<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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
</TABLE>
UNITED STATES EXPLORATION, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the 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)(1) 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:
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<PAGE> 2
UNITED STATES EXPLORATION, INC.
1560 BROADWAY, SUITE 1900
DENVER, COLORADO 80202
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AUGUST 8, 2000
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 August
8, 2000, 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 ratify the appointment of Ernst &
Young LLP as the Company's independent accountants for the fiscal year ending
December 31, 2000; and
3. Transact such other business as may properly come before
the meeting or any adjournment thereof.
The record date for the annual meeting is June 30, 2000. 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,
F. Michael Murphy, Secretary
July 7, 2000
<PAGE> 3
UNITED STATES EXPLORATION, INC.
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 8, 2000
PROXY STATEMENT
This proxy statement is furnished in connection with the
solicitation of proxies from the holders of the Company's common stock 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 August 8, 2000, at 1:00 p.m., Mountain Time,
and at any adjournments of that meeting. This proxy statement and the enclosed
proxy are first being sent to shareholders on or about July 7, 2000.
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.
The record date for the meeting is June 30, 2000. Only
shareholders of record as of that date are entitled to receive notice of and to
vote at the annual meeting.
The holders of the Company's common stock have the right to
elect four directors at the meeting, to vote on the proposal to ratify the
appointment of the Company's auditors and to vote on any other business that may
come before the meeting. Each share of common stock is entitled to one vote on
all matters submitted to a vote of the holders of common stock. On June 30,
2000, there were a total of 18,620,631 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
As discussed under Election of Directors below, the holders of
the Company's outstanding Series C Convertible Preferred Stock have the right to
elect two directors at the meeting. The Company has not received nominations for
either of those positions. If a candidate is nominated for either or both of
those positions, each share of Series C Convertible Preferred Stock will be
entitled to one vote in the election of such directors. On June 30, 2000, there
were 443,167 shares of Series C Convertible Preferred Stock outstanding. The
holders of a majority of the outstanding Series C Convertible Preferred Stock
will constitute a quorum for the election of directors by the holders of Series
C Convertible Preferred Stock. The Company is not soliciting proxies from the
holders of Series C Convertible Preferred Stock.
In the election of directors by the holders of common stock,
the four nominees who receive the most votes will be elected to the Board of
Directors. If a candidate is nominated for election to either or both of the
director positions that the holders of the Series C Preferred Stock have the
right to fill, the two 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 by the holders of common stock 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.
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 FOR ELECTION
BY THE HOLDERS OF COMMON STOCK
NOMINEES
The Board of Directors of the Company consists of six members.
The holders of common stock are entitled to elect four directors and the holders
of Series C Convertible Preferred Stock are entitled to elect two directors. The
two positions on the Board that the holders of Series C Convertible Preferred
Stock have the right to fill are vacant and the Company has not received any
2
<PAGE> 5
nominations for those positions at the meeting. The Company is not soliciting
proxies from the holders of the Series C Convertible Preferred Stock.
Accordingly, the information presented herein relates only to the election of
directors by the holders of common stock. If directors are nominated at the
meeting by the holders of Series C Convertible Preferred Stock, a vote of the
holders of the Series C Convertible Preferred Stock will be taken as provided in
the Company's Articles of Incorporation and Bylaws.
Each director is 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 61 Chairman of the Board of Directors,
Chief Executive Officer and President
Thomas W. Gamel 60 Director
Robert J. Malone 55 Director
Richard L. Robinson 70 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, 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 Capital
Partners, 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 continued as the chairman of the board
3
<PAGE> 6
until April 30, 2000. 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 the Denver Zoological Foundation. 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 or co-chairman of
Robinson Dairy, Inc. 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, Horizon Organic Holding Corp., a publicly held
company quoted on the NASDAQ National Market, 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 1999, the Company's Board of Directors met 12 times and
took action one time by unanimous written consent. Each of Messrs. Benson,
Gamel, Malone and Robinson were 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 1999.
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 1999, 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, 61, 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.
4
<PAGE> 7
F. Michael Murphy, 58, 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 R. Wallace, 40, 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
effected 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.
Shirley R. Kovar, 50, 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 28 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 and Murphy 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 Directors' 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 for 1999, the Company's outside directors were each issued 9,600 shares
of stock under the Plan.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table summarizes the total compensation for the
Company's Chief Executive Officer and its three other officers whose
compensation exceeded $100,000 for 1999 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------ -------------
SECURITIES
NAME AND SALARY UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR ($) OPTIONS(#) COMPENSATION(1)
------------------ ---- ------ ---------- ---------------
<S> <C> <C> <C> <C>
Bruce D. Benson, 1999(2) $112,500 -- $4,046
Chairman of the 1998 150,000 -- 7,500
Board, Chief 1997(3) 53,077 4,000,000 --
Executive Officer
and President
John R. Wallace 1999 147,000 -- 7,511
Vice President of 1998 91,875 -- 4,594
Exploration and 1997 -- -- --
Acquisitions
F. Michael Murphy 1999 150,920(4) -- 7,546
Chief Financial 1998 --(4) 150,000 --(5)
Officer, Vice 1997 --(4) -- --(5)
President and
Secretary
Murray N. Brooks 1999 139,465(6) -- 6,973
Vice President of 1998 --(6) -- --(5)
Operations 1997 --(6) -- --(5)
</TABLE>
----------
(1) Consists of Company contributions to defined contribution plan.
(2) Mr. Benson took no salary for July 1999 through September 1999. His salary
for October 1999 through December 1999 ($37,500) was accrued in 1999 but
was not paid in 1999.
(3) From commencement of employment on August 7, 1997 through December 31,
1997.
(4) Mr. Murphy was on the BMG payroll until February 22, 1999 at which time he
was transferred to the Company payroll. The $150,920 shown above reflects
Mr. Murphy's salary for approximately 10 months. For the period in 1999
that Mr. Murphy was on the BMG payroll, BMG billed the Company $15,205 for
time spent by Mr. Murphy on Company business. For the period in 1999 that
Mr. Murphy was on the Company payroll, the Company billed BMG $54,398 for
time spent by Mr. Murphy on BMG business. For 1998 and 1997, BMG billed the
Company $134,223 and $28,400, respectively, for time spent by Mr. Murphy on
Company business.
(5) During 1997 and 1998, Messrs. Murphy and Brooks were carried as employees
of BMG and contributions were made for their accounts by BMG to the defined
contribution plan in which BMG and the Company now participate. The Company
reimbursed BMG for a portion of such contributions based on the percentage
of time spent on Company affairs. In 1997 and 1998, such reimbursements
were $1,420 and $6,711, respectively, for Mr. Murphy and $883 and $542,
respectively, for Mr. Brooks.
6
<PAGE> 9
(6) Mr. Brooks was on the BMG payroll until February 22, 1999 at which time he
was transferred to the Company payroll. The $139,465 reflects Mr. Brooks'
salary for approximately 10 months. For the period during 1999 that Mr.
Brooks was on the BMG payroll, BMG billed the Company $12,930 for time
spent by Mr. Brooks on Company business. For the period during 1999 that
Mr. Brooks was on the Company payroll, the Company billed BMG $107,896 for
time spent by Mr. Brooks on BMG business. For 1998 and 1997, BMG billed the
Company $108,411 and $17,655, respectively, for time spent by Mr. Brooks on
Company business.
No options were granted to or exercised by the Named Executive Officers
during 1999. The following table sets forth the value of unexercised options
held by the Named Executive Officers at December 31, 1999:
<TABLE>
<CAPTION>
1999 YEAR-END OPTION VALUES
---------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR END(#) AT FISCAL YEAR END
NAME EXERCISABLE/UNEXERCISABLE ($)
---- --------------------------- --------------------
<S> <C> <C>
Bruce D. Benson 4,000,000/0 (1)
F. Michael Murphy 50,000/100,000 (1)
</TABLE>
----------
(1) None of the unexercised options reflected in the table were in-the-money as
of December 31, 1999, based upon the last sales price of the Common Stock
on The American Stock Exchange on December 31, 1999 of $.6875.
In connection with an amendment to his employment agreement in
May 2000, Mr. Benson voluntarily relinquished the options to purchase 4,000,000
shares reflected in the tables above.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Mr. Benson dated
August 7, 1997, as amended May 18, 2000. The agreement provides for a base
salary of not less than $150,000 per year and bonuses at the discretion of the
Board of Directors. The term of the agreement ends August 6, 2001. 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 agreement provides for a severance payment of $1
million to Mr. Benson in the event that he is terminated by the Company without
cause prior to the end of the term of the agreement, a majority of the board of
directors changes during the term of the agreement or the Company defaults under
the agreement. Mr. Benson is not required to devote his full business time to
the Company.
The Company has an employment agreement with Mr. Wallace dated
May 11, 1998. The agreement provides for a base salary of not less than $147,000
per year with annual increases of $15,000 per year. To date, Mr. Wallace has
voluntarily declined to take the salary increases
7
<PAGE> 10
required by the agreement. Bonuses are discretionary. The term of the agreement
was originally two years, but automatically renews for successive one-year
periods unless either party gives notice of nonrenewal. The agreement may be
terminated by the Company or Mr. Wallace at any time. If the agreement is
terminated by the Company without "cause" or by Mr. Wallace with "good reason"
(as those terms are defined in the agreement), the Company is required to pay
Mr. Wallace an amount equal to one year's salary plus two times his bonus for
the most recent year. If the agreement is terminated upon a change of control of
the Company, Mr. Wallace is entitled to receive two times the sum of his then
current salary plus his bonus for the most recent year. Mr. Wallace is not
required to devote his full business time to the Company. Mr. Wallace is
entitled to receive a 1% overriding royalty interest, proportionately reduced,
in all oil and gas properties acquired by the Company during the term of the
agreement (other than the properties acquired from Union Pacific Resources
Corporation).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 28, 2000 the
beneficial ownership of each class of the Company's equity securities by the
Named Executive Officers, each director of the Company 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.
<TABLE>
<CAPTION>
COMMON STOCK SERIES C PREFERRED STOCK
--------------------------- --------------------------
NAME AND ADDRESS OF NUMBER PERCENT OF NUMBER OF PERCENT OF
BENEFICIAL OWNER OF SHARES CLASS(1) SHARES SERIES(1)
------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Bruce D. Benson 3,236,500 17.38% -- --
1560 Broadway, Suite 1900
Denver, CO 80202
Thomas W. Gamel 479,500(2) 2.54% -- --
700 Broadway, Suite 800
Denver, CO 80203
Robert J. Malone 388,412(3) 2.06% -- --
335 St. Paul St.
Denver, CO 80206
F. Michael Murphy 150,000(4) * -- --
1560 Broadway, Suite 1900
Denver, Colorado 80202
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
COMMON STOCK SERIES C PREFERRED STOCK
--------------------------- --------------------------
NAME AND ADDRESS OF NUMBER PERCENT OF NUMBER OF PERCENT OF
BENEFICIAL OWNER OF SHARES CLASS(1) SHARES SERIES(1)
------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Richard L. Robinson 383,312(5) 2.03% -- --
646 Bryant
Denver, CO 80204
John R. Wallace -- --
1560 Broadway, Suite 1900
Denver, CO 80202
Dale M. Jensen 4,786,370(6) 25.70% -- --
26796 N. 98th Way
Scottsdale, AZ 85255
Charles D. Guyette 32,700 * 83,500 18.84%
4323 Ulysses Way
Golden, CO 80403
Keith R. Hesli 83,334 * 125,000 28.21%
1334 Sunny Lane
Anoka, MN 55303
Joseph A. Hutchinson 26,000 * 76,000 17.15%
27 Columbine Place
Castle Rock, CO 80104
Ram Development Company -- -- 25,000 5.64%
John Rinderknecht (Pres.)
10 Jackson Street
Denver, CO 80206
R.W. Rinderknecht Co. -- -- 75,000 16.92%
John Rinderknecht (Pres.)
P.O. Box 101298
Denver, CO 80250-1298
Charles D. Unruh -- * 41,667 9.40%
12723 E. 111th St. North
Owasso, OK 74055
Directors and Executive
Officers as a Group 4,704,524(7) 24.06% -- --
(11 individuals)
</TABLE>
----------
(1) Based on 18,620,631 shares of Common Stock and 443,167 shares of Series C
Preferred Stock outstanding 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 (i) 106,288 shares held indirectly through a corporation of which
Mr. Gamel has voting control and (ii) 238,733 shares of Common Stock
underlying options that are currently exercisable.
(3) Includes 238,733 shares of Common Stock underlying options that are
currently exercisable, 10,000 shares of Common Stock owned jointly with
spouse, and 6,000 shares of Common Stock owned by spouse.
(4) Consists of 150,000 shares of Common Stock underlying options that are
currently exercisable.
(5) Includes 238,733 shares of Common Stock underlying options that are
currently exercisable.
(6) Includes 391,000 shares as to which Mr. Jensen has an irrevocable proxy.
(7) Includes an aggregate of 932,999 shares of Common Stock underlying options
that are currently exercisable.
* Less than 1%.
9
<PAGE> 12
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 and other overhead and administrative expenses associated with operation of
the Company's business based upon actual use of BMG's facilities by the Company
and BMG reimburses the Company for personnel costs associated with the use of
Company personnel in the operation of BMG's business based on time spent on BMG
matters. The Cost and Expense Sharing Agreement is effective so long as Mr.
Benson's employment agreement is in effect. During the years ended December 31,
1999 and 1998, the Company paid or accrued an aggregate of $230,800 and
$660,570, respectively 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.
In connection with the acquisition of its oil and gas
properties in Northeastern Colorado from Union Pacific Resources Company
("UPRC") in May of 1998, the Company retained four unaffiliated individuals to
provide technical and evaluation services. In return for those services, the
Company agreed to grant to the members of that group overriding royalty
interests totalling 21/2%, proportionately reduced, in all properties acquired
from UPRC, including any properties in which the Company earns an interest
pursuant to its Exploration Agreement with UPRC. Such royalties are shared
equally by the members of that group. One of the four individuals, John R.
Wallace, subsequently became the Company's Vice President of Exploration and
Acquisitions.
On May 18, 2000, the Company completed the settlement of its
obligations to its principal lender, ING (U.S.) Capital LLC. At March 31, 2000,
the Company owed ING $31,250,000, plus accrued interest of approximately
$2,222,500. These obligations were settled on May 18, 2000 for an aggregate
payment of $17,000,000.
The Company obtained the funds to effect the settlement from
several sources. First, the Company sold its interests in 60 producing wells and
associated undeveloped acreage in the Wattenburg field of Northeastern Colorado
to an unaffiliated oil and gas company for approximately $7.15 million, subject
to customary adjustments. Second, the Company sold 3,000,000 shares of common
stock to Mr. Benson for $1.10 per share, or a total of $3.3 million. Third, BMG
provided $4 million in debt financing. The balance of the payment to ING was
made from internally generated Company funds.
The shares purchased by Mr. Benson were issued pursuant to an
agreement entered into on April 21, 2000. The closing price of the Company's
Common Stock on April 20, 2000 was $0.56 per share. Pursuant to that agreement,
at the time the shares were purchased, Mr. Benson's employment agreement was
amended to extend its term for an additional year, or until August 6, 2001, and
Mr. Benson voluntarily relinquished options to purchase 4,000,000 shares of
Common
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<PAGE> 13
Stock that were granted pursuant to his employment agreement. The amendment also
provides for a severance payment of $1 million to Mr. Benson in the event that
he is terminated by the Company without cause prior to the end of the term of
the agreement, a majority of the board of directors changes during the term of
the agreement or the Company defaults under the agreement.
The proceeds of the debt financing provided by BMG were paid
directly to ING and ING assigned to BMG the Note, Credit Agreement and related
security documents entered into in connection with the ING loan. Upon that
assignment, BMG and the Company entered into an amendment to the Credit
Agreement and the Note that reduces the outstanding principal balance of the
Note to $4 million, forgives all interest and fees accruing prior to the date of
the amendment, provides for interest on the reduced principal amount at 9% per
annum and requires the Company to pay the Note in a lump sum no later than May
17, 2001. In that amendment, the Company acknowledges that the financing was
provided by BMG as an accommodation and agrees to use its best efforts to
refinance or otherwise prepay the Note as soon as possible. The Company intends
to seek financing from a bank or other lender to pay the Note held by BMG and to
provide funds for the further development of its properties. In addition, the
Note may be paid from Company cash flow or the proceeds of additional property
sales.
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 initial reports of ownership and reports of changes in
ownership of Common Stock. The Company believes that all such Section 16(a)
reports were filed on a timely basis during the fiscal year ended December 31,
1999, except as follows: Mr. Benson reported a May 1999 purchase of 500 shares
of Common Stock on a Form 4 filed June 1, 2000. Ms. Kovar reported an option
grant of 25,200 shares in June 1998 on a Form 4 filed June 1, 2000.
RATIFICATION OF APPOINTMENT OF AUDITORS
(ITEM 2 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 year ending December 31,
2000, and solicits the ratification of this appointment by the shareholders.
Ernst & Young LLP audited the Company's financial statements for 1999. 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.
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The Company expects a representative of Ernst & Young LLP to
be present at the Annual Meeting and to be available to answer questions. Such
representative will have an opportunity to make a statement, if desired, and
will be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
The Company currently expects to hold its annual meeting of
shareholders for 2001 on or about April 23, 2001. 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 December 24, 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 2001 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 9, 2001 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, 1999, which includes the Company's 1999 Annual Report to the
Securities and Exchange Commission on Form 10-KSB, 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:
F. Michael Murphy, Secretary
July 7, 2000
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UNITED STATES EXPLORATION, INC.
1560 BROADWAY, SUITE 1900
DENVER, COLORADO 80202
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 8, 2000
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:
<TABLE>
<S> <C> <C> <C>
1. To elect Directors.
[ ] FOR ALL NOMINEES LISTED [ ] WITHHOLD AUTHORITY to vote
(Except as marked below) for all nominees below
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, PLACE AN "X" THROUGH THE NOMINEE'S NAME:
Bruce D. Benson Thomas W. Gamel Robert J. Malone Richard L. Robinson
2. To ratify the appointment of Ernst & Young LLP as auditors for the current
fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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.
</TABLE>
(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 PROPOSAL 2.
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: , 2000
-------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD TODAY USING THE ENCLOSED
PRE-PAID ENVELOPE.
