Document:

<PAGE>   1

                                                                    EXHIBIT 10.8

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and
between INLAND RESOURCES INC. (hereinafter referred to as "Employer") and
MICHAEL J. STEVENS (hereinafter referred to as "Employee").

         WHEREAS, Employer desires to continue the employment of Employee as its
Vice President, Secretary and Treasurer and Employee desires to continue such
employment; and

         WHEREAS, Employer and Employee have previously entered into an
Employment Agreement dated May 1, 1997, as amended (the "Original Employment
Agreement"), and Employer and Employee desire to mutually terminate the Original
Employment Agreement in connection with the execution of this Agreement; and

         WHEREAS, Employer has granted options and warrants (collectively the
"Existing Options/Warrants") to Employee exercisable for 112,240 shares of
common stock, par value $.001 per share (the "Common Stock"), of Employer, and
Employer and Employee desire to mutually terminate the Existing Options/Warrants
in connection with this Agreement, and grant new options to Employee as provided
herein.

         NOW, THEREFORE, in consideration of the mutual promises herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Employer and Employee agree as
follows:

         1.       TERMINATION OF ORIGINAL EMPLOYMENT AGREEMENT. Employer and
Employee hereby agree that the Original Employment Agreement is terminated
effective the date hereof.

         2.       TERMINATION OF EXISTING OPTIONS/WARRANTS. Employer and
Employee hereby agree that the Existing Options/Warrants are terminated
effective the date hereof.

         3.       AGREEMENT TO GRANT OPTIONS. Employer hereby grants to
Employee, effective the date of execution of this Agreement, an option to
purchase 292,000 shares of Common Stock exercisable at the closing sale price of
the Common Stock on the date of execution of this Agreement. The number of
option shares granted herein shall be increased or decreased to the same extent
that the outstanding shares of Common Stock of Employer are increased or
decreased by any stock split occurring after the effective date of this
Agreement. Such options shall vest over a period of five years, as provided for
herein. On each of the first four anniversary dates of

                                      -1-
<PAGE>   2

the effective date of this Agreement, ten percent (10%) of such options shall be
vested and, on the fifth anniversary of the date of execution of this Agreement,
the remaining sixty percent (60%) shall vest. All options granted hereunder will
be exercisable for a period of five years after the last options are vested,
regardless whether Employer subsequently voluntarily leaves the employment of
Employer or is terminated with or without "Cause" (as hereinafter defined).
Options will vest on each such anniversary date if Employee continues to be
employed by Employer on such anniversary date. All non-vested options will vest
immediately upon a "Change of Control" (as hereinafter defined). Employer will
concurrently with execution of this Agreement prepare an Option Agreement
incorporating these terms and such other standard terms as have been contained
in prior options or warrants granted to Employee.

         4.       EMPLOYMENT. Employer hereby employs Employee to serve as Vice
President, Secretary and Treasurer of Employer and otherwise at the direction of
the Board of Directors.

         5.       DUTIES. During his employment, Employee shall devote all of
his working time, energies and skills to the management of Employer's business.
Employee agrees to serve Employer diligently and to the best of his ability.
Employee shall render services consistent with those of a person in his position
and shall perform all duties incident to such office and all such further
similar duties that may, from time to time, be assigned to him by Employer.
Employee's duties include finding further business opportunities for Employer
and Employee agrees to bring to Employer for acceptance or rejection all
business opportunities located by or made available to Employee.

         6.       COMPENSATION. Employee's compensation for services performed
under this Agreement shall be as follows:

                  (a) Base Salary. Employer shall pay Employee a base salary
         ("Base Salary") of One Hundred Thirty Thousand and No/100 Dollars
         ($130,000.00) per year, commencing effective October 1, 1999. In
         addition, the Board of Directors of Employer shall, in good faith,
         consider granting increases in such salary based upon such factors as
         Employee's performance and the growth and/or profitability of Employer,
         but it shall have no obligation to grant any such increases in
         compensation. Such Base Salary shall be payable in equal monthly
         installments, or at such other times and in such installments as may be
         agreed upon between Employer and Employee. All payments shall be
         subject to the deduction of payroll taxes and similar assessments as
         required by law.

                  (b) Bonus. In addition to the Base Salary, Employee shall be
         eligible to receive bonus compensation in such amounts and at such
         times as the Board of Directors of Employer shall, from time to time,
         determine.

                                      -2-
<PAGE>   3

                  (c) Retention Bonus. In addition to the Base Salary and any
         bonus paid to Employee under Section 6(b) hereof, Employer shall pay
         Employee a retention bonus of $50,000 upon execution of this Agreement,
         and an additional retention bonus of $50,000 over the next five
         quarters, payable $10,000 on each of January 1, 2000, April 1, 2000,
         July 1, 2000, October 1, 2000 and January 1, 2001. If Employee's
         employment is terminated by the Company for any reason (i.e., with
         "Cause" or without "Cause"), the unpaid portion of the retention bonus
         shall be payable immediately upon the date of termination. However, if
         Employee voluntarily leaves the employment of Employer prior to payment
         of all of the installments of the retention bonus, any unpaid
         installments shall be forfeited by Employee.

                  (d) Performance Bonus. In addition to the Base Salary and the
         bonuses payable pursuant to Sections 6(b) and (c) hereof, Employer
         shall pay to Employee a performance bonus of $125,000, as follows: (A)
         one-third shall vest on each of the three years ending December 31,
         2000, December 31, 2001 and December 31, 2002 provided (i) Employee
         continues to be employed by Employer on such date and (ii) Employer has
         met the financial performance targets for each of such years; such
         performance targets to be determined by the Board of Directors (and
         approved by Trust Company of the West) at a later date and attached to
         this Agreement as Schedule "A" and (B) shall be payable equally, if
         vested, on December 31, 2003, December 31, 2004 and December 31, 2005.
         Upon a "Change of Control", any unvested portion of the performance
         bonus shall be deemed to be immediately vested and shall be paid to
         Employee immediately if Employee is terminated within ninety days of
         such Change of Control. If Employee voluntarily leaves the employment
         of Employer, Employee shall forfeit any unpaid vested installments.

         7.       EXPENSES AND BENEFITS. Employee is authorized to incur
reasonable expenses in connection with the business of Employer, including
expenses for entertainment, travel and similar matters. Employer will reimburse
Employee for such expenses upon presentation by Employee of such accounts and
records as Employer shall, from time to time, require. Employer also agrees to
provide Employee with the following benefits:

                  (a) Employee Benefit Plans. Employee shall be entitled to
         participate in employee benefit plans or programs of Employer, if any,
         to the extent that his position, tenure, salary, age, health and other
         qualifications make him eligible to participate, subject to the rules
         and regulations applicable thereto. Such additional benefits shall
         include, subject to the approval of the Board of Directors, full
         medical, dental and disability income insurance.

                  (b) Other. Such items and benefits as Employer shall, from
         time to time, consider necessary or appropriate to assist Employee in
         the performance of his duties.

                                      -3-
<PAGE>   4

                  (c) Vacations. Employee shall be entitled (in addition to the
         usual public holidays) to a paid vacation for a period in each calendar
         year not exceeding three (3) weeks, to be taken at such times as may be
         approved by Employer.

         8.       TERM. The term of this Agreement shall be for one (1) year,
beginning from the effective date hereof and from month to month thereafter
unless terminated by either party on thirty (30) days' notice.

         9.       DISABILITY. In the event that Employee becomes Permanently
Disabled (as hereafter defined) during the term of this Agreement and while
engaged in the scope of his employment by Employer, Employee shall continue in
the employ of Employer but his compensation hereunder shall be reduced to
one-half (1/2) of the Base Salary then in effect, as set forth in Section 6(a)
hereof, commencing upon the determination of Employee's Permanent Disability and
continuing thereafter until the first to occur of (a) twelve (12) months or (b)
the death of Employee or (c) the expiration of the term of this Agreement; and
during such period of time, Employee shall not be entitled to payment of
expenses or benefits specified in Section 7 hereof (except for reimbursement of
expenses incurred by Employee prior to becoming Permanently Disabled), except
that Employer shall continue to provide Employee with the insurance benefits
specified in Section 7(a) hereof. In addition, any compensation payable to
Employee by Employer shall be reduced by any amount which Employee is eligible
to receive from workers compensation, social security or disability insurance
provided by Employer. If Employee becomes Permanently Disabled while not engaged
in the scope of his employment by Employer, such disability may be cause for
termination for "Cause" under Section 10 hereof.

                  (a) Definition of Disability. For purposes of this Agreement,
         the terms "Permanent Disability" or "Permanently Disabled" shall mean
         three (3) months of substantially continuous disability. Disability
         shall be deemed "substantially continuous" if, as a practical matter,
         Employee, by reason of his mental or physical health, is unable to
         sustain reasonably long periods of substantial performance of his
         duties. Frequent long illnesses, though different from the preceding
         illness and though separated by relatively short periods of
         performance, shall be deemed to be "substantially continuous".
         Disability shall be determined in good faith by the Board of Directors
         whose decision shall be final and binding upon Employee. Employee
         hereby consents to medical examinations by such physicians and medical
         consultants as Employer shall, from time to time, require.

         10.      TERMINATION BY EMPLOYER. Employer shall have the right to
terminate Employee's employment as hereinafter provided.

                  (a) Termination by Employer for Cause. The Board of Directors
         shall have the

                                      -4-
<PAGE>   5

         right to terminate Employee's employment under this Agreement for
         Cause, in which event no compensation under Sections 6(a), (b) or (d)
         shall be paid or other benefits furnished to Employee after termination
         for Cause. Termination for Cause shall be effective immediately upon
         notice sent or given to Employee.

                           (i) Definition of Cause. For purposes of this
                  Agreement, the term "Cause" shall mean and be strictly limited
                  to: (1) conviction of a crime constituting a felony under
                  state or federal law; (2) determination by the Board of
                  Directors that Employee has committed any act of dishonesty
                  against Employer; (3) gross negligence by Employee in carrying
                  out his duties; (4) breach of this Agreement by Employee; (5)
                  gross misconduct by Employee, such as intoxication on the job,
                  use of drugs on the job for non-medical purposes or other
                  misconduct which has a substantial adverse effect on the
                  business of Employer; or (6) Employee becoming Permanently
                  Disabled while not engaged in the scope of his employment by
                  Employer.

                  (b) Termination by Employer without Cause. The Board of
         Directors shall have the right to terminate Employee's employment under
         this Agreement without Cause at any time, by giving written notice of
         termination to Employee. In such event, Employer will immediately pay
         an amount that is the remaining unpaid amount, if any, set forth in
         Sec. 6(c) and the amount vested under Sec. 6(d) above.

         11.      CHANGE OF CONTROL. For purposes of this Agreement, a "Change
of Control" shall mean: (i) the issuance of shares of capital stock of Employer
or the granting of options or other derivative securities representing on a
combined basis more than 50% of the outstanding capital stock following such
issuance and grant, or the issuance of shares of capital stock by Employer or
the granting of options or other derivative securities to a person who, when
added to shares acquired by such person in the market or from other stockholders
of Employer, would result in such person owning more than 50% of the outstanding
capital stock (assuming for this purpose, exercise of such options or other
derivative securities) of Employer; or(ii) the sale or other disposition by
Employer of substantially all of the assets of Employer.

         12.      GENERAL PROVISIONS.

                  (a) Notices. Any notices to be given hereunder by either party
         to the other may be effected by personal delivery, in writing or by
         mail, registered or certified, postage prepaid with return receipt
         requested. Mailed notices shall be addressed to the parties at the
         addresses set forth below, but each party may change his or its address
         by written notice in accordance with this Section 12(a). Notices
         delivered personally shall be deemed communicated as of the actual
         receipt; mailed

                                      -5-
<PAGE>   6

         notices shall be deemed communicated as of three (3) days after
         mailing.

                                    If to Employee:
                                    Inland Resources Inc.
                                    410 17th Street, Suite 700
                                    Denver, Colorado  80202

                                    If to Employer:
                                    Board of Directors
                                    Inland Resources Inc.
                                    410 17th Street, Suite 700
                                    Denver, Colorado  80202

                  (b) Partial Invalidity. If any provision in this Agreement is
         held by a court of competent jurisdiction to be invalid, void, or
         unenforceable, the remaining provisions shall, nevertheless, continue
         in full force without being impaired or invalidated in any way.

                  (c) Law Governing Agreement. This Agreement shall be governed
         by and construed in accordance with the laws of the State of
         Washington.

                  (d) Attorneys' Fees and Costs. If any action at law or in
         equity is necessary to enforce or interpret the terms of this
         Agreement, the prevailing party shall be entitled to reasonable
         attorneys' fees, costs and necessary disbursements in addition to any
         other relief to which he or it may be entitled.

                  (e) Assignment. This Agreement shall inure to the benefit of
         and bind the parties hereto and their respective legal representatives,
         successors and assigns.

                  (f) Entire Agreement. This Agreement supersedes any and all
         other agreements, either oral or in writing, between the parties hereto
         with respect to the employment of Employee by Employer and contain all
         of the covenants and agreements between the parties with respect to
         such employment. Each party to this Agreement acknowledges that no
         representations, inducements, or agreements, oral or otherwise, have
         been made by any party, or anyone acting on behalf of any party, which
         are not embodied herein, and no other agreement, statement or promise
         not contained in this Agreement shall be valid or binding. Any
         modification of this Agreement will be effected only if it is in
         writing signed by the party to be charged.

                                      -6-
<PAGE>   7

         IN WITNESS WHEREOF, the parties have executed this Agreement on October
21, 1999, but to be effective the 1st day of October, 1999.

                                      EMPLOYER:
                                      INLAND RESOURCES INC.

                                      By: /s/ Bill I. Pennington
                                          ---------------------------------
                                          Bill I. Pennington
                                          Chief Executive Officer

                                      EMPLOYEE:

                                       /s/ Michael J. Stevens
                                      ----------------------------------------
                                      Michael J. Stevens

                                      -7-
<PAGE>   8

                                  SCHEDULE "A"
                          FINANCIAL PERFORMANCE TARGETS

         THE FINANCIAL PERFORMANCE TARGET, TO BE SATISFIED FOR THE INITIAL ONE
YEAR VESTING PERIOD ENDING DECEMBER 31, 2000 IS TOTAL EARNINGS BEFORE INTEREST,
TAXES, DEPRECIATION AND AMORTIZATION, DETERMINED UTILIZING GENERALLY ACCEPTED
ACCOUNTING PRINCIPALS, CONSISTENTLY APPLIED, OF AT LEAST $17.3 MILLION. THE
FINANCIAL PERFORMANCE TARGETS FOR THE ONE YEAR VESTING PERIODS ENDING DECEMBER
31, 2001 AND DECEMBER 31, 2002 WILL BE ESTABLISHED BY AMENDMENT TO THIS SCHEDULE
A.

                                      -8-<PAGE>   1
                                                                    EXHIBIT 10.9

                              INLAND RESOURCES INC.
                             STOCK OPTION AGREEMENT

         This Stock Option Agreement ("Agreement") is entered into effective as
of October 1, 1999 between Inland Resources Inc., a Washington corporation (the
"Company"), and Bill I. Pennington, an employee of the Company (the "Employee").

                                   Recitals:

     The Company desires to grant to the Employee a Nonqualified Stock Option to
purchase shares of its Common Stock, $0.001 par value, pursuant to the terms and
conditions of this Agreement.

                  The parties agree as follows:

         1. Grant of Option. The Company hereby grants to the Employee the right
and option (the "Option") to purchase all or any part of an aggregate of 875,000
shares (the "Shares") of its Common Stock, $0.001 par value, on the terms and
conditions and subject to all the limitations set forth herein.

         2. Purchase Price. The purchase price of the Shares covered by the
Option shall be $0.9375 per share.

         3. Vesting of Option. Subject to the other terms and conditions of this
Agreement, the Shares exercisable upon exercise of the Option granted hereby
shall vest in accordance with the following schedule: (i) 10% shall vest on each
of the first four anniversary dates of the date of this Agreement if Employee
continues to be employed by the Company on each such anniversary date, and (ii)
the remaining 60% shall vest on the fifth anniversary of the date of this
Agreement if Employee continues to be employed by the Company on such date.

         Any non-vested Shares under the Option granted hereby shall be deemed
to have

                                      -1-
<PAGE>   2

immediately and automatically vested on a "Change of Control", as such term is
defined in the Employment Agreement between Employee and the Company entered
into effective as of the same effective date of this Agreement.

         4. Exercise of Option. Subject to the other terms and conditions of
this Agreement, the vested Shares granted pursuant to this Option may be
exercised at any time during the term of this Agreement in accordance with the
terms of paragraph 7.

         5. Term of Option. The Option shall terminate on the fifth (5th)
anniversary of the date that the last Option granted hereunder vested, but shall
be subject to earlier termination as provided herein.

         6. Non-Assignability. The Option shall not be transferable by the
Employee otherwise than by will or by the laws of descent and distribution and
shall be exercisable, during the Employee's lifetime, only by the Employee or
his or her guardian or legal representative. The Option shall not be assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to execution, attachment or similar process. Any
attempted transfer, assignment, pledge, hypothecation or other disposition of
the Option or of any rights granted hereunder contrary to the provisions of this
paragraph 6, or the levy of any attachment or similar process upon the Option or
such rights, shall be null and void.

         7. Manner of Exercising Option and Issue of Shares. The Option relating
to vested Shares may be exercised in whole or in part by giving written notice
to the Company, together with the tender of the Option purchase price. Such
written notice shall be signed by the person exercising the Option, shall state
the number of Shares with respect to which the Option is being exercised, shall
contain any representation required by paragraph 8 below and shall otherwise
comply with the terms and conditions of this Agreement. The Company shall pay
all transfer or original issue taxes

                                      -2-
<PAGE>   3
 with respect to the issue of the Shares pursuant hereto and all other fees and
expenses necessarily incurred by the Company in connection herewith. Except as
specifically set forth herein, Employee acknowledges that any income or other
taxes due from him with respect to this Option or the Shares issuable pursuant
to this Option shall be the responsibility of Employee and that the Company may,
in accordance with the Internal Revenue Code, require Employee to pay additional
withholding taxes in respect of the amount that is considered compensation
includable in Employee's gross income. Employee shall have rights as a
shareholder only with respect to any Shares covered by the Option after due
exercise of the Option and tender of the full exercise price for the Shares
being purchased pursuant to such exercise.

         8. Purchase for Investment. Unless the offering and sale of the Shares
to be issued upon the particular exercise of the Option shall have been
effectively registered under the Securities Act of 1933, as amended, or any
successor legislation (the "Act"), the Company shall be under no obligation to
issue the Shares covered by such exercise unless and until the following
conditions have been fulfilled:

         The person(s) who exercise the Option shall represent to the Company,
at the time of such exercise, that such person(s) are, acquiring such Shares for
his or her own account, for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares, in which event the
person(s) acquiring such Shares shall be bound by the provisions of the
following legend which shall be endorsed upon the certificate(s) evidencing
their option Shares issued pursuant to such exercise:

                  "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
         ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
         STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD,
         PLEDGED, HYPOTHECATED OR

                                       -3-
<PAGE>   4

         OTHERWISE TRANSFERRED, EXCEPT UPON DELIVER TO THE COMPANY OF AN OPINION
         OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT
         REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE COMPANY OF SUCH
         OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
         ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF
         1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR
         REGULATION PROMULGATED THEREUNDER."

         Without limiting the generality of the foregoing, the Company may delay
issuance of the Shares until completion of any action or obtaining of any
consent, which the Company deems necessary under any applicable law (including
without limitation state securities or "blue sky" laws).

         9. Notices. Any notice to be given under this Agreement shall be deemed
sufficient if addressed in writing, and delivered by registered or certified
mail or delivered personally, in the case of the Company to its principal
business office and in the case of the Employee, to his address appearing on the
records of the Company, or to such other address as he may have designated in
writing to the Company.

         10. Governing Law. This Agreement shall be construed and enforced in
accordance with the internal laws, and not the laws of conflict, of the State of
Colorado.

         11. Benefit of Agreement. This Agreement shall be for the benefit of
and shall be binding upon the heirs, executors, administers and successors of
the parties hereto.

         12. Adjustment of Shares. Wherever this Agreement specifies a number of
shares of Common Stock or a purchase price per share, the specified number of
Shares of Common Stock to be received on exercise and the applicable purchase
price per share shall be changed to reflect adjustments (which may require that
additional securities or other property be delivered on exercise) required by
this paragraph 12, as follows:

                                       -4-
<PAGE>   5

                  (a) If an increase has been effected in the number of
         outstanding shares of the same class of securities of the Company as is
         issuable upon exercise of this Option by reason of a subdivision of
         such shares, the number of Shares which may thereafter be purchased
         upon exercise of this Option shall be increased with respect to each
         Share issuable upon exercise of this Option by the number of Shares
         which could have been received by Employee at the time of such
         subdivision had he been the holder of record of such issuable Shares at
         the record and/or effective date of the subdivision. In such event, the
         purchase price per Share under this Option shall be proportionately
         reduced.

                  (b) If a decrease has been effected in the number of
         outstanding shares of the same class of securities of the Company as is
         issuable upon exercise of this Option by reason of a reverse stock
         split, the number of Shares which may thereafter be purchased upon
         exercise of this Option shall be changed with respect to each Share
         issuable upon exercise of this Option to the number of Shares which
         would have been held by Employee at the time of said reverse stock
         split had Employee been the holder of such issuable Share at the record
         and/or effective date of the reverse stock split. In such event, the
         purchase price per Share shall be proportionately increased.

                                      -5-

<PAGE>   6

         EXECUTED effective as of the date and year first above written.

                                              INLAND RESOURCES INC.

                                              By: /s/ Michael J. Stevens
                                                 -------------------------------
                                              Its:   Vice President

                                              EMPLOYEE:

                                              /s/ Bill I. Pennington
                                              ----------------------------------
                                              Bill I. Pennington

                                      -6-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00006-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00006-of-00352.parquet"}]]