<PAGE> 1
UNITED STATES EXPLORATION, INC.
1560 BROADWAY, SUITE 1900
DENVER, COLORADO 80202
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JULY 13, 1999
The annual meeting of shareholders of United States Exploration, Inc.,
a Colorado corporation (the "Company"), will be held at the Company offices at
1560 Broadway, Suite 1900, Denver, Colorado 80202 on July 13, 1999, at 1:00
p.m., Mountain Time. At the annual meeting we will:
1. Elect four members of the Board of Directors to serve until the next
annual meeting of shareholders and until their successors are elected;
2. Vote upon a proposal to approve the 1999 Employee Stock Option Plan;
3. Vote upon a proposal to ratify the appointment of Ernst & Young LLP
as the Company's independent accountants for the fiscal year ending December 31,
1999; and
4. Transact such other business as may properly come before the meeting
or any adjournment thereof.
The record date for the annual meeting is May 7, 1999. Only
shareholders of record at the close of business on that date are entitled to
vote at the Annual Meeting.
We hope you will attend the meeting in person. HOWEVER, EVEN IF YOU
EXPECT TO ATTEND THE MEETING, WE ASK THAT YOU 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
May 25, 1999
<PAGE> 2
UNITED STATES EXPLORATION, INC.
ANNUAL MEETING OF SHAREHOLDERS
JULY 13, 1999
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 at 1560 Broadway, Suite 1900, Denver, Colorado 80202, on July 13, 1999,
at 1:00 p.m., Mountain Time, and at any adjournments of that meeting. This proxy
statement and the enclosed form of proxy are first being sent to shareholders on
or about May 28, 1999.
PROXIES AND VOTING AT THE ANNUAL MEETING
If you properly execute the enclosed proxy and return it in time to be
voted at the meeting, your shares will be voted in accordance with the
instructions you give in the proxy. IF YOU EXECUTE AND RETURN YOUR PROXY BUT DO
NOT GIVE INSTRUCTIONS AS TO HOW YOUR SHARES SHOULD BE VOTED, YOUR SHARES WILL BE
VOTED FOR THE ELECTION AS DIRECTORS OF ALL NOMINEES NAMED IN THIS PROXY
STATEMENT AND FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS
AUDITORS.
You may revoke your proxy at any time before your shares are voted 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 annual 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 its common stock in nominee names to distribute proxy
solicitation materials to beneficial owners and will reimburse them for
reasonable out-of-pocket expenses they incur.
Only holders of record of the common stock on May 7, 1999 are entitled
to receive notice of and to vote at the annual meeting. Each share of common
stock is entitled to one vote. On May 7, 1999, there were a total of 15,591,828
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.
In the election of directors, the four nominees who receive the most
votes will be elected to the Board of Directors. Any other matter voted upon at
the meeting will be approved if the votes cast in favor of the matter exceed the
votes cast against the matter. As a result, shares that are not voted will have
no effect on the outcome of any vote. For example, if you mark your proxy to
withhold authority to vote for any nominee for director or to abstain from
voting on the ratification of the appointment of auditors, your shares will not
be taken into account in determining whether that nominee is elected or the
appointment is ratified.
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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 by brokers on nonroutine proposals are "broker nonvotes."
Broker nonvotes will be counted as present for purposes of establishing a
quorum, but will have no effect on the matter voted on because they will not be
counted as votes for or against the 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
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 nominee should become unavailable to serve for
any reason, proxies will be voted for another person selected by the persons
named in the proxy in accordance with their judgment. The nominees are as
follows:
<TABLE>
<CAPTION>
Name Age Position with Company
---- --- ---------------------
<S> <C> <C>
Bruce D. Benson 60 Chairman of the Board of Directors,
Chief Executive Officer and President
Thomas W. Gamel 59 Director
Robert J. Malone 54 Director
Richard L. Robinson 69 Director
</TABLE>
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 and Mr. Benson have also
been active investors 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, Chairman of the Denver
Zoological Foundation,
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National Chairman of the University of Colorado Comprehensive Capital Campaign
and past chairman of the Colorado Commission on Higher Education.
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 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., a publicly held
company listed on the American Stock Exchange. 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 publicly held company listed on the New York
Stock Exchange, 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 Rose Community Foundation,
Regis University and Children's Hospital of Denver, Colorado.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
During 1998, the Company's Board of Directors met 11 times and took
action three times by unanimous written consent. Each of Messrs. Benson, Gamel,
Malone and Robinson was 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
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officers and key employees and making recommendations concerning their
compensation. The members of the Compensation Committee are Messrs. Malone
(Chairman), Gamel and Robinson. During 1998, the Audit Committee met once and
the Compensation Committee met once. The Company does not maintain a standing
nominating committee.
EXECUTIVE OFFICERS
Bruce D. Benson, the Company's Chief Executive Officer and President,
is also Chairman of the Board of Directors and his biographical information is
presented above. The Company's other executive officers are as follows.
F. Michael Murphy, 57, 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).
Murray N. Brooks, 56, 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 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, 43, 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.
John Wallace, 39, 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 Esperanza 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 completed more than 25
acquisitions of producing properties throughout the United States. In addition,
Esperanza 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.
Kenton M. Scroggs, 47, was appointed Vice President - Finance of the
Company in September 1998. Mr. Scroggs currently provides services to the
Company as an independent consultant rather than as an employee. Prior to his
appointment as an officer of the Company, Mr. Scroggs was employed by Forest Oil
Corporation where he served as Vice President and Treasurer from 1993 through
1997.
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Shirley Kovar, 49, was appointed Vice President-Land of the Company in
January 1999. Ms. Kovar joined UXP in April 1998 as Manager of the Land
Department. Prior to that she worked as an independent consultant in the oil and
gas industry for more than five years. Ms. Kovar has more than 27 years of
experience in the industry and is a member of the American, Colorado and Denver
Bar Associations.
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 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 $1,000 for each Board meeting and $500 for each
committee meeting not held in conjunction with a Board meeting attended in
person or by telephone. Effective April 1, 1998, the Board of Directors adopted
a Director's Fee Stock Plan whereunder directors fees are paid in common stock
of the Company rather than in cash. The number of shares issued to each outside
director each year is determined by dividing the director's fees earned by that
director during the year by the average of the trading prices of the Company's
common stock on the first and last trading days of the year. If a director joins
or leaves the Board during the year, the day of his appointment or resignation
is substituted for the first or last trading day in that calculation. For their
services from April 1 through December 31, 1998, the Company's outside directors
were each issued 3,879 shares of stock under this plan.
EXECUTIVE COMPENSATION
The following table summarizes the total compensation of the Chief
Executive Officer, who was the only executive officer of the Company whose
compensation exceeded $100,000 for services rendered during 1998 (the "Named
Executive Officer").
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<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Annual Compensation Long-Term Compensation
------------------- ----------------------
Salary Securities Underlying
Name and Principal Position Year ($) Options (#)
- --------------------------- ---- ----- ---------------------
<S> <C> <C> <C>
Bruce D. Benson, Chairman
of the Board, Chief Executive
Officer and President 1998 $150,000 --
1997(1) 53,077 4,000,000
</TABLE>
- ----------
(1) From commencement of employment on August 7, 1997 through December 31,
1997.
No options were granted to or exercised by the Named Executive Officer
during 1998. The following table sets forth the value of unexercised options
held by the Named Executive Officer at December 31, 1998:
<TABLE>
<CAPTION>
1998 Year-End Option Values
---------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options
Year End (#) at Fiscal Year end
Name Exercisable/Unexercisable ($)
- ---- ------------------------- -------------------
<S> <C> <C>
Bruce D. Benson 4,000,000/0 (1)
</TABLE>
- ----------
(1) None of the unexercised options reflected in the table were in-the-money as
of December 31, 1998, based upon the last sales price of the Common Stock on The
American Stock Exchange on December 31, 1998 of $1.5625.
EMPLOYMENT AGREEMENT
The Company has an employment agreement with Mr. Benson dated August 7,
1997. 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
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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 his employment. Mr. Benson is not required to devote his full
business time to the Company.
Pursuant to his employment agreement, Mr. Benson received options to
acquire 1,000,000 shares at $4.50 per share, 1,000,000 shares at $6.00 per
share, 1,000,000 shares at $9.00 per share and 1,000,000 shares at $12.00 per
share, all of which are now exercisable. 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 1999 the beneficial
ownership of each class of the Company's equity securities by each of the Named
Executive Officers, each director of the Company (all of whom are nominees for
re-election at the annual meeting), and all directors and executive officers as
a group. The table also reflects the beneficial ownership of each class of the
Company's voting securities by each person known by the Company to own
beneficially more than 5% of any such class. Shares issuable upon exercise of
outstanding options that are currently exercisable or will become exercisable
within 60 days are treated as outstanding for the purpose of computing the
beneficial ownership of the person who holds the options, but not for the
purpose of computing the percentage ownership of any other person or group. To
the Company's knowledge, the shareholders listed below have sole voting and
investment power, except as otherwise noted. All information is based upon
filings with the Securities and Exchange Commission or upon information provided
to the Company.
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<TABLE>
<CAPTION>
Common Stock
-------------------------------------------
Number
Name and Beneficial Owner of Shares Percent of Class(1)
------------------------- ------------- -------------------
<S> <C> <C>
Bruce D. Benson 4,230,100(2) 21.70%
1560 Broadway, Suite 1900
Denver, CO 80202
Thomas W. Gamel 392,667(3) 2.51%
700 Broadway, Suite 800
Denver, CO 8022
Robert J. Malone 309,479(4) 1.97%
335 St. Paul St.
Denver, CO 80202
Richard L. Robinson 308,979(4) 1.97%
646 Bryant
Denver, CO 80202
Demetrie D. Carone 1,028,618(5) 6.64%
6623 East 117th St.
Bixby, OK 74008
Dale M. Jensen 3,368,770 21.75%
P.O. Box 85748
Lincoln, NE 68501
Lancaster Ventures, LLC 916,668 5.92%
5561 South 40th Street
Suite 220
Lincoln, NE 68516
Donald Dillon 916,668(6) 5.92%
6600 South 56th Street
Lincoln, NE 68516
Thomas Stansfield 1,417,600 9.15%
7052 East Fremont Place
Englewood, CO 80112
Directors and Executive Officers as a 5,241,225(7) 26.17%
Group (10 individuals)
</TABLE>
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- -------------------
(1) Based on 15,491,828 shares of Common Stock outstanding on March 31,
1999 plus, in the case of each individual or group, the number of shares that
such individual has, or the members of such group have, the right to acquire
within 60 days after that date.
(2) Includes 4,000,000 shares of Common Stock underlying options that
are currently exercisable.
(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 that are currently exercisable.
(4) Includes 179,000 shares of Common Stock underlying options that are
currently exercisable.
(5) Includes 519,261 shares held jointly with spouse.
(6) Includes 916,668 shares of Common Stock owned by Lancaster
Ventures, LLC, of which Mr. Dillon is a member.
(7) Includes an aggregate of 4,537,000 shares of Common Stock
underlying options that are currently exercisable.
CERTAIN TRANSACTIONS
The Company shares certain facilities, equipment and personnel with BMG
pursuant to a Cost and Expense Sharing Agreement. 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 Cost
and Expense Sharing Agreement, the Company reimburses 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 Cost and Expense Sharing Agreement is effective so long as
Mr. Benson's employment agreement is in effect. During the year ended December
31, 1998, the Company paid or accrued an aggregate of $660,570 to BMG pursuant
to this arrangement. Management believes 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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. The Company believes that all
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such Section 16(a) reports were filed on a timely basis during the fiscal year
ended December 31, 1998, except as follows: Kenton M. Scroggs, who was elected
Vice President - Finance of the Company on September 29, 1998, filed his initial
statement of beneficial ownership on Form 3 on December 7, 1998, and Shirley
Kovar, who was elected Vice President-Land of the Company on January 13, 1999,
filed her initial statement of beneficial ownership on Form 3 on April 8, 1999.
PROPOSAL TO APPROVE THE 1999 EMPLOYEE STOCK OPTION PLAN
(ITEM 2 ON PROXY CARD)
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE 1999 EMPLOYEE STOCK
OPTION PLAN BY THE SHAREHOLDERS.
The 1999 Employee Stock Option Plan (the "Plan") provides for the
granting of two types of options: "incentive stock options" and "non-statutory
stock options." The incentive stock options are intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
The Plan is administered by a committee (the "Committee") appointed by
the Board of Directors that consists of different persons depending on the
optionee. If the optionee is an officer, director or 10% shareholder of the
Company who is subject to the beneficial ownership reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Committee consists, in the Board of Directors' discretion, of either
two non-employee directors (as defined in Rule 16b-3 under the Exchange Act) or
the entire Board. If the optionee may be subject to Section 162(m) of the
Internal Revenue Code (which limits the deductibility by the corporation of
certain compensation paid to employees), the Board may designate a Committee
consisting of two or more outside directors as required by the regulations under
that section. In all other cases, the Committee will consist of one or more
members of the Board as determined by the Board. All Committee members will be
appointed by the Board.
The purpose of the Plan is to provide an incentive to key employees of
the Company and its subsidiaries and to enable the Company to attract and retain
such key employees as well as to reward services. Under the Plan, options to
purchase a maximum of 500,000 shares of the Company's common stock may be issued
to key employees of the Company or a subsidiary whose judgment, initiative and
effort are expected to contribute to the Company's success, as selected by the
Committee. Option exercise prices for incentive stock options must be 100% of
the fair market value of the shares on the date of grant and the option exercise
period may not exceed ten years except that, with respect to incentive stock
options awarded to employees holding 10% or more of the combined voting power of
the Company, the option exercise price for an incentive option may not be less
than 110% of the fair market value of the shares on the date of grant and the
exercise period may not exceed five years. The exercise price of a non-statutory
stock option may not be less than 85% of the fair market value of the shares on
the date of grant. Vesting of options granted under the plan is determined by
the Committee.
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Incentive options granted under the Plan terminate three months after
cessation of employment of the optionee (other than cessation due to death or
disability, in which event options which were exercisable on the date of death
or disability continue to be exercisable for a period of one year from the date
thereof), subject to the earlier expiration of the option term. Non-statutory
options are expected to contain similar termination provisions, but the
Committee, in its discretion, could vary those provisions for a non-statutory
option. Options may be exercised only by the optionee or, in the case of death
or disability, his estate, personal representative or designated beneficiary.
The Committee also has the right to impose other restrictions on the exercise of
options. Options are generally not transferable during the lifetime of the
optionee.
The Plan has a stated term of ten years. It may be amended or
terminated by the Board of Directors at any time, but no action of the Board of
Directors, unless approved by the shareholders, may increase the maximum number
of shares which may be issued under the plan (except as permitted by certain
anti-dilution provisions), extend the maximum period during which any award may
be granted or exercised or increase the benefits accruing to an optionee. All
proceeds from the sale of shares pursuant to options granted under the Plan will
constitute general funds of the Company.
The number of employees which the Company deems eligible to be granted
options under the Plan as of the date of this Proxy Statement is 20. As of May
18, 1999, the closing per share price of the Company's Common Stock was $1.1875.
There are generally no federal income tax consequences to the Company
by reason of the grant or exercise of options under the Plan, except that where
the optionee recognizes ordinary income as a result of the exercise of an
option, the Company will be entitled to a business expense deduction for its
fiscal year that includes the last day of the optionee's fiscal year in which
income is recognized (subject to the reasonableness of the amount of income to
the employee as a result of the exercise, considered as a part of the employee's
compensation). The amount of ordinary income will be, in the case of
non-statutory options, the excess of the fair market value over the exercise
price of shares as to which options are exercised. In the case of incentive
stock options, the optionee will not recognize ordinary income upon exercise of
the option unless the shares are transferred prior to either two years from the
date of option grant or one year from the date option stock is issued to the
optionee. If such a transfer is made, the amount of ordinary income will be the
lesser of (i) the excess of fair market value on the date of exercise over the
exercise price or (ii) the optionee's actual gain, if any, on the purchase and
sale.
The Board of Directors has adopted the Plan and may grant non-statutory
options thereunder whether or not the shareholders approve the Plan. The effect
of shareholder approval will be to allow options granted to employees to qualify
as incentive options, which are more beneficial to employees from a tax
standpoint as described above.
A copy of the Plan is attached to this Proxy Statement as Exhibit A.
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<PAGE> 13
RATIFICATION OF APPOINTMENT OF AUDITORS
(ITEM 3 ON PROXY CARD)
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF THE COMPANY
The Board of Directors has appointed Ernst & Young LLP to audit the
financial statements of the Company for the fiscal year ending December 31,
1999, 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 ended 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 or procedure 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.
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.
The Company expects a representative of Ernst & Young LLP to be present
at the Annual Meeting. Such representative will have the opportunity to make a
statement if he desires to do so and will be available to respond to appropriate
questions.
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SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
The Company currently expects to hold its annual meeting of
shareholders for 2000 on or about July 14, 2000. Any shareholder who wishes to
make a proposal for consideration at that meeting and wishes to have that
proposal included in the proxy statement for the meeting must submit the
proposal to the Secretary of the Company no later than January 27, 2000. Such a
proposal will be included in next year's proxy statement to the extent required
by the regulations of the Securities and Exchange Commission. A shareholder who
wishes to make a proposal at the 2000 annual meeting, but does not wish to have
the proposal included in the proxy statement for that meeting, must give notice
of the proposal to the Secretary of the Company no later than March 13, 2000 in
order for the notice to be considered timely under Rule 14a-4(c) of the
Securities and Exchange Commission. The name and address of the Company's
Secretary are: F. Michael Murphy, Secretary, United States Exploration, Inc.,
1560 Broadway, Suite 1900, Denver, Colorado 80202.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders for the period ended
December 31, 1998, including financial statements and schedules, is included
with this Proxy Statement.
OTHER BUSINESS
The Board of Directors is not aware of any business to come before the
meeting other than those matters described in this proxy statement. If any other
matters should properly come before the meeting, the 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
May 25, 1999
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-KSB 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 THE SHAREHOLDER IS OR WAS
ENTITLED TO VOTE AT THE ANNUAL MEETING.
13
<PAGE> 15
EXHIBIT A
UNITED STATES EXPLORATION, INC.
1999 EMPLOYEE STOCK OPTION PLAN
ARTICLE 1.: DEFINITIONS
1.1 BOARD. The Board is the board of directors of the Company.
1.2 CODE. The Code is the Internal Revenue Code of 1986, as it may be amended.
1.3 COMMITTEE. Committee is one or more of the committees described below.
Members of the Committee shall serve at the pleasure of the Board and may resign
at any time upon written notice to the Board.
(a) Generally: If paragraphs [b] and [c] below are not applicable, the
Committee shall consist of one or more members of the Board and/or such other
person or persons as may be appointed from time to time by the Board, or the
entire Board if no such Committee has been appointed.
(b) For Reporting Persons: With respect to the grant or administration
of any Options granted under the Plan to eligible employees who are subject to
the reporting requirements under Section 16(a) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), unless the Board determines otherwise, the
Committee shall be constituted so as to comply with Rule 16b-3 promulgated under
the 1934 Act and shall consist of (1) two non-employee directors (as defined in
Rule 16b-3) or (2) the entire Board ("16b-3 Committee"); provided that if a
16b-3 Committee is not required for such grant or grants to meet the exemption
requirements under Rule 16b-3, then this sentence shall not be applicable.
(c) For Compliance with Code Section 162(m): With respect to the grant
or administration of any Options granted under the Plan to an eligible employee
subject to Code Section 162(m) and for which the Board determines, in its
discretion, that compliance with Code Section 162(m) is necessary or desirable,
the Committee shall be constituted so as to comply with Code Section 162(m) and
the Treasury Regulations thereunder and shall consist of two or more outside
directors and no other person ("162(m) Committee"); provided that if a 162(m)
Committee is not required for such grant or grants to meet the conditions of
Code Section 162(m), then this sentence shall not be applicable.
1.4 COMPANY. The Company is United States Exploration, Inc., a Colorado
corporation, and its successors and assigns.
1.5 FAIR MARKET VALUE. The Fair Market Value of a share of Stock is the closing
price of the Stock on the principal exchange on which the Stock is traded, or,
if the Stock is not traded on an exchange, as reported by NASDAQ, or, if the
closing price of the Stock is not reported by NASDAQ, the
<PAGE> 16
average of the high bid and low asked prices for the Stock, as reported by
NASDAQ or any other accepted source selected by the Committee, or, if Fair
Market Value cannot be determined by any of the foregoing means, the fair market
value of the Stock as determined by the Committee in good faith by any
reasonable means.
1.6 GRANT DATE. The Grant Date is the date when a Stock Option is granted, as
determined under 4.3.
1.7 INCENTIVE STOCK OPTION. An Incentive Stock Option means a Stock Option
designated as such at the time of grant and granted and administered in
accordance with the requirements of Code Section 422.
1.8 KEY EMPLOYEE. A Key Employee is an employee of the Company or any Subsidiary
whose judgment, initiative and continued efforts are expected to contribute to
the successful conduct of the business of the Company or any Subsidiary, as
determined by the Committee. A Key Employee may be a member of the Board who is
also an employee of the Company or a Subsidiary.
1.9 NON-STATUTORY STOCK OPTION. A Non-Statutory Stock Option means any Stock
Option other than an Incentive Stock Option.
1.10 OPTIONEE. An Optionee is a Key Employee to whom the Committee has granted a
Stock Option.
1.11 PARENT. A Parent is any corporation which owns, directly or indirectly, at
least 50% of the Company's outstanding Stock.
1.12 PLAN. The Plan is this 1999 Employee Stock Option Plan of the Company, as
it may be amended.
1.13 SECURITIES ACT. The Securities Act is the Securities Act of 1933, as from
time to time amended, or any functional successor to that act, and the
regulations of the Securities and Exchange Commission thereunder.
1.14 STOCK. Stock is the authorized $0.0001 par value Common Stock of the
Company.
1.15 STOCK OPTION. A Stock Option is the right granted to an Optionee under this
Plan to acquire Stock pursuant to the Optionee's Stock Option Agreement.
1.16 STOCK OPTION AGREEMENT. A Stock Option Agreement is the contract under
which an Optionee is given the right to acquire Stock pursuant to this Plan.
1.17 STOCK OPTION PRICE. The Stock Option Price is the exercise price
established by the Committee with respect to an Optionee's Stock Option.
2
<PAGE> 17
1.18 SUBSIDIARY. A Subsidiary is any corporation in which the Company owns,
directly or indirectly, at least 50% of the total voting power of its stock.
ARTICLE 2.: PURPOSE AND TAX STATUS
2.1 PURPOSE. The purpose of this Plan is to enable the Company and its
Subsidiaries to attract and retain Key Employees by giving them an opportunity
to acquire a proprietary interest in the Company and thereby create a more
direct interest in the future success of the Company.
2.2 TAX STATUS. The Stock Options granted under this Plan shall be either
Incentive Stock Options or Non-Statutory Stock Options, in the discretion of the
Committee. Each Stock Option Agreement shall specify whether the Stock Options
granted thereby are Incentive Stock Options or Non- Statutory Stock Options. The
Committee may grant either or both types of Stock Options to any Optionee. If a
Stock Option granted as an Incentive Stock Option fails for any reason to
qualify as such under the Code, in whole or in part, it shall be deemed an
Incentive Stock Option to the extent it does so qualify and a Non-Statutory
Option to the extent it does not so qualify.
2.3 INTERPRETATION. This Plan and any Stock Option Agreement, as well as all
questions arising thereunder, shall be interpreted and answered in a manner
consistent with the Code and applicable Treasury Regulations.
ARTICLE 3.: ADMINISTRATION
3.1 COMMITTEE. The Plan shall be administered by the Committee.
3.2 AUTHORITY OF COMMITTEE. The Committee shall have full authority to
administer this Plan, including authority to interpret and construe any
provision of this Plan and to adopt such rules and regulations as it may deem
necessary in order to administer the Plan. Without limitation, but subject to
the provisions of the Plan, the Committee is authorized to:
(i) Direct the grant of Stock Options;
(ii) Determine the identity of Key Employees who shall be granted Stock
Options, the Grant Date, and the number of shares of Stock to be covered by such
Stock Options;
(iii) Determine the Stock Option Price, which shall not be less than
85% of the Fair Market Value of the Stock on the Date of Grant;
(iv) Determine the manner and the times at which the Stock Options
shall be exercisable, including the discretion to accelerate the exercisability
of any Stock Option at any time and for any reason;
3
<PAGE> 18
(v) Determine other conditions and limitations, if any, on each Stock
Option granted under this Plan (which need not be identical, but which shall
comply with the terms of this Plan);
(vi) Prescribe the form or forms of the Stock Option Agreements and any
restrictions imposed on the Stock and of any other instruments required under
this Plan and to change such forms from time to time;
(vii) Waive compliance (either generally or in any one or more
particular instances) by an Optionee with the requirements of any Stock Option
Agreement or any rule or regulation with respect to a Stock Option, subject to
the terms of this Plan;
(viii) Impose restrictions, or waive any restrictions imposed, with
respect to the transferability or voting of Stock acquired by the exercise of
Stock Options; and
(ix) Decide all questions and settle all controversies and disputes
which may arise in connection with this Plan or any Stock Option Agreement, and
cure any defect, supply any omission or reconcile any inconsistency therein.
3.3 ACTIONS OF COMMITTEE. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all Optionees, the Company and all other interested persons. In addition to
any other rights of indemnification, each Committee member shall be indemnified
by the Company against reasonable expenses (including attorneys' fees) actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding (or in connection with any appeal) to which such person may be a
party by reason of an action taken, or any failure to act, in connection with
this Plan and any Stock Option granted under it. This indemnification shall
further extend to all amounts paid by any Committee member either in a
settlement approved by independent legal counsel selected by the Committee or
pursuant to a judgment in any such action, suit or proceeding, provided that the
Committee member acted in good faith and in a manner he or she reasonably
believed to be in the best interests of the Company. Any action taken by the
Committee under this Plan may be made without notice or meeting of the Committee
in a writing signed by all members of the Committee.
ARTICLE 4.: GRANT OF STOCK OPTION
4.1 SHARES AVAILABLE. There shall be 500,000 shares of Stock available for
issuance under this Plan. All shares underlying Stock Options granted under this
Plan which for any reason are not exercised prior to option expiration, or which
are otherwise cancelled or forfeited, shall be available for granting of further
Stock Options under this Plan.
4.2 PARTICIPATION. Grants of Stock Options may be made to any Key Employee. In
determining Key Employees and selecting Optionees in its discretion, the
Committee shall consider granting Stock Options to those individuals whose
judgment, initiative and continued efforts are expected to contribute to the
successful conduct of the business of the Company or any Subsidiary. Individuals
who have been granted Stock Options may, if otherwise eligible, be granted
additional Stock Options.
4
<PAGE> 19
4.3 GRANT DATE. With respect to each Stock Option, the Grant Date is the date
when the Committee approves the Stock Option grant as specified in the Committee
resolution containing such approval.
4.4 NOTICE. Notice of the grant of a Stock Option shall be given to the Optionee
within a reasonable time.
4.5 AGREEMENT. Each Stock Option shall be evidenced by a written Stock Option
Agreement, signed on behalf of the Company, containing such terms and provisions
as the Committee may deter mine, subject to the provisions of this Plan. Each
Stock Option Agreement shall set forth the number of shares of Stock that may be
purchased upon exercise thereof, the Stock Option Price, the duration of the
Stock Option, the time or times at which or the events or conditions upon the
occurrence of which the Stock Option shall become exercisable as to all or any
portion of the shares of Stock covered thereby, and any other terms and
conditions determined by the Committee. If the Optionee fails to sign and
deliver an original of the Stock Option Agreement to the Company within thirty
days after such agreement has been delivered to the Optionee, the Stock Option
granted by such Stock Option Agreement shall automatically terminate at the end
of such thirty-day period (unless the Committee otherwise determines).
4.6 PERIOD OF GRANT. No Stock Option shall be granted under this Plan after ten
years from the date this Plan is adopted by the Board or approved by the
stockholders of the Company (whichever is earlier). Stock Options outstanding
ten years or more after the effective date of the Plan shall continue to be
governed by the provisions of this Plan.
4.7 TERMS. The Committee may impose such terms and conditions upon the exercise
of a Stock Option as the Committee shall deem appropriate, in its discretion.
Without limitation, these provisions include all matters relating to granting,
vesting, exercise, payment and termination of any Stock Option. Any such
provision shall be set forth in the Stock Option Agreement between the Company
and an Optionee.
ARTICLE 5.: EXERCISE OF STOCK OPTIONS
5.1 TIME OF EXERCISE. Any Stock Option granted under this Plan shall be
exercisable at any time or times within the period specified in the Stock Option
Agreement, which period shall not be more than ten years from the Date of Grant.
The provisions on exercise of the Stock Option, including any provision on
earlier termination, shall be as determined by the Committee. If any Stock
Option is not exercised during the applicable exercise period, it shall
automatically expire as of the expiration of such period and shall be of no
further force or effect.
5.2 MANNER OF EXERCISE. Each exercise of a Stock Option, in whole or in part,
shall be made by the Optionee's delivery of written notice of such exercise to
the Company, a form of which shall be attached to each Stock Option Agreement.
Such notice shall be signed by the Optionee, shall specifically identify the
Stock Option being exercised and shall set forth the number of shares of Stock
with respect to which the Stock Option is being exercised. The notice of
exercise shall be accompanied by payment in full of the Stock Option Price by
any of the methods or any combination of the methods set forth in 5.3 below. The
Stock Option shall be deemed to have been exercised on the first day when the
Company has received both the notice of exercise and the Stock Option Price
5
<PAGE> 20
and the Optionee has complied with the requirements of 5.4 and any other
requirements of the Stock Option Agreement. Within ten days after the exercise
of the Stock Option, the Company shall cause a certificate representing the
Stock issuable as a result of such exercise, registered in the name of the
Optionee, to be sent to the Optionee at the Optionee's address as reflected on
the records of the Company. The Stock Option shall continue with respect to any
remaining shares subject to the Stock Option as to which exercise and payment
has not yet been made, subject to the terms of the applicable Stock Option
Agreement.
5.3 PAYMENT OF STOCK OPTION PRICE. Unless the Stock Option Agreement otherwise
provides or unless the Committee otherwise determines, the Stock Option Price
shall be paid by the Optionee in cash, by bank cashier's check or by delivery to
the Company of certificates representing shares of Stock then owned by the
Optionee having a Fair Market Value as of the date the Stock Option is exercised
equal to the Stock Option Price of the Stock for which the Stock Option is being
exercised, duly endorsed for transfer to the Company. The Company may, but shall
not be required to, cooperate in such manner as the Optionee may reasonably
request to effect a broker-assisted cashless exercise of a Stock Option,
including delivering the certificates for the Stock issuable upon exercise of
the Stock Option to a broker designated by the Optionee and entering into any
agreement relating thereto.
5.4 STOCK ISSUANCE. If the Stock subject to a Stock Option has not been
registered under the Securities Act at the time the Stock Option is exercised,
such Stock shall be issued only upon delivery by the Optionee to the Company of
an investment letter signed by the Optionee, in such form as the Committee may
from time to time determine and containing such representations, warranties and
covenants as the Committee may deem necessary to establish the availability of
an exemption from the registration requirements of the Securities Act and all
applicable state securities laws. Notwithstanding any other provision of the
Plan or any Stock Option Agreement, the Company shall not be obligated to sell
any Stock pursuant to a Stock Option Agreement unless and until, in the opinion
of the Company's counsel, there has been compliance with all applicable federal
and state laws and regulations and only when all other legal matters in
connection with the issuance and delivery of such Stock have been approved by
the Company's counsel. The Company shall use reasonable commercial efforts to
effect any such compliance, and the Optionee shall take any action reasonably
requested by the Company in connection therewith; provided, however, that in no
event shall the Company be required to file a registration statement under the
Securities Act or any state securities law to effect such compliance.
5.5 EMPLOYMENT TERMINATION. Every Stock Option granted under this Plan shall
terminate as set forth in the Optionee's Stock Option Agreement.
5.6 LEAVE OF ABSENCE. For purposes of this Plan, employment of an Optionee shall
be treated as continuing intact while such person is on sick leave, military
leave or other Company-approved leave of absence. The Committee, in its sole
discretion, and from time to time, may determine the number of days of sick
leave, military leave or other company-approved leave to which an Optionee will
be entitled without such leave constituting a termination of employment under
this Plan.
6
<PAGE> 21
ARTICLE 6.: INCENTIVE STOCK OPTIONS
6.1 RESTRICTIONS ON TERMS. Notwithstanding any other provision of the Plan, the
terms of Incentive Stock Options shall be subject to the following restrictions:
(a) The aggregate Fair Market Value of the Stock with respect to which
Incentive Stock Options are exercisable for the first time by any Optionee in
any calendar year, under the Plan and all other plans of the Company or its
Parent or Subsidiaries, shall not exceed $100,000. For that purpose, Fair Market
Value shall be determined as of the Date of Grant of each Stock Option.
(b) The Stock Option Price of an Incentive Stock Option shall not be
less than: [i] in the case of an Incentive Stock Option issued to an Optionee
who owns stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company, its Parent or Subsidiaries, 110% of the
Fair Market Value of the Stock on the Date of Grant and [ii] in all other cases,
the Fair Market value of the Stock on the Date of Grant.
(c) Any Incentive Stock Option granted to an Optionee who owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, its Parent, or Subsidiaries must expire not later than
five years after the Date of Grant.
(d) Each Stock Option Agreement for an Incentive Stock Option shall
provide as follows with respect to the exercise of the Incentive Stock Option
upon the termination of employment, death or disability of the Optionee: [i] if
the Optionee dies or becomes disabled (within the meaning of Code Section 22(e))
during the term of the Incentive Stock Option while still employed, or within
the three-month period referred to in clause [ii], the Incentive Stock Option
may be exercised by those entitled to do so under the Optionee's will or under
applicable law within twelve months following the Optionee's death or
disability, but not thereafter; provided that such exercise must occur prior to
the expiration of the Incentive Stock Option and the Incentive Stock Option may
be exercised only as to the shares of Stock for which it had become exercisable
on or before the date of the Optionee's death or disability; and [ii] if the
employment of the Optionee is terminated (which for this purpose means that the
Optionee is no longer employed by the Company or by any Subsidiary) within the
term of the Incentive Stock Option for any reason other than the Optionee's
death or disability, the Incentive Stock Option may be exercised by the Optionee
within three months following the date of such termination, but not thereafter;
provided that such exercise must occur prior to the expiration of the Incentive
Stock Option and the Incentive Stock Option may be exercised only as to the
shares of Stock for which it had become exercisable on or before the date of
termination of the Optionee's employment.
ARTICLE 7.: EFFECT OF CERTAIN CORPORATE ACTIONS
7.1 STOCK SPLITS. The number of shares and purchase price of Stock previously
made subject to Stock Options and the aggregate number of shares available for
issuance under the Plan shall be proportionately adjusted in the event of any
stock dividend, stock split, reverse stock split or other division or
combination of outstanding shares of Stock as determined by the Committee.
7
<PAGE> 22
7.2 MERGERS. In the event of a merger or consolidation [a] to which the Company
is a party, [b] as a result of which the stockholders of the Company immediately
prior to the transaction will own less than a majority of the combined voting
power and ownership interest of the surviving or resulting corporation
immediately after the transaction and [c] which is accounted for as a pooling of
interests, [i] all outstanding Stock Options, whether or not otherwise
exercisable, shall become fully exercisable in respect of all Stock covered
thereby immediately prior to the effective time of the transaction, contingent
upon the consummation of the transaction, and [ii] any Stock Options not
exercised prior to the transaction shall automatically terminate at the
effective time of the transaction. The Committee shall make such arrangements as
it deems appropriate to allow Optionees to exercise their Stock Options
contingent upon the consummation of the transaction, including, without
limitation, establishing a cut-off date in advance of the effective time of the
transaction by which Stock Options must be exercised. In the event that the
transaction is not ultimately consummated, all exercises of Stock Options
pursuant to this provision shall be of no force or effect, the Company shall
return to the Optionees all notices of exercise, payments and other documents
received by it in connection with such exercise and all Stock Options shall be
exercisable only in accordance with their original terms.
7.3 SALE OF ASSETS; LIQUIDATION. In the event of a sale of all or substantially
all of the property of the Company, a merger or consolidation to which the
Company is a party other than one described in Section 7.2, or the dissolution
or liquidation of the Company, the Committee may, in its discretion, take such
action with respect to outstanding Stock Options as it deems appropriate,
including, without limitation [i] accelerating the exercisability thereof,
subject to such procedures and conditions as it may determine, [ii] providing
for the termination of all unexercised Stock Options as of the effective date of
the transaction, [iii] providing for the conversion of outstanding Stock Options
into options or other rights to acquire stock or other securities or property of
any entity that is a party to the transaction, or any affiliate of any such
entity, for a price and on terms deemed reasonable by the Committee in its sole
discretion, or [iv] making cash payments or issuing Stock or other securities to
Optionees in settlement of their Stock Option in an amount equal to the
difference between the Fair Market Value of the Stock for which they are then
exercisable, or for all of the Stock covered thereby, as the Committee may
determine, and the Stock Option Price thereof. The Committee shall not be
required to take any of the foregoing actions and shall not be required to treat
all outstanding Stock Options in the same manner.
7.4 FRACTIONAL SHARES. If, upon any exercise of a Stock Option, a fractional
share of Stock would otherwise be issuable, the Company shall, in lieu of
issuing the fractional share, pay the Optionee in cash the Fair Market Value
thereof as of the date the Stock Option was exercised.
ARTICLE 8.: GENERAL PROVISIONS
8.1 Section 83(b) ELECTION. If the Stock issued upon exercise of a Stock Option
is, under the terms of the Stock Option Agreement, subject to a substantial risk
of forfeiture (as that term is defined under Section 83 of the Code and
applicable Treasury Regulations), and the Optionee makes an election under
Section 83(b) of the Code to include in gross income (as compensation) the
excess, if any, of the fair market value of such Stock over the Stock Option
Price, the Optionee shall give timely notice to the Company of the statement
required by the Treasury Regulations under Section 83 of the Code.
8
<PAGE> 23
8.2 WITHHOLDING. Whenever compensation income is recognized by an Optionee with
respect to a Stock Option, the Company may require the Optionee to make a
withholding tax payment to the Company. The amount of such payment shall equal
the amount of federal and state income tax that the Company or any Subsidiary is
required to withhold with respect to the issuance or disposition of such Stock.
The Committee, in its sole discretion, may permit the Optionee to pay all or any
portion of such tax withholding by transferring to the Company, or directing the
Company to withhold from Stock otherwise issuable to such Optionee, shares of
Stock having a Fair Market Value equal to the amount to be so paid, determined
as of the date of exercise. To the extent the required withholding tax payment
is not timely made by the Optionee, the Company or any Subsidiary may either
withhold such payment from the Optionee's cash compensation or make such other
arrangements as the Committee determines.
8.3 NO EMPLOYMENT RIGHT. Nothing in this Plan shall confer upon any Optionee the
right to continue in the employ of the Company or any Subsidiary, nor shall it
interfere in any way with the right of the Company or any Subsidiary to
discharge the Optionee at any time for any reason whatsoever, with or without
cause (subject to any employment agreement between the Company or any Subsidiary
and the Optionee). Neither the existence of this Plan, nor the grant or
termination of any Stock Option under it, shall be the basis of any claim for
damages or otherwise by an Optionee upon his or her termination of employment.
8.4 NO STOCKHOLDER RIGHTS. Prior to the issuance or transfer of Stock to the
Optionee following the exercise of a Stock Option, an Optionee shall have no
rights as a stockholder with respect to any shares of Stock subject to any Stock
Option granted to such person under this Plan. Except as provided in 7.1, no
adjustment shall be made in the number of shares of Stock issued to an Optionee,
or in any other rights of the Optionee upon exercise of a Stock Option by reason
of any dividend, distribution, or other right granted to shareholders for which
the record date is prior to the date of issuance of Stock pursuant to a Stock
Option.
8.5 TRANSFERABILITY RESTRICTIONS; REPURCHASE RIGHTS. No Stock Option, and no
other rights acquired by an Optionee under this Plan, shall be assignable or
transferable by an Optionee and all such rights are exercisable, during such
person's lifetime, only by the Optionee; provided, however, that (i) the
Committee may authorize the assignment or transfer of a Stock Option in its sole
discretion and subject to such terms, conditions and restrictions as it deems
appropriate and (ii) in the event the Optionee's Stock Option Agreement
expressly permits the Stock Option to be exercised after the Optionee's death or
disability, the Optionee's heirs or legal representatives, as the case may be,
may exercise the Stock Option in accordance with, and subject to all of the
terms and conditions of, this Plan and the Optionee's Stock Option Agreement.
Any assignment, transfer, pledge, hypo thecation or other disposition of any
Stock Option contrary to the provisions of this Plan, and any levy of any
attachment or similar process upon a Stock Option, shall be null and void and
without effect. Upon the occurrence of such an event, the Committee may, in its
discretion, terminate the Stock Option. The Company may impose such transfer
restrictions (not otherwise expressly provided for in this Plan) and repurchase
rights on the Stock as the Committee may from time to time deem appropriate.
Such transfer restrictions and repurchase rights shall be set forth in the
Optionee's Stock Option Agreement or in another written agreement between the
Optionee and the Company.
9
<PAGE> 24
8.6 OTHER EMPLOYEE BENEFITS. By acceptance of the grant of a Stock Option, the
Optionee shall be deemed to have agreed that such Stock Option is special
incentive compensation that will not be taken into account, in any manner, as
salary, compensation, or bonus in determining the amount of any payment under
any pension, retirement or other employee benefit plan, program or policy of the
Company or any Subsidiary. In addition, each beneficiary of a deceased Optionee
shall be deemed to have agreed that such Stock Option will not affect the amount
of any life insurance coverage, if any, provided by the Company or any
Subsidiary on the life of the Optionee which is payable to such beneficiary
under any life insurance plan covering employees of the Company or any
Subsidiary.
8.7 NONEXCLUSIVITY OF PLAN. Neither the adoption of the Plan by the Board nor
the submission of the Plan to stockholders of the Company for approval shall be
construed as creating any limitation on the power or authority of the Board to
grant options to purchase Stock or other securities of the Company to any
employee of the Company outside the Plan.
8.8 DELIVERY. Delivery of any notice or document shall occur upon actual
delivery to the recipient (including receipt of telecopy or facsimile
transmission).
8.9 AMENDMENT. The Board may from time to time alter, amend, suspend or
discontinue this Plan; provided, however, any amendment or modification that is
required to be approved by the stockholders to enable the Plan to satisfy any
applicable statutory or regulatory requirements shall be subject to such
approval as may be required by the statute or regulation. However, no such
action shall adversely affect the rights and obligations with respect to Stock
Options which are then outstanding under this Plan.
8.10 EFFECTIVE DATE. This Plan has been adopted by the Board and became
effective on May 5, 1999.
10
<PAGE> 25
UNITED STATES EXPLORATION, INC.
1560 BROADWAY, SUITE 1900
DENVER, COLORADO 80202
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 13, 1999
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, hereby revoking any proxy or proxies heretofore
given by the undersigned, and authorizes them to vote all the shares of common
stock, $.0001 par value, of United States Exploration, Inc. (the "Company") that
the undersigned may be entitled to vote at the annual meeting of shareholders of
the Company, and at all adjournments or postponements thereof as follows:
1. To elect 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 approve the 1999 Employee Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the appointment of Ernst & Young LLP as auditors for the current
fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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.
(continued and to be signed on the reverse side)
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 PROPOSALS 2 AND 3.
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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: , 1999
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PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD TODAY USING THE ENCLOSED
PRE-PAID ENVELOPE.
