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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): May 2, 1997
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)
423 - 688-0582
(Registrant's Telephone number, including area code)
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Item - 202(a)(2)
As previously reported, during the period from May 8, 1996
through October 17, 1997, the Company sold 13 Convertible Debentures (the
"Debentures") pursuant to an exemption from Registration afforded by Regulation
S as promulgated by the Securities and Exchange Commission under the Securities
Act of 1933, as amended. The Debentures have a maturity of two years. The
aggregate face value of the Debentures was $27,500,000 with net proceeds to the
Company of approximately $20,631,500 before expenses of $2,890,000. Debentures
with a face value of $14,200,000 bear interest at the rate of 7% per annum. The
balance of the Debentures bear interest at the rate of 6% per annum. The
Debentures are convertible into shares of the Company's common stock at a price
equal to the average of the closing bid price of the Company's common stock for
the five trading days immediately preceding the submission of a Notice of
Conversion. Subsequent to the sales of the Debentures, the market price of the
Company's common stock deteriorated rapidly and dropped to approximately fifty
cents ($.50) per share from a price of approximately Five ($5.00) Dollars per
share.
Disputes arose between the Company and the purchasers of the
Debentures with regard to the role played by the Debenture Holders in causing
the drop in the price of the Company's stock in violation of the terms of the
Debentures. As a result of this dispute, the Company refused to accept and act
upon Notices of Conversion received from many of the Debenture Holders.
After several months of negotiations among the Company and
these Debenture Holders, an agreement was entered into with holders of
$16,822,400 of Debentures (the "Agreement") effective April 30, 1997.
The Agreement provided, among other things, for the exchange
of $9,750,000 worth of Debentures into 8,775 shares of Preferred Stock, Series A
of the Company (the "Preferred Stock" or "Preferred Shares"), after a reduction
of 10% in the face amount of the Debentures. The Preferred Stock will pay a
cumulative dividend of eighteen (18%) percent for a period of one year.
Thereafter, at the option of the preferred shareholder, the dividend shall
either be reduced to seven (7%) for the second year or, a preferred shareholder,
at his option, may surrender to the Company ten percent of the preferred stock
and continue to receive a dividend of eighteen (18%) percent. At the option of
the Company, dividends may be paid in cash or in the Company's common stock.
Preferred shareholders shall have voting rights equal to those
which they would have if they converted their preferred shares to common stock
at the then conversion price, provided,
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however, that no preferred shareholder or group of affiliated preferred
shareholders may, at any time, vote more than 4.99% of the total of the stock
entitled to vote.
Commencing July 1, 1997, one thirteenth of the Preferred Stock
may be converted each month on a cumulative basis. The conversion price shall be
the lesser of $3.00 or the the average closing bid price for the five trading
days prior to conversion. Notwithstanding the foregoing, the minimum conversion
price for the first three months commencing July 7, 1997 shall be the greater of
$2.50 per share or two-thirds of the average of the closing bid prices for the
prior month. For the next three months, the minimum conversion price shall be
the greater of $2.00 per share or two-thirds of the average of the closing bid
prices for the prior month. For the next three months, the minimum conversion
price shall be the greater of $1.50 per share or two thirds of the average of
the closing bid prices for the prior month. Thereafter, the minimum conversion
price shall be the greater of $1.00 or two-thirds of the average of the closing
bid price for the prior month.
The Preferred Shares may be automoatically converted by the
Company by notice given between October 1, 1999 and October 10, 1999 at a price
equal to the average of the closing bid prices for the five trading days prior
to the giving of the notice.
Each Preferred Share shall have liquidation rights equal to
$1,000 and shall have preference over common shareholders and junior preferred
shareholders.
The Company may redeem the Preferred Shares at any time upon
payment of the liquidation price together with any accrued dividends.
Item - 202(a)(4)
The Company's Charter provides for a staggered Board of
Directors with three classes, one class to be elected each year for a period of
three years; removal of a director for any reason requires the vote of the
holders of 70% of the voting power of all shares entitled to vote; numerous
provisions of the Charter may not be amended, repealed or altered except by the
vote of the holders of at least 75% of the voting power of all shares entitled
to vote.
The Agreement provides that the Preferred Shareholders shall
vote their shares for the continuation of current management and shall not
participate in any proxy contests so long as the Company is not in default with
respect to any of the provisions of the Agreement, the Preferred Shares or the
Debentures.
Item - 202(b)(1)
The Agreement provides that the holders of $3,454,511 of
3
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the Debentures shall receive in their place amended convertible debentures
("Amended Debentures") in a face amount equal to 90% of the face amount of the
old Debentures. The maturity date of the Amended Debentures is September 1,
1999.
The interest rate on the Amended Debentures is 18% for one
year and thereafter 7%, provided, however, that the Amended Debenture holders
shall have the option at the end of one year to surrender to the Company, for no
consideration, 10% of their Amended Debentures and to receive interest of 18% on
the remaining Amended Debentures. At the option of the Company, interest may be
paid in cash or common stock.
The Amended Debentures are convertible into shares of the
Company's common stock commencing August 1, 1998 at the rate of one-fifth per
month. The conversion price shall be the lesser of $3.00 or the average of the
closing bid prices for the Company's common stock for the five trading days
preceding the notice of conversion, provided, however, that the minimum
conversion price shall be the greater of $1.00 per share or two-thirds of the
average of the closing bid price for the prior month.
The Company may redeem the Amended Debentures at any time upon
payment of the face amount of the Amended Debenture together with accrued
interest.
Item - 202(b)(2)
No Amended Debenture holder or affiliated group of Amended
Debenture holders may convert their Amended Debentures to common stock to the
extent that such conversion would cause them to own more than 4.99 percent of
the Company's outstanding common stock.
The Amended Debenture holders have agreed to vote any common
stock acquired by them to continue current management so long as no event of
default, as defined in the Agreement, has occurred.
Item 5 - Other Events
One of the Debenture Holders has subscribed for $666,666 worth
of new debentures to be issued pursuant to Regulation S. The purchase price for
these new debentures is $500,000. These funds are to be used by the Company for
working capital purposes. These debentures are convertible under the same terms
and conditions as the Amended Debentures.
As part of the Agreement, Debentures with a face amount of
$623,200, together with shares issue in payment of interest accrued through
April 30,1997 were converted to common stock at a price of $.50 per share.
4
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The following documents are filed herewith
Exhibit Number and Description
10.11 Agreement between the Company and Debenture Holders
dated April 30, 1997.
5
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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: May 12, 1997
United Petroleum Corporation
By: L. Douglas Keene, Jr.
-------------------------------
L. Douglas Keene, Jr.
Executive Vice President
6
UNITED PETROLEUM CORPORATION
4867 North Broadway
Knoxville, Tennessee 37928
April 30, 1997
Holders of Convertible Debentures
Listed on Schedule 1 Attached Hereto
Gentlemen:
Each of you were issued Convertible Debentures of United Petroleum
Corporation (the "Company") pursuant to Offshore Debenture Securities
Subscription Agreements (collectively, the "Subscription Agreements"), as
summarized on Schedule 2 attached hereto (collectively, the "Debentures").
Contemporaneous herewith, Infinity Investors Limited ("Infinity") shall acquire
the remaining Debentures owned by Mohamad Ghaus Khalifa (the "Khalifa
Debentures").
Pursuant to the terms of this letter agreement (this "Letter
Agreement"), the Company and each of you desire to restructure certain terms of
the Debentures.
Accordingly, by your signature hereto each of you and the Company
hereby agree to amend the terms of the Debentures as follows:
1. Recently certain of you converted a percentage of the aggregate
principal amount of the Debentures held by you, together with all accrued and
unpaid interest thereon. Schedule 3 attached hereto sets forth the amount of
such Debentures (plus accrued and unpaid interest thereon) converted by each of
you. Such amounts were converted at a conversion price of $0.50 per share of the
Company's common stock (the "Common Stock"). The Company has issued, without
restrictive legend, certain of such shares. Further, as of the date hereof, each
of you, without further action of any party hereto, shall convert a certain
percentage of the aggregate principal amount of such Debentures, together with
accrued and unpaid interest thereon through the date hereof. Schedule 3 attached
hereto sets forth the amount of such Debentures (plus accrued and unpaid
interest thereon) which shall be converted by each of you as of the date hereof.
Such amounts shall be converted at a conversion price of $0.50 per share of
Common Stock. In addition, as of the date hereof, the Company shall issue (i) to
Infinity, shares of Common Stock (at a price of $0.50 per share) in an amount
equal to the accrued and unpaid interest on the Khalifa Debentures through the
date hereof, (ii) to each of you, shares of Common Stock (at a price of $0.50
per share) in an amount equal to all accrued and unpaid interest on the
Debentures through the date hereof, and (iii) to each of you, additional shares
of Common Stock; in each instance in the amounts set forth on Schedule 4
attached hereto. Notwithstanding the foregoing, in the event the delivery of
such shares of Common Stock would contravene the Limitation on Conversion
described in Section 7 below, then the number of shares of Common Stock to be
delivered to the Group Members (as defined in Section 7 below) shall be limited
to
LETTER AGREEMENT - Page 1
(United Petroleum Corporation)
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the number of shares of Common Stock that does not violate the Limitation on
Conversion (the "April 30 Issued Shares"). The difference between the number of
shares of Common Stock issuable as of the date hereof pursuant to this Section 1
to the Group Members and the April 30 Issued Shares shall be promptly issued,
from time to time, to the Group Members following the delivery by the Group
Members to the Company of a written notice stating that such issuance will not
violate the Limitation on Conversion (each, a "Subsequent Notice"). The Company
shall, and shall use its best efforts to cause its transfer agent to, issue
these shares, without restrictive legend. If the Company fails to deliver such
shares within five (5) trading days of the date hereof (or the date of delivery
of a Subsequent Notice, as applicable), the Company shall pay to each holder of
the Debentures the Liquidated Damage Amount (as hereafter defined) for each day
the delivery of such shares is so delayed. Such sums shall be payable at the end
of each calendar week.
2. The Company has filed an amendment to its Certificate of
Incorporation with the Secretary of State of Delaware, authorizing the creation
and issuance of "blank check" preferred stock. Contemporaneous herewith, the
Company shall authorize the issuance of at least 10,000,000 shares of Series A
Convertible Preferred Stock (with each share having an initial liquidation
preference of $1,000) (the "Preferred Shares"), containing the rights,
privileges, and related provisions set forth in the form of Certificate of
Designation attached hereto as Exhibit A (the "Certificate of Designation"),
which has been, or shall be filed as of the date hereof by the Company with the
Secretary of State of Delaware.
3. Contemporaneous herewith, Infinity shall acquire from the Company a
convertible debenture with a stated principal amount of $666,666 for a $500,000
cash payment to the Company, containing terms (including conversion price and
conversion dates) identical to those of the Debentures (the "Newly Issued
Debenture").
4. Contemporaneous herewith, without further action of any party
hereto, the Company and each of you by your signatures hereto agree to reduce
the remaining stated principal balance of the Debentures and Newly Issued
Debenture (but excluding all Designated Securities, as defined in Section 8(b)
below) following the actions set forth in Section 1 above by ten percent (10%)
and the interest rate thereon shall be increased to eighteen percent (18%)
simple interest per annum (which shall also be the dividend rate on the
Preferred Shares and the interest rate on the Amended Debentures, each as
hereafter defined); provided, however, $666,666 stated principal amount
(together with accrued and unpaid interest thereon) of the Debentures held by
Infinity shall not be subject to the terms of Sections 4, 5, 6 and 10 of this
Letter Agreement, as further set forth in Section 8 below (the "Infinity
Excluded Debenture"). Notwithstanding the foregoing provisions of this Section
4, at least five (5) business days prior to April 30, 1998 (the "Anniversary
Date"), each of you shall be required to elect, as to all of the Preferred
Shares and Amended Debentures held by you, by written notice to the Company, to
either (i) reduce the dividend rate on the Preferred Shares and interest rate on
the Amended Debentures to seven percent (7%) from and after the Anniversary Date
or (ii) to reduce the then remaining principal balance of the Amended Debentures
and stated liquidation preference (excluding accrued and unpaid dividends) on
the Preferred Shares by ten percent (10%) from and after the Anniversary Date
and retaining as the interest rate on the Amended Debentures and the dividend
rate on the Preferred Shares a rate of eighteen percent (18%) simple interest
per annum.
LETTER AGREEMENT - Page 2
(United Petroleum Corporation)
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In the event you fail to make the foregoing election, clause (i) shall apply.
Promptly upon the receipt of such notice, the Company and each of you shall
cooperate in effecting any amendments to the Certificate of Designation and/or
terms of the Amended Debentures to reflect such election.
5. Contemporaneous herewith, without further action of any party
hereto, the Company and each of you shall consummate an exchange pursuant to
which each of you shall convey to the Company a portion of each Debenture and
Newly Issued Debenture (but excluding all Designated Securities) held by you, in
the amounts set forth on Schedule 5 attached hereto. In exchange therefor, the
Company shall issue to each of you Preferred Shares in the amounts set forth on
Schedule 5. The Preferred Shares shall be issued with a legend substantially in
the form attached hereto as Exhibit B.
6. Immediately following the actions set forth Sections 1, 2, 3, 4 and
5 above, and without further action of any party hereto, the remaining portion
of each Debenture held by you shall be deemed exchanged for an Amended and
Restated Debenture in the form attached hereto as Exhibit C, in the amounts set
forth on Schedule 6 attached hereto (the "Amended Debentures"). Notwithstanding
the terms of Sections 5 and 6 hereof, and as reflected on Schedules 5 and 6
hereof, Dan Dotan has elected, with the consent of each of you and the Company,
to receive all Preferred Shares and no Amended Debentures in exchange for his
Debentures. The form of Notice of Conversion for the Amended Debentures and
Preferred Shares shall be substantially as set forth on Exhibit D attached
hereto. The Khalifa Debentures, Newly Issued Debenture, Infinity Excluded
Debenture, Amended Debentures and Preferred Shares are collectively herein
referred to as the "Convertible Securities." Each of you in delivering any
Notice of Conversion to the Company associated with any Convertible Securities
shall use your reasonable efforts to provide a copy thereof, via telecopy, to
Morton Robson, Esq. (212/949-1871) and Neal Melnick, Esq. (423/523-2681);
provided, the failure to provide such copy shall not be a prerequisite to the
effectiveness of such Notice of Conversion.
7. In addition to and not in lieu of the limitations on conversion set
forth in the Convertible Securities, the conversion right of each of you who are
members of a "group" within the meaning of Rule 13d-3 of the Securities Exchange
Act of 1934, as amended (i.e., Infinity Investors Limited, Seacrest Capital
Limited and Fairway Capital Limited) (the "Group Members"), shall be limited,
solely to the extent required, from time to time, such that in no instance shall
the maximum number of shares of Common Stock which the Group Members may receive
in respect of any conversion of the Convertible Securities and Preferred Shares
exceed, at any one time, an amount equal to the remainder of (i) 4.99% of the
then issued and outstanding shares of Common Stock of the Company following such
conversion minus (ii) the number of shares of Common Stock of the Company then
owned (beneficially or of record) by the Group Members other than shares deemed
beneficially owned due to the ownership of Convertible Securities (the foregoing
being referred to as the "Limitation on Conversion"). Notwithstanding the voting
rights granted under the Certificate of Designation or this Letter Agreement,
the voting rights of the Group Members shall be limited to the extent necessary
such that in no event will the Group Members be entitled to vote more than 4.99%
of the then issued and outstanding shares of Common Stock of the Company (the
"Voting Limitation"). The Limitation on Conversion and Voting Limitation shall
not apply, and shall be of no further force and effect,
LETTER AGREEMENT - Page 3
(United Petroleum Corporation)
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upon the occurrence of either (i) a Redemption Transaction as described in the
Certificate of Designation or Amended Debentures, or (ii) an automatic
conversion as described in the Certificate of Designation or Amended Debentures,
or (iii) at the expiration of at least ten (10) consecutive business days
following the occurrence of any Event of Default described in the Amended
Debentures and for which the holder thereof has provided written notice thereof
and which is not cured within the greater of the applicable time period
specified in either (x) such written notice or (y) the Amended Debentures.
8. Notwithstanding any provisions of this Letter Agreement, the
Amended Debentures or the Certificate of Designation to the contrary, each of
you and the Company hereby agree as follows:
(a) Contemporaneous herewith, Infinity shall acquire the Khalifa
Debentures. Thereafter, the Khalifa Debentures and Infinity
Excluded Debenture shall be convertible in accordance with their
stated terms and shall not be subject to the terms of Sections 4,
5, 6 and 10 of this Letter Agreement (and no Preferred Shares or
Amended Debentures shall be issued in replacement thereof);
provided, the Company agrees that (i) any Event of Default in any of
the Amended Debentures or Preferred Shares, or under this Letter
Agreement, shall result in an Event of Default under the Khalifa
Debentures and Infinity Excluded Debenture, and (ii) the Limitation
on Conversion set forth in Section 4 above shall apply in lieu of the
limitation set forth in the Khalifa Debentures and Infinity and
Excluded Debenture;
(b) At the option of Infinity, exercisable from time to time, Infinity may
designate a portion of the Amended Debentures and/or Preferred Shares
held by Infinity, Seacrest Capital Limited and/or Fairway Capital
Limited, not to exceed the amount of the Infinity Excluded Debenture
and the Khalifa Debentures (such designated amount being referred to as
the "Designated Securities") in replacement of an identical principal
amount of the Khalifa Debentures and/or the Infinity Excluded Debenture
(such amount being referred to as the "Replacement Debentures"). Upon
such designation, the limitations on conversion described in the
Amended Debentures shall: (i) apply to the Replacement Debentures and
(ii) not apply to the Designated Securities. Infinity hereby
designates, consistent with Schedules 5 and 6 hereof, $620,700 of the
Seacrest Debentures, $620,700 of the Fairway Debentures and $1,175,266
of the Infinity Debentures as Designated Securities and an identical
amount of Infinity Debentures are designated as the Replacement
Debentures; and
(c) At its option, Infinity may assign, pursuant to a transaction
satisfying the provisions of Rule 904(a) and 904(b) of the Securities
Act of 1933, as amended (the "Securities Act"), and in conformity with
the applicable regulations and interpretations of the Securities and
Exchange Commission (the "Commission"), a portion of the Designated
Securities.
(d) The Company hereby releases Mohamad Ghaus Khalifa to the same extent as
it releases each of you in accordance with the form of mutual release
described in Section 9 below.
LETTER AGREEMENT - Page 4
(United Petroleum Corporation)
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9.
(a) If the Company fails to deliver shares of Common Stock, without
restrictive legend, by the fifth (5th) New York Stock Exchange trading
day after the applicable date a notice of conversion for the
Convertible Securities is delivered (including delivery via facsimile)
(the "Penalty Date"), the holder of the applicable Convertible
Securities shall receive, as liquidated damages and not as a penalty,
in cash, $2,500 per day for each day (the "Liquidated Damage Amount")
the delivery of such shares is delayed beyond the Penalty Date. Such
sum shall be payable at the end of each calendar week.
(b) If, (i) upon conversion of any of the Convertible Securities the
Company fails to issue the certificate for the shares of Common Stock
issuable upon such conversion (the "Underlying Shares") to the
appropriate holder bearing no restrictive legend, or (ii) the
Commission issues final rules and regulations regarding certain
amendments to Regulation S promulgated under the Securities Act that,
in the reasonable opinion of counsel to the holder of a majority of
Convertible Securities, would cause the Underlying Shares to be
subject to resale restrictions in excess of restrictions that presently
apply to such Underlying Shares, then the Company shall be required,
at the request of any holder of any Convertible Security and at the
Company's expense, to effect the registration of the Common Stock
issuable upon conversion of the applicable Convertible Security under
the Securities Act and relevant blue sky laws as provided below;
provided, that if counsel to the Company delivers an opinion to the
holders of the Convertible Securities, without qualification, that the
resale restrictions alleged pursuant to clause (ii) above will not
apply to the Underlying Shares, then the Company shall not be obligated
to honor the registration request pursuant to such clause (ii). The
holder and the Company shall cooperate in good faith in connection
with the furnishing of the information required in order to effect the
registration. The Company shall file the registration statement within
thirty (30) days of the holder's demand thereof and shall use its best
efforts to cause such registration statement to become effective
within ninety (90) days of the date of the initial filing thereof.
Such best efforts shall include but not be limited to, promptly
responding to all comments received from the staff of the Securities
and Exchange Commission, providing the holder's counsel with a
contemporaneous copy of all written communications from and to the
staff of the Securities and Exchange Commission with respect to such
registration statement and promptly preparing and filing amendments to
such registration statement which are responsive to the comments
received from the staff of the Securities and Exchange Commission.
Once declared effective by the Securities and Exchange Commission, the
Company shall cause such registration statement to remain effective
until the earlier of (i) the sale of all of the shares of Common Stock
issuable upon conversion of any Convertible Security by holder, or (ii)
one hundred twenty (120) days after the effective date of such
registration. If such registration statement is not effective within
ninety (90) days of the initial filing thereof, then, the Company
agrees to (i) increase the interest rate payable on any outstanding
principal and interest due under the Amended Debentures, the Khalifa
Debentures and/or the Infinity Excluded Debenture, and (ii) increase
the Dividend Rate (as defined in the Certificate of Designation)
applicable to the Preferred Shares, in each case by an
LETTER AGREEMENT - Page 5
(United Petroleum Corporation)
<PAGE>
additional two percent (2%) per annum retroactive to the date of the
demand (but not to exceed, in any event, the maximum rate permitted by
applicable law), payable in cash or shares of Common Stock in
accordance with the applicable terms of the Convertible Security until
the date the registration statement becomes effective. Upon receipt of
such a demand from any holder, the Company will give notice to all
holders of the Convertible Security and provide such holders an
opportunity to participate in the registration statement. The Company
shall not be required to file more than two (2) registration statements
with respect to the Convertible Securities.
10. Each of you, your agents and affiliates and any person acting in
concert with you or them, agree not to engage in any "short selling" of the
Company's securities within or outside the boundaries of the United States of
America, and you shall not sell long (or effect a "covered short sale" of) any
shares of Common Stock which you anticipate receiving in connection with the
exercise of a notice of conversion prior to the date on which a notice of
conversion in respect of all of such shares sold is delivered to the Company.
Notwithstanding the foregoing, a notice of conversion in respect of such shares
may be sent to the Company up to three (3) business days following the date of
any conversion (which date shall (i) be specified in such notice and (ii) serve
as the reference date for determining the conversion price applicable to that
conversion). Notwithstanding any of the provisions hereof, each of you agrees
that you will not sell, assign or otherwise transfer or exercise any conversion
rights with respect to, any of the Amended Debentures or Preferred Shares prior
to July 1, 1997; however, such prohibition shall not prevent (i) the issuance of
shares of Common Stock pursuant to Section 1 hereof or (ii) the sale of any
shares of Common Stock issued in accordance with the terms of this Letter
Agreement and of the applicable Convertible Security.
11. Contemporaneous herewith, the Company and each of you
will enter into a mutual release in the form attached hereto as Exhibit E.
12. To the extent consistent with applicable law, each of you agree
that you will support retention of current management of the Company at any
special or annual stockholders meeting held while any Convertible Securities are
outstanding and further that you shall not commence, directly or indirectly, any
proxy solicitation adverse to such current management. This agreement of each of
you set forth in this Section 12 shall be null and void if the Company, any of
its officers or employees, or any of their respective affiliates, breach the
terms of this Letter Agreement, or of any of the Exhibits attached hereto.
13. Contemporaneous herewith the Company shall enter into a
Noncompetition Agreement with Michael F. Thomas in the form attached hereto as
Exhibit F.
14. Contemporaneously herewith, the Company shall receive a letter
from Morton Robson, Esq., counsel to the Company, substantially in the form
attached hereto as Exhibit G.
15. For good and valuable consideration, including the agreements of
the parties set forth herein, the Company hereby agrees that it shall not, and
shall not agree to, sell or offer to sell any of its equity securities (or
securities convertible into or exchangeable or exercisable for equity
securities, including warrants), other than offerings in connection with mergers
and
LETTER AGREEMENT - Page 6
(United Petroleum Corporation)
<PAGE>
acquisitions, offerings pursuant to compensatory plans that are approved by the
Company's shareholders, in a "firm commitment" underwritten offering, or as
reasonable compensation for services rendered; provided, such prohibition shall
not apply to securities that are not convertible, exchangeable or exercisable
for shares of Common Stock which are either freely tradable, or freely tradable
upon the effectiveness of a registration which the Company may file with the
Securities and Exchange Commission, prior to January 1, 1999.
16. The holders of the Preferred Shares, by majority vote amongst the
holders thereof, may, at their option, cause the election of one (1) Director to
the Company's Board of Directors, which Director may only be removed by a
majority vote of the holders of the Preferred Shares, but who shall resign from
the Board at such time as no Preferred Shares are outstanding. Such persons
shall not, however, be an individual who would cause any of you to be deemed
affiliates of the Company. Each of you, amongst yourselves as holders of the
Preferred Shares, hereby agree to be bound by the terms of this Section 16 as a
voting agreement among shareholders of the Company.
17. The Company hereby agrees to pay by wire transfer of funds on the
date hereof all reasonable fees and expenses of (i) Arter & Hadden, in
connection with the transactions contemplated herein and associated with
Infinity's purchase of the Khalifa Debentures, provided such amounts shall not
exceed $15,000 in the aggregate, and (ii) David Kagel, Esq., associated with the
transactions contemplated herein, provided such amounts shall not exceed $5,000
in the aggregate.
18. The Company hereby represents and warrants that the transactions
contemplated by this Letter Agreement have been approved by all necessary action
by the officers, directors and shareholders (if applicable) of the Company, and
that the shares of Common Stock issuable without restrictive legend upon
conversion of the Convertible Securities will be duly and validly issued and
outstanding, fully paid and nonassessable, free and clear of any claims or
preemptive rights, and will have been issued in compliance with all applicable
U.S. Federal and state securities laws. In addition, as long as any of the
Convertible Securities are outstanding, the Company hereby covenants and agrees
to have authorized and reserved for the purpose of issuance upon conversion a
sufficient number of shares of Common Stock to provide for the conversion into
shares of Common Stock of all of the Convertible Securities outstanding at the
then effective conversion price. The Company further covenants and agrees to
include and support a proposal in connection with the next annual or special
meeting of stockholders of the Company which seeks the approval of such
stockholders to amend the Certificate of Incorporation of the Company to
increase the number of shares of Common Stock authorized thereunder to not less
than 100,000,000 and to approve such other amendments, actions or transactions
as are necessary to consummate the transactions contemplated hereby.
19. Notwithstanding any provision herein or in any Convertible
Security to the contrary, the Company and each of you expressly hereby agree
that in no event whatsoever shall the amount paid or agreed to be paid by the
Company for the use, forbearance or detention of money associated with any
Convertible Security, or otherwise for the payment or performance of any
covenant or obligation contained herein or in any Convertible Security, exceed
the maximum amounts permissible under applicable law. If, from any circumstance
whatsoever, fulfillment of
LETTER AGREEMENT - Page 7
(United Petroleum Corporation)
<PAGE>
any provision hereof or of any Convertible Security, shall involve exceeding
such rates prescribed by applicable usury law, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if from any such
circumstance, any of you shall ever receive interest or anything which might be
deemed interest under applicable law which would exceed the highest lawful rate,
such amount which would be excessive interest shall be applied to the reduction
of the principal owing on account of the applicable Convertible Security (or the
amounts owing on other obligations of the Company to you hereunder) and not to
the payment of interest, or if such excessive interest exceeds the unpaid
balance of the applicable Convertible Security (or the amounts owing on other
obligations of the Company to you hereunder), as the case may be, such excess
shall be refunded to the Company. All sums paid or agreed to be paid to you for
the use, forbearance, or detention of any Convertible Security shall, to the
extent permitted by applicable law (i) be amortized, prorated, allocated, and
spread throughout the full term of such Convertible Security until payment in
full so that the actual rate of interest on account of such Convertible Security
does not exceed the maximum amount permissible under applicable law now or
hereafter amended, (ii) be characterized as a fee, expense or other charge,
other than interest, and/or (iii) exclude any voluntary prepayments or
redemptions and the effects thereof.
20. The Company hereby restates all representations and warranties of
the Company set forth in Subscription Agreements, each of which the Company
represents and warrants are true and correct as of the date hereof. Each of you
hereby restate all of your representations and warranties set forth in your
applicable Subscription Agreement, each of which you represent and warrant are
true and correct as of the date hereof. Without limiting the foregoing, the
Company and each of you hereby agree that in so restating such representations
and warranties the term Securities as defined in the Subscription Agreements
shall be deemed to include the Preferred Shares and the Amended Debentures (and
the shares of Common Stock issuable upon conversion thereof), each issued
pursuant to the terms of this Letter Agreement (collectively, the "Prior
Representations"). The Company and Infinity, respectively, by their signatures
hereto, shall be deemed to have made to each other the applicable Prior
Representations with respect to the Company's issuance to Infinity of the Newly
Issued Debenture.
21. In the event of any inconsistency between the terms of this Letter
Agreement and the terms of any Convertible Security or other document executed
in connection herewith, the terms of this Letter Agreement shall control to the
extent necessary to resolve such inconsistency.
22. This Letter Agreement, and the terms of each Convertible Security,
shall be governed by Delaware law.
[Signature Page Follows]
LETTER AGREEMENT - Page 8
(United Petroleum Corporation)
<PAGE>
This Letter Agreement may be executed in one or more counterparts
and by facsimile signature. This Letter Agreement shall be effective upon the
execution below by each of you.
Very truly yours,
UNITED PETROLEUM CORPORATION
By: /s/ Michael F. Thomas
---------------------------
Title: President
ACKNOWLEDGED AND AGREED TO:
INFINITY INVESTORS LIMITED
By: /s/ J. A. Loughran
-------------------------
Title: Director
SEACREST CAPITAL LIMITED
By: /s/ James E. Martin
-------------------------
Title: President
FAIRWAY CAPITAL LIMITED
By: /s/ James E. Martin
-------------------------
Title: President
/s/ DAN DOTAN agent
- ---------------------------
DAN DOTAN
LAKE MANAGEMENT, LDC
By: Field Secretaries (Cayman) Limited,
Title: Kelly Ireland
Assistant Manager--Mutual Funds
Secretary, Neall Brooks,
Manager Mutual Funds
LETTER AGREEMENT - Page 9
(United Petroleum Corporation)
<PAGE>
SCHEDULE 1
CURRENT HOLDERS OF CONVERTIBLE DEBENTURES
Holder Address
Infinity Investors Limited 27 Wellington Road
Cork, Ireland
Seacrest Capital Limited 27 Wellington Road
Cork, Ireland
Fairway Capital Limited 27 Wellington Road
Cork, Ireland
Dan Dotan 12 Frishman Street
Apartment 1
Tel Aviv, Israel
or
c/o H.W.R. Services, Ltd.
Crigmuir Chambers
P.O. Box 71
Road Town, Tortula
British Virgin Islands
Lake Management, LDC c/o Field Securities
(Cayman), Ltd. Butterfield
House, Fort Street Grand
Cayman, Cayman Islands
British West Indies
<PAGE>
SCHEDULE 2
CONVERTIBLE DEBENTURES AS ORIGINALLY ISSUED
Aggregate Principal
Value of Debentures Date of Issuance
------------------- ----------------
Infinity Investors Limited $7,100,000 08/09/96
Infinity Investors Limited $5,000,000 08/15/96
Seacrest Capital Limited $1,250,000 09/11/96
Fairway Capital Limited $1,250,000 09/11/96
Dan Dotan $1,060,000 09/30/96
Lake Management, LDC $ 700,000 05/01/96
Lake Management, LDC $2,500,000 08/01/96
Mohamad Khalifa $2,000,000 10/01/96
(Debentures to be transferred
to Infinity Investors Limited
as of the date hereof)
<PAGE>
SCHEDULE 3
A. AMOUNT OF DEBENTURES CONVERTED
CONVERSION DATE
(2/3 OF 1%)
SHARES DELIVERED AT SIGNING OF TERM SHEET:
Principal Amount Accrued Interest Number of Shares
Covered Converted @ $0.50 Per Share
Infinity Investors
Limited(1) $0 $0 N/A
Infinity Investors
Limited(1) $0 $0 N/A
Seacrest Capital
Limited(2) $169,200.000 $14,238.66 366,877
Fairway Capital Limited $169,200.000 $14,238.66 366,877
Dan Dotan(3) $0 $0 N/A
Lake Management(3) $0 $0 N/A
Lake Management(3) $0 $0 N/A
Mohamed Khalifa (Infinity) $0 $0 N/A
B. AMOUNT OF DEBENTURES CONVERTED
ON EFFECTIVE DATE
(1/3 OF 1%)
Principal Amount Accrued Interest Number of Shares
Covered Converted @ $0.50 Per Share
Infinity Investors
Limited(1) $0 $0 N/A
Infinity Investors
Limited(1) $0 $0 N/A
Seacrest Capital
Limited(2) $84,600.000 $7,703.43 184,607
Fairway Capital Limited $84,600.000 $7,703.43 184,607
Dan Dotan(3) $32,000.000 $1,157.33 66,315
Lake Management(3) $28,000.000 $ 898.83 57,798
Lake Management(3) $55,600.000 $1,797.65 114,795
Mohamed Khalifa (Infinity) $0 $0 0
Footnote:
(1) Per request of fund manager the 4% conversion was included in the
conversions of Fairway and Seacrest.
(2) Accrued interest based on principal balance for Seacrest and Fairway.
(3) These Holders did not receive the initial 2/3 of 4% conversion and the
entire conversion is listed in Schedule 3B.
(4) Per terms of Letter Agreement these shares have not been delivered pending
delivery of Subsequent Notice.
<PAGE>
SCHEDULE 4
ADDITIONAL COMMON SHARES ISSUED
AS OF APRIL 30, 1997
<TABLE>
<CAPTION>
Number of Number of
Accrued and Shares Based Section 1
Unpaid Interest on Accrued and Shares
Holder through 4/30 Unpaid Interest (Bonus Shares)
<S> <C> <C> <C>
Infinity Investors Limited(1) $34,181.10 63,362 90,000
Infinity Investors Limited(1) $24,657.53 49,315 106,938
Seacrest Capital Limited(1) $ 4,753.53 9,507 11,173
Fairway Capital Limited(1) $ 4,753.53 9,507 11,173
Dan Dotan $27,776.00 55,552 14,400
Lake Management $35,183.35 70,367 12,600
Lake Management $57,089.49 114,179 25,020
Mohamed Khalifa (Infinity) $58,602.74 117,205(2) N/A
</TABLE>
Footnotes:
(1) Per terms of Letter Agreement these shares, save and excepting 37,261
shares issued to Infinity Investors Limited, have not been issued pending
delivery of Subsequent Notice.
(2) All shares are to be issued to Infinity Investors Limited. Per terms of
Letter Agreement these shares have not been delivered pending delivery of a
Subsequent Notice.
<PAGE>
SCHEDULE 5
PORTION OF DEBENTURES
CONVERTED INTO PREFERRED STOCK
(AFTER GIVING EFFECT TO INFINITY ELECTION
PURSUANT TO SECTION 8 AND FOLLOWING 10% PRINCIPAL REDUCTION)
Portion of Shares of Preferred
Debentures Stock Received
Holder Converted ($1,000 Liquidation Preference)
Infinity Investors Limited(1) 13/18ths 7,918
Seacrest Capital Limited -0- -0-
Fairway Capital Limited -0- -0-
Dan Dotan 18/18ths 691
Lake Management 13/18ths 436
Lake Management 13/18ths 867
Footnote:
(1) Remaining Balance after giving effect to election pursuant to Section 8
and prior to 10% Reduction is $10,964,160.
Excluded Debentures (Principal at May 1, 1997)
Infinity Investors Limited $1,175,266(1)
Seacrest Capital Limited $620,700
Fairway Capital Limited $620,700
$2,416,666
==========
(1) $400,000 principal amount has been trasferred to Lake Management LDC
pursuant to Section 8 of the Letter Agreement. Hence the remaining Infinity
Investor Limited Debenture balance is $775,266 and Lake Management LDC will
retain its original Debenture in the aggregate principal amount of $400,000.
<PAGE>
SCHEDULE 6
AMENDED AND RESTATED DEBENTURES
(GIVING EFFECT TO INFINITY ELECTION PURSUANT TO SECTION 8)
Remaining Aggregate Principal
Balance of
Holder Amended and Restated Debentures
Infinity Investors Limited $3,046,160
Seacrest Capital Limited $-0-
Fairway Capital Limited $-0-
Dan Dotan $-0-
Lake Management, LDC $501,000
Excluded Debentures (Principal at May 1, 1997)
Infinity Investors Limited $1,175,266(1)
Seacrest Capital Limited $620,700
Fairway Capital Limited $620,700
$2,416,666
==========
(1) $400,000 principal amount has been trasferred to Lake Management LDC
pursuant to Section 8 of the Letter Agreement. Hence the remaining Infinity
Investor Limited Debenture balance is $775,266 and Lake Management LDC will
retain its original Debenture in the aggregate principal amount of $400,000.
SHARES TO BE ORDERED FOR CLOSING
1% Plus Accrued & Bonus Total
Holder Interest Unpaid Interest Shares Common Shares
Infinity Investors, Ltd. .... 0 37,261 0 37,261
Infinity Investors, Ltd. .... 0 0 0 0
Seacrest Capital ............ 0 0 0 0
Fairway Capital ............. 0 0 0 0
Dan Dotan ................... 66,315 55,552 14,400 136,267
Lake Management ............. 57,798 70,367 12,600 140,765
Lake Management ............. 114,795 114,179 25,020 253,994
<PAGE>
EXHIBIT A
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A
CONVERTIBLE PREFERRED STOCK OF
UNITED PETROLEUM CORPORATION
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority
conferred upon the Board Directors of this Corporation in accordance with the
provisions of the Certificate of Incorporation there is hereby established a
series of the authorized preferred stock of the Corporation which series shall
be designated as "Series A Cumulative Convertible Preferred Stock," and which
shall consist of ten million shares (10,000,000) (collectively the "Series A
Shares" or singularly, a "Series A Share") and shall have the following dividend
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and other rights, qualifications, limitations and restrictions.
1. DIVIDEND RIGHTS
1.1 A. The holder of record of each Series A Share (a
"Holder") as of the Record Date (as defined below) shall be entitled to receive,
when, as and if declared by the Corporation's Board Directors or a duly
authorized committee thereof, on January 1, April 1, July 1 and October 1 of
each year (a "Dividend Payment Date"), at the option of the Corporation, either
(i) out of the funds of the Corporation legally available therefor, cumulative
dividends per Series A Share (the "Cash Dividends") in cash equal to the "Cash
Rate" (as hereinafter defined) multiplied by the Liquidation Preference (as
defined in Paragraph 2 and as adjusted pursuant Paragraph 1.1.D below) for each
Quarterly Payment Period (as hereafter defined) that such Series A Share is
outstanding; or (ii) cumulative dividends per Series A Share (the "PIK
Dividends") equal to the "PIK Rate" as hereafter defined multiplied by the
Liquidation Preference (as adjusted pursuant to Paragraph 1.1.D below) for each
Quarterly Payment Period that such Series A Share is outstanding. On or prior to
each applicable Dividend Payment Date, the Corporation shall deliver a notice of
election indicating whether dividends will be paid in cash or in shares of
common stock of the Corporation ("Common Stock"). If such notice is not
delivered prior to the applicable Dividend Payment Date, dividends shall be paid
in shares of common stock. To the extent permitted by applicable law and not
prohibited pursuant to the terms of applicable credit instruments, senior
securities or the Certificate of Designation, the Board of Directors shall
declare either Cash Dividends or PIK Dividends (collectively referred to herein
as the "Dividends") on
CERTIFICATE OF DESIGNATION - Page 1
(United Petroleum Corporation)
<PAGE>
each Dividend Payment Date (or, if such day is not a business day, on the next
business day thereafter).
B. A "Quarterly Payment Period" shall mean the
three-month period ending on March 31, June 30, September 30 and December 31 of
each year.
C. The "Cash Rate" and the "PIK Rate" shall
mean an annual dividend rate of 18% (i.e., a quarterly dividend rate of 4.5%).
The Cash Rate and PIK Rate shall be collectively referred to as the "Dividend
Rate." If the Corporation, at its option, determines to pay PIK Dividends, the
number of shares of Common Stock issuable in connection therewith shall be
determined by the Market Price (as hereafter defined) for the five (5)
consecutive trading days ending on the Dividend Payment Date.
D. Dividends shall accrue (whether or not paid)
during each Quarterly Payment Period from the Dividend Payment Date immediately
preceding such Quarterly Payment Period to the earlier to occur of a conversion
event specified in Paragraph 4 hereof or the last day of such Quarterly Payment
Period. Dividends shall be calculated on the basis of a 90-day Quarterly Payment
Period and the actual number of days elapsed. The Holder of any Series A Shares
which are the subject of a conversion pursuant to Paragraph 4 shall, on the
Conversion Date (as defined in Paragraph 4.6), be entitled to receive, to the
extent lawful, accrued Dividends on such Series A Shares which have not been
declared and paid on or before such Conversion Date. In addition, in the event a
conversion of Series A Shares is effected after a Redemption Notice (as defined
in Paragraph 5.2) is delivered by the Corporation but prior to a Redemption
Date, then, to the extent lawful, the Corporation shall pay to such Holder an
amount equal to all accrued and unpaid Dividends (whether or not declared) from
the last Dividend Payment Date until the date the converting Holder delivered
its notice of conversion pursuant to Paragraph 4.6. For any period with respect
to which the Dividend is not fully paid in cash as described herein (as a result
of a lawful restriction thereon or otherwise), such accrued but unpaid Dividends
shall be added to the Liquidation Preference of the Series A Shares effective at
the beginning of the period next succeeding the period as to which such
Dividends were not paid, and shall thereafter accrue additional Dividends at the
Dividend Rate. Any Dividend payment made on Series A Shares shall be credited
against the earliest accrued but unpaid Dividend which has been added to the
Liquidation Preference of the Series A Shares pursuant to this Paragraph 1.1.D
and shall reduce the Liquidation Preference by the amount of the Dividend paid.
1.2 Dividends, if and when declared on each Series A Share,
shall to the extent permitted by applicable law be declared at least twenty (20)
business days prior to the next Dividend Payment Date for payment on the next
Dividend Payment Date
CERTIFICATE OF DESIGNATION - Page 2
(United Petroleum Corporation)
<PAGE>
to the Holders of record on the date determined in such declaration, which date
shall in no event be more than fifteen (15) business days after the date of
declaration (the "Record Date"). Dividends shall be
payable, whether or not declared, on the earlier to occur of a conversion event
specified in Paragraph 4 hereof or a redemption transaction described in
Paragraph 5 herein or each Dividend Payment Date (or if any such day is not a
business day, the next succeeding business day).
1.3 So long as any Series A Shares are outstanding, the
Corporation shall not declare, pay or set aside for payment any dividend (other
than in shares of Junior Stock (as hereinafter defined)) or other distribution
in respect of its Junior Stock, or call for redemption, redeem, purchase or
otherwise acquire for any consideration (other than shares of its Junior Stock)
any shares of its Junior Stock, any warrants, rights, calls or options
exercisable for any shares of Junior Stock unless all dividends accumulated and
unpaid with respect to the Series A Shares are simultaneously declared and paid.
"Junior Stock" means Common Stock (as hereinafter defined) or any other series
of preferred stock of the Corporation which ranks junior to or on a parity with
(as determined pursuant to Paragraph 6) the Series A Shares. "Common Stock"
means the common stock of the Corporation and any share of successor or
replacement stock.
1.4 Each Holder shall be entitled to participate with the
holders of Common Stock equally and ratably (on the basis of the number of
shares of Common Stock such Holder would then own if it then converted its
Series A Shares pursuant to Paragraph 4) in any subscription rights or other
similar rights to acquire securities or property of the Corporation granted to
any holder of Common Stock.
2. RIGHTS ON LIQUIDATION AND RANKING
2.1 In the event of the liquidation, dissolution, winding-up
or sale or other disposition of all or substantially all of the assets of the
Corporation, whether voluntary or involuntary ("Liquidation"), the Holder of a
Series A Share shall be entitled to receive with respect to such Series A Share,
after the satisfaction of all distributions to holders of other series of
preferred stock, if any, which are required (at the direction of the holder
thereof or otherwise) to be redeemed prior to or in connection with the
consummation of such Liquidation or which are expressly senior in liquidation
preference to the Series A Shares, including any series of preferred stock which
is mandatorily redeemable (collectively, the "Senior Payments") but before any
distribution is made to or set aside for the holders of Common Stock or any
other series of preferred stock of the Corporation, if any, which are not then
required to be redeemed or which are junior in liquidation preference to the
Series A Shares, cash or any other assets of the Corporation in an amount (or
having a fair market
CERTIFICATE OF DESIGNATION - Page 3
(United Petroleum Corporation)
<PAGE>
value) equal to One Thousand Dollars ($1,000) per share (the "Liquidation
Preference") plus all accrued but unpaid Dividends up to the date of the final
distribution in Liquidation. If, after the satisfaction of all Senior Payments,
the assets of the Corporation available for distribution to
Holders shall be insufficient to permit the payment in full of the amount due
the Holders pursuant to this Paragraph 2, then the entire assets of the
Corporation available for distribution to Holders after the satisfaction of all
Senior Payments shall be distributed pari passu among the Holders and the
holders of other series of preferred stock which are not junior in liquidation
preferences to the Series A Shares, if any, in accordance with their respective
liquidation preferences. The fair market value of any assets of the Corporation
and the proportion of cash and other assets distributed by the Corporation to
the Holders of the Series A Shares shall be reasonably determined in good faith
by the Board of Directors. A consolidation or merger of the Corporation with or
into any other corporation or corporations, or a sale of all or substantially
all of the assets of the Corporation, shall, at the option of the holders of the
Series A Shares, be deemed a liquidation, dissolution or winding up within the
meaning of this Section 2 if the shares of stock of the Corporation (along with
all derivative securities) outstanding immediately prior to such transaction
represent immediately after such transaction less than a majority of the voting
power of the surviving corporation (or of the acquirer of the Corporation's
assets in the case of a sale of assets). Such option may be exercised by the
vote or written consent of holders of a majority of the Series A Shares at any
time within thirty (30) calendar days after written notice of the essential
terms of such transaction shall have been given to the holders of the Series A
Shares in the manner provided by law for the giving of notice of meetings of
shareholders. Such notice shall be given by the Corporation immediately
following determination of such essential terms.
2.2 With regard to rights to receive distributions upon
Liquidation of the Corporation and dividends, the Series A Shares shall rank
senior to the Common Stock and any other equity securities of the Corporation
that by their terms are not made senior to or on a parity with the Series A
Shares as to such rights.
3. VOTING RIGHTS
3.1 Except as otherwise provided in Paragraphs 3.2 and 3.3
below, each Holder shall have the same voting rights as a holder of the number
of shares of Common Stock which such Holder would then own if it then converted
its Series A Shares pursuant to Paragraph 4.
3.2 So long as any of the Series A Shares are outstanding the
Corporation will not, without the affirmative vote
CERTIFICATE OF DESIGNATION - Page 4
(United Petroleum Corporation)
<PAGE>
or consent of the Holders of at least seventy percent (70%) of the Series A
Shares at the time outstanding, given in person or by proxy, either in writing
or by a resolution adopted at a meeting called for such purpose, with the
Holders of the Series A Shares voting or consenting separately as a class:
A. amend, alter or repeal any of the provisions of
the Corporation's Certificate of Incorporation or Bylaws or
the resolution providing for the issue of the Series A Shares
or pass any shareholder resolution, including such action
effected by merger or similar transaction in which the
Corporation is the surviving corporation, if such amendment or
resolution would affect adversely the preferences, special
rights or powers of the Series A Shares except if such action
is otherwise permitted under the other provisions of this
Paragraph 3.2;
B. increase or decrease (other than by redemption
or conversion) the total number of authorized Series A Shares;
C. issue any capital stock which ranks senior
to or on a parity with the Series A Shares with respect
to rights to receive distributions upon liquidation,
dissolution, or winding up of the Corporation or with
respect to dividends; or
D. purchase or otherwise acquire for value any Common
Stock or other equity security of the Corporation either
junior or senior to or on a parity with the Series A Shares
while there exists any arrearage in the payment of cumulative
dividends hereunder.
3.3 In the event of an issuance by means of a stock split,
reverse split or stock dividend or other similar event or reclassification of
shares of Common Stock outstanding, the voting rights of the Series A Shares
shall be fairly and equitably (in the judgment of the Board of Directors of the
Corporation) adjusted at the same time and in the same manner as the adjustment
is made in the rights of the Common Stock in order to maintain the same voting
rights as the Series A Shares had on the date of issuance.
3.4 Copies of all notices sent to the holders of Common
Stock shall be simultaneously sent to each Holder.
4. CONVERSION RIGHTS - COMMON STOCK
4.1 NUMBER OF SERIES A SHARES. Each Series A Share shall be
convertible, at the option of the Holder thereof, at any time and from time to
time commencing on or after July 1, 1997 into that number of shares of Common
Stock, obtained by dividing the Liquidation Preference (including any Dividends
added to
CERTIFICATE OF DESIGNATION - Page 5
(United Petroleum Corporation)
<PAGE>
Liquidation Preference pursuant to Paragraph 1.1.D) of such Series A
Share by the "Conversion Price" determined in accordance with Paragraph 4.2.
Notwithstanding the foregoing, the Holder shall not be entitled to convert more
than 1/13th of the Liquidation Preference of all Series A Shares issued to such
Holder in each calendar month, on a cumulative basis, commencing July 1, 1997
(such that the entire Liquidation Preference of such Series A Shares shall be
convertible by August 1, 1998). Further, at the option of the Corporation
exercisable by written notice between October 7 and October 10, 1999, each
Series A Share outstanding on October 10, 1999 shall automatically be converted
into Common Stock on such date at the Mandatory Conversion Price (as hereafter
defined) and October 10, 1999 shall be deemed the Conversion Date with respect
to such conversion without the requirement of the delivery of a Notice of
Conversion, provided such automatic conversion shall not occur if, at such time,
the Corporation is in default of any of its obligations hereunder or under any
other contractual agreement with any Holder of Series A Shares or under any of
the Corporation's outstanding convertible debentures. As used herein, the
"Mandatory Conversion Price" shall mean the Market Price for the five (5)
consecutive trading days ending on and including October 9, 1999.
4.2 CONVERSION PRICE. The Conversion Price shall be equal to
the lesser of (x) $3.00 (as adjusted pursuant to the following clauses) and (y)
the greater of (i) the Fixed Conversion Price (as hereinafter defined) and (ii)
the Market Price of the Common Stock (as defined in Paragraph 4.10 below) for
the five (5) consecutive trading days immediately preceding the Conversion Date
(the "5 Day Average"); provided, if the Monthly Price for the preceding month is
greater than $3.00 (the "Ceiling Price"), then the Ceiling Price for such month
shall be the greater of (X) $3.00 and (Y) 66-2/3rds% of the Monthly Price for
such preceding month. The "Fixed Conversion Price" shall be equal to the
following:
$2.50 per share through September 30, 1997;
$2.00 per share from October 1, 1997 through
December 31, 1997;
$1.50 per share from January 1, 1998 through
March 31, 1998;
$1.00 per share after April 1, 1998;
in each case adjusted as follows:
if the Market Price for the trading days in the
applicable calendar month (the "Monthly Price") of the Common
Stock for any calendar month commencing October 1997 is
greater than the Fixed Conversion Price, then the Fixed
Conversion Price shall be the greater of the Fixed Conversion
Price and 66-2/3rds% of the Monthly Price for the preceding
calendar month. The Fixed Conversion Price
CERTIFICATE OF DESIGNATION - Page 6
(United Petroleum Corporation)
<PAGE>
and Ceiling Price shall each be adjusted as set forth in
Section 4.4 hereof.
4.3 CONVERSION AND REDEMPTION. In case any Series A Share is
called for redemption, the right to convert such Series A Share shall terminate
with respect to all Series A Shares for which a Notice of Conversion (as defined
in Paragraph 4.6 below) shall not have previously been delivered to the
Corporation pursuant to the procedures described in Paragraph 5.2 below at the
close of business on the date which is five (5) business days preceding the
Redemption Date (as defined in Paragraph 5.2 below); provided that no default by
the Corporation in the payment of the applicable Redemption Price (as defined in
Paragraph 5.1) shall have occurred and be continuing.
4.4 ADJUSTMENT OF CONVERSION PRICE. In the event that during
any period of consecutive trading days provided for above, the Corporation shall
declare or pay any dividend on the Common Stock payable in Common Stock or in
rights to acquire Common Stock, or shall effect a stock split or reverse stock
split, or a combination, consolidation or reclassification of the Common Stock,
then the Conversion Price shall be proportionately decreased or increased, as
appropriate, to give effect to such event.
4.5 CONVERSION UPON REORGANIZATION. In case of any
reorganization or any reclassification of the capital stock of the Corporation
or any consolidation or merger of the Corporation with or into any other
corporation or corporations or a sale of all or substantially all of the assets
of the Corporation to any other person, and the holders of Series A Shares do
not elect to treat such transaction as a liquidation, dissolution or winding up
as provided in Section 2, then, as part of such reorganization, consolidation,
merger or sale, provision shall be made so that each Series A Share shall
thereafter be convertible into the number of shares of stock or other securities
or property (including cash) to which a holder of the number of shares of Common
Stock deliverable upon conversion of such Series A Shares would have been
entitled upon the record date of (or date of, if no record date is fixed) such
event and, in any case, appropriate adjustment (as determined by the Board of
Directors) shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the holders of the Series
A Shares, to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as equivalent as is practicable, in relation to any shares
of stock or the securities or property (including cash) thereafter deliverable
upon the conversion of the Series A Shares.
4.6 CONVERSION METHOD. Any Holder of Series A Shares may, at
any time prior to the close of business on the date which is two (2) business
days prior to the Redemption Date (as hereafter defined)
CERTIFICATE OF DESIGNATION - Page 7
(United Petroleum Corporation)
<PAGE>
for such Series A Shares, exercise the conversion rights as to such Series A
Shares by delivering to the Corporation during regular business hours, a notice
requesting conversion on a specified date and the number of Series A Shares that
the Holder elects to convert (a "Notice of Conversion"). The Notice of
Conversion shall also state the names and addresses of the persons to whom
certificates for shares of Common Stock shall be issued, the denominations of
such certificates and reasonable delivery instructions with respect thereto. The
term Conversion Date shall mean the date so specified in the applicable Notice
of Conversion, which date may not be more than three (3) trading days prior to
the date on which the Holder has telecopied to the Corporation such Notice of
Conversion. Promptly following each Conversion Date, each Holder shall surrender
to the Corporation the Certificate or Certificates representing the specified
portion of the total number of Series A Shares held by such Holder subject to
the Notice of Conversion, duly endorsed, at the offices of the Corporation;
provided, the conversion shall be deemed effected on the Conversion Date so long
as such Certificate or Certificates are delivered to the Corporation within
three (3) business days of the date of the Notice of Conversion. The person in
whose name any certificate for shares of Common Stock is issuable upon the
conversion shall be deemed to have become the holder of record of the Common
Stock on the Conversion Date. If the stock transfer books of the Corporation are
closed on the Conversion Date, the Conversion Date for purposes of determining
record ownership shall be the next succeeding day on which the stock transfer
books are open (and the conversion shall be deemed to have been effected
immediately prior to the close of business on that day), but in all cases the
conversion shall be at the Conversion Price in effect on the Conversion Date
specified in the Notice of Conversion. As promptly as practicable after the
Conversion Date but in any event within three (3) trading days of the receipt of
the Notice of Conversion, the Corporation shall, and shall use its best lawful
efforts to cause its transfer agent to, issue and deliver to such Holder, at the
expense of the Corporation and in accordance with such Holder's delivery
instructions, a certificate or certificates for the number of full shares of
Common Stock to which such Holder is entitled, without any restrictive legend,
and cash with respect to any fractional interest in a share of Common Stock as
provided in Paragraph 4.7 below.
4.7 FRACTIONAL SHARES OF COMMON STOCK. No fractional shares of
Common Stock or scrip shall be issued upon conversion of Series A Shares. If
more than one Series A Share shall be surrendered for conversion at any one time
by the same Holder, the number of full shares of Common Stock issuable upon
conversion of such Series A Shares shall be computed on the basis of the
aggregate number of Series A Shares so surrendered. Instead of any fractional
shares of Common Stock which otherwise would be issuable upon conversion of any
Series A Shares, the Corporation shall pay a cash adjustment in respect of such
fractional interest based upon
CERTIFICATE OF DESIGNATION - Page 8
(United Petroleum Corporation)
<PAGE>
the Conversion Price in effect at the close of
business on the last business day prior to the Conversion Date.
4.8 TAXES. All shares of Common Stock issued upon conversion
of Series A Shares will be validly issued, fully paid and nonassessable. The
Corporation shall pay any and all documentary stamp or similar issue or transfer
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series A Shares pursuant hereto. The Corporation
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of shares of Common Stock in
a name other than that in which the Series A Shares so converted were
registered, and no such issue or delivery shall be made unless and until the
person requesting such transfer has paid to the Corporation the amount of any
such tax or has established to the satisfaction of the Corporation that such tax
has been paid or that no such tax is payable.
4.9 SURRENDERED SERIES A SHARES. All certificates representing
Series A Shares converted or redeemed shall be appropriately canceled on the
books of the Corporation and the Series A Shares so converted or redeemed
represented by such certificates shall be restored to the status of authorized
but unissued Series A Shares. Promptly following the delivery of certificates
representing Series A Shares which are not fully converted or redeemed, the
Corporation shall immediately reissue in the name of the Holder an appropriate
number of Series A Shares.
4.10 MARKET PRICE. The term "Market Price" on any day shall
mean the closing bid price per share of the Common Stock as reported by
Bloomberg, L.P. on the Nasdaq National Market, or on such exchange as the Common
Stock is then traded. When referred to herein, a "trading day" shall mean a
business day in which the principal market on which the Common Stock is traded
is open for trading for at least four (4) hours. If at the time of any
computation pursuant to this Paragraph 4.10 the Common Stock is not then traded
on any trading market, the "Market Price" for the purposes hereof shall be the
fair value as reasonably determined in good faith by the Board of Directors of
the Corporation.
4.11 AVAILABLE COMMON STOCK. The Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of Series A
Shares, such number of shares of Common Stock as shall from time to time be
sufficient to effect a conversion of all outstanding Series A Shares under
Paragraph 4.1, as such number may from time to time be adjusted pursuant to
Paragraphs 4.4 and 4.5, and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
then outstanding Series A Shares, the Corporation shall promptly take such
corporate action as may, in
CERTIFICATE OF DESIGNATION - Page 9
(United Petroleum Corporation)
<PAGE>
the opinion of its counsel and subject to any
necessary approval of its shareholders, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
4.12 NOTICE TO HOLDERS. In the event (i) the Corporation shall
declare a dividend or other distribution on the Common Stock other than regular
cash dividends declared in the ordinary course or dividends or other
distributions payable in Common Stock, (ii) the Common Stock is subdivided,
combined or reclassified, (iii) of a merger or consolidation, (iv) of a
Liquidation, or (v) the Corporation offers for subscription pro rata to holders
of Common Stock any additional shares of stock of any class or series or other
rights, then the Corporation shall mail to each Holder at the Holder's address
as it appears in the stock records of the Corporation, promptly and in any event
at least 15 days prior to the date described in clause (a) below, a notice
stating (a) the date for the determination of holders of Common Stock entitled
to receive the distribution, subscription rights or the consideration in the
merger, consolidation or liquidation, or the date of determination as to which
shares of Common Stock will be affected by a subdivision, combination,
reclassification, (b) a brief statement of the facts requiring such notice, and
(c) if applicable, that the Conversion Price shall be adjusted in accordance
with this Paragraph 4.4. Upon any adjustment in the Conversion Price, the
Corporation shall mail to each Holder at the Holder's address as it appears in
the stock records of the Corporation a notice setting forth the adjusted
Conversion Price and the method of calculation thereof, provided that if such
address is outside of the United States, then such notice shall be sent by
facsimile transmission (if such Holder shall have provided a facsimile number).
4.13 CONCLUSIVE DETERMINATION. Whenever the Fixed Conversion
Price is adjusted as herein provided, the Corporation shall promptly prepare a
certificate of a firm of independent public accountants regularly employed by
the Corporation setting forth the adjusted Fixed Conversion Price, along with a
brief statement of the facts requiring the adjustment and the manner of
computing the adjustment, which certificate shall be conclusive evidence of the
correctness of the adjustment, absent manifest error.
5. REDEMPTION RIGHTS
5.1 VOLUNTARY REDEMPTION. The Corporation may, at any time, at
its option and following at least twenty (20) business days prior written notice
redeem (a "Redemption") for cash at the Redemption Price (as hereafter defined),
from funds legally available therefor, all or any portion of the outstanding
Series A Shares, provided a Redemption shall not be effective (i) for any
portion of the Series A Shares for which a Notice of Conversion has
CERTIFICATE OF DESIGNATION - Page 10
(United Petroleum Corporation)
<PAGE>
been delivered to the Company at least five (5) days prior to the Redemption
Date (as hereafter defined), and (ii) unless such notice is for at least 250
Series A Shares. The "Redemption Price" shall be the Liquidation Preference of
each Series A Share plus all accrued but unpaid Dividends thereon through the
Redemption Date.
5.2 NOTICE OF REDEMPTION. If the Corporation elects to redeem
any or all Series A Shares pursuant to a Redemption, the Corporation shall (i)
give at least twenty (20) business days' prior written notice of such Redemption
(the "Redemption Notice") to each Holder of Series A Shares to be redeemed at
such Holder's address as it appears on the stock records of the Corporation by
facsimile transmission (if such Holder shall have provided a facsimile number),
and (ii) set aside into an escrow account, apart from its other funds, or
provide written evidence reasonably satisfactory to each Holder of the
Corporation's ability to fund the Redemption Price and the amount equal to the
Redemption Price of all Series A Shares subject to Redemption at that time for
the benefit of all Holders of Series A Shares subject to Redemption; and the
Series A Shares then subject to Redemption and not otherwise converted prior to
the Redemption Date shall, on the date which is twenty (20) business days after
the deposit of Redemption Notice in accordance with clause (i) of this sentence
(the "Redemption Date"), cease to be outstanding, and the rights of the Holders
and owners thereof shall be limited to payment of the Redemption Price thereof.
The Corporation shall deposit with the escrow agent for delivery to each Holder
of a Series A Share the Redemption Price thereof within three (3) business days
of the Redemption Date. Should any Holder not receive payment of any amounts due
on Redemption of its Series A Shares by reason of the Corporation's failure to
make payment at the times prescribed above for any reason, the Corporation shall
pay to the applicable Holder on demand (x) interest on the sums not paid when
due at an annual rate equal to the lesser of (a) two percent (2%) over the then
applicable dividend rate or (b) the maximum additional interest rate permitted
by applicable law, until the applicable Holder is paid in full and (y) all costs
of collection, including, but not limited to, attorneys' fees and costs, whether
or not suit or other formal proceedings are instituted. The Redemption Price
shall (in the reasonable discretion of the Board of Directors of the
Corporation) be adjusted to take into account any stock split or other similar
event.
5.3 SELECTION OF SHARES. The Corporation shall select the
Series A Shares to be redeemed in a Redemption in which not all Series A Shares
are to be redeemed so that the Series A Shares of each Holder selected for
Redemption shall bear the same proportion to the total Series A Shares owned by
that Holder that the proportion of all Series A Shares selected for Redemption
bears to the total of all then outstanding Series A Shares. Should any Series A
Shares required to be redeemed under the terms hereof not
CERTIFICATE OF DESIGNATION - Page 11
(United Petroleum Corporation)
<PAGE>
be redeemed solely by reason of limitations imposed by law, the applicable
Series A Shares shall be redeemed on the earliest possible date thereafter that
the applicable Series A Shares may be redeemed to the maximum extent permitted
by law. Except as set forth above, the Board of Directors shall prescribe the
manner in which any Redemption shall be effected. Any monies deposited with the
escrow agent by the Corporation for the Holders of the Series A Shares subject
to Redemption which shall not be claimed at the end of one (1) year after the
first service of the applicable Redemption Notice shall be released and repaid
to the Corporation but shall be paid to the Holder of the applicable Series A
Shares so long as submission of its shares occurs within five (5) years after
the first service of the applicable Redemption Notice.
6. RANKING OF STOCK OF THE CORPORATION
For purposes of this resolution, any stock of any class or
classes of the Corporation shall be deemed to rank:
A. Prior to the Series A Shares, either as to
dividends or upon liquidation, if the holders of such class or
classes shall be entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding
up of the Corporation, as the case may be, in preference or
priority to the Holders;
B. On a parity with the Series A Shares, either as to
dividends or upon liquidation, whether or not the dividend rates, dividend
payment dates or redemption or liquidation prices per share or sinking and fund
provisions, if any, are different from those of the Series A Shares, if the
holders of such stock shall be entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in proportion to their respective dividend
rates or liquidation prices without preference or priority, one over the other,
as between the holders of such stock and the Holders, and
C. Junior to the Series A Shares, either as to dividends or
upon liquidation, if such class shall be Common Stock or if the Holders of the
Series A Shares shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation, winding up of the Corporation, or
upon redemption as the case may be, in preference or priority to the holders of
shares of such class or classes.
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of the Corporation are each authorized to
do or cause to be done all such acts or things and to make, execute and deliver
or cause to be made, executed and delivered all such agreements, documents,
instruments and certificates in the name and on behalf of the Corporation or
otherwise as they deem necessary, desirable or appropriate to
CERTIFICATE OF DESIGNATION - Page 12
(United Petroleum Corporation)
<PAGE>
execute or carry out the purpose and intent of the foregoing resolutions.
IN WITNESS WHEREOF, I have subscribed this document on the date set
forth below and do hereby affirm, under penalty of perjury, that the statements
contained therein are true and correct.
Dated: April 29, 1997
/s/ Michael F. Thomas
-------------------------------
Michael F. Thomas - President
CERTIFICATE OF DESIGNATION - Page 13
(United Petroleum Corporation)
<PAGE>
EXHIBIT B
FORM OF LEGEND FOR PREFERRED SHARES
The Securities offered hereby have not been registered with U.S. Securities and
Exchange Commission under the U.S. Securities Act of 1993, as amended (the
"Act"), or the Securities Commission of any state under state securities law.
These Securities are being issued in exchange for a portion of a convertible
debenture exempt from registration under Regulation S ("Regulation S")
promulgated under the Act. These Securities may not be offered or sold in the
United States or to U.S. Persons (as such term is defined in Regulation S)
unless these Securities are registered under the Act or such offers and sales
are made pursuant to available exemptions from the registration requirements of
those laws. Furthermore, these securities are subject to the terms of that
certain Letter Agreement of United Petroleum Corporation dated April 30, 1997, a
copy of which is on file with and may be obtained from United Petroleum
Corporation at its principal place of business, including, but not limited to,
limitations on conversion and voting, elections with respect to dividend rate
and redemption, and the holder hereof is further subject to certain voting
agreements concerning the securities, as described therein.
<PAGE>
EXHIBIT C
$___________USD
UNITED PETROLEUM CORPORATION
$____________ AMENDED AND RESTATED
18% CONVERTIBLE DEBENTURE
APRIL 30, 1997
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR
SOLD IN THE UNITED STATES (AS DEFINED IN REGULATION S UNDER THE ACT) OR TO OR
FOR THE ACCOUNT OR BENEFIT OF US PERSONS (AS DEFINED IN REGULATION S UNDER THE
ACT) EXCEPT PURSUANT TO REGISTRATION UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT. FURTHERMORE, THESE SECURITIES ARE SUBJECT
TO CERTAIN LIMITATIONS ON CONVERSION AND VOTING AND TO POTENTIAL LIQUIDATED
DAMAGES AS DESCRIBED HEREIN AND IN THAT CERTAIN LETTER AGREEMENT OF UNITED
PETROLEUM CORPORATION DATED APRIL 30, 1997, A COPY OF WHICH IS ON FILE WITH AND
MAY BE OBTAINED FROM UNITED PETROLEUM CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS.
THIS DEBENTURE is one of a duly authorized issue of Debentures of United
Petroleum Corporation, a corporation duly organized and existing under the laws
of the State of Delaware (the "ISSUER") designated as its Eighteen Percent (18%)
Convertible Debenture Due September 1, 1999.
FOR VALUE RECEIVED, the ISSUER promises to pay to
[______________________]
the registered holder hereof and its successors and assigns (the "HOLDER"), the
principal sum of
____________________________ (____________) UNITED STATES DOLLARS,
on September 1, 1999 (the "Maturity Date"), and to pay interest on the principal
sum outstanding at the rate of 18% per annum in cash or, at the option of the
Issuer, shares of Common Stock, $.01 par value, of the ISSUER (the "Common
Stock") as hereinafter provided, on the basis of the actual number of days
elapsed in a three hundred sixty five (365) day year, due and payable quarterly
in arrears commencing on July 1, 1997, and subsequently on October 1, January 1,
April 1, for the term of the Debenture or until the Debenture is completely
converted. Accrual of interest shall commence on the first day following the
date hereof and shall continue until payment in full of the principal sum hereof
has been made or duly provided for. The interest so payable will be paid to the
person in whose name this Debenture (or one or more predecessor Debentures) is
registered on the records of the ISSUER regarding registration and transfers of
the Debenture (the "Debenture Registrar"), provided, however, that the ISSUER'S
obligation to a transferee of this Debenture arises only if such transfer, sale
or other disposition is made in accordance with the terms and
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<PAGE>
conditions of the Offshore Debenture Securities Subscription Agreement between
ISSUER and HOLDER as amended by that certain Letter Agreement (the "Letter
Agreement") of United Petroleum Corporation dated April 30, 1997, (the "Offshore
Debenture Securities Subscription Agreement"). The principal of, and interest on
(to the extent such interest is paid in cash), this Debenture are payable in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts, at the address last
appearing on the Debenture register of the ISSUER as designated in writing by
the HOLDER hereof from time to time. The ISSUER may, at its option, elect to pay
interest on this Debenture in shares of Common Stock; provided, however, the
ISSUER shall deliver to each HOLDER a notice of election prior to each interest
payment date indicating its intention to do so. If the ISSUER shall properly
elect to pay interest accruing hereunder in Common Stock, the number of shares
issuable in connection therewith shall be determined by dividing the amount of
interest then payable by the Market Price(as hereafter defined) on the
applicable interest payment date. The ISSUER will pay the principal of and all
accrued and unpaid interest due upon this Debenture on the Maturity Date subject
to the conversion rights set forth herein, less any amounts required by law to
be deducted or withheld on account of, income or other similar taxes to the
HOLDER by wire transfer of funds or by certified check at the last address on
the Debenture Register. The forwarding of such payment shall, subject to
collection, constitute a payment of principal and interest hereunder and shall
satisfy and discharge the liability for principal and interest on this Debenture
to the extent of the sum represented by such payment plus any amount so
deducted.
The Debenture is subject to the following additional provisions:
1. The Debenture is exchangeable for like Debentures in equal aggregate
principal amount of different authorized denominations, as requested by the
HOLDER surrendering the same. No service charge will be made for such
registration or transfer or exchange.
2. The ISSUER shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States Income Tax or
other similar applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment representations
of the original HOLDER hereof and may be transferred or exchanged in the US only
in compliance with the Securities Act of 1933, as amended (the "Act") (including
the rules and regulations promulgated thereunder) and applicable state
securities laws. Prior to the due presentment for such transfer of this
Debenture, the ISSUER and any agent of the ISSUER may treat the person in whose
name this Debenture is duly registered on the ISSUER'S Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and all
other purposes, whether or not this Debenture is overdue, and neither the ISSUER
nor any such agent shall be affected by notice to the contrary. The transferee
shall be bound, as the original HOLDER, by the same representations and terms
described herein and under the Offshore Debenture Securities Subscription
Agreement.
4. The HOLDER of this Debenture is entitled, at its option, at any time
commencing from and after August 1, 1998 (the "First Conversion Date") to
convert up to One Hundred percent (100%), of the original principal amount of
this Debenture into shares of Common Stock at a conversion price equal to the
greater of (i) the Fixed Conversion Price (as hereinafter defined) and (ii) the
Market Price (as hereinafter defined) of the Common Stock for the five (5)
consecutive
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<PAGE>
trading days immediately preceding the Conversion Date (the "5 Day Average");
provided, if the Monthly Price (as hereinafter defined) for the preceding month
is greater than $3.00 (the "Ceiling Price"), then the Ceiling Price for such
month shall be the greater of (x) $3.00 and (y) 66-2/3rds% of the Monthly Price
for such preceding month. The "Fixed Conversion Price" shall be equal to the
following:
$2.50 per share through September 30, 1997;
$2.00 per share from October 1, 1997 through December 31, 1997;
$1.50 per share from January 1, 1998 through March 31, 1998;
$1.00 per share after April 1, 1998;
in each case adjusted as follows: if the Market Price for the trading days in
the applicable calendar month (the "Monthly Price") of the Common Stock for any
calendar month commencing October 1997 is greater than the Fixed Conversion
Price, then the Fixed Conversion Price shall be the greater of the Fixed
Conversion Price and 66-2/3% of the Monthly Price for the preceding calendar
month. For purposes of this Section 4, the "Market Price" on any day shall mean
the average of the closing bid prices per share of the Common Stock as reported
by Bloomberg, L.P. on the Nasdaq National Market, or on such exchange as the
Common Stock is then traded, in each case, for the five (5) consecutive trading
days immediately preceding the date of determination. When referred to herein, a
"trading day" shall mean a business day in which the principal market on which
the Common stock is traded is open for trading for at least four (4) hours. If
at the time of any such computation pursuant to this Section 4 the Common Stock
is not then traded on any trading market, the "Market Price" for the purpose
hereof shall be the fair value as reasonably determined in good faith by the
Board of Directors of the ISSUER. Notwithstanding the foregoing, the HOLDER
shall not be entitled to convert more than 1/5th of the principal amount of this
Debenture held by such Holder in each calendar month, on a cumulative basis,
commencing August 1, 1998 (such that the entire principal amount thereof shall
be convertible by January 1, 1999). The Fixed Conversion Price and Ceiling Price
shall each be adjusted as set forth herein. Such conversion shall be effected by
surrendering the Debentures to be converted (with the copy, by facsimile or
courier), to the ISSUER, with a conversion notice, executed by the HOLDER of
this Debenture or a specified portion (as provided) hereof, and accompanied, if
required by the ISSUER, by proper assignment hereof in blank. In the event that
the Issuer shall have elected to pay interest on this Debenture in shares of
Common Stock, accrued but unpaid interest shall be subject to conversion under
the same terms and conditions as the principal amount of this Debenture at the
time of conversion of this Debenture or any portion thereof. No fractional
shares or scrip representing fractions of shares will be issued on conversion,
but the number of shares issuable shall be rounded to the nearest whole share,
with the fraction paid in cash at the discretion of the ISSUER. For purposes of
this Debenture, the "Conversion Date" shall be deemed to be the close of
business on the date so specified in a conversion notice, which date may not be
more than three (3) trading days prior to the date on which the Holder has
telecopied to the Issuer its conversion notice,; provided, this Debenture is
delivered to the Issuer within five (5) business days of the conversion notice.
The ISSUER, at its sole option, may cause the automatic conversion notice into
common stock of any or all of the remaining outstanding Debentures that remain
-3-
<PAGE>
unconverted after April 21, 2000 at the aforesaid Conversion Price; provided
that no event of default by the ISSUER has occurred or is continuing.
5. If, prior to the conversion of all of the Debentures, the number of
outstanding shares of Common Stock is increased by a stock split, stock dividend
or other similar event, the Fixed Conversion Price shall be appropriately
reduced. If, prior to the conversion of all the Debentures, the number of
outstanding shares of Common Stock is decreased by a combination or
reclassification of shares, or other similar event, the Fixed Conversion Price
shall be appropriately increased.
6. If, prior to the conversion of all the Debentures, there is a stock
split, stock dividend, or other similar event which occurs, then the Conversion
Price shall be adjusted appropriately to reflect such stock split, stock
dividend or other similar event.
7. If, prior to the conversion of all the Debentures the Issuer fixes a
record date for the issuance of rights or warrants to all or substantially all
of the Common Shareholders entitling them to subscribe for or purchase shares of
Common Stock or Securities convertible into Common Stock at a price per share,
or having a conversion price per share, less than the market price of the Common
Stock (calculated by taking the average closing bid price of the Common Stock on
the NASDAQ market, or on such market as the Common Stock then trades, for the
five (5) trading days immediately preceding the record date), then the Fixed
Conversion Price shall be appropriately and proportionately reduced.
8. If, prior to the conversion of all the Debentures, there shall be a
merger, consolidation, exchange of shares, recapitalization, reorganization or
other similar event, as a result of which shares of Common Stock of the ISSUER
shall be changed into the same or a different number of shares of the same or
another class or classes of stock or securities of the ISSUER or another entity,
then the Holders of the Debentures shall thereafter have the right to purchase
and receive upon conversion of the Debentures, upon the basis and upon the terms
and conditions specified herein and in lieu of Common Stock immediately
theretofore issuable upon conversion, such shares of stock and/or securities as
may be issued or payable with respect to or in exchange for the number of shares
of Common Stock immediately theretofore purchasable and receivable upon the
conversion of Debentures held by such HOLDERS had such merger, consolidation,
exchange of shares, recapitalization, reorganization or other similar event had
not taken place, and in any such case appropriate provisions shall be made with
respect to the rights and interests of the HOLDER of the Debentures to the end
that the provisions hereof (including, without limitation, provisions for
adjustment of the Conversion Price and of the number of shares issuable upon the
conversion of the Debentures) shall thereafter be applicable, as nearly as may
be practicable in relation to any shares of stock or securities thereafter
deliverable upon the exercise hereof. The ISSUER shall not effect any
transaction described in this section unless the resulting successor or
acquiring entity (if not the ISSUER) assumes by written instrument the
obligation to deliver to the HOLDERS of the Debentures such shares of stock
and/or securities as, in accordance with the foregoing provisions, the HOLDERS
of the Debentures may be entitled to purchase.
-4-
<PAGE>
9. No adjustment need be made if it would result in a change of less
than One (1) percent of the Conversion Price. Any adjustments required to be
made shall be rounded up to the right to acquire the nearest whole number of
shares of Common Stock.
10. (a) ISSUER may, at any time, at its option and following at least
twenty (20) business days prior written notice redeem (a "Redemption") for cash
at the Redemption Price (as hereafter defined), from funds legally available
therefor, all or any portion of the outstanding Debentures; provided a
Redemption shall not be effective (i) for any portion of the Debenture for which
a Notice of Conversion has been delivered to the Issuer at least five (5) days
prior to the Redemption Date (as hereafter defined) and (ii) unless such notice
is for at least $250,000 principal amount of the Debenture. The "Redemption
Price" shall be equal to 100% of the aggregate principal amount of the
Debentures being called for redemption, plus any accrued but unpaid interest
thereon through and including the date of the Redemption. Notwithstanding the
foregoing, ISSUER may not exercise the Redemption option set forth above as long
as at least ten percent (10%) of the shares of ISSUER'S Series A Cumulative
Convertible Preferred Stock issued to the Holder hereof remain issued and
outstanding.
(b) If ISSUER elects to redeem any or all of the Debentures
pursuant to a Redemption, ISSUER shall (i) give at least
twenty (20) business days' prior written notice of such
Redemption (the "Redemption Notice") to each HOLDER of the
Debentures to be redeemed at its address as it appears on the
Debenture Register of ISSUER by facsimile transmission (if
such HOLDER shall have provided a facsimile number), and (ii)
set aside cash into an escrow account, apart from its other
funds, or provide written evidence reasonably satisfactory to
each HOLDER of ISSUER'S ability to fund in cash the Redemption
Price, an amount equal to the Redemption Price of all
Debentures as to which a Redemption Notice has been provided
at that time for the benefit of all HOLDERS of the Debentures
subject to Redemption; and the Debentures as to which a
Redemption Notice has been provided not otherwise converted
prior to the Redemption Date shall, on the date which is
twenty (20) business days after the deposit of Redemption
Notice in accordance with clause (i) of this sentence (the
"Redemption Date"), cease to be outstanding, and the rights of
the HOLDERS and owners thereof shall be limited to payment of
the Redemption Price thereof. ISSUER shall deposit with the
escrow agent for delivery to each HOLDER of the Debentures the
Redemption Price thereof within three (3) business days of the
Redemption Date. Should any HOLDER not receive payment of any
amounts due on Redemption of its Debentures by reason of
ISSUER'S failure to make payment at the times prescribed above
for any reason, ISSUER shall pay to the applicable HOLDER on
demand (x) interest on the sums not paid when due at an annual
rate equal to the then applicable interest rate payable on
this Debenture plus the lesser of (i) two percent (2%) or (ii)
the maximum lawful rate, until the applicable HOLDER is paid
in full and (y) all costs of collection, including, but not
limited to, attorneys' fees and costs, whether or not suit or
other formal proceedings are
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<PAGE>
instituted. The Redemption Price shall (in the reasonable
discretion of the Board of Directors of ISSUER) be adjusted to
take into account any stock split or other similar event.
(c) ISSUER shall select the Debentures to be redeemed in a
Redemption in which not all Debentures are to be redeemed so
that the Debentures of each HOLDER selected for Redemption
shall bear the same proportion to the total Debentures owned
by that HOLDER the proportion of all Debentures selected for
Redemption bears to the total of all then outstanding
Debentures. Should any Debentures be required to be redeemed
under the terms hereof not be redeemed solely by reason of
limitations imposed by law, the applicable Debentures shall be
redeemed on the earliest possible date thereafter that the
applicable Debentures may be redeemed to the maximum extent
permitted by law. Except as set forth above, the Board of
Directors shall prescribe the manner in which any Redemption
shall be effected. Any monies deposited with the escrow agent
by ISSUER for the HOLDERS of Debentures subject to Redemption
which shall not be claimed at the end of one (1) year after
the first service of the applicable Redemption Notice shall be
released and repaid to ISSUER but shall be paid to the HOLDER
of the applicable Debentures so long as submission of its
shares occurs within five (5) years after the first service of
the applicable Redemption Notice.
11. No provision of this Debenture shall alter or impair the obligation
of the ISSUER, which is absolute and unconditional, to pay the principal of, and
interest on, this Debenture at the place, time, and rate, and in the coin or
currency, herein prescribed.
12. The ISSUER hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of protest, notice of dishonor,
notice of acceleration or intent to accelerate, bringing of suit and diligence
in taking any action to collect amounts called for hereunder and shall be
directly and primarily liable for the payment of all sums owing and to be owing
hereon, regardless of and without any notice, diligence, act or omission as or
with respect to the collection of any amount called for hereunder.
13. The ISSUER agrees to pay all costs and expenses, including
reasonable attorneys' fees, which may be incurred by the HOLDER in collecting
any amount due as a result of default by the ISSUER or exercising the conversion
rights under this Debenture.
14. If one or more of the following described "Events of Default"
shall occur:
(a) The ISSUER shall default in the payment of principal or
interest on this Debenture when due; or
(b) Issuer fails to declare or pay dividends on Preferred Stock;
or
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<PAGE>
(c) Any of the representations or warranties made by the ISSUER
herein, or in the Offshore Debenture Securities Subscription
Agreement shall have been incorrect in any material respect
when made; or
(d) The ISSUER shall fail to perform or observe any other
covenant, term, provision, condition, agreement or obligation
of the ISSUER hereunder or under the Offshore Debenture
Securities Subscription Agreement or this Debenture and such
failure shall continue uncured for a period of seven (7) days
after notice from the Holder of such failure; or
(e) A trustee, liquidator or receiver shall be appointed for the
ISSUER or for a substantial part of its property or business
without its consent and shall not be discharged within thirty
(30) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction
at the instance of any governmental agency shall assume
custody or control of the whole or any substantial portion of
the properties or assets of the ISSUER and shall not be
dismissed within thirty (30) calendar days thereafter; or
(g) Bankruptcy, reorganization, insolvency, or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors shall be
instituted by or against the ISSUER, and if instituted against
the ISSUER shall not have been dismissed within thirty (30)
calendar days; or
(h) The ISSUER'S Common Stock is delisted from the exchange or
over-the-counter markets; or
(i) The ISSUER shall default in the payment of any indebtedness
which, individually or in the aggregate, exceeds $1,000,000
and such indebtedness is properly accelerated by the holder
thereof following the expiration of any cure period set forth
in the documents governing such indebtedness; or
(j) ISSUER shall fail to comply with any of its obligations under
the Certificate of Designation, Preferences and Rights of
Series A Convertible Preferred Stock of United Petroleum
Corporation (other than dividends) and such failure continues
for ten days after notice thereof has been given to ISSUER by
any HOLDER.
Then, or at any time thereafter, and in each and every such
case, unless such Event of Default shall have been waived in
writing by the HOLDER (which waiver shall not be deemed to be
a waiver of any subsequent default) at the option of the
HOLDER and in the HOLDER'S sole discretion, the HOLDER may
consider this Debenture immediately due and payable, without
presentment, demand protest or notice of any kind, all of
which are hereby expressly waived, anything herein or in any
note or other instruments contained to the contrary
notwithstanding, and the HOLDER may immediately, and without
expiration of any period of grace, enforce
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<PAGE>
any and all of the HOLDER'S rights and remedies provided
herein or any other rights or remedies afforded by law.
15. In case any provision of this Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Debenture will not in any way
be affected or impaired thereby.
16. This Debenture and the agreements referred to in this Debenture
constitute the full and entire understanding and agreement between the ISSUER
and the HOLDER with respect hereof. Neither this Debenture nor any terms hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by the ISSUER and the HOLDER.
17. This Debenture shall be governed by and construed in accordance
with the laws of the State of Delaware.
18. This Debenture is given in amendment of the terms of and in
extension, but not extinguishment, of all amounts left owing and unpaid on that
certain United Petroleum Corporation Convertible Debenture previously executed
and delivered by ISSUER and described in the Letter Agreement. All of the
priorities of the rights, remedies, liens, equities, powers and privileges
securing the payment of the indebtedness hereby amended and extended are hereby
recognized, renewed, extended and preserved in full to secured payment of this
Debenture.
IN WITNESS WHEREOF, the ISSUER has caused this instrument to be duly
executed by an officer thereunto duly authorized.
United Petroleum Corporation
By:________________________________________
Official Signatory of Issuer
Name (Printed):____________________________
Title:_____________________________________
Date: April 30, 1997
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<PAGE>
<PAGE>
EXHIBIT D
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER
TO CONVERT THE PREFERRED SHARES)
The undersigned (the "Holder") hereby irrevocably elects to convert
__________ Preferred Shares, with a Liquidation Preference of $1,000 per Share,
into _______________ (______) common shares of Common Stock, $.01 par value, of
United Petroleum Corporation (the "Issuer"), as of the date written below. The
shares are to be issued in the "Street Name" written below.
The undersigned represents and warrants as follows:
1. The offer to purchase the Preferred Shares was made to it outside of
the United States, and the undersigned was, at the time the subscription form
was executed and delivered, and is now outside the United States;
2. It is not a U.S. person (as such term is defined in Section 902(a)
of Regulation S ("Regulation S") promulgated under the United States Securities
Act of 1933 (the "Securities Act"); and it has purchased the Preferred Shares
and the shares for its own account and not for the account or benefit of any
U.S. person;
3. All offers and sales by the undersigned of the shares issuable upon
the conversion of the Preferred Shares acquired pursuant to the Offshore
Debenture Securities Subscription Agreement, as amended by that certain Letter
Agreement, shall be made pursuant to an effective registration statement under
the Securities Act or pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act;
4. It is familiar with and understands the terms and conditions, and
requirements contained in Regulation S and definitions of U.S. Person contained
in Regulation S; and
5. The undersigned has not engaged in any "directed selling efforts"
(as such term is defined in Regulation S) with respect to the Shares;
6. Upon Conversion pursuant to this Notice of Conversion, the Holder
will not own or be deemed to beneficially own (within the meaning of the
Securities Exchange Act of 1934) 4.99% or more of the then issued and
outstanding shares of the Issuer.
Holder:__________________________________________________
By:______________________________________________________
Official Signatory of Holder
Title:____________ Country of execution:_________________
Date of Conversion:______________________________________
Applicable Conversion Price:_____________________________
Name of Holder for Registration:_________________________
Address for Registration:________________________________
* The original Preferred Shares and this Notice of Conversion must be
received by the Issuer within five (5) New York Stock Exchange Trading
Days following the Date of Conversion.
<PAGE>
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER
TO CONVERT THE DEBENTURE)
The undersigned (the "Holder") hereby irrevocably elects to convert
__________ (US $__________) of the above Debenture into _______________ (______)
common shares of Common Stock, $.01 par value, of United Petroleum Corporation
(the "Issuer"), as of the date written below. The shares are to be issued in the
"Street Name" written below.
The undersigned represents and warrants as follows:
1. The offer to purchase the Debenture was made to it outside of the
United States, and the undersigned was, at the time the subscription form was
executed and delivered, and is now outside the United States;
2. It is not a U.S. person (as such term is defined in Section 902(a)
of Regulation S ("Regulation S") promulgated under the United States Securities
Act of 1933 (the "Securities Act"); and it has purchased the Debenture and the
shares for its own account and not for the account or benefit of any U.S.
person;
3. All offers and sales by the undersigned of the shares issuable upon
the conversion of the Debentures acquired pursuant to the Offshore Debenture
Securities Subscription Agreement, as amended by that certain Letter Agreement,
shall be made pursuant to an effective registration statement under the
Securities Act or pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act;
4. It is familiar with and understands the terms and conditions, and
requirements contained in Regulation S and definitions of U.S. Person contained
in Regulation S; and
5. The undersigned has not engaged in any "directed selling efforts"
(as such term is defined in Regulation S) with respect to the Shares;
6. Upon Conversion pursuant to this Notice of Conversion, the Holder
will not own or be deemed to beneficially own (within the meaning of the
Securities Exchange Act of 1934) 4.99% or more of the then issued and
outstanding shares of the Issuer.
Holder:__________________________________________________
By:______________________________________________________
Official Signatory of Holder
Title:____________ Country of execution:_________________
Date of Conversion:______________________________________
Applicable Conversion Price:_____________________________
Name of Holder for Registration:_________________________
Address for Registration:________________________________
* The original Debenture and this Notice of Conversion must be received
by the Issuer within five (5) New York Stock Exchange Trading Days
following the Date of Conversion.
<PAGE>
EXHIBIT E
MUTUAL RELEASE
THIS MUTUAL RELEASE is by and between ____________ ("Holder") and
United Petroleum Corporation ("Issuer").
WHEREAS, Holder is the holder of the United Petroleum Corporation
$_______ __% Convertible Debenture (the "Original Debenture") issued pursuant to
the Offshore Debenture Securities Subscription Agreement dated ________, 1996
(the "Subscription Agreement") between Holder and Issuer;
WHEREAS, disputes have arisen between Holder and Issuer with respect to
the obligations of the Issuer under the Original Debenture;
WHEREAS, in order to settle such disputes, Issuer, Holder and certain
other parties have entered into the Letter Agreement dated April , 1997 (the
"Letter Agreement") pursuant to which, among other things, Issuer has issued to
Holder shares of its Series Convertible Preferred Stock (the "Preferred
Stock") containing the rights, privileges and related provisions set forth in
the Certificate of Designation attached hereto (the "Certificate of
Designation") and its $ Amended and Restated % Convertible
Debentures dated April , 1997 (the "Amended and Restated Debenture") in
amendment and extension of the Original Debenture.
WHEREAS, Holder and Issuer desire to mutually release each other from
any claims or obligations arising in connection with the Original Debenture and
the Subscription Agreement and the transactions contemplated thereby in
existence on the date hereof;
NOW, THEREFORE, for and in consideration of the covenants and premises
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Issuer does hereby fully release, acquit and discharge Holder,
together with its employees, agents, representatives, officers, directors,
stockholders, subsidiaries, parents and their respective successors and assigns,
from all rights, claims, demands, actions and causes of action of any nature
whatsoever which Issuer may now have or may have in the future against them or
any of them, known or unknown, foreseen or unforeseen, arising from or in
connection with the Original Debenture and the Subscription Agreement that are
based on acts or omissions of Holder occurring prior to the execution of this
Mutual Release by both parties hereto; provided, however, notwithstanding any
other provision of this Mutual Release, Holder shall continue to be fully liable
for and subject to all indebtedness, liabilities and obligations applicable to
Holder contained in the Letter Agreement, the Amended Debenture the Certificate
of Designation and the Subscription Agreement, as amended by the Letter
Agreement.
2. Holder does hereby fully release, acquit and discharge
Issuer, together with its employees, agents, representatives, officers,
directors, stockholders, subsidiaries, parents and their respective successors
and assigns, from all rights, claims, demands, actions and causes of action of
MUTUAL RELEASE -PAGE 1
<PAGE>
any nature whatsoever which Holder may now have or may have in the future
against them or any of them, known or unknown, foreseen or unforeseen, arising
from or in connection with the Original Debenture and the Subscription Agreement
that are based on acts or omissions of Issuer occurring prior to the execution
of this Mutual Release by both parties hereto; provided, however,
notwithstanding any other provision of this Mutual Release, Issuer shall
continue to be fully liable for and subject to all indebtedness, liabilities and
obligations applicable to Issuer contained in the Letter Agreement, the Amended
Debenture, the Certificate of Designation and the Subscription Agreement, as
amended by the Letter Agreement; and provided further, the release of Issuer
hereunder by Holder shall be null and void in the event Issuer shall breach any
of its obligations under the Letter Agreement, the Amended Debenture, the
Certificate of Designation and/or the Subscription Agreement, as amended by the
Letter Agreement.
EXECUTED to be effective as of this day of April, 1997.
UNITED PETROLEUM CORPORATION
By:____________________________
Name:__________________________
Its:___________________________
[HOLDER]
By:____________________________
Name:__________________________
Its:___________________________
<PAGE>
EXHIBIT F
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT dated April 30, 1997 ("Agreement")
between United Petroleum Corporation, a Delaware corporation (the "Company"),
and Michael F. Thomas ("Restricted Party").
1. NONCOMPETITION. Restricted Party covenants and agrees that during
the Noncompetition Period (as defined below), he will not, directly or
indirectly, compete (as defined) below) with the Company; provided, however,
Restricted Party shall be permitted to continue to operate the Cumberland
Avenue, Farragut and Cookeville, Tennessee car wash, gas and convenience and
quick lube centers and to develop the Asheville Highway and Lee Highway
locations. As used herein, (i) "Noncompetition Period" means the period
commencing on the date of this Agreement and ending on April 30, 2000 and (ii)
"compete" means to engage or participate in any business that provides the same
or similar products or services as those provided or offered by the Company in
any market area in which the Company currently operates or, which could, in the
judgment of the Board of Directors, be exploited by the Company without
materially interfering with the Company's business as it is conducted at that
time.
2. LIMITATIONS. If any of the restrictions contained herein shall for
any reason be held by a court of competent jurisdiction to be excessively broad
as to duration, geographical scope, activity or subject, such restriction shall
be reformed automatically and thereafter limited or reduced so as to be
enforceable to the extent compatible with applicable laws; it being understood
that by the execution of this Agreement, the parties hereto acknowledge that
such restrictions are fair, reasonable and necessary and that such restrictions
do not impose a greater restraint than is necessary to protect the good will or
other business interests of the Company.
3. REMEDIES. Restricted Party acknowledges that were he to breach the
provisions of this Agreement, the damages to the Company would be irreparable,
and he therefore agrees that, in addition, to any monetary damages and
reasonable attorneys' fees, the Company shall be entitled to enjoin any such
breach in any court of competent jurisdiction.
4. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns. This Agreement may not be
assigned by Restricted Party and any purported assignment by Restricted Party
contrary to the terms of this Agreement shall be void. The Company may assign
this Agreement and all of its rights hereunder to any party.
5. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6. GOVERNING LAW. This Agreement shall be governed in all respects,
including the validity, interpretation, and effect by the substantive laws of
the State of Tennessee without regard to conflict of law provisions.
NONCOMPETITION AGREEMENT - Page 1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers.
UNITED PETROLEUM CORPORATION
/s/ L. Douglas Keene, Jr. By: /s/ Michael F. Thomas
Executive Vice President Name: Michael F. Thomas
L. DOUGLAS KEENE, JR. Its: President
RESTRICTED PARTY
By: /s/ Michael F. Thomas
MICHAEL F. THOMAS
NONCOMPETITION AGREEMENT - Page 2
<PAGE>
EXHIBIT G
[LETTERHEAD OF ROBSON & MILLER, LLP]
April 30, 1997
United Petroleum Corporation
4867 North Broadway
Knoxville, TN 37928
Re: April 30, 1997 Letter Agreement Restructuring
Certain Terms of Outstanding Convertible
Debentures (the "Letter Agreement")
Gentlemen:
Reference is hereby made to the Letter Agreement Capitalized terms used
herein and not otherwise defined shall have the meanings described to them in
the Letter Agreement.
I am aware of the terms of the Letter Agreement including without
limitation, the terms associated with the Infinity Excluded Debenture and the
Kalifa Debentures (or the Designated Securities, as applicable which, by their
terms, are immediately convertible into shares of Common Stock of the Company at
the conversion price set forth in the original Debentures. You have requested
that I, as counsel to the Company, write this letter confirming that I will,
from time to time as necessary, render appropriate opinions of counsel to the
Company and its stock transfer agent to issue shares of Common Stock, without
restrictive legend, upon the delivery from the holders of any Convertible
Security (including the Infinity Excluded Debenture and Khalifa Debenture, or
the Designated Securities in replacement thereof, as applicable) of a
conversation notice properly completed in accordance with the terms of each
applicable Convertible Security.
I further understand that this letter shall be appended to the Letter
Agreement as an Exhibit thereto.
Should you have any questions in this regard please do not hesitate to
contact me.
Yours very truly,
/s/ Morton S. Robson
Morton S. Robson, Esq.
