SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Date of Report (Date of Earliest Event Reported): September 30, 1996
UNITED STATES EXPLORATION, INC.
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(Exact name of registrant as specified in its charter)
Colorado 0-18981 84-1120323
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(State of other juris- (Commission (I.R.S. Employer
diction of incorpora- File Number) Identification No.)
tion)
1901 New Street
Independence, Kansas 67301
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code: (316) 331-8102
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Former name or former address if changed since last report:
N/A
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
No report required.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective September 30, 1996, United States Exploration, Inc.
("Company") completed the minimum portion of a private placement which
resulted in gross proceeds to the Company of $6,000,000. The offering
was completed by the Company through its officers and directors. The
Company sold 1,000,000 shares of a new series of Preferred Stock to a
single purchaser under exemptions from the registration requirements of
Federal and state securities laws. Proceeds from the offering will be
utilized by the Company to reduce outstanding debt and provide working
capital.
A new series of Preferred Stock was created for this offering.
The Company authorized a maximum of 4,000,000 shares of Series C
Convertible Preferred Stock, of which 1,000,000 shares were sold in
this transaction. The Series C Preferred Stock pays dividends at the
rate of eight percent (8%) per annum and may be redeemed at the
Company's option beginning March 17, 1997. The Preferred Stock is
convertible into Common Stock of the Company at the option of the
holder at a conversion rate of two shares of Common Stock for each
share of Preferred Stock, unless the conversion rate is subsequently
adjusted in accordance with the designation of the Preferred Stock. The
conversion price of the Preferred Stock was determined with reference
to the trading price of the Company's Common Stock immediately
preceding commencement of the offering, discounted to account for the
restricted nature of the securities under Federal and state securities
laws.
The Preferred Stock was sold to Mr. Dale Jensen, a current
shareholder of the Company. Prior to the acquisition, Mr. Jensen owned
an aggregate of approximately twelve percent (12%) of the Company's
Common Stock. Following acquisition of the Preferred Stock and an
additional private transaction, Mr. Jensen either owns, or has the
right to acquire, up to approximately thirty nine percent (39%) of the
Company's issued and outstanding Common Stock.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
No report required.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
No report required.
ITEM 5. OTHER EVENTS.
Also effective September 30, 1996, the Company consummated a
transaction with Tipperary Corporation pursuant to which previously
outstanding Series A and Series B Preferred Stock was converted into
Common Stock and the parties agreed to the issuance of dividends on
the previously outstanding Preferred Stock. Contemporaneously, Common
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Stock issued by the Company upon conversion of the Preferred Stock was
purchased by two current shareholders of the Company.
The Series A and Series B Preferred Stock was converted into
restricted Common Stock of the Company based upon a predetermined
conversion price established in 1994 upon issuance of the Preferred
Stock. An aggregate of 250,000 shares of Series A and 104,000 shares of
Series B Preferred Stock were converted into 786,667 shares of Common
Stock, a majority of which was acquired by current Company
shareholders. The balance of 150,000 shares was retained by Tipperary
Corporation. The Company also agreed to issue Common Stock in
satisfaction of dividends on previously outstanding Preferred Stock,
based upon the average of the closing bid and asked prices for the
Company's Common Stock during the first five trading days in November,
1996. Tipperary Corporation was granted registration rights with regard
to the Common Stock retained and to be obtained upon issuance of the
dividend stock.
Mr. Dale Jensen, purchaser of the Series C Preferred Stock,
also purchased a majority of the Common Stock issued upon conversion of
the Series A and Series B Preferred Stock. It is not anticipated that
any further shares of the Series A or Series B Preferred Stock will be
issued by the Company.
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS.
No report required.
ITEM 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
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No report required.
(b) Proforma Financial Information.
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No report required.
(c) Exhibits.
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Articles of Amendment to the Articles of Incorporation of
the Company as filed with the Colorado Secretary of State,
dated September 24, 1996.
ITEM 8. CHANGE IN FISCAL YEAR.
No report required.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be filed on its behalf by the
undersigned thereunto duly authorized.
UNITED STATES EXPLORATION, INC.
Date: October 15, 1996 By: /S/ DEMETRIE D. CARONE
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Demetrie D. Carone, President and
Chief Executive Officer
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ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
UNITED STATES EXPLORATION, INC.
ESTABLISHING
ONE SERIES OF
PREFERRED STOCK
($.0l Par Value)
1996 SERIES C CONVERTIBLE PREFERRED STOCK
[Pursuant to Section 7-106-102 of the
Colorado Business Corporation Act]
FIRST: The name of the Corporation is UNITED STATES EXPLORATION, INC.
SECOND: UNITED STATES EXPLORATION, INC., a corporation organized and
existing under the laws of the State of Colorado (the "Corporation"), HEREBY
CERTIFIES that the following amendment to its Articles of Incorporation was duly
adopted on September 16, 1996, by the Board of Directors of the Corporation
pursuant to the authority conferred upon the Board of Directors of the
Corporation by the Articles of Incorporation of the Corporation and by the
Colorado Business Corporation Act:
RESOLVED, that the Board of Directors of the Corporation (the "Board")
pursuant to authority conferred upon the Board of Directors by the provisions of
the Articles of Incorporation of the Corporation, as amended (the "Articles of
Incorporation"), which authorize the issuance of up to 100,000,000 shares of
preferred stock, $.0l par value (the "Preferred Stock" which term shall include
any additional preferred stock authorized from time to time), does hereby create
and provide for the issuance of one series of Preferred Stock and does hereby
fix and determine the designations, preferences, limitations and relative rights
of such series of Preferred Stock as follows:
1. Designation and Number. The designation of such series of Preferred
Stock shall be the "l996 Series C Convertible Preferred Stock" (the "Series
C Preferred Stock") and the number of shares constituting such series shall
be 4,000,000. Shares of Series C Preferred Stock shall have a preference
upon liquidation, dissolution or winding up of the Corporation of $6.00 per
share plus all accrued but unpaid dividends thereon.
2. Rank. The Series C Preferred Stock shall, with respect to dividend
rights and rights on liquidation, winding up or dissolution of the
Corporation, rank junior to the liquidation rights in the amount of $5.00
per share associated with the Series A and Series B Convertible Preferred
Stock, but the Series C Preferred Stock shall, unless otherwise agreed in
accordance with Section 4(g), rank senior to the Corporation's common
stock, par value $.0001 per share (the "Common Stock"), and to all other
classes and series of
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equity securities of the Corporation now or hereafter authorized, issued or
outstanding (the Common Stock and such other classes and series of equity
securities, with the exception of the 1994 Series A and Series B
Convertible Preferred Stock, collectively referred to herein as "Junior
Stock").
3. Dividends. Holders of the Series C Preferred Stock will be entitled
to receive, when, and if declared by the Board, out of the funds of the
Corporation at the time legally available therefore and after taking into
account the priority of the Series A and Series B Preferred Stock dividend
rights, cash dividends at the annual rate of 8% (equal to $.48 per share
annually) payable quarterly in arrears, on March 31, June 30, September 30
and December 31 of each year, commencing on December 31, 1996, except that
if any such date is a Saturday, Sunday or legal holiday, then such dividend
will be payable on the next business day that is not a Saturday, Sunday or
legal holiday.
(a) Dividends on the outstanding shares of the Series C Preferred
Stock will begin to accrue and be cumulative (regardless of whether
such dividends shall have been declared by the Board) from the date of
the first issuance of the Series C Preferred Stock and will be payable
to holders of record as they appear on the stock books of the Company
on such record dates, which shall not be less than ten (10) nor more
than sixty (60) days preceding the payment date, as are fixed by the
Board. If, however, the shares of Series C Preferred Stock are called
for redemption, as set forth herein, on a redemption day falling
between a dividend payment record date and the dividend payment date,
in lieu of receiving such dividend on the dividend payment date fixed
therefore, the holders of the Series C Preferred Stock to be redeemed
will receive such dividend payment together with all other accrued and
unpaid dividends on the date fixed for redemption (unless such holders
elect to convert such shares as provided for herein). In any case
where the date fixed for any dividend or other payment with respect to
the Series C Preferred Stock shall not be a Business Day, as defined
below, then such payments need not be made on such date but may be
made on the next succeeding Business Day with the same force and
effect as if made on the date fixed therefor, without interest. The
term "Business Day' shall mean any day except a Saturday, Sunday or
day on which banking institutions are authorized or required by law to
close in the State of Colorado.
(b) The Series C Preferred Stock shall have priority as to
dividends over the Common Stock and any other class or series of
Preferred Stock hereafter issued except for the Series A and Series B
Preferred Stock. So long as any shares of the Series C Preferred Stock
are outstanding, no dividend or distribution may be declared, paid or
set apart for payment on the Common Stock or any other stock of the
Corporation ranking junior to the Series C Preferred Stock, or may any
shares of stock ranking junior to the Series C Preferred Stock be
purchased, redeemed or acquired by the Corporation unless all accrued
and unpaid dividends on the Series C Preferred Stock have been paid or
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declared and set apart for payment. Whenever all accrued dividends are
not paid in full on the Series C Preferred Stock, all dividends
declared on the Series C Preferred Stock will be declared or made
pro-rata so that the amount of dividends declared per share on the
Series C Preferred Stock will bear the same ratio that accrued and
unpaid dividend per share on the Series C Preferred Stock bear to each
other.
(c) The amount of dividend payable per share of the Series C
Preferred Stock for each quarterly dividend payment will be computed
by dividing the annual dividend amount by four (4). The amount of
dividends payable for the initial dividend period and any period
shorter than a full dividend period will be computed on the basis of a
360 day year. No interest or sum of money in lieu of interest will be
payable in respect of any dividend payment on the Series C Preferred
Stock which may be in arrears. Holders of the Series C Preferred Stock
will not be entitled to any participating dividends or other
distributions, whether payable in cash, property or securities, in
excess of the full cumulative dividends described above.
(d) The amount of any dividends "accumulated" on any share of
Series C Preferred Stock at any Dividend Payment Date shall be deemed
to be the same amount of any unpaid dividends accrued thereon to and
excluding such Dividend Payment Date regardless of whether declared,
and the amount of dividends "accumulated" on any share of Series C
Preferred Stock at any date other than a Dividend Payment Date shall
be calculated as the amount of any unpaid dividends accrued thereon to
and excluding the last preceding Dividend Payment Date regardless of
whether declared, plus an amount calculated on the basis of the annual
dividend rate for the period from and including such last preceding
Dividend Payment Date to and excluding the date as of which the
calculation is made (regardless of whether declared).
(e) Dividends in arrears with respect to the outstanding shares
of Series C Preferred Stock may be declared and paid or set apart for
payment at any time and from time to time, without reference to any
regular Dividend Payment Date, to holders of record as they appear on
the stock books of the Corporation at the close of business on such
Record Date as the Board of Directors may establish with respect to
the payment of such payment in arrears. No interest, or sum of money
in lieu of interest, shall be payable in respect of any dividend or
other payment or payments which may be in arrears with respect to the
Series C Preferred Stock. All dividends paid with respect to the
Series C Preferred Stock shall be paid pro rata to the holders
entitled thereto.
(f) In the event dividends have not been paid on the Series C
Preferred Stock for three successive years the Corporation shall, to
the extent legally possible, pay all dividends in arrears in common
stock of the Corporation, subject to prior permission of the holders
of Series C Preferred Stock who are to receive dividends, which
consent may not be withheld from the Corporation for more than 180
consecutive days/
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4. Voting Rights. The holders of the Series C Preferred Stock will
have no voting rights except as described below or as required by law. In
exercising any such vote, each share of Series C Preferred Stock will be
entitled to one vote, excluding shares held by the Company or any entity
controlled by the Company, which shares shall have no voting right.
(a) Whenever dividends on the Preferred Stock have not been paid
in an amount equal to at least six (6) quarterly dividends (whether
consecutive), the number of directors of the Corporation shall be
increased by two, and the holders of the Series C Preferred Stock,
voting separately as a class shall be entitled to elect such two
additional directors to the Board at any meeting of shareholders of
the Company, at which directors are to be elected and which is held
during the period such dividends remain in arrears. Such voting rights
shall terminate when all such dividends in default have been paid in
full or declared and set apart for payment.
(b) Whenever the right of the Series C Preferred Stock to elect
directors under 4(a) shall have arisen, such right shall be exercised
only at a meeting duly held, within sixty (60) days after the Dividend
Payment Date on which such right arose, for the purpose of electing or
removing directors at which the holders of the Series C Preferred
Stock shall have the right to elect or remove directors as provided
herein. Upon written notice to the Corporation by the holders of at
least two-thirds of the outstanding shares of the Series C Preferred
Stock, the Corporation shall take all action necessary to call and
hold, within sixty (60) days after such request is received, a meeting
of the holders of the Series C Preferred Stock for the purpose of
electing and/or removing a director.
(c) The presence in person or by proxy of the holders of at least
a majority of the votes entitled to be cast at such meeting with
respect to the then outstanding shares of the Series C Preferred Stock
shall be required and be sufficient to constitute a quorum. At any
such meeting or adjournment thereof (i) the absence of a quorum with
respect to the Series C Preferred Stock shall not prevent the election
of directors other than those to be elected by the holders of the
Series C Preferred Stock, and the absence of a quorum or quorums with
respect to the stock entitled to elect such other directors shall not
prevent the election of directors to be elected by the holders or the
Series C Preferred Stock and (ii) in the absence of a quorum with
respect to the Series C Preferred Stock, a majority of the votes
entitled to be cast at such meeting with respect to the Series
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C Preferred Stock, present in person or by proxy, shall have the power
to adjourn the meeting for the election of directors which the holders
of shares of the Series C Preferred Stock may be entitled to elect,
from time to time, without notice (except as required by applicable
law) other than announcement at the meeting, until a quorum shall be
present.
(d) The term of office of all directors elected by the holders of
the Series C Preferred Stock in office at any time when the aforesaid
voting right is vested in such holders shall terminate upon the
election of their successors at any meeting of shareholders for the
purpose of electing directors or upon payment of the arrearage,
whichever shall first occur; provided, however, that, without further
action but subject to applicable law, any director who shall have been
elected by holders of the Series C Preferred Stock or appointed to
fill a vacancy among such directors as provided herein may be removed
at any time, either with or without cause, at a meeting of the holders
of the Series C Preferred Stock duly held for that purpose, if the
number of votes cast in favor of such removal exceeds the number of
votes cast against such removal. Upon any termination of the right of
the holders of the Series C Preferred Stock to elect directors under
this section 4, the term of office of all directors elected by the
holders of the Series C Preferred Stock pursuant hereto then in office
shall, without further action, thereupon terminate. Upon such
termination, the number of directors constituting the Board of
Directors shall, without further action, immediately be reduced
accordingly, subject always to subsequent increase in case the right
of the holders of the Series C Preferred Stock to elect directors as
provided herein shall arise as a result of subsequent dividend
arrearages.
(e) Unless otherwise required by applicable law, in case of any
vacancy occurring among the directors elected by the Series C
Preferred Stock, the remaining director who shall have been so elected
may appoint a successor to hold office for the unexpired term of the
director whose place shall be vacant and, in case all directors so
elected shall cease to serve as directors before their terms expire,
the holders of the Series C Preferred Stock then outstanding may, at a
meeting of such holders duly held, elect successors to hold office for
the unexpired terms of the directors whose places shall be vacant.
(f) In connection with any matter on which holders of the Series
C Preferred Stock are entitled to vote including, without limitation,
any matter on which the holders of the Series C Preferred Stock are
entitled to vote as a class or otherwise pursuant to applicable law or
the provisions of the Articles of Incorporation of the Corporation,
each holder of the Series C Preferred Stock shall be entitled to one
vote for each share of Series C Preferred Stock held by such holder.
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(g) So long as any shares of Series C Preferred Stock shall be
outstanding, the Corporation shall not, without the affirmative vote
of the holders of at least a two-thirds majority of the outstanding
shares of the Series C Preferred Stock, voting separately as a class,
(i) amend, alter or repeal any provision of the Articles or the Bylaws
of the Corporation so as to adversely effect the relative rights,
preferences, qualifications, limitations or restrictions of the Series
C Preferred Stock, (ii) authorize, create, issue, or increase the
authorized number of shares of any additional class or series of
stock, or any security convertible into stock of such class or series,
ranking senior to the Series C Preferred Stock as to dividends or upon
liquidation, dissolution or winding up of the Corporation or which
possess rights which may allow for voting separately as one class with
the Series C Preferred Stock other than with respect to the election
of directors pursuant to the provisions hereof on a basis of one vote
or less for each $6.00 of liquidation preference thereof or(iii)
effect any reclassification of the Series C Preferred Stock. Neither
shall the Company, without the affirmative vote of at least 50% of all
outstanding shares of Series C Preferred Stock, voting as a class,
authorize, issue or increase the authorized number of shares of any
additional class or series of stock, or any security convertible to
stock of such class or series, ranking on a parity with the Series C
Preferred Stock as to dividends or liquidation and having superior
voting rights or authorize or issue, or increase the authorized amount
of, any additional class or series of stock ranking on a parity with
the Series C Preferred Stock as to dividend or liquidation rights, if
the adjusted shareholder's equity of the Corporation is less than the
aggregate liquidation preference of all classes of Preferred Stock
ranking senior to or on a parity with the Series C Preferred Stock.
5. Redemption. The Series C Preferred Stock may not be redeemed before
March 16, 1997. The Series C Stock is thereafter redeemable for cash, in
whole or in part, at any time or from time to time, at the option of the
Corporation, at the rate of $6.00 per share, plus any and all accrued
and/or unpaid dividends, whether or not declared. If fewer than all of the
shares of Series C Preferred Stock are to be redeemed, the Company will
select those to be redeemed pro-rata or by lot in such other manner as the
Board may determine. There is no mandatory redemption or sinking fund
obligation with respect to the Series C Preferred Stock. If the Corporation
has failed to pay accrued dividends on the Series C Preferred Stock, it may
not redeem any of the outstanding shares of the Series C Preferred Stock
until all such accrued and unpaid dividends and, except with respect to
shares to be redeemed, the then current quarterly dividends have been paid
in full.
(a) Notice of the redemption shall be sent by or on behalf of the
Corporation, by certified mail, postage prepaid, to the holders of
record of the Series C Preferred Stock at their respective addresses
as they appear on the records of the Corporation, not less than twenty
(20) days but not more than sixty (60) days prior to the redemption
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date, notifying such holders of (i) the election of the Corporation to
redeem such shares, (ii) the date of redemption, (iii) stating the
place or places at which the shares called for redemption shall, upon
presentation and surrender of the certificates evidencing such shares,
be redeemed, and the Redemption Price therefor and (iv) stating the
name and address of any Redemption Agent selected by the Corporation
in accordance with the provisions of this Section 5, and the name and
address of the Corporation's Transfer Agent for the Series C Preferred
Stock. The Corporation may act as the redemption agent to redeem the
Series C Preferred Stock.
(b) If notice of redemption shall have been given as hereinbefore
provided, and the Corporation shall not default in the payment of the
Redemption Price, then each holder of Series C Preferred Stock called
for redemption shall be entitled to all preferences and relative and
other rights accorded by this resolution until and including the date
prior to the Redemption Date. If the Corporation shall fail to make
payment or delivery as aforesaid on the Redemption Date, then each
holder of the Series C Preferred Stock called for redemption shall be
entitled to all preferences and relative and other rights accorded by
this resolution until and including the date prior to the date (the
"Final Redemption Date") when the Corporation makes payment or
delivery as aforesaid to the holders of the Series C Preferred Stock.
The Final Redemption Date shall be no later than five business days
after the Redemption Date. From and after the Redemption Date or, if
the Corporation shall default in making payment or delivery as
foresaid, the Final Redemption Date, the Series C Preferred Stock
called for redemption shall no longer be deemed to be outstanding, and
all rights of the holders of such Series C Preferred Stock shall cease
and terminate, except the right of the holders of such Series C
Preferred Stock, upon surrender of certificates therefor, to receive
amounts to be paid hereunder. The deposit of monies in trust with the
Redemption Agent shall be irrevocable except that the Corporation
shall be entitled to receive from the Redemption Agent the interest or
other earnings, if any, earned on any monies so deposited in trust,
and the holders of any Series C Preferred Stock redeemed shall have no
claim to such interest or other earnings, and any balance of monies so
deposited by the Corporation and unclaimed by the holders of the
Series C Preferred Stock entitled thereto at the expiration of one
year from the Redemption Date (or the Final Redemption Date, as
applicable) shall be repaid, together with any interest or other
earnings thereon, to the Corporation, and after any such repayment,
the holders of the Series C Preferred Shares entitled to the funds so
repaid to the Corporation shall look only to the Corporation for such
payment, without interest.
(d) So long as the payment of any declared dividends on shares of
the Series C Preferred Stock is not paid, no shares of the Series C
Preferred Stock shall be redeemed, unless consented to in writing by a
holder thereof after receipt of written notice from the Corporation
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(whether by mandatory or optional redemption) unless all such shares
are simultaneously redeemed and the Corporation may not (i) make any
payment on account of, or set apart payment for, the purchase or other
acquisition, redemption, retirement or other requirement of, or with
respect to, any sinking or other similar fund or agreement for the
purchase or other acquisition, redemption, retirement or other
requirement of, or with respect to, any other capital stock of the
Corporation or any warrants, rights, calls or options exercisable or
exchangeable for or convertible into other capital stock of the
Corporation or (ii) permit any corporation or other entity controlled
directly or indirectly by the Corporation to purchase or otherwise
acquire or redeem any other capital stock of the Corporation or any
warrants, rights, calls or options exercisable or exchangeable for or
convertible into other capital stock of the Corporation.
(e) Notwithstanding any language herein to the contrary, in no
event shall shares of Series C Preferred Stock be redeemed by the
Corporation until the holder shall have determined in good faith that
it is not subject to liability under Section 16 of the Securities
Exchange Act of 1934 or any successor provision. All dates for
redemption shall be postponed until such determination is made by the
holder.
6. Conversion Rights. Subject to and upon compliance with the
provision of this Section 6, the holder of any shares of Series C Preferred
Stock shall have the right at such holder's option, at any time or from
time to time, to convert any of such shares of Series C Preferred Stock
into fully paid and non-assessable shares of Common Stock of the
Corporation at the Conversion Price (as hereinafter defined) in effect on
the Conversion Date (as hereinafter defined) upon the terms and conditions
hereinafter set forth. In case any share of Series C Preferred Stock is
called for redemption, such right of conversion shall terminate at the
close of business on the date notice of redemption is received by the
holder of the Series C Preferred Stock, which for purposes of this section
shall be deemed to be three (3) business days following placement in the
United States mails; provided, however, that upon defaults on any announced
redemption by the Corporation of Series C Preferred Stock, the holder shall
be allowed to convert shares of Series C Preferred Stock for a period of
sixty (60) days immediately after a default of a redemption by the
Corporation.
(a) Conversion Price. Each share of Series C Preferred Stock
shall be converted into a number of shares of Common Stock determined
by dividing (i) the sum of (A) $6.00 plus (B) any dividends on such
share of Series C Preferred Stock which such holder is entitled to
receive, but has not yet received, by (ii) the Conversion Price in
effect on the Conversion Date. The Conversion Price at which shares of
Common Stock shall initially be issuable upon conversion of the shares
of Series C Preferred Stock shall be $3.00. The Conversion Price shall
be subject to adjustment in certain events, including the issuance of
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stock dividend on the Common Stock, issuance of Additional Stock,
subdivisions or combinations of the Common Stock, the issuance to all
holders of Common Stock of certain rights or warrants. No adjustment
in the Conversion Price will be required to be made until cumulative
adjustments aggregate 5% or more of the Conversion Price as last
adjusted; provided, however, that any adjustment not made shall be
carried forward.
(b) Fractional Shares. No fractional shares of Common Stock or
scrip shall be issued upon conversion of shares of Series C Preferred
Stock. If more than one share of Series C Preferred Stock shall be
surrendered for conversion at any one time by the same holder, the
number of full shares of Common Stock issuable upon conversion thereof
shall be computed on the basis of the aggregate number of shares of
Series C Preferred Stock so surrendered. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon
conversion of any shares of Series C Preferred Stock, the Corporation
shall pay a cash adjustment in respect of such fractional interest
based upon the closing price for the shares of Common Stock on the
trading day before the day of Conversion.
(c) Mechanics of Conversion. The holder of any shares of Series C
Preferred Stock may exercise the conversion right by surrendering to
the Corporation or any transfer agent of the Corporation the
certificate or certificates for the shares to be converted,
accompanied by written notice specifying the number of shares to be
converted. Conversion shall be deemed to have been effected on the
date when delivery of notice of an election to convert and
certificates for shares is made or on the date of the occurrence of
any event specified in this Section 6, as the case may be, and such
date is referred to herein as the "Conversion Date." As promptly as
practicable thereafter (and after surrender of the certificate or
certificates representing shares of Series C Preferred Stock to the
Corporation or any transfer agent of the Corporation in the case of
conversions pursuant to this Section 6) the Corporation shall issue
and deliver to or upon the written order of such holder a certificate
or certificates for the number of full shares of Common Stock to which
such holder is entitled and a check or cash with respect to any
fractional interest in a share of Common Stock as provided in this
Section 6. Subject to the provisions of this Section 6, the person in
whose name the certificate or certificates for Common Stock are to be
issued shall be deemed to have become a holder of record of such
Common Stock on the applicable Conversion Date. Upon conversion of
only a portion of the number of shares covered by a certificate
representing shares of Series C Preferred Stock surrendered for
conversion (in the case of conversion pursuant to this Section 6), the
Corporation shall issue and deliver to or upon the written order of
the holder of the certificate so surrendered for conversion, at the
expense of the Corporation, a new certificate covering the number of
shares of Series C Preferred Stock representing the unconverted
portion of the certificate so surrendered.
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(d) Conversion Adjustment. The Conversion Price and the number of
shares issuable upon conversion shall be subject to adjustment from
time to time as hereinafter provided. Upon each adjustment of the
Conversion Price, the holder of Series C Preferred Stock shall
thereafter be entitled to convert, at the Conversion Price resulting
from such adjustment, the number of shares obtained by multiplying the
number of shares convertible hereto immediately prior to such
adjustment by a fraction, the numerator of which is the Conversion
Price in effect immediately prior to such adjustment and the
denominator of which is the Conversion Price resulting from such
adjustment. In making the adjustments to the Conversion Price and the
number of shares issuable upon the conversion, the following
provisions shall be applicable:
(i) If and whenever the Corporation shall issue Additional
Stock (as defined below), then forthwith upon such issue or sale
the Conversion Price in effect immediately prior thereto shall be
adjusted to an amount (calculated to the nearest cent) determined
by dividing (i) an amount equal to the sum of (a) the number of
shares outstanding immediately prior to such issue or sale
multiplied by the Conversion Price in effect immediately prior to
such issue or sale, and (b) the consideration, if any, received
by the Corporation upon such issue or sale by (ii) the total
number of shares outstanding immediately after the such issue or
sale.
(ii) For the purpose of making any adjustment in the
Conversion Price, the consideration received by the Corporation
for any issue or sale of Additional Stock;
(1) To the extent it consists of cash, shall be
computed at the net amount of cash received by the
Corporation after deduction of any underwriting or similar
commissions or compensation paid or allowed by the
Corporation in connection with such issue or sale;
(2) To the extent it consists of property other than
cash, shall be computed at the fair value of that property
as determined in good faith by the Board; and
(3) If Additional Stock, Convertible Securities (as
hereinafter defined), or rights or options to purchase
either Additional Stock or Convertible Securities are issued
or sold together with other stock or securities or other
assets of the Corporation for a consideration that covers
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both, the consideration received by the Corporation shall be
computed as the portion of the consideration so received
that may be reasonably determined in good faith by the Board
to be allocable to such Additional Stock, Convertible
Securities or rights or options.
(iii) For the purpose of the adjustment provided herein, if
any time or from time to time after the Corporation shall issue
or have outstanding any rights or options for the purchase of, or
stock or other securities convertible into, Additional Stock
(such convertible stock or securities being hereinafter referred
to as "Convertible Securities"), then, in each case, if the
Effective Price (as hereinafter defined) of such rights, options,
or Convertible Securities shall be less than the then existing
Conversion Price, the Corporation shall be deemed to have issued
at the time of the issuance of such rights or options or
Convertible Securities the maximum amount of Additional Stock
issuable upon exercise or conversion thereof and to have received
as consideration for the issuance of such shares an amount equal
to the total amount of the consideration, if any, received by the
Corporation for the issuance of such rights or options or
Convertible Securities, plus, in the case of such options or
rights, the minimum amounts of consideration, if any, payable to
the Corporation upon exercise or conversion of such options or
rights. "Effective Price" shall mean the quotient determined by
dividing the total of all of such consideration by such maximum
number of shares of Additional Stock which may be obtained upon
conversion of such Convertible Securities. No further adjustment
of the Conversion Price adjusted upon the issuance of such
rights, options, or Convertible Securities shall be made as a
result of the actual issuance of Additional Stock on the exercise
of any such rights or options or the conversion of any such
Convertible Securities.
(iv) For the purpose of the adjustment provided for herein,
if at any time or from time to time after the date hereof, the
Corporation shall issue any rights or options in respect of
Convertible Securities, then, in each such case, if the Effective
Price thereof is less than the then current Conversion Price, the
Corporation shall be deemed to have issued at the time of the
issuance of such rights or options the maximum amount of
Additional Stock issuable upon conversion of the total amount of
Convertible Securities covered by such rights or options and to
have received as consideration for the issuance of such
Additional Stock an amount equal to the amount of consideration,
if any, received by the Corporation for the issuance of such
rights or options, plus the minimum amounts of consideration, if
any, payable to the Corporation upon the exercise of such rights
or options plus the minimum amounts of consideration, if any,
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<PAGE>
payable to the Corporation upon the conversion of such
Convertible Securities. "Effective Price" shall mean the quotient
determined by dividing the total amount of such consideration by
such maximum amount of Additional Stock. No further adjustment of
such Conversion Price adjusted upon the issuance of such rights
or options shall be made as a result of the actual issuance of
the Convertible Securities upon the exercise of such rights or
options or upon the actual issuance of Additional Stock upon the
conversion of such Convertible Securities.
(v) The term "Additional Stock" as used herein shall mean
all shares of Common Stock issued or deemed issued by the
Corporation after the date hereof, whether or not subsequently
reacquired or retired by the Corporation, other than pursuant to
(i) employee stock option plans approved by the Board of
Directors of the Corporation which exist on the date of this
Agreement, (ii) up to 100,000 shares of Common Stock on terms and
conditions as the Board of Directors of the Corporation
determines, and (iii) Common Stock issued or deemed issued at a
price equal to or above the existing Conversion Price at the time
of issuance of such Common Stock.
vi) In the event the Corporation should at any time or from
time to time after the date hereof fix a record date for the
effectuation of a split or subdivision of the outstanding shares
of Common Stock or the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in
additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive
directly or indirectly, additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without
payment of any consideration by such holder for the additional
shares of Common Stock or the Common Stock Equivalents (including
the additional shares of Common Stock issuable upon conversion or
exercise thereof, then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record
date is fixed), the Conversion Price shall be appropriately
decreased to an amount equal to the Conversion Price in effect on
the record date (or the date of such dividend, distribution,
split or subdivision) times a fraction, the numerator of which
shall be the number of shares utstanding before the dividend,
subdivision, distribution or split and, the denominator of which
shall be the number of shares outstanding after the dividend,
subdivision, distribution or split.
(vii) If the number of shares of Common Stock outstanding at
any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price shall be
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appropriately increased to an amount equal to the Conversion
Price in effect on the record date (or the date of such
combination) times a fraction, the numerator of which shall be
the number of shares outstanding before the combination and, the
denominator of which shall be the number of shares outstanding
after the combination.
(viii) In the event the Corporation shall declare a
distribution payable in securities of other persons, evidences of
indebtedness issued by this Corporation or other persons, assets
(excluding cash dividends) or options or rights not otherwise
referred to herein, then, in each such case for the purpose of
this subsection, the holders of the Series C Preferred Stock
shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of
shares of Common Stock of the Corporation into which their shares
of Series C Preferred Stock are convertible as of the record date
fixed for the determination of the holders of Common Stock of the
Corporation entitled to receive such distribution.
(ix) In the case of any consolidation or any merger of the
Corporation with or into another corporation (other than a
consolidation or merger in which the Corporation is the
continuing corporation), the corporation resulting from such
consolidation or surviving such merger shall make suitable
provision so that the Series C Preferred Stock shall thereafter
be convertible into the kind and amount of shares of stock, other
securities, or property receivable upon such consolidation or
merger by a holder of the number of shares of Common Stock into
which such Series C Preferred Stock might have been converted
immediately prior to such consolidation or merger. The provisions
of this subparagraph shall apply to successive consolidations and
mergers.
(x) In the case of a recapitalization of the Corporation
affecting its outstanding shares of Common Stock, or
reclassification (other than change in par value), the Series C
Preferred Stock shall thereafter be convertible into the kind and
amount of shares of stock, other securities, or property
receivable upon such recapitalization by a holder of the number
of shares of Common Stock into which such stock might have been
converted immediately prior to such recapitalization.
(xi) The Corporation will not, by amendment of its Articles
of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issuance
or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by this Corporation, but
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<PAGE>
will at all times in good faith assist in the carrying out of all
the provisions of this Paragraph 6 and in the taking of all such
action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series C Preferred Stock
against impairment.
(e) Statement Regarding Adjustments. Whenever the Conversion
Price or the number of shares issuable upon conversion shall be
adjusted as provided in this Section 6, the Corporation shall
forthwith file, at the office of any transfer agent for the Series C
Preferred Stock and at the principal office of the Corporation, a
statement showing in detail the facts requiring such adjustment and
the Conversion Price or the number of shares issuable upon conversion
that shall be in effect after such adjustment, and the Corporation
shall also cause a copy of such statement to be sent by mail, first
class postage prepaid, to each holder of shares of Series C Preferred
Stock at its address appearing on the Corporation's records. The
Corporation shall use reasonable efforts to have each such statement
signed by the Corporation's independent public accountants. Where
appropriate, such copy may be given in advance and may be included as
part of a notice required to be mailed under the provisions of this
Section 6.
f) Notice. In the event the Corporation shall propose to take any
actions of the type described in this Section 6, the Corporation shall
give notice to each holder of shares of Series C Preferred Stock, in
the manner set forth herein, which notice shall specify the record
date, if any, with respect to any such action and the approximate date
on which such action is to take place. Such notice shall also set
forth such facts with respect thereto as shall be reasonably necessary
to indicate the effect of such action (to the extent such effect may
be known at the date of such notice) on the Conversion Price and the
number, kind or class of shares or other securities or property which
shall be deliverable upon conversion of shares of Series C Preferred
Stock. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 10 days prior to the
date so fixed, and in case of all other action, such notice shall be
given at least 15 days prior to the taking of such proposed action.
Failure to give such notice, or any defect therein, shall not affect
the legality or validity of any such action.
(g) Treasury Stock. For the purposes of this paragraph 6, the
sale or other disposition of any Common Stock theretofore held in the
Corporation's treasury shall be deemed to be an issuance thereof.
(h) Costs. The Corporation shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance or
delivery of shares of Common Stock upon conversion of any shares of
Series C Preferred Stock provided that the Corporation shall not be
required to pay any taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificate for
such shares in a name other than that of the holder of the shares of
Series C Preferred Stock in respect of which such shares are being
issued.
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(i) Reservation of Shares. The Corporation shall reserve at
all times so long as any shares of Series C Preferred Stock
remain outstanding, free from preemptive rights, out of its
treasury stock (if applicable) or its authorized but unissued
shares of Common Stock, or both, solely for the purpose of
effecting the conversion of the shares of Series C Preferred
Stock, sufficient shares of Common Stock to provide for the
conversion of all outstanding shares of Series C Preferred Stock.
(j) Valid Issuance. All shares of Common Stock which may be
issued upon conversion of the shares of Series C Preferred Stock will
upon issuance by the Corporation be duly and validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with
respect to the issuance thereof, and the Corporation shall take no
action which will cause a contrary result (including without
limitation, any action which would cause the Conversion Price to be
less than the par value, if any, of the Common Stock).
7. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, the holders of outstanding
shares of Series C Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to shareholders,
before any distribution of assets shall be made to the holders of shares of
Common Stock or any other Junior Stock an amount equal to $6.00 per share,
plus an amount equal to all accumulated and unpaid dividends on such shares
of the Series C Preferred Stock to and including the date of such
liquidation, dissolution or winding up. Provided, however, that no
liquidation rights shall accrue to the holders of the Series C Preferred
Stock until and after the holders of the Series A and the Series B
Preferred Stock shall have received the benefit of the liquidation rights
of those shares in the amount of $5.00 per share plus any accrued dividend
rights applicable thereto. If, upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the amounts
payable with respect to the Series C Preferred Stock are not paid in full,
the holders of the Series C Preferred Stock shall share ratably in any such
distribution of assets of the Corporation in proportion to the full
respective preferential amounts (including accumulated and unpaid
dividends) to which they are entitled. After payment to the holders of the
Series C Preferred Stock of the full preferential amount (including
accumulated and unpaid dividends) provided for in this Section, the holders
of the Series C Preferred Stock shall be entitled to no further
participation in any distribution of assets by the Corporation. Neither the
voluntary sale, conveyance, exchange or transfer (for cash, securities or
other consideration) of all or any part of the property or assets of the
Corporation, nor the consolidation or merger or other business combination
of the Corporation with or into any other corporation or corporations,
shall be deemed to be a voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, unless such voluntary sale, conveyance,
exchange or transfer shall be in connection with a plan of liquidation,
dissolution or winding up of the Corporation.
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8. No Other Rights. The shares of Series C Preferred Stock shall not
have any preferences, voting powers or relative, participating, optional or
other special rights except as set forth above and in the Articles of
Incorporation or as otherwise required by applicable law.
THIRD: The foregoing amendment to the Articles of Incorporation was adopted
on September 16, 1996.
FOURTH: The foregoing amendment was duly adopted by the Board of Directors
of the Corporation.
IN WITNESS WHEREOF, United States Exploration, Inc. has caused its
corporate seal to be hereunto affixed and this instrument to be signed by its
President and attested by its Secretary this ...... of ............. , 1996.
UNITED STATES EXPLORATION, INC.
[Corporate Seal] By:
---------------------------------
, President
Attest:
- -------------------------------
Secretary
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