SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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 ss. 240.14a-11(c) or ss. 240.14a-12
TEXOIL, INC.
(Name of Registrant as Specified in its Charter)
_____________________________________________________________________
(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 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the 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.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE>
TEXOIL, INC.
110 Cypress Station Drive, Suite No. 220
Houston, Texas 77090-1629
(281) 537-9920 (281) 537-8324 - Fax
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 11, 1998
Notice is hereby given that the annual meeting of stockholders of Texoil,
Inc. (the "Company"), will be held at the Houston Marriott North at Greenspoint,
255 North Sam Houston Parkway East, Houston, Texas 77060, on Friday, December
11, 1998, at 2:00 P.M. (Houston time), for the following purposes:
1. To elect a Board of seven directors to serve until the next annual
meeting of stockholders and until their successors are elected and
qualified.
2. To approve the appointment of Arthur Andersen LLP as the independent
accountant for the Company.
3. To consider and act upon such other business as may properly be
presented to the meeting or any adjournment thereof.
A record of stockholders has been taken as of the close of business on
October 30, 1998, and only those stockholders of record on that date will be
entitled to notice of, and to vote at the meeting or any adjournment thereof. A
complete list of stockholders so entitled to vote will be available at the
Company's principal office at 110 Cypress Station Drive, Suite No. 220, Houston,
Texas 77090- 1629, commencing December 1, 1998, for inspection by any
stockholder during usual business hours prior to the annual meeting.
All stockholders of the Company are invited to attend the meeting. The
Board of Directors, however, requests that you promptly sign, date and mail the
enclosed proxy, even if you plan to be present at the meeting. If you attend the
meeting, you can either vote in person or by your proxy. Please return your
proxy in the enclosed, postage-paid envelope.
By Order of the Board of Directors,
Jerry M. Crews
Secretary
October 30, 1998
<PAGE>
TEXOIL, INC.
110 Cypress Station Drive, Suite No. 220
Houston, Texas 77090-1629
(281) 537-9920 (281) 537-8324 - Fax
PROXY STATEMENT
This Proxy Statement and the enclosed proxy are being mailed to
stockholders of Texoil, Inc., a Nevada corporation (the "Company"), commencing
on or about November 13, 1998. The Company's Board of Directors is soliciting
proxies to be voted at the Company's annual meeting of stockholders to be held
at the Houston Marriott North at Greenspoint, 255 North Sam Houston Parkway
East, Houston, Texas 77060, on Friday, December 11, 1998, and at any adjournment
thereof, for the purposes set forth in the accompanying notice. The shares
covered by a proxy, if such is properly executed and received prior to the
meeting, will be voted in accordance with the directions specified thereon
regarding election of directors, and with respect to any other matters which may
properly come before the meeting, in accordance with the judgment of the persons
designated as proxies. A proxy may be revoked at any time before it is exercised
by giving written notice to, or filing a duly executed proxy bearing a later
date with, the Secretary of the Company, or by voting in person at the meeting.
Management expects that the only matters to be presented for action at the
meeting will be the election of directors.
At the close of business on October 30, 1998, the record date for
determining the stockholders entitled to notice of, and to vote at the meeting
(the "Record Date"), there were outstanding and entitled to vote 39,285,094
shares of the Company's common stock, par value $.01 per share ("Common Stock").
Each share of Common Stock entitles the holder to one vote on all matters
presented at the meeting. There is no cumulative voting with respect to the
Common Stock.
The Company will bear the costs of soliciting proxies in the accompanying
form. In addition to solicitations by mail, a number of regular employees of the
Company may solicit proxies in person or by telephone.
THE COMPANY
Texoil, Inc., is an independent energy company engaged in the acquisition
and development of oil and gas reserves through an active and diversified
program which includes purchases of reserves, re-engineering, development and
exploration activities, currently focused in Texas, South Louisiana and the
Texas Gulf Coast. On December 31, 1997, the Company acquired Cliffwood Oil & Gas
Corp. ("Cliffwood"), in a merger (the "Merger") which resulted in a change of
ownership, management, business strategy, and substantially increased the
Company's overall financial resources.
2
<PAGE>
Pursuant to the Merger, the Company issued shares of its Common Stock to
fifty-three former Cliffwood stockholders, which was equal to approximately 70%
of the outstanding shares of Common Stock. The Merger also restructured the
Company's Board of Directors so that five former Texoil directors resigned, and
the remaining members of the Board filled the vacancies with five nominees from
Cliffwood. Finally, all of the executive officers of the Company resigned and
the Board replaced them with the two former officers of Cliffwood. There was no
outside source of funding for this change of control.
ELECTION OF DIRECTORS
NOMINEES
At the meeting, seven nominees are to be elected to the Company's Board of
Directors, each Director to hold office until the next annual meeting of
stockholders and until his successor is elected and qualified. Unless your proxy
specifies otherwise, or withholds authority to vote for one or more nominees
named thereon and described below, it is intended that the shares represented by
your proxy will be voted for the election of these seven nominees. Proxies
cannot be voted for a greater number of persons than the number of nominees
named. If any nominee should become unavailable for election, your proxy may be
voted for a substitute nominee selected by the Board, or the Board may be
reduced accordingly. The Board is unaware of any circumstances likely to render
any nominee unavailable.
Set forth below are the names, ages and positions of the directors and
executive officers of the Company.
NAME AGE POSITION WITH THE COMPANY
- ------ ----- -----------------------------
Frank A. Lodzinski......... 49 Chairman of the Board, President and
Chief Executive Officer, Director
Jerry M. Crews............. 48 Secretary, Executive Vice President,
Director
T. W. Hoehn III............ 48 Director
Robert E. LaJoie........... 73 Director
Gary J. Milavec............ 36 Director
Thomas A. Reiser........... 47 Director
Michael A. Vlasic.......... 38 Director
FRANK A. LODZINSKI has been Chairman of the Board, President, Chief
Executive Officer, and a Director of the Company since the Merger. He has been
President and a Director of Cliffwood since he founded a predecessor entity and
commenced operations in February 1996. From January 1992 to February 1995, he
served as President and a Director of Hampton Resources Corporation, a public
corporation which he co-founded. From February 1995, when Hampton was sold to
Bellwether Exploration Company, to February 1996, he was self-employed and was a
consultant to
3
<PAGE>
Bellwether Exploration Company. From 1984 to 1992, Mr. Lodzinski was engaged in
the oil and natural gas business through Energy Resource Associates, Inc., a
closely-held Texas corporation which he owned and controlled. Prior to 1984, he
was employed in public accounting with Arthur Andersen & Co. and in various
capacities with independent oil and gas companies. He is a Certified Public
Accountant and holds a BSBA degree from Wayne State University.
JERRY M. CREWS has been an Officer and Director of the Company since the
Merger and was an Officer and Director of Cliffwood since April 1996. For the
preceding 12 years he was an Officer of Citation Oil & Gas Corp. and was
responsible for all production operations. His experience includes acquisitions,
drilling and development operations in most of the producing basins of the
United States. Prior experience was with Conoco and Lear Petroleum. He holds a
B.S. in Petroleum Engineering from Texas A&M University.
T. W. HOEHN, III has been a Director of the Company since 1984. He is
President and General Manager of Hoehn Motors, Inc., a multi-line automobile
agency located in Carlsbad, California, where he has been employed since 1975.
He is a graduate of Stanford University.
ROBERT E. LAJOIE has been a Director of the Company since the Merger and
was a Director of Cliffwood since July 1996. Mr. LaJoie retired in 1977 and is a
private investor with more than forty years experience in the oil and natural
gas, real-estate and food services industries. He is a graduate of the
University of Michigan.
GARY J. MILAVEC has been a Director of the Company since September 1996
and served as its Secretary from October 1996 until December 31, 1997. He is a
Managing Director of RIMCO, and has been active in its investment management and
corporate finance activities since October 1990. Mr. Milavec received a B.A. in
Geology from the University of Rochester, an M.S. in Geology from the University
of Oklahoma, and an M.B.A. from the University of Houston. He is also a Director
of Universal Seismic Associates, Inc.
THOMAS A. REISER has been a Director the Company since the Merger and was
a Director of Cliffwood since April 1996. For more than the past five years he
has served as Chairman and President of Technical Risks, Inc., a private
insurance brokerage firm which he founded. He is a graduate of the College of
William and Mary.
MICHAEL A. VLASIC has been a Director of the Company since the Merger and
was a Director of Cliffwood since July 1996. For more than the past five years,
he has been a principal with Vlasic Investments L.L.C. He is a graduate of Brown
University.
BOARD AND COMMITTEE ACTIVITIES - STRUCTURE AND COMPENSATION
The Company's operations are managed under the broad supervision and
direction of the Board of Directors, which has the ultimate responsibility for
the establishment and implementation of the Company's general operating
philosophy, objectives, goals and policies. Pursuant to delegated
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<PAGE>
authority, certain Board functions are discharged by the Board's two current
standing committees, the Executive and Audit/Compensation committees. The Board
of Directors has no standing nominating or similar committee. During the fiscal
year ended December 31, 1997, the Board of Directors held five (5) meetings, the
Audit Committee held one (1) meeting and the Compensation Committee held one (1)
meeting. In fiscal year 1997, William F. Seagle attended two (2) of five (5)
aggregate Board meetings. Incumbent members of the Board attended or
participated in at least 75% of the aggregate number of (i) Board meetings and
(ii) committee meetings held by all committees of the Board on which he served.
The Executive committee is authorized to exercise, to the extent permitted
by law, the power of the full Board of Directors when a meeting of the full
Board is not practicable or necessary. The Executive Committee is currently
comprised of Messrs. Lodzinski, Crews, LaJoie and Vlasic, and its membership
reflects the change of control effected by the Merger.
The Audit Committee recommends to the Board the independent accountants of
the Company and reviews the Company's annual report on Form 10-KSB, internal
controls and accounting operations and any transactions of the Company in which
management or controlling persons of the Company have an interest. The
Compensation Committee is responsible for formulating and adopting or
recommending to the Board, executive compensation plans and policies, including
those relating to incentive compensation and benefits. The Audit Committee is
currently composed of Messrs. LaJoie, Milavec and Reiser. The Compensation
Committee is composed of Messrs. LaJoie and Reiser. The membership of both
committees reflects the change of control effected by the Merger.
Directors who are not employed by the Company are authorized to be paid a
fee of $1,000 for each meeting of the Board of Directors attended (including
Committee meetings, if any, held in conjunction therewith). The Company
reimburses each Director for his actual and necessary expenses reasonably
incurred in connection with attending meetings of the Board and its Committees.
MANAGEMENT
EXECUTIVE OFFICERS
The executive officers of the Company serve at the pleasure of the Board
of Directors and are subject to annual appointment by the Board. The Company
currently has two executive officers, Frank A. Lodzinski, who has been President
and Chief Executive Officer of the Company since the Merger, and Jerry M. Crews,
who has been Secretary and Executive Vice President since the Merger. For
further information regarding Messrs. Lodzinski and Crews, please refer to
"Election of Directors" above.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table reflects all forms of compensation for each of the
years ended December 31, 1997, 1996, and 1995 for Ruben Medrano who served as
Chief Executive Officer until the Merger. In 1997, no executive officer had
salary and bonus which exceeded $100,000.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------- --------- ---------
SECURITIES
UNDERLYING
OTHER ANNUAL RESTRICTED OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL P0SITION YEAR SALARY BONUS COMPENSATION STOCK AWARDS SARS(#) PAYOUTS COMPENSATION
- --------------------------- ------ ------- ------- ------------ ------------ ---------- ------- ------------
<S> <C> <C> <C>
Frank A. Lodzinski ........... 1997 -- -- -- -- -- -- --
Chairman of the Board,
President and Chief
Executive Officer (1)
Ruben Medrano ................ 1997 $72,940 $10,000 $18,235(3) -- -- -- --
Former President and ...... 1996 $67,700 -- $28,800(3) -- -- -- --
Chief Executive Officer (2) 1995 $74,400 -- $21,600(3) -- 30,000(4) -- --
</TABLE>
- --------------------
(1) Mr. Lodzinski became Chairman of the Board, President and Chief Executive
Officer on December 31, 1997. Mr. Lodzinski received no compensation from
Texoil in 1997. Mr. Lodzinski voluntarily reduced his salary in April
1998, from $90,000 to $48,000 as part of a corporate initiative to reduce
general and administrative costs in response to declining oil prices.
(2) Mr. Medrano resigned as President and Chief Executive Officer effective
December 31, 1997.
(3) See "...1995 Stock Compensation Plan" and "...Amended and Restated 1996
Stock Compensation Plan."
(4) See "...Option Exercises and Year End Values" below.
1995 STOCK COMPENSATION PLAN
In July 1995, the Company's stockholders approved the 1995 Stock
Compensation Plan, which provides for the issuance of shares of Common Stock to
certain employees and consultants whose cash compensation was reduced by 30%
effective April 1, 1995. Pursuant to the 1995 Stock Compensation Plan, shares of
Common Stock were issued to such individuals on recognition of their reduced
cash compensation in 1995 and for the months of January through February, 1996.
AMENDED AND RESTATED 1996 STOCK COMPENSATION PLAN
By consent dated June 10, 1996, the Company's Board of Directors adopted
the 1996 Stock Compensation Plan after the 1995 Stock Compensation Plan expired
March 31, 1996 with an insufficient number of shares of Common Stock reserved
for issuance thereunder remaining to cover issuances which otherwise would have
been made after February 1996. The 1996 Stock
6
<PAGE>
Compensation Plan required shareholder approval thereof before shares could be
issued thereunder. Shareholder approval was a requirement of Rule 16b-3
promulgated under Section 16 of the Securities Exchange Act of 1934, as amended
(the "1934 Act"). After the Board's adoption of the 1996 Stock Compensation
Plan, Rule 16b-3 was amended and shareholder approval was no longer mandatory
thereunder. Since the 1996 Stock Compensation Plan had not been implemented and
no common stock issued thereunder, the Company's Board of Directors amended and
restated the 1996 Stock Compensation Plan to make it more consistent with
amended Rule 16b-3. Accordingly, the Amended and Restated 1996 Stock
Compensation Plan (the "1996 Plan") superseded the 1996 Stock Compensation Plan
in its entirety. Pursuant to the 1996 Plan, shares of common stock were issued
to such individuals in recognition of their reduced cash compensation for the
months of January through August, 1997 and for services rendered and
reimbursement of expenses incurred. The Company recognized compensation expense
in the amount of $18,235 for the 1996 Plan representing the fair market value of
such shares issued in lieu of reduced cash compensation for the months of
January through August 1997.
CLIFFWOOD OPTIONS
Prior to the Merger, Cliffwood Oil & Gas Corp. had options to purchase
573,000 shares of Cliffwood Class A Common Stock issued under the Cliffwood Oil
& Gas Corp. 1997 Stock Option Plan. and the Cliffwood Oil & Gas Corp.,
Non-Employee Director Stock Option Plan. Pursuant to the Merger Agreement, these
options were canceled and replaced by options to purchase 6.74 shares of Common
Stock for every share that could have been bought under the old Cliffwood
options. Therefore, following the Merger, Texoil issued options to purchase
3,862,020 shares of Common Stock to former Cliffwood option holders.
OPTION GRANTS
As described above, new options were granted to current executive officers
of the Company, following the Merger as a result of the conversion of Cliffwood
options as described in "Cliffwood Options." The following table sets forth
additional information with respect to these stock option grants.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL
CLIFFWOOD OPTIONS/SARS NUMBER OF
SHARES GRANTED TO TEXOIL SHARES EXERCISE
UNDERLYING EXERCISE OR EMPLOYEES IN UNDERLYING OR BASE
OPTIONS BASE PRICE FISCAL YEAR OPTIONS PRICE
NAME GRANTED(#) ($/SHARE) 1997 GRANTED(1) ($/SHARE) EXPIRATION DATE
------------ ----------- ------------- ------------- -------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Frank A. Lodzinski .. 100,000 $3.50 22.3% 674,000 $.52 December 31, 1999
Francis M. Mury ..... 90,000 $3.50 20.1% 606,600 $.52 December 31, 1999
Jerry M. Crews ...... 90,000 $3.50 20.1% 606,600 $.52 December 31, 1999
Peggy C. Simpson .... 35,000 $3.50 7.8% 235,900 $.52 December 31, 1999
Mandel C. Selber .... 25,000 $3.50 5.6% 168,500 $.52 December 31, 1999
Ralph D. Hollingshead 20,000 $3.50 4.5% 134,800 $.52 December 31, 1999
</TABLE>
(1) Represents options previously granted by Cliffwood that were replaced by
options to purchase Texoil Common Stock.
7
<PAGE>
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth information regarding two unexercised options
to purchase 20,000 shares of Common Stock at $3.00 per share and 30,000 shares
of Common Stock at $1.3125 per share that were granted to Mr. Medrano on July
26, 1994 and May 2, 1996, respectively. Mr. Medrano did not exercise any Common
Stock options during 1997. In addition, information on the options issued to
Cliffwood employee option holders is presented in the following table.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS AT IN-THE-MONEY
NAME DECEMBER 31, 1997 OPTIONS/SARS AT DECEMBER 31, 1997
------- ------------------------------- ---------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Ruben Medrano .... 20,000 0 $ 0 $ 0
Ruben Medrano .... 30,000 0 $ 0 $ 0
Frank A. Lodzinski 222,420 451,580 $162,367 $329,653
Francis M. Mury .. 200,178 406,422 $146,130 $296,688
Jerry M. Crews ... 200,178 406,422 $146,130 $296,688
Peggy Simpson .... 77,847 158,053 $ 56,828 $115,379
Mandel Selber .... 55,605 112,885 $ 40,592 $ 82,413
Ralph Hollingshead 44,484 90,316 $ 32,473 $ 65,931
</TABLE>
(1) Based upon the last sales price of $1.25 per share on December 31, 1997, as
reported in the consolidated reporting system for the NASDAQ Small Cap Issues,
Mr. Medrano's options were not in-the-money. The comparable sales price as of
September 30, 1998, was $1.00.
EMPLOYMENT AGREEMENT
Pursuant to the Merger, Mr. Lodzinski is employed under an agreement
pursuant to which he receives an annual salary of $90,000, subject to increases
at the discretion of the Board of Directors, and a bonus at the sole discretion
of the Board of Directors. The employment agreement also provides for the grant
of options to purchase Common Stock. This employment agreement expires January
1, 2001. Mr. Lodzinski voluntarily reduced his salary in April 1998, from
$90,000 to $48,000 as part of a corporate initiative to reduce general and
administrative costs in response to declining oil prices.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of September 30, 1998, the number of
shares of the Company's equity securities owned by (i) each person known by
the Company (based on publicly-available filings with the Commission) to be
the holder of more than five percent of its voting securities, (ii) each
Director and each executive officer of the Company, and (iii) all of the
Company's directors and executive officers as a group. Unless otherwise
indicated, each holder has sole voting and investment power with respect to
the shares of capital stock owned by such holder.
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<PAGE>
NAME OF BENEFICIAL OWNER
(ADDRESS INDICATED IF NOT AMOUNT AND NATURE OF PERCENT
A DIRECTOR OR AN OFFICER) BENEFICIAL OWNERSHIP OF CLASS
- ------------------------- -------------------- ----------
COMMON STOCK:
Michael A. Vlasic, Director ............... 8,366,587(1) 21.06%
Frank A. Lodzinski, Director, President
and Chief Executive Officer ............. 8,872,559(2) 22.17%
Jerry M. Crews, Director, Executive Vice
President and Secretary ................. 2,003,263(3) 5.05%
Robert E. LaJoie, Director ................ 960,450(4) 2.44%
T. W. Hoehn III, Director ................. 619,429 1.57%
Thomas A. Reiser, Director ................ 388,112(5) *
All Directors and Executive Officers
as a group (6 persons) .................. 12,942,105(6) 31.80%
RIMCO ..................................... 10,540,303(7) 23.42%
600 Travis Street, Suite No. 6875
Houston, Texas 77002
The Lincoln National Life Insurance Company 5,282,475(8) 12.87%
200 East Berry Street
Ft. Wayne, Indiana 46802
First Union Capital Partners, Inc. ........ 3,375,621(9) 8.35%
1001 Fannin, Suite 2255
Houston, Texas 77002
V&C Energy Limited Partnership ............ 8,268,295(10) 20.87%
710 Woodward
Bloomfield Hills, Michigan 45304
Vlasic Investments, L.L.C ................. 8,366,587(11) 21.06%
710 Woodward
Bloomfield Hills, Michigan 45304
EnCap Investments, Inc. ...................
1100 Louisiana, Suite No. 3150
Houston, Texas 77002 ............... 2,567,225 6.53%
* Indicates less than one percent.
(1) Includes 7,931,295 shares of Common Stock and 337,000 shares of Common
Stock underlying presently exercisable warrants beneficially owned through
V&C Energy Limited Partnership, of which Vlasic Investments L.L.C. ("Vlasic
Investments") is the limited partner. Mr. Vlasic is the Managing Director
of Vlasic Investments. Mr. Vlasic disclaims any beneficial ownership of
shares held by V&C Energy Limited Partnership. Includes 98,292 shares of
Common Stock underlying presently exercisable options assigned by Mr.
Vlasic to Vlasic Investments. Excludes 70,208 shares of Common Stock
underlying options assigned by Mr. Vlasic to Vlasic Investments that are
not presently exercisable.
(2) Includes 7,931,295 shares of Common Stock and 337,000 shares of Common
Stock underlying presently exercisable warrants beneficially owned through
V&C Energy Limited Partnership, of which Energy Resource Associates, Inc.
("ERA"), a Texas corporation owned by and controlled by Mr. Lodzinski, is a
general partner. Mr. Lodzinski disclaims any beneficial ownership of shares
held by V&C Energy Limited Partnership. Includes 393,167 shares of Common
Stock underlying presently exercisable options owned by Mr. Lodzinski.
Excludes 280,833 shares of Common Stock underlying options owned by Mr.
Lodzinski that are not presently exercisable.
(3) Includes 1,649,413 of Common Stock and 353,850 shares of Common Stock
underlying presently exercisable options owned by Mr. Crews. Excludes
252,750 shares of Common Stock underlying options owned by Mr. Crews that
are not presently exercisable.
9
<PAGE>
(4) Includes 842,500 shares held by Robert E. LaJoie, as General Partner to a
family limited partnership, and 117,950 shares underlying presently
exercisable options owned by Mr. LaJoie. Excludes 84,250 shares of Common
Stock underlying options owned by Mr. LaJoie that are not presently
exercisable.
(5) Includes 98,292 shares of Common Stock underlying presently exercisable
options owned by Mr. Reiser. Excludes 70,208 shares underlying options
owned by Mr. Reiser that are not presently exercisable.
(6) Excludes Gary J. Milavec, who has been a Director of Texoil since September
1996. Although Mr. Milavec does not own any Common Stock, he is a Managing
Director of RIMCO, and a vice-president of RIMCO Associates, Inc., which is
the General Partner of RIMCO and the indirect holder of 4,820,017 shares of
Common Stock and debt presently convertible into 5,714,286 shares of Common
Stock. Mr. Milavec disclaims any beneficial ownership of said shares.
(7) Includes 5,714,286 shares of Common Stock underlying presently convertible
notes.
(8) Includes 1,760,825 shares of Common Stock underlying presently exercisable
warrants.
(9) Includes 1,128,950 shares of Common Stock underlying presently exercisable
warrants.
(10) Includes 337,000 shares of Common Stock underlying presently exercisable
warrants.
(11) Includes 7,931,295 shares of Common Stock and 337,000 shares of Common
Stock underlying presently exercisable warrants beneficially owned through
V&C Energy Limited Partnership, of which Vlasic Investments is the limited
partner. Mr. Vlasic is the Managing Director of Vlasic Investments. Mr.
Vlasic disclaims any beneficial ownership of shares held by V&C Energy
Limited Partnership. Includes 98,292 shares of Common Stock underlying
presently exercisable options assigned by Mr. Vlasic to Vlasic Investments.
Excludes 70,208 shares of Common Stock underlying options assigned by Mr.
Vlasic to Vlasic Investments that are not presently exercisable.
CERTAIN TRANSACTIONS
TRANSACTIONS WITH DIRECTOR
In conjunction with the Merger, the Company repaid $1,050,000 in
non-convertible notes to T.W. Hoehn, Jr., a Director of the Company until
December 31, 1997, and Opal Air, Inc., an affiliate of T. W. Hoehn, Jr. Also
pursuant to the Merger Agreement, $5.1 million in convertible notes were
converted into 5.5 million shares of Common Stock. The holders of these notes
were directors and affiliates of directors of the Company. The conversions are
set forth in the table below.
NAME OF HOLDER AMOUNT SHARES ISSUED
-------------------- ------------ --------------
T. W. Hoehn, Jr. $ 295,720 369,650
T. W. Hoehn, III $ 265,128 331,410
William F. Seagle $ 50,986 63,732
RIMCO (1) $4,570,278 4,826,017
(1) Gary J. Milavec, a Director of the Company, is a Vice President of RIMCO
Associates, Inc.
TRANSACTION WITH RIMCO
In addition, the Company and RIMCO entered into a Note Purchase Agreement
on December 31, 1997, pursuant to which the RIMCO Lenders provided the Company
with $10.0 million in new financing. See Item 1. "Description of Business-Recent
Developments" and Item 6. "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources-Current
RIMCO Financing".
10
<PAGE>
The Company is the operator for certain properties and prospects where
affiliates of RIMCO have a direct or indirect interest as follows:
(1) The Company is the operator and direct owner of a 12% working interest
in the East and West Refugio prospects located in Refugio County,
Texas. Certain affiliates of RIMCO also have direct working interests
in these prospects.
(2) The Company is providing certain operating and administrative
services, for a monthly fee, to an affiliate of RIMCO related to the
operation of certain fields located in Montana and North Dakota.
All operating and management fees charged by the Company to related
parties are arms-length and based on rates for comparable services prevailing in
the industry.
TRANSACTION WITH CLIFFWOOD PARTNERSHIP
On May 4, 1998, the Company, through its wholly-owned subsidiary,
Cliffwood Oil & Gas Corp. ("Cliffwood"), acquired all of the assets of the
Cliffwood Acquisition 1996 Limited Partnership, an affiliated partnership, in
which a Company subsidiary served as general partner and owned a 10% direct
partnership interest. The net effect of the acquisition was to acquire all of
the non-affiliated limited partners' share of partnership assets. The purchase
price was $4,430,000 cash and 858,000 shares of the Company's common stock. The
Company financed the cash portion of the acquisition with its existing bank
credit facility.
OTHER MATTERS
REQUIRED VOTE
Only holders of Common Stock as of the Record Date will be entitled to
vote in person or by proxy at the meeting. A majority of issued and outstanding
shares of Common Stock as of the Record Date represented at the meeting in
person or by proxy will constitute a quorum for the transaction of business.
Abstentions and broker non-votes will be counted for purposes of determining the
presence or absence of a quorum. Provided that a quorum is present at the
meeting, the seven Director nominees who receive the greater number of votes
cast for election by stockholders entitled to vote therefore will be elected
directors. Votes withheld in connection with the election of one or more
Director nominees will not be counted as votes cast for such individuals. Votes
will be tabulated by Chase Mellon Shareholder Services LLC, the transfer agent
and registrar for the Common Stock, and the results will be certified by the
inspector of election who is required to resolve impartially any interpretive
questions as to the conduct of the vote. In tabulating votes, a record will be
made of the number of shares (a) voted for each nominee, (b) with respect to
which authority to vote for each nominee has been withheld, and (c) present at
the meeting but not voting.
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INDEPENDENT ACCOUNTANTS
The Company has engaged Arthur Andersen LLP as its independent
accountants as of March 4, 1998. The Company did not consult Arthur Andersen LLP
on any accounting, audit or financial reporting issue during its two most recent
fiscal years or through March 4, 1998. Arthur Andersen LLP served as auditors of
Cliffwood Oil & Gas Corp., prior to its merger with the Company. The Audit
Committee recommends that Arthur Andersen be appointed as the independent
accountant. Representatives of Arthur Andersen LLP are expected to be present at
the annual meeting, will have an opportunity to make a statement if they desire
to do so, and are expected to be available to respond to appropriate questions.
PREVIOUS INDEPENDENT ACCOUNTANTS
Texoil, the Company, dismissed BDO Seidman LLP ("BDO") as its principal
independent accountant on March 4, 1998.
The reports of BDO on the Company's financial statements for the last two
fiscal years did not contain an adverse opinion or a disclaimer of opinion, nor
was such opinion qualified or modified as to uncertainty, audit scope, or
accounting principles, except that it was modified as to uncertainty as follows:
"The Company has suffered recurring operating losses and has a working
capital deficit that raises substantial doubt about its ability to meet future
expenditure obligations necessary to fully evaluate and develop its oil and gas
properties and to continue as a going concern. The consolidated financial
statements do not reflect any adjustments that might result from the outcome of
these uncertainties. In this regard the Company entered into the financing
arrangement described in NOTE 4 in order to meet its working capital
requirements and to pursue its exploration opportunities. Despite the Company's
successful efforts to obtain initial financing for its 1997 exploratory drilling
program there can be no assurance that such financing will be sufficient to
fully fund the drilling program or that the results of drilling operations will
be successful".
The decision to change accountants was approved by the Company's Audit
Committee.
In connection with its audits for the two most recent fiscal years and
subsequent interim period preceding the replacement of BDO, the Company had not
disagreements with BDO or any matter of accounting principles or practices,
financial statement disclosure, or audit scope or procedure, which disagreements
if not resolved to the satisfaction of BDO would have caused them to make
reference thereto in their report on the financial statements for such years.
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<PAGE>
OWNERSHIP REPORTS
Section 16(a) of the 1934 Act requires the Company's officers, directors
and persons who own more than 10% of its Common Stock to file with the
Securities and Exchange Commission reports of their ownership and changes of
ownership of Common Stock. These persons are required to furnish the Company
copies of all Section 16(a) reports that they file. Based solely upon a review
of reports and related written representations received by it, the Company
believes that all required reports were filed on a timely basis during and in
respect of the fiscal year ended 1997, except for the following:
On October 31, 1997, T. W. Hoehn, Jr. filed Form 4 reporting transactions
occurring in April and September 1997. In addition, the Form 4 for T. W. Hoehn,
III for December 1996 was filed three days late and the Form 4 for Ruben Medrano
and Walter L. Williams for March 1997, were filed four days late.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for action to be included
in the proxy statement and form of proxy relating to the Company's 1998 annual
stockholders' meeting must submit the proposal to the Company on or before July
31, 1998. Any such proposals should be timely sent by certified mail, return
receipt requested, to the Secretary of the Company, 110 Cypress Station Drive,
Suite No. 220, Houston, Texas, 77090-1629.
AVAILABILITY OF ANNUAL REPORT
The Company is including herewith a copy of its quarterly reports on
Form 10-QSB for the period June 30, 1998, and September 30, 1998, and reports on
Form 8-K, dated May 4, 1998. The Company's annual report on Form 10-KSB for the
fiscal year ended December 31, 1997 and its quarterly report on Form 10-QSB for
the period ended March 31, 1998 were mailed previously.
By Order of the Board of Directors,
Jerry M. Crews
Secretary
October 23, 1998
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON DECEMBER 11, 1998
The undersigned hereby appoints Frank A. Lodzinski and Jerry M. Crews, and
each of them, either one of whom may act without joinder of the other, each with
full power of substitution and ratification, attorneys and proxies of the
undersigned to vote all shares of Texoil, Inc., which the undersigned is
entitled to vote at the annual meeting of stockholders to be held at the Houston
Marriott North at Greenspoint, 255 North Sam Houston Parkway East, Houston,
Texas 77060 on Friday, December 11, 1998, at 2:00 P.M., and at any adjournment
thereof.
This proxy will be voted in accordance with the specifications made hereon.
IF NO CONTRARY SPECIFICATION IS MADE, THEN THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE SEVEN DIRECTOR NOMINEES NAMED IN ITEM 1.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and the Proxy Statement furnished herewith. PLEASE DATE, SIGN
AND RETURN THIS PROXY PROMPTLY in the enclosed, pre-addressed stamped envelope.
(Continued, and to be dated and signed on the reverse side.)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ELECTION OF DIRECTORS [ ] FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] EXCEPTIONS
listed below for all nominees listed below
</TABLE>
Nominees: Frank A. Lodzinski, Jerry M. Crews, T. W. Hoehn III, Gary J. Milavec,
Robert E. LaJoie, Thomas A. Reiser, Michael A. Vlasic.
INSTRUCTION: To withhold authority to vote for any individual nominee, mark the
"Exception" box and write that nominee's name in the space provided below.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
APPROVAL OF APPOINTMENT OF ARTHUR ANDERSEN LLP [ ] FOR [ ] AGAINST
In their discretion, upon such other matters (including procedures and other
matters relating to the conduct of the meeting) which may properly come before
the meeting and any adjournment thereof.
Please sign exactly as your name
appears on your stock certificate. When
signing as executor, administrator,
trustee or other representative, please
give your full title. All joint owners
should sign.
Dated: _______________________ 1998
_______________________________________
Signature(s) of Stockholders
Sign, date, and return the
Proxy Card Promptly Using _______________________________________
the Enclosed Envelope. Signature(s) of Stockholders
FOLD AND DETACH HERE
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