<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 JUNE 22, 1998
-------------------
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, June 22, 1998, beginning at 10:00 a.m., central daylight 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 II 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 April 27,
1998 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
Ed Donahue, Secretary
Houston, Texas
May 21, 1998
<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" or "TransTexas"), 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., central daylight time on Monday, June 22, 1998, 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. This Proxy Statement and the
enclosed proxy card will first be sent to stockholders on or about May 21, 1998.
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 II 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 April 27, 1998. At the close of business on
that day, there were 57,515,566 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
<PAGE> 4
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.
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 1998 Annual Report to Stockholders is being mailed to
stockholders 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, 1998, 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 2000, 1998 and 1999 annual meetings, respectively, or
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
1998 annual meeting, stockholders will elect one Class II director to serve
until the 2001 annual meeting of stockholders or until his successor is elected
and qualified. The Board of Directors has nominated Thomas B. McDade to serve as
Class II director of the Company. Mr. McDade presently serves as Class II
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 II director of the Company.
Thomas B. McDade, 74, has been Chairman of the Board of the Company
since May 1993. He is also a director of TransAmerican Energy Corporation
("TEC") and TransAmerican Refining Corporation ("TARC"). Mr. McDade is primarily
engaged in managing his personal investments and in providing consulting
services in Houston, Texas. He also serves on the board of Group Maintenance
America Corp. Mr. McDade was a director of TransAmerican Natural Gas Corporation
("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. From 1985 to 1995, Mr. McDade served
as a
2
<PAGE> 5
director and trustee of eleven registered investment companies for which John
Hancock Funds serves as investment advisor in Boston, Massachusetts. He is a
former director of Houston Industries, Inc. and Houston Lighting & Power
Company. Mr. McDade 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.
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.
Set forth below is certain information concerning the directors
continuing in office.
Directors of Class III to continue in office until 1999:
James R. Lesch, 76, 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. He
is a former director of Raymond International, Borg-Warner Corporation, Texas
Commerce Bancshares, Dun & Bradstreet Corporation, Houston Industries, Inc.,
Houston Lighting & Power Company, Rowan Companies, Inc. and YPF Sociedad
Anonima. Mr. Lesch currently serves as a director of Maxus Energy Corporation.
Robert L. May, 74, 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. Mr.
May is a former director of Christiana General Insurance Corporation of New
York, Integrated Resources, Inc. and Fairchild Industries, Inc.
Donald D. Sykora, 67, has been a director of the Company since August
1993. He is retired from Houston Industries, Inc., where he was the President
and Chief Operating Officer. Mr. Sykora was with Houston Industries, Inc. or its
subsidiaries for 41 years. He is a former director of Houston Industries, Inc.,
Houston Lighting & Power Co., Utility Fuels, Inc. and KBLCOM Incorporated. Mr.
Sykora currently serves as a director of Powell Industries, Inc., Pool Oil Field
Services, Inc. and American Residential Services, Inc.
Director of Class I to continue in office until 2000:
John R. Stanley, 59, has been a director and Chief Executive Officer of
the Company since May 1993. He is also a director and the Chief Executive
Officer of TEC and 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, which is the
indirect majority stockholder of the Company. He has operated TransAmerican
since 1958.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met 33 times during the fiscal year ended
January 31, 1998. 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 61% 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 accountants' audit of the
Company's financial statements and receives and reviews their reports. The Audit
Committee meets with the independent accountants, receives recommendations or
suggestions for changes in
3
<PAGE> 6
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, 1998.
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, 1998.
DIRECTOR COMPENSATION
Each director, other than Mr. Stanley, is paid an annual fee of $75,000
plus $750 for each board 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, officers and holders of more than 10% of the
Company's Common Stock ("Reporting Persons") to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and reports of changes
in ownership of the Common Stock ("Section 16 Reports"). Such Reporting Persons
are required by SEC regulations to furnish the Company with copies of all
Section 16 Reports they file with the SEC. Based solely on a review of the
Section 16 Reports furnished to the Company by the Reporting Persons, none of
the Reporting Persons failed to timely file any Section 16 Reports during the
year ended January 31, 1998.
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 59
Arnold H. Brackenridge President and Chief Operating Officer 65
Edwin B. Donahue Vice President, Chief Financial Officer and Secretary 47
Lee Muncy Vice President of Exploration and Land 45
</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. He also serves as Vice President, Chief
Financial Officer and Secretary of TEC and as Vice President and Secretary of
TransAmerican and TARC. Mr. Donahue has been employed in various positions with
TransAmerican for over 20 years.
Lee Muncy has been Vice President of Exploration and Land of the
Company since April 1998. From 1989 through 1997, Mr. Muncy was with Fina Oil
and Chemical Company where he held the positions of Exploitation Manager and
Exploration Manager.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid during the fiscal
year ended July 31, 1995, the six months ended January 31, 1996 ("Transition
Period") and the fiscal years ended January 31, 1997 and 1998 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, 1998 ("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 ......................... 1995 $369,521 $ -- $ 4,500
Chief Executive Officer .............. 1996 175,001 -- 808
1997 397,117 -- 5,170
1998 400,483 -- 4,346
Arnold H. Brackenridge .................. 1995 $221,154 $ -- $ 1,027
President and Chief Operating Officer 1996 137,500 -- 288
1997 209,411 85,397(b) 2,742
1998 326,538 336,089 8,479
Edwin B. Donahue ........................ 1995 $149,423 $ -- $ 4,553
Vice President, Chief Financial 1996 90,385 -- 1,110
Officer and Secretary 1997 129,987 85,397(b) 4,731
1998 200,000 213,885 4,519
Lee Muncy (c) ........................... 1995 $ -- $ -- $ --
Vice President of Exploration 1996 -- -- --
and Land 1997 -- -- --
1998 76,154 25,000 --
</TABLE>
(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) These bonuses were paid in fiscal 1997 for services rendered during the
Transition Period.
(c) Mr. Muncy joined the Company in December 1997.
EMPLOYMENT AGREEMENTS
In August 1996, the Company and Mr. Brackenridge entered into a
one-year employment agreement which provided for an annual salary of $295,000.
In December 1997, the Company and Mr. Brackenridge entered into a new employment
agreement which provides for an annual salary of $500,000 and guaranteed annual
bonus of $250,000. The agreement has an initial term of one year and is
renewable on an annual basis for subsequent one-year terms. If the Company
terminates Mr. Brackenridge's employment other than for cause, or Mr.
Brackenridge terminates his employment for cause, prior to the end of the
initial term of the agreement, the Company shall pay Mr. Brackenridge his salary
for the remaining term of the agreement plus an additional six months' salary.
If the Company terminates Mr. Brackenridge's employment other than for cause, or
Mr. Brackenridge terminates his employment for cause, prior to the
5
<PAGE> 8
end of any subsequent term, the Company shall pay Mr. Brackenridge his salary to
the date of termination plus an additional six months' salary.
In November 1997, the Company and Mr. Muncy entered into a Severance
Agreement which provides that if the Company terminates Mr. Muncy's employment
other than for cause, the Company shall pay Mr. Muncy his salary for six months
past the date of termination.
SAVINGS PLAN
TransAmerican 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 1998, this limit is $10,000. 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 TransAmerican. As of January 31, 1998, approximately 1,400
employees of the Company were eligible to participate in the Savings Plan,
including the Named Executive Officers.
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, 1998, 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.
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
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<PAGE> 9
compensation and benefit policies and programs. The Committee was created in
August 1993 and met once during the fiscal year ended January 31, 1998.
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 1998, the Committee determined to pay a cash bonus to Mr.
Brackenridge and an additional bonus consisting of cash and Common Stock to each
of Messrs. Brackenridge and Donahue for services rendered. The Committee also
determined to increase Mr. Brackenridge's salary to a level consistent with that
of other executives with comparable experience in the industry.
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 1998, 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 (the date the Common Stock began trading in
a public market) to January 31, 1998, with the cumulative total stockholder
return of the New York Stock Exchange Composite Index and a peer group (which
includes Anadarko Petroleum Corp., Apache Corp., Burlington Resources, Inc.,
Enron Oil & Gas Co., Mesa, Inc., Pioneer Natural Resources, Inc., Newfield
Exploration Co., Noble Affiliates, Inc., Seagull Energy Corp. and United
Meridian Corp.) over the same period. From March 10, 1994 until October 30,
1997, the Common Stock traded on the Nasdaq National Market tier of The Nasdaq
Stock Market and stock performance graphs for prior years were prepared using
the Nasdaq Stock Market Index (the "Old Index"). On October 30, 1997, the Common
Stock began trading on the New York Stock Exchange; therefore, the Company has
elected to change the comparative index to the New York Stock Exchange Composite
Index (the "New Index"). Both the Old Index and the New Index are represented in
the stock performance graph presented below. The comparison assumes a $100
investment on March 10, 1994 in the Common Stock, the Nasdaq Stock Market Index,
the New York Stock Exchange Composite Index and the peer group, and assumes
reinvestment of all dividends and distributions.
[TOTAL STOCKHOLDER RETURN GRAPH]
<TABLE>
<CAPTION>
March 10, January 31, January 31, January 31, January 31,
1994 1995 1996 1997 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TRANSTEXAS GAS CORP 100.00 75.00 83.93 121.43 121.87
- ------------------------------------------------------------------------------------------------------------------------
NY STOCK EXCHANGE- 100.00 99.50 132.19 160.17 198.52
COMPOSITE
- ------------------------------------------------------------------------------------------------------------------------
NASDAQ INDEX 100.00 96.72 136.39 181.61 211.04
- ------------------------------------------------------------------------------------------------------------------------
PEER GROUP 100.00 85.96 106.20 138.66 119.37
- ------------------------------------------------------------------------------------------------------------------------
</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 April 27, 1998, 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) 46,800,264 81.37%
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032
TNGC Holdings Corporation (2) 46,788,664 81.35%
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032
TransAmerican Natural Gas Corporation (3)(6) 46,788,664 81.35%
1300 North Sam Houston Parkway East, Suite 300
Houston, Texas 77032
TransAmerican Energy Corporation (4)(6) 41,588,664 72.31%
1300 North Sam Houston Parkway East, Suite 200
Houston, Texas 77032
State Street Research & Management Company(5) 3,229,300 5.61%
One Financial Center
Boston, Massachusetts 02111
TransAmerican Refining Corporation(6) 1,940,147 3.37%
Thomas B. McDade 10,000 *
Arnold H. Brackenridge 7,100 *
Edwin B. Donahue 5,000 *
James R. Lesch (7) 1,000 *
Robert L. May 1,000 *
Donald D. Sykora (8) 1,000 *
Lee Muncy 1,000 *
All directors and executive officers
as a group (8 persons) 46,826,364 81.42%
</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 owns all of
the common stock 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 8,100 shares of Common
Stock held by his wife.
(2) TNGC Holdings owns all of the 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 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 and Southeast Marine.
(4) TEC owns 39,648,517 shares of Common Stock. TEC also owns all of the
common stock of TARC, and may be deemed to beneficially own the 1,940,147
shares of Common Stock held by TARC.
(5) This information was obtained from the Schedule 13G filed by State Street
Research & Management Company ("State Street") to report its holdings as
of December 31, 1997. State Street disclaims any beneficial interest in
these shares.
(6) All of the shares of Common Stock held by TransAmerican, TEC and TARC are
pledged to secure their obligations under various debt and other
instruments.
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<PAGE> 12
(7) Mr. Lesch is the sole general partner and a limited partner of The Lesch
Family Limited Partnership, and may be deemed to beneficially own the
1,000 shares of Common Stock held by The Lesch Family Limited
Partnership.
(8) Mr. Sykora is a managing general partner of Sykora Interests Ltd., and
may be deemed to beneficially own the 1,000 shares of Common Stock held
by Sykora Interests Ltd.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From August 1993 to June 1997, TransTexas provided 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 fee to TARC and TEC for
general commercial legal services and certain accounting services (including
payroll, tax and treasury services) was $26,000 per month. At TransAmerican's
request, TransTexas, at its election, has provided drilling and workover
services. In June 1997, the receivable from TransAmerican under the services
agreement was paid and the services agreement was terminated.
On June 13, 1997, a new services agreement was entered into among
TransAmerican, TEC, TARC and TransTexas. Under the new services agreement,
TransTexas will provide accounting, legal, administrative and other services to
TARC, TEC and TransAmerican and its affiliates. TransAmerican will provide
advisory services to TransTexas, TARC and TEC. TARC will pay to TransTexas
approximately $300,000 per month for services rendered and for allocated
expenses paid by TransTexas on behalf of TARC. TransAmerican will pay to
TransTexas approximately $20,000 per month for such services. TEC and its
subsidiaries will pay $2.5 million in the aggregate per year to TransAmerican
for advisory services and benefits provided by TransAmerican. As of January 31,
1998, the receivable from TARC and TransAmerican for such services was $1.4
million.
TransTexas sells natural gas to TARC under an interruptible long-term
sales contract. Revenues from TARC under this contract totaled approximately
$1.1 million, $2.7 million and $2.4 million, respectively, for the years ended
January 31, 1998, 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 for the
year ended July 31, 1995.
In October 1997, Mr. Stanley guaranteed a portion of TransTexas' $40
million line of credit with BNY Financial Corporation.
In December 1994, TransTexas 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, 1997 and 1996, the six months ended January 31, 1996 and
1995 and the year ended July 31, 1995, respectively. TransAmerican did not
purchase any gas from TransTexas during the year ended January 31, 1998. All
amounts owed under the agreement were paid on June 13, 1997.
In order to facilitate the settlement of certain litigation in May 1996,
TransTexas advanced to TransAmerican $16.4 million of the settlement amount in
exchange for a note receivable. All amounts outstanding under this note were
repaid on June 13, 1997.
TransTexas has made various advances to TransAmerican in an aggregate
amount of approximately $7 million for lease purchases and other corporate
expenses. This amount was repaid on June 13, 1997.
In July 1996, TransAmerican executed a note payable to TransTexas
Exploration Corporation, a subsidiary of TransTexas ("TTEX") in the original
principal amount of $25 million maturing on July 31, 1998. Advances by TTEX to
TransAmerican under the note bore interest at a rate of 15% per annum, payable
quarterly. This note was repaid on June 13, 1997.
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<PAGE> 13
TNGC Holdings, TransAmerican and its existing subsidiaries, including
TARC, TEC and TransTexas, are parties to a tax allocation agreement, as amended
(the "Tax Allocation Agreement"), the general terms of which require
TransAmerican 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 group.
The Tax Allocation Agreement requires each of TransAmerican's
subsidiaries to pay to TransAmerican 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 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 TransAmerican the authority to compromise or settle
disputes and to control litigation, subject to the approval of TARC, TEC or
TransTexas, 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
TransAmerican and 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 TransAmerican (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. The parties to the Tax Allocation Agreement amended such
agreement in May 1997 to include additional affiliates as parties, and further
amended the Tax Allocation Agreement in June 1997 to allocate to TransAmerican,
as among the parties, any tax liability associated with the Lobo Sale.
INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand L.L.P. as the
Company's independent accountants for the year ending January 31, 1999. Coopers
& Lybrand L.L.P. has audited the Company's financial statements since the
Company's organization in May 1993. Representatives of Coopers & Lybrand L.L.P.
will be present at the Annual Meeting, will have an opportunity to make a
statement if they so desire, and will be available to respond to appropriate
questions.
STOCKHOLDER PROPOSALS
Any proposals from stockholders to be presented for consideration for
inclusion in the proxy material in connection with the 1999 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, 1999.
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.
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<PAGE> 14
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
Ed Donahue, Secretary
Houston, Texas
May 21, 1998
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<PAGE> 15
TRANSTEXAS GAS CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
June 22, 1998
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, June 22, 1998 at 10:00 a.m., and at any and all adjournments
thereof, upon the matters set forth on the reverse side and described in the
accompanying Proxy Statement, and upon such other matters as may properly come
before the Annual Meeting and any adjournment thereof.
(Continued and to be signed on the other side)
<PAGE> 16
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 II Director (the Board of Directors
recommends a vote FOR the nominee listed below).
FOR WITHHOLD
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Thomas B. McDade [ ] [ ]
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement dated May 21, 1998. 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]
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[Signature]
