United Petroleum completes negotiations with Convertible Debenture holders converting approximately 72% of its debenture debt into equity

Business Wire, May 8, 1997

KNOXVILLE, Tenn.--(BUSINESS WIRE)--May 8, 1997--United Petroleum Corporation (NASDAQ:UPET) announced today that it has completed negotiations and has entered into an agreement with its Convertible Debenture holders effective April 30, 1997.

Under the terms of the agreement Convertible Debenture holders have converted approximately $8,775,000 of their debentures to a newly created Class "A" convertible preferred stock and have substituted amended convertible debentures for the balance of the original debentures with a face amount of $20,800,000. The preferred stock and the amended convertible debentures provide for restrictions on conversions which were not present in the original debentures. One of the provisions contained in the preferred stock is a prohibition against any conversions until July 1, 1997 and then only at the rate of 1/13 per month. Also there is a conversion floor price for the preferred stock which was not present in the original debentures. The established floor price begins at $2.50 per share or two-thirds of the average closing bid price of the Company's common stock for the prior month, whichever is greater commencing July 1, 1997. The established minimum floor price reduces by $.50 per share per quarter to a minimum floor price of $1.00 or two-thirds of the average closing bid price for the Company's common stock for the prior month, whichever is greater. The amended convertible debentures are not eligible for conversion until Aug. 1, 1998 at the rate of 1/5 per month with an established minimum floor price per share of $1.00 or two-thirds of the average closing bid price of the Company's common stock for the previous month. Conversion of the preferred stock and the new debentures are further restricted such that no conversion shall cause the holder to beneficially own more than 4.99% of the Company's outstanding shares. The largest holder of the Company's convertible securities has purchased an additional debenture with a face value of $666,666 which provides the Company with additional working capital of $500,000 indicating the holders support of the Company's present management and business plans.

This agreement results in substantial improvement in the Company's balance sheet by increasing Equity to approximately $12,200,000 while reducing debt to approximately $13,700,000 as of March 31, 1997 as compared to approximately $22,200,000 as of December 31, 1996. Company management believes that the agreement will serve as a stabilizing factor in the marketplace for the Company's common stock.

The agreement also provides the preferred shareholders, as a class, the option to elect one director to the Company's Board of Directors which is intended to broaden the base and experience of the Board.

The Jackson-United Petroleum Corporation subsidiary, after completing its 1996 drilling program has a 75% Working Interest in 16 operating natural gas and oil wells in western Pennsylvania and operates 2 natural gas wells in eastern Kentucky, 2 additional eastern Kentucky wells are presently awaiting connection to a pipeline so that the 2 wells can be placed into production. The Company expects these wells to provide between approximately $600,000 to approximately $800,000 in additional revenues during 1997.

Continuing its efforts to increase shareholder value, the Company is presently negotiating for several acquisitions, both in the Calibur Systems, Inc. and Jackson-United Petroleum Corporation subsidiaries.

CONTACT: United Petroleum Corporation, Knoxville

Doug Keene, 423/688-0582