<PAGE> 1
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]
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 sec. 240.14a-11(c) or sec. 240.14a-12
TRANSTEXAS GAS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) 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 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(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> 2
TRANSTEXAS GAS CORPORATION
1300 EAST NORTH BELT, SUITE 310
HOUSTON, TEXAS 77032
____________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 27, 1997
____________________
To the Stockholders of
TRANSTEXAS GAS CORPORATION:
Notice is hereby given that the Annual Meeting of Stockholders of
TransTexas Gas Corporation, a Delaware corporation (the "Company"), will be
held on Monday, January 27, 1997, beginning at 10:00 a.m., local time, at the
Hotel Sofitel, 425 N. Sam Houston Parkway East, Houston, Texas 77060, for the
following purposes:
1. To elect three persons, as Class III directors of the Company,
to hold office for a term of three years or until their
successors are elected and qualified; and
2. To transact any other business as may properly come before the
Annual Meeting or any postponements or adjournments thereof.
The Board of Directors has fixed the close of business on December 6,
1996 as the record date for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting or any adjournment thereof. Only
stockholders of record at the close of business on the record date are entitled
to notice of and to vote at the Annual Meeting. A complete list of such
stockholders will be available for inspection at the offices of the Company in
Houston, Texas, during regular business hours for a period of 10 days before
the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting.
STOCKHOLDERS ARE URGED, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND TO RETURN IT PROMPTLY IN
THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. You may revoke the proxy at any
time before the proxy is exercised by delivering written notice of revocation
to the Secretary of the Company, by delivering a subsequently dated proxy, or
by voting in person at the Annual Meeting.
By Order of the Board of Directors
/s/ ED DONAHUE
Ed Donahue, Secretary
Houston, Texas
January 7, 1997
<PAGE> 3
TRANSTEXAS GAS CORPORATION
1300 EAST NORTH BELT, SUITE 310
HOUSTON, TEXAS 77032
(PRINCIPAL EXECUTIVE OFFICES)
_____________________________
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
_____________________________
This Proxy Statement is furnished to the stockholders of TransTexas
Gas Corporation, a Delaware corporation (the "Company"), in connection with the
solicitation of proxies on behalf of the Board of Directors of the Company for
use at the annual meeting of stockholders ("Annual Meeting") to be held at the
Hotel Sofitel, 425 N. Sam Houston Parkway East, Houston, Texas 77060 at 10:00
a.m. on Monday, January 27, 1997, and at any postponements or adjournments
thereof. Proxies in the form enclosed will be voted at the Annual Meeting if
properly executed, returned to the Company prior to the Annual Meeting, and not
revoked. The approximate date on which this Proxy Statement and the enclosed
proxy card will first be sent to stockholders is January 7, 1997.
REVOCABILITY OF PROXY
Your proxy may be revoked at any time before it is voted by delivering
written notice of revocation to the Secretary of the Company, by executing and
delivering a subsequently dated proxy, or by voting in person at the Annual
Meeting. Your attendance at the Annual Meeting will not constitute automatic
revocation of the proxy.
ACTION TO BE TAKEN AT THE ANNUAL MEETING
Where stockholders have appropriately specified how their proxies are
to be voted, they will be voted accordingly. UNLESS OTHERWISE SPECIFIED, THE
ACCOMPANYING PROXY WILL BE VOTED FOR THE ELECTION AS CLASS III DIRECTORS OF THE
NOMINEES LISTED UNDER "ELECTION OF DIRECTORS."
OUTSTANDING CAPITAL STOCK
The record date for determining stockholders entitled to vote at the
Annual Meeting is December 6, 1996. At the close of business on that day,
there were 74,000,000 shares of the Company's Common Stock, $0.01 par value
("Common Stock"), outstanding and entitled to vote at the Annual Meeting.
QUORUM AND VOTING REQUIREMENTS
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock is necessary to constitute a quorum at
the Annual Meeting. Abstentions, withheld votes and broker non-votes will be
counted towards a quorum. If a quorum is not present in person or represented
by proxy at the Annual Meeting, the stockholders who are present or represented
by proxy at the Annual Meeting have the power to adjourn the Annual Meeting
from time to time without notice other than an announcement at the Annual
Meeting, until a quorum is present or represented by proxy. At any such
adjourned Annual Meeting at which a quorum is present or represented by proxy,
any business may be transacted that might have been transacted at the
originally scheduled Annual Meeting.
In deciding all questions, a holder of Common Stock is entitled to one
vote, in person or by proxy, for each share held in his or her name on the
record date. With respect to the election of directors, votes may be cast in
favor or withheld. Directors are elected by a plurality of the votes cast at
the Annual Meeting, and votes that are withheld will be excluded entirely from
the vote and will have no effect. Stockholders may not cumulate their votes in
the election of directors. Abstentions will have the same effect as a vote
against a proposal other than the election of directors. Under applicable
Delaware law, a broker non-vote (that is, shares that have been voted by the
broker on at least one matter but not on the matter in question) will have no
effect on the outcome of the election of directors, but will have the same
effect as a vote against any other proposal.
<PAGE> 4
PERSONS MAKING THE SOLICITATION
The accompanying proxy is being solicited by the Board of Directors of
the Company. The cost of soliciting your proxy will be borne entirely by the
Company and no other person or persons will bear such costs either directly or
indirectly. In addition to the use of the mails, proxies may be solicited in
person or by other means of communication by directors, officers and employees
of the Company. Directors, officers and employees of the Company will not be
compensated for such solicitation, but may be reimbursed for their
out-of-pocket expenses in connection with such solicitation. Arrangements are
also being made with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation materials to the beneficial
owners of Common Stock at the Company's expense.
ANNUAL REPORT
A copy of the transition report on Form 10-K for the transition period
from August 1, 1995 to January 31, 1996 ("Transition Report"), which includes
financial statements, is being mailed with this Proxy Statement. The
Transition Report does not form any part of the material for the solicitation
of proxies.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON WHOSE PROXY
IS SOLICITED HEREBY, A COPY OF THE EXHIBITS TO THE COMPANY'S TRANSITION REPORT
UPON WRITTEN REQUEST TO ED DONAHUE, SECRETARY, TRANSTEXAS GAS CORPORATION, 1300
EAST NORTH BELT, SUITE 310, HOUSTON, TEXAS 77032.
ITEM 1.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation, as amended, provides that
the Board of Directors shall be divided into three classes, designated Class I,
Class II, and Class III. The Board of Directors presently consists of five
directors: one in Class I, one in Class II, and three in Class III, whose terms
of office expire with the 1997, 1998, and 1996 annual meetings, respectively,
and when their successors are elected and qualified.
At each annual meeting, directors are chosen for three-year terms to
succeed those in the class whose term expires at that annual meeting. At the
1996 annual meeting, stockholders will elect three Class III directors to
serve until the 1999 annual meeting of stockholders and until their successors
are elected and qualified. The Board of Directors has nominated three persons
to serve as Class III directors of the Company: James R. Lesch, Robert L. May
and Donald D. Sykora, all of whom presently serve as Class III directors of the
Company. All of the nominees have expressed an intention to serve the entire
term for which election is sought.
Set forth below is certain information concerning the persons
nominated for election as Class III directors of the Company.
James R. Lesch, 75, has been a director of the Company since August
1993 and is currently a director of TransTexas Transmission Corporation, a
wholly owned subsidiary of the Company ("Transmission"), YPF Sociedad Anonima
and Maxus Energy Corporation. He is retired from Hughes Tool Company, where he
was the Chairman and Chief Executive Officer. Mr. Lesch was with Hughes Tool
Company for 40 years. Mr. Lesch is a former director of Raymond International,
Borg-Warner Corporation, Texas Commerce Bancshares, Dun & Bradstreet
Corporation, Houston Industries, Inc., Houston Lighting & Power Company, and
Rowan Companies, Inc.
Robert L. May, 72, has been a director of the Company since August
1993. Mr. May is also a director of Transmission. He is retired from Arthur
Andersen & Co., where he was a Senior Partner. Mr. May was a partner with
Arthur Andersen & Co. for over 25 years. He has served as Chairman of the
Board of the American Institute of Certified Public Accountants and as
President of the International Federation of Accountants. He is a former
director of Christiana General Insurance Corporation of New York, Integrated
Resources, Inc. and Fairchild Industries, Inc.
2
<PAGE> 5
Donald D. Sykora, 66, has been a director of the Company since August
1993. Mr. Sykora is also a director of Transmission. He is the former
President and Chief Operating Officer of Houston Industries, Inc., where he is
currently attached to the Office of the Chairman, with responsibility for
special projects. Mr. Sykora has been with Houston Industries, Inc. or its
subsidiaries for 41 years. Mr. Sykora is a former director of Houston
Industries, Inc., Houston Lighting & Power Co., Utility Fuels, Inc. and KBLCOM
Incorporated. He currently serves as a director of Powell Industries, Inc.,
Pool Oil Field Services, Inc. and American Residential Services, Inc.
THE BOARD OF DIRECTORS HAS NOMINATED THE ABOVE-REFERENCED DIRECTORS
FOR ELECTION BY THE STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF
THE NOMINEES LISTED ABOVE. THE ELECTION OF THESE DIRECTORS REQUIRES A
PLURALITY OF THE VOTES CAST BY THE HOLDERS OF SHARES OF COMMON STOCK PRESENT OR
REPRESENTED BY PROXY AT THE ANNUAL MEETING AND ENTITLED TO VOTE IN THE ELECTION
OF DIRECTORS.
Set forth below is certain information concerning the directors
continuing in office.
Director of Class I to continue in office until 1997:
John R. Stanley, 57, has been a director and Chief Executive Officer
of the Company since May 1993. Mr. Stanley is also a director and the Chief
Executive Officer of Transmission, TransAmerican Energy Corporation ("TEC") and
TransAmerican Refining Corporation ("TARC"). Mr. Stanley is also the founder,
Chairman of the Board, Chief Executive Officer, and sole stockholder of TNGC
Holdings Corporation ("TNGC Holdings"), which is the sole stockholder of
TransAmerican Natural Gas Corporation ("TNGC"), which is the indirect majority
stockholder of the Company. He has operated TNGC for the past 36 years. Mr.
Stanley is the father-in-law of Alan E. Drane, the Vice President of Operations
for the Company.
Director of Class II to continue in office until 1998:
Thomas B. McDade, 73, has been Chairman of the Board of the Company
since May 1993. Mr. McDade is also a director of Transmission, TEC and TARC.
Mr. McDade is primarily engaged in managing his personal investments and in
providing consulting services in Houston, Texas. Mr. McDade was a director of
TNGC from 1985 to 1995. Prior to 1989, he served as a consultant to Texas
Commerce Bancshares, Inc. and prior to July 1985 he served as Vice Chairman and
Director of Texas Commerce Bancshares, Inc. and Vice Chairman and Advisory
Director of Texas Commerce Bank. Mr. McDade served as a director and trustee
of eleven registered investment companies from 1985 to 1995 for which John
Hancock Funds now serves as investment advisor in Boston, Massachusetts. He is
recently retired as a director of Houston Industries, Inc. and Houston Lighting
& Power Company. He is a former member of the Board of Managers of the Harris
County Hospital District and former Chairman of the State Securities Board of
Texas.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met 14 times during the transition period ended
January 31, 1996. During the transition period, all directors, other than Mr.
Stanley, attended at least 75% of all meetings of the Board of Directors and
each of the committees on which they served. Mr. Stanley attended
approximately 64% of such meetings.
The Company has an Audit Committee and a Compensation Committee, but
no Nominating Committee.
The Audit Committee is composed of Messrs. Lesch, May, and Sykora.
The Audit Committee reviews the scope of the independent auditors' examinations
of the Company's financial statements and receives and reviews their reports.
The Audit Committee meets with the independent auditors, receives
recommendations or suggestions for changes in accounting procedures, and
initiates or supervises any special investigations it may choose to undertake.
The Audit Committee met one time during the transition period ended January 31,
1996.
3
<PAGE> 6
The Compensation Committee is composed of Messrs. Lesch, Sykora, and
McDade. The Compensation Committee determines the nature and amount of
compensation of the Company's executive officers. The Compensation Committee
met one time during the transition period ended January 31, 1996.
DIRECTOR COMPENSATION
Each director is paid an annual director's fee of $75,000 plus $750
for each meeting of the Board of Directors attended and $750 for each meeting
of a committee of the Board of Directors attended (exclusive of committee
meetings occurring on the same day as Board of Directors meetings).
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers, and holders of more than
10% of the Common Stock to file with the Securities and Exchange Commission
("SEC") and Nasdaq initial reports of ownership and reports of changes in
ownership of the Common Stock. Such persons are required by SEC regulations to
furnish the Company with copies of all Section 16(a) reports they file with the
SEC. During the current fiscal year ending January 31, 1997, TARC, TEC, TNGC,
TNGC Holdings and John R. Stanley each filed one late report with respect to a
sale. In addition, Messrs. Sykora and Lesch each filed one late report with
respect to a transfer. During the transition period ended January 31, 1996,
Mr. Stanley filed one late report with respect to a purchase.
EXECUTIVE OFFICERS
The following persons serve as executive officers of the Company:
<TABLE>
<CAPTION>
Name Office Age
---- ------ ---
<S> <C> <C>
John R. Stanley Chief Executive Officer 57
Arnold H. Brackenridge President and Chief Operating Officer 63
Edwin B. Donahue Vice President, Chief Financial Officer, and Secretary 46
Richard P. Bianchi Vice President and General Counsel 44
Alan E. Drane Vice President of Operations 35
</TABLE>
Set forth below is a description of the business experience of each of
the executive officers. Information concerning the business experience of Mr.
Stanley is provided above under "Election of Directors."
Arnold H. Brackenridge has been President and Chief Operating Officer
of the Company since May 1993. Mr. Brackenridge is also the President of
Transmission. Mr. Brackenridge was the President and Chief Executive Officer
of Wintershall Energy, a business group of BASF Corporation, from 1984 until
June 1992. Mr. Brackenridge has worked in the domestic and international oil
and gas industry for 38 years.
Edwin B. Donahue has been Vice President, Chief Financial Officer and
Secretary of the Company since May 1993 and also serves as Vice President,
Chief Financial Officer and Secretary of Transmission and Vice President and
Secretary of TNGC. Mr. Donahue has been employed in various positions with
TNGC for 20 years.
Richard P. Bianchi has been Vice President and General Counsel since
June 1995. From 1990 to June 1995, he was Judge of the 333rd State District
Court in Harris County, Texas. Prior to 1990, he was a partner in Bivin and
Bianchi, a business and civil litigation firm in Houston, Texas.
Alan E. Drane has been Vice President of Operations of the Company and
of Transmission since November 1995. Mr. Drane has held various production,
engineering, purchasing and operational positions with the Company and its
affiliates since March 1993. Prior to joining the Company, Mr. Drane was a
Senior Testing Engineer with the Teledynamics division of Hamilton Standard, a
subsidiary of United Technologies Corp. Mr. Drane is a son-in-law of Mr.
Stanley.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid during the fiscal
years ended July 31, 1993, 1994, 1995 and the transition period ended January
31, 1996 to the Chief Executive Officer and each other executive officer whose
total annual salary and bonus exceeded $100,000 in the fiscal year ended July
31, 1995 ("Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
============================================================================================
ANNUAL COMPENSATION
- --------------------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITION FISCAL OTHER ANNUAL
IN THE COMPANY YEAR SALARY BONUS COMPENSATION(a)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John R. Stanley (b) . . . . . . . 1993 $350,000 $1,500,000 --
Chief Executive Officer 1994 350,000 -- $ 4,620
1995 369,521 -- 4,620
1996* 175,000 -- 807
- --------------------------------------------------------------------------------------------
Arnold H. Brackenridge (c) . . . 1993 $ 32,981 -- --
President and Chief Operating 1994 175,000 -- $ 80
Officer 1995 221,154 -- 1,454
1996* 137,449 $ 85,397(e) 144
- --------------------------------------------------------------------------------------------
Edwin B. Donahue (b) . . . . . . 1993 $125,008 -- $ 3,750
Vice President, Chief Financial 1994 134,234 -- 3,997
Officer and Secretary 1995 149,423 -- 4,364
1996* 90,384 $ 85,397(e) 1,110
- --------------------------------------------------------------------------------------------
Richard Bianchi (d) . . . . . . . 1995 $ 11,538 -- --
Vice President and General Counsel 1996* 107,692 -- --
============================================================================================
</TABLE>
____________________________
* Six months ended January 31, 1996 ("Transition Period")
(a) Reflects amounts contributed under the Company's Savings Plan. Certain
of the Company's executive officers receive personal benefits in addition
to salary and cash bonuses. The aggregate amount of such personal
benefits, however, does not exceed the lesser of $50,000 or 10% of the
total of the annual salary and bonus reported for the named executive
officer and accordingly, such amounts have been excluded from the table.
(b) Prior to August 1993, Messrs. Stanley and Donahue were employed and
compensated by TNGC.
(c) Mr. Brackenridge joined the Company in May 1993.
(d) Mr. Bianchi joined the Company in June 1995.
(e) These bonuses were paid in fiscal 1997 as compensation for services
rendered during the Transition Period.
EMPLOYMENT AGREEMENTS
In June 1995, the Company and Mr. Bianchi entered into a one-year
employment agreement which provided for an annual salary of $200,000. In
August 1996, the Company and Mr. Bianchi entered into a new employment
agreement which provides for an annual salary of $214,000 and which terminates
on August 12, 1997. This employment agreement provides that if Mr. Bianchi's
employment is terminated prior to the term of the agreement, the Company is
required to pay Mr. Bianchi his salary for the remaining term of the agreement
plus an additional six months' salary.
5
<PAGE> 8
In August 1996, the Company and Mr. Brackenridge entered into an
employment agreement which provides for an annual salary of $295,000 and which
terminates on August 12, 1997. If Mr. Brackenridge's employment is terminated
prior to the term of the agreement, the Company is required to pay Mr.
Brackenridge his salary for the remaining term of the agreement plus an
additional six months' salary.
SAVINGS PLAN
The Company maintains a long-term savings plan (the "Savings Plan") in
which eligible employees of the Company and certain of its affiliates may elect
to participate. Each employee becomes eligible to participate in the Savings
Plan on January 1 or July 1 following the completion of one year of service
with the Company or its participating affiliates and attainment of age 21.
The Savings Plan is intended to constitute a qualified plan under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code") and
contains a salary reduction arrangement described in Section 401(k) of the
Code.
Each participant may elect to reduce his compensation by a percentage
equal to 2% to 15% and the Company will contribute that amount to the Savings
Plan on a pre-tax basis on behalf of the participant. The Code limits the
annual amount that a participant may elect to have contributed on his behalf on
a pre-tax basis to the Savings Plan. For 1996, this limit is $9,500. The
Company presently makes a matching contribution in an amount equal to 10%, 20%,
or 50% of the amount elected to be contributed by each participant on a pre-tax
basis, up to a maximum of 3% of each participant's compensation, depending on
whether the employee has been a participant in the Savings Plan for one year,
two years, or three years. Each participant also may elect to contribute up to
10% of his compensation to the Savings Plan on an after-tax basis. The Code
imposes nondiscrimination tests on contributions made to the Savings Plan
pursuant to participant elections and on the Company's matching contributions,
and limits amounts which may be allocated to a participant's Savings Plan
account each year. In order to satisfy the nondiscrimination tests,
contributions made on behalf of certain highly compensated employees (as
defined in the Code) may be limited. Contributions made to the Savings Plan
pursuant to participant elections and matching contributions are at all times
100% vested. Contributions to the Savings Plan are invested, according to
specified investment options selected by the participants, in investment funds
maintained by the trustee of the Savings Plan. Generally, a participant's
vested benefits will be distributed from the Savings Plan as soon as
administratively practicable following a participant's retirement, death,
disability, or other termination of employment. In addition, a participant may
elect to withdraw his after-tax contributions from the Savings Plan prior to
his termination of employment, and subject to strict limitations and
exceptions, the Savings Plan provides for withdrawals of a participant's
pre-tax contributions prior to a participant's termination of employment, in
the event of the participant's severe financial hardship or attainment of age
59 1/2. The Savings Plan may be amended or terminated by the Board of
Directors of the Company. As of October 31, 1996, approximately 1,526
employees were eligible to participate in the Savings Plan, including Messrs.
Stanley, Brackenridge, Donahue and Bianchi.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Lesch, Sykora, and McDade are members of the Company's
Compensation Committee. During the transition period ended January 31, 1996,
none of the members was an officer or employee of the Company or any of its
subsidiaries, and none had any relationship with the Company requiring
disclosure under Item 404 of Regulation S-K.
6
<PAGE> 9
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors has furnished the
following report on the Company's executive compensation program. The report
describes the Compensation Committee's policies applicable to the Company's
executive officers and provides specific information regarding the compensation
of the Company's Chief Executive Officer.
The Compensation Committee, which consists of directors Lesch, McDade and
Sykora, administers and oversees the Company's executive compensation program.
The Committee is also responsible for the review of the objectives, structure,
cost and administration of the Company's compensation and benefit policies and
programs. The Committee was created in August 1993 and met once during the
Transition Period.
The Committee's basic policy is to ensure that salary levels and
compensation incentives are designed to attract and retain qualified
individuals in key positions and are commensurate with the level of executive
responsibility, the type and scope of the Company's operations, and the
Company's financial condition and performance. The goal of the policy is to
promote the attainment of the financial and strategic objectives of the Company
and, thus, enhance stockholder value.
The Committee receives recommendations from the Company's Chief Executive
Officer with respect to salaries, bonuses and other compensation to be paid to
the Company's executive officers. The Committee reviews these recommendations
and takes such action as it deems appropriate.
Currently, the base salaries of the Company's executive officers may be
augmented at the discretion of the Compensation Committee by the award of
performance-based cash bonuses. The Compensation Committee has not followed a
formal policy with respect to the award of bonuses; however, the factors
enumerated above are considered in determining bonus awards. A formal policy
may be formulated in response to Section 162(m) of the Internal Revenue Code,
which limits the deductibility of executive compensation in excess of $1
million. The Company does not currently grant stock options to any of its
executive officers or key employees. In fiscal 1997, the Committee determined
to pay a cash bonus to Messrs. Brackenridge and Donahue for services rendered
by them during the Transition Period.
As described above, the Compensation Committee determines the pay level
for all executives, including the Chief Executive Officer. Mr. Stanley is paid
a base salary and is eligible for a performance-based cash bonus. Although Mr.
Stanley did not receive a bonus for services rendered during the Transition
Period, future performance-based bonuses will be based upon quantifiable
objectives so as to comply with Section 162(m) of the Code.
This report shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
The Compensation Committee
of the Board of Directors
James R. Lesch
Donald D. Sykora
Thomas B. McDade
7
<PAGE> 10
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
the Common Stock from March 10, 1994 to January 31, 1996, with the cumulative
total stockholder return on the Nasdaq Stock Market Index and a peer group
(which includes Anadarko Petroleum Corp., Apache Corp., Burlington Resources,
Inc., Enron Oil & Gas Co., Mesa, Inc., Newfield Exploration Co., Noble
Affiliates, Inc., Seagull Energy Corp., and United Meridian Corp.) over the
same period. The comparison assumes a $100 investment on March 10, 1994 in the
Common Stock, the Nasdaq Stock Market Index, and the peer group, and assumes
reinvestment of all dividends and distributions.
<TABLE>
<CAPTION>
10Mar94 Mar94 Apr94 May94 Jun94 Jul94 Aug94
<S> <C> <C> <C> <C> <C> <C> <C>
TRANSTEXAS GAS CORP. 100 89 90 84 85 81 83
NASDAQ INDEX 100 94 93 93 90 92 98
PEER GROUP 100 102 114 108 109 101 98
</TABLE>
<TABLE>
<CAPTION>
Sep94 Oct94 Nov94 Dec94 Jan95 Feb95 Mar95
<S> <C> <C> <C> <C> <C> <C> <C>
TRANSTEXAS GAS CORP. 81 95 86 80 75 81 80
NASDAQ INDEX 97 99 96 96 97 102 105
PEER GROUP 99 109 93 90 86 97 106
</TABLE>
<TABLE>
<CAPTION>
Apr95 May95 Jun95 Jul95 Aug95 Sep95 Oct95
<S> <C> <C> <C> <C> <C> <C> <C>
TRANSTEXAS GAS CORP. 95 103 108 106 127 129 114
NASDAQ INDEX 108 111 120 128 131 134 133
PEER GROUP 101 107 99 100 108 103 96
</TABLE>
<TABLE>
<CAPTION>
Nov95 Dec95 Jan96
<S> <C> <C> <C>
TRANSTEXAS GAS CORP. 113 96 84
NASDAQ INDEX 136 136 136
PEER GROUP 102 111 106
</TABLE>
8
<PAGE> 11
SECURITY OWNERSHIP OF
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock, as of December 6, 1996, by (i) each
director and director nominee, (ii) each Named Executive Officer, (iii) each
person known to the Company to beneficially own more than five percent of the
outstanding shares of Common Stock, and (iv) all directors and executive
officers of the Company as a group. Except as otherwise indicated, each
stockholder identified in the table has sole voting and investment power with
respect to its or his shares.
<TABLE>
<CAPTION>
Shares Owned
------------------------------
Name and Address Number Percentage
- ---------------- --------- ----------
<S> <C> <C>
John R. Stanley (1) 59,357,600 80.21%
1300 East North Belt, Suite 310
Houston, Texas 77032
TNGC Holdings Corporation (2) 59,350,000 80.20%
1300 East North Belt, Suite 310
Houston, Texas 77032
TransAmerican Natural Gas Corporation (3) 59,350,000 80.20%
1300 East North Belt, Suite 300
Houston, Texas 77032
TransAmerican Energy Corporation (4) 50,450,000 68.18%
1300 East North Belt, Suite 200
Houston, Texas 77032
TransAmerican Refining Corporation 10,450,000 14.12%
1300 East North Belt, Suite 320
Houston, Texas 77032
Thomas B. McDade 100,000 *
Arnold H. Brackenridge 3,500 *
Edwin B. Donahue 1,400 *
James R. Lesch (5) 1,000 *
Robert L. May 1,000 *
Donald D. Sykora (6) 1,000 *
Richard Bianchi -- --
All directors and executive officers
as a group (10 persons) 59,465,700 80.36%
</TABLE>
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* Less than 1% of the outstanding shares of the Company.
(1) Mr. Stanley owns 3,500 shares of Common Stock. Mr. Stanley is the
sole stockholder of TNGC Holdings, and may be deemed to beneficially
own all of the shares of Common Stock owned beneficially by TNGC
Holdings. Mr. Stanley is also deemed to beneficially own 4,100
shares held by his wife.
(2) TNGC Holdings owns all of the shares of common stock of TNGC, and may
be deemed to beneficially own all of the shares of Common Stock owned
beneficially by TNGC.
(3) TNGC owns 5,200,000 shares of Common Stock. TNGC also owns all of the
common stock of TEC and all of the common stock of TransAmerican
Exploration Corporation ("TEXC"), which owns 3,700,000 shares of
Common Stock. TNGC may be deemed to beneficially own all of the
shares of Common Stock held and owned beneficially by TEC and TEXC.
(4) TEC owns 40,000,000 shares of Common Stock. TEC also owns all of the
common stock of TARC, and may be deemed to beneficially own the
10,450,000 shares of Common Stock held by TARC.
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<PAGE> 12
(5) The Lesch Family Limited Partnership, of which Mr. Lesch is the sole
general partner and also a limited partner, owns 1,000 shares of Common
Stock; therefore, Mr. Lesch may be deemed to beneficially own the
1,000 shares held by The Lesch Family Limited Partnership.
(6) Sykora Interests Ltd., a limited partnership in which Mr. Sykora is a
managing general partner, owns 1,000 shares of Common Stock;
therefore, Mr. Sykora may be deemed to beneficially own the 1,000
shares held by Sykora Interests Ltd.
In connection with a public offering of debt securities by TARC, TEC
and TARC pledged the shares of Common Stock held by them to secure TARC's debt
securities and TEC's guarantee of TARC's debt securities. Under certain
circumstances, a sale of Common Stock upon foreclosure by the holders of the
TARC debt securities would constitute a "change of control" of the Company
under the indenture ("Indenture") governing the Company's 11 1/2% Senior
Secured Notes due 2002 (the "Notes"), which would allow the holders thereof to
require the Company to repurchase the Notes at a price equal to 101% of the
principal amount thereof plus accrued and unpaid interest.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1994, the Company entered into an interruptible gas sales
agreement with TNGC. Revenues from TNGC pursuant to this agreement totaled
approximately $11.1 million for the six months ended January 31, 1996 and
approximately $11.7 million for the nine months ended October 31, 1996. The
receivable from TNGC from natural gas sales totaled approximately $12 million
at October 31, 1996. Pursuant to this agreement, interest accrues on all
unpaid balances at a rate of prime plus 2% per annum.
The Company sells natural gas to TARC under an interruptible long-term
sales contract. Revenues from TARC under this contract totaled approximately
$1.4 million for the six months ended January 31, 1996 and $2.2 million for the
nine months ended October 31, 1996. The receivable from TARC for natural gas
sales totaled approximately $2.1 million at October 31, 1996.
In July 1995, the Company acquired certain oil leases in the Lodgepole
Prospect in North Dakota from TNGC for approximately $6.3 million, which amount
represented TNGC's cost for such leases. The Company continued to acquire
additional leases in the area. In October 1995, the Company sold an undivided
interest in its Lodgepole leases to TransDakota Oil Corporation ("TDOC"), a
subsidiary of TNGC. The sales price was $16,050,000, which amount represented
the cost to the Company of the interest sold. The Company and TDOC entered
into a joint operating agreement pursuant to which the Company will operate the
properties. In September 1996, the Company purchased these and other oil and
gas leasehold interests in the Lodgepole area from TDOC for approximately $20
million. The Company believes that the combination of these interests,
together with the Company's other interests in the Lodgepole area, will produce
a more marketable property package.
In September 1995, the Company made advances to TNGC in the aggregate
amount of $4.7 million. In October 1995, TNGC repaid the full amount of these
advances with interest at an annualized rate of 13%. In December 1995, TARC
advanced approximately $0.8 million to the Company which was subsequently
repaid with interest. The Company then advanced approximately $0.2 million to
TARC which will be repaid at a future date.
In October 1995, Mr. Stanley guaranteed the Company's $40 million line
of credit with BNY Financial Corporation.
As of January 1996, the Company and TransTexas Exploration Company, a
wholly owned subsidiary of the Company ("TTEX"), entered into a drilling
program, as defined in the Indenture governing the Notes. Pursuant to this
drilling program, TTEX received a portion of revenues, in the form of a
production payment, from certain of the Company's wells. The production
payment was transferred in consideration of a note payable in the amount of
$23.6 million issued by TTEX. In July 1996, TTEX transferred this production
payment to the Company in the form of a dividend, and the Company forgave the
$13.2 million remaining balance of the note payable.
In February 1996, the Company purchased the building for its corporate
headquarters from TNGC for $4 million.
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<PAGE> 13
In July 1996, TTEX loaned $9.5 million to TNGC pursuant to the terms
of a $25 million promissory note due July 31, 1998 that bears interest, payable
quarterly, at 15% per annum. TTEX has made further advances pursuant to the
note, subject to the same terms. The amount outstanding under this promissory
note totaled approximately $25 million at October 31, 1996. The Company
believes that the advances by TTEX to TNGC reduce the risk of tax
deconsolidation (and potential tax liability of the Company) that could be
caused by the sale of shares of the Company's common stock by TNGC or its
affiliates. TNGC did not make its scheduled October 31, 1996 interest payment.
The Services Agreement. TNGC, the Company, TARC and TEC are parties
to a Services Agreement (the "Services Agreement") pursuant to which the
Company provides drilling and workover, administrative and procurement,
accounting, legal, lease operating, and gas marketing services to TNGC, and
accounting and legal services to TARC and TEC. At TNGC's request, the Company
may, at its election, provide drilling and workover services. Compensation for
these services is determined by competitive bidding. TNGC obtains bona fide
bids for these services from three independent drillers. If the Company
provides these services, it is compensated in the amount of or at the rate set
forth in the lowest bid. In addition, to the extent TNGC requests
administrative and procurement services, it pays the Company $8,800 per well,
subject to annual adjustment based on the consumer price index. At TNGC's
request, the Company provides general accounting services to TNGC for a fee of
$3,000 per month. To the extent the Company operates TNGC's producing
properties and provides legal services other than general legal services
included in the monthly fee and costs of the Company's legal department
relating to the litigation for which the Company has assumed liability, TNGC
compensates the Company in an amount equal to its direct costs for such
services plus 10% of such costs. These additional legal services primarily
consist of litigation support and supervision. In addition, to the extent the
Company markets production from TNGC's properties, it receives a fee of $0.03
per MMBtu of TNGC's net production. The Company provides certain legal and
accounting services to TARC and TEC for a fee of $26,000 per month. The
Services Agreement will terminate (i) upon 30 days' notice to the Company by
the trustee under the Indenture governing the Notes after an event of default
under the Indenture or (ii) upon 30 days' notice from either party to the other
party. In accordance with the Indenture governing the Notes, other services
provided by the Company to TNGC must be on terms that are fair and reasonable
to the Company and at least as favorable to the Company as could be obtained on
an arm's length basis with unrelated parties. The receivable from TNGC for
drilling, workover and administrative services totaled approximately $19
million at October 31, 1996.
The Tax Allocation Agreement. TNGC and its subsidiaries, including
the Company, TEC and TARC, are parties to a Tax Allocation Agreement, the
general terms of which require TNGC and all of its subsidiaries to file federal
income tax returns as members of a consolidated group to the extent permitted
by law. Filing on a consolidated basis allows income and tax of one member to
be offset by losses and credits of another and allows deferral of certain
intercompany gains; however, each member is severally liable for the
consolidated federal income tax liability of the consolidated return group.
The Tax Allocation Agreement requires each of TNGC's subsidiaries to
pay to TNGC each year its allocable share of the federal income tax liabilities
of the consolidated group ("Allocable Share"). The Tax Allocation Agreement
provides for a reallocation of the group's consolidated federal income tax
liabilities among the members if the Internal Revenue Service ("IRS") or the
courts ultimately re-determine the group's regular tax or alternative minimum
tax liability. In the event of an IRS audit or examination, the Tax Allocation
Agreement generally gives TNGC the authority to compromise or settle disputes
and to control litigation, subject to the approval of the Company, TEC and
TARC, as the case may be, where such compromise or settlement affects the
determination of the separate tax liability of that company.
Under the Tax Allocation Agreement, each subsidiary's Allocable Share
for each tax year will generally equal the amount of federal income tax it
would have owed had it filed a separate federal income tax return for each year
except that each subsidiary will be able to utilize net operating losses and
credits of the other members of the consolidated group effectively to defer
payment of tax liabilities that it would have otherwise owed had it filed a
separate federal income tax return. Each subsidiary will essentially pay the
deferred taxes at the time TNGC (or the member whose losses or credits are
utilized by such subsidiary) begins generating taxable income or tax. This
will have the effect of deferring a portion of such subsidiary's tax liability
to future years.
11
<PAGE> 14
In addition to its Allocable Share, the Company agreed to pay the
following amounts:
(a) the amount of federal income or alternative minimum tax due
and payable by TNGC after the August 1993 transfer of TNGC's natural
gas exploration, production and transmission businesses to the Company
(the "Asset Transfer") for the taxable year ended July 31, 1994, to
the extent attributable to the Asset Transfer; and the amount of the
Texas franchise tax due and payable by TNGC after the Asset Transfer
for the privilege periods ending after December 31, 1993, but in no
event later than the privilege period ending on December 31, 1995, to
the extent attributable to the Asset Transfer; and
(b) each year, an amount equal to the lesser of (i) the reduction
in taxes paid by the Company for such year as a result of any increase
in the tax basis of assets acquired by the Company from TNGC that is
attributable to the Asset Transfer, and (ii) the increase in taxes
paid by TNGC for such year and all prior years attributable to gain
recognized by TNGC in connection with the contribution of assets by
TNGC to the Company (less amounts paid by the Company under clause (a)
above or under this clause (b) for all prior years).
The Transfer Agreement. Pursuant to the Asset Transfer Agreement
among TNGC, the Company, Transmission, and Mr. Stanley, TNGC assigned and
transferred to the Company all operating assets relating to its natural gas
exploration, production, and transportation business, subject to the existing
liens on those assets, other than (i) certain mineral interests that are
subject to restriction on transfer pursuant to the terms of the instruments
evidencing those interests, (ii) capital stock of any of its subsidiaries, and
(iii) all cash and accounts receivable in the amount of $37 million.
The Company assumed substantially all liabilities relating to TNGC's
natural gas exploration, production, and transportation business other than
those attributable to the excluded assets and assumed liability for ongoing
proceedings involving disputed claims in TNGC's bankruptcy. With respect to
other litigation to which TNGC was a party at the time of the Asset Transfer,
and which related to the assets and businesses transferred to the Company, the
Company assumed liability for up to $15 million plus the difference, if any,
between $10 million and the costs (if less than $10 million) incurred to
resolve the disputed claims. TNGC has agreed to indemnify the Company for
costs in excess of (i) $25 million incurred in connection with disputed claims
and other litigation assumed by the Company (other than settlements or
judgments paid from escrowed cash established in connection with TNGC's plan of
reorganization) plus accrued interest, and (ii) $10 million plus interest with
respect to a tax indemnification claim, which was settled.
TNGC is obligated under the Asset Transfer Agreement to indemnify the
Company for all future losses incurred in connection with litigation or
bankruptcy claims assumed in the Transfer. Any indemnification payments
received from TNGC for which the Company is the primary obligor will be
considered a contribution of capital. In order to facilitate the settlement of
the Terry/Penrod litigation in May 1996, the Company advanced $16.4 million of
the settlement amount to TNGC in exchange for a note receivable. In connection
with this settlement, the Company received from Terry a reversionary interest
in certain producing properties. The Company and TNGC had intended that such
interests would revert to TNGC under the Asset Transfer Agreement; however, the
Company retained such interests in partial satisfaction of TNGC's indemnity
obligations.
In September 1996, the Company and TNGC entered into an agreement
pursuant to which the Company obtained an $11.5 million dollar-denominated
production payment, subsequently increased to $19 million, bearing interest at
17% per annum, burdening certain oil and gas interests owned by TNGC as a
source of repayment for certain of the receivables from TNGC discussed above.
At October 31, 1996, $37 million of remaining related-party receivables has
been recorded as a contra-stockholder equity account due to uncertainties
regarding the repayment terms for such receivables.
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<PAGE> 15
INDEPENDENT AUDITORS
The Board of Directors has selected Coopers & Lybrand L.L.P. as the
Company's independent auditors for its fiscal year ending January 31, 1997.
Coopers & Lybrand L.L.P. has been the Company's independent public accounting
firm since the Company's organization in May 1993. Representatives of Coopers
& Lybrand L.L.P. will be present at the Annual Meeting, will have the
opportunity to make a statement if they so desire, and will be available to
answer questions.
STOCKHOLDER PROPOSALS
Due to the change in the Company's fiscal year end from July 31 to
January 31, the Company expects to hold its 1997 annual meeting of stockholders
in July rather than December. Any proposals from stockholders to be presented
for consideration for inclusion in the proxy material in connection with the
1997 annual meeting of stockholders of the Company must be submitted in
accordance with the rules of the SEC and received by the Secretary of the
Company at the Company's principal executive offices no later than the close of
business on February 28, 1997.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at
the Annual Meeting other than those mentioned above. However, if any other
matters come before the Annual Meeting, the holders of the proxies will vote on
such matters in their discretion.
All information contained in this Proxy Statement relating to the
occupations, affiliations, and securities holdings of directors and officers of
the Company and their relationship and transactions with the Company is based
upon information received from the individual directors and officers. All
information relating to any beneficial owner of more than five percent of the
Common Stock is based upon information contained in reports filed by such owner
with the SEC.
By the Order of the Board of Directors
/s/ ED DONAHUE
Ed Donahue, Secretary
Houston, Texas
January 7, 1997
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<PAGE> 16
TRANSTEXAS GAS CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
January 27, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TRANSTEXAS GAS CORPORATION.
The undersigned stockholder of TransTexas Gas Corporation (the
"Company") hereby appoints Arnold H. Brackenridge and Ed Donahue, and each of
them, proxies for the undersigned with full power of substitution, to vote all
shares of Company Common Stock which the undersigned may be entitled to vote at
the Annual Meeting of Stockholders of the Company to be held in Houston, Texas
on Monday, January 27, 1997 at 10:00 a.m., and at any and all adjournments
thereof, upon the matters set forth below and described in the accompanying
Proxy Statement, and upon such other matters as may properly come before the
Annual Meeting and any adjournment thereof.
PLEASE MARK THIS PROXY AS INDICATED BELOW TO VOTE ON THE ITEMS PRESENTED. THIS
PROXY WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED. IF NO CHOICE IS
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ITEMS PRESENTED.
Item 1. Election of Class III Directors [the Board of Directors
recommends a vote FOR the nominees listed below].
FOR WITHHOLD
--- --------
James R. Lesch [ ] [ ]
Robert L. May [ ] [ ]
Donald D. Sykora [ ] [ ]
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement dated January 7, 1997. PLEASE MARK, SIGN AND DATE THIS
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
Please sign as name appears hereon.
Joint owners should each sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such.
DATE:___________________________________
________________________________________
[Signature]
