SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of report (Date of Earliest Event Reported): May 2, 1997
UNITED PETROLEUM CORPORATION
(Exact name of Registrant as specified in its Charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
0-25006 13-3103494
Commission File Number I.R.S Employer Identification
4867 North Broadway
Knoxville, TN 37918
(Address of Principal Executive Offices)
423 - 688-0582
(Registrant's Telephone number, including area code)
Item - 202(a)(2)
As previously reported, during the period from May 8, 1996
through October 17, 1997, the Company sold 13 Convertible Debentures (the
"Debentures") pursuant to an exemption from Registration afforded by Regulation
S as promulgated by the Securities and Exchange Commission under the Securities
Act of 1933, as amended. The Debentures have a maturity of two years. The
aggregate face value of the Debentures was $27,500,000 with net proceeds to the
Company of approximately $20,631,500 before expenses of $2,890,000. Debentures
with a face value of $14,200,000 bear interest at the rate of 7% per annum. The
balance of the Debentures bear interest at the rate of 6% per annum. The
Debentures are convertible into shares of the Company's common stock at a price
equal to the average of the closing bid price of the Company's common stock for
the five trading days immediately preceding the submission of a Notice of
Conversion. Subsequent to the sales of the Debentures, the market price of the
Company's common stock deteriorated rapidly and dropped to approximately fifty
cents ($.50) per share from a price of approximately Five ($5.00) Dollars per
share.
Disputes arose between the Company and the purchasers of the
Debentures with regard to the role played by the Debenture Holders in causing
the drop in the price of the Company's stock in violation of the terms of the
Debentures. As a result of this dispute, the Company refused to accept and act
upon Notices of Conversion received from many of the Debenture Holders.
After several months of negotiations among the Company and
these Debenture Holders, an agreement was entered into with holders of
$16,822,400 of Debentures (the "Agreement") effective April 30, 1997.
The Agreement provided, among other things, for the exchange
of $9,750,000 worth of Debentures into 8,775 shares of Preferred Stock, Series A
of the Company (the "Preferred Stock" or "Preferred Shares"), after a reduction
of 10% in the face amount of the Debentures. The Preferred Stock will pay a
cumulative dividend of eighteen (18%) percent for a period of one year.
Thereafter, at the option of the preferred shareholder, the dividend shall
either be reduced to seven (7%) for the second year or, a preferred shareholder,
at his option, may surrender to the Company ten percent of the preferred stock
and continue to receive a dividend of eighteen (18%) percent. At the option of
the Company, dividends may be paid in cash or in the Company's common stock.
Preferred shareholders shall have voting rights equal to those
which they would have if they converted their preferred shares to common stock
at the then conversion price, provided,
however, that no preferred shareholder or group of affiliated preferred
shareholders may, at any time, vote more than 4.99% of the total of the stock
entitled to vote.
Commencing July 1, 1997, one thirteenth of the Preferred Stock
may be converted each month on a cumulative basis. The conversion price shall be
the lesser of $3.00 or the the average closing bid price for the five trading
days prior to conversion. Notwithstanding the foregoing, the minimum conversion
price for the first three months commencing July 7, 1997 shall be the greater of
$2.50 per share or two-thirds of the average of the closing bid prices for the
prior month. For the next three months, the minimum conversion price shall be
the greater of $2.00 per share or two-thirds of the average of the closing bid
prices for the prior month. For the next three months, the minimum conversion
price shall be the greater of $1.50 per share or two thirds of the average of
the closing bid prices for the prior month. Thereafter, the minimum conversion
price shall be the greater of $1.00 or two-thirds of the average of the closing
bid price for the prior month.
The Preferred Shares may be automoatically converted by the
Company by notice given between October 1, 1999 and October 10, 1999 at a price
equal to the average of the closing bid prices for the five trading days prior
to the giving of the notice.
Each Preferred Share shall have liquidation rights equal to
$1,000 and shall have preference over common shareholders and junior preferred
shareholders.
The Company may redeem the Preferred Shares at any time upon
payment of the liquidation price together with any accrued dividends.
Item - 202(a)(4)
The Company's Charter provides for a staggered Board of
Directors with three classes, one class to be elected each year for a period of
three years; removal of a director for any reason requires the vote of the
holders of 70% of the voting power of all shares entitled to vote; numerous
provisions of the Charter may not be amended, repealed or altered except by the
vote of the holders of at least 75% of the voting power of all shares entitled
to vote.
The Agreement provides that the Preferred Shareholders shall
vote their shares for the continuation of current management and shall not
participate in any proxy contests so long as the Company is not in default with
respect to any of the provisions of the Agreement, the Preferred Shares or the
Debentures.
Item - 202(b)(1)
The Agreement provides that the holders of $3,454,511 of
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the Debentures shall receive in their place amended convertible debentures
("Amended Debentures") in a face amount equal to 90% of the face amount of the
old Debentures. The maturity date of the Amended Debentures is September 1,
1999.
The interest rate on the Amended Debentures is 18% for one
year and thereafter 7%, provided, however, that the Amended Debenture holders
shall have the option at the end of one year to surrender to the Company, for no
consideration, 10% of their Amended Debentures and to receive interest of 18% on
the remaining Amended Debentures. At the option of the Company, interest may be
paid in cash or common stock.
The Amended Debentures are convertible into shares of the
Company's common stock commencing August 1, 1998 at the rate of one-fifth per
month. The conversion price shall be the lesser of $3.00 or the average of the
closing bid prices for the Company's common stock for the five trading days
preceding the notice of conversion, provided, however, that the minimum
conversion price shall be the greater of $1.00 per share or two-thirds of the
average of the closing bid price for the prior month.
The Company may redeem the Amended Debentures at any time upon
payment of the face amount of the Amended Debenture together with accrued
interest.
Item - 202(b)(2)
No Amended Debenture holder or affiliated group of Amended
Debenture holders may convert their Amended Debentures to common stock to the
extent that such conversion would cause them to own more than 4.99 percent of
the Company's outstanding common stock.
The Amended Debenture holders have agreed to vote any common
stock acquired by them to continue current management so long as no event of
default, as defined in the Agreement, has occurred.
Item 5 - Other Events
One of the Debenture Holders has subscribed for $666,666 worth
of new debentures to be issued pursuant to Regulation S. The purchase price for
these new debentures is $500,000. These funds are to be used by the Company for
working capital purposes. These debentures are convertible under the same terms
and conditions as the Amended Debentures.
As part of the Agreement, Debentures with a face amount of
$623,200, together with shares issue in payment of interest accrued through
April 30,1997 were converted to common stock at a price of $.50 per share.
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The following documents are filed herewith
Exhibit Number and Description
10.11 Agreement between the Company and Debenture Holders
dated April 30, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be authorized on its behalf
by the undersigned duly authorized.
Dated: May 12, 1997
United Petroleum Corporation
By: L. Douglas Keene, Jr.
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L. Douglas Keene, Jr.
Executive Vice President
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