<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:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
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)(1) 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:
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<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 9, 1999
---------------------
Dear Stockholders:
The Company will hold its Annual Meeting on Friday, July 9, 1999,
beginning at 10:00 a.m., central daylight time, at The Hotel Sofitel, 425 North
Sam Houston Parkway East, Houston, Texas 77060. The matters to be voted on
include:
1. the election of two persons to serve as Class III directors of
the Company for a three-year term; and
2. any other matters that may properly come before the Annual
Meeting or any postponements or adjournments thereof.
The record date for the Annual Meeting is May 12, 1999. Only
stockholders of record at the close of business on the record date are entitled
to receive notice of and to vote at the Annual Meeting. A complete list of such
stockholders will be available for inspection at the Company's offices in
Houston, Texas, during regular business hours for a period of 10 days before the
Annual Meeting. This list will also be available for inspection at the Annual
Meeting.
We cordially invite all stockholders to attend the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, WE URGE YOU TO
MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE
PROVIDED. You may revoke your proxy at any time before it is voted. If you plan
to attend the Annual Meeting in person and your shares are held in the name of a
bank, broker or other record holder, you will need to bring a copy of a
brokerage statement or other document evidencing stock ownership as of the
record date.
By Order of the Board of Directors
Ed Donahue, Secretary
Houston, Texas
June 1, 1999
<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
---------------------
TransTexas Gas Corporation is furnishing this Proxy Statement to its
stockholders in connection with the solicitation of proxies by the Board of
Directors of the Company for use at the 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 Friday, July 9, 1999, and at any postponements or
adjournments thereof. Your proxy will be voted at the Annual Meeting if properly
executed, returned to the Company prior to the Annual Meeting, and not revoked.
We first sent this Proxy Statement and the enclosed proxy card to stockholders
on or about June 1, 1999.
REVOCATION OF PROXY
You may revoke your proxy at any time before it is voted by (1)
delivering written notice of revocation to the Secretary of the Company, (2)
executing and delivering a subsequently dated proxy or (3) voting in person at
the Annual Meeting. Your attendance at the Annual Meeting will not constitute
automatic revocation of your proxy. If you decide to vote in person at the
Annual Meeting and your shares are held in the name of a bank, broker or other
record holder, you must obtain a proxy, executed in your favor, from the record
holder.
ACTION TO BE TAKEN AT THE ANNUAL MEETING
Your proxy will be voted according to your specifications. However, if
you return a proxy card that has been signed but not marked, your proxy will be
voted FOR the election of the nominees listed below under "Election of
Directors."
OUTSTANDING CAPITAL STOCK
The record date for determining stockholders entitled to receive notice
of and to vote at the Annual Meeting is May 12, 1999. At the close of business
on that day, there were 57,515,566 shares of the Company's 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. Withheld votes and broker non-votes will be counted as present
for purposes of determining a quorum. If a quorum is not present, the
stockholders who are present will have the power to adjourn the Annual Meeting
until such time as a quorum will be present. Such adjournment may be made by an
announcement at the Annual Meeting; no other notice is required. Any business
that might have been transacted at the originally scheduled Annual Meeting may
be transacted at any adjourned Annual Meeting at which a quorum is present.
Stockholders are entitled to one vote for each share held in his or her
name on the record date. Cumulative voting is prohibited. With respect to the
election of directors, votes may be cast in favor of the nominees or withheld. A
plurality of the votes cast at the Annual Meeting is required for the election
of directors. Withheld votes and broker non-votes will not be counted and will
have no effect in the election of directors.
<PAGE> 4
PERSONS MAKING THE SOLICITATION
The Board of Directors of the Company is soliciting your proxy. The
cost of soliciting your proxy will be borne entirely by the Company. Proxies may
be solicited by mail, 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
The Company files an Annual Report on Form 10-K with the Securities and
Exchange Commission. The Company mailed a copy of the Annual Report on Form 10-K
for the fiscal year ended January 31, 1999 to its stockholders with this Proxy
Statement. The Annual Report on Form 10-K does not form any part of the material
for the solicitation of proxies. Stockholders may obtain copies of exhibits to
the Annual Report on Form 10-K upon written request and payment of the Company's
reasonable expenses in furnishing such exhibits. Written requests should be sent
to Investor Relations Department, TransTexas Gas Corporation, 1300 North Sam
Houston Parkway East, Houston, Texas 77032.
ITEM 1 -- ELECTION OF DIRECTORS
The Board of Directors currently has four members divided into three
classes. One director serves in Class I, one director serves in Class II and two
directors serve in Class III. Directors in each class serve for three-year
terms. One of the three classes is elected each year to succeed the directors
whose terms are expiring. The terms of the current Class III directors expire at
this year's Annual Meeting.
Certain changes in the composition of the Board have occurred since the
1998 Annual Meeting. On April 13, 1999, the Board elected James V. Langston to
fill a vacancy created by the resignation of Don D. Jordan. Mr. Jordan served as
a Director from July 29, 1998 until January 25, 1999. He was elected by the
Board to fill a vacancy created by the death of Donald D. Sykora on June 25,
1998. In addition, James R. Lesch resigned from the Board on May 11, 1999. By
resolution of the Board of Directors, the size of the Board was reduced from
five to four.
The Board of Directors has nominated Robert L. May and James V.
Langston for election as Class III directors of the Company to serve for a term
of three years or until their successors are elected and qualified. Messrs. May
and Langston presently serve as Class III directors of the Company. Each of the
nominees has expressed an intention to serve the entire term for which election
is sought.
Set forth below is certain information concerning the nominees for
election as Class III directors of the Company.
Robert L. May, 75, 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. Mr. May is a
member of the Audit Committee.
James V. Langston, 75, has been a director of the Company since April
1999. He served as a director of TransAmerican Energy Corporation ("TEC"), from
February 1995 until his resignation in April 1999. He also served as a director
of TransAmerican Natural Gas Corporation ("TransAmerican"), from 1986 until his
resignation
2
<PAGE> 5
in February 1995. Mr. Langston served as the Chairman and Chief Executive
Officer of Arctic Offshore Technology Company from 1984 until his retirement in
1998. From 1977 to 1984, he was President, Director and Chief Operating Officer
of Dual Drilling Company. Prior thereto, he was with Exxon USA for 29 years and
served as Manager of Exploration and Production Drilling and as Vice President
of Exxon International Co. Mr. Langston is a member of the Audit and
Compensation Committees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED ABOVE.
The following Class I Director will continue in office until the 2000
Annual Meeting:
John R. Stanley, 60, 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 TransAmerican Refining Corporation ("TARC"). He is also a
director of TCR Holding Corporation ("TCR Holding") and Orion Refining
Corporation ("Orion"). 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. Mr. Stanley has operated
TransAmerican since 1958.
The following Class II Director will continue in office until the 2001
Annual Meeting:
Thomas B. McDade, 75, has been a director and Chairman of the Board of
the Company since May 1993. He 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. He also serves on the board of Group
Maintenance America Corp. 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. From 1985 to 1995, Mr. McDade served as a 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. Mr. McDade
is a member of the Compensation Committee.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met 31 times during the fiscal year ended
January 31, 1999. 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 71% of such meetings.
The Company has an Audit Committee and a Compensation Committee, but no
Nominating Committee.
The Audit Committee is currently composed of Messrs. May and Langston.
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 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, 1999.
The Compensation Committee is currently composed of Messrs. McDade and
Langston. 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, 1999.
DIRECTOR COMPENSATION
All directors, other than Mr. Stanley, are paid an annual fee of $75,000
plus $750 for each meeting attended.
3
<PAGE> 6
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, 1999.
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 60
Arnold H. Brackenridge President and Chief Operating Officer 66
Edwin B. Donahue Vice President, Chief Financial Officer and Secretary 48
Lee Muncy Vice President of Exploration and Land 46
George C. Wright Vice President of Accounting 56
</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. He 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 40 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 also serves as a director of TARC, TCR
Holding and Orion. 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. Mr. Muncy has worked in the domestic oil and gas industry
for 20 years.
George C. Wright has been Vice President of Accounting since March
1999. He has been employed by the Company and its affiliates since June 1982.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid during the fiscal
years ended January 31, 1999, 1998 and 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, 1999 ("Named Executive Officers"):
4
<PAGE> 7
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.............................. 1999 $ 367,309 $ -- $ 4,800
Chief Executive Officer 1998 400,483 -- 4,346
1997 397,117 -- 5,170
- ---------------------------------------------------------------------------------------------------------------
Arnold H. Brackenridge....................... 1999 $ 500,000 $ 72,917 $ 2,668
President and Chief Operating Officer 1998 326,538 336,089 8,479
1997 209,411 85,397(b) 2,742
- ---------------------------------------------------------------------------------------------------------------
Edwin B. Donahue............................. 1999 $ 271,923 $ 83,333 $ 7,701
Vice President, Chief Financial 1998 200,000 213,885 4,519
Officer and Secretary 1997 129,987 85,397(b) 4,731
- ---------------------------------------------------------------------------------------------------------------
Lee Muncy (c)................................ 1999 $ 180,000 $ -- $ 83
Vice President of Exploration 1998 27,692 25,000 --
and Land 1997 -- -- --
- ---------------------------------------------------------------------------------------------------------------
George C. Wright............................. 1999 $ 170,394 $ -- $ 5,019
Vice President of Accounting 1998 165,000 7,500 4,560
1997 171,346 -- 5,071
===============================================================================================================
</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
six months ended January 1996.
(c) Mr. Muncy joined the Company in November 1997.
EMPLOYMENT AGREEMENTS
In November 1998, the Company and Mr. Stanley entered into a three-year
employment agreement. Although the employment agreement provides for an annual
salary of $500,000, Mr. Stanley is currently being paid at his prior salary
level. If the Company terminates Mr. Stanley's employment other than for cause,
the Company shall pay Mr. Stanley his salary for the remaining term of the
agreement.
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 provided for an annual salary of $500,000 and guaranteed annual
bonus of $250,000. In December 1998, the Company extended Mr. Brackenridge's
contract for three months. Mr. Brackenridge's contract expired on March 1, 1999.
In December 1998, the Company and Mr. Donahue entered into a two-year
employment agreement which provides for an annual salary of $300,000. The
employment agreement also provides that Mr. Donahue shall be entitled to a bonus
of $500,000 payable in two equal installments on January 31, 1999 and July 31,
1999. If the Company terminates Mr. Donahue's employment other than for cause,
or Mr. Donahue terminates his employment for cause, prior to the end of the term
of the agreement, the Company shall pay Mr. Donahue his salary for the remaining
term of the agreement plus an additional six months' salary. "Cause" includes a
sale, reorganization or merger of the Company that results in a change of
control of the Company.
5
<PAGE> 8
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, or Mr. Muncy terminates his employment for cause, the
Company shall pay Mr. Muncy his salary for six months past the date of
termination. "Cause" includes a sale, reorganization or merger of the Company
that results in a change of control of the Company.
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 1999, 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 that 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, 1999, approximately 200 employees of the
Company were eligible to participate in the Savings Plan, including the Named
Executive Officers.
EXECUTIVE REIMBURSEMENT PLAN
TransAmerican also maintains an executive reimbursement plan in which
certain officers of the Company are entitled to participate. Pursuant to this
plan, participants are entitled to reimbursement for medical expenses not
otherwise covered by the Company's medical insurance. As of January 31, 1999, no
amounts had been reimbursed under this plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. McDade and Langston are members of the Company's Compensation
Committee. During the fiscal year ended January 31, 1999, 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, including 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, 1999.
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 basic policy
described above is 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 employees.
In fiscal 1999, the Committee determined to increase the base salaries
of Messrs. Stanley and Donahue to levels consistent with that of other
executives with comparable experience in the industry. The Committee also
determined to pay cash bonuses to Messrs. Brackenridge and Donahue for services
rendered. Although Mr. Stanley did not receive a bonus for services rendered
during fiscal 1999, future performance-based bonuses, if any, 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
Thomas B. McDade
James V. Langston
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, 1999, 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
changed its 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 Old Index, the New Index
and the peer group, and assumes reinvestment of all dividends and distributions.
On April 19, 1999, the Common Stock was suspended from trading on the New York
Stock Exchange for failure to meet minimum compliance requirements and an
application for de-listing has been filed with the SEC. Prices for the Common
Stock are currently quoted on Nasdaq's Over the Counter Bulletin Board.
TOTAL STOCKHOLDER RETURN
ANNUAL RETURN PERCENTAGE
YEARS ENDING
<TABLE>
<CAPTION>
COMPANY NAME / INDEX JAN 95 JAN 96 JAN 97 JAN 98 JAN 99
========================================================================================
<S> <C> <C> <C> <C> <C>
TRANSTEXAS GAS CORP (25.00) 11.90 44.68 0.36 (88.64)
NY STOCK EXCHANGE-COMPOSITE (0.50) 32.86 21.16 23.95 17.59
NASDAQ INDEX (3.28) 41.02 33.15 16.21 56.05
PEER GROUP (14.09) 23.29 31.97 (15.10) (31.16)
</TABLE>
INDEXED RETURNS
<TABLE>
<CAPTION>
BASE YEARS ENDING
PERIOD
COMPANY NAME / INDEX 10 MAR 94 JAN 95 JAN 96 JAN 97 JAN 98 JAN 99
========================================================================================
<S> <C> <C> <C> <C> <C> <C>
TRANSTEXAS GAS CORP 100 75.00 83.93 121.43 121.87 13.84
NY STOCK EXCHANGE-COMPOSITE 100 99.50 132.20 160.17 198.52 233.44
NASDAQ INDEX 100 96.72 136.39 181.61 211.05 329.35
PEER GROUP 100 85.91 105.91 139.77 118.66 81.69
</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 12, 1999, 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)(2) 46,800,264 81.37%
TNGC Holdings Corporation(1)(3) 46,788,664 81.35%
TransAmerican Natural Gas Corporation(1)(4)(7) 46,788,664 81.35%
TEC/TransAmerican LLC(1)(5) 41,588,664 72.31%
TransAmerican Energy Corporation(1)(7) 41,588,664 72.31%
Thomas B. McDade 10,000 *
Arnold H. Brackenridge 7,100 *
Edwin B. Donahue 5,000 *
Robert L. May 1,000 *
Lee Muncy 1,000 *
James V. Langston(6) 700 *
George Wright -- --
All directors and executive officers
as a group (8 persons) 46,825,064 81.41%
</TABLE>
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* Less than 1% of the outstanding shares of the Company.
(1) The address for each of John R. Stanley, TNGC Holdings, TransAmerican,
TEC/TransAmerican LLC and TEC is 1300 North Sam Houston Parkway East,
Houston, Texas 77032.
(2) 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.
(3) 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.
(4) TransAmerican owns 5,000,000 shares of Common Stock. TransAmerican also
owns all of the membership interests of TEC/TransAmerican LLC 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 or owned beneficially by TEC/TransAmerican
LLC and Southeast Marine.
(5) TEC/TransAmerican LLC owns all of the common stock of TEC, and may be
deemed to beneficially own all of the shares of Common Stock held by TEC.
(6) These shares are held of record by Mr. Langston's wife.
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(7) All of the shares of Common Stock held by TransAmerican and TEC are
pledged to secure their obligations under various debt and other
instruments.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 13, 1997, a services agreement was entered into among
TransAmerican, TEC, TARC and the Company. Under the services agreement, the
Company provided accounting, legal, administrative and other services to TARC,
TEC and TransAmerican and its affiliates. TransAmerican will provide advisory
services to the Company, TARC and TEC. As of January 31, 1999, the receivable
from TARC and TransAmerican for service agreement fees of $0.2 million was
charged to general and administrative expenses. As of January 31, 1999,
receivables of $4.6 million for other services provided to TransAmerican and
certain of its affiliates were recorded as a reduction of additional paid-in
capital.
In connection with a December 15, 1998 transaction pursuant to which
TARC transferred its refinery assets to a minority-owned subsidiary, TCR Holding
Corporation, a Delaware corporation ("TCR Holding"), and TCR Holding transferred
such assets to its majority-owned subsidiary, TransContinental Refining
Corporation, a Delaware corporation, d/b/a Orion Refining Corporation ("Orion"),
the Company entered into an Amended and Restated Services Agreement (the "TCR
Group Services Agreement") with TCR Holding and Orion, and an Amended and
Restated Services Agreement with TransAmerican and its affiliates (other than
TCR Holding and Orion). Pursuant to the TCR Group Services Agreement, the
Company will provide accounting, legal, administrative and other services to TCR
Holding and Orion through December 15, 2000. From December 15, 1998 through
February 28, 1999, the fee for such services was $200,000 per month. Thereafter,
the fee is adjusted based on an assessment of the cost to the Company of
providing such services. As of January 31, 1999, the receivable from Orion for
such services was $0.3 million.
During fiscal 1998 and 1999, TEC made advances to the Company pursuant
to a $50 million promissory note which matures on June 14, 2002. The note
currently bears interest at a rate of 11.375% per annum. Semiannual interest
payments are due and payable on June 15 and December 15. As of January 31, 1999,
the outstanding principal balance was $6.5 million and accrued interest was $0.1
million.
In December 1998, the Company executed a note payable to TransAmerican
in the original principal amount of $1.4 million plus interest at a rate of 15%
per annum. The proceeds of this loan were used to pay a portion of the Company's
interest payment obligations on December 31, 1998.
The Company leases approximately 5,316 square feet of office space to
Orion in its office building located in Houston, Texas. The monthly rental rate
for this space is approximately $5,100.
From time to time, the Company sells natural gas to TARC under an
interruptible long-term sales contract. Revenues from TARC under this contract
totaled approximately $1.1 million and $2.7 million, respectively, for the years
ended January 31, 1998 and 1997, respectively. There were no such sales during
fiscal 1999.
TNGC Holdings, TransAmerican and its existing subsidiaries, including
TARC, TEC and the Company, 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 the
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<PAGE> 13
Company, 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.
The Company is required, under the Tax Allocation Agreement, to pay any
Texas franchise tax (which is estimated not to exceed $11.4 million)
attributable to prior year transactions by any member of the TNGC Consolidated
Group. As of January 31, 1999, the Company had paid $9.6 million of these
franchise taxes and estimates that it will pay approximately $0.6 million during
fiscal 2000. During the year ended January 31, 1999, the Company paid
approximately $5.6 million of Texas franchise taxes on behalf of affiliates.
Approximately $2.3 million of the franchise taxes paid exceeded the payable to
affiliates for such taxes and was recorded as a reduction of additional paid-in
capital.
INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP as the
Company's independent accountants for the year ending January 31, 2000.
PricewaterhouseCoopers has audited the Company's financial statements since the
Company's organization in May 1993. Representatives of PricewaterhouseCoopers
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 materials in connection with the 2000 Annual Meeting 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, 2000.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at
the Annual Meeting other than those listed in the Notice of Annual Meeting.
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
Ed Donahue, Secretary
Houston, Texas
June 1, 1999
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<PAGE> 14
TRANSTEXAS GAS CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
July 9, 1999
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 Friday, July 9, 1999, 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> 15
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).
<TABLE>
<S> <C> <C> <C>
FOR WITHHOLD
--- --------
Robert L. May [ ] [ ]
FOR WITHHOLD
--- --------
James V. Langston [ ] [ ]
The undersigned hereby acknowledges receipt of the
Notice of Annual Meeting and Proxy Statement dated
June 1, 1999. 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]
----------------------------------------------------
[Signature]
</TABLE>
