<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 transaction 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<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 Tuesday, June 30, 1998, 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 six members of the Board of Directors to serve until the
1999 annual meeting of stockholders or until their respective successors
are duly elected and qualified; and
(2) 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 C Preferred Stock of the
Company at the close of business on April 30, 1998 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 410
17th Street, Suite 700, Denver, Colorado.
By order of the Board of Directors
MICHAEL J. STEVENS
Secretary
April 30, 1998
----------------------
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
JUNE 30, 1998
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
Tuesday, June 30, 1998 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 June 1, 1998.
The Company's principal executive office is located at 410 17th Street,
Suite 700, Denver, Colorado 80202, and its telephone number is (303) 893-0102.
At the close of business on April 30, 1998, (the "Record Date"), the
Company had outstanding and entitled to vote 8,359,830 shares of Common Stock,
$.001 par value (the "Common Stock"), and 100,000 shares of Series C Cumulative
Convertible Preferred Stock, $.001 par value (the "Series C Preferred Stock").
The holders of Common Stock and the holders of Series C Preferred Stock will
vote together as one class on all matters presented at the annual meeting, and
the holders of record of such shares of Series C Preferred Stock will be
entitled to vote their shares based on the number of shares of Common Stock into
which the Series C Preferred Stock is convertible (8.911 shares of Common Stock
for each share of Series C Preferred Stock at March 31, 1998). The presence, in
person or by proxy, of a majority of the outstanding shares of Common Stock and
Series C 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, 1997,
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 the election of directors 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>
ELECTION OF DIRECTORS
At the meeting, six directors are to be elected to hold office until the
1999 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 six
members, as fixed by the Board of Directors. The nominees for consideration by
holders of Common Stock and Series C Preferred Stock are identified below under
"Management".
Proxies for shares of Common Stock and Series C 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 C Preferred Stock proxies
provide a means for holders of Common Stock and Series C 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 C 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 C
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 C Preferred Stock
will constitute a quorum. The shares held by each holder of Common Stock and
Series C Preferred Stock who signs and returns the enclosed form of Common Stock
or Series C 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.
MANAGEMENT
DIRECTOR NOMINEES AND EXECUTIVE OFFICERS
The following table provides information as of April 30, 1998, with respect
to each of the Company's nominees for director and each executive officer:
<TABLE>
<CAPTION>
Served as Executive
Officer or
Name Age Position Director Since
---- --- -------- -------------------
DIRECTORS
<S> <C> <C> <C>
Kyle R. Miller 45 Chairman, President and 1992
Chief Executive Officer
Arthur J. Pasmas/(1)(2)/ 63 Director 1994
Thomas J. Trzanowski 59 Director 1996
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
Served as Executive
Officer or
Name Age Position Director Since
---- --- -------- -------------------
<S> <C> <C> <C>
Paul C. Schorr IV/(1)(2)/ 31 Director 1996
Gregory S. Anderson/(1)/ 41 Director 1998
Bruce M. Schnelwar/(2)/ 57 Director 1998
OTHER EXECUTIVE OFFICERS
Bill I. Pennington 46 Vice President and Chief 1994
Financial Officer
John E. Dyer 35 Vice President and Chief 1993
Operating Officer
Michael J. Stevens 32 Vice President, 1993
Secretary
and Treasurer
</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.
ARTHUR J. PASMAS. Mr. Pasmas has served as Vice President of Smith
Management LLC (or affiliated entities), New York, New York, a private
investment firm, 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 an affiliate of Smith Management LLC in
1987. He currently manages various oil and gas investments for Smith Management
LLC from offices in Houston, Texas, and also serves as a director of Hawaiian
Airlines, Inc.
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 affiliates of Smith Management LLC. Mr. Trzanowski also served as Treasurer
of various affiliates of Smith Management LLC 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 in 1993. He also
serves as a director of Fairchild Semiconductor Corporation, a private company
based in Portland, Maine, and as a director of Sybron Chemicals, Inc. and KEMET
Corporation.
GREGORY S. ANDERSON. Mr. Anderson has served as a director of the Company
since February 17, 1998. Since October 1993, he has been the President and
Chief Executive Officer of Anderson & Wells Sundance Venture Partners, L.P., a
venture capital firm located in Phoenix, Arizona, and prior thereto served for
over eight years as Vice President
-3-
<PAGE>
and General Manager of El Dorado Investment Company, a venture capital firm
located in Phoenix, Arizona. Mr. Anderson also serves as a director of Gateway
Data Sciences, Inc. and Western Pacific Airlines, Inc.
BRUCE M. SCHNELWAR. Mr. Schnelwar has served as a director of the Company
since February 17, 1998. He has served since August 1994 as Senior Vice
President and Chief Financial Officer of Smith Management LLC (or affiliated
entities), and prior thereto served as Executive Vice President and Chief
Financial Officer of Margaretten Financial Corporation, a mortgage banking
company, for over two years.
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, the Secretary since September 30, 1993 and a Vice President
since April 30, 1997. 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, Schorr and Schnelwar. It
took three actions by written consent and held two meetings in 1997.
The Audit Committee reviews financial press releases and earnings reports,
recommends to the Board the independent public accountants to be used by the
Company, reviews with the Company's independent auditors any management letters
or other reports which such independent auditors deem necessary to be
communicated to the Company or Audit Committee, and conducts a review of all
related party transactions between the Company and any of its officers,
directors or holders of five percent (5%) or more of the Company's Common Stock
for the review of potential conflicts of interest in order to make reports to
the full Board. Its current members are Messrs. Pasmas, Schorr and Anderson.
The Audit Committee held one meeting in 1997.
The Board of Directors of the Company held a total of five meetings during
1997 and took four actions by written consent. The Company's non-employee
directors are paid an annual fee of $12,000, $1,000 for each meeting attended
personally, $500 for each meeting attended telephonically and $500 for each
meeting of any committee whether attended personally or telephonically.
Directors are also reimbursed for reasonable expenses incurred in connection
with attendance at Board or committee meetings. Each non-employee director is
also granted an option for 6,000 shares of Common Stock upon the date of initial
election and upon the date of each reelection to the Board 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 may also grant discretionary
options to directors, in addition to the foregoing options.
-4-
<PAGE>
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 1997.
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 also 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.
On June 12, 1996, Farmout, the Farmout Stockholders, Inland, IPC and an
entity affiliated with Smith and Smith Management LLC ("Smith Affiliate")
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.
-5-
<PAGE>
Pursuant to the Purchase Agreement, Smith Affiliate 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 Affiliate 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 LLC, 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. In connection with the
Company's issuance of the Series C Preferred Stock on July 21, 1997, the holders
of Series B Preferred Stock waived redemption of the Series B Preferred Stock
and instead elected to convert their Series B Preferred Stock into 1,977,671
shares of Common Stock.
On July 21, 1997, the Company closed the sale of 100,000 shares of Series C
Preferred Stock to an affiliate of Enron Corp. for cash of $10.0 million ($9.6
million net of closing fees). The Series C Preferred Stock is initially
convertible at any time by the holder into 8.333 shares of Common Stock, an
effective conversion price of $12.00 per share. The Series C Preferred Stock
bears a dividend of 10% per annum. Accumulated dividends may also be converted
by the holder at the same ratio as the Series C Preferred Stock. Subsequent to
July 21, 2000 (the third anniversary), the Company has the option to redeem for
cash at par value ($100 per share) all outstanding shares of Series C Preferred
Stock plus accrued dividends. If not converted by the holder or redeemed for
cash by the Company prior to the later of (i) July 21, 2005 (the eighth
anniversary) or (ii) six months following maturity of any high yield offering or
long-term debt financing in the aggregate amount of at least $25.0 million
obtained after July 21, 1997, the Company must redeem the Series C Preferred
Stock and all accrued dividends for (i) cash or, at the Company's election, (ii)
Common Stock issued at 80% of the market price of the Common Stock on the day of
redemption. The Series C Preferred Stock votes with common stockholders on all
matters based on the number of shares of Common Stock the Series C Preferred
Stock is convertible into; except for the approval of amendments to the Series C
Preferred Stock, the authorization of any other series of preferred stock having
equal or greater rights, and the approval of any merger, consolidation or share
exchange involving the Company unless the holder of the Series C Preferred Stock
receives equivalent stock with equivalent rights. In these instances, the
Series C Preferred Stock votes as a separate class. The Series C Preferred
Stock also carries anti-dilution protection, rights to demand registration at
the Company's expense, a liquidation preference equal to par value of all
outstanding shares plus accrued dividends, and other mandatory redemption
requirements under certain circumstances involving the Company entering into a
new line of business or certain mergers, consolidations or share exchanges.
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, 1997, 1996 and 1995, 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, 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Securities
Name and Underlying
Principal Options or All Other
Position Year Salary Bonus Warrants Compensation
-------- ---- ------ ----- -------- ------------
<S> <C> <C> <C> <C> <C>
Kyle R. Miller, 1997 $199,559 $85,000 295,000 $ 19,147
President and 1996 180,000 45,000 100,000 71,924/(1)/
Chief Executive Officer 1995 180,000 - 31,250 7,738
</TABLE>
-6-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Bill I. Pennington, 1997 148,236 60,000 185,000 3,958
Vice President and 1996 137,500 34,375 50,000 2,043
Chief Financial Officer 1995 137,500 - - 1,884
John E. Dyer, 1997 148,187 60,000 220,000 1,681
Vice President and 1996 109,400 34,375 50,000 4,609
Chief Operating Officer 1995 80,600 - 37,500 2,265
Michael J. Stevens, 1997 90,430 25,000 100,000 3,459
Secretary and 1996 73,507 5,000 12,240 1,187
Treasurer 1995 61,155 - 5,200 550
</TABLE>
- ------------------
(1) This amount includes a $50,000 payment for Mr. Miller canceling his old
employment agreement and entering into a new one.
- ------------------
OPTION/WARRANT/SAR GRANTS TABLE
(OPTION/WARRANT/SAR GRANTS IN LAST FISCAL YEAR)
Number of
Securities Percent of
Underlying Total
Options or Option/Warrant
Warrants Granted to Exercise or
Granted Employees in Base Price Expiration
Name # Fiscal Year ($/Sh) Date
---- ---------- -------------- ----------- ----------
Kyle R. Miller 70,000 7.7% $10.00 1/23/02
112,500 12.4% 11.00 11/10/07
112,500* 12.4% 16.00 11/10/07
Bill I. Pennington 60,000 6.6% 10.00 1/23/02
62,500 6.9% 11.00 11/10/07
62,500* 6.9% 16.00 11/10/07
John E. Dyer 70,000 7.7% 10.00 1/23/02
75,000 8.2% 11.00 11/10/07
75,000* 8.2% 16.00 11/10/07
Michael J. Stevens 50,000 5.5% 11.00 11/10/07
50,000* 5.5% 16.00 11/10/07
- ------------------
* These options vest one-third on each of November 10, 2001, 2002 and 2003 if
the optionee continues to be an employee of the Company and the Company has
net earnings, before interest, income taxes, depreciation and amortization,
of at least $40 million for the twelve months ended on the October 31
immediately preceding each such vesting date.
- ------------------
-7-
<PAGE>
AGGREGATED OPTION/WARRANT/SAR EXERCISES IN LAST FISCAL
YEAR AND FY-END OPTION/WARRANT/SAR VALUES
<TABLE>
<CAPTION>
Value of
Unexercised
Number of Securities In-the-Money
Shares Underlying Unexercised Options/Warrants/
Acquired Value Options/Warrants/SARs SARs at 1997
on Exercise Realized at 1997 FY-End (#) FY-End ($)*
Name # $ Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Kyle R. Miller None None 358,911/260,000 $1,748,488/$8,750
Bill I. Pennington 20,000 115,950 80,000/155,000 206,500/7,500
John E. Dyer 30,000 115,550 95,500/185,000 279,749/8,750
Michael J. Stevens 8,200 46,183 12,240/100,000 43,591/ -
</TABLE>
- --------------------
* Value is based on the closing bid price of $10.25 per share on December
31, 1997.
- --------------------
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), and on May 1, 1997, Michael J. Stevens entered into a one-
year employment agreement with the Company to serve as Vice President, Secretary
and Treasurer. Under their respective employment agreements, Messrs. Miller,
Pennington, Dyer and Stevens will receive an annual base salary of $250,000,
$175,000, $175,000 and $100,000, 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, to pay Messrs. Pennington, Dyer and Stevens 100% of their
respective base salaries and bonuses paid during the 12 months preceding
termination. 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.
PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the ownership
of Common Stock and Series C Preferred Stock as of March 31, 1998, by each
stockholder known to the Company to own beneficially more than five
-8-
<PAGE>
percent of the outstanding Common Stock or Series C Preferred Stock, each
current director and nominee, and all executive officers, directors and nominees
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 C Preferred Common Stock
------------------ -------------------------------------------
Stock
-----
Number of
Shares-
Assuming
Conversion of
Series C
Number Number Preferred
Name and Address of of Stock by
of Beneficial Owner Shares Percent Shares Percent Holder Percent
------------------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Randall D. Smith/(1)/ - - 5,111,679 61.1 5,111,679 55.3
Pengo Securities Corp.
885 Third Ave., 34th Floor
New York, New York 10022
Citicorp Venture Capital Ltd./(2)/ - - 544,078 6.5 544,078 5.9
Citicorp
Citibank, N.A.
399 Park Ave.
Floor 14/Zone 4
New York, New York 10043
Enron Corp./(3)/ 100,000 100.0 - - 891,096 9.6
Joint Energy Development
Investments II Limited
Partnership
1400 Smith
Houston, Texas 77002
Kyle R. Miller/(4)/ - - 642,254 7.2 642,254 6.5
410 17th Street
Suite 700
Denver, Colorado 80202
Arthur J. Pasmas/(1)(4)/ - - 234,353 2.8 234,353 2.5
5858 Westheimer, Suite 400
Houston, Texas 77057
Thomas J. Trzanowski/(1)/ - - 10,000 * 10,000 *
1010 Lamar Street, Suite 550
Houston, Texas 77002
Paul C. Schorr IV/(2)/ - - 6,000 * 6,000 *
339 Park Avenue
14th Floor, Zone 4
New York, New York 10043
Gregory S. Anderson - - - - - -
One Arizona Center
400 E. Van Buren
Suite 750
Phoenix, Arizona 85994
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
Series C Preferred Common Stock
------------------ ------------------------------------------------
Stock
-----
Number of
Shares-
Assuming
Conversion of
Series C
Number Number Preferred
Name and Address of of Stock by
of Beneficial Owner Shares Percent Shares Percent Holder Percent
------------------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Bruce M. Schnelwar/(1)/ - - - - - -
885 Third Avenue, 34th Floor
New York, New York 10022
John E. Dyer/(4)/ - - 338,013 3.9 338,013 3.5
410 17th Street
Suite 700
Denver, Colorado 80202
Bill I. Pennington/(4)/ - - 303,676 3.5 303,676 3.2
410 17th Street
Suite 700
Denver, Colorado 80202
Michael J. Stevens/(4)/ - - 112,240 1.3 112,240 1.2
410 17th Street
Suite 700
Denver, Colorado 80202
All Executive Officers and - - 1,646,536 17.1 1,646,536 15.7
Directors as a Group
(9 persons)/(4)/
</TABLE>
- -----------------
* Less than 1%
(1) Pengo Securities Corp. ("Pengo"), an affiliate of Smith Management LLC,
owns of record and beneficially 4,129,269 shares of Common Stock. Randall
D. Smith owns of record and beneficially 982,410 shares and may also be
deemed to beneficially own the shares owned of record by Pengo. Pengo and
Randall D. Smith disclaim beneficial ownership of 163,735 shares of Common
Stock owned by Jeffrey A. Smith and 163,735 shares of Common Stock owned by
John W. Adams, both of whom are officers and directors of Pengo and Smith
Management LLC, and the shares owned by Jeffrey A. Smith and John W. Adams
are not included in the table of shares owned by Randall D. Smith and
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 Bruce M. Schnelwar, Vice President
and Senior Vice President and Chief Financial Officer, respectively, of
Smith Management LLC, are such nominees. Thomas J. Trzanowski is the
President of two affiliates of Smith Management LLC. Messrs. Pasmas,
Schnelwar and Trzanowski disclaim beneficial ownership of the shares of the
Company's Common Stock owned by Pengo and Pengo disclaims beneficial
ownership of the shares of the Company's Common Stock owned by Mr. Pasmas,
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 C.
-10-
<PAGE>
Schorr IV 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) Joint Energy Development Investments II Limited Partnership ("JEDI") is the
record and beneficial owner of the shares, which may also be deemed to be
beneficially owned by Enron Corp. JEDI has the right, at its election, to
appoint one member to the Board, but has not elected to exercise this
right.
(4) Includes shares issuable under outstanding stock options and warrants
granted to Messrs. Miller, Pasmas, Trzanowski, Schorr, Pennington, Dyer,
Stevens, and all executive officers and directors as a group for 618,911,
9,000, 6,000, 6,000, 235,000, 280,500, 112,240 and 1,267,651 shares,
respectively; of which options and warrants for 260,000, 155,000, 185,000
and 100,000 shares granted to Messrs. Miller, Pennington, Dyer and Stevens,
respectively, have not vested and will not vest within sixty days from the
date of this proxy statement.
- -----------------
STOCKHOLDER PROPOSALS FOR THE
1999 ANNUAL MEETING OF STOCKHOLDERS
Proposals of stockholders must be received by the Company at its principal
executive office at 410 17th Street, Suite 700, Denver, Colorado 80202, by
January 31, 1999 for inclusion in the Company's proxy statement and form of
proxy relating to the 1999 annual meeting of stockholders.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP served as the Company's principal independent public
accountants for 1997 and 1996, and has been selected by the Company to serve in
1998. Representatives of Arthur Andersen LLP are expected to be present at the
1998 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.
-11-
<PAGE>
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
April 30, 1998
-12-
<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 June 30, 1998, 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, Thomas J. Trzanowski, Paul C. Schorr
IV, Gregory S. Anderson and Bruce M. Schnelwar
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the line provided below.)
-----------------------------------------------------------------------
2. 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.
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 _________________ ____, 1998
-------------------------------------
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 C PREFERRED STOCK PROXY
INLAND RESOURCES INC.
THIS SERIES C 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 June 30, 1998, 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 C 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, Thomas J. Trzanowski, Paul C. Schorr
IV, Gregory S. Anderson and Bruce M. Schnelwar
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the line provided below.)
-----------------------------------------------------------------------
2. 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.
The undersigned hereby revokes any proxy heretofore given to vote or act
with respect to the Series C 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 ____________________ ___, 1998
-----------------------------------------
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.
