INTERLINE RESOURCES CORPORATION
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 4, 1998
TO THE SHAREHOLDERS OF INTERLINE RESOURCES CORPORATION
The Annual Meeting of the Shareholders of Interline Resources Corporation
(the "Company") will be held at 160 West Canyon Crest Road, Alpine, Utah, on
September 4, 1998, at 2:00 p.m. local time, for the following purposes:
1. To elect three (3) directors each to serve until the 1999 Annual
Meeting of Shareholders or until their successors shall have been duly
elected and qualified.
2. To transact such other business as may come before the meeting or any
adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on July 23, 1998 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting and any adjournments thereof.
By Order of the Board of Directors
/s/ Michael R. Williams
----------------------------------
Chief Executive Officer
Alpine, Utah
July 29, 1998
All shareholders are cordially invited to attend the meeting in person. However,
to assure your representation at the meeting, your are urged to sign and return
the enclosed proxy as promptly as possible in the envelope enclosed for that
purpose. Any shareholder attending the meeting may vote in person even if he or
she has returned a proxy.
<PAGE>
INTERLINE RESOURCES CORPORATION
160 West Canyon Crest Road
Alpine, Utah 84004
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be held September 4, 1998
The Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Interline Resources Corporation, a Utah
corporation, (the "Company") to be voted at the Annual Meeting of Shareholders
to be held September 4, 1998 and at any adjournment(s) thereof. The Annual
Meeting of Shareholders (the "Meeting") will be held at the Company's offices at
160 West Canyon Crest Road, Alpine, Utah 84004 at 2:00 p.m. local time. The
Proxy Statement, the Notice of Annual Meeting of Shareholders and the Proxy were
first sent or given to the Company's shareholders on or about July 29, 1998.
The sole matter to come before the Meeting is the election of three (3)
directors to the Board of Directors to serve until the 1999 Annul Meeting of
Shareholders and thereafter until their successors are elected and are
qualified.
RECORD DATE AND VOTING SECURITIES
The securities of the Company entitled to vote at the Meeting consist of
shares of the Company's common stock, $.005 par value. Only shareholders of
record at the closing of business on July 23, 1998, the record date for the
Meeting, well be entitled to notice of and to vote at the Meeting. On the record
date the Company had outstanding 14,074,160 shares of common stock. See
"Principal Shareholders and Security Ownership of Management" for information
concerning beneficial ownership of the Company's stock.
Assuming a quorum is present, the three (3) nominees receiving the
greatest number of votes cast by the holders of the common stock will be elected
as directors. There will be no cumulative voting in the election of directors.
Abstentions are treated as present and entitled to vote at the Meeting.
Therefore, abstentions well be counted in determining whether a quorum is
present and will have the effect of a vote against a matter. A broker non-vote
on a matter (i.e., share held by brokers) requiring a minimum number of votes
for approval (but not the election of directors) or nominees as to which
instructions have not been received from the beneficial owners or persons
entitled to voted and as to which the broker or nominee does not have
discretionary power to vote on a particular matter)
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is considered not entitled to vote on that matter and, thus, will not be counted
in determining whether a quorum is present or whether a matter requiring
approval of a majority of the shares present and entitled to vote has been
approved.
All Proxies received pursuant to this solicitation will be voted at the
Meeting and at any adjournments thereof as indicated in the Proxy. If no
instructions are given, the persons named in the Proxy solicited by the Board of
Directors of the Company intend to vote for the nominees for election as
directors of the Company listed below.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the meeting and voting in person
GENERAL INFORMATION ABOUT THE COMPANY
The Company is a Utah corporation with its principal and executive offices
located at 160 West Canyon Crest Road, Utah 84004 (801) 756-3031. Interline
Resources Corporation (the "Company"), a Utah corporation, is engaged in two
areas of business, each operating as separate subsidiaries: Interline
Hydrocarbon Inc., a Wyoming corporation, which commercializes the Company's
patented used oil refining technology; and Interline Energy Services, Inc., a
Wyoming corporation, which manages the Company's oil and gas operations located
in Wyoming.
The Company has invested substantial resources commercializing an used oil
refining technology and has signed license agreements with companies in England,
South Korea, Dubia, Australia and Spain. The Company's first used oil refinery
was constructed in Salt Lake City, Utah in 1996. The Company's main oil and gas
operations consist of natural gas gathering, natural gas processing and oil well
production.
On September 26, 1997, the Company filed a Petition for Reorganization
under Chapter 11 (the "Petition") of the United States Bankruptcy Code. The
Company is continuing with its operations as a debtor-in-possession under the
Bankruptcy Code. The Company's subsidiaries did not join the Company in the
Petition and are not directly involved in the Bankruptcy Reorganization
Proceeding, however, because the Company operates through its subsidiaries, the
bankruptcy reorganization will substantially impact the subsidiaries. During the
time the Company is in the Bankruptcy Proceeding, it will be subject to the
jurisdiction of the U.S. Bankruptcy Court.
On June 18, 1998, the Company filed a Plan of Reorganization and
Disclosure Statement to the Plan of Reorganization with the United States
Bankruptcy Court for the District of Utah,
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Central Division. On July 14, 1998, the Company's Plan of Reorganization and
Disclosure Statement to the Plan of Reorganization was approved and circulation
thereof authorized by the United States Bankruptcy Court for the District of
Utah, Central Division. A hearing on confirmation of the Plan of Reorganization
and Disclosure Statement to the Plan of Reorganization is schedule with the
United States Bankruptcy Court for the District of Utah, Central Division, for
August 27, 1998.
PRINCIPAL SHAREHOLDERS AND
SECURITY OWNERSHIP OF MANAGMENT
The following table sets forth information regarding shares of the
Company's common stock owned beneficially as of July 23, 1998 by each director
and nominee for director, each of the executive officers, all officers and
directors as a group and each person known by the Comp. any to beneficially own
5% or more of the outstanding shares of the Company's common stock.
Name and Address Percentage
of Beneficial Owner Shares Owned(1)
Owned
Michael R. Williams(2)(3) 3,130,506 21%
160 W. Canyon Crest Rd.
Alpine, UT 84004
Mike Mcgee(2)(6) 15,000 0%
4010 South Poplar Street
Casper, Wyoming 82601
Maurice D. Sabbah(4) 2,120,416 14.5%
c/o Fortress RE
262 East Morehead St.
PO Box 700
Burlington, NC 27216
Mark W. Holland(2)(5) 232,220 1.6%
160 W. Canyon Crest Rd.
Alpine, UT 84004
All Officers and Directors 3,377,726 23%
as a Group (3 persons)
Total Shares Issued and 14,608,826 100%
Outstanding(1)
(1)As of July 23, 1998 there were 14,074,160 shares of the Company's
common stock issued and outstanding. Under the rules of the Securities and
Exchange Commission and for purposes of the above set forth chart, all
shares issuable to the above referenced persons upon the exercise of
options and warrants and conversion rights are deemed to be issued and
outstanding. A total of 534,666 shares are issuable upon
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currently exercisable options and debentures owned by the persons set
forth in the table above. Therefore, for purposes of the above set forth
chart, there are deemed to be 14,608,826 shares issued and outstanding.
(2) These individuals are the officers and directors of the Company.
(3) Mr. Williams is a Director and the Company's Chief Executive Officer.
The number of shares indicated as owned by Mr. Williams includes 2,628,056
beneficially owned, 104,450 shares owned by his minor children and 398,000
shares issuable upon the exercise of currently exercisable options.
(4) Includes 2,052,666 shares which are owned directly by Mr. Sabbah and
67,750 shares which may be issued upon the conversion of outstanding debt
instrument. The number of shares indicated excludes 29,000 shares owned by
Mr. Sabbah's daughter and 25,000 shares owned by Mr. Sabbah's wife, as to
both of which Mr. Sabbah disclaims beneficial ownership, and any shares
issuable upon conversion of an aggregate of $5,000,000 of debt instruments
issued by the Company which are convertible into shares of common stock
because of defaults on those debt instruments.
(5) Mr. Holland is Director and Chief Financial Officer of the Company.
The number of shares indicated as owned by Mr. Holland includes 178,054
directly owned by Mr. Holland and 54,166 shares which may be issued upon
the exercise of a currently exercisable stock option.
(6) Mr. Megee is a Director and Executive Vice President of the Company.
The number of shares indicated as owned by Mr. Megee is 15,000 shares
which may be issued upon the exercise of a currently exercisable stock
option.
PROPOSAL 1: ELECTION OF DIRECTORS
Nominees
A board of three (3) directors is to be elected as the Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's nominees named below. In the event that any nominee of the
Company is unable or declines to serve as a director at the time of the Meeting,
the proxies will be voted for any nominee who shall be designated by the present
Board of Directors to fill the vacancy. It is not expected that any nominee will
be unable or will decline to serve as a director. The term of office of each
person elected as a director will continue until the next Annual Meeting of
Shareholders or until a successor has been elected and qualified.
The following table sets forth for each nominee for election as a director
his name, all position with the Corporation held by him, his principal
occupation, his age and the year in which he first became a director of the
Corporation.
Name Age Position
Michael R. Williams 46 Director/Chairman/CEO/President
Mark W. Holland 41 Director/Chief Financial Officer
Michael A. Megee 51 Director
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Background information concerning the Company's officers and directors is
as follows:
Michael R. Williams. Mr. Williams has been an officer and director of
the Company since October 1990. He was also president, founder and majority
owner of Interline Natural Gas, a privately held company acquired by the
Company. Mr. Williams received his Bachelor of Arts degree in Business
Management from Brigham Young University in 1975.
Mark W. Holland. Mr. Holland has been employed as a Controller for the
Company since 1989 and was appointed Chief Financial Officer in 1994. On May
16, 1997 Mr. Holland was appointed as a Director of the Company. From 1983
to 1989 Mr. Holland was employed by Savage Industries, Inc. as an accountant
and as a Controller for the Ideal Corporation and Cornelius Development
Corporation subsidiaries. Mr. Holland received his Certified Public
Accountant certification in 1989. Mr. Holland received his Bachelor of
Science degree in Accounting and Business Administration from Southern Utah
State College in 1983.
Michael A. Megee. Mr. Megee has been employed as President of the oil
and gas operations since joining the Company in 1994. On September 18, 1997
Mr. Megee was appointed as a Director and Vice President of the Company. Mr.
Megee has 25 years experience in the energy industry, with emphasis on
business development, economic analysis, and management of oil and gas
pipelines, chemicals, coal, and gas processing. Mr. Megee has an accounting
degree from Lamar University in Texas, and was previously employed with Gulf
Oil and Coastal Corporation prior to joining the Company.
Committees and Meetings
The Board of Directors held four meetings during the 1997 fiscal year.
Mr. Williams and Mr. Holland were directors of the Company during all of the
meetings during the fiscal year and the number of Board Meetings attended by
each of them is as follow: Michael R. Williams - four; Mark W. Holland -
four. Mr. Yeoman was director for three meeting during the fiscal year and
attended three meetings. Mr. McGee was director for one meeting during the
fiscal year and attended that meeting
The Board of Directors presently has no standing audit, compensation or
nominating committees.
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<PAGE>
Executive Compensation
The following table sets forth the aggregate compensation paid by the
Company for services rendered during the last three years to the Company's Chief
Executive Officer and to the Company's most highly compensated executive
officers other than the CEO, whose annual salary and bonus exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------
Long-Term Compensation
-------------------------
Annual Compensation Awards Payouts
-------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
All
Other Other
Name and Annual Restrict Options/ LTIP Compen-
Principal ($) ($) Compen- Stock SAR's Payouts sation
Position Year Salary Bonus sation($) Awards($) (#) ($) ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael R. 1997 $156,216 $-0- $-0- $-0- 7,500(1) $-0- $-0-
Williams, 1996 $168,000 $-0- $-0- $-0- 7,500(1) $-0- $-0-
President, 1995 $198,000 $-0- $-0- $-0- 7,500(1) $-0- $-0-
CEO Chairman
- ---------------------------------------------------------------------------------------------------------
LaMar Gagon 1997 $33,679 $-0- $-0- $-0- 0 $-0- $-0-
Director/ 1996 $100,000 $-0- $-0- $-0- 24,167(2) $-0- $-0-
President 1995 $100,000 $-0- $-0- $-0- 7,500(2) $-0- $-0-
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) According to the Company's 1994 Officers and Directors Stock Option Plan
which was approved by the Company's shareholders on May 10, 1994, Mr.
Williams was granted 7,500 shares of the Company common stock on March 1,
1995, March 1, 1996 and March 1, 1997 at a price of $4.50.
(2) According to the Company's 1994 Officers and Directors Stock Option Plan
which was approved by the Company's shareholders on May 10, 1994, Mr. Gagon
was granted 7,500 shares of the Company common stock on March 1, 1995,
March 1, 1996 and March 1, 1997 at a price of $4.50. Mr. Gagon was granted
16,667 shares of the Company's stock at an exercise price of $4.50 per
share, according to a stock option grant approved by shareholders on June
15, 1995. The option was not exercisable until the expiration of six months
from the date of shareholders approval. On May 1, 1997, Mr. Gagon resign
his positions as Director and Officer of the Company.
The Company provides health and life insurance to its employees, including
its officers and certain directors.
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Stock Options Granted During 1997
The following table provides information on grants of stock options during
1997 to the persons named in the Summary Compensation Table above.
<TABLE>
<CAPTION>
___________________________________________________________________________________________
OPTION GRANTS IN 1997
Individual Grants
(a) (b) (c) (d) (e)
___________________________________________________________________________________________
% of Total
Options Exercise
Options Granted to or Base
Granted Employees in Price Expiration
Name (#) Fiscal Year ($/Sh) Date
___________________________________________________________________________________________
<S> <C> <C> <C> <C>
Michael R. Williams 7,500 25% $4.50 3/1/02
___________________________________________________________________________________________
</TABLE>
Option Values at December 31, 1997
No options were exercised during 1997 by the person named in the Summary
Compensation Table. The following table provides information on the unexercised
options at December 31, 1997 owned by the people named in the Summary
Compensation Table above.
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISED IN 1997
AND YEAR-END 1997 OPTION VALUES
- -----------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
- -----------------------------------------------------------------------------------------------------
Number of Value of Unexercised
Unexercised Options at In-the-Money Options
Year End 1997 (#) at
Year End 1997 ($)(1)
- -----------------------------------------------------------------------------------------------------
Shares
Acquired Value
on Realized Exercisable Unexercisable Exercisable Unexercisable
Name Exercise
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Williams -0- -0- 388,000 -0- $ -0- -0-
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1)An "In-the-Money" stock option is an option for which the market price of
the Company's common stock underlying the option on December 31, 1997
exceeded the option price. The value shown represents stock price
appreciation since the date of grant. The market price was based upon the
closing price of the Company's common stock on the obtain by a licensed stock
broker on December 31, 1997 ($0.0625).
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<PAGE>
Employment Agreements
The Company has no written employment agreement with any officers or
directors. Effective November 1997, Michael R. Williams monthly salary was
reduced from $14,000 to $10,417 by the Company.
Compensation of Directors
The Company's directors receive no compensation for Board of Directors
Meetings attended. On February 24, 1994, the Board of Directors adopted an
Officer and Directors Stock Option Plan. The Plan was adopted by the Company's
shareholders on May 10, 1994 and is a "formula" grant plan. The Plan provides
that each director and officer is to receive an option to purchase 7,500 shares
at market value on the initial date of grant or upon becoming an officer or
director of the Company. The initial date of grant was February 24, 1994. On
March 1st of each year thereafter, an additional option for 7,500 shares is
granted. Such additional options are exercisable at the market value on such
date.
Certain Relationships and Related Transactions
In connection with the Company's purchase of its corporate offices in
Alpine, Utah, in 1992, Michael R. Williams executed a personal and individual
guarantee agreement for the $250,000 SBA 504 portion of the long-term financing.
Michael R. Williams, Timothy G. Williams and Gearle D. Brooks executed
guarantees as individual guarantors of the commercial bank's $562,000 first
mortgage.
During 1993, the Company borrowed funds from officers Michael R.
Williams, Timothy G. Williams and Gearle D. Brooks. These loans accrued
interest at the rate of 6% per annum and are unsecured. The amounts of such
loans made by each lender and the amount due and owed by the Company as of
December 31, 1997 was as follows:
Total Amount Unpaid as of
Lender of Loans 12/31/97
---------- -------------- -------------
Michael R. Williams $89,519 $-0-
Timothy G. Williams $19,000 $9,000
Gearle D. Brooks $79,985 $21,491
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As part of the merger with Interline Natural Gas, the Company issued a
total of $300,000 in long-term notes to the shareholders of Interline Natural
Gas. The amounts of such loans made by each lender and the amount due and owed
by the Company as of December 31, 1997 was as follows:
Total Amount Unpaid as of
Lender of Loans 12/31/97
------------ ----------------- ----------------
Michael R. Williams $165,000 $ -0-
Timothy G. Williams $ 60,000 $ -0-
Gearle D. Brooks $ 75,000 $64,843
As of April 6, 1998, the Company has not paid the following three Senior
Securities notes due to Maurice D. Sabbah, a shareholder of the Company,
totaling $2,530,089 and associated interest due September 1, 1996. As a result,
loans from this person are currently in default.
I. During 1994, the Company issued a $250,000 senior convertible note payable
to a shareholder. The note bears interest at 10% and was due on September
1, 1996. After December 31, 1994, the note is convertible in full to 67,750
shares of the Company's restricted common stock, at the option of the note
holder.
II. On February 29, 1996 the Company obtained $1,500,000 in a 6% senior secured
note from a shareholder. The obligation was due September 1, 1996. In the
event of a default on the note the principal can be converted to shares of
the Company's common stock at the price of the lesser of $3.20 per share or
80 percent of the average closing price for the Company's shares for the
five consecutive trading days preceding the date of conversion. The note
was secured by all of the issued and outstanding stock of two subsidiaries,
Interline Energy Services and Gagon Mechanical Contractors.
III. On July 19, 1996, the Company obtained $780,089 in a 9.5% senior secured
note from the same shareholder. The note was due September 1, 1996. The
note is secured by the outstanding shares of Interline Energy Services,
Gagon Mechanical and Interline Hydrocarbon.
IV. On May 15, 1996, the Company obtained $2,500,000 in a 9.25% senior secured
note from the same shareholder as above. The note is due January 15, 1998
and is secured by the outstanding shares of Interline Energy Services and
Gagon Mechanical. Upon default, the loan may be converted into shares of
the Company's common stock at the lesser of $3.12 per share or 80 percent
of the average closing price for shares of the Company's common stock for
five consecutive trading days preceding the date of conversion. As
additional consideration for the shareholder making the Loan to the
Company, the Company has issued a Warrant to purchase up to 250,000 shares
of common stock at $3.90 per share. By virtue of cross default provisions
in this note, an event of default under this note has occurred, and its
holder has a right to accelerate the Company's obligation to repay
principal and interest at any time.
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<PAGE>
During 1997, the Company paid a related party $2,350,000 of which $2,200,000 was
proceeds from the sale of the Utah oil and gas operations and $150,000 was
proceeds from the sale of two compressor located in the Wyoming operations. The
$2,350,000 was all applied to principal. As of December 31, 1997 the balance
owed to the related party is $2,680,089 in principal and $885,776 in interest.
Note Payable and Accrued Interest Due to Related Party
Initial Interest Current Accrued
Balance Rate Balance Interest
-------------------------------------------------------------------
Note 1 $250,000 12% $250,000 $90,014
Note 2 1,500,000 12% 1,500,000 285,042
Note 3 780,089 16% 0 426,656
Note 4 2,500,000 16% 930,089 84,064
-------------------------------------------------------------------
Total: $5,030,089 $2,680,089 $885,776
===================================================================
RECOMMENDATION OF BOARD OF DIRECTORS
Tanner + Co. has served as the Company's independent auditor since
1989. No change of auditors is contemplated. A representative of Tanner +
Co. will be present at the Annual Meeting, and will have an opportunity to
make a statement if he or she desires to do so, and will be available to
respond to any appropriate questions.
COMPLIANCE WITH SECTION 16(a) OF THE SECURTIES AND
EXCHANGE ACT OF 1934
Section 16 of the Securities Exchange Act of 1934 requires the filing of
reports for sales and purchases of the Company's common stock made by officers,
directors and 10% or greater shareholders. A Form 4 must be filed within 10 days
after the end of the calendar month in which a sale or purchase occurred. Based
upon review of Form 4 filed with the Company, the Company believes that all
persons required to file reports under Section 16 were current on their filing
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<PAGE>
RIGHTS OF DISSENTING SHAREHOLDERS
The matters to be considered and acted upon at the Meeting do not create
any dissenting shareholders rights under Utah corporation law.
STOCKHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1999 Annual
Meeting must be received by the Company by January 2, 1999 to be considered for
inclusion in the proxy statement and form proxy relating to the 1999 Meeting.
FORM 10-KSB
The Company's Form 10-KSB for the year ended December 31, 1997, is being
mailed to shareholders with this Proxy Statement.
GENERAL
Management of the Company does not know of any matters other than the
foregoing that will be presented for consideration at the meeting. However, if
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy to vote thereon in accordance with their
judgment.
The entire cost of soliciting management proxies will be borne by the
Company. Proxies will be solicited by mail and may be solicited personally by
directors, officers or regular employees of the Company who will not be
compensated for their services. The Company will reimburse banks, brokerage
firms and others custodians nominees and fiduciaries for reasonable expenses
incurred in sending proxy material to their proposals and obtaining their
proxies. A professional proxy solicitor will not be engaged.
Whether or not you expect to be present at the meeting, please sign the
accompanying form of proxy and return promptly in the enclosed envelope.
By Order of the Board of Directors
/s/ Michael R. Williams
----------------------------------
Chief Executive Officer
By: Order of the Board of Directors
July 29, 1998
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