<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 (AMENDMENT NO. )
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)
- --------------------------------------------------------------------------------
(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)(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 NORTH SAM HOUSTON PARKWAY EAST, SUITE 310
HOUSTON, TEXAS 77032
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 8, 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 Tuesday, July 8, 1997, beginning at 10:00 a.m., local time, at The
Hotel Sofitel, 425 North Sam Houston Parkway East, Houston, Texas 77060, for
the following purposes:
1. To elect one person, as Class I director of the Company, to
hold office for a term of three years or until his successor
is 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 May 15, 1997
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/ ARNOLD BRACKENRIDGE
-----------------------------------
Arnold Brackenridge, President
Houston, Texas
June 3, 1997
<PAGE> 3
TRANSTEXAS GAS CORPORATION
1300 NORTH SAM HOUSTON PARKWAY EAST, 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 North Sam Houston Parkway East, Houston, Texas 77060 at
10:00 a.m. on Tuesday, July 8, 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 June 3, 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 I DIRECTOR OF THE
NOMINEE LISTED UNDER "ELECTION OF DIRECTORS."
OUTSTANDING CAPITAL STOCK
The record date for determining stockholders entitled to notice of and
to vote at the Annual Meeting is May 15, 1997. 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 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 1997 Annual Report to Stockholders is being mailed with
this Proxy Statement. The Annual 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 COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED JANUARY 31, 1997, UPON WRITTEN REQUEST TO SIMON WARD,
INVESTOR RELATIONS, TRANSTEXAS GAS CORPORATION, 1300 NORTH SAM HOUSTON PARKWAY
EAST, 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 1999 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
1997 annual meeting, stockholders will elect one Class I director to serve
until the 2000 annual meeting of stockholders and until his successor is
elected and qualified. The Board of Directors has nominated John R. Stanley to
serve as Class I director of the Company. Mr. Stanley presently serves as
Class I director of the Company and has expressed an intention to serve the
entire term for which election is sought.
Set forth below is certain information concerning the person nominated
for election as Class I director of the Company.
John R. Stanley, 58, 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 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 (" TransAmerican"), which is the indirect majority
stockholder of the Company. He has operated TransAmerican since 1958. Mr.
Stanley is the father-in-law of Alan E. Drane, the Vice President of Operations
for the Company.
THE BOARD OF DIRECTORS HAS NOMINATED THE ABOVE-REFERENCED DIRECTOR FOR
ELECTION BY THE STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE FOR THE NOMINEE
LISTED ABOVE. THE ELECTION OF THIS DIRECTOR 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.
2
<PAGE> 5
Set forth below is certain information concerning the directors
continuing in office.
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 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
TransAmerican from 1985 until 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 serves as investment advisor in Boston, Massachusetts. Mr.
McDade is a former director of Houston Industries, Inc. and Houston Lighting &
Power Company. He is also a former member of the Board of Managers of the
Harris County Hospital District and former Chairman of the State Securities
Board of Texas.
Directors of Class III to continue in office until 1999:
James R. Lesch, 75, has been a director of the Company since August
1993. 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.
Mr. Lesch currently serves as a director of YPF Sociedad Anonima and Maxus
Energy Corporation.
Robert L. May, 73, has been a director of the Company since August
1993. 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.
Donald D. Sykora, 66, has been a director of the Company since August
1993. 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.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met 35 times during the fiscal year ended
January 31, 1997. 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 68% 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 fiscal year ended January 31, 1997.
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 fiscal year ended January 31, 1997.
3
<PAGE> 6
DIRECTOR COMPENSATION
Each director, other than Mr. Stanley, is paid an annual director's
fee of $75,000 plus $750 for each board meeting and committee meeting attended
(exclusive of committee meetings occurring on the same day as board 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 fiscal year ended January 31, 1997, TARC, TEC, TransAmerican,
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.
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 58
Arnold H. Brackenridge President and Chief Operating Officer 64
Edwin B. Donahue Vice President, Chief Financial Officer, and Secretary 46
Richard P. Bianchi Vice President and General Counsel 45
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 Executive Vice
President of TransAmerican. From 1984 until June 1992, Mr. Brackenridge was
the President and Chief Executive Officer of Wintershall Energy, a business
group of BASF Corporation. Mr. Brackenridge has worked in the domestic and
international oil and gas industry for over 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 and
Secretary of TransAmerican, TEC and TARC. Mr. Donahue has been employed in
various positions with TransAmerican for over 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
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, 1994 and 1995, the transition period ended January 31,
1996 and the fiscal year ended January 31, 1997 to the Chief Executive Officer
and each other executive officer whose total annual salary and bonus exceeded
$100,000 in the fiscal year ended January 31, 1997 ("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 . . . . . . . . 1994 $ 350,000 $ -- $ 4,620
Chief Executive Officer 1995 350,000 -- 4,620
1996* 175,000 -- 807
1997 397,117 -- 5,154
- ----------------------------------------------------------------------------------------------
Arnold H. Brackenridge . . . . . 1994 $ 175,000 $ -- $ 80
President and Chief Operating 1995 221,154 -- 1,454
Officer 1996* 137,500 85,397(c) 721
1997 294,808 111,089 2,435
- ----------------------------------------------------------------------------------------------
Edwin B. Donahue . . . . . . . . 1994 $ 134,234 $ -- $ 3,997
Vice President, Chief Financial 1995 149,423 -- 4,364
Officer and Secretary 1996* 90,384 85,397(c) 1,110
1997 215,385 113,885 4,731
- ----------------------------------------------------------------------------------------------
Richard Bianchi (b) . . . . . . . 1995 $ 11,538 $ -- $ --
Vice President and General Counsel 1996* 100,000 -- --
1997 214,154 -- 777
- ----------------------------------------------------------------------------------------------
Alan E. Drane . . . . . . . . 1996* $ 23,077 $ -- $ 692
Vice President of Operations 1997 116,923 -- 3,508
==============================================================================================
</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) Mr. Bianchi joined the Company in June 1995.
(c) These bonuses were paid in fiscal 1997 for services rendered during the
Transition Period.
EMPLOYMENT AGREEMENTS
In August 1996, the Company and Mr. Brackenridge entered into an
employment agreement which provides for an annual salary of $295,000 and
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.
5
<PAGE> 8
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 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.
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 1997, 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 January 31, 1997, approximately 1,840 employees were
eligible to participate in the Savings Plan, including Messrs. Stanley,
Brackenridge, Donahue, Bianchi and Drane.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Lesch, Sykora and McDade are members of the Company's
Compensation Committee. During the fiscal year ended January 31, 1997, 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 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 fiscal year ended January 31, 1997.
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. Additional bonuses were paid to these
individuals for services rendered during fiscal 1997.
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 fiscal 1997,
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, 1997, 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>
MEASUREMENT PERIOD TRANSTEXAS GAS
(FISCAL YEAR COVERED) CORP. NASDAQ INDEX PEER GROUP
<S> <C> <C> <C>
10-MAR-94 100 100 100
MAR94 89 94 102
APR94 90 93 114
MAY94 84 93 108
JUN94 85 90 109
JUL94 81 92 101
AUG94 83 98 98
SEP94 81 97 99
OCT94 95 99 109
NOV94 86 96 93
DEC94 80 96 90
JAN95 75 97 86
FEB95 81 102 97
MAR95 80 105 106
APR95 95 108 101
MAY95 103 111 107
JUN95 108 120 99
JUL95 106 128 100
AUG95 127 131 108
SEP95 129 134 103
OCT95 114 133 96
NOV95 113 136 102
DEC95 96 136 111
JAN96 84 136 106
FEB96 77 141 108
MAR96 71 142 113
APR96 72 154 119
MAY96 64 161 115
JUN96 68 153 130
JUL96 63 140 119
AUG96 79 147 123
SEP96 82 159 127
OCT96 100 157 140
NOV96 96 167 147
DEC96 104 167 143
JAN97 121 178 138
</TABLE>
8
<PAGE> 11
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock, as of May 15, 1997, 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 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032
TNGC Holdings Corporation (2) 59,350,000 80.20%
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032
TransAmerican Natural Gas Corporation (3) 59,350,000 80.20%
1300 North Sam Houston Parkway East, Suite 300
Houston, Texas 77032
TransAmerican Energy Corporation (4) 50,450,000 68.18%
1300 North Sam Houston Parkway East, Suite 200
Houston, Texas 77032
TransAmerican Refining Corporation 10,450,000 14.12%
1300 North Sam Houston Parkway East, 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 P. Bianchi -- --
Alan E. Drane (7) 200 *
All directors and executive officers
as a group (9 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 TransAmerican,
and may be deemed to beneficially own all of the shares of Common
Stock owned beneficially by TransAmerican.
(3) TransAmerican owns 5,000,000 shares of Common Stock. TransAmerican
also owns all of the common stock of TEC, all of the common stock of
TransAmerican Exploration Corporation ("TEXC"), which owns 3,700,000
shares of Common Stock, and all of the common stock of Southeast
Marine, Inc., which owns 200,000 shares of Common Stock.
TransAmerican may be deemed to beneficially own all of the shares of
Common Stock held and owned beneficially by TEC, TEXC and Southeast
Marine.
(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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(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.
(7) These shares are held of record by Mr. Drane's wife.
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 February 1996, the Company purchased the building for its corporate
headquarters from TransAmerican for $4 million.
In December 1994, the Company entered into an interruptible gas sales
agreement with TransAmerican, revenues from which totaled approximately $11.7
million, $21.4 million, $11.1 million, $4.4 million and $14.8 million for the
years ended January 31, 997 and 1996, the six months ended January 31, 1996 and
1995 and the year ended July 31, 1995, respectively. The receivable from
TransAmerican for natural gas sales totaled approximately $13.6 million at
January 31, 1997. 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
$2.7 million and $2.4 million, respectively, for the years ended January 31,
1997 and 1996, $2.2 million and $2.3 million, respectively, for the six months
ended January 31, 1996 and 1995 and $2.5 million and $2.3 million,
respectively, for the years ended July 31, 1995 and 1994. The receivable from
TARC for natural gas sales totaled approximately $3.2 million at January 31,
1997.
As of January 1996, the Company and TransTexas Exploration Company
("TTEX") entered into a Drilling Program, as defined in the Indenture.
Pursuant to the 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
$23.7 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 July 1996, TTEX loaned $9.5 million to TransAmerican 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 $26.6 million at January 31, 1997.
The Company believes that the advances by TTEX to TransAmerican 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 TransAmerican
or its affiliates. TransAmerican has not made its scheduled interest payments
on this note. TTEX has agreed to defer the interest payments on the note until
1998.
Pursuant to the terms of the Transfer Agreement, TransAmerican is
obligated to indemnify the Company for all future losses incurred in connection
with litigation or bankruptcy claims assumed in the Transfer. In order to
facilitate the settlement of the Terry/Penrod litigation in May 1996, the
Company advanced to TransAmerican $16.4 million of the settlement amount in
exchange for a note receivable. TransAmerican has not made its scheduled
interest payments on this note. The Company has agreed to defer the interest
payments on the note until 1998. In addition, the
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Company transferred escrowed funds of approximately $22 million to
TransAmerican. In connection with this settlement, the Company received from
Terry the reversionary interest in certain producing properties. The Company
and TransAmerican had intended that such interests would revert to
TransAmerican under the Transfer Agreement; however, the Company retained such
interests in partial satisfaction of TransAmerican's indemnity obligations.
The amount outstanding under this agreement totaled approximately $7 million at
January 31, 1997.
In September 1996, the Company purchased from TransDakota Oil
Corporation ("TDOC"), a subsidiary of TransAmerican, certain oil and gas
leasehold interests located in the Lodgepole area in North Dakota 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. The purchase price was $3.9
million greater than TDOC's basis in the properties. The properties have been
recorded in the Company's financial statements at carryover basis and the $3.9
million has been classified as a reduction of retained earnings.
The Company provides accounting and legal services to TARC and TEC and
drilling and workover, administrative and procurement, accounting, legal, lease
operating, and gas marketing services to TransAmerican pursuant to a services
agreement (the "Services Agreement"). The Company provides general commercial
legal services and certain accounting services (including payroll, tax, and
treasury services) to TARC and TEC for a fee of $26,000 per month. At
TransAmerican's request, the Company, at its election, may provide drilling and
workover services. The receivable under this agreement was approximately $5.1
million as of January 31, 1997.
The Company has made various advances to TransAmerican in an aggregate
of approximately $7 million for lease purchases and other corporate expenses.
The entire amount was outstanding at January 31, 1977.
In September 1996, the Company and TransAmerican 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
TransAmerican as a source of repayment for certain of the receivables from
TransAmerican discussed above. On January 31, 1997, TransAmerican conveyed at
historical cost certain oil and gas properties to the Company for a purchase
price of $31.6 million. A portion of the purchase price was used to offset
obligations under the September 1996 production payment. At January 31, 1997,
$59 million of related-party receivables has been recorded as a contra-
stockholder equity account due to uncertainties regarding the repayment terms
for such receivables. The Company has agreed to defer any interest payments
due from TransAmerican until 1998.
In January 1997, an affiliate of the Company contributed all of the
outstanding common stock of Signal Capital Holdings Corporation ("SCHC"), with
a book value of $6 million, to the Company. In the same month, the Company
contributed the stock of SCHC to TransTexas Transmission Corporation, a wholly
owned subsidiary of the Company ("TTC").
In January 1997, the Company contributed substantially all of its Lobo
Trend properties to TTC.
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, 1998.
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.
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STOCKHOLDER PROPOSALS
Any proposals from stockholders to be presented for consideration for
inclusion in the proxy material in connection with the 1998 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 January 31, 1998.
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/ ARNOLD BRACKENRIDGE
Arnold Brackenridge, President
Houston, Texas
June 3, 1997
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TRANSTEXAS GAS CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
July 8, 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 Tuesday, July 8, 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 1 Director [the Board of Directors
recommends a vote FOR the nominee listed below].
FOR WITHHOLD
John R. Stanley [ ] [ ]
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement dated June 3, 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:
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[Signature]
