ISRAMCO, INC.
1770 St. James Place, Suite 607, Houston, Texas
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held May 18, 1998
DEAR STOCKHOLDER:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Shareholders of Isramco,
Inc. will be held at the Double Tree Guest Suites Hotel, 5353 Westheimer,
Houston, Texas, on May 18, 1998 at 11:00 A.M. for the following purposes:
Proposal 1. To elect five (5) directors for the ensuing year.
Proposal 2. To approve the amendment of the Articles of Incorporation
of the Company to effect a 10 to 1 Reverse Stock Split of the
Company's Common Stock.
Proposal 3. To approve the appointment of Hein + Associates, LLP as
independent auditors of the Company for 1998.
To consider any other matter which may properly come before the meeting.
A Proxy Statement relating to this meeting is enclosed herewith.
Shareholders of record at the close of business on April 17, 1998 are entitled
to notice of and to vote at the meeting or any adjournment thereof. I hope you
plan to attend the Annual Meeting. It is requested that you read carefully the
attached Proxy Statement for information on matters to be considered and acted
upon.
YOUR VOTE IS IMPORTANT
You are urged to date, sign and promptly return your Proxy so that your shares
may be voted in accordance with your wishes and in order that the presence of a
quorum may be assured. The prompt return of your signed Proxy, regardless of the
number of shares you hold, will aid the Company in reducing the expense of
additional Proxy solicitation. The giving of such Proxy does not affect your
right to vote in person in the event you attend the meeting.
Haim Tsuff
Chairman of the Board
Chief Executive Officer
April 17, 1998
<PAGE>
ISRAMCO, INC.
1770 St. James Place, Suite 607, Houston, Texas
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
May 18, 1998
PROXY STATEMENT
General Information
- -------------------
This Proxy Statement is being furnished in connection with the solicitation
of proxies in the enclosed form on behalf of the Board of Directors of Isramco,
Inc. (the "Company") for use at the annual meeting of stockholders, to be held
on May 18, 1998 at 11:00 A.M., local time, at the Double Tree Guest Suites
Hotel, 5353 Westheimer, Houston, Texas, and at any adjournments thereof (the
"Annual Meeting").
Voting and Revocability of Proxies
- ----------------------------------
Unless authority to vote is herein withheld or is withheld with respect to
any specific nominee or proposal, all shares represented by properly signed
Proxies received pursuant to this solicitation (and not revoked before they are
voted) will be voted for (i) the election of those persons nominated herein for
election as directors, (ii) the approval of the Amendment of the Articles of
Incorporation of the Company to effect a 10 to 1 Reverse Stock Split of the
Company's Common Stock, and (iii) the approval of the appointment of Hein +
Associates, LLP as the Company's independent auditors.
As of the date of this Proxy Statement, the Board of Directors knows of no
business that will be presented for consideration at the Annual Meeting other
than that referred to above. If any other business property comes before the
Annual Meeting, the persons designated in the enclosed Proxy will vote on such
business in accordance with their best judgment.
Proxy Cards for use by the Company's stockholders accompany this Proxy
Statement.
Any stockholder who executes and returns a Proxy Card may revoke it at any
time before it is exercised by delivering to the Secretary of the Company, at
the offices of the Company at the address set forth above, either an instrument
revoking the proxy, or a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person.
This Proxy Statement is being first given or sent to the Company's
Shareholders on or about April 17, 1998.
- 1 -
<PAGE>
Solicitation of Proxies
- -----------------------
The enclosed Proxy is being solicited by the Board of Directors of the
Company for use in connection with the Annual Meeting. The cost of such
solicitation will be borne by the Company. Solicitation may be made by
directors, officers, employees and management of the Company, however, such
persons will not receive any fees for such solicitation. Proxies may be
solicited in person or by mail, telephone, telegram, mailgram, or other means.
Brokers, nominees, fiduciaries and other custodians have been requested to
forward such soliciting material to the beneficial owners of shares held of
record by such custodians. Such custodians may be reimbursed for their expenses.
Voting Securities and Holders Thereof
- -------------------------------------
As of the close of business on April 17, 1998, the record date for voting
at the Annual Meeting, the Company had 26,398,523 shares of common stock, par
value $0.01 per share outstanding. Such shares were held by approximately 908
shareholders of record. The total number of votes entitled to be cast at the
Annual Meeting is 26,398,523.
Submission of Shareholder Proposals for 1999 Annual Meeting
- -----------------------------------------------------------
Under the rules of the Securities and Exchange Commission, Shareholder
proposals intended to be presented at the 1999 Annual Meeting of the Company
must be received by the Company at its principal executive offices at 1770 St.
James Place, Suite 607, Houston, Texas by January 8, 1999 for inclusion in the
Proxy Statement and form of Proxy relating to that meeting.
Quorum and Voting Requirements
- ------------------------------
The holders of a majority of the shares issued and outstanding and entitled
to vote in person or represented by proxy will constitute a quorum for the
transaction of business at the Annual Meeting. Assuming a quorum is present, the
affirmative vote of a majority of shares present in person or by proxy and
voting on a matter is necessary for approval.
- 2 -
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
---------------------
Board of Directors and Committees
- ---------------------------------
The business of the Company is managed by its Board of Directors. The Board
of Directors is presently comprised of five (5) directors, of which all five (5)
directors are standing for re-election. The number of members of the Board of
Directors is fixed by a majority of the Board of Directors. The Board of
Directors held six (6) meetings during the period from December 31, 1996 through
December 31, 1997 and each director attended at least 90% of the scheduled
meetings.
At the Annual Meeting, five (5) directors are to be elected, to hold office
pursuant to the Company's By-laws, for a term of one year and until a successor
shall be elected and qualified. Unless otherwise instructed, the shares
represented by the Proxies, will be voted FOR the election of the nominees in
the Proxy Statement and on the Proxy Card.
Because of the size of the Board of Directors the Company does not require a
standing, nominating or compensation committee of the Board of Directors. Avihu
Ginzburg, Ph.D. and Linda Canina, Ph.D. are members of the Audit Committee.
Each Director receives a fee of $750.00 for attendance at a meeting of the
Board of Directors. Directors are eligible to participate in the Company's Stock
Incentive Plan and are eligible to receive stock options granted under this
Plan.
Information Concerning Nominees
- -------------------------------
Each of the five (5) nominees named on the following pages has been
nominated for election as a director of the Company to serve until the 1999
Annual Meeting of Shareholders, or until his successor has been duly elected and
qualified. All five (5) of the nominees are currently directors of the Company.
If so authorized, the persons named in the accompanying Proxy Card intend to
vote FOR the election of each nominee. Shareholders who do not wish their shares
to be voted for a particular nominee may so indicate in the space provided on
the Proxy Card. If one or more of the nominees should become unavailable to
serve at the time of the Annual Meeting, the shares presented by proxy will be
voted for the remaining nominees and for any substitute nominee or nominees
designated by the Board of Directors. The Board of Directors knows of no reason
why any of the nominees will be unavailable to serve.
There follows a brief description of each of the nominees' principal
occupation and business experience, age and directorships held in other
corporations.
The Board of Directors recommends a vote FOR each of the nominees
identified on the following pages.
- 3 -
<PAGE>
Daniel Avner has been a director and Secretary of the Company since May 1996.
Since July 1997 Mr. Avner has been President of the Company. Mr. Avner since
1992 has been the General Manager of E.D.R. GMBH Co., a company which engages in
investment, development and management of residential property in Germany. From
1991 to 1992 Mr. Avner was a Financial Analyst with Proctor & Gamble Company in
Germany. Mr. Avner holds a BA Degree in Accounting and Economics from the
University of Tel Aviv and a Masters of Business Administration from Duke
University. Age 35.
Tina Maimon Arckens has been a director of the Company since March 1997. Mrs.
Arckens is a director of YHK General Manager Ltd. Mrs. Arckens is the sister of
Jackob Maimon, the Chairman of the Board of Directors of Naphtha Israel
Petroleum Corp. Ltd. Mrs. Maimon Arckens is a housewife. Age 43.
Linda Canina has been a director of the Company since December 1997. From 1993
to the present Dr. Canina has held the position of Professor of Finance at
Cornell University, Ithaca, New York. Dr. Canina also holds the position of
Visiting Assistant Professor of Finance at the Recanati School of Business in
Tel Aviv, Israel. From July 1992 - January 1993 Dr. Canina was a Research
Fellow, Johnson Graduate School of Management, Cornell University. Age 42.
Avihu Ginzburg has been a director of the Company since July 1997. Dr. Ginzburg
is currently Emeritus Professor in Geophysics at Tel Aviv University. In 1996 he
was Visiting Professor in Exploration Geophysics at Curtin University, Perth,
Western Australia; and, Research Fellow at the Department of Geological
Sciences, University College, London. From 1992 - 1995 Dr. Ginzburg held the
position of Chairman of Geophysics and Planetary Science at Tel Aviv University.
Age 71.
Haim Tsuff has been a director of the Company since January 1996 and the
Chairman of the Board of Directors and Chief Executive Officer since May 1996.
Mr. Tsuff is the sole director and owner of United Kingsway Ltd. and Chairman of
YHK General Manager Ltd. (which entity effectively controls Equital Ltd., JOEL
Ltd., Naphtha, Naphtha Holdings Ltd., public companies in Israel) and may be
deemed to control the Company. During the past five years, Mr. Tsuff has served
as General Manager of Painton Chemical Industries Ltd., a private company which
produces printed material. Mr. Tsuff is also the Managing Director and Chairman
of the Board of Y. Habaron Ltd. (real estate), Painton Chemical Factors Ltd.
(printed material), Madad Ltd. (printed material), Benfica Holdings Ltd.
(construction) and Benfica Ltd. (construction), all of which are private
companies. See Security Ownership of Certain Beneficial Owners. Age 39.
- 4 -
<PAGE>
SUMMARY OF COMPENSATION
The following table sets forth the compensation paid for years 1995 - 1997
to the Chief Executive Officer and the five (5) other highly paid officers
and/or key employees of the Company.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long-Term Compensation
Name and Year Salary/ Bonus Other Annual Securities All Other
Principal Consulting Compensation Underlying Compensation
Position Fee (6) Options
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Haim Tsuff 1997 216,000
Chairman of the Board 1996 84,000 -- -- -- --
and Chief Executive Officer (1)
Daniel Avner
President and Secretary (2) 1997 37,900
Pincus Pincus 1997 -0-
Controller Branch Office
Yossi Levy 1997 92,230
Branch Manager (3) 1996 36,055 --
Joshua Folkman 1997 101,128
Exploration Manager 1996 106,441 --
Branch Office 1995 92,777 25,000 --
Yuval Ran 1997 151,000
Former President (4) 1996 60,000 -- --
------
Raanan Wiessel (5) 1997 91,358 --
Former Treasurer 1996 70,565 -- -- 20,000 --
------
Controller
Branch Office
- 5 -
</TABLE>
<PAGE>
Notes
(1) In May of 1996 the Company entered into a Consulting Agreement with a
company owned and controlled by Haim Tsuff, the Chairman of the Board and
Chief Executive Officer of the Corporation. Pursuant to this Consulting
Agreement as amended April 1997, the Company pays to consultant the sum of
$240,000 per annum in installments of $20,000 per month in addition to
reimbursing all reasonable business expenses incurred in connection with
the services rendered on behalf of the Company.
(2) In August of 1997 the Company entered into a Consulting Agreement with
Romulas Investment Ltd. (which Agreement has been assigned to Remarkable
Holdings Ltd.), a company which is wholly owned and controlled by Daniel
Avner, the President of the Company. Pursuant to this Agreement, the
Company has agreed to pay the Consultant the sum of $7,500 per month plus
expenses. The Company has also agreed to provide a company car and company
furnished apartment to Consultant, if available.
(3) In November of 1996 the Company entered into an Employment Agreement with
Yossi Levy, the Managing Director of Naphtha Israel Petroleum Company Ltd.
to employ Mr. Levy as the General Manager of the Israel Branch of the
Company.
(4) In August of 1996 the Company entered into a Consulting Agreement with
Yuval Ran, the former President of the Corporation. Pursuant to the
Consulting Agreement as amended April 1997, the Company has agreed to pay
to Mr. Ran the sum of $240,000 per annum payable in installments of $20,000
per month in addition to reimbursing all reasonable business expenses
incurred in connection with performing the consulting services on behalf of
the Company. Mr. Ran resigned as President of the Company on July 15, 1997.
(5) The services of Raanan Wiessel were terminated in December 1997.
(6) Does not include personal benefits which do not exceed 10% of the cash
compensation of all officers as a group.
- 6 -
<PAGE>
The following table sets forth information concerning the exercise of stock
options during 1997 by each of the named executive officer and key employee and
the year end value of unexercised options.
<TABLE>
<CAPTION>
Aggregated Option Exercises
in 1997
and Year End Option Values
--------------------------
Name Shares Value Number of Value of
Acquired Realized ($) Securities Unexercised
on Exercise Underlying In the Money
Unexercised Options at
Options (#) Year End ($)(2)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joshua Folkman 0 0 20,000 0
Raanan Wiessel (1) 0 0 25,000 0
</TABLE>
Notes
(1) Ceased his relationship with the Company in December 1997.
(2) The value reported is based on the closing price of the common stock of the
Company as reported on NASDAQ on the date of the exercise less the exercise
price.
- 7 -
<PAGE>
The following table sets forth information concerning individual grants of
stock options made during the 1997 fiscal year to each named executive officer
and key employee. The Corporation did not grant any stock appreciation rights
during 1997 and has no outstanding SAR's.
Option Grants in 1997
---------------------
Individual Grants
-----------------
Name No. of % of Total Exercise Expiration
Shares Options Price Date
Underlying Granted to ($/SH)
Options Employees
Granted
- --------------------------------------------------------------------------------
NONE
All stock options were granted with an exercise price equal to the market
price of the common stock on the date of grant.
The Company during 1997 did not amend or adjust the exercise price of
outstanding stock options previously awarded to any of the named executive
officers or directors or employees. The only incentive plan which the Company
has is its 1993 Stock Option Plan (the "Stock Option Plan").
Stock Option Plan
- -----------------
The Company's Stock Option Plan was adopted with the intention of
encouraging stock ownership by directors, officers, employees and consultants of
the Company and its subsidiaries. The plan provides for stock options of up to
500,000 shares of common stock of the Company. Options may either be options
intended to qualify as "incentive stock options" or "non-statutory stock
options", as those terms are defined in the Internal Revenue Code.
Employees (including officers) of the Company are eligible to receive
incentive stock options, however, non-statutory stock options may be granted to
officers, directors, employees and consultants of the Company and its
subsidiaries. Options are granted for a period of up to ten (10) years from the
grant date for an exercise price of not less than 100% of the fair market value
of the securities of the Company's common stock on the date of grant. As of this
date no persons have been appointed to fill the current vacancies on the
committee which administers this plan.
- 8 -
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND KEY EMPLOYEES
On March 11, 1998 the Directors, executive Officers and certain key
employees of the Company beneficially owned or controlled, the aggregate
15,786,225 shares of the Company's common stock (comprising 49.9% of the shares
of common stock if the Company's Class A and Class B Warrants were exercised)
including 20,000 shares under options which are currently exercisable. Unless
otherwise indicated, the individuals named hold sole voting and investment power
over the shares listed below.
Name Position Number of
Shares
Owned
Beneficially
- --------------------------------------------------------------------------------
Haim Tsuff Chairman of the Board, 15,766,225 (1)
Chief Executive Officer,
Chief Financial Officer,
and Director
Daniel Avner President, Principal Accounting Officer
Secretary and Director 0
Joshua Folkman Exploration Manager (Israel) 20,000 (2)
Yossi Levy Manager of Branch Office (Israel) 0
Pincus Pincus Controller of Branch Office Israel) 0
Avihu Ginzburg, Ph.D. Director 0
Linda Canina, Ph.D. Director 0
Tina Maimon Arckens Director 0
All Directors, Officers and Key Employees as a Group ___________
(nine persons) 15,786,225
Notes
(1) Haim Tsuff owns 100% of United Kingsway Ltd. which through YHK General
Manager Ltd. controls various entities, which may be deemed to control the
Company. For more information see Security Ownership of Certain Beneficial
Owners.
(2) Includes 20,000 shares of common stock issuable upon exercise of Stock
Options.
- 9 -
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Set forth below is certain information with respect to ownership of the
Company's securities as of March 11, 1998 by persons or entities who are known
by the Company to own beneficially more than 5% of the outstanding shares of the
common stock, as determined in accordance with Rule 13d-3 under the Act.
Name of No. of
Beneficial Owner Common Shares Percentage
- ---------------- ------------- ----------
Naphtha Holdings Ltd. * 15,766,225 49.9% +
Haim Tsuff *
United Kingsway Ltd. *
YHK Investment Limited Partnership *
Notes
* Haim Tsuff owns and controls 100% of United Kingsway Ltd. (Kingsway) which
holds a 74% interest in YHK Investment Limited Partnership (YHK). Avrahm
Livnat Ltd. through its subsidiary Carmen Management and Assets (1997) Ltd.
owns 26% of YHK. The General Partner of YHK is YHK General Manager Ltd. and
Haim Tsuff, Joseph Tsuff (the father of Haim Tsuff) and Tina Maimon-Arckens
(the sister of the Chairman of the Board of Naphtha are the directors of
YHK General Manager Ltd. YHK owns of record 42.3% of Equital Ltd. (formerly
known as Pass-port Ltd.), Equital Ltd. owns 43.4% of J.O.E.L. - Jerusalem
Oil Exploration Ltd. (JOEL), JOEL owns 86.6% of Naphtha, which holds 100%
of Naphtha Holdings Ltd. JOEL also owns 9.6% of the shares of Naphtha.
Naphtha Holdings Ltd. owns of record approximately 47.3% (if the Class A
and Class B Warrants are exercised) of the issued and outstanding common
stock of the Company, Naphtha holds 2.6% (if the Class A and Class B
Warrants are exercised) of the issued and outstanding common stock of the
Company. Naphtha Holdings Ltd. holds 2,500,000 Class A Warrants and
2,500,000 Class B Warrants of the Company.
Information regarding these relationships is set forth on the Chart of
Ownership and in Schedule 13d filings and amendments made thereto made on
behalf of the above entities which are on file with the Securities and
Exchange Commission.
As a result of the foregoing, Haim Tsuff, Kingsway, YHK, Equital Ltd.,
JOEL, Naphtha and Naphta Holdings Ltd. may be deemed to control the
Company.
+ This percentage is based on 26,398,523 shares of common stock outstanding
March 11, 1998 plus the issuance of an additional 5,000,000 shares of
common stock in the event of the exercise of the Class A and Class B
Warrants by Naphtha Holdings Ltd.
- 10 -
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Agreements with Danny Toledano
- ------------------------------
In October 1995 the Company entered into an Employment Agreement with Mr.
Toledano which provided for a payment of annual salary of $144,000 per annum
payable in installments of $12,000 per month. The term of the agreement was for
one (1) year. In June of 1996 the Company terminated its Employment Agreement
with Mr. Toledano and paid to Mr. Toledano a lump sum of $72,000 for the balance
of the employment term. Pursuant to the terms of a Termination Agreement entered
into between the Company and Mr. Toledano, Mr. Toledano resigned as President
and Chief Operating Officer of the Company, and executed a Covenant Not to
Compete Agreement with the Company. Pursuant to the terms of the Covenant Not to
Compete, Mr. Toledano agreed that for a period of five (5) years he would not
directly or indirectly compete with the Company in connection with the
exploration for oil and gas in the State of Israel, the territorial waters off
Israel or the territories currently under control of the State of Israel. In
consideration for the Covenant Not To Compete, the Company paid to Mr. Toledano
the sum of $200,000. The Company also entered into a Consulting Agreement with
Natural Resources Exploration Services B.V., a Netherlands corporation
controlled by Mr. Toledano. Pursuant to the Consulting Agreement between the
Company and Natural Resources Exploration Services B.V., the Company paid a lump
sum payment of $72,000 to Natural Resources Exploration Services B.V. to provide
the services of Mr. Toledano to the Company through June 23, 1997.
Consulting Agreement with Dr. Joseph Elmaleh and Subsequent Termination
Agreement
- --------------------------------------------------------------------------------
In July of 1995 the Company formalized its existing oral consulting
agreement with Dr. Joseph Elmaleh and entered into a written Consulting
Agreement for the payment to Dr. Elmaleh of an annual fee of $99,000 payable in
equal monthly installments of $8,250. The expiration of the term of the
Consulting Agreement commenced August 1, 1995 and was to expire July 31, 1997.
Under the terms of a Termination Agreement made on April 17, 1996, Dr. Elmaleh
resigned as the Chairman of the Board, Chief Executive Officer and a director of
Isramco and its subsidiaries, the Company terminated the 1995 Consulting
Agreement with Dr. Elmaleh and (i) paid to him the sum of $123,750 representing
the balance of unpaid consulting fees; (ii) paid to him the sum of $270,000 for
a non-compete agreement for a term of three (3) years in connection with the
exploration for oil and gas in the State of Israel, the territorial waters off
Israel or the territories currently under control of the State of Israel. The
Company also purchased from Southern Shipping and Energy Inc. (a company
controlled by Dr. Elmaleh) 292,675 shares of the common stock of the Company
held by Southern Shipping and Energy Inc. for a purchase price of $208,238.
Consulting Agreement with Haim Tsuff
- ------------------------------------
In May of 1996 the Company entered into a Consulting Agreement with
Goodrich Global L.T.D. B.V.I., a company owned and controlled by Haim Tsuff, the
Chairman of the Board of Directors and Chief Executive Officer of the
Corporation. Pursuant to this Consulting Agreement which had a term of two (2)
years, the Company agreed to pay the sum of $144,000 per annum in installments
of $12,000 per month, in addition to reimbursing all reasonable business
expenses incurred during the term in connection with the performance of services
- 11 -
<PAGE>
on behalf of the Company. In April 1997 the consulting compensation was
increased to $240,000 per annum and in December 1997 the term of the Agreement
was extended to May 31, 2001. The Consulting Agreement provides that the term
shall be automatically extended for an additional term of three (3) years,
commencing June 1, 2001, unless the Company has given notice at least ninety
(90) days prior to June 1, 2001, that it does not intend that the term be
renewed.
Consulting Agreement with Yuval Ran
- -----------------------------------
In August of 1996 the Company entered into a Consulting Agreement with
Yuval Ran, the then President of the Corporation. Pursuant to this Consulting
Agreement which had a term of three (3) years, the Company agreed to pay Mr. Ran
the sum of $144,000 per annum in installments of $12,000 per month, in addition
to reimbursing all reasonable business expenses incurred during the term in
connection with the performance of services on behalf of the Company. In April
1997 the consulting compensation was increased to $240,000 per annum. Mr. Ran
resigned as President of the Company on July 15, 1997, his Consulting Agreement
terminated and the Company.
Consulting Agreement with Daniel Avner
- --------------------------------------
In August of 1997 the Company entered into a Consulting Agreement with
Romulas Investment Ltd. (which Agreement has been assigned to Remarkable
Holdings Ltd.), a company which is wholly owned and controlled by Daniel Avner,
the President of the Company. Pursuant to this Agreement which has a term of one
(1) year through July 31, 1998, the Company has agreed to pay the Consultant the
sum of $7,500 per month plus expenses. The Company has also agreed to make
provide a company car and company furnished apartment to Consultant, if
available.
Agreement with Equital Ltd.
- ---------------------------
In December of 1997 the Company entered into a Inventory Service Management
Agreement with Equital Ltd. pursuant to which the Company is obligated to pay to
Equital Ltd. $1,650 plus VAT payable December, March, June and September of each
year during the term of the Agreement. In the case of the drilling of a well if
the total monthly hours of services provided to the Company by Equital Ltd.
exceed 30 hours per month, then the Company shall pay an additional $40.00 per
hour plus VAT for services rendered. The Agreement may be terminated on three
(3) month's written notice. The Company believes that the prices charged by
Equital Ltd. to the Company for these services are comparable to the cost for
such services negotiated in arm's length transactions. Equital Ltd. may be
deemed to be a control person to the Company.
- 12 -
<PAGE>
PROPOSAL NO. 2
Approval of Amendment to Certificate of Incorporation
to effect a 10 to 1 Reverse Stock Split of the Common Stock
- -------------------------------------------------------------
The Nasdaq Stock Market (Nasdaq) has modified its requirements with regard
to standards for a company's shares being listed by Nasdaq SmallCap Market.
Among other requirements, the minimum bid price for a security trading on the
Nasdaq SmallCap Market is now $1.00. On February 27, 1998 the staff of Nasdaq
advised the Company that its common stock is not in compliance with the new
Nasdaq SmallCap Market minimum bid price requirement and has provided the
Company with a ninety (90) calendar day period, which expires May 28, 1998 in
order to regain compliance with this standard. The price per share of the
Company's common stock has not exceeded One ($1.00) Dollar since September 11,
1997 at which time the high bid price reported on the Nasdaq Automated Quotation
System was 1 1/8.
The Board of Directors has adopted a resolution declaring the advisability
of submitting to the stockholders for approval, a proposal to amend the
Company's Certificate of Incorporation (the "Proposed Amendment") to effect a
reverse stock split of the Company's common stock, pursuant to which each ten
(10) shares of common stock will be automatically converted into one (1) share,
without any action on the part of the stockholder (the "Reverse Stock Split").
The text of the Proposed Amendment is set forth in Exhibit A to this Proxy
Statement.
Consummation of the Reverse Stock Split will not change the number of
shares of common stock authorized by the Company's Certificate of Incorporation
which will remain at 75,000,000 or the par value of the common stock per share.
The Reverse Stock Split will become effective as of 5:00 P.M., New York time
(the "Effective Date"), on the date that the Certificate of Amendment to the
Company's Certificate of Incorporation is filed with the Secretary of State of
the State of Delaware.
In lieu of issuing less than one (1) whole share resulting from the Reverse
Stock Split to holders of a fraction of one (1) share (a "Fractional Interest"),
the Company will determine the fair market value of each outstanding share of
the Company's common stock held on the Effective Date of the Reverse Stock Split
(the "Fractional Share Purchase Price"). The Company currently anticipates that
the Fractional Share Purchase Price will be based on the average daily closing
bid price per share of the common stock as reported by the Nasdaq Automated
Quotation System for the Company's common stock for the ten (10) trading days
immediately preceding the Effective Date. Stockholders who hold a Fractional
Interest on the Effective Date will be entitled to receive, in lieu of the less
than one (1) whole share arising as a result of the Reverse Stock Split, cash in
the amount of the Fractional Share Purchase Price multiplied by the Fractional
Interest.
As soon as practical after the Effective Date, the Company's Transfer Agent
(American Stock Transfer & Trust Company) will mail a letter of transmittal to
each holder of record of a stock certificate or certificates which represent
issued common stock outstanding on the Effective Date. The letter of transmittal
will contain instructions for the surrender of such certificate or certificates
to the Company's Transfer Agent in exchange for certificates representing the
number of whole shares of common stock (plus the relevant portion of the
Fractional Share Purchase Price, if any) into which the shares of common stock
- 13 -
<PAGE>
have been converted as a result of the Reverse Stock Split. No cash payment will
be made or New Certificate issued to a stockholder until he or she has
surrendered his or her outstanding certificates, together with the letter of
transmittal to the Company's Transfer Agent. Stockholders will not be required
to pay a transfer or other fee in connection with the exchange of certificates.
Stockholders should not submit any certificates to the Transfer Agent until
requested to do so.
The Company anticipates that if the Reverse Stock Split is approved by the
shareholders that the decrease in the number of outstanding shares of the
Company's common stock resulting from the Reverse Stock Split will place the
market price of the post Reverse Split Stock in a range satisfactory to satisfy
the Nasdaq minimum bid price requirement.
If the Company's securities are delisted from Nasdaq trading, the Company's
securities will likely be quoted in the "pink sheets" maintained by the National
Quotation Bureau, Inc. or the Nasdaq Electronic Bulletin Board and the spread
between the "bid" and the "asked" price of the shares of common stock is likely
to be greater than at present and the stockholders may experience a greater
degree of difficulty in engaging in trades of shares of the Company's common
stock.
The stockholders should note that the effect of the Reverse Stock Split,
upon the market prices of the Company's common stock cannot be accurately
predicted. In particular, there is no assurance that the prices for shares of
the common stock after the Reverse Stock Split will be ten (10) times the price
of shares of the Company's common stock immediately prior to the Reverse Stock
Split. Furthermore, there can be no assurance that the Reverse Stock Split will
not adversely impact the market price of the common stock or alternatively, that
any increase price per share of the common stock immediately after the proposed
Reverse Stock Split will be sustained for any prolonged period of time. In
addition, the Reverse Stock Split may have the effect of creating odd lots of
stock for some stockholders and such odd lots may be more difficult to sell or
have higher brokerage commissions associated with the sale of such odd lots.
As a result of the Reverse Stock Split, the number of whole shares of
common stock held by stockholders of record as of the close of business on the
Effective Date will automatically, without any action required by the
stockholders, be equal to the number of shares of common stock held immediately
prior to the close of business on the Effective Date divided by ten (10), plus
cash in lieu of any fractional share. The Reverse Stock Split will not effect a
stockholder's percentage ownership interest in the Company or proportional
voting power, except for minor differences resulting from the payment of cash in
lieu of fractional shares. The rights and privileges of the holders of shares of
common stock will be unaffected by the Reverse Stock Split. Par value of the
common stock will remain at $.01 per share following the Effective Date of the
Reverse Stock Split, and the number of shares of common stock issued will be
reduced. Consequently, the aggregate par value of the issued common stock also
will be reduced.
Stockholders have no right under Delaware law or under the Company's
Certificate of Incorporation or By-laws to dissent to the Reverse Stock Split.
The Company is currently subject to certain obligations to issue shares of
common stock pursuant to the exercise of outstanding Class A and Class B
Warrants and outstanding options. Under the terms of the various agreements
relating to these securities, the number of shares of common stock issuable
- 14 -
<PAGE>
pursuant to these securities and the per share prices, will automatically be
adjusted in accordance with the Reverse Stock Split. Thus, for every ten (10)
shares of the common stock pre-Reverse Stock Split previously issuable, the
holders of these securities will, upon exercise of the security now receive one
(1) share of common stock, post-Reverse Stock Split for the same aggregate
amount of consideration paid.
As soon as practical after the Effective Date, the Company intends to
require stockholders to exchange their stock certificates and warrant
certificates (the "Old Certificates") for new certificates (the "New
Certificates") representing the number of whole shares of common stock into
which their shares of common stock have been converted as a result of the
Reverse Stock Split (as well as cash in lieu of Fractional Interest resulting
from the Reverse Stock Split). Stockholders will be furnished with the necessary
materials and instructions for the surrender and exchange of stock certificates
at the appropriate time by the Company's Transfer Agent. Stockholders will not
be required to pay any transfer or other fee in connection with the exchange of
certificates. Stockholders should not submit any certificates to the Transfer
Agent until requested to do so.
The following description of the material federal income tax consequences
of the Reverse Stock Split is based on the Internal Revenue Code of 1986, as
amended, the applicable treasury regulations promulgated thereunder, judicial
authority and current administrative rulings and practices all as in effect on
the date of this Proxy Statement. The Company has not sought and will not seek
an opinion of counsel or a ruling from the Internal Revenue Service regarding
the federal income tax consequences on the Reverse Stock Split. This discussion
is for general information purposes only and each stockholder is urged to
consult their own tax advisor to determine the particular consequences to them.
In general, the federal income tax consequence of the proposed Reverse
Stock Split will vary among stockholders depending upon whether they receive
cash for a Fractional Interest or solely new certificates in exchange for old
certificates. The Company believes that because the Reverse Stock Split is not
part of a plan to increase periodically a stockholder's proportionate interest
in the Company's assets or earnings and profits, the Reverse Stock Split
probably will have the following federal income tax effects:
1. A stockholder who receives solely new certificates will not recognize
gain or loss on the exchange. In the aggregate, the stockholder's basis in the
common stock represented by New Certificates will equal the holder's basis in
the common stock represented by old certificates.
2. A stockholder who receives cash for a Fractional Interest, as a result
of the Reverse Stock Split will generally be treated as having received the
payment as a distribution in redemption of the fractional share. Each effected
stockholder will be required to consult such stockholder's own tax advisor for
the tax effect of such redemption in light of such stockholder's particular
facts and circumstances.
The Board of Directors believes that the adoption of the Proposed Amendment
is in the best interest of the Company and its stockholders and recommends that
the stockholders vote FOR the Proposed Amendment.
- 15 -
<PAGE>
PROPOSAL NO. 3
Appointment of Independent Auditors
- -----------------------------------
Subject to the approval of the shareholders, the Board of Directors has
selected Hein + Associates, LLP as independent auditors to audit the accounts of
the Company for the 1998 calendar year. The Company's financial statements for
the year ended December 31, 1997 were audited by Hein + Associates, LLP. Hein +
Associates, LLP has no interest or relationship with the Company except in the
capacity of independent public accountants, nor has that firm had any other
interest or relationship with the Company in the past. A representative of the
firm is expected to be present at the 1998 Annual Meeting. Such representative
will have the opportunity to make a statement, if they so desire, and will be
available to respond to appropriate stockholder questions.
The Company terminated the firm of Richard A. Eisner & Company, LLP
effective February 9, 1998 and appointed the firm of Hein + Associates, LLP as
its principal auditor for the year ending December 31, 1997.
Recommendation of Board of Directors
- ------------------------------------
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE FOLLOWING
PROPOSAL:
RESOLVED, that the appointment by the Board of Directors of
the firm Hein + Associates, LLP as Independent Auditors for
the Company for the year 1998 is hereby approved.
OTHER MATTERS
-------------
Management does not know of any other matters to come before the Annual
Meeting. However, if any other matters properly come before the Annual Meeting,
it is the intention of the persons designated as proxies to vote in accordance
with their judgment on such matters.
IT IS IMPORTANT THAT YOU RETURN YOUR SIGNED PROXY PROMPTLY, REGARDLESS OF
THE NUMBER OF SHARES YOU OWN. PLEASE COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE PROMPTLY, WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING.
By Order of the Board of Directors,
Haim Tsuff
Chairman of the Board
April 17, 1998
A copy of the Company's Annual Report on Form 10-KSB, filed
with the Securities and Exchange Commission, is available
without charge to shareholders upon written request to:
Secretary, Isramco, Inc., 1770 St. James Place, Suite 607, Houston, Texas 77056
- 16 -
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ISRAMCO, INC.
(originally incorporated November __, 1982)
Isramco, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), does hereby
certify that:
First: The name of the Corporation is Isramco, Inc.
Second: The Certificate of Incorporation of the Corporation is hereby
amended by adding the following paragraph to Article IV to following the first
paragraph of Article IV:
"Each of the Corporation's issued and outstanding shares of common stock,
par value $.01 per share, as of the date of this Certificate of Amendment shall
be converted into one tenth (.10) of one (1) share of the common stock, par
value $.01 per share; no change shall be made to the par value of the
Corporation's common stock; and in lieu of any fractional shares, the
Corporation shall pay to the holders thereof the fair value of such shares in
cash, based on the average daily closing bid price per share of the common stock
as reported on the Nasdaq SmallCap Market for the Corporation's common stock for
the ten (10) trading days immediately preceding the effective date of the
Reverse Split."
Third: The Amendment to the Certificate of Incorporation herein certified
has been duly adopted in accordance with the provisions of Section 211 and 242
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this ___
day of April, 1998.
-------------------------------------
Haim Tsuff, Chairman of the Board
-------------------------------------
Daniel Avner, President and Secretary
<PAGE>
ISRAMCO, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
May 18, 1998
This Proxy is solicited on behalf of the Board of Directors of ISRAMCO,
INC. and the Board of Directors recommends a vote FOR Proposal 1, Proposal 2 and
Proposal 3.
The undersigned having received the Notice and Proxy Statement for the
Annual Meeting of Shareholders hereby revokes all prior proxies, and appoints
Haim Tsuff and Daniel Avner and each of them, proxies, with power of
substitution, to vote in the manner indicated below, and with discretionary
authority as to any other matter that may properly come before the meeting, all
my (our) shares of record of Isramco, Inc. at the Annual Meeting of Shareholders
to be held May 18, 1998, and at any postponements and adjournments thereof.
Unless you indicate otherwise, this Proxy will be voted in accordance with the
Board of Directors' recommendations. The Directors recommend a vote FOR Items 1,
2 and 3.
(1) FOR [ ] WITHHOLD VOTE [ ] The election of Daniel Avner,
Tina Maimon Arckens, Linda Canina,
Avihu Ginzburg and Haim Tsuff as
directors of the Company to hold
office until their successors are
elected.
If you desire to withhold authority to vote for the election of any one or more
of the nominees listed above, please print the name of such nominee or nominees:
____________________________________.
(2) FOR [ ] AGAINST [ ] ABSTAIN [ ] Approve the amendment of the
Articles of Incorporation of
the Company to effect a
10 to 1 Reverse Stock Split of
the Company's Common Stock.
(3) FOR [ ] AGAINST [ ] ABSTAIN [ ] Approve appointment of Hein +
Associates, LLP as independent
auditors of the Company for
1998.
(SEE OVER)
<PAGE>
If no instructions are given, the proxies will vote FOR Items (1), (2) and
(3).
Dated: ......................, 1998
...................................
(Signature(s) of Shareholder(s))
Note: Please sign exactly as your
name appears on your stock
certificates. If this stock is
jointly held, each owner should
sign. Executors, administrators,
trustees, guardians and attorneys
should so indicate when signing.
Attorneys should submit powers of
attorney.
PLEASE MARK, SIGN, DATE AND MAIL
THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE SO THAT IT MAY BE COUNTED
AT THE ANNUAL MEETING ON MAY 18,
1998.
