--
PETROMINERALS CORPORATION
915 Westminster
Alhambra, California 91803
1997 ANNUAL MEETING OF SHAREHOLDERS
To Be Held On September 22, 1997
PROXY STATEMENT
This Proxy Statement and accompanying Proxy are being furnished in connection
with the solicitation by the Board of Directors of Petrominerals Corporation
("Petrominerals" or the "Company") of proxies to be voted at the 1997 Annual
Meeting of Shareholders of the Company to be held on Monday, September 22,
1997 at 10:30 A.M. at the Hilton Hotel, 150 South Los Robles, Pasadena,
California, and at any adjournment or postponement thereof (the "Annual
Meeting"), for the purposes set forth in this Proxy Statement and the
accompanying Notice of Annual Meeting. This Proxy Statement and accompanying
Proxy are being mailed to shareholders of the Company on or about August 22,
1997.
SHAREHOLDERS ARE URGED, WHETHER OR NOT THEY EXPECT TO ATTEND THE ANNUAL
MEETING, TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE. Your executed Proxy may be revoked at any time before it
is exercised by filing with the Secretary of the Company, at the Company's
principal executive offices, a written notice of revocation or a duly executed
Proxy bearing a later date. The execution of the enclosed Proxy will not
affect your right to vote in person, should you find it convenient to attend
the Meeting and desire to vote in person. Attendance at the Annual Meeting
will not in and of itself constitute the revocation of a Proxy.
The purpose of the Annual Meeting is to elect four directors to serve one-year
terms until the 1998 Annual Meeting and until their respective successors
shall be elected and qualified. Unless otherwise directed in the accompanying
Proxy, the proxyholders will vote FOR the election of the four management
nominees listed under "Election of Directors." The shareholders shall also
vote on the proposal presented by the Company to approve and ratify the
selection of Independent Auditors. As to any other business which may
properly come before the Annual Meeting, the proxyholders will vote in
accordance with their best judgment. Management of the Company does not
presently know of any other such business.
<PAGE>
The Company intends to solicit proxies principally by the use of the mails and
will bear all expenses in connection with such solicitations. In addition,
some of the directors, officers and regular employees of the Company may,
without extra compensation, solicit proxies by telephone, telegraph and
personal interview. Arrangements have been made with banks, brokerage houses
and other custodians and nominees to forward copies of the Proxy Statement and
1997 Annual Report to persons for whom they hold stock of the Company and to
request authority for the execution of proxies. The Company will reimburse
the foregoing persons for their reasonable expenses, upon request.
VOTING SECURITIES
On August 1, 1997, the Record Date for the determination of shareholders
entitled to notice of and to vote at the Annual Meeting, 8,475,336 shares of
the Company's common stock ("common stock") were outstanding. Shareholders
are entitled to one vote per share on all matters to be considered at the
Meeting, except that shareholders are entitled to exercise cumulative voting
rights in electing Directors. Cumulative voting rights entitle a shareholder
to cast as many votes as is equal to the number of directors to be elected,
multiplied by the number of shares owned by such shareholder. A shareholder
may cast all of such shareholder's votes as calculated above for one candidate
or may distribute the votes among two or more candidates. No shareholder
shall be entitled to cumulate votes for a candidate or candidates unless such
candidate's or candidates' names have been placed in nomination prior to the
voting, and a shareholder has given notice at the Meeting prior to the voting
of shareholder's intention to cumulate the shareholders's votes. if any one
shareholder has given such notice, all shareholders may cumulate their votes
for candidates in nomination. Unless otherwise instructed, the shares
represented by proxies to management will be voted in the discretion of
management so as to elect the maximum number of management nominees which may
be elected by cumulative voting.
PRINCIPAL SHAREHOLDERS
The following table sets forth the specified information, as of August 1,
1997, with respect to persons or groups beneficially owning more than 5% of
the common stock, to the extent it is known to the Company, either from
Securities Exchange Act filings, Company records or information supplied by
the persons named in the table.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name and Address Amount and Nature of Percent
Of Beneficial Owner Beneficial Ownership of Class
Everett L. Hodges 799,478 (1) 9.43%
14711 Bentley Circle
Tustin, CA 92680
Morris V. Hodges 97,291 (2) 1.15%
14711 Bentley Circle
Tustin, CA 92680
Paul L. Howard 691,000 (3) 8.15%
2255 Huntley Circle
San Marino, CA 91108
</TABLE>
_____________________
(1) The 799,478 shares beneficially held by Everett L. Hodges include
587,896 shares held of record jointly in the Everett L. Hodges and Mary M.
Hodges Trust. This amount also includes 63,400 shares held directly by
Everett L. Hodges, 83,182 shares held of record by Energy Production & Sales
Co., Inc. ("EPS"), and 65,000 shares held by California Oil Independents, Inc.
The 799,478 shares do not include 145,664 shares held in trust for the
children and grandchild of Everett L. and Mary M. Hodges, as to which Mr. &
Mrs. Everett L. Hodges disclaim any beneficial ownership. Everett L. Hodges
and Morris V. Hodges, as a group, may be deemed to be a controlling person of
Petrominerals by virtue of their share ownership.
(2) The 97,291 shares beneficially held by Morris V. Hodges include
14,109 shares held of record jointly in the Morris V. Hodges and Kathryn M.
Hodges Trust. This amount also includes 83,182 shares held of record by
Sunset Pipeline and Terminaling, Inc. The 97,291 shares beneficially held by
Morris V. Hodges do not include 869,235 shares held by adult children of
Morris V. Hodges and Kathryn M. Hodges, as to which Mr. and Mrs. Morris V.
Hodges disclaim any beneficial ownership. Morris V. Hodges and Everett L.
Hodges, as a group, may be deemed to be a controlling person of Petrominerals
by virtue of their share ownership.
(3) The 691,000 shares beneficially held by Paul L. Howard are held
in the Howard Family Trust.
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors proposes the election of four directors, each to hold
office for a term of one year until the 1998 Annual Meeting and until their
respective successors are elected and qualified. All of the nominees have
served as directors since the last annual meeting of shareholders. If any
person other than the nominees proposed by management is nominated for
election as a director, the persons named in the accompanying Proxy, unless
otherwise directed, may, in their discretion, vote cumulatively so as to elect
the maximum number of management nominees, which may be elected by cumulative
voting. See "Voting Securities." Although it is not anticipated that any of
the nominees will decline or be unable to serve, if that should occur, the
proxyholders may, in their discretion, vote for substitute nominees.
The following table sets forth the name, principal occupation, age and the
year in which the individual first became a director for each nominee, and all
persons nominated or chosen to become directors, together with all positions
and offices with the Company held by each such person and term or period
during which each has served, for election as a director at the annual meeting
of stockholders.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Name and Served as a
Principal Occupation Age Director Since
- -------------------- --- --------------
David G. Davidson (1) 72 1990
Everett L. Hodges (2) 63 1979
Morris V. Hodges (3) 61 1979
Paul L. Howard (4) 71 1975
</TABLE>
The Board of Directors recommends a vote "FOR" the election of the nominees
listed above for election as a director.
(1) Mr. Davidson has been principally employed as President and owner
of OP&E Company since 1984. Mr. Davidson serves as a Director of Mieco, Inc.,
a public company engaged in domestic and foreign petroleum trading.
<PAGE>
(2) Mr. Everett L. Hodges served as President of the Company from
September 1987 through February 1992. For more than the past ten years, Mr.
Hodges has held a controlling interest in and has served as a director and
officer of Energy Production & Sales Co., Inc., California Oil Independents;
Inc., Coastal Petroleum Refiners, Inc. and California Tar Sands Development
Corporation, and has served as a Director of St. James Oil Corporation since
1988. Mr. Hodges has also served as the President of the Violence Research
Foundation, a non-profit foundation, since its inception in 1991. Certain of
the foregoing companies have been affiliated with the Company in various
transactions. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS." Everett
L. Hodges and Morris V. Hodges, as a group, may be deemed to be controlling
persons.
(3) Mr. Morris V. Hodges has held a controlling interest in and has
served as a director and officer of the following companies for more than the
past ten years: Hillcrest Beverly Oil Corporation; Century Resources
Development; Kaymor Petroleum Products, Inc., Sunset Pipeline and Terminaling,
Inc., Coastal Petroleum Refiners, Inc., and CPR Transportation. Mr. Hodges
has also served as a Director of St. James Oil Corporation since 1988.
Certain of the foregoing companies have been affiliated with the Company in
various transactions. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
Morris V. Hodges and Everett L. Hodges, as a group, may be deemed to be
controlling persons.
(4) Mr. Howard served as President of the Company from November 1975
through September 1987, and at various times during this period, served as
Chairman and Chief Executive Officer. For more than the past 10 years, Mr.
Howard held a controlling interest in and served as a director and officer of
Howard Oil Company and California Petroleum Products, Inc. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."
Standing Committees and Meetings of the Board of Directors
Standing Committees. The Company has certain standing committees, each of
which is described below.
The Ad-Hoc Committee consists of Messrs. Morris Hodges, Paul Howard and David
Davidson. This committee evaluates proposed acquisitions, mergers or other
pertinent negotiations which may come before the Board. This Committee held
no meetings during the last fiscal year.
<PAGE>
The Audit Committee consists of Messrs. Paul Howard and Morris Hodges. Mr.
Howard serves as Chairman of the committee. The Audit Committee is
responsible for reviewing the scope and procedures of internal auditing work,
the results of independent audits, the accounting policies of management, and
recommends to the Board the appointment of the Company's outside auditors.
This committee held two meetings during the last fiscal year.
The Compensation Committee consists of Messrs. Paul Howard and David Davidson.
This committee reviews and makes recommendations to the Board of Directors
regarding compensation for the Company's officers and key employees. In
addition to compensation matters, the committee determines, develops, and
makes recommendations to the Board regarding employee benefits packages, and
special stock option and stock bonus plans. This committee held no meetings
during the last fiscal year.
Attendance at Board Meetings. During the last fiscal year, the Board of
Directors of the Company held six (6) special meetings. Average attendance at
such meetings of the Board was 80%. During the last fiscal year, each
director attended at least 80% of the aggregate of (a) all meetings of the
Board; and (b) all meetings of the committees of the Board on which such
director served.
Executive Officers
The executive officers of Petrominerals, together with the years in which such
Officers were named to their present offices, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Year Named to
Name Position with Company Present Position
Paul L. Howard (1) President & Chief Executive 1995
Officer; Chief Financial Officer
Phillip Mungiovino (2) Corporate Secretary 1995
Morris V. Hodges (3) Assistant Secretary 1995
</TABLE>
Each of the executive officers serves at the pleasure of the Board of
Directors.
(1) Mr. Howard was appointed to serve as Chairman, President and
Chief Executive Officer, and Chief Financial Officer on March 24, 1995.
<PAGE>
(2) Mr. Mungiovino was appointed to the position of Corporate
Secretary on March 24, 1995. He has been an employee of the Corporation for
the past 23 years and has held the position of full-charge bookkeeper.
(3) Mr. Hodges was appointed Assistant Secretary on March 24, 1995.
<PAGE>
SUMMARY COMPENSATION TABLE
Cash Compensation
The following table contains information concerning the most highly
compensated former executive officers of the Corporation, for the three fiscal
years ended December 31, 1996, whose cash compensation, on an annual basis,
exceeded $60,000.
<TABLE>
<CAPTION>
<S> <C> <C><C> <C>
Name and Principal Position Annual Compensation Long Term
- --------------------------- ------------------- Awards
----------
Securities
Underlying
Options
----------
Year Salary Bonus
---- ------ -----
Paul L. Howard (1) 1996 $ 84,000 -
President & Chief Executive Officer; 1995 $ 45,000 -
Chief Financial Officer
Eugene L. Butler (2) 1995 $ 44,614 -
Former President & Chief Executive Officer 1994 $123,306 -
Kevin P. Brady (3) 1994 $ 80,000 -
Former Vice President Operations
Kenneth M. Padula (4) 1993 $ 75,000 -
Former Chief Administrative Officer & CFO
Bill W. Holder (5) 1993 $ 79,327 -
Former Vice President Operations
Lunn Production Service
===========================================
</TABLE>
<PAGE>
(1) Mr. Howard was appointed Chairman, President, Chief Executive
Officer and Chief Financial Officer on March 24, 1995. Until March, 1996, his
compensation consisted of a special director's fee of $5,000 per month. In
March, 1996, Mr. Howard became an employee and his total compensation on an
annual basis increased to $90,000. He received total compensation of $84,000
in 1996.
(2) Mr. Butler was appointed President & Chief Executive Officer of
Petrominerals Corporation on April 15, 1993. His employment terminated on
March 24, 1995. Mr. Butler provided consulting services to the Corporation
through May 31, 1995. Pursuant to the terms of his option agreement, Mr.
Butler's option rights expired thirty days following the termination of his
employment.
(3) Mr. Brady was appointed President of Hydro-Test International,
Inc. in September 1993, and Vice President of Operations for Petrominerals
Corporation in October 1993. His employment terminated in January, 1995.
(4) Mr. Padula's employment as Chief Administrative Officer, Vice
President and Chief Financial Officer terminated on February 11, 1994. Mr.
Padula acted as a consultant to the Company for the period February 11, 1994
through April 30, 1994. The fees noted above were paid as consulting fees
rendered in connection with the Company's Form 10-K for the year ended
December 31, 1993.
(5) Mr. Holder's employment with the Corporation terminated in August
of 1994, following the liquidation of the Lunn Production Services division.
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No Stock Options were granted during the fiscal year ended December 31,
1996.
No options were exercised by any executive officer in the last fiscal
year. The Company does not have any long term incentive plans.
The following table sets forth annual compensation and Stock options for
the last three fiscal years, and the current fiscal year to the date hereof.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Name and Principal Position Annual Compensation Long Term
- ----------------------------------- ------------------- Awards
--------
Securities
Underlying
Options
----------
Year Salary Bonus
---- ------ -----
Paul L. Howard (1) 1996 $ 84,000 -
President, Chief 1995 $ 45,000 -
Executive Officer &
Chief Financial Officer
Eugene L. Butler (2) 1995 $ 44,614 -
former President & 1994 123,306 -
Chief Executive Officer
Kevin P. Brady (2) 1994 $ 80,000 -
Vice President -
Operations
Kenneth M. Padula (3) 1994 $ 13,522 -
Chief Administrative Officer & CFO 1993 75,000 -
Bill W. Holder (4) 1993 $ 79,327 -
Vice President -
Operations
Lunn Production Service
===================================
</TABLE>
<PAGE>
(1) Mr. Howard was appointed Chairman, President, Chief Executive
Officer and Chief Financial Officer on March 24, 1995. Until March, 1996, his
compensation consisted of a special director's fee of $5,000 per month. In
March, 1996, Mr. Howard became an employee and his total compensation on an
annual basis increased to $90,000. He received total compensation of $84,000
in 1996.
(2) Mr. Butler was appointed President & Chief Executive Officer of
Petrominerals Corporation on April 15, 1993. His employment terminated on
March 24, 1995. Mr. Butler provided consulting services to the Corporation
through May 31, 1995. Pursuant to the terms of his option agreement, Mr.
Butler's option rights expired thirty days following the termination of his
employment.
(3) Mr. Brady was appointed President of Hydro-Test International,
Inc. in September 1993, and Vice President of Operations for Petrominerals
Corporation in October 1993. His employment terminated in January, 1995.
(4) Mr. Padula's employment as Chief Administrative Officer, Vice
President and Chief Financial Officer terminated on February 11, 1994. Mr.
Padula acted as a consultant to the Company for the period February 11, 1994
through April 30, 1994. The fees noted above were paid as consulting fees
rendered in connection with the Company's Form 10-K for the year ended
December 31, 1993.
(5) Mr. Holder's employment with the Corporation terminated in August
of 1994, following the liquidation of the Lunn Production Services division.
Other Compensation of Executive Officers
The Company also provided travel and entertainment expenses to its executive
officers and key employees. The aggregate amount of such compensation, as to
any executive officer or key employee, did not exceed the lesser of $25,000 or
10% of the cash compensation paid to such executive officer or key employee,
nor did the aggregate amount of such other compensation exceed 10% of the cash
compensation paid to all executive officers or key employees as a group.
<PAGE>
Termination and Change In Control Arrangements.
In July 1993, the Board of Directors adopted a severance plan for executive
officers providing that, in the event of termination of employment as a result
of a change in control of the corporation, that such executive officer would
receive severance in the amount of one year's base salary. The Plan does not
provide for any severance in the event of the resignation, retirement or
termination of any Executive Officer's employment with the Company for reasons
other than a change in control of the Company.
COMPENSATION OF DIRECTORS
Under the Directors Stock Compensation Plan described below, each of the
non-employee directors of the Company was compensated by an award of shares of
common stock of the Company equivalent to the amount of $700 per month,
payable in lieu of cash. In February 1994, 99,600 shares of common stock were
distributed to each of the non-employee directors for services rendered for
the period May 1, 1992 through September 30, 1993. In February 1995, the
balance of 50,400 shares earmarked under the Plan were distributed to each of
the six non-employee directors for services rendered for the period October
1993 through May 1994. (See "Directors Stock Compensation Plan.") The
Directors Stock Compensation Plan provided that each non-employee director
shall be compensated by an award of shares of the Company's common stock
valued at $700 per month, the actual number of shares to be calculated at the
average market price of the Company's common stock for the month preceding the
award or the net book value of the Company (but not less than $.70 per share),
expressed on a per-share basis, whichever is greater. Subsequent to May,
1994, non-employee director fees were accrued at the rate of $700 per month.
On March 24, 1995, the directors fees were reduced to $350 per month. In
addition, the non-employee directors are reimbursed for reasonable expenses
incurred in connection with any meetings.
The Company did not pay any additional fees to directors for serving as
members of the Audit, Ad-Hoc, Compensation or Executive Committees during the
last fiscal year.
<PAGE>
1993 Incentive Stock Option Plan and 1993 Non-Statutory Stock Option Plan
The Company has in effect two stock option plans -- the 1993 Incentive Stock
Option Plan (the "Incentive Plan") and the 1993 Non-Statutory Stock Option
Plan (the "Non-Statutory Plan")(the Incentive Plan and the Non-Statutory Plan
are sometimes collectively referred to herein as the "Plans"), which were
adopted by the Board of Directors and approved by the shareholders of the
Company in 1993. The Plans in the aggregate provide for the granting of
options to purchase a maximum of 1,200,000 shares of the Company's Common
Stock to employees and directors of the Company and its affiliates (as defined
therein); however, options which may be granted to non-employee directors are
limited to a maximum of 60,000 shares. The Plans expire on February 8, 2003.
Any of the Company's current or future employees who render, in the opinion of
the Board of Directors, the type of services which tend to contribute
materially to the success of the Company or an affiliate of the Company are
eligible to participate in the Incentive Plan. Any of the Company's current
or future employees or directors (whether or not otherwise employed by the
Company) who render, in the opinion of the Board of Directors, the type of
services which tend to contribute materially to the success of the Company or
an affiliate of the Company are eligible to participate in the Non-Statutory
Plan.
The Plans are administered by the Board of Directors of the Company which has
the authority to determine the employees and directors to whom options are to
be granted, the number of shares subject to each option and the term thereof.
The Board of Directors will have the power to reduce the option price of
outstanding options (but not below the fair market value of the shares subject
thereto), to enter into agreements relating to the value of the options at the
date of grant and to make all other determinations necessary or advisable to
the administration of the Plan. With the consent of the optionee, the Board
of Directors will also have the power to substitute options with different
terms for previously granted options, or to amend the terms of any option.
The Board of Directors may delegate administration of the Plan to a committee
composed of not less than three members of the Board of Directors.
Administration of the Plan with respect to committee members, however, must
remain vested in the Board. With respect to options granted to a director,
the Board of Directors shall take action by a vote sufficient without counting
the vote of the interested director. Interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors
which authorizes the granting of options to such directors.
<PAGE>
On October 7, 1993, Eugene L. Butler was granted an option under the
Non-Statutory Stock Option Plan to purchase up to 500,000 shares of the common
stock of the Company at a price of $.70 per share. Pursuant to the terms of
the Plan, Mr. Butler's option rights expired thirty days following the
termination of his employment by the Company. No options were granted to
officers or employees of the Company during 1996.
1993 Stock Bonus Plan
In February 1993, the Board of Directors adopted the Company's 1993 Stock
Bonus Plan ("Bonus Plan"). The Bonus Plan provides for the awarding of up to
50,000 shares of the Company's Common Stock to officers and key employees of
the Company. The Plan is administered by the Board of Directors which has the
authority to determine the officers and key employees to whom stock bonuses
are to be awarded, the time or times at which stock bonuses will be awarded,
and, subject to the limits discussed below, the number of shares to be granted
under each award. The Board of Directors has the power to delegate the
administration of the Bonus Plan to a committee of the Board appointed in
accordance with the Company's Bylaws. The aggregate fair market value
(determined as of the date of grant) of the shares of Common Stock awarded to
any officer or key employee under the Bonus Plan in any one calendar year
cannot exceed one-sixth of the officer's or key employee's salary (excluding
bonuses and awards under other incentive plans maintained by the Company) for
such calendar year. The Bonus Plan terminates on February 8, 1998. No stock
bonus awards were made to officers or key employees of the Company during
1996.
Directors Stock Compensation Plan
On April 16, 1992, as part of its cost containment program, the Board of
Directors of the Company adopted the Directors Stock Compensation Plan (the
"Stock Compensation Plan"). The Stock Compensation Plan provides for the
granting of stock to non-employee directors of the Company in lieu of paying
director's fees in cash. The purpose of the Stock Compensation Plan was to
minimize cash outflow from the Company by compensating non-employee directors
for their services to the Company in stock rather than in cash. The maximum
number of shares provided for the Stock Compensation Plan was 150,000. In
February 1994, 99,600 shares of common stock were distributed to each of the
non-employee directors for services rendered for the period May 1, 1992
through September 30, 1993. In February 1995, the balance of 50,400 shares
earmarked under the Plan were distributed to each of the six non-employee
directors for services rendered for the period October 1993 through May 1994.
Only non-employee directors of the Company were eligible to participate in the
Stock Compensation Plan.
<PAGE>
The Stock Compensation Plan was administered by the disinterested members of
the Board, or, in the event there were none such, the President and Chief
Executive Officer and the Secretary of the Company. The granting of stock
under the Stock Compensation Plan was according to a pre-set formula.
Directors fees payable to non-employee directors of the Company were set by
the Board at $700 per month. Under the Stock Compensation Plan, the eligible
directors will receive stock at a value of $700 per month, determined by the
average trading price as quoted on the NASDAQ National Market System for the
calendar month immediately preceding the month in which the directors fee is
earned; provided, however, that the valuation of the stock shall not be less
than the net book value of the Company expressed on a per share basis (but not
less than $.70 per share).
APPROVAL AND SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Brown, Armstrong, Randall &
Reyes, independent auditors, as the Company's auditors for the fiscal year
ending December 31, 1996, subject to the approval of and ratification by the
shareholders. Brown, Armstrong, Randall & Reyes, located in Bakersfield,
California, has experience in auditing oil and gas producing companies, and
their appointment is anticipated to result in cost savings to the Company in
connection with the annual audit.
The Company expects one or more representatives of Brown, Armstrong, Randall &
Reyes to attend the annual meeting in order to respond to any appropriate
questions.
The Board of Directors recommends a vote "For" the approval and ratification
of the appointment of Brown, Armstrong, Randall & Reyes.
Vote Required
Approval of the appointment of Brown, Armstrong, Randall & Reyes as the
Company auditors requires the affirmative vote of the holders of a majority of
the shares of the Company's Common Stock present at the Meeting, in person or
by proxy, voting as a single class.
<PAGE>
SECURITY OWNERSHIP OF
BENEFICIAL OWNERS AND MANAGEMENT
The following table lists the beneficial ownership, as of August 1, 1997, of
the Company's common stock with respect to all directors and officers as a
group.
<TABLE>
<CAPTION>
<S><C> <C><C> <C> <C> <C>
Name of Director Number of Shares
or Number of and Nature of Percent
Persons in Group Beneficial Ownership of Class
------------------ -------------------- --------
David G. Davidson 28,000 (1) .33%
Everett L. Hodges 799,478 (1)(2) 9.43%
Morris V. Hodges 97,291 (1)(3) 1.15%
Paul L. Howard 691,000 (1)(4) 8.15%
All directors and officers
as a group, including the
persons named above
(4 Persons) 1,615,769 19.06%
</TABLE>
__________________________
(1) Messrs. David G. Davidson, Everett L. Hodges, Morris V. Hodges
and Paul L. Howard were each granted 25,000 shares of the Company's common
stock under the Directors Stock Compensation Plan in 1994 in lieu of cash
directors fees for the period from May 1, 1992 to June 1, 1994. See "EXECUTIVE
COMPENSATION - Stock Option Plans."
(2) The 799,478 shares beneficially held by Everett L. Hodges include
587,896 shares held of record jointly in the Everett L. Hodges and Mary M.
Hodges Trust. This amount also includes 63,400 shares held directly by
Everett L. Hodges; 83,182 shares held of record by Energy Production & Sales
Co., Inc. ("EPS"), and 65,000 shares held by California Oil Independents, Inc.
See "EXECUTIVE COMPENSATION -Stock Option Plans."
(3) The 97,291 shares beneficially held by Morris V. Hodges include
14,109 shares held jointly in a family trust by Morris V. and Kathryn M.
Hodges, and 83,182 shares held in the name of Sunset Pipeline and
Terminalling, Inc. See "EXECUTIVE COMPENSATION - Stock Option Plans."
(4) The 691,000 shares beneficially held by Paul L. Howard are held
in the name of the Howard Family Trust. See "EXECUTIVE COMPENSATION - -Stock
Option Plans."
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
During the last fiscal year, the Company has been involved in various related
party transactions with certain Directors of the Company, or entities
controlled or affiliated with such individuals. The following table sets
forth the relationships, through ownership of securities, between
Petrominerals and the following individuals and entities involved in related
party transactions during the last fiscal year:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Name Beneficial Owner Percentage Owned
---------------------- ------------------ ----------------
1. Petrominerals 81-1, a General Partner:
Limited Partnership Petrominerals 6.78%
("Partnership") Limited Partners:
EPS 33.00%
Morris V. Hodges 2.26%
Paul L. Howard 2.26%
Unrelated Parties 57.40%
</TABLE>
The Petrominerals 81-1 Limited Partnership was formed in 1981 for the purpose
of drilling one development well on the Company's McGillivrae lease, located
on the Hasley Canyon field, Santa Clarita Valley, Los Angeles County,
California, and two development wells on the Field Fee lease, located on the
Cat Canyon field, Santa Barbara County, California. The Limited Partners were
granted options to participate in the drilling of one additional well on the
McGillivrae lease and two additional wells on the Field Fee lease. During
1996, Petrominerals did not receive any income from the Partnership operations
and realized $2,006 in overriding royalty interests. Petrominerals also
received operations and equipment lease fees which totaled $3,600 during 1996.
The Partnership contributed the funds for the intangible costs of drilling the
wells. Until the Partnership receives 110% of its investment in all ventures
("payout"), the Partnership will receive 176% and 110% of the revenues
attributable to the working interest in the first and second McGillivrae
wells, respectively, and Petrominerals, as General Partner, receives a five
percent (5%) overriding royalty on the McGillivrae lease. Petrominerals'
overriding royalty terminates after payout, at which time Petrominerals will
receive 65% of the net revenues attributable to the working interest, and the
Partnership will receive the remaining 35% of the net revenues attributable to
the working interest. The Partnership does not anticipate that production
will result in sufficient distributions to reach payout.
<PAGE>
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C>
Name Beneficial Owner Percentage Owned
- ---------------------- ----------------- ----------------
2. Terra-Therme II Petrominerals 19.125%
(Formerly the Newberry Paul L. Howard 9.563%
Partnership), a general Unrelated Parties 71.312%
partnership
</TABLE>
Terra-Therme II, a general partnership, was formed in November 1982, for the
purpose of acquiring and owning interests in geothermal leases located in the
Newberry Crater area of the Deschutes National Forest in Central Oregon. In
addition to their interests in Terra-Therme II, the Company and Paul L.
Howard, individually, held interests in lease options to acquire approximately
17,000 acres and 15,000 acres, respectively, of geothermal leases in the
Newberry Crater area.
In June 1991, Vulcan Power Company ("Vulcan") purchased certain rights in the
Newberry Crater geothermal leases formerly held by another party. Vulcan
formed a new joint venture partnership entity known as Vulcan Pacific, in
which Vulcan acts as operator of the interests it acquired.
The Terra-Therme II Partnership retains a 1% net profits interest in certain
of the properties in the Newberry site. In addition, the Terra--Therme
Partnership retains a 0.6% overriding royalty interest on certain remaining
properties it acquired from Vulcan. The Company retains a 19.125% interest
and Mr. Howard retains a 9.563% interest in the Terra--Therme II Partnership.
In the first half of 1997, the Terra-Therme II Partnership filed for
protection under Chapter 11 of the United States Bankruptcy Code.
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C>
Name Beneficial Owner Percentage Owned
---------------------- ------------------ -----------------
3. Petrominerals 96-1, a General Partner:
Limited Partnership Petrominerals 1.00%
("Partnership") Limited Partners:
Paul L. Howard 23.21%
Kaymore Petroleum
Products, Inc. 17.86%
David G. Davidson 17.86%
Unrelated Parties 40.07%
</TABLE>
Kaymore Petroleum Products, Inc. is controlled by Morris V. Hodges.
<PAGE>
The Petrominerals 96-1 Limited Partnership was formed in 1996 for the purpose
of participating in the drilling and operation of one well on Petromineral's
Mabel Strawn lease, located on the Hasley Canyon field, Santa Clarita Valley,
Los Angeles County, California, pursuant to a Joint Venture Agreement with
Petrominerals.
Petrominerals, as General Partner, has contributed $2,800 to the Partnership,
which represents approximately one percent (1%) of the aggregate contributions
to the Partnership's capital, and the limited partners have contributed
$277,200 to the Partnership. Petrominerals will receive or be charged its
proportionate share of each item of the Partnership's income, gain, expense,
deduction, loss or credit; provided, however, that Petrominerals bears 100% of
the losses incurred by the Partnership after the losses exceed the capital
contributions of the limited partners.
Pursuant to the Joint Venture Agreement, Petrominerals assigned to the Joint
Venture one drill site on the Mabel Strawn Lease, located on the Hasley Canyon
field, Santa Clarita Valley, and contributed the use of metering and treatment
equipment, its pipelines and shipping facilities and access to the other
existing facilities.
The Partnership contributed the sum of $280,000.00 for the intangible costs of
drilling. Until the Partnership receives 125% of the funds it contributed to
the Joint Venture ("payout"), the Partnership will receive 90% of the net
working interest in the wells designated by Petrominerals to be drilled and
Petrominerals will receive 10% of the net working interest. After payout, the
Partnership will receive 30% of the working interest and Petrominerals will
receive 70% of the working interest.
The payment of the $280,000 is to pay 100% of the intangible costs of drilling
the well. Thereafter, operation will be conducted by Petrominerals for $1,000
per well per month pursuant to an Operating Agreement between Petrominerals
and the Partnership. Production commenced in January, 1997. Distributions
through April, 1997, have been approximately $38,004 to the limited partners
of the Partnership and approximately $5,631 to Petrominerals. In addition,
Petrominerals has received approximately $9,600 in equipment rentals.
Other than the transactions described above, no executive officer,
director, stockholder known to the Company to own, beneficially or of record,
more than 5% of the Company's Common Stock, or any member of the immediate
family of any of those persons has engaged since the beginning of the
Company's last fiscal year or proposes to engage in the future, in any
transaction or series of similar transactions with the Company, directly or
indirectly through a separate entity, in which the amount involved exceeded or
will exceed $60,000.
<PAGE>
Certain Business Relationships
Other than as described above, no business relationship between the
Company and any business or professional entity for which a director of the
Company has served during the last fiscal year or currently serves as an
executive officer, or in which a director of the Company has owned during the
last fiscal year or currently owns a beneficial interest or of record 10% of
the Company's common stock, has existed since the beginning of the Company's
fiscal year or currently exists. In addition, the Company did not owe at the
end of its last full fiscal year any business or professional entity for which
a director of the Company served during the last fiscal year or currently
serves as an executive officer, or in which a director of the Company served
during the last fiscal year or currently owns beneficially or of record a 10%
interest, or an aggregate amount in excess of 5% of the Company's total assets
at the end of its last fiscal year. No director of the Company has served
during the last fiscal year or currently serves as a partner or executive
officer of any investment banking firm that performed services for the Company
during the last fiscal year, or that the Company proposes to have perform
services during the current year. The Company knows of no other relationship
between any director and the Company substantially similar in nature and scope
to those described above.
Indebtedness of Management
During the Company's last fiscal year, no executive officer, director, any
member of the immediate family or any of those persons, any corporation or
organization for which any of those persons serve as an executive officer or
partner or which they own directly or indirectly 10% or more of its equity
securities, or any trust or other estate in which any of the Company's
executive officers or directors have a substantial beneficial interest or for
which they serve as a trustee or in a similar capacity, has owed the Company
at any time since the beginning of its last fiscal year more than $60,000.
SECTION 16 COMPLIANCE
Based upon a review of the original and amended Forms 3 and 4 furnished to the
Company during its last fiscal year and the original and amended Forms 5
furnished to the Company with regard to its last fiscal year, the Company does
not know of any person who failed to file on a timely basis any reports
required by Section 16(a) of the Securities Exchange Act of 1934, as
amended.
<PAGE>
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
From time to time the shareholders of the Company submit proposals which they
believe should be voted upon by the shareholders. The Securities and Exchange
Commission has adopted regulations which govern the inclusion of such
proposals in the Company's annual proxy materials. All such proposals must be
submitted to the Corporate Secretary not later than April 24, 1998, in order
to be considered for inclusion in the Company's 1998 proxy materials.
OTHER BUSINESS
The Company does not intend to present any other business for action at the
Annual Meeting and does not know of any other business intended to be
presented by others. Should any other matters come before the meeting, the
Proxies will be voted by the persons authorized therein, or their substitutes,
in accordance with their best judgment on such matters.
ANNUAL REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996, as filed with the Securities and Exchange Commission, is being
mailed concurrently with the mailing of this Proxy Statement to shareholders
of record on or about August 22, 1997. The cost of furnishing such Annual
Report on Form 10-K and of making this proxy solicitation will be borne by the
Company. Copies of exhibits to the Annual Report on Form 10-K are available,
but a reasonable handling fee will be charged to the requesting shareholder.
Each written request must set forth a good faith representation that, as of
the record date, the person making the request is a beneficial owner of the
Company's Common Stock and entitled to vote at the Annual Meeting.
Shareholders should direct their written request to the Company, Attention:
Corporate Secretary, 915 Westminster, Alhambra, California 91803.
BY ORDER OF THE BOARD OF DIRECTORS
_____________________________________
Phillip Mungiovino, Secretary
Dated: August 22, 1997
