the holders of Series B Preferred Stock will be entitled to a full
two years of accumulated dividends in calculating amounts payable upon
redemption or the number of shares of Common Stock issuable upon conversion, as
the case may be. Inland has agreed to register the shares of Common Stock
issuable upon conversion of the Series B Preferred Stock upon the request of
Pengo Securities Corp. or Pasmas, and to pay all expenses of such registration.
The Series B Preferred Stock is redeemable at any time by Inland by payment of
the Redemption Price of $10.00 per share, unless converted by the holder of
Series B Preferred Stock.
EXECUTIVE COMPENSATION
The following tables set forth the compensation paid by Inland (and
its subsidiary, IPC) for services rendered during the fiscal years ended
December 31, 1996, 1995 and 1994, and the number of options granted, to the
Chief Executive Officer of Inland and each of the executive officers named
below, and the value of the unexercised options held by such officers on
December 31, 1996:
-6-
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
------------------- Securities
Name and Underlying
Principal Options or All Other
Position Year Salary Bonus Warrants Compensation/(1)(2)(3)/
--------- ---- -------- ------- ------------ -----------------------
<S> <C> <C> <C> <C> <C>
Kyle R. Miller, 1996 $180,000 $45,000 100,000 $71,924
President and 1995 180,000 - 31,250 7,738
Chief Executive Officer 1994 180,000 15,000 119,848 6,907
Bill I. Pennington, 1996 137,500 34,375 50,000 2,043
Vice President and 1995 137,500 - - 1,884
Chief Financial Officer 1994 123,905 - 20,000 10,268
John E. Dyer, 1996 109,400 34,375 50,000 4,609
Vice President and 1995 80,600 - 37,500 2,265
Chief Operating Officer 1994 75,000 6,250 - 1,816
</TABLE>
- -------------------
(1) The amounts in this column for Mr. Miller include $2,000 in directors' fees
for attending four Board meetings during 1994, disability insurance
premiums and club membership in 1996, 1995 and 1994 of $3,547, $5,272 and
$4,907, respectively, $2,723 and $2,466 in 1996 and 1995, respectively,
representing a matching contribution by the Company under the 401(k) Plan,
a $7,000 car allowance in 1996, a payout of accrued vacation time of $8,654
in 1996 and a $50,000 payment in 1996 for canceling his old employment
agreement and entering into a new one.
(2) The amounts in this column for Mr. Pennington include club allowance of
$4,500 in 1994, medical insurance reimbursements of $497 in 1994, moving
expenses of $5,271 for 1994, and $2,043 and $1,884 in 1996 and 1995,
respectively, representing a matching contribution by the Company under the
401(k) Plan.
(3) The amounts in this column for Mr. Dyer include a payout of accrued
vacation time in 1996 of $3,391, matching contributions by the Company
under the 401(k) Plan of $1,218 and $1,128 in 1996 and 1995, respectively,
and club membership in 1995 and 1994 of $1,137 and $1,816, respectively.
- -------------------
OPTION/SAR GRANTS TABLE
(OPTION/WARRANT/SAR GRANTS IN LAST FISCAL YEAR)
<TABLE>
<CAPTION>
Number of
Securities Percent of
Underlying Total
Options or Option/Warrant Market Price
Warrants Granted to Exercise or on Date
Granted Employees in Base Price of Grant Expiration
Name # Fiscal Year ($/Sh) ($/Sh) Date
---- ---------- -------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Kyle R. Miller 100,000 38.9% $6.27 $5.00 5/22/06
Bill I. Pennington 50,000 19.4% 6.27 5.00 5/22/06
John E. Dyer 50,000 19.4% 6.27 5.00 5/22/06
</TABLE>
-7-
<PAGE>
AGGREGATED OPTION/WARRANT/SAR EXERCISES IN LAST FISCAL
YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Value of
Unexercised
Number of Securities In-the-Money
Shares Underlying Unexercised Options/Warrants/
Acquired Value Options/Warrants/SARs SARs at 1996
on Exercise Realized at 1996 FY-End(1) FY-End
Name # $ # $
---- ----------- -------- ---------------------- -----------------
<S> <C> <C> <C> <C>
Kyle R. Miller None None 323,911 $1,132,405
Bill I. Pennington None None 70,000 210,250
John E. Dyer None None 90,500 249,811
</TABLE>
- --------------------
(1) All options and warrants were exercisable at December 31, 1996. Value is
based on the closing bid price of $8 3/8 per share on December 31, 1996.
All warrants were in-the-money on December 31, 1996.
- --------------------
EMPLOYMENT AGREEMENTS
On June 1, 1996, Kyle R. Miller, Bill I. Pennington and John E. Dyer
entered into one-year employment agreements with the Company to serve as
President and Chief Executive Officer (Mr. Miller), Vice President and Chief
Financial Officer (Mr. Pennington) and Vice President and Chief Operating
Officer (Mr. Dyer). Under their respective employment agreements, Messrs.
Miller, Pennington and Dyer will receive an annual base salary of $180,000,
$137,500 and $137,500, respectively, and Mr. Miller will also receive a monthly
car allowance of $1,000. Such agreements also entitle each person to
participate in all employee benefit plans and programs of the Company. Each
employment agreement automatically renews for successive one year periods,
unless terminated by the Company for cause or without cause, or by the employee.
If terminated without cause by the Company, the Company is required to pay Mr.
Miller 150% of his base salary and bonus paid during the calendar year preceding
termination, and to pay Messrs. Pennington and Dyer 100% of their respective
base salaries and bonuses paid during the preceding 12 months. Each agreement
also provides that if the employee is permanently disabled during the term of
the agreement, he will continue to be employed at 50% of his base salary until
the first to occur of his death, expiration of 12 months, or expiration of the
then-current term of the employment agreement. Each employee also agreed not to
compete, directly or indirectly, against the Company for a period of one year
following termination of his employment, within a 100 mile radius of any oil or
gas property owned by the Company. Mr. Miller also agreed, as part of his
employment agreement, to the termination of his warrant agreement dated July 23,
1993 pursuant to which he was entitled to be granted a five-year warrant equal
to 5% of the number of shares, options or warrants issued or granted by the
Company at any time during the term of such agreement, and the Company and Mr.
Miller agreed that all prior warrants granted under such warrant agreement would
expire June 1, 2003.
PROPOSAL 2
APPROVAL OF 1997 STOCK OPTION PLAN
GENERAL
The Company's Board of Directors has approved, and recommends that the
stockholders approve, the adoption of the 1997 Stock Option Plan (the "1997
Plan") under which the Company will reserve 500,000 shares of Common Stock for
issuance to key employees, directors and consultants of the Company pursuant to
options granted by the Board of Directors (or a committee of the Board of
Directors, if appointed) during the term of the Plan. Following is a
description of the 1997 Plan.
-8-
<PAGE>
The purposes of the 1997 Plan are to encourage key employees,
directors and consultants of the Company and its subsidiaries to acquire a
proprietary interest in the Company and thus share in the future success of the
Company's business; to enable the Company, by offering comparable incentives, to
attract and retain quality management personnel, directors and consultants who
are in a position to make important and direct contributions to the success of
the Company; and to promote a closer identity of interests between the Company's
employees, directors and consultants and its stockholders. The maximum number
of shares reserved for issuance and subject to option under the 1997 Plan will
be 500,000 shares of Common Stock. Under the 1997 Plan, officers, key
employees, directors and consultants of the Company and its subsidiaries will be
eligible to receive options to purchase Common Stock. The exercise period of
each option will be determined by the Board of Directors, but no option shall
have a term longer than ten years. Options granted under the 1997 Plan may be
either Incentive Stock Options or options that are not intended to be Incentive
Stock Options ("Nonqualified Stock Options"). The Board of Directors is
authorized to designate the recipients of options, the dates of grants, the
number of shares subject to options, the option price, the terms of payment upon
exercise of the options, and the time during which the options may be exercised.
The Board of Directors may delegate its authority to a committee of the Board of
Directors from time to time under the Plan.
The 1997 Plan will continue for a period of ten years and no options
will be granted on or after April 30, 2007. All options granted prior to that
time will remain in effect in accordance with their terms. In the event of any
future change in the Company's Common Stock as a result of stock splits or stock
dividends, or combinations or exchanges of stock, or otherwise, the number of
shares available for option and subject to any option and the price per share of
shares subject to any option may be proportionately adjusted by the Board of
Directors, which will administer the 1997 Plan, subject to its power to delegate
authority from time to time to a committee of the Board of Directors to
administer the 1997 Plan.
The 1997 Plan provides a "formula award" grant of options to directors
equal to 1,000 shares of Common Stock upon the date of initial election to the
Board of Directors and upon the date of each reelection to the Board of
Directors at an exercise price equal to the fair market value of the Common
Stock on the business day preceding the date of election or reelection. The
Board of Directors may also grant discretionary options to directors, in
addition to the "formula award" options.
The Board of Directors has full power to select optionees from among
the officers, key employees, directors and consultants of the Company and its
subsidiaries, and to specify the terms and conditions of any option granted
under the 1997 Plan; however, no option may be granted at an exercise price less
than 85% of the fair market value of the Company's Common Stock on the business
day preceding the date of the grant of such option. No option may be
exercisable more than ten years after the date of its grant, but options may
have differing permissible exercise periods.
The Board of Directors may not grant an Incentive Stock Option to any
consultant who is not a salaried employee of the Company, or any of its
subsidiaries, nor may it grant an Incentive Stock Option to any stockholder who
at the time of the grant beneficially owns more than 10% of the Company's
outstanding voting securities, unless such option has an exercise price at the
time of the grant of at least 110% of the fair market value of the Common Stock,
and the option is not exercisable for more than five years from the date of
grant. Incentive Stock Options may not be granted to any person when the effect
would be to permit such person to first exercise options, in any calendar year,
for the purchase of shares of Common Stock having a fair market value in excess
of $100,000 (determined at the time of the grant of the options).
Incentive Stock Options and Nonqualified Stock Options may not be
transferred except by will or the laws of descent and distribution, and during
the lifetime of the optionee to whom granted, may be exercised only by such
optionee. Incentive Stock Options and Nonqualified Stock Options may be
exercised by the optionee within three months after termination of employment,
directorship or consulting relationship (unless the option expires earlier by
its terms), unless such termination was due to death or disability of the
optionee. In the event of the death of an optionee holding an Incentive Stock
Option or Nonqualified Stock Option while employed by, or serving as a director
or consultant of, the Company the option shall be exercisable by the person or
persons to whom such optionee's rights pass by will or by the laws of descent
and distribution at any time prior to the expiration date of the option or
within one year after the date of such death, whichever is earlier, but only to
the extent the optionee had the right to exercise such Incentive Stock Option or
Nonqualified Stock Option on the date of his death. In the event of the
disability of an optionee holding an Incentive Stock or Nonqualified Stock
Option while employed by, or serving as a director or consultant of, the
Company, which results in termination of such optionee's employment,
directorship or consulting
-9-
<PAGE>
relationship, the Board of Directors may allow an Incentive Stock Option or
Nonqualified Stock Option to be exercisable by the optionee at any time prior to
the expiration date of the Incentive Stock Option or Nonqualified Stock Option
or within one year after the date of such termination, whichever is earlier, but
only to the extent the optionee had the right to exercise such option at the
date of such termination.
The Board of Directors may amend the 1997 Plan at any time in any
manner; however, no amendment may, without the approval of the Company's
stockholders increase the maximum number of shares issuable under the 1997 Plan
except in the case of certain capital adjustments.
As of the date of this Proxy Statement, there were approximately 49
persons eligible to receive Incentive Stock Options and Nonqualified Stock
Options under the 1997 Plan, consisting of four executive officers, four non-
officer directors and 41 other employees.
The Company has one additional stock option plan, the Amended 1988
Stock Option Plan (the "1988 Plan"), under which 212,800 shares are reserved for
issuance. As of the date of this Proxy Statement, options had been granted for
the full 212,800 shares reserved under the 1988 Plan. The Board of Directors
also administers the 1988 Plan.
The closing "bid" and "ask" prices of the Common Stock on February 28, 1997
were $8.63 and $9.13, respectively.
FEDERAL INCOME TAX CONSEQUENCES
There are no federal income tax consequences to the optionee or the
Company upon the grant of stock options under the 1997 Plan. The federal tax
consequences upon exercise will vary depending on whether the option is an
Incentive Stock Option or a Nonqualified Stock Option.
INCENTIVE STOCK OPTIONS. When an optionee exercises an Incentive
Stock Option, the optionee will not at that time recognize any income, nor will
the Company be entitled to a deduction. The optionee will recognize capital
gain or loss at the time of disposition of the shares acquired through the
exercise of an Incentive Stock Option if the disposition occurs more than two
years after the option was granted and if the shares have been held more than
one year after it was exercised. The Company will not be entitled to a tax
deduction if the optionee satisfies these holding requirements. The net federal
income tax effect to the holder of Incentive Stock Options is to defer, until
the acquired stock is sold, taxation of any increase in the stock's value from
the time of grant of the option to the time of its exercise, and to tax such
gain, at the time of sale, at capital gain rates rather than at ordinary income
rates.
If the holding requirements are not met, then upon sale of the shares
the optionee generally recognizes as ordinary income the excess of the fair
market value of the shares at the date of exercise over the exercise price, and
any increase in the value of the option stock subsequent to exercise is long or
short-term capital gain to the optionee depending on the optionee's holding
period for the stock. However, if the sale is for a price less than the value
of the shares on the date of exercise, the optionee might recognize ordinary
income only to the extent the sales price exceeded the option price. In either
case, the Company is entitled to a business expense deduction to the extent of
ordinary income recognized by the optionee.
NONQUALIFIED STOCK OPTIONS. When an optionee exercises a Nonqualified
Stock Option, the optionee recognizes ordinary income in the amount of the
excess of the fair market value of the shares received upon exercise over the
aggregate amount paid for those shares, and the Company may deduct as an expense
the amount of income so recognized by the optionee. For capital gains purposes,
the holding period of the shares begins upon the exercise of the option, and the
optionee's basis in the shares is equal to the fair market value of the shares
on the date of exercise.
If, upon exercise of a Nonqualified Stock Option, the optionee pays
all or part of the purchase price by delivering to the Company shares of
already-owned stock, there are no federal income tax consequences to the
optionee or the Company to the extent of the number of shares so delivered. As
to any additional shares issued, the optionee recognizes ordinary income equal
to the aggregate fair market value of the additional shares received, less any
cash paid
-10-
<PAGE>
to the Company, and the Company is allowed to deduct as an expense the amount of
such income. For purposes of calculating tax upon disposition of the shares
acquired, the holding period and basis of the new shares, to the extent of the
number of old shares delivered, is the same as for those old shares. The
holding period for the additional shares begins on the date the option is
exercised, and the basis in those additional shares is equal to the taxable
income recognized by the optionee, plus the amount of any cash paid to Inland.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR APPROVAL AND
---
ADOPTION OF THE 1997 PLAN DESCRIBED ABOVE.
PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the
ownership of Common Stock and Series B Preferred Stock as of February 28, 1997,
by each stockholder known to the Company to own beneficially more than five
percent of the outstanding Common Stock or Series B Preferred Stock, each
current director, and all executive officers and directors of the Company as a
group, based on information provided to the Company by such persons. Except as
otherwise stated, each such person has sole investment and voting power with
respect to the shares set forth in the table:
<TABLE>
<CAPTION>
Series B
Preferred Stock Common Stock
--------------- -----------------------------------------------
Number of Shares-
Assuming
Number Number Conversion of
Name and Address of of Series B Preferred
of Beneficial Owner Shares Percent Shares Percent Stock by Holder Percent
------------------- ------- ------- ------- --------- ------------------ -------
<S> <C> <C> <C> <C> <C> <C>
Randall D. Smith/(1)/ 950,000 95.0 3,232,893 51.2 4,823,803 61.0
Pengo Securities Corp.
885 Third Ave., 34th Floor
New York, New York 10022
Citicorp Venture Capital Ltd./(2)/ - - 544,078 8.6 544,078 8.6
Citicorp
Citibank, N.A.
399 Park Ave.
Floor 14/Zone 4
New York, New York
Kyle R. Miller/(3)/ - - 449,054 6.7 449,054 6.7
475 17th Street
Suite 1500
Denver, Colorado 80202
Arthur J. Pasmas/(1)(3)/ 50,000 5.0 125,470 2.0 209,202 3.3
5858 Westheimer, Suite 400
Houston, Texas 77057
Richard F. Conway/(1)(4)/ - - 7,000 * 7,000 *
885 Third Ave., 34th Floor
New York, New York 10022
Thomas J. Trzanowski/(1)(5)/ - - 2,000 * 2,000 *
1010 Lamar Street, Suite 550
Houston, Texas 77002
Paul C. Schorr IV/(2)/ - - - - - -
339 Park Avenue
14th Floor, Zone 4
New York, New York 10043
</TABLE>
-11-
<PAGE>
<TABLE>
Series B
Preferred Stock Common Stock
--------------- -----------------------------------------------
Number of Shares-
Assuming
Number Number Conversion of
Name and Address of of Series B Preferred
of Beneficial Owner Shares Percent Shares Percent Stock by Holder Percent
------------------- ------- ------- ------- --------- ------------------ -------
<S> <C> <C> <C> <C> <C> <C>
All Executive Officers and 50,000 5.0 1,037,653 14.8 1,121,385 15.8
Directors as a Group
(8 persons)/(3)/
</TABLE>
- -------------------
* Less than 1%
(1) Pengo Securities Corp. owns of record and beneficially 2,250,483 shares of
Common Stock and 950,000 shares of Series B Preferred Stock. Randall D.
Smith is deemed to also beneficially own the shares owned of record by
Pengo. Pengo has the right to designate up to two nominees to the
Company's Board of Directors for as long as it owns 600,000 or more shares,
and one nominee for as long as it owns 300,000 or more shares but less than
600,000 shares. Arthur J. Pasmas and Richard F. Conway, Vice Presidents of
Smith Management Company, Inc., an affiliate of Pengo, are such nominees.
Thomas J. Trzanowski is the President of two wholly owned subsidiaries of
Smith Management Company, Inc. Messrs. Pasmas, Conway and Trzanowski
disclaim beneficial ownership of the shares of the Company's Common Stock
and Series B Preferred Stock owned by Pengo and Pengo disclaims beneficial
ownership of the shares of the Company's Common Stock and Series B
Preferred Stock owned by Messrs. Pasmas, Conway and Trzanoswki and their
respective shares are not included in the table in the shares owned by the
other.
(2) Citicorp Venture Capital Ltd. is the record and beneficial owner of the
shares, which may also be deemed to be beneficially owned by its parent,
Citibank, N.A., and by Citicorp, the parent of Citibank, N.A. Paul G.
Schorr is Vice President of Citicorp Venture Capital Ltd. Mr. Schorr
disclaims beneficial ownership of the shares of the Company's Common Stock
owned by Citicorp Venture Capital Ltd.
(3) Includes shares issuable under outstanding stock options and warrants
granted to Messrs. Miller, Pasmas, Conway, and all executive officers and
directors as a group for 393,911, 3,000, 1,000 and 708,851 shares,
respectively.
(4) Includes 1,000 shares of Common Stock owned of record and beneficially by
Mr. Conway's spouse.
(5) These shares are owned by Mr. Trzanowski's spouse.
- -------------------
STOCKHOLDER PROPOSALS FOR THE
1998 ANNUAL MEETING OF STOCKHOLDERS
Proposals of stockholders must be received by the Company at its
principal executive office at 475 17th Street, Suite 1500, Denver, Colorado
80202, by November 25, 1997 for inclusion in the Company's proxy statement and
form of proxy relating to the 1998 annual meeting of stockholders.
-12-
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP served as the Company's principal independent
public accountants for 1996 and has been selected by the Company to serve in
1997. Representatives of Arthur Andersen LLP are expected to be present at the
1997 annual meeting of stockholders with the opportunity to make a statement if
they so desire and will be available to respond to appropriate questions.
Coopers & Lybrand LLP served as the Company's independent public
accountants for 1995, but effective October 4, 1996, the Company dismissed
Coopers & Lybrand LLP and engaged Arthur Andersen LLP. There were no
disagreements with Coopers & Lybrand LLP on any matters of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to its satisfaction, would have caused it to make
reference to such disagreement in its report. A copy of a letter from Coopers &
Lybrand LLP, addressed to the Securities and Exchange Commission, concurring
with the Company's statements herein has been filed with the Securities and
Exchange Commission. Neither of the reports of Coopers & Lybrand LLP on the
Company's financial statements for the Company's fiscal years ended December 31,
1995 and 1994 contained an adverse opinion or disclaimer of opinion, or was
modified as to uncertainty, audit scope, or accounting principles. The decision
to change the Company's principal independent accountant was approved by the
Audit Committee of the Board of Directors of the Company.
OTHER MATTERS
The cost of solicitation of proxies in the accompanying form will be
paid by the Company. In addition to solicitation by use of the mails, certain
officers and employees of the Company may solicit the return of proxies by
telephone, telegram or personal interviews.
By Order of the Board of Directors
Michael J. Stevens
Secretary
March 24, 1997
-13-
<PAGE>
1997 STOCK OPTION PLAN
OF
INLAND RESOURCES INC.
1. PURPOSE. This 1997 Stock Option Plan (the "Plan") of Inland Resources
Inc. (the "Company") is adopted effective April 30, 1997, subject to approval of
the Plan by the stockholders of the Company at the 1997 Annual Meeting of
Stockholders. The purposes of the Plan are (a) to encourage key employees,
directors and consultants of the Company, as well as key employees, directors
and consultants of any current or after-acquired subsidiary corporation, to
acquire a proprietary interest in the Company and thus share in the future
success of the Company's business; and (b) to enable the Company, by offering
comparable incentives, to attract and retain outstanding management personnel,
directors and consultants who are in a position to make important and direct
contributions to the success of the Company; and (c) to promote a closer
identity of interests between the Company's employees, directors and consultants
and its stockholders.
2. STOCK OPTIONS. Options granted under this Plan shall qualify either
as Incentive Stock Options ("ISOs") as defined in Section 422(b) of the Internal
Revenue Code of 1986 as now stated or hereafter amended (the "Code"), or
Nonstatutory Stock Options ("NSOs"), at the discretion of the Company and as
reflected in the terms of the written Option Agreements. The ISOs and NSOs are
collectively referred to herein as "Options." If an Option is not specifically
designated as an ISO at the date of grant, it shall be deemed an NSO.
3. SCOPE AND DURATION OF THE PLAN. There will be reserved for sale upon
the exercise of Options granted under this Plan Five Hundred Thousand (500,000)
shares of the Company's authorized but unissued voting common stock. If an
Option expires or terminates for any reason without having been fully exercised,
the unpurchased shares will be available for other Options under the Plan.
Unless this Plan is terminated earlier pursuant to Section 16 hereof, it shall
terminate ten (10) years from its effective date and no Option shall be granted
after that date; provided, however, that termination of this Plan will have no
effect on the Options previously granted.
4. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company (the "Board"). The Board may delegate administration
of the Plan from time to time to a committee of the Board that is composed
solely of two or more "Non-Employee Directors", as defined in Rule 16b-3 adopted
by the Securities and Exchange Commission (the "Commission"), or a committee
which otherwise satisfies the requirements of Rule 16b-3 if subsequently amended
by the Commission so that Options granted pursuant to the Plan will be exempt
from Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). It is the express intention of the Plan that the
administration shall be performed in such a manner that Options granted under
the Plan will be exempt from Section 16(b) pursuant to the provisions of Rule
16b-3 or any replacement Rule, and the Board is granted the express power to
change the administration of the Plan from time to time in such a manner as it
may deem appropriate to ensure that grants of Options under the Plan will be
exempt from Section 16(b) under Rule 16b-3, as subsequently amended, or any
replacement Rule adopted by the Commission. If the Board elects to appoint a
committee of the Board to administer the Plan, rather than the entire Board
administering the Plan, each member of
-1-
<PAGE>
such committee shall be a director of the Company and all members shall be
appointed by the Board. From time to time, the Board may increase the size of
any such committee and appoint additional members thereof, remove members (with
or without cause) and appoint new members in substitution thereof; provided,
however, that any such addition or substituted new members of any such committee
shall also be directors of the Company. The Board also may at any time remove
all members of any such committee and thereafter administer the Plan.
The Board (or any committee of the Board if one has been appointed and is
in place) has the responsibility to adopt such rules and regulations as it deems
necessary or desirable for the proper administration of this Plan. Any decision
or action taken or to be taken by the Board (or any committee of the Board if
one has been appointed and is in place), arising out of or in connection with
the construction, interpretation, and administration of this Plan shall, to the
extent permitted by law, be within its absolute discretion, but subject to the
express provisions of this Plan. Decisions of the Board (or any committee of
the Board if one has been appointed and is in place) shall be conclusive and
binding upon all recipients of Options and any person claiming under or through
any recipient of an Option.
5. CLASSES OF AWARD: ELIGIBLE PERSONS. Options may be granted to
directors, key employees and consultants of the Company and current or future
subsidiary corporations who otherwise comply with the requirements of this Plan.
The Board (or any committee of the Board if one has been appointed and is in
place) has the authority to grant Options pursuant to the following two classes
of award:
(a) Discretionary Awards. The Board (or any committee of the Board
--------------------
if one has been appointed and is in place) has the authority, subject to
the terms of this Plan, to determine key employees, directors and
consultants to whom Options shall be granted, the number of shares to be
covered by each Option, whether such Option shall be an ISO or NSO, the
form of payment, the time or times at which Options shall be granted, and
the terms and provisions of the instruments evidencing Options. The term
"key employee" shall include officers, executives and supervisory personnel
of the Company or any subsidiary. In determining the key employees,
directors and consultants to whom Options shall be granted and the number
of shares to be issued on the exercise of an Option, the Board (or any
committee of the Board if one has been appointed and is in place) shall
take into account the duties of the key employees, directors and
consultants, their present and potential contributions to the success of
the Company and its subsidiary corporations, and such other factors as the
Board (or any committee of the Board if one has been appointed and is in
place) deems relevant to accomplish the purpose of this Plan. A director of
the Company may be granted discretionary Options notwithstanding the fact
such person is also eligible to receive Options pursuant to the formula
award provided by this Plan. Consultants shall not receive ISOs, but may be
eligible to receive NSOs.
(b) Formula Awards to Directors. Directors of the Company who are
---------------------------
not employees of the Company shall be awarded Options to purchase 1,000
shares of common stock upon the date of initial election to the Board and
upon the date of each
-2-
<PAGE>
reelection to the Board, with the exercise price to be equal to the Fair
Market Value (as defined in Section 6) of such shares on the business day
preceding the date of election or reelection.
For purposes of this Plan, subsidiary corporations have the same meaning as
contained in Section 424(f) of the Code. Notwithstanding the foregoing
provisions, an ISO shall not be granted to an employee who, at the time such ISO
is granted, owns directly or indirectly within the meaning of Section 424(d) of
the Code (e.g., an individual shall be considered as owning the stock owned,
----
directly or indirectly by or for his brothers and sisters, spouse, ancestors,
and lineal descendants; and stock owned by a corporation shall be considered as
being owned proportionately by its shareholders), more then ten percent (10%) of
the total combined voting power of all classes of stock of the Company;
provided, however, that said ten percent (10%) limitation shall not apply if at
the time such ISO is granted the ISO price (as otherwise specified in Section 6
below) is at least equal to one hundred ten percent (110%) of the Fair Market
Value of the stock subject to the ISO and such ISO by its terms is not
exercisable after the expiration of five (5) years following the date such ISO
is granted.
6. EXERCISE PRICE. Subject to the provisions of Section 5 above, the
price of the shares of common stock to be issued on exercise of Options shall be
not less than (a) the Fair Market Value of such shares on the date an ISO is
granted, or (b) eighty-five percent (85%) of the Fair Market Value on the date a
NSO is granted. "Fair Market Value" of a share of common stock shall be
determined as of any specified date as follows: (i) if the Company's common
stock is traded on any United States securities exchange (including the National
Market System of the National Association of Securities Dealers, Inc.) the price
per share shall be the closing price on such exchange on the business day
immediately preceding such date; (ii) if the Company's common stock is not
traded on any United States securities exchange, but is traded on any formal
over-the-counter quotation system in general use in the United States, the price
per share shall be the mean between the closing high bid and low asked
quotations on such system at the close of the business day immediately preceding
such date; and (iii) if neither subparagraph (i) nor (ii) applies, the Fair
Market Value shall be as determined solely by the Board (or any committee of the
Board if one has been appointed and is in place) in good faith in accordance
with uniform principles consistently applied. Subject to the foregoing, the
Board (or any committee of the Board if one has been appointed and is in place),
in fixing the Option price, shall have full authority and discretion and their
good faith judgment in establishing Fair Market Value and in establishing the
purchase price shall be conclusive.
7. TERM OF OPTIONS. Except as otherwise provided in Section 5, the term
of each Option shall be determined by the Board (or any committee of the Board
if one has been appointed and is in place), but shall not be for more than ten
(10) years from the date the Option is granted.
8. LIMITATION ON FAIR MARKET VALUE OF INCENTIVE STOCK OPTIONS EXERCISABLE
IN ANY CALENDAR YEAR. No ISO may be granted to an optionee which, when
aggregated with all other ISO's granted to such optionee, would result in shares
having an aggregate Fair Market Value (determined for each share as of the date
of granting of the Option covering such shares) in excess of One Hundred
Thousand Dollars ($100,000.00) becoming first available for purchase upon
exercise of one or more ISOs during any calendar year.
-3-
<PAGE>
9. EXERCISE OF OPTIONS. An Option may be exercised on such terms and
conditions as the Board (or any committee of the Board if one has been appointed
and is in place) shall determine, subject to the requirements of this Plan.
Unless otherwise determined by the Board (or any committee of the Board if one
has been appointed and is in place), the price of the shares purchased pursuant
to an Option shall be paid in full at the time of exercise in cash or in such
other consideration as the Board (or any committee of the Board if one has been
appointed and is in place) deems appropriate, including, without limitation,
shares of common stock of the Company valued at Fair Market Value (in the manner
prescribed in Section 6 above) as of the date of exercise of the Option. No
Option may be exercised during the optionee's lifetime unless the optionee is
then an employee, director or consultant of the Company or a subsidiary
corporation; provided that, in the event the optionee's employment, term as a
director or consulting relationship terminates for reasons other than death or
disability, the Option may be exercised during the three (3) month period
following such termination. Thereafter, the Option shall terminate and be at an
end. In the case of disability, the Board (or any committee of the Board if one
has been appointed and is in place) may extend the Option for up to one (1)
year; and in the event of death, the Option shall be extended for one (1) year
as provided in Section 11. Whether an authorized leave of absence, disability,
or temporary absence for any other reason constitutes termination for the
purposes of this Plan shall be determined by the Board (or any committee of the
Board if one has been appointed and is in place).
10. ADDITIONAL RESTRICTIONS UPON EXERCISE OF OPTIONS. Options may be
exercisable either in whole or in part. No less than one hundred (100) shares
of common stock may be purchased at any one time unless the number purchased is
the total number of shares at that time purchasable under the Option. The Board
(or any committee of the Board if one has been appointed and is in place) may
impose such other restrictions upon the exercise of the Option or the transfer
shares of common stock acquired upon the exercise of the Option as the Board (or
any committee of the Board if one has been appointed and is in place) deems
necessary to comply with federal and state securities law.
11. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the optionee,
the Option shall be exercised only by the optionee. An Option granted under
this Plan is not transferable by the optionee by operation of law or otherwise,
except that in the event of death of the optionee while in the employ, or while
serving as a director or consultant, of the Company or a subsidiary, an Option
granted hereunder may be exercised (subject to the time restrictions set forth
in Sections 5 and 7 hereof) at any time within one (1) year after death, by the
duly appointed personal representative of the optionee, or by any person or
persons who shall acquire such Option directly from the optionee by bequest or
inheritance.
12. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION. Notwithstanding any other
provision of this Plan, each instrument evidencing an Option may contain such
provision as the Board (or any committee of the Board if one has been appointed
and is in place) determines to be appropriate for the adjustment of the number
and class of shares of common stock covered by the Option, the Option price, and
the number of shares of common stock as to which the Option shall be exercisable
at any time, in the event of changes in the outstanding shares of common stock
of the Company by reason of stock dividends, split-ups, recapitalizations,
mergers, consolidations, reorganizations, or
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<PAGE>
liquidations. In the event of any such change in the outstanding shares of
common stock of the Company, the aggregate number of shares available under this
Plan shall be appropriately adjusted.
13. EVENTS ACCELERATING EXERCISE OF OPTIONS. If the shares of common
stock of the Company are changed into or exchanged for shares of stock of
another unrelated corporation or are converted to cash pursuant to a plan of
merger, partial or complete liquidation or dissolution, each Option then
outstanding (to the extent this Plan is not continued, as adjusted in the manner
specified in Section 12 by the successor entity) shall be exercisable, with
respect to all the shares of common stock covered thereby and without regard to
the time the Option has been outstanding, beginning with the date the Board of
Directors approves or authorizes such change or conversion, and ending two (2)
days prior to the effective date of such change or conversion.
14. LOANS TO HOLDERS OF OPTIONS. The Company may, in the sole discretion
of the Board of Directors, directly or indirectly, lend money or credit to any
employee for the purpose of assisting an optionee in purchasing shares of common
stock to be issued upon the exercise of an Option granted under this Plan.
15. EMPLOYMENT RIGHTS. Nothing in this Plan or any instrument evidencing
an Option shall confer upon any employee any right to continue in the employment
of the Company or a subsidiary corporation, nor be construed to interfere in any
way with the right otherwise available to the Company or a subsidiary
corporation to terminate the employee's employment at any time for any reason.
16. AMENDMENT/TERMINATION. The Board of Directors may amend or terminate
this Plan from time to time in such respects as it may deem advisable; provided
that any increase in the number of shares subject to the Plan, other than in
connection with an adjustment under Section 12, shall require approval at a duly
held stockholders' meeting of the holders of a majority of the voting power of
the outstanding shares of the Company entitled to vote.
17. RIGHTS AS A SHAREHOLDER. An optionee, or permitted transferee of an
Option upon the death of an optionee, shall have no rights as a stockholder with
respect to any shares of common stock covered by an Option until the date of the
issuance of a stock certificate to and for such shares. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities, or
other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Section 12 above.
18. INVESTMENT PURPOSE. Common stock acquired upon the exercise of an
Option granted under this Plan may only be resold in the event such stock is
registered under the Securities Act of 1933, as amended, or if, in the opinion
of responsible counsel for the Company, such stock can be resold without such
registration. Unless a registration statement with respect to such stock
covering the holder of such Option is then in effect, each certificate issued
pursuant to the exercise of such Option shall contain a legend to this effect.
19. OTHER PROVISIONS. As soon as possible after the adoption of this Plan
by the stockholders, Option Agreements for the ISOs and NSOs shall be completed
and attached to this Plan
-5-
<PAGE>
as exhibits. The Option Agreements authorized under this Plan may contain such
other provisions, including without limitation, restrictions upon the exercise
of Options, as the Board (or any committee of the Board if one has been
appointed and is in place) shall deem advisable. The ISO Option Agreement shall
contain such limitations and restrictions upon the exercise of an ISO as shall
be necessary or permitted in order that the ISO will be an "incentive stock
option" as defined in Section 422(b) of the Code, or to conform to any change in
the law.
20. COMPLIANCE WITH EXCHANGE ACT. Notwithstanding anything herein to the
contrary, Options shall always be granted in such a manner as to conform to the
provisions of Rule 16b-3, as subsequently amended, or any replacement Rule
adopted under the provisions of Section 16 of the Exchange Act as the same now
exists or may, from time to time, be amended, and the Board is granted the
express authority to make any such changes or modifications to the Plan, without
stockholder approval, as it may determine to be necessary to conform to the
provisions of Rule 16b-3, as subsequently amended, or any replacement Rule.
21. INDEMNIFICATION. In addition to such other rights of indemnification
as they may have as Directors, the members of the Board (or any committee of the
Board if one has been appointed and is in place) administering this Plan shall
be indemnified by the Company against the reasonable expenses, including
attorney fees actually and necessarily incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with this Plan or any Option granted
hereunder, and against all amounts paid by them in settlement thereof (provided
such settlement is approved by independent legal counsel selected by the
Company), or paid by them in satisfaction of a judgment in any such action, suit
or proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit, or proceeding that such Director is liable for negligence or
misconduct in the performance of his duties; provided that within sixty (60)
days after the institution of any such action, suit or proceeding, the Director
shall, in writing, offer the Company the opportunity, at its own expense, to
defend the same.
This Plan is executed this 30th day of April, 1997.
INLAND RESOURCES INC.
By:
-----------------------------------------
Kyle R. Miller, President
-6-
<PAGE>
COMMON STOCK PROXY
INLAND RESOURCES INC.
THIS COMMON STOCK PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (1) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Inland Resources Inc. (the "Company") to be held at
the Denver Petroleum Club located at 555 17th Street, Suite 3700, Denver,
Colorado 80202, on April 30, 1997, beginning at 9:00 a.m., Denver Time, and the
Proxy Statement in connection therewith and (2) appoints Kyle R. Miller and
Michael J. Stevens, and each of them, the undersigned's proxies with full power
of substitution for and in the name, place and stead of the undersigned, to vote
upon and act with respect to all of the shares of Common Stock of the Company
standing in the name of the undersigned, or with respect to which the
undersigned is entitled to vote and act, at the meeting and at any adjournment
thereof.
The undersigned directs that the undersigned's proxy be voted as follows:
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for [ ] ABSTAIN
DIRECTORS (except as marked to the contrary below) all nominees listed below from voting
</TABLE>
Kyle R. Miller, Arthur J. Pasmas, Richard F. Conway,
Thomas J. Trzanowski and Paul C. Schorr IV
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the line provided below.)
---------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
2. APPROVAL AND [ ] FOR Approval and Adoption of [ ] AGAINST Approval and Adoption of [ ] ABSTAIN
AND ADOPTION the 1997 Plan described below the 1997 Plan described below from voting
OF 1997 PLAN
</TABLE>
The 1997 Plan is the 1997 Stock Option Plan of the Company
under which 500,000 shares of Common Stock shall be
reserved for issuance to key employees, directors and
consultants of the Company pursuant to options granted by
the Board of Directors (or a committee of the Board of
Directors, if appointed).
3. IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTER WHICH MAY
PROPERLY COME BEFORE THE MEETING.
This proxy will be voted as specified above. If no specification is made,
this proxy will be voted for the election of the director nominees in item 1
above and for approval and adoption of the 1997 Plan in item 2 above.
The undersigned hereby revokes any proxy heretofore given to vote or act
with respect to the Common Stock of the Company and hereby ratifies and confirms
all that the proxies, their substitutes, or any of them may lawfully do by
virtue hereof.
If more than one of the proxies named shall be present in person or by
substitute at the meeting or at any adjournment thereof, the majority of the
proxies so present and voting, either in person or by substitute, shall exercise
all of the powers hereby given.
Please date, sign and mail this proxy in the enclosed envelope.
Date __________________ ____, 1997
----------------------------------------
Signature of Stockholder
----------------------------------------
Signature of Stockholder
Please date this proxy and sign your
name exactly as it appears hereon. Where
there is more than one owner, each
should sign. When signing as an
attorney, administrator, executor,
guardian or trustee, please add your
title as such. If executed by a
corporation, the proxy should be signed
by a duly authorized officer.
<PAGE>
SERIES B PREFERRED STOCK PROXY
INLAND RESOURCES INC.
THIS SERIES B PREFERRED STOCK PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby (1) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Inland Resources Inc. (the "Company") to be held at
the Denver Petroleum Club located at 555 17th Street, Suite 3700, Denver,
Colorado 80202, on April 30, 1997, beginning at 9:00 a.m., Denver Time, and the
Proxy Statement in connection therewith and (2) appoints Kyle R. Miller and
Michael J. Stevens, and each of them, the undersigned's proxies with full power
of substitution for and in the name, place and stead of the undersigned, to vote
upon and act with respect to all of the shares of Series B Preferred Stock of
the Company standing in the name of the undersigned, or with respect to which
the undersigned is entitled to vote and act, at the meeting and at any
adjournment thereof.
The undersigned directs that the undersigned's proxy be voted as follows:
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for [ ] ABSTAIN
DIRECTORS (except as marked to the contrary below) all nominees listed below from voting
</TABLE>
Kyle R. Miller, Arthur J. Pasmas, Richard F. Conway,
Thomas J. Trzanowski and Paul C. Schorr IV
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the line provided below.)
---------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
2. APPROVAL AND [ ] FOR Approval and Adoption of [ ] AGAINST Approval and Adoption of [ ] ABSTAIN
AND ADOPTION the 1997 Plan described below the 1997 Plan described below from voting
OF 1997 PLAN
</TABLE>
The 1997 Plan is the 1997 Stock Option Plan of the Company
under which 500,000 shares of Common Stock shall be
reserved for issuance to key employees, directors and
consultants of the Company pursuant to options granted by
the Board of Directors (or a committee of the Board of
Directors, if appointed).
3. IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTER WHICH MAY
PROPERLY COME BEFORE THE MEETING.
This proxy will be voted as specified above. If no specification is made,
this proxy will be voted for the election of the director nominees in item 1
above and for approval and adoption of the 1997 Plan in item 2 above.
The undersigned hereby revokes any proxy heretofore given to vote or act
with respect to the Series B Preferred Stock of the Company and hereby ratifies
and confirms all that the proxies, their substitutes, or any of them may
lawfully do by virtue hereof.
If more than one of the proxies named shall be present in person or by
substitute at the meeting or at any adjournment thereof, the majority of the
proxies so present and voting, either in person or by substitute, shall exercise
all of the powers hereby given.
Please date, sign and mail this proxy in the enclosed envelope.
Date __________________ ____, 1997
----------------------------------------
Signature of Stockholder
----------------------------------------
Signature of Stockholder
Please date this proxy and sign your
name exactly as it appears hereon. Where
there is more than one owner, each
should sign. When signing as an
attorney, administrator, executor,
guardian or trustee, please add your
title as such. If executed by a
corporation, the proxy should be signed
by a duly authorized officer.
