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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of report (Date of Earliest Event Reported): August 19, 1996
UNITED PETROLEUM CORPORATION
(Exact name of Registrant as specified in its Charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
0-25006 13-3103494
Commission File Number I.R.S Employer Identification
4867 North Broadway
Knoxville, TN 37918
(Address of Principal Executive Offices)
615 - 688-0582
(Registrant's Telephone number, including area code)
Item 5. Other Events.
On April 17, 1996 the Board of Directors of United
Petroleum Corporation (the "Company") passed resolutions which
authorized the Company to issue $5,000,000 of Convertible
Debentures (or a greater amount if there was a sufficient interest)
for a consideration equal to 75% of the face value of the
Debentures. The Debentures were to have a maturity of two years and
bear interest at the rate of approximately 7% per annum. The
Debentures were to be convertible into common stock of the Company.
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The conversion price is the lesser of the average market price of
the Company's stock, as reported by NASDAQ, for the five trading
days preceding the record date for the principal or interest
payment or Four ($4.00) Dollars per share.
Between May 8, 1996 and July 1, 1996, the Company sold
$7,099,999.66 face amount of Debentures to five purchasers for a
net price, after commissions of $4,650,500.
The aforementioned facts were reported by the Company in
a Form 8K filing on July 16, 1996.
Thereafter through October 8, 1996, the Company sold
additional Debentures in the face amount of $20,400,000 to six
purchasers including two of the earlier purchasers for a net price,
after commissions, of $13,268,850.
The Debentures were sold to foreign investors pursuant to
Regulation S of the Rules and Regulations of the Securities and
Exchange Commission.
The Company intended to use the proceeds (1) to finance
oil and gas drilling operations in its Jackson-United Petroleum
subsidiary; (2) to expand the number of full service auto care
centers and convenience stores operated by the Company's
subsidiary, Calibur Enterprises, Inc.; and (3) for working capital
and other corporate purposes.
On or about June 27, 1996, the Company engaged TAJ Global
Equities ("TAJ") to act as the Company's underwriter for a planned
$20,000,000 offering of the Company's common stock which was to
take place during the third quarter of 1996. In connection
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therewith, TAJ was paid an underwriting fee of $100,000.
In connection with the offering and sale of the
Debentures, TAJ and Strategic Holdings, Inc. ("Strategic") acted as
consultants to the Company.
During the period from July 1, 1996 to October 31,1996,
2,361,319 shares were issued to six of the purchasers of Debentures
who exercised their conversion rights. The Debentures were
converted at share prices ranging from $2.40 to $4.00 per share.
Each of the Subscription Agreements executed by
purchasers of Debentures required that the purchasers refrain from
short sales of the Company's common stock, prior to conversion.
Despite this requirement, certain Debenture holders sold
short substantial quantities of the Company's shares prior to
conversion of their Debentures resulting in a sharp drop in the
price of the Company's shares.
On July 11, 1996, the Board of Directors of the Company
authorized the purchase in the open market of up to One Million
(1,000,000) shares of the Company's common stock. This action was
taken in view of the fact that the unauthorized short selling by
Debenture holders had caused the price of the Company's shares to
drop from approximately $5.50 per share to approximately $2.00 per
share.
During the period from July 16, 1996 to August 9, 1996,
the Company wired funds to TAJ Global in the amount of $850,000 for
use in the repurchase of the Company's shares.
The Company received confirmations during July, 1996 of
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the purchase for its account of 117,000 shares at a cost of
$303,083. Thereafter, TAJ orally advised the Company that it had
cancelled those trades. TAJ failed, however, to provide the Company
with confirmations of the cancellation of those trades. The Company
believes that those trades were cancelled and on statements
received thereafter from TAJ the Company has no position in its
stock.
In August, 1996, the Company forwarded the sum of
$857,997 to TAJ in accordance with its request, in the belief that
those funds were to be used for the purchase of shares by the
Company. The Company recently learned that the shares purchased
with those funds were acquired by TAJ in its trading account.
Short selling by Debenture holders who planned to convert
their shares continued throughout August and September, 1996 and
TAJ, as market maker, purchased shares in its trading account at an
increasing rate - approximately 1,259,843 shares, in August and
1,940,187 shares in September, 1996. TAJ did not consult with the
Company when making these purchases and did not advise the Company
of these purchases until long afterward. Some of the shares were
resold by TAJ to its customers, and some were transferred to an
account at TAJ in the name of Strategic Holdings ("Strategic").
Strategic has advised the Company that it never authorized those
purchases but that they had been accomplished by TAJ by the use of
a power of attorney which Strategic had given to TAJ. In any event,
neither TAJ nor Strategic were able to pay for most of the
securities purchased and they requested that the Company lend them
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sufficient funds to cover the cost of the purchases promising to
return those funds upon resale of the shares. Thereafter, the
Company received numerous frantic telephone calls from Strategic,
TAJ and National Financial Service Corporation ("National"), TAJ's
clearing broker, requesting it to advance the funds necessary to
pay for the shares which had been purchased by TAJ and sold to
Strategic. National advised that unless it was paid, it would
liquidate the entire position which would have had a devastating
effect on the price of the Company's stock with resultant
substantial losses to the Company's shareholders. In response to
those calls, the Company during the period August 19, 1996 to
October 21, 1996, advanced the additional sums of $7,382,703 to
Strategic and $1,617,959 to TAJ.
There are presently 2,184,407 shares of the Company's
stock in the account of Strategic at TAJ and Strategic has executed
a promissory note and a loan agreement with the Company agreeing to
repay the sum of $10,776,600 and to refrain from transferring or
hypothecating those shares until the note is paid.
It is the opinion of counsel to the Company that, in view
of the large percentage of shares owned by Strategic, it is an
affiliate, and the shares presently held by Strategic cannot be
sold, except in accordance with the limitations imposed by Rule 144
of the Rules and Regulations of the Securities and Exchange
Commission. The Company has notified Strategic, TAJ and the
Company's transfer agent of this opinion. It is the intention of
the Company to prepare a Registration Statement, Form S-3, covering
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the shares being held by Strategic and to restrict the transfer of
those shares until such Registration Statement has become
effective. Upon the sale of those shares, the Company anticipates
that its loan to Strategic will be repaid.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be
authorized on its behalf by the undersigned duly authorized.
Dated: November 14, 1996
United Petroleum Corporation
By: /s/ L. Douglas Keene, Jr.,
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L. Douglas Keene, Jr., Executive Vice President
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