[DESCRIPTION]ROYALE ENERGY, INC.
<PAGE> 1
AMENDED SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
ROYALE ENERGY, INC.
(Name of Registrant as Specified in its Charter)
Filed on Behalf of the Board of Directors
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a6(i)(1) and 0-11.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or
the Form or Schedule and the date of its filing.
<PAGE> 2
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
July 3, 1998
TO THE SHAREHOLDERS OF ROYALE ENERGY FUNDS, INC.:
The annual meeting of shareholders of Royale Energy Funds, Inc. (the
"Company"), will be held at the Palmer House Hilton Hotel, 17 Monroe Street,
Chicago, Illinois, beginning at 10:00 a.m. on Friday, July 24, 1998, for the
purposes of:
1. electing seven directors to serve for the ensuing year;
2. ratifying the Board of Directors' selection of Brown Armstrong Randall &
Reyes as the Company's independent public accountants for 1998; and
3. transacting such other business as may properly come before the meeting
and any adjournment thereof.
Shareholders of record at the close of business on June 15, 1998, and valid
proxy holders may attend and vote at the meeting. If your shares are
registered in the name of a brokerage firm or trustee and you plan to attend
the meeting, please obtain from the firm or trustee a letter or other
evidence of your beneficial ownership of those shares to facilitate your
admittance to the meeting.
By Order of the Board of Directors,
Donald H. Hosmer
President and Secretary<PAGE>
<PAGE> 3
PROXY STATEMENT
Your proxy, using the enclosed form, is solicited by the Company's board of
directors for use at the annual meeting of shareholders to be held July 24,
1998, and at any adjournment thereof.
The only items of business which management intends to present at the meeting
are listed in the preceding Notice of Annual Meeting of Shareholders and are
explained in more detail on the following pages. By returning your signed
proxy, you authorize management to vote your shares as you indicate on these
items of business and to vote your shares in accordance with management's
best judgment in response to proposals initiated by others at the meeting.
You may revoke your signed proxy at any time before it is exercised at the
annual meeting. You may do this by advising the Company's Secretary in
writing of your desire to revoke your proxy, or by submitting a duly executed
proxy bearing a later date. You may also revoke your proxy by attending the
annual meeting and indicating that you wish to vote in person.
Each shareholder of record at the close of business on June 15, 1998, is
entitled, for each share then held, to one vote on each proposal or item that
comes before the annual meeting, except that under certain circumstances
shareholders may be entitled to cumulate their votes in voting for directors.
See, Election of Directors. On June 1, 1998, the Company had outstanding
3,842,050 shares of Common Stock, 9,375 shares of Series A Convertible
Preferred Stock, and 24,000 shares of Series AA Convertible Preferred Stock
entitled to vote at the meeting.
If you mark "Abstain" with respect to any proposal on your proxy, your shares
will be counted in the number of votes cast, but will not be counted as votes
for or against the proposal. If a broker or other nominee holding shares for
a beneficial owner does not vote on a proposal, the shares will not be
counted in the number of votes cast.
This proxy statement and the accompanying proxy form were first mailed on or
about July 3, 1998, to shareholders entitled to vote at the meeting.
ITEMS OF BUSINESS
1. ELECTION OF DIRECTORS
Seven directors will be elected to serve on the Company's board of directors
until the next annual meeting of shareholders or until their successors shall
be elected and qualified. Six of the seven currently serving directors have
be nominated for reelection to the board.
In the election of directors, no shareholder shall be entitled to cumulate
votes (i.e., cast for any one or more candidates a number of votes greater
than the number of shares) unless a shareholder has given notice of the
intention to cumulate votes prior to the commencement of voting. If any
<PAGE> 4
shareholder has given notice of the intent to cumulate votes, then each
shareholder has the right to give one candidate a number of votes equal to
the number of directors to be elected multiplied by the number of shares held
by the shareholder, or distributing such number of votes among as many
candidates as the shareholder sees fit.
Directors are elected from those nominated based on a plurality of votes
cast. Unless authority to vote is withheld or another contrary instruction
is indicated, signed proxies received will be voted for the election of the
listed nominees, all of whom have agreed to serve is elected. Should any of
the nominees become unavailable at the time of the meeting to accept
nomination or election as a director, the proxy holders named in the enclosed
proxy will vote for substitute nominees at their discretion.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
FOLLOWING SEVEN NOMINEES FOR DIRECTOR. Proxies solicited by the board of
directors will be voted in favor of each nominee unless shareholders specify
otherwise in their proxies. The following pages describe the nominees for
director, including their principal occupations for the past five years,
certain other directorships, age, and length of service as director of the
Company. Membership on board committees, attendance at board and committee
meetings, and ownership of stock in the Company are indicated in separate
sections following the individual resumes of the nominees.
<TABLE>
<CAPTION>
NOMINEES FOR DIRECTOR
Name Age First Became Positions Held
Director or
Executive
Officer
<S> <C> <C> <C>
Harry E. Hosmer(1) 66 1987 Chairman of the Board.
Donald H. Hosmer 41 1987 President, Secretary
and Director.
Chairman of the Board
and Director of Royale
Petroleum Corporation
(RPC).
Stephen M. Hosmer 30 1991 Chief Financial
Officer and Director.
Secretary and
Director of RPC.
Oscar Hildebrandt 63 1995 Director
Rodney Nahama 65 1994 Director
George M. Watters 78 1991 Director
(1) (2)
Gilbert C.L. Kemp 65 Nominee None
</TABLE>
<PAGE> 5
(1) Member of the audit committee of the board of directors.
(2) Member of the compensation committee of the board of directors.
The following summarizes the business experience of each director and
executive officer for the past five years.
HARRY E. HOSMER is the Chairman of the Board of the Company. He has served
as Chairman since the Company began operations in 1987, and from inception in
1987 until June 1995, he also served as President and Chief Executive
Officer. In October 1985, Mr. Hosmer and three of his sons founded Royale
Petroleum Corporation, an affiliate of the Company.
DONALD H. HOSMER is President, Chief Executive Officer, Secretary, and
Director of the Company. He has served as an executive officer and Director
of the Company since its inception in 1987, and in June 1995 he became
President and Chief Executive Officer. Prior to becoming President, he was
Executive Vice President, responsible for marketing working interests in oil
and gas projects developed by the Company. He was also responsible for
investor relations and communications. Donald H. Hosmer is the son of Harry
E. Hosmer and brother of Stephen M. Hosmer.
STEPHEN M. HOSMER is Chief Financial Officer and Director of the Company.
Mr. Hosmer joined the Company as the Management Information Systems Manager
in May 1988, responsible for developing and maintaining the Company's
computer software. Mr. Hosmer developed programs and software systems used
by the Company. Mr. Hosmer graduated from Oral Roberts University in Tulsa,
Oklahoma, in May 1988 with a Bachelor of Science in Business Administration.
He is a member of the Natural Gas Producers Committee of the California
Independent Petroleum Association. Stephen M. Hosmer is the son of Harry E.
Hosmer and brother of Donald H. Hosmer.
OSCAR HILDEBRANDT, D.V.M., is a Director and is Chairman of the Company's
Compensation Committee. From 1994 to 1995 he served as an advisory member of
the Company's Board of Directors. Dr. Hildebrandt practiced veterinary
medicine as President of Medford Veterinary Clinic, Medford, Wisconsin, from
1960 to 1990. Since 1990, Dr. Hildebrandt has engaged independently in
veterinary practice consulting services. He has served on the board of
directors of Fidelity National Bank - Medford, Wisconsin, and its predecessor
bank from 1965 to the present and is past chairman of the board of the Bank.
From 1990 to the present he has acted as a financial advisor engaged in
private business interests. Dr. Hildebrandt received a Bachelor of Science
degree from the University of Wisconsin in 1954 and a Doctor of Veterinary
Medicine degree from the University of Minnesota in 1958.
RODNEY NAHAMA, a Director of the Company, was employed as president and chief
executive officer of Nahama & Weagant Energy Co. from 1971 until March 1994.
Since March 1994, Mr. Nahama has pursued private business interests,
including the provision of geologic consulting
<PAGE> 6
services to the Company. Mr. Nahama holds a B.A. degree in geology from the
University of California, Los Angeles, and an M.A. degree in geology from the
University of Southern California. He was an independent exploration
geologist from 1965 to 1971 and prior to that served as a geologist with
Franco Western Oil Company from 1963 to 1965. Between 1957 and 1963, Mr.
Nahama worked as an exploration geologist with Honolulu Oil Company, Getty
Oil Company, and Sunray Oil Company. Mr. Nahama is a member of the American
Association of Petroleum Geologists, the San Joaquin Geological Society, the
California Independent Petroleum Association and the Independent Petroleum
Association of America.
GEORGE M. WATTERS has been retired from full time employment during the last
five years. Mr. Watters retired from AMOCO Corporation in 1983 after serving
for 24 years in senior management positions with AMOCO Corporation and its
affiliates. From 1987 to the present Mr. Watters has managed his personal
investments. Mr. Watters received his Bachelor of Science degree from
Massachusetts Institute of Technology in 1942.
GILBERT C. L. KEMP currently manages the California operations of Western
Atlas, Inc., a New York Stock Exchange company. Mr. Kemp was a founding
member of 3D Geophysical, Inc., where he served as Vice President from 1996
until March 1998. In March 1998 3-D Geophysical, whose stock had been listed
on the Nasdaq National Market System since February 1996, merged with Western
Atlas, Inc. During the years 1987 to 1995, Mr. Kemp served as President and
CEO of Kemp Geophysical Corporation, which owned and operated seismic crews
in the United States and Canada.
INFORMATION REGARDING THE BOARD OF DIRECTORS
ATTENDANCE AT BOARD MEETINGS
Six meetings of the board of directors were held in 1997. No director
attended less than 75% of the board meetings held in 1997.
AUDIT COMMITTEE
The board of directors is responsible for the overall affairs of the Company.
For 1997, the board also appointed an audit committee, consisting of
directors Harry E. Hosmer, Henry C. Thorne and George M. Watters, to assist
it in carrying out its responsibility as to the independence and competence
of the Company's independent public accountants. The audit committee held
one meeting in 1997. No director attended less than 75% of the committee
meetings held in 1997.
Compensation Committee
The compensation committee is made up of three members of the board of
directors, Henry C. Thorne, George M. Watters, and Oscar A. Hildebrandt.
None of the committee members are
<PAGE> 7
officers or employees of the Company, nor officers or employees of any other
corporation on whose board of directors any Company officers serves as a
member. The compensation committee reviews and makes recommendations to the
board of directors on setting the salaries of the board's officers and the
compensation to be paid to members of the board of directors who are not
employees of the Company. The compensation committee held one meeting during
1997. No director attended less than 75% of the committee meetings held in
1997.
COMPENSATION OF DIRECTORS
The Company compensates non-employee directors for their service on the board
of directors. No directors received any stock options or stock appreciation
rights in 1997. The following table sets forth information regarding the
cash compensation paid to directors, other than Named Officers, in 1997.
<TABLE>
<CAPTION>
(a) (b)
Name Annual Retainer Fees
<S> <C>
Oscar Hildebrandt $6,800
Rodney Nahama $6,800
Henry C. Thorne $6,800
George M. Watters $6,800
</TABLE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation of the chairman of the board
and the president of the Company and its subsidiaries, Harry E. Hosmer and
Donald H. Hosmer (the "Named Officers"), for the fiscal years ended December
31, 1997, 1996, and 1995.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- Awards
(a) (b) (c) (d) (e)
Name Period Salary Compensation Underlying
Covered Options
- ----- -------------- ------- ------------- ----------
<S> <S> <C> <C> <C>
Donald H. FYE 12/31/97 $103,974 $356
Hosmer, CEO FYE 12/31/96 $100,000 $703 -
FYE 12/31/95 $100,000 $785 30,000
Harry E.
Hosmer, FYE 12/31/97 $110,000 $299
<PAGE> 8
Long Term
Annual Compensation Compensation
------------------- Awards
(a) (b) (c) (d) (e)
Name Period Salary Compensation Underlying
Covered Options
- ----- -------------- ------- ------------- ----------
<S> <S> <C> <C> <C>
Chairman FYE 12/31/96 $122,444 $882 -
FYE 12/31/95 $110,000 $1,295 30,000
</TABLE>
* Under the terms of a plan adopted by the board of directors in 1989,
Harry E. and Donald H. Hosmer have elected to participate in wells
drilled by the Company. See, Certain Relationships and Related
Transactions. The costs incurred by Messrs. Harry and Donald Hosmer for
interests acquired in wells pursuant to this policy are less than would
have been the cost of purchasing an equivalent percentage as working
interests in these wells which are sold to unaffiliated outside
investors. The difference between the Hosmers' actual cost and the cost
incurred by outside investors could be considered as additional
compensation to them. However, the Company's management does not
believe that the amount of such difference is significant. In addition,
prior to June 1995, the Company advanced funds to Harry and Donald
Hosmer to pay for their well participation interests. To the extent
that the advances amount to interest free loans, Harry and Donald Hosmer
could also be considered to have received additional compensation. The
Other Compensation in the foregoing table consists of the amounts which
the Company's management believe may be considered income to be imputed
from such foregone interest. The imputed interest was estimated using
approximate amounts due at the end of each period, as if that amount had
been due for the entire period. The imputed interest rate used by the
Company is currently 7.5% simple interest per annum. In June 1995, the
Company's policy regarding advancement of funds was changed. The
Current policy requires that all such purchases of interests in wells
must be paid in cash prior to the drilling of the well.
In 1997, the Company did not maintain a retirement plan or "Section 401(k)"
compensation plan on behalf of its employees.
STOCK OPTIONS GRANTED IN 1997
No stock options were granted to officers, directors, or employees during
1997.
AGGREGATED 1996 OPTION EXERCISES AND YEAR-END VALUES
Neither of the Named Officers exercised any stock options or stock
appreciation rights in 1997,
<PAGE> 9
1996, or 1995. The following table summarizes the number and value of all
unexercised stock options held by the Named Officers at the end of 1997.
<TABLE>
<CAPTION>
(a) (b) (c)
Number of Securities Value of Unexercised In-
Underlying Unexercised the-Money Options/SARs at
Options/SARs at FY-End (#) FY-End ($) 1
Name Exercisable/Unexercisable Exercisable/Unexercisable
- -----------------------------------------------------------------------------
<S> <C> <C>
Harry E. Hosmer 45,000/0 $182,700/0
Donald H. Hosmer 45,000/0 $182,700/0
</TABLE>
1 Based on a fair market value of $4.06 per share, which was the closing
bid price of the Company's Common Stock in the Nasdaq National Market
System on December 31, 1997.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the ownership of
the Company's voting securities as of December 31, 1997, by: (i) each person
who is known by the Company to own beneficially more than 5% of the
outstanding shares of each class of equity securities, (ii) each director of
the Company, and (iii) all directors and officers of the Company as a group.
Except pursuant to applicable community property laws and except as otherwise
indicated, each shareholder identified in the table possesses sole voting and
investment power with respect to its or his shares.
COMMON STOCK
On December 31, 1997, 3,864,300 shares of the Company's Common Stock were
outstanding.
<TABLE>
<CAPTION>
Shares Owned (1)
----------------
Shareholder (2) Number Percent
--------------- ------ -------
<S> <C> <C>
Royale Petroleum Corporation 1,279,243 (3), (4) 31.24%
Donald H. Hosmer 1,325,243 (3), (4) 32.42%
Harry E. Hosmer 45,000 (4) 1.15%
Oscar A. Hildebrandt 62,422 (5) 1.61%
Stephen M. Hosmer 1,310,793 (3), (4) 32.04%
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
Shares Owned (1)
----------------
Shareholder (2) Number Percent
--------------- ------ -------
<S> <C> <C>
Owen LeTissier
St. Peter Port
Guernsey, Channel Islands 400,000 (6) 10.35%
Rodney Nahama 14,000 0.36%
Henry C. Thorne 33,472 0.86%
George M. Watters 77,500 (7) 1.99%
All directors and officers as a group
(7 persons) 1,588,887 (3) 36.87%
</TABLE>
(1) Includes shares which the listed shareholder has the right to acquire
before March 1,1998, from options or warrants, as follows: Royale
Petroleum Corporation 230,555, Donald H. Hosmer 45,000, Harry E. Hosmer
45,000, Stephen M. Hosmer 30,000, Oscar Hildebrandt 20,000, Rodney
Nahama 14,000, Henry C. Thorne 30,000, George M. Watters 30,000, and all
officers and directors as a group 214,000.
(2) Unless otherwise indicated, the mailing address of each listed
shareholder is 7676 Hazard Center Drive, Suite 1500, San Diego,
California 92108.
(3) Because Messrs. Donald and Stephen Hosmer are directors of Royale
Petroleum Corporation ("RPC") and have power to vote the shares of
Common Stock owned by RPC, pursuant to Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended, each of them may be deemed
to be the beneficial owner of all the Common Stock owned by RPC.
Accordingly, the 1,048,688 shares of the Company owned by RPC are
included in the number of shares held by both Donald and Stephen Hosmer
and in the number of shares owned by all officers and directors as a
group.
(4) Donald H. and Stephen M. Hosmer are sons of Harry E. Hosmer, Chairman of
the Board.
(5) Includes shares held by a family partnership of which Dr. Hildebrandt is
a 50% partner and shares held by a trust of which Dr. Hildebrandt is
trustee.
(6) The Company's transfer records reflect that Owen LeTissier holds 400,000
shares as the Trustee of two foreign charitable trusts.
(7) Includes Common Stock held by a trust of which Mr. Watters is the
Trustee.
<PAGE> 11
PREFERRED STOCK
Holders of each series of preferred shares have voting rights equal to the
number of shares into which they are convertible. None of the Preferred
shareholders have the right to vote as much as 5% of the shares entitled to
vote when taking into account the total number of both Common and Preferred
Shares. On December 31, 1997, there were 16,875 shares of Series A and
50,000 shares of Series AA Convertible Preferred Stock outstanding. The
shares of each series of Convertible Preferred Stock is convertible into the
Company's Common Stock at the option of the security holder, at the rate of
two shares of Convertible Preferred Stock for each share of Common Stock.
<TABLE>
<CAPTION>
Series A Series AA
------------- -------------
Shareholder (1) Number % Number %
- --------------- ------ - ------ -
<S> <C> <C> <C> <C>
Richard G. and Margaret E.
Algire 3,125 18.6%
Marjorie Carson 6,250 12.50%
June L. Ginnings 3,125 6.25%
Virginia L. Hoffman 7,500 44.4%
Overland Bank 6,250 12.50%
Audrey Sanabria & B.G. Dienelt, Jr. 3,125 6.25%
George Singleton 6,250 12.50%
Charles Swaner 6,250 12.50%
James S. Trowbridge 6,250 37.0%
William W. Well 6,250 12.50%
Jerome Winston 6,250 12.50%
Nim E. Wire 6,250 12.50%
All officers and directors as a group
(7 persons). 0 0.0% 0 0.0%
</TABLE>
(1) The mailing address of each listed shareholder is 7676 Hazard Center
Drive, Suite 1500, San Diego, California 92108.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1989, the board of directors adopted a policy (the "1989 policy") as to
all directors and officers of the Company that permits each director and
officer to purchase from the Company, at its cost, up to one percent (1%)
fractional interest in any well to be drilled by the Company. When an
<PAGE> 12
officer or director elects to make such a purchase, the amount charged per
each percentage working interest is equal to the actual pro rata cost to the
Company of drilling and completion costs, rather than the higher amount that
the Company charges to working interest holders for the purchase of a
percentage working interest in a well. Of the current officers and
directors, Donald Hosmer, Stephen Hosmer, Harry E. Hosmer, Henry Thorne, and
Oscar Hildebrandt have at various times elected to purchase interests in
certain wells drilled by the Company under the 1989 policy.
Under the 1989 policy, officers and directors may elect to participate in
wells at any time up until drilling of the prospect commences. Participants
do not pay a set, turnkey price (as do outside investors who purchase
undivided working interests from the Company), but are liable for all direct
costs and expenses through completion of a well, whether or not the well
drilling and completion expenses exceed the Company's cost estimates. Thus,
they participate on terms much the same as would be afforded to other oil and
gas industry participants or joint venturers. Participants are invoiced for
their share of direct costs of drilling and completion as expenses are
incurred by the Company.
Officer and director participants under this program do not pay some expenses
paid by outside, retail investors in working interests, such as sales
commission, if any, or marketing expenses. The outside, turnkey drilling
agreement investors, on the other hand, are not obligated to pay additional
costs if a drilling project experiences cost overruns or unanticipated
expenses in the drilling and completion stage. Accordingly, the Company's
Management believes that the terms on which officers and directors
participate in wells under the Board of Directors' policy are being offered
their interests on terms the same as could be obtained by unaffiliated oil
and gas industry participants in arms-length transactions, albeit those terms
are different than the turnkey agreement under which outside investors
purchase fractional undivided working interests from the Company.
Donald and Stephen Hosmer have each individually participated in 25 wells
under the 1989 policy. Donald and Stephen Hosmer have also participated in
26 wells in the name of RPC, a corporation jointly owned by them, beginning
in 1996. The Hosmer Trust, a trust for the benefit of family members of
Harry E. Hosmer, has participated in 24 wells.
Pursuant to the 1989 policy, in 1995, the Hosmer Trust, Donald Hosmer, and
Stephen Hosmer were each charged $1,522 for costs related to one well in
which they had each agreed, in 1994, to acquire a 0.5% interest. In 1995,
Donald and Stephen Hosmer were each charged a total of $2,113 for purchasing
a 0.5% interest in one well and a 0.25% interest in a second well. The cost
of purchasing direct working interests of similar size in those two wells
would have been $7,533.
During 1996, Donald and Stephen Hosmer invested in nine wells under the 1989
policy in the name of RPC. RPC was charged a total of $4,619 for a 0.25%
interest in each of the nine wells drilled by the Company in 1996, with the
exception of Bowerbank #4A and #4B, in which its
<PAGE> 13
interests were 0.0625% and 0.1875%, respectively. The amount charged was
based on those costs actually billed through December 31, 1996. Certain of
the wells in which RPC invested were not completed in 1996, and additional
costs relating to those wells will be incurred and billed to RPC during
1997. The cost of purchasing a 0.25% direct working interest in the nine
wells would have been $15,395. In addition, during 1996 RPC was charged
$1,303 for costs related to one well in which Donald and Stephen Hosmer had
originally invested individually, prior to 1996, under the 1989 policy.
During 1996, Director Oscar Hildebrandt invested $ 12,954 in working
interests in five wells under the under the 1989 policy. The cost of
purchasing the same percentage interest in direct working interests would
have been $29,155.
Prior to June 1995, the Company had advanced to the participants under the
1989 policy, the funds with which to purchase their interests, with funds to
be repaid from future production from the working interests, with advances to
be repaid from well production. Each month, participants are credited with
well income and charged with well expenses from producing wells, at the same
time as other investors including working interest purchasers. Each officer
and director who participates in one or more wells with the Company has a
single account to which all charges and income from all wells is credited.
The Company has advanced a total of $50,814 to the Hosmer Trust for
participation in 24 wells, of which $4,767 and $3,328.29 remained outstanding
at December 31, 1996 and 1997, respectively. See, Executive Compensation.
The Company has advanced Donald and Stephen Hosmer each a total of $28,906
for their interests in 23 wells, of which a total of $5,481 and $4,418.77
remained unpaid by each of them at December 31, 1996 and 1997, respectively.
In June 1995, the Company's policy regarding the advancement of funds was
changed. Current policy requires that all such purchases of interests in
wells must be paid in cash prior to the drilling of the well.
During 1996, one independent director, Henry Thorne, was partially
compensated for directors' fees and reimbursed for expenses incurred for
board meetings by receiving an assignment of a 0.5% interest in one well
drilled by the Company. The value of the well interest he received was
$1,864, calculated on approximately the same basis as that under which
directors could have participated in the well under the 1989 policy.
3. RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
With the approval of the members of the audit committee, the board of
directors has selected Brown Armstrong Randall & Reyes as the independent
public accountants to examine the financial statements of the Company and its
subsidiaries for the year 1998. Brown Armstrong Randall & Reyes was engaged
on May 12, 1994 and has examined the Company's financial statements for each
fiscal year from 1994 to the present.
<PAGE> 14
A representative of Brown Armstrong Randall & Reyes will be present at the
annual meeting to respond to questions.
Although this appointment is not required to be submitted to a vote of the
shareholders, the board of directors believes it is appropriate as a matter
of policy to request that the shareholders ratify the appointment. If the
shareholders should not ratify the appointment, the audit committee will
investigate the reasons for shareholder rejection and the board will
reconsider the appointment.
A majority of the votes cast is required to ratify the appointment of
the independent public accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
SELECTION OF BROWN ARMSTRONG RANDALL & REYES. Proxies solicited by the board
of directors will be so voted unless shareholders specify otherwise in their
proxies.
3. OTHER MATTERS
The proxy being solicited by the board of directors also provides authority
for the proxy holders, Donald H. Hosmer and Stephen M. Hosmer, to use their
discretion to vote on such other matters as may lawfully come before the
meeting, including matters incidental to the conduct of the meeting, and any
adjournment thereof.
OTHER INFORMATION
ANNUAL REPORT
The Company's annual report for 1996, including financial statements, is
being mailed to shareholders prior to or simultaneously with this proxy
statement.
METHOD AND COST OF SOLICITING PROXIES
The accompanying proxy is being solicited on behalf of the Board of Directors
of the Company. the expense of preparing, printing and mailing the form of
proxy and the material used in the solicitation thereof will be borne by the
Company. Proxies may be solicited by officers, directors, and employees of
the Company in person, or by mail, courier, telephone or facsimile. In
addition, the Company has retained ADP Proxy Services to solicit proxies by
mail, courier, telephone and facsimile and to request brokerage houses and
other nominees to forward soliciting material to beneficial owners. For
these services the Company will pay a fee of approximately $1,500 plus
expenses.
<PAGE> 15
SECTION 16(A) COMPLIANCE
In May 1998, the Company received a copy of an annual report on Form 5 from
Owen LeTissier, who controls more than 10% of the Company's outstanding
Common Stock, directly and indirectly as trustee of two foreign charitable
trusts. The report indicated the sale, in November and December 1997, of a
total of 15,000 shares of Common Stock of the Company by on behalf of the
trusts. The reported sales were not originally reported by Mr. LeTissier at
the time they were made. Except for the sale reported on this Form 5 filed
by Mr. LeTissier, and based solely upon a review of the copies of the forms
furnished to the Company, or written representations from certain reporting
persons that no reports were required, the Company believes that no person
failed to file required reports on a timely basis during or in respect of
1997.
ADDITIONAL INFORMATION
This proxy statement is accompanied by the Annual Report to Shareholders of
Royale Energy, Inc., which contains the Company's audited financial
statements dated December 31, 1997. This proxy statement is also accompanied
by
Shareholders may obtain, free of charge, a copy of the Form 10-KSB for the
year ended December 31,1997 (including the financial statements and schedules
thereto) filed with the Securities and Exchange Commission by writing to the
Company's Secretary at 7676 Hazard Center Drive, Suite 1500, San Diego,
California 92108.
PROPOSALS BY SHAREHOLDERS - 1999
Any proposal by a shareholder to be submitted for inclusion in proxy
soliciting material for the 1999 annual shareholders meeting must be received
by the corporate secretary of the Company no later than December 31, 1998.
OTHER MATTERS
No proposals have been received from shareholders for inclusion in the proxy
statement or action at the 1998 annual meeting. Management does not know of
any matter to be acted upon at the meeting other than the matters above
described. However, if any other matter should properly come before the
meeting, the proxy holders named in the enclosed proxy will vote the shares
for which they hold proxies in their discretion.
By Order of the Board of Directors,
Donald H. Hosmer
President and Secretary
<PAGE> 16
ROYALE ENERGY FUNDS, INC.
Shareholders' Proxy For Annual Meeting, July 24, 1998
Solicited by the Board of Directors
The undersigned hereby appoints Donald H. Hosmer and Stephen M. Hosmer, and
either of them, or such other persons as the board of directors of Royale
Energy Funds, Inc. (the "Company"), may designate, proxies for the
undersigned, with full power of substitution, to represent the undersigned
and to vote all of the shares of Common Stock, Series A Convertible Preferred
Stock, and Series AA Convertible Preferred Stock of the Company, which the
undersigned is entitled to vote at the annual meeting of shareholders of the
Company to be held on July 24, 1998, and at any and all adjournments thereof.
1. ELECTION OF DIRECTORS or any adjournment thereof.
FOR all nominees listed below (except as marked to the contrary below. (
)
NOMINEES: Harry E. Hosmer, Donald H. Hosmer, Stephen M. Hosmer, Oscar
A. Hildebrandt, Rodney Nahama, George M. Watters, Gilbert C.L. Kemp.
(Instructions: To to vote for any additional nominee, write that
nominee's name in the space provided below.)
Write in additional nominees in the space provided below.
2. Ratification of Selection of Accountants - The board of directors
recommends a vote FOR the following.
To ratify and approve the selection of Brown Armstrong Randall & Reyes
as the Company's independent public accountants.
( ) For ( ) Against ( ) Abstain
3, Other Matters - The board of directors recommends a vote FOR the
following.
In their discretion, to vote on such other matters as may properly come
before the meeting, but which are not now anticipated, to vote for the
election of any person as a director should any person named in the proxy
statement to be elected be unable to serve or for good cause cannot serve,
and to vote upon matters incident to the conduct of the meeting.
( ) For ( ) Against ( ) Abstain
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED
AS DIRECTED HEREIN. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE
PERSONS NAMED IN PROPOSAL 1, FOR PROPOSAL 2, AND IN ACCORDANCE WITH THE
DISCRETION OF THE PROXY HOLDERS RESPECTING PROPOSAL 3.
Dated:
--------------------- -----------------------------
(Signature of Stockholder)
Dated:
---------------------- -----------------------------
(Signature of Stockholder)
Please sign exactly as your name appears on the envelope in which this material
was mailed. Agents, executors, administrators, guardians, and trustees must
give full title as such. Corporations should sign by their president or
authorized officer. Partnerships should sign in the Partnership name by an
authorized person.
