PETROMINERALS CORPORATION
915 WESTMINSTER
ALHAMBRA, CALIFORNIA 91803
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 9, 1998
To the Shareholders of
Petrominerals Corporation:
A Special Meeting of Shareholders of Petrominerals Corporation will be held at
the Hilton Hotel, 150 South Los Robles, Pasadena, California 91101 on Monday,
January 9, 1998 at 10:30 A.M. for the purpose of considering and acting upon
the following matters:
(1) to approve a one-for-eight reverse split of all issued and
outstanding shares of Common Stock; and
(2) to approve the amendment of the Company's Certificate of
Incorporation to effect a change in the par value of the Company's common
stock from $.10 per share to $.80 per share; and
(3) To transact such other business as may properly come before the
meeting or any adjournment of the meeting.
The Board of Directors has fixed the date of December 8, 1997 as the Record
Date for the Special Meeting, and only shareholders of record at the close of
business on that date are entitled to notice of and to vote at the Special
Meeting or any adjournment or postponement thereof.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING IN
PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO
COMPLETE, SIGN, AND DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE, IF MAILED WITHIN THE UNITED
STATES. YOUR PROXY WILL NOT BE USED IF YOU ARE PRESENT AT THE ANNUAL MEETING
AND DESIRE TO VOTE YOUR SHARES PERSONALLY.
BY ORDER OF THE BOARD OF DIRECTORS
Phillip Mungiovino, Secretary
December 10, 1997
Alhambra, California
<PAGE>
PETROMINERALS CORPORATION
915 WESTMINSTER
ALHAMBRA, CALIFORNIA 91803
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 9, 1998
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 a Special Meeting
of Shareholders of the Company to be held on Friday, January 9, 1998 at 10:30
A.M. at the Hilton Hotel, 150 South Los Robles, Pasadena, California, and at
any adjournment or postponement thereof (the "Special Meeting"), for the
purposes set forth in this Proxy Statement and the accompanying Notice of
Special Meeting. This Proxy Statement and accompanying Proxy are being mailed
to shareholders of the Company on or about December 10, 1997.
SHAREHOLDERS ARE URGED, WHETHER OR NOT THEY EXPECT TO ATTEND THE SPECIAL
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 Special Meeting
will not in and of itself constitute the revocation of a Proxy.
The Special Meeting is being held for the purpose of considering and acting
upon a proposal which would (I) effect a one-for-eight reverse split (the
"Reverse Split") of all issued and outstanding shares of Common Stock, and
(ii) amend the Company's Certificate of Incorporation to change the par value
of the Common Stock from $.10 per share to $.80 per share.
Unless otherwise directed in the accompanying Proxy, the proxy holders will
vote FOR the approval of the foregoing amendment of the Certificate of
Incorporation and the Reverse Split. As to any other business which may
properly come before the Special Meeting, the proxy holders 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 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 December 8, 1997, the Record Date for the determination of shareholders
entitled to notice of and to vote at the Special 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. The shares represented by proxies to management will be voted in the
discretion of management to approve the proposal presented to the
shareholders.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth the specified information, as of November 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>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS
<S> <C> <C>
Everett L. Hodges 799,478 (1) 9.43%
3811 Via Del Campo
San Clemente, CA 92673
Morris V. Hodges 97,291 (2) 1.15%
27241 Burbank
Foothill Ranch, CA 92610
Paul L. Howard 691,000 (3) 8.15%
2255 Huntley Circle
San Marino, CA 91108
<PAGE>
</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.
<PAGE>
(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.
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
The following table sets forth the name, principal occupation, age and the
year in which the individual first became a director for each director of the
Company, together with all positions and offices with the Company held by each
such person and term or period during which each has served.
<TABLE>
<CAPTION>
SERVED AS A
NAME AND PRINCIPAL OCCUPATION AGE DIRECTOR SINCE
- ------------------------------ --- --------------
<S> <C> <C>
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>
(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."
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>
YEAR NAMED TO
NAME POSITION WITH COMPANY PRESENT POSITION
<S> <C> <C>
President & Chief Executive Officer;
Paul L. Howard (1) Chief Financial Officer 1995
Phil 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.
<PAGE>
(1) Mr. Howard was appointed to serve as Chairman, President and
Chief Executive Officer, and Chief Financial Officer on March 24, 1995.
(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.
PROPOSAL 1
RECAPITALIZATION
GENERAL
The Board of Directors of the Company has adopted resolutions approving and
recommending to the shareholders of the Company for their approval the
following:
(I) To effect a one-for-eight reverse split of all issued and
outstanding shares of Common Stock (the "Reverse Split"); and
(ii) To change the par value of the Common Stock from $.10 per share
to $.80 per share.
If the Recapitalization is approved by the requisite vote of the Company's
shareholders, it will become effective at the time (the "Effective Date") of
the filing of the Amendment with the Delaware Secretary of State (the "SOS").
At and after the Effective Date, each share of the Company's $.10 par value
Common Stock issued and outstanding immediately prior to the Effective Date
will be reclassified and change into one-eighth (1/8) of one (1) share of the
Common Stock, $.80 par value (shares of Common Stock issued and outstanding
prior to the Effective Date being hereinafter called "Old Shares" and shares
of Common Stock issued and outstanding at and after the effective Date being
hereinafter called "New Shares"); provided, however, that, with respect to
each holder of Old Shares such reclassification will be effected on the basis
of the total number of Old Shares held by such shareholder and, if such
reclassification would result in any holder of Old Shares becoming the holder
of a fractional share interest in a New Share, the number of New shares into
which such holder's Old Shares are reclassified will be rounded upward to the
nearest whole share. For example, the holder of 120 Old Shares prior to the
Effective Date would be holder of 15 New Shares at the Effective Date and the
holder of 125 Old Shares prior to the Effective Date would be holder of 16 New
Shares at the Effective Date.
<PAGE>
Each holder of certificates representing Old Shares will be entitled, upon
surrender of such certificates to the Company or any transfer or exchange
agent for cancellation, to receive a new certificate or certificates
representing the number of fully paid and nonassessable New Shares into which
such Old Shares have been reclassified and changed. Until so presented and
surrendered, certificates for Old Shares will be deemed for all purposes to
evidence the ownership of a number of New Shares into which such Old Shares
have been reclassified.
After the Effective Date, shareholders will be asked to surrender all
certificates representing Old Shares in accordance with the procedures set
forth in a letter of transmittal to be sent by the Company. Upon such
surrender, certificates representing the appropriate number of New Shares will
not be issued to a shareholder until such shareholder has surrendered his
certificates together with the properly completed and executed letter of
transmittal to the Company. Shareholders should not submit their certificates
until requested to do so.
Each shareholders' percentage ownership interest in the Company and
proportional voting power will remain substantially unchanged after the
Effective Date, except for minor differences resulting from adjustments for
fractional interests. The rights and privileges of the shareholders will be
materially unaffected by the Recapitalization.
REASONS FOR THE RECAPITALIZATION
AUTHORIZED SHARE REDUCTION: THE "REVERSE SPLIT"
The Board of Directors has approved the amendment of Article Fourth of the
Certificate of Incorporation, which, if approved by the shareholders, will be
filed with the Delaware Secretary of State. The Amendment changes the par
value of the Company's common Stock from $0.10 per share to $0.80 per share,
to compensate for the one-for-eight Reverse Split, and provides for the
Reverse Split of all issued and outstanding shares at the ratio of one New
Share for every eight Old Shares, as discussed above. At the Effective Date
the number of issued and outstanding shares of Common Stock will be reduced
from 8,475,336 Old Shares to approximately 1,059,417 New Shares.
The Board believes that the Reverse Split should increase the marketability
and liquidity of the Common Stock. The Common Stock is listed for trading on
the NASD Small Cap Market under the symbol "PTRO". As of November 20, 1997,
the Common Stock was traded at $0.406 per share on the NASD Small Cap Market.
If this trading price continues, the Company's stock will be downgraded from
the Small Cap Market to the NASD Over-the-Counter Electronic Bulletin Board,
with a consequent reduction in the ease in which the Company's shares may
trade in the market. In order to retain its position on the NASD Small Cap
Market, the Company's shares must be trading at $1.00 or more per share by
February 23, 1998. The Board believes that a decrease in the number of shares
of Common Stock outstanding without any material alteration of the
proportionate economic interest in the Company represented by individual
shareholders will increase the trading price of such shares to a price more
appropriate for an exchange-listed security, in excess of $2.00 per share, and
will thus preserve the Company's position on the Small Cap Market. However,
no assurance can be given that the market price of the Common Stock will rise
in proportion to the reduction in the number of outstanding shares resulting
from the Reverse Split.
<PAGE>
The Board further believes that the current per share price of the Common
Stock may limit the effective marketability of the Common Stock because of the
reluctance of many brokerage firms and institutional investors to deal in or
follow lower-priced stock. Certain policies and practices of the securities
industry may tend to discourage individual brokers within those firms from
dealing in lower priced stock. Some of those policies and practices involve
time-consuming procedures that make the handing of lower-priced stock
economically unattractive. The brokerage commission on a sale of lower-priced
stock may also represent a higher percentage of the sale price than the
brokerage commission on a higher-priced issue. Any reduction in brokerage
commissions resulting from the Reverse Split may be offset, however, in whole
or in part, by increased brokerage commissions required to be paid by
shareholders selling "odd lots" created by the Reverse Split.
The text of the Resolutions adopted by the Board of Directors, amending
Article Fourth of the Certificate of Incorporation and proposing the Reverse
Split to effect the Recapitalization, is set forth in Exhibit A to this Proxy
Statement.
The Board has concluded that the reduction in the number of issued and
outstanding shares of Common Stock resulting from the Authorized Share
Reduction should not result in a decrease in the number of shares of Common
Stock authorized for issuance by the Corporation, and the Reverse Split shall
not effect the number of shares which the Company is authorized to issue. The
Board of Directors believes that the increased ratio of authorized shares to
issued and outstanding shares resulting from the Recapitalization will provide
additional flexibility for the Company to issue additional shares of Common
Stock, as the need may arise, for purposes of, among other things, raising
additional capital for working capital, potential acquisitions, or mergers,
and for other corporate purposes.
The Board of Directors considers it to be in the best interests of the Company
to have, after the Effective Date, shares of Common Stock of the Company
authorized and available for issuance without further action by the
shareholders, unless such shareholder action is required by applicable law or
the rules of any national securities exchange on which the Company's
securities may be listed.
If the Recapitalization is approved, shareholders will have no preemptive
rights with respect to the additional shares of Common Stock which become
available as a result of the Reverse Split. Such shares will be issued on
such terms, at such time and on such conditions as the Board of Directors may
determine without further action by the shareholders. The Board of Directors
has neither entered into any negotiations, agreements, or understandings, nor
made any other determinations, with respect to the issuance of any shares of
such Common Stock.
NO DISSENTERS RIGHTS
Shareholders have no right under Delaware law or under the Certificate of
Incorporation or Bylaws to dissent from the Recapitalization or to dissent
from the rounding up of any fractional interest in New Shares to the nearest
whole New Share as a result of the Reverse Split.
<PAGE>
CHANGES AFFECTING CAPITAL
The Common Stock will have a par value of $0.80 per share following the
Recapitalization. After the Effective Date, the number of outstanding shares
of Common Stock will be reduced from approximately 8,475,336 shares (assuming
that no additional shares of Common Stock are issued after the record date and
prior to the Effective Date) to approximately 1,059,417 shares, and the number
of authorized shares of Common Stock will be remain at Twenty Million shares.
No change is being made in the par value or authorized number of Preferred
Shares of the Company, which will remain at 2,900,000 shares of $0.10 par
value Preferred Shares. There are currently no issued or outstanding
Preferred Shares.
The Common Stock is currently registered under Section 12(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, as a result, the
Company is subject to the periodic reporting and other requirements of the
Exchange Act. The Recapitalization will not affect the registration of the
Common Stock under the Exchange Act. After the Effective Date, trades of New
Shares will continue to be reported on the NASD Small Cap Market under the
symbol "PTRO".
FEDERAL INCOME TAX CONSEQUENCES OF THE RECAPITALIZATION
The following description of Federal income tax consequences is based upon the
Code, the applicable Treasury Regulations promulgated thereunder, judicial
authority and current administrative rulings and practices as in effect on
the date of this Proxy Statement. This discussion is for general information
only and does not discuss consequences which may apply to special classes of
taxpayers (e.g., non-resident aliens, broker-dealers or insurance companies).
Shareholders are urged to consult their own tax advisors to determine the
particular consequences to them of the Recapitalization.
The Company believes that because the Reverse Split is not part of a plan to
periodically increase a shareholder's proportionate interest in the assets or
earnings and profits of the Company, the Reverse Split will have the following
federal income tax effects:
1. A shareholder will not recognize gain or loss upon the
reclassification of the Common Stock. In the aggregate, a shareholders' basis
in the New Shares will equal such shareholder's basis in the Old Shares.
2. A shareholder's holding period for the New Shares will be the same
as the holding period of the Old Shares.
3. The Reverse Split will constitute a reorganization within the
meaning of Section 368(a)(1)(E) of the Code and the Company will not recognize
any gain or loss as a result of the Reverse Split.
<PAGE>
MISCELLANEOUS
The Board of Directors may abandon the proposed Recapitalization at any time
before or after the Meeting and prior to the Effective Time if for any reason
the Board of Directors deems it advisable to abandon the proposal. The Board
of Directors may consider abandoning the proposed Recapitalization if it
determines, in its sole discretion, that the Recapitalization will adversely
affect the ability of the Company to raise capital or the liquidity of the
Common Stock, among other things. In addition, the Board of Directors may
make any and all changes to the Amendments that it deems necessary in order to
file the Amendments with the CCC and give effect to the Recapitalization
VOTE REQUIRED
Approval of Proposal No. 1 requires the affirmative vote of the holders of a
majority of the shares of the Company's Common Stock present at the Special
Meeting, in person or by proxy, voting as a single class.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL AND ADOPTION OF THE
RECAPITALIZATION PROPOSAL AND URGES EACH SHAREHOLDER TO VOTE "FOR" THE
ADOPTION OF THIS PROPOSAL.
SECURITY OWNERSHIP OF
BENEFICIAL OWNERS AND MANAGEMENT
The following table lists the beneficial ownership, as of November 1, 1997, of
the Company's common stock with respect to all directors and officers as a
group.
<TABLE>
<CAPTION>
NAME OF DIRECTOR OR NUMBER NUMBER OF SHARES AND NATURE
OF PERSONS IN GROUP OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- -------------------------- ---------------------------- -----------------
<S> <C> <C>
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%
</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."
<PAGE>
(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 Terminaling,
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."
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>
NAME BENEFICIAL OWNER PERCENTAGE OWNED
---------------------- ----------------- -----------------
<S> <C> <C> <C>
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 Partie 57.40%
</TABLE>
<PAGE>
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.
<TABLE>
<CAPTION>
NAME BENEFICIAL OWNER PERCENTAGE OWNED
------------------------------------ ----------------- -----------------
<C> <S> <C> <C>
2. Terra-Therme II Petrominerals 19.125%
(Formerly the Newberry Partnership), Paul L. Howard 9.563%
a general partnership Unrelated Parties 71.312%
</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.
<PAGE>
<TABLE>
<CAPTION>
NAME BENEFICIAL OWNER PERCENTAGE OWNED
------------------------------ ----------------- -----------------
<S> <C> <C> <C>
3. Petrominerals 96-1, a Limited General Partner:
Partnership ("Partnership) Petrominerals 1.00%
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.
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.
<PAGE>
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.
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.
OTHER BUSINESS
The Company does not intend to present any other business for action at the
Special 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.
<PAGE>
QUARTERLY REPORT ON FORM 10-QSB
The Company's Quarterly Report on Form 10-QSB for the period ending September
30, 1997, 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 December 10, 1997. The cost of furnishing such Quarterly
Report on Form 10-QSB and of making this proxy solicitation will be borne by
the Company. Copies of exhibits to the Quarterly Report on Form 10-QSB are
available upon request, 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
Special Meeting. Shareholders should direct their written request to the
Company, Attention: Corporate Secretary, 915 Westminster, Alhambra, California
91803.
INCORPORATION BY REFERENCE OF
ANNUAL REPORT ON FORM 10-K
The Company's Annual Report on Form 10-KSB for the year ending December 31,
1996, as filed with the Securities and Exchange Commission, is incorporated
herein by this reference. Copies of the Annual Report are available upon the
written request of any shareholder, at no charge. 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 Special Meeting. Shareholders should direct their
written request to the Company, Attention: Corporate Secretary, 915
Westminster, Alhambra, California 91803. Copies of exhibits to the Annual
Report on Form 10-KSB are also available upon request.
BY ORDER OF THE BOARD OF DIRECTORS
___________________________________
Phillip Mungiovino, Secretary
Dated: December 8, 1997
<PAGE>
EXHIBIT A TO PROXY STATEMENT
RESOLUTIONS ADOPTED AT SPECIAL MEETING
OF BOARD OF DIRECTORS OF
PETROMINERALS CORPORATION
November 20, 1997
I. AMENDMENT AND RESTATEMENT OF CERTIFICATE OF INCORPORATION
AND REVERSE SPLIT OF COMMON STOCK
WHEREAS, the Board of Directors has determined that it is in the best
interests of the Corporation and its Shareholders to effect a one-for-eight
reverse stock split of the Corporation's $0.10 par value common stock, and
thereby to change each presently authorized share of common stock that may be
in the treasury or issued and outstanding immediately prior to such reverse
split into one-eighth of a share of $0.80 par value common stock, having the
same characteristics, so that eight shares of issued and outstanding $0.10 par
value common stock of the Corporation immediately prior to the reverse stock
split shall be converted into one share of $0.80 par value common stock
immediately following the reverse stock split; and
WHEREAS, the Board of Directors desires to obtain shareholder approval of such
action, in accordance with the Bylaws of the Corporation and relevant laws of
the State of Delaware regulating such action;
NOW, THEREFORE, IT IS
RESOLVED, that effective as of the approval of these resolutions by the
shareholders of the Corporation, the first paragraph of Article Fourth of the
Certificate of Incorporation shall be amended to read in its entirety as
follows:
"FOURTH: This Corporation shall have two classes of stock to be called
Common Stock and Preferred Stock. The total number of shares of Common Stock
which this Corporation is authorized to issue is Twenty Million (20,000,000)
and the par value of each share is Eighty Cents ($0.80), amounting in the
aggregate to Forty Million Dollars ($40,000,000). The total number of shares
of Preferred Stock which this Corporation is authorized to issue is Two
Million Nine Hundred Thousand (2,900,000) and the par value of each share is
Ten Cents ($0.10), amounting in the aggregate to Two Hundred Ninety Thousand
Dollars ($290,000)."
<PAGE>
RESOLVED FURTHER, that each presently authorized share of $0.10 par value
common stock that may be in the treasury or outstanding immediately prior to
such amendment and restatement of the Certificate of Incorporation shall be
changed and converted into one-eighth of a share of $0.80 par value common
stock having the same characteristics; and
RESOLVED FURTHER, that the foregoing amendment and restatement of the
Certificate of Incorporation of this Corporation shall not effect any change
in the aggregate amounts of the Corporation's various capital and surplus
accounts; and
RESOLVED FURTHER, that the appropriate officers of the Corporation are
authorized and directed to prepare and execute appropriate certificates of
amendment and to cause such certificates to be filed with the proper state
agency upon approval of such amendment and restatement by the shareholders of
the Corporation so that such amendments will become effective at the time
indicated above.
RESOLVED FURTHER, that if the foregoing amendments are duly approved by the
shareholders, the manner in which the one-for-eight reverse stock split shall
be effected is as follows:
1. Each share of the Corporation's Common Stock, $0.10 par value, issued
and outstanding as of the close of business on January 9, 1997 (the "Old
Shares"), shall thereafter, without any further action being taken, be
reclassified and shall be converted into one-eighth (1/8) of one share of
Common Stock, $0.80 par value (the "New Shares").
2. With respect to each holder of Old Shares, the reclassification and
conversion of such Old Shares shall be effected on the basis of the total
number of Old Shares held by such Holder, and if such reclassification and
conversion would result in any holder of Old Shares becoming the holder of a
fractional share interest in a New Share, then the number of New Shares in
which such holders Old Shares are reclassified and converted shall be rounded
upward to the nearest whole share.
3. Each holder of certificates representing Old Shares shall be entitled,
upon surrender of such certificate to the corporation or any transfer or
exchange agent for cancellation, to receive a new certificate or certificates
representing the number of fully paid and non-assessable New Shares into which
such Old Shares have been reclassified and converted. Until so presented and
surrendered, certificates of Old Shares shall, except as provided in the
following sentence, be deemed for all purposes to evidence the ownership of
the number of New Shares into which such Old Shares have been reclassified and
converted pursuant to this paragraph. The holder of any certificate of any
Old Shares shall not be paid any distribution payable on the Common Stock to
which such holder shall otherwise be entitled until such holder surrenders
such certificate in exchange for a certificate or certificates representing
New Shares.
<PAGE>
RESOLVED FURTHER, that if the foregoing amendments are duly approved by the
shareholders, then, pursuant to Paragraph 19 of the Corporation's 1993
Incentive Stock Option Plan and 1993 Nonstatutory Stock Option Plan, this
board hereby makes the following adjustments to reflect the one-for-eight
stock split:
1. The number of shares subject to each option granted under each such
plan that may be outstanding as of the close of business on January 9, 1998,
shall be divided by eight and the option price per share under each option
shall be multiplied by eight times the price previously set by the Board in
each case;
2. The aggregate number of shares that shall be available for options not
yet granted under each such plan at said time shall be divided by eight and
the maximum limit imposed on the number of shares as to which options may be
granted to any single individual shall likewise be divided by eight.
RESOLVED FURTHER, that the Corporation shall take all necessary action to
notify the National Association of Securities Dealers ("NASDAQ") as to the
one-for-eight reverse stock split (subject to shareholder approval of the
foregoing amendment) for the correction of the listing of the Corporation's
Common Stock and its share price to reflect the results of such reverse split.
RESOLVED FURTHER, that the president, any vice-president, the treasurer, and
the secretary are hereby jointly and severally authorized, in the name and on
behalf of the Corporation:
1. To execute, file, and deliver to NASDAQ any applications and other
documents that they may deem necessary or appropriate;
2. To make any changes in any such listing application or other document
or instrument that they may deem necessary and desirable; and
3. To make any required appearances before any official or group of
officials of NASDAQ.
RESOLVED FURTHER, that if the foregoing amendments are duly approved by the
shareholders, the appointment of ChaseMellon Shareholder Services as transfer
agent for the Corporation's capital stock shall automatically be extended, as
of the time such amendments become effective, to include the reverse stock
split.
<PAGE>
RESOLVED FURTHER, that if the foregoing amendments are duly approved by
shareholders, the proper officers of the Corporation are hereby authorized and
directed, in the name and on behalf of the Corporation, to execute, deliver,
and file all notices, certificates, and other papers, pay all fees, and take
such action as may be required to maintain the Corporation's good standing in
the states and territories of the United States in which the Corporation is
authorized to do business and to comply with the blue-sky or securities laws
of any of the states or territories of the United States that may be
applicable to (1) the solicitation of shareholder proxies authorizing
management to vote in favor of said amendments or (2) the offering for sale,
or the sale or issuance of shares of the Corporation's Common Stock as
contemplated by these amendments.
RESOLVED FURTHER, that the secretary of the Corporation be, and he hereby is,
authorized and directed to call a special meeting of the shareholders of the
Corporation to be held on January 9, 1998, at 10:30 a.m. at the Hilton Hotel,
150 South Los Robles, Pasadena, California 91101.
RESOLVED, that pursuant to Section 213 of the General Corporation Law of the
State of Delaware, the Board of Directors hereby declares that stockholders of
record at the close of business on December 8, 1997, shall be entitled to
notice of and to vote at the special meeting of stockholders to be held
January 9, 1998.
<PAGE>
PETROMINERALS CORPORATION
915 WESTMINSTER
ALHAMBRA, CALIFORNIA 91803
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Paul L. Howard and Phillip Mungiovino as
Proxies, each with power to appoint his substitute, and hereby authorizes them
to represent and to vote as designated below, all the shares of common stock
of Petrominerals Corporation held of record by the undersigned on December 8,
1997, at the Special Meeting of Shareholders to be held on January 9, 1998, or
any adjournment or postponement thereof.
1. APPROVAL OF ONE-FOR-EIGHT REVERSE SPLIT OF ISSUED AND OUTSTANDING
SHARES OF COMMON STOCK, AND CHANGE IN PAR VALUE OF COMMON STOCK FROM $0.10 PER
SHARE TO $0.80 PER SHARE
<PAGE>
<TABLE>
<CAPTION>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<S> <C> <C>
</TABLE>
3. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
OR ANY ADJOURNMENT OF THE MEETING.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSAL, AND IN ACCORDANCE WITH THE BEST JUDGMENT OF THE
PROXIES ON ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
Dated:
Signature
(Signature if held jointly)
Please sign exactly as name appears in type.
When the shares are held by joint tenants,
both should sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full corporate
name by president or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
