<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
Section 240.14a-11(c) or Section 240.14a-12
UNITED STATES EXPLORATION, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of filing fee (Check the appropriate box):
[X] No filing fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
- --------------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
3) Filing Party:
- --------------------------------------------------------------------------------
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
UNITED STATES EXPLORATION, INC.
1560 BROADWAY, SUITE 1900
DENVER, COLORADO 80202
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 29, 1998
The Annual Meeting of Shareholders of United States
Exploration, Inc., a Colorado corporation (the "Company"), will be held at the
Company offices located at 1560 Broadway, Suite 1900, Denver, Colorado 80202 on
June 29, 1998, at 9:00 a.m., Mountain Daylight Time, for the following
purposes:
1. To elect four members of the Board of Directors to
serve until the next annual meeting of shareholders and until their successors
are elected;
2. To ratify the appointment of Ernst & Young LLP as the
Company's independent accountants for the fiscal year ending December 31, 1998;
and
3. To transact such other business as may properly come
before the meeting or any adjournment thereof.
Only shareholders of record on the books of the Company at the
close of business on May 1, 1998 are entitled to notice of and to vote at the
Annual Meeting.
All shareholders are invited and urged to attend the meeting
in person. EVEN IF YOU EXPECT TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN, DATE, AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED,
PRE-ADDRESSED ENVELOPE. If you attend the meeting, you can revoke your Proxy
and vote in person.
A Proxy Statement explaining the matters to be acted upon at
the meeting follows. Please read it carefully.
By Order of the Board of Directors,
/s/ F. MICHAEL MURPHY
F. Michael Murphy, Secretary
June 1, 1998
<PAGE> 3
UNITED STATES EXPLORATION, INC.
ANNUAL MEETING OF SHAREHOLDERS
JUNE 29, 1998
PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation of Proxies by the Board of Directors of United States Exploration,
Inc., a Colorado corporation (the "Company"), for use at the Annual Meeting of
Shareholders of the Company to be held at the Company's principal executive
offices located at 1560 Broadway, Suite 1900, Denver, Colorado 80202, on June
29, 1998, at 9:00 a.m., Mountain Daylight Time, and at any and all adjournments
of such meeting. This Proxy Statement and the enclosed form of Proxy are first
being sent to shareholders on or about June 1, 1998.
PROXIES AND VOTING AT THE ANNUAL MEETING
If the enclosed Proxy is properly executed and returned in
time to be voted at the meeting, the shares represented will be voted in
accordance with the instructions contained therein. EXECUTED PROXIES THAT
CONTAIN NO INSTRUCTIONS WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES NAMED
HEREIN AS DIRECTORS AND FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST &
YOUNG LLP AS AUDITORS.
Shareholders who execute Proxies for the Annual Meeting may
revoke their Proxies at any time prior to their exercise by delivering written
notice of revocation to the Company, by delivering a duly executed Proxy
bearing a later date, or by attending the meeting and voting in person.
The cost of the meeting, including the cost of preparing and
mailing this Proxy Statement and Proxy, will be borne by the Company. The
Company may use the services of its directors, officers, employees and
contractors to solicit Proxies, personally or by telephone, but at no
additional salary or compensation. The Company will also request banks,
brokers and others who hold shares of the common stock, par value $.0001 per
share of the Company (the "Common Stock") in nominee names to distribute proxy
solicitation materials to beneficial owners and will reimburse such banks and
brokers for reasonable out-of-pocket expenses which they may incur in so doing.
Only holders of record of the Common Stock on May 1, 1998 are
entitled to receive notice and to vote at the Annual Meeting. Each share of
Common Stock is entitled to one vote. On May 1, 1998, there were a total of
8,825,946 shares of Common Stock outstanding. The holders of a majority of the
outstanding Common Stock will constitute a quorum for the transaction of
business at the Annual Meeting.
<PAGE> 4
In the election of directors, the nominees equaling the number
of directors to be elected that receive the most votes cast in favor of their
election are elected to the Board of Directors. All other matters submitted at
the meeting will be approved if the votes cast in favor of the matter exceed
the votes cast against the matter. Shares represented by proxies that are
marked "withhold authority" with respect to the election of one or more
nominees for election as directors, proxies which are marked "abstain" on other
proposals and proxies that are marked to deny discretionary authority on other
matters will not be counted in determining the number of votes cast for such
matters. If no directions are given and the signed proxy card is returned, the
shares will be voted in favor of the election of all listed nominees, in
accordance with the directors' recommendations on the other matters listed on
the proxy card, and at the proxies' discretion on any other matter that may
properly come before the meeting. Brokers who hold Common Stock in street name
and do not receive instructions from their clients on how to vote on a
particular proposal are permitted to vote on routine proposals but not on
nonroutine proposals. The absence of votes on nonroutine proposals are "broker
nonvotes." Abstentions and broker nonvotes will be counted as present for
purposes of establishing a quorum, but will have no effect on the election of
directors, the ratification of appointment of auditors or any other matter
voted on at the meeting because they will not be counted as votes for or
against any matter.
YOUR VOTE IS IMPORTANT. PLEASE RETURN YOUR MARKED PROXY CARD PROMPTLY SO YOUR
SHARES CAN BE REPRESENTED, EVEN IF YOU PLAN TO ATTEND THE MEETING IN PERSON.
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES
The Board of Directors of the Company consists of four
members, each of whom is to be elected to serve until the next Annual Meeting
of Shareholders and until his successor is elected and qualified. All of the
nominees are presently Directors of the Company. If any such person should be
unable to serve or become unavailable for any reason, or if a vacancy should
occur before the election (which events are not anticipated), the Proxy will be
voted for such other person or persons as shall be determined by the persons
named in the Proxy in accordance with their judgment. The following
information concerning the nominees as of May 1, 1998 was provided by the
nominees:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Bruce D. Benson 59 Chairman of the Board of Directors,
Chief Executive Officer and President
Thomas W. Gamel 58 Director
Robert J. Malone 53 Director
Richard L. Robinson 68 Director
</TABLE>
2
<PAGE> 5
Bruce D. Benson has been the Chairman of the Board of
Directors, Chief Executive Officer and President of the Company since August
1997. Since 1965, Mr. Benson has been the owner and president of Benson
Mineral Group, Inc. ("BMG"), a privately held company involved in oil and gas
production, gas processing and oil and gas pipeline operations. BMG has also
been an active investor in a variety of other industries including real estate,
banking, mortgage servicing, cable television, management of real estate
investment trusts and franchise restaurants. Mr. Benson is a director of Asset
Investors Corporation, a publicly held company listed on the New York Stock
Exchange, and Commercial Assets, Inc., a publicly held company listed on the
American Stock Exchange. He is a trustee and past president and past chairman
of the Denver Area Council of the Boy Scouts of America, president of the
Denver Zoological Foundation, National Chairman of the University of Colorado
Comprehensive Capital Campaign and past chairman of the Colorado Commission on
Higher Education. In 1994, Mr. Benson was the Republican nominee for Governor
of the State of Colorado.
Thomas W. Gamel has been a director of the Company since
August 1997. Since 1992, Mr. Gamel has served as chairman of Rockmont Value
Investors, Ltd., a privately held investment company. He has been an owner and
director of Timpte Industries, Inc., a diversified private holding company,
since 1970, and is an owner and director of several other private companies.
Mr. Gamel is presently a director of Koala Corporation, a Nasdaq National
Market System listed company that designs, manufactures and distributes infant
and children's products to businesses. Mr. Gamel is a certified public
accountant.
Robert J. Malone has been a director of the Company since
August 1997. From 1992 to 1996, Mr. Malone was the chairman and chief
executive officer of Colorado National Bank of Denver, Colorado (now US Bank of
Denver, Colorado) and has continued as the chairman of the board since 1996.
From 1990 to 1992, he was chairman of the board, president and chief executive
officer of Western Capital Investment Inc. and its principal subsidiary, Bank
Western. Western Capital was merged into First Bank Systems, Inc. (now U.S.
Bancorp) in December 1992. He presently serves on the Board of Commercial
Assets, Inc., an American Stock Exchange listed company. Mr. Malone has served
on the boards of several community and charitable organizations, including the
Denver Metro Chamber of Commerce, and is currently Chairman of the Board of
Trustees of Colorado's Ocean Journey and a Trustee of Regis University. He is
past-president of the Young Presidents Organization and past chairman of the
board of Regis University.
Richard L. Robinson has been a director of the Company since
August 1997. Since 1975, Mr. Robinson has served as chairman of the board and
chief executive officer of Robinson Dairy, Inc., a privately held dairy
company. He also serves on the Board of Directors of several other companies,
including Asset Investors Corporation, a New York Stock Exchange listed
company, and Columbia/Health One. In addition to serving on the Board of
Directors of the Milk Industry Foundation, Mr. Robinson serves on the Boards of
many charitable and community organizations including Mile High United Way,
Regis University and Children's Hospital of Denver, Colorado.
3
<PAGE> 6
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
During the twelve-month period ended December 31, 1997, the
Company's Board of Directors met five times and took action twice by unanimous
written consent. Messrs. Benson, Gamel, Malone and Robinson were all present,
either in person or by telephone, at each meeting of the Board of Directors and
each committee of which he was a member during the period he served as a
director.
The Board of Directors of the Company maintains a standing
Audit Committee and a standing Compensation Committee. The Audit Committee is
responsible for reviewing and evaluating the Company's financial controls and
financial reporting obligations. The members of the Audit Committee are
Messrs. Gamel (Chairman), Malone and Robinson. The Compensation Committee is
responsible for reviewing and evaluating the duties and performance of the
Company's officers and key employees and making recommendations concerning
their compensation. The members of the Compensation Committee are Messrs.
Malone (Chairman), Gamel and Robinson. During the twelve month period ended
December 31, 1997, the Audit Committee met twice and the Compensation Committee
met one time.
EXECUTIVE OFFICERS
The following persons serve as executive officers of the
Company. Mr. Benson is also a member of the Board of Directors and his
biographical information is presented above under the caption "Election of
Directors."
F. Michael Murphy, 56, was appointed Chief Financial Officer,
Vice President and Secretary of the Company in August 1997. He has been
employed by BMG since 1977, first as tax manager and since 1980 as chief
financial officer. Mr. Murphy is a certified public accountant, having begun
his career with Arthur Young (now Ernst & Young).
John Wallace, 38, was appointed Vice President of Exploration
and Acquisitions in May 1998. For more than five years prior to joining the
Company, Mr. Wallace was President of The Esperonza Corporation, a privately
held oil and gas acquisition company, and Vice President of Dual Resources,
Inc., a privately held oil and gas exploration company. Esperanza has effected
more than 25 acquisitions of producing properties throughout the United States.
In addition, Esperonza formed and administered royalty programs for private
investors, primarily in the Rocky Mountain region, and has participated in a
number of international exploration projects. Dual Resources is in the
business of generating and selling exploration prospects, several of which have
resulted in new field discoveries.
Murray N. Brooks, 55, has been the vice president of
operations of the Company since August 1997. Mr. Brooks has more than 30
years experience in the oil and gas industry. He has been employed by BMG
since 1984. During that time he has worked in virtually every aspect of BMG's
business with special emphasis on management, engineering, production and
drilling. From
4
<PAGE> 7
1965 through 1984, Mr. Brooks was employed by Husky Oil Company, rising to the
division manager of the Mid-Continent Region with overall responsibility for
engineering.
Randall L. Rogers, 42, has been Treasurer of the Company since
August 1997. He has been employed by BMG since 1985. Until 1996, he was BMG's
tax manager and since that time he has been its controller. Mr. Rogers is a
Certified Public Accountant.
Officers of the Company serve at the pleasure of the Board of
Directors. There is no family relationship between any of the Company's
directors or executive officers. Messrs. Benson, Murphy, Brooks and Rogers
continue to serve as officers and employees of BMG and do not devote their full
business time to the Company.
COMPENSATION OF DIRECTORS
Each member of the Board of Directors who is not an employee
of the Company is entitled to receive compensation in the amount of $1,000 per
meeting of the Board attended in person or by telephone and $500 per committee
meeting attended in person or by telephone and which is not in connection with
a regular or special meeting of the Board. Each member is also entitled to be
reimbursed for reasonable and necessary expenses incurred on behalf of the
Company.
In August 1997, each retiring member of the Company's Board of
Directors (Messrs. Demetrie D. Carone, Ronald R. McGinnis and Jack McIsaac) was
granted 5,000 shares of Common Stock as compensation for past services. The
market price of Common Stock on the date these shares were granted was $4.25
per share. Also, in August 1997, each incoming director (Messrs. Gamel, Malone
and Robinson) was granted options exercisable for 179,000 shares of Common
Stock at an exercise price of $4.125 per share, the market price on the date of
grant of such options.
EXECUTIVE COMPENSATION
The following table summarizes the total compensation of the
Chief Executive Officer, and any person who served as the chief executive
officer during the twelve-month period ended December 31, 1997 (the "Named
Officers"). No executive officer's salary and bonus from the Company exceeded
$100,000 during 1997.
5
<PAGE> 8
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Salary Securities Underlying
Name and Principal Position Year ($) Options (#)
--------------------------- ---- ------ ----------------------
<S> <C> <C> <C>
Bruce D. Benson, 1997 53,077 4,000,000
Chairman of the Board,
Chief Executive Officer
and President
Demetrie D. Carone, 1997 25,000(1)
Chairman of the Board, 1996 -0-
President and Chief
Executive Officer
</TABLE>
- ---------------
(1) In August, 1997 Mr. Carone was granted 5,000 shares of Common Stock for his
service as a director. See "Compensation of Directors."
OPTION GRANTS FOR 1997
The following table sets forth information regarding the grant of
stock options to the Named Officers during the twelve-month period ended
December 31, 1997:
Option Grants In 1997
<TABLE>
<CAPTION>
Number Of Percent of
Securities Total Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted (#) Fiscal Year ($/share) Date
---- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Bruce D. Benson 1,000,000 (1) 24.8% 4.50 08/07/2007
1,000,000 (1) 24.8% 6.00 08/07/2007
1,000,000 (1) 24.8% 9.00 08/07/2007
1,000,000 (1) 24.8% 12.00 08/07/2007
</TABLE>
- ---------------
(1) See "Employment Agreement" for a description of the material terms of such
options.
YEAR END OPTION VALUES
No options were exercised by a Named Officer during 1997. The
following table sets forth the value of unexercised options held by the Named
Officers at December 31, 1997:
6
<PAGE> 9
1997 Year End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options
Year End (#) at Fiscal Year end
Name Exercisable/Unexercisable ($)
---- ------------------------- --------------------
<S> <C> <C>
Bruce D. Benson 2,000,000/2,000,000 (1)
Demetrie D. Carone 0/0 --
</TABLE>
- ---------------
(1) None of Mr. Benson's unexercised options were in-the-money as of
December 31, 1997, based upon the last sales price of the Common Stock on
The American Stock Exchange on December 31, 1997 of $2.625.
EMPLOYMENT AGREEMENT
In connection with his appointment as the Company's Chief Executive
Officer, Mr. Benson and the Company entered into an Executive Employment
Agreement dated August 7, 1997 (the "Employment Agreement"). The Employment
Agreement provides for a base salary of not less than $150,000 per year and
bonuses at the discretion of the Board of Directors. It has an initial term of
three years, but renews automatically for successive one-year terms unless
terminated by either party. During the initial or any renewal term, Mr.
Benson's employment may be terminated at any time by the Board of Directors,
with or without cause, but Mr. Benson may terminate only upon the occurrence of
certain events, including a change in control of the Company as defined in the
Employment Agreement. The Company would not be required to pay Mr. Benson any
compensation as a result of or after any termination of the Employment
Agreement. Mr. Benson is not required to devote his full business time to the
Company.
Pursuant to the Employment Agreement, Mr. Benson received options to
acquire up to 4,000,000 shares of the Company's Common Stock. Of those
options, options to acquire 1,000,000 shares at $4.50 per share and 1,000,000
shares at $6.00 per share vested immediately and options to purchase 1,000,000
shares at $9.00 per share and 1,000,000 shares at $12.00 per share will vest on
the first anniversary of the Employment Agreement. All of the options, whether
or not otherwise vested, become exercisable (a) immediately prior to the
closing of the sale by the Company of all or substantially all of its assets or
(b) immediately prior to the closing of any merger, consolidation, or other
transaction in which the outstanding Common Stock of the Company is converted
into or exchanged for securities, cash or other property. All of the options
have a term of ten years from the date of the Employment Agreement. However,
the options would expire 90 days after the termination of Mr. Benson's
employment for cause, as defined in the Employment Agreement, or one year after
Mr. Benson's death or disability. The termination of employment for any other
reason would not affect the term of the options.
7
<PAGE> 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of May 1, 1998 the beneficial
ownership of the Company's Common Stock and Series C Preferred Stock, $.01 par
value ("Series C Preferred Stock") by (i) each Named Officer and each director
of the Company; (ii) each person known to the Company to own beneficially more
than 5% of the Company's Common Stock or Series C Preferred Stock; and (iii)
all nominee directors and executive officers as a group. At the option of the
holder, and subject to certain antidilution provisions not yet applicable, the
Series C Preferred Stock is convertible into shares of Common Stock at the rate
of two shares of Common for each share of Preferred. The holders of the Series
C Preferred Stock are not entitled to vote except as provided by applicable
law. Shares issuable upon conversion of Series C Preferred Stock and upon
exercise of outstanding options that are currently exercisable or will become
exercisable within 60 days are deemed outstanding for the purpose of computing
the percentage ownership of persons beneficially owning such Series C Preferred
Stock or holding such options, but have not been deemed to be outstanding for
the purpose of computing the percentage ownership of any other person. To the
Company's knowledge, the shareholders listed below have sole voting and
investment power, except as otherwise noted. All information is taken from or
based upon ownership filings made by such persons with the Securities and
Exchange Commission or upon information provided by such persons to the
Company.
<TABLE>
<CAPTION>
Common Stock Series C Preferred Stock
---------------------------------- ----------------------------------
Amount and Amount and
Nature Nature of
Beneficial Beneficial
Name and Beneficial Owner Ownership Percent of Class(1) Ownership Percent of Class(1)
------------------------- ----------- ------------------- ---------- -------------------
<S> <C> <C> <C> <C>
Bruce D. Benson 2,220,100(2) 20.5% -- --
1560 Broadway, Suite 1900
Denver, CO 80202
Thomas W. Gamel 388,788(3) 4.3% -- --
700 Broadway, Suite 800
Denver, CO 8022
Robert J. Malone 295,600(4) 3.3% -- --
335 St. Paul St.
Denver, CO 80202
Richard L. Robinson 305,100(4) 3.4% -- --
646 Bryant
Denver, CO 80202
Demetrie D. Carone 1,138,804(5) 12.8% 23,665 0.6%
6623 East 117th St.
Bixby, OK 74008
Dale M. Jensen 3,368,770(6) 31.1% 1,000,000 26.2%
P.O. Box 85748
Lincoln, NE 68501
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
Common Stock Series C Preferred Stock
---------------------------------- ----------------------------------
Amount and Amount and
Nature Nature of
Beneficial Beneficial
Name and Beneficial Owner Ownership Percent of Class(1) Ownership Percent of Class(1)
------------------------- ----------- ------------------- ---------- -------------------
<S> <C> <C> <C> <C>
Lancaster Ventures, LLC 1,132,818(7) 11.6% 458,334 12.0%
5561 South 40th Street,
Suite 220
Lincoln, NE 68516
Donald Dillon 1,132,818(8) 11.6% 458,334 12.0%
6600 South 56th Street
Lincoln, NE 68516
Thomas Stansfield 1,417,600(9) 14.4% 500,000 13.1%
7052 East Fremont Place
Englewood, CO 80112
Paragon Ranch, Inc. 700,000(10) 7.3% 350,000 9.2%
1200 17th Street, Suite 2660
Denver, CO 80202
Directors and Executive Officers 3,209,488(11) 28.3% -- --
as a Group
(7 individuals)
</TABLE>
- -----------------
(1) Based on 8,825,946 shares of Common Stock and 3,820,000 shares of
Series C Preferred Stock outstanding on May 1, 1998.
(2) Includes 2,000,000 shares of Common Stock underlying options which are
exercisable within 60 days of May 1, 1998.
(3) Includes (i) 106,288 shares held indirectly through a corporation of
which Mr. Gamel has voting control and (ii) 179,000 shares of Common
Stock underlying options exercisable within 60 days of May 1, 1998.
(4) Includes 179,000 shares of Common Stock underlying options exercisable
within 60 days of May 1, 1998.
(5) Includes (i) 47,330 shares of Common Stock issuable upon conversion of
23,665 shares of Series C Preferred Stock held jointly with the
reporting person's spouse and (ii) 471,931 shares held jointly with
that spouse.
(6) Includes 2,000,000 shares of Common Stock issuable upon conversion of
1,000,000 shares of Series C Preferred Stock.
(7) Includes 916,668 shares of Common Stock issuable upon conversion of
458,334 shares of Series C Preferred Stock.
(8) Includes 216,150 shares of Common Stock and 916,668 shares of Common
Stock issuable upon conversion of 458,334 shares of Series C Preferred
Stock owned by Lancaster Ventures, LLC, of which the reporting person
is a member.
(9) Includes 1,000,000 shares of Common Stock issuable upon conversion of
500,000 shares of Series C Preferred Stock.
(10) Represents shares of Common Stock issuable upon conversion of 350,000
shares of Series C Preferred Stock.
(11) Includes an aggregate of 2,537,000 shares of Common Stock underlying
options exercisable within 60 days of May 1, 1998.
9
<PAGE> 12
CHANGE IN CONTROL
Effective August 8, 1997, Bruce D. Benson was appointed Chairman of
the Board of Directors, Chief Executive Officer and President of the Company
pursuant to an Executive Employment Agreement with the Company. (See "Executive
Compensation--Employment Agreement" for a description of the terms and
conditions of Mr. Benson's Employment Agreement). Following Mr. Benson's
appointment, previous members of the Company's Board of Directors resigned and
were replaced by Messrs. Benson, Robert J. Malone, Richard L. Robinson and
Thomas W. Gamel.
CERTAIN TRANSACTIONS
EXPENSE SHARING ARRANGEMENT
Effective August 12, 1997, the Company relocated its principal
executive office from Independence, Kansas to Denver, Colorado and shares
office space with BMG. In connection with that move, the Company entered into
a Cost and Expense Sharing Agreement with BMG. Bruce D. Benson, Chairman of
the Board of Directors, Chief Executive Officer and President of the Company,
is also the President, a Director and sole shareholder of BMG. Pursuant to the
Expense Sharing Agreement, the Company has agreed to compensate BMG for office
rent, personnel costs and other overhead and administrative expenses associated
with operation of its business based upon actual use of the facilities and
personnel by the Company. The Expense Sharing Agreement is effective so long
as Mr. Benson's employment agreement is in effect. During the twelve-month
period ended December 31, 1997, the Company paid or accrued an aggregate of
$229,345 to BMG pursuant to this arrangement. Management is of the opinion
that the terms and conditions of this arrangement are no less favorable than
could be obtained from an unaffiliated third party or than could be obtained by
the Company in leasing separate office space and retaining separate personnel.
ACQUISITIONS
Effective January 15, 1997, the Company completed three acquisitions
from individuals who were, at the time, either officers, directors or principal
shareholders of the Company, or entities controlled by such individuals. The
Company acquired all of the assets of Five Star Petroleum, consisting of
interests in oil and gas leases and related equipment, for a purchase price of
$1,300,000. The entire purchase price was paid in cash. At the time of the
purchase, Demetrie D. Carone was Chairman of the Board, President and Chief
Executive Officer of the Company, and was also President, a Director and
principal shareholder of Five Star. In addition, Messrs. Dale M. Jensen and
Thomas Stansfield, beneficial owners of greater than five percent of the
Company's Common Stock, were principal shareholders of Five Star. As a result
of that acquisition, Messrs. Carone, Jensen and Stansfield were paid $262,286,
$275,340 and $241,150, respectively.
Contemporaneously, the Company completed the acquisition of United
States Gas Gathering Co., Inc. ("U.S. Gas"), a privately-held Delaware
corporation. The assets of U.S. Gas included an interest in a gas gathering
system and oil and gas leases. The purchase price of this acquisition paid
10
<PAGE> 13
in cash by the Company was $560,000. Messrs. Carone and Jensen were sole
shareholders of U.S. Gas, owning an equal interest in that entity. The former
shareholders of U.S. Gas also received $300,000 in connection with this
transaction from an unrelated third party for transfer of an interest in the
gathering system and leases. U.S. Gas was acquired by Messrs. Carone and Jensen
in July, 1996 for a purchase price of $800,000.
Finally, the Company acquired certain oil and gas leases located in
Osage County, Oklahoma from certain individuals, including Messrs. Carone,
Jensen and Donald F. Dillon, a beneficial owner of more than 5% of the
Company's Common Stock. The Company paid $200,000 cash for those leases, of
which Mr. Carone received $120,000, Mr. Jensen received $20,000 and Mr. Dillon
received $20,000.
Richard L. Robinson, who is currently a director of the Company, was a
beneficial shareholder of Five Star at the time of the transaction described
above and was, indirectly, one of the sellers of the leases in Osage County to
the Company. Mr. Robinson was not associated with the Company at the time of
either transaction. Mr. Robinson received approximately $6,500 and $9,000,
respectively, from those two transactions.
All of the foregoing transactions were approved by a disinterested
majority of the Board of Directors as then constituted, which determined that
the acquisitions were in the best interest of the shareholders. Current
management does not anticipate any such transactions with affiliates in the
future. However, in the event the Company considers an acquisition from an
affiliate in the future, it would evaluate the transaction on the same terms as
it evaluates transactions from an unaffiliated party.
OTHER EVENTS
The Company sold shares of its Series C Preferred Stock to Mr. Carone,
a former officer and director and principal shareholder of the Company, and
Messrs. Jensen, Dillon and Stansfield, principal shareholders of the Company,
in a private placement during the fiscal year ended March 31, 1997. Such
individuals purchased 23,664, 1,000,000, 458,334 and 500,000 shares of the
Series C Preferred Stock, respectively. These sales were made on the same
terms and conditions as those made to other purchasers in the offering. Two
members of the current Board of Directors, Mr. Robinson and Mr. Malone, were
beneficial purchasers of 50,000 shares each of the Company's Series C Preferred
Stock, which each converted into 100,000 shares of Common Stock of the Company
on October 1, 1997.
In August 1997, the Company paid a consulting fee of $50,000 to BMG
for consulting services provided to the Company prior to Mr. Benson's
appointment as Chairman of the Board, Chief Executive Officer and President of
the Company. The services rendered for this fee included an inspection and
general analysis of the Company's physical assets and operations and
suggestions for the improvement thereof. At the time the consulting
arrangement was entered into, Mr. Benson was not an officer, director or
shareholder of the Company.
11
<PAGE> 14
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and any persons who own more than
10 percent of the Company's Common
Stock, to file with the Securities and Exchange Commission ("SEC") initial
reports of ownership and reports of changes in ownership of Common Stock.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, the
Company believes that all such Section 16(a) filing requirements were met with
respect to transactions required to have been filed in fiscal 1997 or on Form 5
for the fiscal year ended December 31, 1997, except as follows: (i) Mr.
Demetrie D. Carone failed to file a Form 5 to report one transaction which was
not reported on a Form 4 and (ii) Mr. Ronald R. McGinnis filed a late Form 5
reporting two transactions that should have been reported earlier.
RATIFICATION OF APPOINTMENT OF AUDITORS
(ITEM 2 ON PROXY CARD)
The Board of Directors has appointed Ernst & Young LLP to audit the
financial statements of the Company for the fiscal year ending December 31,
1998, and solicits the ratification of this appointment by the shareholders.
Neither such firm, nor any of its members or any of their associates, has or
has had during the past four years, any financial interest in the Company,
direct or indirect, or any relationship with the Company other than in
connection with its or their duties as auditors and accountants.
On May 19, 1998 the Company engaged Ernst & Young LLP as its
independent auditors for the year ending December 31, 1998, as approved by the
Board of Directors upon recommendation of the Company's Audit Committee and
simultaneously dismissed Grant Thornton, LLP.
The reports of Grant Thornton, LLP on the Company's financial
statements for the past two fiscal years did not contain an adverse opinion or
a disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles.
In connection with the audits of the Company's financial statements
for each of the two fiscal years ended March 31, 1996 and 1997 and the
transitional period from April 1, 1997 through December 31, 1997, there were no
disagreements with Grant Thornton, LLP, on any matters of accounting principles
or practices, financial statement disclosure, or auditing scope and procedures
which, if not resolved to the satisfaction of Grant Thornton, LLP, would have
caused Grant Thornton, LLP to make reference to the matter in its report.
Further, there were no reportable events as that term is described in Item
304(a)(1)(iv)(B) of Regulation S-B.
12
<PAGE> 15
Pursuant to the requirements of Regulation S-B, the Company has
previously provided Grant Thornton, LLP a copy of the above statements
relating to the change of accountants and an opportunity to furnish the Company
with a statement, to be included in this Proxy Statement, if it does not agree
with the above statements. Grant Thornton, LLP has indicated to the Company
that it does not disagree with such statements and, accordingly, it has not
furnished such a statement.
During the two most recent fiscal years and any subsequent interim
period, the registrant has not consulted Ernst & Young LLP regarding any matter
requiring disclosure in this Form 8-K.
Neither representatives of Grant Thornton, LLP nor Ernst & Young LLP
are expected to be present at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF THE COMPANY. If no instructions
are given, shares authorized to be voted by the proxies named in a returned
Proxy will be voted "FOR" the ratification of Ernst & Young LLP as the
Company's independent auditors for 1998.
SHAREHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Shareholder proposals intended to be considered for inclusion at the
1999 Annual Meeting must be submitted to the Secretary of the Company no later
than February 1, 1999. It is anticipated that the next Annual Meeting will be
held in the spring of 1999. Such proposals may be included in next year's
Proxy Statement if they comply with certain rules and regulations of the
Securities and Exchange Commission. Such proposals should be directed to
United States Exploration, Inc., 1560 Broadway, Suite 1900, Denver, Colorado
80202, Attention: F. Michael Murphy, Secretary.
ANNUAL REPORT TO SHAREHOLDERS
Effective April 1, 1997, the Company changed its fiscal year end from
March 31 to December 31. The Company's Annual Report to Shareholders for the
transition period of April 1 through December 31, 1997, including financial
statements and schedules, is included with this Proxy Statement.
13
<PAGE> 16
OTHER BUSINESS
The Board of Directors is not aware of any business to come before the
meeting other than those matters described above in this Proxy Statement. If,
however, any other matters should properly come before the meeting, it is
intended that holders of the Proxies will act in accordance with their judgment
on such matters.
BY ORDER OF THE BOARD OF DIRECTORS:
/s/ F. MICHAEL MURPHY
F. Michael Murphy, Secretary
June 1, 1998
UPON WRITTEN REQUEST OF ANY SHAREHOLDER ENTITLED TO RECEIVE THIS PROXY
STATEMENT, THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS ANNUAL
REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY
SUCH REQUEST SHOULD BE ADDRESSED TO THE COMPANY AT 1560 BROADWAY, SUITE 1900,
DENVER, COLORADO 80202, ATTENTION: F. MICHAEL MURPHY, SECRETARY. THE REQUEST
MUST INCLUDE A REPRESENTATION BY THE SHAREHOLDER THAT AS OF MAY 1, 1998, THE
SHAREHOLDER WAS ENTITLED TO VOTE AT THE ANNUAL MEETING.
14
<PAGE> 17
UNITED STATES EXPLORATION, INC.
1560 BROADWAY, SUITE 1900
DENVER, COLORADO 80202
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 29, 1998
The undersigned hereby appoints Bruce D. Benson and F. Michael
Murphy, or either of them, proxies and attorneys-in-fact for the
undersigned, each with full power of substitution, and hereby
authorizes them to vote all the shares of common stock, $.0001 par
value, of the Company that the undersigned may be entitled to vote at
the Annual Meeting of Shareholders of United States Exploration, Inc.
(the "Company"), and at all adjournments or postponements thereof as
follows:
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR ALL NOMINEES LISTED [ ] WITHHOLD AUTHORITY to
(Except as marked below) vote for all nominees below
</TABLE>
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, PLACE AN "X" THROUGH
THE NOMINEE'S NAME:
Bruce D. Benson Thomas W. Gamel Richard L. Robinson Robert J. Malone
2. To ratify the action of the Board of Directors appointing Ernst &
Young LLP as auditors for the current fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued and to be signed on the reverse side)
3. In their discretion, the proxies are authorized to vote on such
other business as may properly come before the Annual Meeting or
any adjournments or postponements thereof;
hereby revoking any proxy or proxies heretofore given by the
undersigned.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY AND MAY BE REVOKED PRIOR TO ITS EXERCISE. THIS PROXY, WHEN
PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED ABOVE BY THE UNDERSIGNED.
IF NO DIRECTION IS MADE, IT WILL BE VOTED FOR ALL NOMINEES IN PROPOSAL
1 AND FOR PROPOSAL 2 AND, IN THE PROXIES' DISCRETION, ON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
-----------------------------------
By:
--------------------------------
Your signature should appear
exactly as your name appears in the
space at the left. For joint
accounts, all owners should sign.
When signing in a fiduciary or
representative capacity, please
give your full title as such.
Date:________________________, 1998
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
TODAY USING THE ENCLOSED PRE-PAID ENVELOPE.
