SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
TEXOIL, INC.
(Name of Registrant as Specified in its Charter)
_____________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
TEXOIL, INC.
1600 Smith Street, Suite 4000
Houston, Texas 77002
(713) 652-5741
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 12, 1997
Notice is hereby given that the annual meeting of stockholders of
Texoil, Inc. (the "Company") will be held at The Doubletree Hotel at the Allen
Center, 400 Dallas Street, Houston, Texas on Wednesday, November 12, 1997 at
2:00 p.m., Houston time, for the following purposes:
1. To elect a board of seven directors to serve until the next
annual meeting of stockholders and until their successors are
elected and qualified; and
2. To consider and act upon such other business as may properly be
presented to the meeting or any adjournment thereof.
A record of stockholders has been taken as of the close of business on
September 23, 1997, and only those stockholders of record on that date will be
entitled to notice of and to vote at the meeting or any adjournment thereof. A
complete list of stockholders so entitled to vote will be available at the
Company's principal office in Houston, Texas, commencing October 31, 1997 for
inspection by any stockholder during usual business hours prior to the annual
meeting.
All stockholders of the Company are invited to attend the meeting. The
Board of Directors, however, requests that you promptly sign, date and mail the
enclosed proxy, even if you plan to be present at the meeting. If you attend the
meeting, you can either vote in person or by your proxy. Please return your
proxy in the enclosed, postage-paid envelope.
By Order of the Board of Directors,
/s/GARY J. MILAVEC
Gary J. Milavec
SECRETARY
September 30, 1997
TEXOIL, INC.
1600 Smith Street, Suite 4000
Houston, Texas 77002
(713) 652-5741
PROXY STATEMENT
This Proxy Statement and the enclosed proxy are being mailed to
stockholders of Texoil, Inc., a Nevada corporation (the "Company"), commencing
on or about September 30, 1997. The Company's Board of Directors is soliciting
proxies to be voted at the Company's annual meeting of stockholders to be held
in Houston, Texas on Wednesday, November 12, 1997 and at any adjournment
thereof, for the purposes set forth in the accompanying notice. The shares
covered by a proxy, if such is properly executed and received prior to the
meeting, will be voted in accordance with the directions specified thereon
regarding election of directors, and with respect to any other matters which may
properly come before the meeting, in accordance with the judgment of the persons
designated as proxies. A proxy may be revoked at any time before it is exercised
by giving written notice to, or filing a duly executed proxy bearing a later
date with, the Secretary of the Company, or by voting in person at the meeting.
Management expects that the only matters to be presented for action at the
meeting will be the election of directors.
At the close of business on September 23, 1997, the record date for
determining the stockholders entitled to notice of and to vote at the meeting
(the "Record Date"), there were outstanding and entitled to vote 4,574,923
shares of the Company's common stock, par value $.01 per share ("Common Stock")
and 23,000 shares of Series A preferred stock, par value $.01 per share ("Series
A Preferred Stock"). Each share of Common Stock and Series A Preferred Stock
entitles the holder to one vote on all matters presented at the meeting.
The Company will bear the costs of soliciting proxies in the
accompanying form. In addition to solicitations by mail, a number of regular
employees of the Company may solicit proxies in person or by telephone.
CORPORATE HISTORY
The Company's business has been conducted since 1964 by its wholly-owned
subsidiary, Texoil Company, a Tennessee corporation (the "Subsidiary"). Texoil
Company became a subsidiary of the Company in March 1993 after surviving a
merger with a wholly-owned subsidiary of the Company. At the time of the merger
the Company, which then was named Comet Entertainment, Inc., a Nevada
corporation ("Comet"), had no substantive assets or operations. Upon
consummation of the merger (the "Comet Merger"), the Subsidiary's stockholders
and management became Comet's management and controlling stockholders, Comet
changed its name to Texoil, Inc., and accordingly, the Subsidiary, as a
wholly-owned subsidiary of Texoil, Inc., survived the Comet Merger. Unless
otherwise indicated, all future references herein to "Texoil" or the "Company"
relate to Texoil Company for the period before the Comet Merger and to Texoil,
Inc. for the period thereafter.
ELECTION OF DIRECTORS
NOMINEES
At the meeting, seven nominees are to be elected to the Company's Board
of Directors, each director to hold office until the next annual meeting of
stockholders and until his successor is elected and qualified. Unless your proxy
specifies otherwise or withholds authority to vote for one or more nominees
named thereon and described below, it is intended that the shares represented by
your proxy will be voted for the election of these seven nominees. Proxies
cannot be voted for a greater number of persons than the number of nominees
named. If any nominee should become unavailable for election, your proxy may be
voted for a substitute nominee selected by the Board, or the Board may be
reduced accordingly. The Board is unaware of any circumstances likely to render
any nominee unavailable.
DIRECTOR NOMINEE AGE POSITION
- - -------------------------------- --------------------------
T. W. Hoehn, III......... 47 Chairman of the Board and a Director
Ruben Medrano............ 40 Director, President and Chief Executive Officer
T. W. Hoehn, Jr.......... 68 Director
Gary J. Milavec.......... 35 Director and Secretary
Joe C. Richardson, Jr.... 69 Director
William F. Seagle........ 69 Director
Walter L. Williams....... 69 Director
T. W. Hoehn, Jr. has been a director of the Company since he co-founded
it in 1964. He also is Chairman of Hoehn Motors, Inc., a multi-line automobile
agency located in Carlsbad, California, which he founded in 1975.
Ruben Medrano has been President, Chief Executive Officer and a Director
of the Company since October 1996. He served as interim President of the Company
from May 1996 to October 1996 and as Vice President Operations from July 1994 to
May 1996. He joined the Company as a consultant in November 1992. From 1980 to
1992, Mr. Medrano was employed by Exxon Company, U.S.A. as a reservoir and
production engineer. Mr. Medrano received a B.S. degree in Mechanical
Engineering from the University of Texas at El Paso in 1979. He is a member of
the Society of Petroleum Engineers, and is a registered professional engineer in
the State of Texas.
T. W. Hoehn, III has been a director of the Company since 1984 and
became its Chairman in October 1996. He is President and General Manager of
Hoehn Motors, Inc., a multi-line automobile agency located in Carlsbad,
California, where he has been employed since 1975. He is a graduate of Stanford
University and a son of T. W.
Hoehn, Jr.
Gary J. Milavec has been a director of the Company since September 1996
(see "Certain Transactions") and became its Secretary in October 1996. He has
been a Vice President of RIMCO Associates, Inc. and active in its investment
management and corporate finance activities since October 1990. He is also a
director of Universal Seismic Associates, Inc. and Brigham Exploration Company.
From May 1989 to October 1990 he was an investment banker with Rauscher Pierce
Refsnes, Inc. From July 1986 to May 1989 he was a geologist with Shell Oil
Company. Mr. Milavec received a B.A. in Geology from the University of
Rochester, an M.S. in Geology from the University of Oklahoma, and an M.B.A.
from the University of Houston.
Joe C. Richardson, Jr. has been a director of the Company since April
1992. He has been President of Vital Energy, Inc. since 1980. Prior to that he
was Manager of Drilling and Production for Shamrock Oil & Gas Corporation,
formed and operated a consulting petroleum engineering firm, and formed and
operated a public oil and gas company. Mr. Richardson received a Bachelor of
Science degree in Petroleum Engineering and a Bachelor of Science degree in
Mechanical Engineering from Texas A&M in 1950 and is a registered professional
engineer in the State of Texas.
William F. Seagle has been a director of the Company since 1977. For
more than the last five years, he has had business and personal interests in
construction, real estate and investments.
Walter L. Williams has been a director of the Company since he
co-founded it in 1964, served as its Chairman and Chief Executive Officer from
July 1995 to May 1996, and served as its President from 1971 to July 1995. He
currently is Vice Chairman of Cheniere Energy, Inc., a publicly-held oil and gas
company. Prior to forming the Company, Mr. Williams was an independent petroleum
consultant for six years and Manager of Drilling and Production for an
independent oil company prior to that period. He received a Bachelor of Science
degree in Petroleum Engineering from Texas A&M in 1949 and is a registered
professional engineer in both the States of Texas and Louisiana.
-2-
BOARD AND COMMITTEE ACTIVITY, STRUCTURE AND COMPENSATION
The Company's operations are managed under the broad supervision and
direction of the Board of Directors, which has the ultimate responsibility for
the establishment and implementation of the Company's general operating
philosophy, objectives, goals and policies. Pursuant to delegated authority,
certain board functions are discharged by the Board's two current standing
committees, the executive and audit/compensation committees. The Board of
Directors has no standing nominating or similar committee. During the fiscal
year ended December 31, 1996, the Board of Directors held three meetings, the
executive committee held no meetings, and the audit/compensation committee held
one meeting. In 1996, each incumbent member of the Board attended or
participated in at least 75% of the aggregate number of (i) Board meetings and
(ii) committee meetings held by all committees of the Board on which he served.
The Executive Committee is authorized to exercise, to the extent
permitted by law, the power of the full Board of Directors when a meeting of the
full Board is not practicable or necessary. The Executive Committee is comprised
of Messrs. Hoehn, III, Medrano and Milavec.
The Audit/Compensation Committee recommends to the Board the independent
accountants of the Company, reviews the Company's annual report on Form 10-KSB,
reviews the Company's internal controls and accounting operations, and reviews
any transactions of the Company in which management or controlling persons of
the Company have an interest. The Committee is also responsible for formulating
and adopting or recommending to the Board executive compensation plans and
policies, including those relating to incentive compensation and benefits. The
Audit/Compensation Committee is composed of Messrs. Hoehn, Jr., Milavec and
Richardson.
Directors who are not employed by the Company had been paid a fee of
$500 for each meeting of the Board of Directors attended. Since March 1995, no
such fees have been paid to outside directors, and the Company does not
anticipate paying any such fees for the remainder of 1997. The Company
reimburses each director for his actual and necessary expenses reasonably
incurred in connection with attending meetings of the Board and its committees.
No fee currently is paid to directors who attend meetings of a Board committee.
MANAGEMENT
EXECUTIVE OFFICERS
The executive officers of the Company serve at the pleasure of the Board
of Directors and are subject to annual appointment by the Board. The Company
currently has two executive officers, Ruben Medrano, who has been President and
Chief Executive Officer of the Company since October 17, 1996 and Gary J.
Milavec, who has been Secretary since October 17, 1996. For further information
regarding Messrs. Medrano and Milavec, please refer to "Election of Directors"
above.
EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for each of the
years ended December 31, 1996, 1995 and 1994 for Walter L. Williams' and Ruben
Medrano's services to the Company. No other executive officer had salary and
bonus which in 1996 exceeded $100,000.
-3-
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- --------------------------------------------------
AWARDS PAYOUTS
----------------------- ----------------------
SECURITIES
OTHER RESTRICTED UNDERLYING
NAME AND ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS SARS (#) PAYOUTS COMPENSATION
- - ------------------------------ ---- ------- ---- ----------- ---- ------- ---- ----
Ruben Medrano, ............... 1996 $67,200 $-- $28,800 (3) $-- 30,000 (4) $-- $--
President and Chief ....... 1995 $74,400 $-- $21,600 (3) $-- -- $-- $--
Executive Officer1 ........ 1994 $48,000 (2) $-- $ -- $-- 20,000 (4) $-- $--
Walter L. Williams, .......... 1996 $55,000 $-- $20,915 (3) $-- -- $-- $--
President and Chief ....... 1995 $84,000 $-- $42,645 (3) $-- -- $-- $--
Executive Officer5 ........ 1994 $99,000 $-- $ 8,532 (6) $-- 50,000 (4) $-- $--
1 Mr. Medrano was appointed interim President of the Company in May 1996 and
became President and Chief Executive Officer in October 1996.
2 Includes salary commencing in July 1994 when Mr. Medrano became an employee
and Vice-President of the Company.
3 This amount represents the amount of compensation expense recognized by the
Company for Common Stock issued to the named executive officer in lieu of the
reduced cash compensation payable to the named executive officer. See "1995
Stock Compensation Plan" and "Amended and Restated 1996 Stock Compensation
Plan" below.
4 See "--Option Grants" below.
5 Mr. Williams resigned as an employee of the Company in May 1996. 6 See
"Employee Overriding Royalty Plans" below.
1995 STOCK COMPENSATION PLAN
In July 1995, the Company's stockholders approved the 1995 Stock
Compensation Plan, which provides for the issuance of shares of Common Stock to
certain employees and consultants whose cash compensation was reduced by 30%
effective April 1, 1995. Pursuant to the 1995 Stock Compensation Plan, shares of
Common Stock were issued to such individuals on recognition of their reduced
cash compensation in 1995 and for the months of January through February, 1996.
AMENDED AND RESTATED 1996 STOCK COMPENSATION PLAN
By consent dated June 10, 1996, the Company's Board of Directors adopted
the 1996 Stock Compensation Plan after the 1995 Stock Compensation Plan expired
March 31, 1996 with an insufficient number of shares of Common Stock reserved
for issuance thereunder remaining to cover issuances which otherwise would have
been made after February 1996. Stockholder approval of the 1996 Stock
Compensation Plan was required before shares could be issued thereunder.
Stockholder approval was a requirement of Rule 16b-3 promulgated under Section
16 of the Securities Exchange Act of 1934, as amended (the "1934 Act"). After
the Board's adoption of the 1996 Stock Compensation Plan, Rule 16b-3 was amended
and stockholder approval was no longer mandatory thereunder. Since the 1996
Stock Compensation Plan had not been implemented and no common stock issued
thereunder, the Company's Board of Directors amended and restated the 1996 Stock
Compensation Plan to make it more consistent with amended Rule 16b-3.
Accordingly, the Amended and Restated 1996 Stock Compensation Plan (the "1996
Plan") superseded the 1996 Stock Compensation Plan in its entirety. Pursuant to
the 1996 Plan, shares of common stock were issued to such individuals on
recognition of their reduced cash compensation for the months of March through
December, 1996.
EMPLOYEE OVERRIDING ROYALTY PLANS
In previous years, the Subsidiary granted to Walter L. Williams and
other former officers overriding royalty interests in exploration prospects
generated, acquired and sold through their respective efforts. This arrangement
provided performance-based incentive compensation for these officers in lieu of
Company-sponsored retirement or savings plans. The awarded overriding royalty
interests are not subject to continued employment and remain the grantee's
property for so long as the underlying lease remains in effect. No overriding
royalty interests were granted by Texoil to its management or other personnel on
the 14 prospects sold to Texas Meridian and none are expected to be granted on
the Company's present exploratory prospect inventory, with the exception of a 2%
of 8/8ths overriding royalty granted to Dennis A. Drake, the Company's
consulting geologist, as the generator of the Greens Lake Prospect. Overriding
royalty interest payments made to Walter L. Williams during the years ended
December 31, 1995 and 1996 were as follows:
-4-
YEARS ENDED DECEMBER 31
------------------------
OFFICER/GROUP 1995 1996
- - ------------------ --------- ---------
Walter L. Williams............................. $ 6,645 $ 5,915
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth additional information with respect to a
non-qualified stock option granted to Ruben Medrano for services rendered in
1996. Pursuant to the Company's 1994 Stock Option Plan, in May 1996 the Company
granted Mr. Medrano options to purchase 30,000 shares of Common Stock at an
exercise price of $1.3125 per share. No other executive or employee was granted
stock options in 1996.
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING OPTIONS/SARS GRANTED TO EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED (#) FISCAL YEAR 1996 PRICE ($/SHARE) DATE
- - ---- ------------ ----------------------- --------------- ------------
Ruben Medrano....... 30,000 100% $ 1.3125 May 2, 2006 (1)
1 Option expires 10 years after the date of grant, and vests 100% on first
anniversary of date of grant. If prior to exercise or expiration of the option
a "change of control" occurs, the entire option generally becomes immediately
exercisable. Such a "change of control" occurs when (i) any person acquires
ownership of the Company's securities representing more than 50% of the
combined voting power of the Company's then outstanding securities, or (ii) at
any given time, less than 50% of the then incumbent members of the Board of
Directors have been continuously incumbent during the preceding 18 months.
In June 1996, the Company granted William F. Seagle, a director of the
Company, a non-qualified stock option exercisable for 50,000 shares of Common
Stock at an exercise price of $1.5625 for his service on a special committee
charged with seeking out and considering significant transactions to maximize
shareholder value. Mr. Seagle's option is exercisable until June 2006.
OPTION EXERCISES AND YEAR-END VALUES
In July 1994, an option to purchase 50,000 shares of Common Stock at
$3.00 per share was granted to Walter Williams, which became exercisable in July
1995. Mr. Williams did not exercise any of the Common Stock options in 1996,
and, as a result of Mr. Williams' resignation as an employee of the Company in
May 1996, the option expired unexercised on August 1, 1996. The following table
sets forth information regarding two unexercised options to purchase 20,000
shares of Common Stock at $3.00 per share and 30,000 shares of Common Stock at
$1.3125 per share that were granted to Mr. Medrano on July 26, 1994 and May 2,
1996, respectively. Mr. Medrano did not exercise any Common Stock option during
1996.
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
NAME UNEXERCISED OPTIONS/SARS AT DECEMBER 31, 1996 OPTIONS/SARS AT DECEMBER 31, 1996 (1)
---- --------------------------------------------- -------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Ruben Medrano 20,000 $0 $0 $0
------------- ----------- -------------
30,000 $0 $0 $0
------------- ----------- -------------
1 Based upon the last sales price of $1.125 per share on December 31, 1996 as
reported in the consolidated reporting system for NASDAQ Small Cap Issues, Mr.
Medrano's options were not in-the-money.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of September 23, 1997, the number of shares
of the Company's equity securities owned by (i) each person known by the Company
(based on publicly-available filings with the Commission) to be the holder of
more than five percent of its voting securities, (ii) each director, director
nominee and named executive officer of the Company, and (iii) all of the
Company's directors and executive officers as a group. Unless otherwise
indicated, each holder has sole voting and investment power with respect to the
shares of capital stock owned by such holder and is a United States citizen.
-5-
NAME OF BENEFICIAL OWNER AMOUNT AND NATURE OF
(ADDRESS INDICATED IF NOT A DIRECTOR OR AN OFFICER) BENEFICIAL OWNERSHIP PERCENT OF CLASS
- - --------------------------------------------------- -------------------- ----------------
COMMON STOCK:
T. W. Hoehn, Jr ................................... 2,118,566(1)(2) 40.9%
T. W. Hoehn, III .................................. 607,519(3) 12.4%
Walter L. Williams ................................ 433,262(4) 9.5%
Joe C. Richardson, Jr ............................. 281,384(5) 5.8%
William F. Seagle ................................. 178,696(6) 3.8%
Ruben Medrano ..................................... 93,124(7) 2.0%
Officers, Directors and Executive
as a Group (6 persons)8 ........................... 3,712,551(1)(9) 62.2%
RIMCO ............................................. 3,750,000(10) 45.0%
600 Travis Street, Suite 6875
Houston, TX 77002
Wellington Management Company ..................... 330,000(11) 7.2%
75 State Street
Boston, MA 02109
John L. Graves .................................... 404,439(12) 8.3%
3421 Overbrook
Houston, TX 77027
SERIES A PREFERRED STOCK:
T. W. Hoehn, Jr ................................... 20,000(13) 87.0%
Robert A. Hoehn ................................... 3,000(14)(15) 13.0%
Directors and Executive Officers
as a (Group 7 persons) ............................ 20,000(13)(14) 87.0%
1 Excludes shares of Common Stock issuable upon conversion of an aggregate
23,000 outstanding shares of Series A Preferred Stock, of which 20,000 may be
deemed held by T. W. Hoehn, Jr. and are presently convertible into 666,667
shares of Common Stock.
2 Includes 240,000 shares issuable to Mr. Hoehn pursuant to presently
exercisable warrants, and 362,500 shares issuable upon conversion of
presently convertible debt.
3 Includes 15,000 shares issuable pursuant to presently exercisable warrants,
and 325,000 shares issuable upon conversion of presently convertible debt.
4 Includes 72,268 shares owned by Betty B. Williams, wife of Mr. Williams. Mr.
Williams disclaims beneficial ownership of such shares.
5 Includes 281,384 shares issuable pursuant to a presently exercisable option.
6 Includes 8,000 shares issuable pursuant to presently exercisable warrants,
50,00 shares issuable pursuant to a presently exercisable option and 62,500
shares issuable upon conversion of presently convertible debt.
7 Includes 50,000 shares issuable upon exercise of a presently exercisable
options.
8 Excludes Gary J. Milavec who became a director of the Company in September
1996. Although Mr. Milavec does not own any Common Stock, he is a vice
president of RIMCO Associates, Inc, which as of September 30, 1997 is the
indirect holder of debt presently convertible into 3,750,000 shares of Common
Stock. Mr. Milavec disclaims any beneficial ownership of said shares. See
"Certain Transactions".
9 Includes an aggregate 1,394,384 shares of Common Stock issuable upon exercise
of presently exercisable options, warrants, and exchangeable or convertible
debt.
10 Includes 3,750,000 shares issuable upon exchange of presently exchangeable
debt. See footnote 8 above.
11 Wellington Management Company, in its capacity as investment advisor, may be
deemed beneficial owner of these shares which are owned by numerous
investment counseling clients.
12 Includes 281,384 shares issuable to Mr. Graves pursuant to a presently
exercisable option and 99,414 shares owned by Ms. Lynn W. Graves, wife of Mr.
Graves. Mr. Graves disclaims beneficial ownership of such shares.
13 These shares presently are convertible into 666,667 shares of Common Stock.
Of these shares, 4,000 shares are owned of record by The BJH Foundation, a
charitable foundation of which Mr. Hoehn is a trustee, and 2,000 shares are
owned of record by Mr. Hoehn's wife, Carolina Vivanco Hoehn. Mr. Hoehn shares
voting and investment power with two co-trustees of the foundation with
respect to these 4,000 shares. Mr. Hoehn disclaims beneficial ownership of
such shares.
14 These shares presently are convertible into 100,000 shares of Common Stock.
-6-
15 Robert A. Hoehn is a son of T.W. Hoehn, Jr. and a brother of T.W. Hoehn, III.
CERTAIN TRANSACTIONS
EXISTING RIMCO FINANCING. On September 6, 1996, the Subsidiary entered
into a Note Purchase Agreement (the "RIMCO Agreement") with four limited
partnerships of which Resource Investors Management Company Limited Partnership
("RIMCO") is the controlling general partner (collectively, the "RIMCO
Purchasers"). Under the RIMCO Agreement, the RIMCO Purchasers provide up to
$8,000,000 in two separate financings:
(a) The first financing under the RIMCO Agreement is in the form of
Senior Exchangeable General Obligation Notes issued by the Subsidiary in
the maximum amount of $3,000,000 (the "Tranche A Notes"). Amounts
advanced under the Tranche A Notes accrue interest at a fixed, annual
rate of 10%, with interest payable monthly and all outstanding principal
plus all accrued and unpaid interest due and payable at maturity.
Indebtedness outstanding under the Tranche A Notes is exchangeable, in
whole or in part at any time, for Common Stock at an initial per share
price equal to $.80, subject to anti-dilution adjustments. The
Subsidiary can require the RIMCO Purchasers to make such an exchange if
they have funded at least $2,800,000 under the Tranche A Notes and the
average trading price of the Common Stock for any consecutive 20-day
trading period is $3.00 or more. The Company granted the RIMCO
Purchasers certain registration rights in respect of shares of Common
Stock issuable upon exchange of debt under the Tranche A Notes. As of
the date of this Proxy Statement, the Subsidiary had borrowed a total of
$3,000,000 under the Tranche A Notes.
(b) The second financing is in the form of Senior Secured General
Obligation Notes (the "Tranche B Notes") issued by the Subsidiary in the
maximum amount of $5,000,000. After $2,800,000 in principal has been
advanced under the Tranche A Notes, the Subsidiary may borrow under the
Tranche B Notes until September 1, 1999; provided that the Subsidiary
can maintain an agreed upon borrowing base. Since the Subsidiary's
ability to maintain the agreed upon borrowing base will depend upon the
extent to which its exploratory drilling program adds to its reserves,
there can be no assurance that it will be able to maintain the necessary
borrowing base. The Tranche B Notes will mature September 1, 2002.
Amounts advanced under the Tranche B Notes will accrue interest at a
fixed, annual rate of 10%, with interest and principal paid monthly from
certain revenues generated by the assets pledged to the RIMCO Purchasers
to secure the notes. As of the date of this Proxy Statement, the
Subsidiary has not made any borrowings under the Tranche B Notes.
NEW RIMCO FINANCING. On May 21, 1997, the Subsidiary entered into an
Amended and Restated Note Purchase Agreement with the RIMCO Purchasers ("Amended
RIMCO Agreement"). Under the Amended RIMCO Agreement, the RIMCO Purchasers will
provide an additional $1,500,000 in a new financing and continue to provide up
to $8,000,000 agreed upon under the RIMCO Agreement. Under the new financing,
the Subsidiary issued 10% Senior Secured Exchangeable General Obligation Notes
in the principal amount of $1,500,000 to the RIMCO Purchasers in various amounts
(collectively, the "Tranche C Notes"). The Subsidiary intends to borrow funds
under the Tranche C Notes if it is unable to borrow funds under the Tranche B
Notes because the borrowing base requirements cannot be satisfied. After
$3,000,000 in principal has been advanced under the Tranche A Notes, the
Subsidiary may borrow under the Tranche C Notes to pay for the Company's share
of drilling and completion costs for the initial well to be drilled on each of
the Raceland Prospect and the Green's Lake Prospect (or for such other purpose
as may be consented to in writing by the RIMCO Purchasers). The Tranche C Notes
will mature September 1, 1999. Amounts advanced under the Tranche C Notes will
accrue interest at a fixed, annual rate of 10%, with interest paid monthly and
all outstanding principal plus all accrued and unpaid interest due and payable
at maturity. Indebtedness outstanding under the Tranche C Notes is exchangeable,
in whole or in part at any time, for Common Stock at an initial per share price
equal to $1.50, subject to anti-dilution adjustments. The Subsidiary can require
the RIMCO Purchasers to make such an exchange if they have funded at least
$1,350,000 under the Tranche C Notes and the average trading price of Common
Stock for any consecutive 20-day trading period is $3.00 or more. The Company
granted the RIMCO Purchasers certain registration rights in respect of shares of
Common Stock issuable upon exchange of debt under the Tranche C Notes. As of the
date of this Proxy Statement, the Subsidiary has not made any borrowings under
the Tranche C Notes.
Under the RIMCO Agreement, the proceeds of the Tranche B Notes could be
used to pay the Company's share of costs to drill, test, complete, equip,
deepen, sidetrack and/or recomplete any well located on the Green's Lake
Prospect, the Laurel Grove Prospect and the Raceland Prospect other than the
first well to be drilled by or on behalf of the Company on either of the Green's
Lake Prospect or the Raceland Prospect. The Amended RIMCO Agreement
-7-
expands this use of proceeds to permit Tranche B Proceeds to be used to pay the
Company's share of costs to drill, test, complete, equip, deepen, side track
and/or recomplete the first well to be drilled on the Raceland Prospect.
At June 30, 1997, the Company was in default of one of the loan
covenants in the Amended RIMCO Agreement regarding the current assets to current
liabilities ratio. The Company requested and obtained a waiver of this violation
from RIMCO effective through September 30, 1997. The Company's ability to
satisfy the requirements of the Amended RIMCO Agreement covenant(s) is dependent
on results of its exploratory drilling program. If the Company is unable to meet
the requirements of the Amended RIMCO Agreement covenant(s) it will again seek a
waiver from RIMCO. The Company can give no assurance that successful drilling
results will be achieved or that a request for waiver will be granted.
Certain other affiliate loans to the Company were made expressly
subordinate to financings under the RIMCO Agreement. In connection with the
execution of the Amended RIMCO Agreement, all such indebtedness previously made
expressly subordinate to the Tranche A Notes and the Tranche B Notes was also
made expressly subordinate to the Tranche C Notes.
CONVERTIBLE NOTES. In May 1996, four directors of the Company loaned it
an aggregate $1,100,000. Each loan was made pursuant to a promissory note
bearing interest at an annual rate of 12%, maturing May 6, 1997, and convertible
at the option of the lender into shares of Common Stock at a price of $.80 per
share, subject to anti-dilution adjustments. Each note was guaranteed by
Subsidiary and the guaranty was secured by substantially all of Subsidiary's
assets. The lenders also were issued warrants exercisable until May 2001 for an
aggregate 1,100,000 shares of Common Stock at $1.3125 per share, subject to
anti-dilution adjustments (the "Lender Warrants"). The four lenders were T. W.
Hoehn, Jr., who loaned $550,000 and received a warrant exercisable for 550,000
shares; T. W. Hoehn, III, who loaned $300,000 and received a warrant exercisable
for 300,000 shares; Joe C. Richardson, Jr., Trustee UDT 5-17-91, as amended, who
loaned $200,000 and received a warrant exercisable for 200,000 shares; and
William F. Seagle, who loaned $50,000 and received a warrant exercisable for
50,000 shares. The lenders were granted certain registration rights in respect
of shares of Common Stock issuable upon exercise or conversion of the warrants
or convertible notes. Proceeds of the loans were used to fund the Company's
share of 3-D seismic survey costs associated with its exploration projects in
progress in Lafourche Parish, Louisiana and Galveston County, Texas, and for
general corporate purposes. Loan proceeds also were used to pay the March 31,
1996 dividend of $69,000 on the Company's outstanding Series A Preferred Stock,
all of which is held by lending director Mr. Hoehn, Jr. and his son Robert A.
Hoehn, and to repay the Company's remaining indebtedness of approximately
$260,000 to First Interstate Bank of Texas, N.A. which was guaranteed by Mr.
Hoehn, Jr.
In conjunction with the RIMCO Agreement, the $200,000 owed to Joe C.
Richardson, Jr., Trustee, UDT May 17, 1991, as amended, was repaid in September
1996. In addition, the Lender Warrants were cancelled, and the convertible notes
payable to T. W. Hoehn, Jr., T. W. Hoehn, III and William F. Seagle were
cancelled and replaced by replacement convertible notes (the "Replacement
Notes") in the aggregate amount of $900,000. Amounts owed under the Replacement
Notes accrue interest at a fixed, annual rate of 12%, with interest payable
monthly and all outstanding principal plus all accrued and unpaid interest due
and payable at maturity. Indebtedness outstanding under the Replacement Notes is
convertible, in whole or in part and at any time, for Common Stock at an initial
per share price equal to $.80, subject to anti-dilution adjustments. The Company
can require the lending directors to make such a conversion if the average
trading price of the Common Stock for any consecutive 20-day trading period is
$3.00 or more. The Company granted certain registration rights in respect of
shares of Common Stock issuable upon conversion of the Replacement Notes.
Two directors elected to convert $300,000 of the debt evidenced by the
Replacement Notes into 375,000 shares of Common Stock effective April 22, 1997.
Mr. T.W. Hoehn, Jr., holder of $550,000 in Replacement Notes, converted $260,000
of debt into 325,000 shares of Common Stock. Mr. T.W. Hoehn, III, holder of
$300,000 in Replacement Notes converted $40,000 of debt into 50,000 shares of
Common Stock. Giving effect to the $300,000 debt conversion, the Replacement
Notes aggregate unpaid principal balance of $600,000 is now held by Mr. T.W.
Hoehn, Jr. in the sum of $290,000, Mr. T.W. Hoehn, III in the sum of $260,000
and Mr. William F. Seagle in the sum of $50,000.
-8-
OTHER AFFILIATE NOTES. The Company has two subordinated notes from a
Company director and his affiliate in the aggregate amount of $1,050,000. There
are $1,000,000 in loans from Mr. T.W. Hoehn, Jr. evidenced by a promissory note
which matures upon the earlier to occur of October 1, 2002, and 30 days after
the RIMCO debt has been paid in full in cash or by exchange for common stock.
The note accrues interest at a variable rate equal to 2% plus the prime rate
announced by Wells Fargo Bank (Texas), N.A., is payable to the T.W. Hoehn, Jr.
and Betty Jo Hoehn Revocable Trust, and is subordinate to the RIMCO financing.
Monthly interest payments are due on the 10th day of each month and scheduled
quarterly principal payments may be made if certain liquidity conditions are
satisfied and after the first $2,800,000 of the RIMCO loans have been funded.
Unpaid quarterly principal payments are cumulative and amounts in excess of the
scheduled quarterly payments may be paid if the liquidity conditions are
satisfied. A $50,000 loan from Opal Air, Inc., a company owned by T.W. Hoehn,
Jr., is evidenced by a promissory note from the Company to Opal Air, Inc.; said
note matures on the same date and is otherwise subject to substantially the same
terms as the Company's $1,000,000 note to the T.W. Hoehn, Jr. and Betty Jo Hoehn
Revocable Trust.
OTHER MATTERS
REQUIRED VOTE
Only holders of Common Stock and Series A Preferred Stock as of the
Record Date will be entitled to vote in person or by proxy at the meeting. A
majority of issued and outstanding shares of Common Stock and Series A Preferred
Stock as of the Record Date represented at the meeting in person or by proxy
will constitute a quorum for the transaction of business. Abstentions and broker
non-votes will be counted for purposes of determining the presence or absence of
a quorum. Holders of Common Stock and Series A Preferred Stock will vote
together as one class on the election of directors. Provided that a quorum is
present at the meeting, the seven director nominees who receive the greatest
number of votes cast for election by stockholders entitled to vote therefore
will be elected directors. Votes withheld in connection with the election of one
or more director nominees will not be counted as votes cast for such
individuals. Votes will be tabulated by ChaseMellon Shareholder Services, the
transfer agent and registrar for the Common Stock, and the results will be
certified by the inspector of election who is required to resolve impartially
any interpretive questions as to the conduct of the vote. In tabulating votes, a
record will be made of the number of shares (i) voted for each nominee, (ii)
with respect to which authority to vote for each nominee has been withheld, and
(iii) present at the meeting but not voting.
INDEPENDENT ACCOUNTANTS
The Company engaged BDO Seidman, LLP as independent accountants of the
Company effective December 29, 1995. Management expects that BDO Seidman, LLP
will remain the Company's independent accountants for 1997. Effective December
29, 1995, the Company dismissed Price Waterhouse LLP who had been the Company's
independent accountants since 1992. Management has had no disagreement with
Price Waterhouse LLP on any material matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure. The
reports of Price Waterhouse LLP on the Company's financial statements for 1993
and 1994 did not contain an adverse opinion or a disclaimer of opinion, and were
not qualified or modified as to uncertainty, audit scope or accounting
principles, except that those reports did contain the following qualification as
to uncertainty: "because the Company has suffered recurring operating losses as
well as cash flow deficits and must extend or otherwise refinance notes payable
due [March 31, 1994 and on or before December 31,1995], there is substantial
doubt about its ability to meet the future expenditure obligations necessary to
fully evaluate and develop its oil and gas properties and to continue as a going
concern." The Company's Board of Directors approved the decision to change
accountants. Since the Board of Directors has the authority to select the
Company's independent accountants, it is not proposed that any formal action be
taken at the annual meeting of stockholders. The Company anticipates that
representatives of BDO Seidman, LLP will attend the meeting, will have the
opportunity to make a statement if they desire to do so, and will respond to any
appropriate questions concerning the Company's financial statements.
-9-
OWNERSHIP REPORTS
Section 16(a) of the 1934 Act requires the Company's officers, directors
and persons who own more than 10% of its Common Stock to file with the
Securities and Exchange Commission reports of their ownership and changes of
ownership of Common Stock. These persons are required to furnish the Company
copies of all Section 16(a) reports that they file. Based solely upon a review
of reports and related written representations received by it, the Company
believes that all required reports were filed on a timely basis during and in
respect of 1996.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for action to be
included in the proxy statement and form of proxy relating to the Company's 1997
annual stockholders meeting must submit the proposal to the Company on or before
May 23, 1998. Any such proposals should be timely sent by certified mail, return
receipt requested, to the Secretary of the Company, 1600 Smith Street, Suite
4000, Houston, Texas 77002.
AVAILABILITY OF ANNUAL REPORT
The Company is including herewith a copy of its annual report on Form
10-KSB for the fiscal year ended December 31, 1996 and its quarterly reports on
Form 10-QSB for the periods ended March 31 and June 30, 1997 each of which has
been filed with the Securities and Exchange Commission in Washington, D.C.
By Order of the Board of Directors,
/s/ GARY J. MILAVEC
Gary J. Milavec
SECRETARY
September 30, 1997
-10-
TEXOIL, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON NOVEMBER 12, 1997
The undersigned hereby appoints Ruben Medrano and T.W. Hoehn, Jr., and
each of them, either one or whom may act without joinder of the other, each with
full power of substitution and ratification, attorneys and proxies of the
undersigned to vote all shares of Texoil, Inc. which the undersigned is entitled
to vote at the annual meeting of stockholders to be held at The Doubletree Hotel
at Allen Center, 400 Dallas Street, Houston, Texas on Wednesday, November 12,
1997 at 2:00 p.m. Houston, Texas time, and at any adjournment thereof.
This proxy will be voted in accordance with the specifications made
hereon. If no contrary specification is made, then this Proxy will be voted FOR
the election of the seven director nominees named in Item 1.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and the Proxy Statement furnished herewith. PLEASE DATE,
SIGN AND RETURN THIS PROXY PROMPTLY in the enclosed, pre-addressed stamped
envelope.
(Continued, and to be dated and signed on the reverse side.)
- - --------------------------------------------------------------------------------
^FOLD AND DETACH HERE^
Please mark you
votes as [X]
indicated in
this example
1. ELECTION OF DIRECTORS FOR all nominees [ ] WITHHOLD AUTHORITY [ ]
listed below to vote for all
nominees listed below:
*EXCEPTIONS [ ]
Nominees: T.W. Hoehn, Jr., Ruben Medrano, T.W. Hoehn III, Gary J. Milavec, Joe
C. Richardson, Jr., William F. Seagle and Walter L. Williams
(INSTRUCTION: To withhold authority to vote for any individual nominee, mark the
"Exception" box and write that nominee's name in the space provided below.)
- - --------------------------------------------------------------------------------
2. In their discretion, upon such other matters (including procedural and other
matters relating to the conduct of the meeting) which may properly come
before the meeting and any adjournment thereof.
ADDRESS [ ]
CHANGE
AND/OR
COMMENTS
Please sign exactly as your name
appears on your stock
certificate. When signing as
executor, administrator, trustee
or other representative, please
give your full title. All joint
owners should sign.
Dated:_________________, 1997
______________________________
Signature(s) of Stockholders
SIGN, DATE, AND RETURN THE PROXY CARD ______________________________
PROMPTLY USING THE ENCLOSED ENVELOPE. Signature(s) of Stockholders
- - --------------------------------------------------------------------------------
^FOLD AND DETACH HERE^