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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period ___ to ___
Commission File Number 0-16487
-------------
INLAND RESOURCES INC.
(Exact Name of Registrant as Specified in its Charter)
WASHINGTON 91-1307042
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
410 17th Street
Suite 700
Denver, Colorado
(303) 893-0102
(Address of Principal Executive Offices) 80202
(Zip Code)
Issuer's telephone number, including area code: (303) 893-0102
-------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. YES X NO ___
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-K contained herein, and none will be contained, to the
best of the Registrant's knowledge, in any amendment to the Form 10-K filed by
the Registrant for the fiscal year ended December 31, 1998. [X]
At March 31, 1999, the Registrant had outstanding 8,529,765 shares of
par value $.001 common stock. The aggregate value on such date of the voting
stock of the Registrant held by non-affiliates was an estimated $5,480,000.
The Registrant hereby amends the Form 10-K filed by the Registrant for
the fiscal year ended December 31, 1998 to incorporate the information required
by Part III of Form 10-K.
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TABLE OF CONTENTS
<TABLE>
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PAGE
PART III.
<S> <C> <C>
Item 10. Directors and Executive Officers of the Registrant...................................................1
Item 11. Executive Compensation...............................................................................3
Item 12. Security Ownership of Certain Beneficial Owners and Management.......................................6
Item 13. Certain Relationships and Related Transactions.......................................................8
</TABLE>
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PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
Kyle R. Miller, age 46, has served as Co-Chairman of the Board and
Co-Chief Executive Officer of the Company since November 20, 1998. From
December 10, 1992 to November 20, 1998, Mr. Miller served as President and
Chief Executive Officer of the Company. 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, age 64, has served as Co-Chairman of the Board and
Co-Chief Executive Officer of the Company since November 20, 1998. He has been
a Director of the Company since 1994. Mr. Pasmas has been Vice President of
Smith Management LLC ("Smith Management") (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 in 1987. He currently manages various oil and gas investments for
Smith Management from offices in Houston, Texas, and also serves as a director
of Hawaiian Airlines, Inc.
Thomas J. Trzanowski, age 60, has served as a Director of the Company
since 1996. 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. Mr. Trzanowski also served as Treasurer of various affiliates
of Smith Management from November 1983 through December 1994. Mr. Trzanowski
has served as a director of Hawaiian Airlines, Inc. since February, 1998.
Gregory S. Anderson, age 42, 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 Sundance Venture Partners, L.P. II, a venture
capital firm located in Phoenix, Arizona. Prior thereto, he served for over
eight years as Vice President and General Manager of El Dorado Investment
Company, a venture capital firm located in Phoenix, Arizona. Mr. Anderson also
serves as a director of Valley Commerce Bank.
Bruce M. Schnelwar, age 58, has served as a Director of the Company
since February 17, 1998. Since August 1994, he has served as Senior Vice
President and Chief Financial Officer of Smith Management (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.
EXECUTIVE OFFICERS
The following table sets forth certain information as of April 23,
1999 regarding the executive officers of the Company. Each executive officer
named in the following table has been elected to serve until his successor is
duly appointed or elected or until his earlier removal or resignation from
office. No arrangement or understanding exists between any executive officer of
the Company and any other person pursuant to which he was or is to be selected
as an officer.
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<TABLE>
<CAPTION>
SERVED AS EXECUTIVE
NAME AGE POSITION OFFICER SINCE
<S> <C> <C> <C>
Arthur J. Pasmas 64 Co-Chairman and Co-Chief Executive 1998
Officer
Kyle R. Miller 46 Co-Chairman and Co-Chief Executive 1992
Officer
John E. Dyer 36 President and Chief Operating Officer 1993
Bill I. Pennington 47 Vice President and Chief Financial 1994
Officer
Michael J. Stevens 33 Vice President, Secretary and 1993
Treasurer
William T. War 56 Vice President 1998
</TABLE>
*Biographical information on Messrs. Pasmas and Miller is set forth
previously in this Annual Report.
John E. Dyer. Mr. Dyer has been Chief Geologist of the Company since
March 1, 1993, President since November 20, 1998, 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.
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 the Company'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.
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, he was a manager
with the accounting firm of Coopers & Lybrand in Minneapolis, Minnesota and a
senior internal auditor at Diversified Energy, Inc., a publicly traded oil and
gas company in Minneapolis, Minnesota. Mr. Stevens is a certified public
accountant.
William T. War. Mr. War has served as Vice President of the Company
since October 5, 1998. From June, 1990 until his association with the Company,
Mr. War was Project Manager for Louisiana Land & Exploration/Burlington
Resource's Lost Cabin Gas Plant. From October 1978 to November 1987, he founded
and served as President of Fuel Chemicals Incorporated and co-founded and
served as Executive Vice President of JN Exploration and Production and JN
Incorporated/Nielson International. Prior thereto since 1966, he served in
engineering, management and executive positions with Shell, Union Carbide, Dow
Chemical and Husky Oil.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
beneficially own more than 10% of the Common Stock to file reports of ownership
and changes in ownership with the Securities and Exchange Commission (the
"Commission").
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
Exchange Act or upon written representations received by the
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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 Commission any Form 3, 4 or 5 during 1998.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned by the
Company's Co-Chief Executive Officers and each of its three other most highly
compensated executive officers for the year ended December 31, 1998
(collectively, the "Named Officers") in salary and bonus for services rendered
in all capacities to the Company for the fiscal years ended December 31, 1998,
1997 and 1996:
<TABLE>
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LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------- ---------------
SECURITIES
UNDERLYING
OTHER ANNUAL OPTIONS OR
NAME/PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION WARRANTS
- -------------------------------------- ------- ------------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Arthur J. Pasmas, 1998 -- -- -- --
Co-Chief Executive Officer
Kyle R. Miller, 1998 $250,000 -- $36,373(1) --
Co-Chief Executive Officer 1997 $199,559 $85,000 $19,147 295,000
1996 $180,000 $45,000 $71,924(2) 100,000
John E. Dyer, 1998 $175,000 -- $21,934(3) --
President and 1997 $148,187 $60,000 $ 1,681 220,000
Chief Operating Officer 1996 $109,400 $34,375 $ 4,609 50,000
Bill I. Pennington, 1998 $175,000 -- $21,705(4) --
Vice President and 1997 $148,236 $60,000 $ 3,958 185,000
Chief Financial Officer 1996 $137,500 $34,375 $ 2,043 50,000
Michael J. Stevens, 1998 $100,000 -- $13,933(5) --
Vice President, Secretary and 1997 $ 90,430 $25,000 $ 3,459 100,000
Treasurer 1996 $ 73,507 $ 5,000 $ 1,187 12,240
</TABLE>
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(1) Vacation compensation in 1998 for Mr. Miller totaled $15,623 and 401(k)
matching compensation totaled $8,750. In addition, Mr. Miller received
$12,000 compensation with respect to his automobile.
(2) Includes a $50,000 payment for Mr. Miller canceling his prior employment
agreement and entering into a new one.
(3) Vacation compensation in 1998 for Mr. Dyer totaled $13,126 and 401(k)
matching compensation totaled $8,808.
(4) Vacation compensation in 1998 for Mr. Pennington totaled $12,453 and 401(k)
matching compensation totaled $9,252.
(5) Vacation compensation in 1998 for Mr. Stevens totaled $7,933 and 401(k)
matching compensation totaled $6,000.
COMPENSATION OF DIRECTORS
Directors of the Company are entitled to reimbursement for their
reasonable expenses in connection with their travel to and from, and attendance
at, meetings of the Board of Directors or committees thereof. Directors of the
Company who are not employees are paid an annual fee of $12,000 plus $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. 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 of Directors may also grant discretionary options to
directors, in addition to the foregoing options.
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OPTION / WARRANT / SAR GRANTS
The Company granted no options, warrants or SAR grants during 1998.
OPTION / WARRANT / SAR EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth certain information regarding option
exercises and the value of the outstanding options and warrants to purchase
Common Stock and SARS held by the Named Officers at December 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
NUMBER OF FISCAL YEAR END FISCAL YEAR END(1)
SHARES --------------------------------------------- ------------------------------
ACQUIRED ON REALIZED
NAME EXERCISE VALUE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ------------------------------ -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Arthur J. Pasmas -- -- 15,000 -- -- --
Kyle R. Miller -- -- 396,411 222,500 -- --
John E. Dyer -- -- 120,500 160,000 -- --
Bill I. Pennington -- -- 100,833 134,167 -- --
Michael J. Stevens -- -- 28,907 83,333 -- --
</TABLE>
- ---------------------
(1) Value is based on the closing bid price of $1.19 per share on December 31,
1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Arthur J. Pasmas served as Chairman of the Compensation Committee of
Inland's Board of Directors and also served as Co-Chief Executive Officer. Mr.
Pasmas received no compensation for his duties as Co-Chief Executive Officer.
REPORT FROM THE COMPENSATION COMMITTEE REGARDING EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors determines the
compensation of the Named Officers. The Compensation Committee has furnished the
following report on executive compensation in connection with this Annual
Report.
Compensation Philosophy. As members of the Compensation Committee, it
is our duty to administer the executive compensation program for the Company.
The Compensation Committee is responsible for establishing appropriate
compensation goals for the executive officers of the Company, evaluating the
performance of such executive officers in meeting such goals and making
recommendations to the Board of Directors with regard to executive compensation.
The Company's compensation philosophy is to ensure that executive compensation
be directly linked to continuous improvements in corporate performance,
achievement of specific operations, financial and strategic objectives and
increases in stockholder value. The Compensation Committee regularly reviews the
compensation packages of the Company's executive officers, taking into account
factors which it considers relevant, such as business conditions within and
outside the industry, the Company's financial performance, the market
compensation for executives of similar background and experience and the
performance of the executive officer under consideration. The particular
elements of the Company's compensation programs for executive officers are
described below.
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Compensation Structure. The executive base compensation for the Named
Officers is intended to be competitive with that paid in comparably situated
industries, taking into account the scope of responsibilities and internal
relationships. The goals of the Compensation Committee in establishing the
Company's executive compensation program are:
(1) To fairly compensate the executive officers of the Company for
their contributions to the Company's short-term and long-term
performance. The elements of the Company's executive compensation
program are (a) annual base salaries, (b) annual bonuses and (c)
equity incentives.
(2) To allow the Company to attract, motivate and retain the
management personnel necessary to the Company's success by
providing an executive compensation program comparable to that
offered by companies with which the Company competes for
management personnel. Individual's base salaries are determined
by the Compensation Committee based on the scope of the
executive's responsibilities, a subjective evaluation of the
executive's performance and the length of time the executive has
been in the position.
Executive Officer Employment Agreements. Each of the Named Officers,
other than Arthur J. Pasmas, is party to an employment agreement, as described
below, which affects the amount of his compensation.
Executive Compensation Deductibility. It is the Company's intent that
amounts paid pursuant to the Company's compensation plans will generally be
deductible compensation expenses. The Compensation Committee does not currently
anticipate that the amount of compensation paid to the Named Officers will
exceed the amounts specified as deductible pursuant to Section 162(m) of the
Internal Revenue Code of 1986, as amended.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Arthur J. Pasmas, Chairman
Bruce M. Schnelwar
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. On September 8, 1998, William T. War entered into an
employment agreement to serve as Vice President. Under their respective
employment agreements, Messrs. Miller, Pennington, Dyer, Stevens and War will
receive an annual base salary of $250,000, $175,000, $175,000, $100,000 and
$150,000, 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 and to pay Mr. War 50%
of his base salary at 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. The
employment agreements of Messrs. Pennington, Dyer and Stevens contain change of
control provisions which have the effect of permitting them to terminate their
agreements and receive 12 months salary and bonus upon a change of control of
Inland.
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PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total stockholder
returns for the Common Stock of Inland, the Nasdaq U.S. Composite Index and the
composite peer group over the last five Inland fiscal years.
COMPARISON OF CUMULATIVE STOCKHOLDER TOTAL RETURN (1)
[GRAPHIC]
AMONG THE COMPANY, NASDAQ U.S. COMPOSITE INDEX AND COMPOSITE PEER GROUP
<TABLE>
<CAPTION>
December 31, December 30, December 29, December 31, December 31, December 31,
------------ ------------ ------------ ------------ ------------ ------------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Inland Resources Inc........... 100 100 150 268 328 42
Nasdaq U.S. Composite Index.... 100 98 138 170 208 293
Peer Group (2)................. 100 83 86 162 178 75
</TABLE>
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(1) Total return assuming reinvestment of dividends. Assumes $100 invested on
December 31, 1993 in Common Stock of Inland, the Nasdaq Composite Index and
the composite peer group.
(2) The Company maintains as its peer group the following companies: Abraxas
Petroleum Corporation, Bellwether Exploration Company, Coho Energy, Inc.,
Credo Petroleum Corporation, Equity Oil Company, The Exploration Company,
Mallon Resources Corporation, Parallel Petroleum Corporation, Prima Energy
Corporation and Southern Mineral Corporation. This peer group was selected
based on market capitalization, total assets and general geographical area.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1999, the beneficial
ownership of the outstanding Common Stock by (i) each person who is known to the
Company to beneficially own more than 5% of the outstanding Common Stock, (ii)
each director and director nominee of the Company, (iii) each of the Named
Officers and (iv) all executive officers and directors of the Company as a
group. Unless otherwise indicated, the persons listed in the table below have
sole voting and investment powers with respect to the stocks indicated.
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<TABLE>
<CAPTION>
SERIES C PREFERRED STOCK COMMON STOCK
------------------------ ------------------------------------------------------
SHARES
ASSUMING
CONVERSION
NAME AND ADDRESS OF SERIES C
OF BENEFICIAL OWNER SHARES PERCENT SHARES PERCENT PREFERRED PERCENT
- ---------------------------- ----------- ---------- ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Randall D. Smith (1) -- -- 5,186,399 53.73% 5,186,399 48.65%
Pengo Securities Corp.
885 Third Ave., 34th Floor
New York, New York 10022
Citicorp Venture Capital Ltd. -- -- 544,078 5.64% 544,078 5.10%
Citicorp
Citibank, N.A.
399 Park Ave.
Floor 14/Zone 4
New York, New York 10043
Enron Corp. (2) 100,000 100% -- -- 1,007,775 9.45%
Joint Energy Development
Investments II Limited
Partnership
1400 Smith
Houston, Texas 77002
Kyle R. Miller (3) -- -- 431,411 4.47% 431,411 4.05%
410 17th Street
Suite 700
Denver, Colorado 80202
Arthur J. Pasmas (1) (3) -- -- 240,453 2.49% 240,453 2.26%
5858 Westheimer, Suite 550
Houston, Texas 77057
Thomas J. Trzanowski (1) (3) -- -- 16,000 * 16,000 *
1010 Lamar Street, Suite 550
Houston, Texas 77002
Gregory S. Anderson (3) -- -- 6,000 * 6,000 *
5030 East Sunrise Dr., Suite 200
Phoenix, Arizona 85044
Bruce M. Schnelwar (1) (3) -- -- 6,000 * 6,000 *
885 Third Avenue, 34th Floor
New York, New York 10022
John E. Dyer (3) -- -- 213,013 2.21% 213,013 2.00%
410 17th Street, Suite 700
Denver, Colorado 80202
Bill I. Pennington (3) -- -- 199,509 2.07% 199,509 1.87%
410 17th Street, Suite 700
Denver Colorado 80202
</TABLE>
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<TABLE>
<CAPTION>
SERIES C PREFERRED STOCK COMMON STOCK
------------------------ ------------------------------------------------------
SHARES
ASSUMING
CONVERSION
NAME AND ADDRESS OF SERIES C
OF BENEFICIAL OWNER SHARES PERCENT SHARES PERCENT PREFERRED PERCENT
- ---------------------------- ----------- ---------- ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Stevens (3) -- -- 28,907 * 28,907 *
410 17th Street, Suite 700
Denver Colorado 80202
All Executive Officers and -- -- 1,141,293 11.82% 1,141,293 10.71%
Directors as a Group (3)
(9 persons)
</TABLE>
- ------------------------
* Less than 1%.
(1) Pengo Securities Corp. ("Pengo"), an affiliate of Smith Management, owns of
record and beneficially 4,051,769 shares of Common Stock. Smith Energy
Partnership ("SEP"), an affiliate of Smith Management, owns of record and
beneficially 152,220 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 and SEP. 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, 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,
are such nominees. Thomas J. Trzanowski is the President of two affiliates
of Smith Management. 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) 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.
(3) Includes shares issuable under outstanding stock options and warrants
granted to Messrs. Miller, Pasmas, Trzanowski, Schnelwar, Anderson, Dyer,
Pennington, Stevens and all executive officers and directors as a group for
431,911, 15,000, 12,000, 6,000, 6,000, 155,500, 130,833, 28,907 and 786,151
shares, respectively
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a summary of certain agreements, arrangements and
transactions between or among the Company, its subsidiaries and/or certain
related parties.
Registration Rights Agreements. Pengo Securities Corp. ("Pengo") has
entered into two Registration Rights Agreements 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. Arthur J. Pasmas is
Co-Chairman of the Board and Co-Chief Executive Officer of Inland. Pengo owns of
record and beneficially 4,051,769 shares of Common Stock. Randall D. Smith is a
significant beneficial equity holder of both Inland and Pengo.
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.
Farmout Agreement. The Company entered into a Farmout Agreement with
Smith Management effective June 1, 1998. As of December 31, 1998, SEP, an
affiliate of Smith Management, received 152,220 shares of Common Stock as
payment of proceeds under the Farmout Agreement. Randall D. Smith is a
significant beneficial equity holder of both Inland, SEP and Smith Management.
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Effective November 1, 1998, an Amendment to the Farmout Agreement was
executed that suspended future drilling rights under the Farmout Agreement until
such time as both the Company, Smith Management and the Company's senior lenders
agree to recommence such rights. In addition, a provision was added that gives
Smith Management the option to receive cash rather than common stock if the
average stock price was calculated at less than $3.00 per share, such cash only
to be paid if the Company's senior lenders agree to such payment. The Farmout
Agreement provides that Smith Management will reconvey all drillsites to the
Company once Smith Management has recovered from production an amount equal to
100% of its expenditures, including management fees and production taxes, plus
an additional sum equal to 18% per annum on such expended sums.
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SIGNATURE
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Company has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
INLAND RESOURCES INC.
April 28, 1999
By: /s/ KYLE R. MILLER
-----------------------------------
Kyle R. Miller
Co-Chairman of the Board and Chief
Executive Officer
